wisconsin
INDEPENDENT AGENT FEBRUARY 2015
THE FUTURE IS NOW SEE PAGE 5
IIAW ANNUAL CONVENTION BROCHURE INSIDE – REGISTER AT IIAW.COM
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wisconsin
INDEPENDENT AGENT FEBRUARY 2015 Eric Schwartz, Editor
Open Door Policy InVEST: Perpetuation Through Education . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Marketing Minute LinkedIn: A Business Lead Generator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Professional Development Five Ways To Improve Email Communications . . . . . . . . . . . . . . . . . . . . . . .8 Errors & Omissions Surety Bonds: Navigating The E&O Maze . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Virtual University Insuring Gift Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Government Affairs Legislative Session Underway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Member Profile Philadelphia Insurance: Carving Out A Niche . . . . . . . . . . . . . . . . . . . . . . . 16 Commissioner Of Insurance Wisconsin: At The Forefront Of State, National & International Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . 19 Members In The News . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Commentary From Counsel Liquid Gold No More . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Technology 4 Data Management Needs For Fraud Detection . . . . . . . . . . . . . . . . . . . . 31 Focus On Content Web Trends For 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
On The Cover… It’s no secret that the insurance industry is getting older and facing a challenge with perpetuation. The time is now to do something about it. InVEST is one way to bring a new generation to the industry. Matt Banaszynski’s article (page 5) talks about what InVEST has to offer and how the program is administered. Make an InVESTment in the future – go to investprogram.org and get involved today!
Independent Insurance Agents of Wisconsin 725 John Nolen Drive, Madison, Wisconsin 53713 Phone: (608) 256-4429 or (800) 362-7441 ■ Fax: (608) 256-0170 ■ Web: www.iiaw.com Executive Vice President - Matt Banaszynski 2014-2015 Executive Committee President.................................................... John Wickhem P.O. Box 1500, Janesville, 53547-15 President-elect ................................................ Steve Leitch P.O. Box 85, River Falls, WI 54022 Secretary-Treasurer ....................................... Matt Weimer 100 North Corporate Drive #100, Brookfield, WI 53045 Chairman of the Board ................................ Dave Dunker P.O. Box 443, Brookfield, WI 53008-0443 State National Director ................................ Linda Steiner 555 Main Street #320, Racine, WI 53403 2014-2015 Board of Directors Mike Ansay 101 East Grand Ave. #11, Port Washington, WI 53704 Mark Behrens 555 Main Street #320, Racine, WI 53403 Jason Bott 330 East Kilbourn Avenue, Milwaukee, WI 53202 Gerald Couri 379 West Main Street, Waukesha, WI 53186 Mike Farrell 1300 S. Green Bay Rd., Racine, WI 53406 Chris Hanson 5601 Grande Market Drive, Appleton, WI 54913 Lise Meyer Kobussen P.O. Box 633, Sauk City, WI 53583 Brian McClone 505 North Westfield Street, Oshkosh, WI 54902 WISCONSIN INDEPENDENT AGENT
Jeff Rasmussen 525 Junction Road, Madison, WI 53717 Michael Walston P.O. Box 236, Kewaunee, WI 54216-0236 Darrel Zaleski 4233 Southtowne Drive, Eau Claire, WI 54701 2014-2015 Committee Chairs Agency Operations....................................... Kim Dandrea 1300 South Green Bay Rd. #100, Racine, WI 53406 Automation/Technology ............... Cathleen Christensen P.O. Box 949, Fond du Lac, WI 54936-0949 Emerging Leaders ...................................... Janelle Higgins 6200 Mineral Point Road, Madison, WI 53705-4504 Employee Benefits............................................. Tim Bever 555 Main St. #320, Racine, WI 53403 Finance & Compensation ............................ Matt Weimer 100 North Corporate Drive #100, Brookfield, WI 53045 Government Affairs .......................................Skip Hansen 100 North Corporate Drive #100 Brookfield, WI 53045 Industry Relations ....................................... Kevin Murray 525 Junction Road, Madison, WI 53717 Marketing & Membership Development ........... Jeff Thiel P.O. Box 1610, Waukesha, WI 53187-1610 Smaller Agencies .................................... Michael Walston P.O. Box 236, Kewaunee, WI 54216-0236 Technical ................................................... Mark Truyman P.O. Box 6 , Seymour, WI 54165
> OUR ADVERTISERS AAA ................................................................ 34 ACUITY Insurance ........................................... 35 AmTrust North America ................................... 13 Applied Underwriters ........................Back Cover Badger Mutual ................................................ 28 Burns & Wilcox ................................................. 6 EMC Insurance................................................. 17 Guard Insurance ............................................. 29 IIAW Continuing Education ............................. 30 Insurance Associates of America .................... 14 Northern Underwriting Managers .................... 9 Partners Mutual ............................................. 28 Pekin Insurance.............................................. 25 Robertson Ryan...............................................10 SFM Insurance ................................................ 20 Society Insurance........................................... 32 The IMT Group ................................................. 21 West Bend ........................................................ 2 Western National .............................................. 4 Wilson Mutual .................................................. 21 FEBRUARY 2015 | 3
4 | NOVEMBER 2014
WISCONSIN INDEPENDENT AGENT
OPEN DOOR POLICY
INVEST: PERPETUATION THROUGH EDUCATION Benjamin Franklin said, “An investment in knowledge pays the best interest.”
According to IIABA’s 2014 Agency Universe Survey, the average age of an independent insurance agency owner is 56. “Recruitment is a battle the industry must fight on two fronts: educating young people on the potentials of an insurance career, and educating principals on the need to address recruitment long before retirement age,” says IIABA Chairman Dave Walker in a Property Casualty 360 article. “Times have changed: agency principals can’t wake up at age 60 and say they will sell or perpetuate the agency, because by then it’s too late.” Sixty percent of the insurance industry’s current employees are older than the age of 45 and every day, 10,000 more Baby Boomers become eligible for Social Security. Millennials, those born between 1982 and 2002, have minimal, if any, exposure to insurance as a profession. The insurance industry has hundreds of career paths to take. Perpetuating an aging workforce is something independent agents need to get serious about and start thinking of ways to attract and keep young talent. While the independent agency distribution channel faces many challenges and threats, the IIAW and IIABA stand ready to help our members combat these pressures. One of the tools in our expansive arsenal is InVEST. It’s a unique certified program that educates high school and community college students on insurance, financial services and risk management while encouraging them to pursue careers in the industry. Students learn risk management, auto, homeowner, and liability insurance in an interactive environment with guest speakers and a chance to run their own business by selling and servicing auto insurance policies. InVEST teams high school educators with representatives from the insurance industry (that’s YOU) to provide insurance instruction, exposure to an insurance environment, and insurance career opportunities WISCONSIN INDEPENDENT AGENT
to students. This nationally administered, locally supported program is FREE for teachers and offered in 45 states and currently taught to more than 23,000 students a year at more than 640 high schools.
D A Student Center for students to learn about insurance careers.
InVEST can be customized to complement individual academic programs. The program is very flexible. It can be offered as a two-week program using guest speakers or up to a full semester with the office simulation (and everywhere in between). In the semester program, InVEST teachers combine the marketing and economic skills students have already learned to start and run their own insurance agency. Students divide into teams with a President-CEO, CFO, sales and support staff. They then decide on a name, slogan, marketing plan and sales goals. Using a comparative rater, students rate insurance policies and enter information into an agency management system. They also decide on risk exposure and match the risk with the price to make sure they have enough money to pay all claims. Teams compete against each other to see who is going to run the most profitable insurance agency/company.
D Business simulation tools - access to agency management systems and rating software.
This is just a snapshot of what the InVEST program has to offer. InVEST makes it easy for teachers and volunteers by providing: D Free resources: books, presentations, games, a newsletter, and many other classroom materials. A new website and E-book are coming soon. D Tens of thousands of dollars annually in scholarships to InVEST students. D Guides to assist you in setting up a program. D Student and teacher workbooks for high school programs. D Tools to create job shadow days and internship programs.
D An Insurance Career Center for students so they can search for jobs and internships.
D Website access for teachers and volunteers to view lesson plans, games and exercises and more for the classroom. D Ask an InVEST teacher - current teachers mentor new teachers. D Access to student and volunteer marketing materials to help fill seats. D AND MUCH MORE! A few years ago the IIAW embarked on a mission to create a better foundation for the InVEST program to expand upon. Andrea KiemenRognsvoog of Johnson Insurance volunteered to serve as State Champion and has been busy engaging committee members and setting up a structure and group of volunteers to support our InVEST teachers/schools, and to increase the number of students participating in the InVEST program. Thanks to the leadership of many of our members, including some of our carrier partners, InVEST is growing and gaining national attention. February is InVEST month for the IIAW. All month long we will be highlighting in Spotlight, our weekly e-newsletter, how this unique industry program can help independent insurance agents and their local communities. Imagine how an InVESTment in the classroom can help perpetuate your agency. Contact Andrea (akiemen-rognsvoog@ johnsonins.com) or I (matt@iiaw.com) today to get started or to learn > Matt Banaszynski is more! the Executive Vice For more about InVEST, see the InVEST Report Card on page 18.
President of the Independent Insurance Agents of Wisconsin. Contact him at matt@ iiaw.com.
FEBRUARY 2015 | 5
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MARKETING MINUTE
GENERATE BUSINESS LEADS WITH LINKEDIN ADVERTISING
LinkedIn, the growing social network for professionals, has over 107 million members in the United States. It is an excellent way to build a strong network and connect with prospects as well as current clients.
In 2012, I wrote a five-part series on how insurance agents can maximize LinkedIn for building a strong network and identifying prospects. I continue to believe building a strong LinkedIn profile should be nonoptional behavior for any commercial insurance producer. During the last two years, LinkedIn has also been developing and enhancing its advertising platform. Experimenting with LinkedIn Advertising could be another source of business leads for any size agency. The LinkedIn advertising platform allows you to target ads to a specific targeted type of person based on business demographics such as Industry and Job Title. You can even deliver your ad only to members of a particular LinkedIn group. You can create an advertisement on LinkedIn in just minutes with a minimum spend of $10/day. Following are the basic steps you need to follow to create a LinkedIn advertising campaign: 1. DEFINE YOUR TARGET AUDIENCE. The first step is to understand and identify your ideal customer. This will help you understand the type of audience that should be the target of your ad. If you’re not sure where to start, take a look at your current client list and see if they have a profile on LinkedIn. Review their job titles, skills, and other important details that might come in handy for your LinkedIn ad targeting. 2. CREATE YOUR LANDING PAGES. Once you’ve determined what you want to advertise and have defined your ideal customer, create landing pages that provide those ideal prospects with information about your product or service. 3. RESEARCH EXISTING LINKEDIN ADS. Finding and reviewing LinkedIn ads on your account is a great way to get some inspiration. These ads show up on the WISCONSIN INDEPENDENT AGENT
The LinkedIn advertising platform allows you to target ads to a specific targeted type of person based on business demographics such as Industry and Job Title. right-hand panel and as part of your news feed. They all have “Sponsored” in the top right corner and are shown to you based on information in your professional profile. 4. CREATE YOUR LINKEDIN AD. Now that you have defined your customer and created your landing pages, you are ready to create a new ad. To get started, sign in with your LinkedIn account, go to LinkedIn Advertising, and start a new campaign. There you will choose your headline, image, description, and landing page destination. 5. TARGET THE RIGHT AUDIENCE. After setting up your ad, your next step is to narrow your audience to your ideal customer. LinkedIn provides a broad range of demographics to choose from including location, industry, job title, seniority, company size, gender, age, school, skills, and LinkedIn groups. Each time you narrow down your audience, LinkedIn gives you the estimated size of the audience you will reach. 6. SET A BUDGET THAT’S COMFORTABLE. You can control the amount of money you spend on advertising by setting a daily budget. Once your advertising costs match your stated budget, your advertisement will stop being
displayed. This allows you to control the amount of money spent as you are experimenting with the platform. 7. TRACK YOUR RESULTS. You can measure your LinkedIn ad campaign results in various ways. Clicking the My Ad Campaigns tab and Reporting tab in LinkedIn Ads will show the number of clicks you’ve received by date range and campaign against your total budget spent. If you use UTM parameters for Google Analytics, you can see the number of conversions and conversion rate from the ad to your website by looking under Traffic Sources > Sources > Campaigns. If you don’t use UTM parameters, you can look under Traffic Sources > Sources > Referrals to see traffic from the entire LinkedIn network. Will LinkedIn advertising generate new business leads for your agency? I’m not sure. However, I do know that this social platform continues to grow and attract business owners. I do believe it is well worth experimenting with some of your 2015 marketing budget.
> Steve Anderson provides information to insurance agents about how they can use technology to increase revenue and/or reduce expenses. He also likes to cook. Find tech and cooking information at steveanderson.com.
FEBRUARY 2015 | 7
PROFESSIONAL DEVELOPMENT
THREE WAYS TO IMPROVE EMAIL COMMUNICATIONS We use communication everyday to express our thoughts, our feelings and our ideas. Given the fact that only 7% of what we communicate is verbal, this leaves 93% to be expressed through written and non-verbal forms of communication. The non-verbal forms include body language, facial expressions, hand gestures and tone of voice. Communication is such a broad topic with so many perceived interpretations that I have chosen to touch on email, a key form of written communication in today’s environment.
1. Email Structure
3. Keep It Simple
Attendee line: Who is key to the meeting and needs to attend?
Stay on topic: Too many emails need to be waded through due to a quagmire of verbiage just to glean critical information. What happens? Often times, the email is not read thoroughly or not at all. This translates into email ping-pong with messages bouncing back and forth that result in little success in understanding the email content. What do you do to clear the playing field? Once you realize your message has been misunderstood it’s best to pick up the phone. If you don’t, you could dig a deeper hole that will be difficult to climb out of and result in someone being too upset to listen. Save the day any way you can.
CC Line: Who needs to be informed but does not need to attend?
So, how do you impress others when communicating through email?
Subject: Your topic should encompass the content of the email in a clear and concise manner.
It’s virtually impossible to
Body: Keep important information at the top using bullet points to reflect clear, concise and accurate content. This makes for an easy read of key takeaways. Note attachments (if any).
undo unintended damage if you have missed the mark in your written message.
In today’s technology driven world, much of what we do is through email, with a good deal of what we send misinterpreted by the recipient even though it was not the sender’s intent. Be careful! Sentence structure and the message need to be clear, concise and accurate. It’s virtually impossible to undo unintended damage if you have missed the mark in your written message. Taking cultural and personality differences into consideration, you can set yourself up for misunderstanding and conflict if you fail to deliver your message in a clear, concise and accurate manner. Here are some key steps to follow when setting up your email message:
8 | FEBRUARY 2015
2. Consider Content Humor: Often times, we look to add humor. Jokes can be dicey, especially in email because you don’t have voice inflection and facial expressions to bring out the humor, which can result in offending someone rather than delivering the intended message. Soft touch: Obviously, there is a time and place for added niceties in an email. In most cases just signing off with the traditional closing, “Sincerely” or “Have a great day!” is all you need. However, if you are working with an outside customer, then an opening of “It was good speaking with you today” or “I hope you are doing well” can be just the lead-in to eliminate a curt or indifferent tone. The last thing you want is to send a message that comes across as rude, upset, impatient or rushed. Remember, in either of these scenarios, the receiver cannot ‘see’ your face, ‘hear’ your voice or ‘watch’ your body language as you are conveying your message. It’s important to keep the soft touch brief while remaining clear, concise and accurate.
Word redundancy: Stay away from using clichés or being redundant in your word choice or verbiage. This will only cloud the message of the email and result in confusion and misunderstanding of the original content. First impressions matter and we need to be accountable. The need to be professional, accurate, concise and polite are critical in keeping existing customers, gaining new ones and being the person that people like and want to do business with. How we engage people will make or break relationships. When we fail to recognize how humor, clipped emails, sentence structuring and adding a personal touch make > Kathy Paulson is the founder of The Assistants’ a difference, then we Coach. She is leading a session at the 2015 IIAW have failed to deliver the intended message, Annual Convention. Contact Kathy at which in the end kapaulson48@gmail.com, and 608.220.6918. affects everyone. WISCONSIN INDEPENDENT AGENT
WISCONSIN INDEPENDENT AGENT
FEBRUARY 2015 | 9
ERRORS & OMISSIONS
SURETY BONDS: NAVIGATING THE E&O MAZE With the vast number of surety bonds available agents need to be cautious when working with customers to meet their needs. Claims data from Swiss Re and the Big “I” Professional Liability Program shows that bond related E&O claims have roughly three times the claims severity as other claims.
Like with any coverage or customer exposure agencies need to feel comfortable and have the expertise to understand the process of writing a bond and the coverage they afford. If they don’t the chances of an E&O claim increase dramatically. Working with a broker that
be determined “nonresponsive” even if that client is the low bidder.
Failure to Deliver Bid Bonds in a Timely Manner or to a Proper Address. Bid bonds sent via regular mail run the risk of being delivered late. Regular mail might be less costly up front, but could end up Claims data from Swiss Re and the Big “I” being very expensive in the long run Professional Liability Program shows that when a client misses a bid date due bond related E&O claims have roughly three to late delivery. This could also result from someone in your office using an times the claims severity as other claims. incorrect address. can assist you through the process of placing bonds can make the difference between a Failure to Give Proper Advice Regarding satisfied customer and a future E&O claim. Bid Security. A bid bond assures that a This article looks at the common missteps performance bond will be put in place by the that could lead to E&O claims that agents can authorizing surety, while using a cashier’s make when handing surety bonds. On the check as bid security does not. Advising facing page are tips for producers and CSRs on a client to use a cashier’s check might be how to avoid surety claims. perceived as expedient, but the amount of the check is ultimately at risk of being forfeited.
Common Surety Handling Missteps Failure to Advise Proper Rate. Often times agents feel compelled to communicate a rate to a client. In many cases, that rate ends up being below what can actually be obtained. Failure to Properly Execute Bid Bonds. If a bond is not prepared in strict accordance with the owner’s requirements, the client runs the risk of presenting a bid that may
Failure to Receive Approval from the Surety. By improperly issuing a bond, an agent exposes him/herself to potential E&O claims from both the carrier and the client. The surety will seek recourse from the agent if the unauthorized bond goes into claim. If the client’s bond program is disrupted as a result of an agent’s actions, the client might have recourse for lost financial opportunity.
Failure to Adhere to Conditions & Exclusions of Line of Authority. In instances where a surety has extended a line of authority to an agent and the agent has issued a bond that falls outside the line of authority, the agent will be held accountable for any loss a surety experiences as a result of the agency mishandling his/her authority. Failure to Provide Timely Information to the Surety. An agent is responsible for communicating all information to the surety that is relevant to the surety’s decision to authorize a bond. The surety may have recourse against the agent for information that is omitted if that information would have been material to a surety company’s ability to avoid a claim situation. These are only a few examples of situations that create E&O exposure for agents. By implementing internal risk management policies and standardized procedures, and addressing proper steps and expectations for associates who handle bonds for your clients, you can > Jack Anderson is significantly mitigate President of Goldleaf your E&O risk. Surety Services LLC.
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Keep your book Remain a trusted advisor to your clients to give them peace of mind ŽŶƟŶƵĞ ǁŽƌŬŝŶŐ ƵŶƟů LJŽƵ ĚĞĐŝĚĞ ƚŽ ƌĞƟƌĞ Find the right buyer for your book within Robertson Ryan to maximize your return Ğ ŝŶ ƚŚĞ ϯϬй ƚŚĂƚ ŚĂǀĞ Ă ƉůĂŶ
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Producer and CSR Tips for Avoiding Surety Claims The relationship between a customer and an agent that helps them secure bonds for their projects is vital to their success. By being aware of the possible pitfalls that can create E&O claims, you will be able to provide bond services to your clients without interruption, and mitigate serious E&O exposures for your agency. Remember working with surety bond is a specialized process in which dabbling can land you in the middle of an E&O claim. It is strongly recommended that you work with an experienced and professional broker that can assist you though the process. E&O Tip #1: Obtain Specific Rate Approval from a Surety - If a client pressures you for a rate, provide a range that includes a low and high estimate (e.g. 1% - 5%). Communicate that you cannot give an exact rate without knowing credit history and other underwriting information. Benefit: By receiving a specific rate from a surety, a contractor will be able to include a more exact amount in his/her bid estimate, and the agent avoids providing inaccurate information. E&O Tip #2: Establish a Checklist for Bid Bond Preparation - The checklist should include the following: ! Verify bond form ! Verify bid bond amount/percentage ! Attach a separate notary signature page for contractor’s signature ! Attach Power of Attorney showing name of person who signed bond ! Independent review of bid bond to ensure accuracy ! All requirements included Benefit: Establishing a checklist will help eliminate the possibility of a contractor’s bid being rejected as a result of bid bond mistakes. This will also eliminate your agency’s exposure to a claim involving a contractor’s lost profit and its ability to cover fixed overhead. E&O Tip #3: Assure Proper and Timely Delivery of Bid Bonds - Confirm delivery address ahead of time and use a reliable overnight delivery service. Benefit: Taking steps to assure proper and timely delivery alleviates the possibility that your client will miss a bid deadline. Delivery date and time will be specified and status can be tracked if reliable overnight delivery is utilized. E&O Tip #4: Never Advise a Contractor to Use a Cashier’s Check as Bid Security in Lieu of a Bid Bond - Notify clients that they must request a bond as soon as they are aware one will be required. If a bid bond cannot be secured in a timely fashion, a cashier’s check should only be used when the surety provides written approval stating that they will support the bid bond. Never assume that the surety will support a bid bond for which a cashier’s check was provided. Benefit: By verifying that a surety will support a bond, the contractor will avoid the possibility that he/she will be out the amount specified in the cashier’s check, triggering him/her to file an E&O claim against the agent. E&O Tip #5: Establish a Written Procedure Requiring Verification of Surety Approval - Set up guidelines regarding what constitutes authorization from the surety and how it should be documented. Agency staff who issue bonds must be notified of this policy and adhere to all requirements prior to delivering bonds to your clients Benefit: By having agency staff receive prior approval, the surety’s trust in your agency will be maintained, and your client’s future surety relationships will not be jeopardized. E&O Tip #6: Train Associates on Specific Criteria Granted by Bond Lines of Authority - Don’t focus solely on single bond size and aggregate limits authorized under the line. Know and understand the other conditions and exclusions before issuing a bond under the line. Benefit: When a line of authority is given by a surety company, it gives the agent authority to issue bonds that fall within the scope of the line. Verifying that the project meets each and every item on the bond line of authority is critical to maintaining the confidence of the surety and protecting your agency against an E&O claim if the project ends up in claim. E&O Tips #7: Deliver All Relevant Information to the Surety in a Timely Manner - Create and adhere to a procedure that calls for providing all known information to the surety that may impact their decision for both bond approval and for the handling of a claim. Benefit: This requirement is included in the agency agreement that is signed with the surety, and honoring it is critical to maintaining the relationship with the companies with whom you do business. WISCONSIN INDEPENDENT AGENT
Copyright © 2011, Big I Advantage®, Inc. and Swiss Re. All rights reserved.
FEBRUARY 2015 | 11 5
VIRTUAL UNIVERSITY
INSURING GIFT CARDS
Gift cards have become an increasingly popular form of giving for Christmas, birthdays, and many other occasions. According to the National Retail Federation, sales of gift cards exceeded $118 billion in 2013, and are projected to top $140 billion by 2016. The ease of using gift cards for online shopping (called “e-gifting” by the industry) has significantly contributed to the popularity of gift cards for almost any occasion. If a gift card is lost or stolen, is there any coverage for the lost value under a homeowners policy? Consider this question that was sent into the Virtual University’s Ask An Expert service.
We had a staff meeting this morning, and the subject of holiday gift cards came up. Since they are increasingly popular at Christmas, as well as other gift-giving occasions, is there any coverage under the Homeowners Policy if they are lost or stolen, etc.? These days, a person could easily have several hundred dollars worth of cards after Christmas, and possibly much more than that as wedding gifts. Great question! And to say that gift cards are “increasingly popular” is quite an understatement! According to the National Retail Federation, there will be approximately $31 billion spent on gift cards for Christmas in 2014, compared to $25 billion spent on gift cards for the 2006 Christmas season and $18.5 billion for Christmas 2015.
However, in the previous 1991 edition, since gift cards were not specifically mentioned, there was some confusion between coverage for gift cards vs. credit cards, which were covered for $500, with no deductible. While most authorities assumed that gift cards should be treated as cash, the HO 00 03 04 91 edition policy provided no specific guidance on that point.
The ISO Homeowners Policy (both 2011 and 2000 editions) treats gift cards the same as cash, providing just $200 in the aggregate — meaning that’s the total amount of coverage for all items in that category (see Coverage C excerpt in next column), no matter how many cards an insured had. In addition, cards that are “lost” would not be covered at all, since the perils that apply to Coverage C are named perils only, unless an insured has the HO 00 05. Note also that while cash and every other type of property in that category is subject to the Section I deductible, the deductible is subtracted from the loss to covered property, and never to an internal limit (such as the $200 cash limit).
Here is the relevant excerpt from the HO-2011 and HO-2000 editions of the HO 00 03:
While gift cards have been around for several years, it wasn’t until the HO-2000 edition of the Homeowners Policy that ISO included language addressing how they were covered under the policy. In the HO-2011 and HO-2000 editions, they are referred to as “stored value cards,” and not “gift cards” – see excerpt.
C. Coverage C – Personal Property 3. Special Limits Of Liability The special limit for each category shown below is the total limit for each loss for all property in that category. These special limits do not increase the Coverage C limit of liability. a. $200 on money, bank notes, bullion, gold other than goldware, silver other than silverware, platinum other than platinumware, coins, medals, scrip, stored value cards and smart cards. Lastly, under ISO rules, the $200 limit on cash and similar items of property (including stored value cards) can be increased up to $1,000 on the HO-3, using endorsement HO 04 65 Coverage C Increased Special Limits of Liability. (Use the HO 04 66 with an HO-5.) Also, check with your individual markets to see if they adopted this optional coverage. The cost is typically around $6 per $100 of coverage.
> Mike Edwards heads an insurance training firm in Atlanta, GA. He can be contacted at 678.513.4390, or medwards65@aol.com.
The Virtual University is a Big “I” members-only resource. Many articles are based on real-life questions received by the Ask an Expert service. This service ensures that the information is current and topical. Go to www.independentagent. com/Education/VU/. You will need to login with your IIABA username and password before using the VU. The IIABA does not assume and has no responsibility for liability or damage which may result from the use of any of this information.
12 | FEBRUARY 2015
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LEGISLATIVE SESSION UNDERWAY
The 2015-16 session of the Wisconsin Legislature officially got underway on January 5th when Governor Scott Walker and 132 lawmakers took their respective oaths of office under the granite dome of the Wisconsin State Capitol.
Here are some interesting facts about the new Legislature: The State Senate has a total of 33 members elected to four-year terms, including 19 Republicans and 14 Democrats. Of the total, 11 senators are women and two are AfricanAmerican. Twenty-three senators are married and the average age is 57, ranging from 34 to 87 years of age. Madison Democratic Senator Fred Risser is the nation’s longest serving state lawmaker with more than 50 years of government service under his belt. Eleven senators consider themselves full-time legislators and two are practicing attorneys. Other occupations include newspaper publisher, accountant, small business owner, and nurse. Seven of 17 senators who won election in 2014 are serving for the first time in the Senate.
This session, Republicans find themselves once again controlling all of state government for the third consecutive session after voters gave Governor Walker a second term and Republicans expanded their majorities in both houses. Republican leaders say we should expect a continuation of more bold reforms this session, particularly in the area of reducing and streamlining the size and scope of state government. Committee hearings and
On February 3rd, the Governor will unveil his more than $70 billion two-year state budget plan to a joint session of the Legislature. The state budget is where most of the Legislature’s time and attention will be devoted for the next five months as they look to modify the Governor’s tax and spending plan with some of their own ideas and priorities. The most immediate challenge facing the Governor and Legislature this session is solving a projected
floor sessions are underway and legislative proposals are already being introduced and vigorously debated between houses and both political parties.
$2.2 billion budget shortfall, while also trying to deliver on a pledge to continue cutting taxes. Walker and legislative Republicans will quickly push to consolidate state agencies and streamline government functions early in the session.
Representative Robin Vos (R-Rochester) returns as Speaker of the Assembly and will lead a larger, more conservative and ambitious Republican caucus of 63 members. A seasoned Senator Scott Fitzgerald (R-Juneau) will
Republican leaders say we should expect a continuation of more bold reforms this session, particularly in the area of reducing and streamlining the size and scope of state government. The State Assembly has 99 members elected to two-year terms, including 63 Republicans and 36 Democrats. Twenty-two members are women, four representatives are AfricanAmerican, and two are Hispanic. Seventy-five representatives are married and the average age is 48, ranging from 24 to 76 years of age. One-third of the body consider themselves full-time legislators. Others include five farmers, seven practicing attorneys, and twenty-four who are business owners or selfemployed. Other occupations in the Assembly include realtor, teacher, law enforcement, labor arbitrator, veterinarian, accountant, librarian, and pilot. Twenty-five of 99 state representatives who won election in 2014 are serving their first term in the Assembly. To find your state legislator, please go to the interactive map at maps.legis.wisconsin.gov. WISCONSIN INDEPENDENT AGENT
serve for his third straight session as Senate Republican Majority Leader with a slightly larger and also more conservative caucus than the previous session. Representative Peter Barca (D-Kenosha) continues to serve as the Assembly Democratic Minority Leader with the challenge of having fewer Democratic members than last year, and Senator Jennifer Shilling (D-La Crosse) leads the Senate Democrats for the first time as their Senate Minority Leader. On January 13th, Governor Walker gave his fifth State of the State address in a brief 25-minute joint convention of the Legislature where he highlighted some of his first term accomplishments and provided some broad themes on a vision for moving the state forward in his second term.
Meanwhile, the state’s Transportation Fund faces a looming $680 million deficit and it’s difficult to imagine a scenario where there won’t be an increase in the gas tax or user fees to try and close the funding gap. Walker and GOP legislative leaders have already begun to step back from supporting any increase in the state’s gasoline tax. Business friendly initiatives that cost the state money such as reducing corporate income taxes or eliminating the personal property tax will be a tough sell with this Legislature unless those initiatives are fully funded by other revenue sources. And in the backdrop of the flurry of legislative activity already underway is the milliondollar question on whether or not Governor Walker decides to run for the 2016 Republican presidential nomination. Governor Walker is visibly laying the groundwork and appears to be positioning himself for a possible run. Many political insiders and those close to him believe that Walker will ultimately jump in. One way or the other, Walker will need to make a decision later this year. > Misha Lee is Owner/ Expect him to govern Founder of Lee from now until he makes Government Relations, LLC and lobbyist that decision as if he for IIAW. Follow Lee were a candidate for Government Relations national office. on Twitter @mishavlee.
FEBRUARY 2015 | 15
By Eric Schwartz
MEMBER PROFILE
PHILADELPHIA INSURANCE COMPANIES:
CARVING OUT A NICHE Find your niche. That’s the message Robert Gudates imparts to agents as he travels Wisconsin and the Upper Peninsula as the marketing representative for Philadelphia Insurance. “We are not a generalist - Philadelphia is going to be your niche player,” said Gudates. “We want to be your nonprofit and human services carrier.” This philosophy is in the DNA of the company. Philadelphia started as the Maguire Insurance Agency in 1962 by offering specialized coverages to the automobile industry. In 1969, the agency caught the brass ring — Maguire secured Chevrolet, its first national account. From there, the agency created and launched the groundbreaking WHEELWAYS program for Chevy’s dealers. With this momentum, the agency forged a national presence over the next two decades, which culminated in the founding of Philadelphia Insurance Companies in 1987. By 1989, the company started offering coverages to nonprofit social service agencies and health and fitness clubs - two niches that remain an essential part of its business today. But Philadelphia’s products extend beyond these in Wisconsin. “Excess and surplus lines is our fastest growing segment in the state,” said Gudates. “The coverage may be appealing as it allows agencies to not broker their business.” In addition to E&S lines, Philadelphia offers cyber liability and environmental products. “Our cyber product is an a la carte policy - an agent can tailor the policy to fit the insured’s needs,” said Gudates. “Philadelphia’s environmental coverage is a very broad, all encompassing niche policy. It covers everything under the sun and has
16 | FEBRUARY 2015
really grown. About the only businesses we won’t cover are refineries.” This menu of timetested products — social services, health clubs, excess and surplus lines, cyber liability and environmental — are complemented by newer offerings that have practical value in Wisconsin. “Our fuel dealers coverage is for businesses that haul gasoline, LP gas and home heating oil to homes and businesses,” said Gudates, “A typical owner has about five fuel trucks in their fleet.” Philadelphia’s commercial flood protection provides Like many in the insurance industry, Robert Gudates started his career in another field. His first sales gig after he graduated from an alternative to the Marian University was with the Milwaukee Bucks. To contact Robert, National Flood Insurance Philadelphia’s marketing representative in Wisconsin and Upper Program and includes Michigan, email Robert.Gudates@phly.com, or call 262.389.0306. coverage that exceeds the NFIP. Gudates said that Philadelphia’s policy has larger limits ($5 Philadelphia Insurance has a proven track million), no waiting period, and includes record of success but the company is not business income coverage. content to rest on its laurels. Wisconsin is a year-round destination for recreational activities like motorcycling and snowmobiling, so it makes sense that Philadelphia would have a policy for dealers that sell these types of toys. The policy provides sound coverage but has not taken off yet in Wisconsin. “We’re looking for traction in Wisconsin,” said Gudates. “Almost every city has a motorcycle or power sports dealership that sells personal watercraft like Jet Skis, or off road vehicles like 4-wheelers or ATVs. The potential is there.” After four decades of selling niche coverages,
“We have a defined direction,” said Gudates. “Philadelphia wants to grow with agencies that want to grow. We are open to new product ideas and opportunities. We want to work with established agencies and new agencies. You don’t need to have a big book to work with Philadelphia - just one account.” Philadelphia Insurance, a member of the Tokio Marine Group, is an open brokerage company with a presence in all 50 states. Its corporate headquarters is located in Bala Cynwyd, Pennsylvania. In Wisconsin, the company partners with approximately 130 agencies. Philadelphia’s Wisconsin office is located at 200 S. Executive Dr., Ste. 101 in Brookfield. WISCONSIN INDEPENDENT AGENT
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COMMISSIONER OF INSURANCE
WISCONSIN AT FOREFRONT OF STATE, NATIONAL AND INTERNATIONAL REGULATORY MATTERS
Being Insurance Commissioner in Wisconsin is both humbling and gratifying. I work for a great Governor. I regulate perhaps the best functioning market in the country. The Wisconsin market is a place where consumers have lots of choices including local and national players, small and large companies, and both non-profit and for-profit companies. Our state also has a history of compliance both from our well-trained and professional insurance agents and the companies that comprise our insurance market. But none of that happens by accident. OCI has a great staff that is experienced in what they do. We have a consistent, predictable, and stable regulatory environment that mirrors what other states do while including some important Wisconsin tweaks. While credit can and should go the Office of the Commissioner of Insurance (which is not just me, by the way, it is all of the fantastic staff), we get a lot of help from the National Association of Insurance Commissioners (NAIC). This standard-setting body helps train our staff, provides model laws and regulations, and represents state insurance commissioners in a variety of settings. Wisconsin has long been an active member – going back to the founding of the NAIC. Because of the importance of the NAIC to Wisconsin and other states, I made a decision to run for the Secretary/Treasurer of the organization. To keep any great organization vital, people need to step up into leadership, and it was an easy choice to commit to an organization that strongly supports state
We must be focused not just on our state issues, but also on federal and international intrusion into the regulation of insurance. Wisconsin is poised to be at the forefront of those fights… regulation of insurance. I am humbled and honored to be elected by my peers into this new role. Although it means more work and some time away from the office, it allows Wisconsin to be part of the conversation on national issues and provides us with the WISCONSIN INDEPENDENT AGENT
opportunity to learn about the best practices of the other states. Make no mistake, Wisconsin companies need to be able to compete not just nationally, but also internationally. Wisconsin consumers need regulators that understand how to regulate sophisticated insurers in a global economy. That is the direction we have been heading in Wisconsin. In the last legislative session, Wisconsin passed new laws to implement changes to the Model Holding Company Act and Own Risk Solvency Assessment (ORSA). This legislation will help OCI as the regulator and also the insurer to better anticipate financial shifts that could cause problems. The insurance sector may not have seen the same problems as other financial institutions in the recent financial crisis, but that doesn’t prevent state regulators and the industry from working together to prevent future problems. Our efforts at the state level and at the NAIC will include efforts to ensure that Dodd-Frank continues to reflect the importance of the state insurance regulatory system. It may seem obvious on its face that federal bank solvency standards shouldn’t form the base line for insurance solvency standards, but that is exactly what is being proposed in some quarters. The Federal Reserve, for example, may be looking to protect bank assets in cases where the company has financial trouble, but the long tail of many insurance risks should be treated differently. Insurance risk is different from banking risk, and an insurer’s risk can vary widely by line of business. For example, the risks of a long-term care policy are vastly different from the risks of an auto insurance policy. The capital and surplus required for a bank, a long-term care insurer, and an auto insurer should be different and our regulatory approaches should reflect that.
In Wisconsin, we are continuing to have this discussion with the industry on appropriate standards and will likely introduce new legislation requiring Principle Based Reserving or PBR. This new approach for life insurance would require insurers to adjust their reserves based on the actual risk the company faces. A company who writes low-risk policies would be required to meet a different reserve standard than a company that writes higher-risk policies. This approach ensures that company reserves meet appropriate standards. Similarly, we are under pressure to take another look at the way state regulators regulate on the international front. Domestic insurers have faced a low interest rate environment for a prolonged period of time and are looking at investment alternatives. International markets provide insurers with ways to increase returns, but the risks are more complicated for both the insurer and regulators to evaluate. Insurers are also looking at international markets as a way to expand. This creates additional concerns because international standards may differ significantly from state standards and may conflict. In short, the next several years are important ones for state insurance regulation. We must be focused not just on our state issues, but also on federal and international intrusion into the regulation of insurance. Wisconsin is poised to be at the forefront of those fights, and while I have great people working both with and for me, I will need your help. I can’t possibly understand every nuance of every issue, so I will be leaning on you for help and advice. I look > Since 2011, Ted Nickel has been Commissioner forward to working with of Insurance for the State you in the years to come! of Wisconsin.
FEBRUARY 2015 | 19
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FEBRUARY 2015 | 21
WS E N E H T N I S R E B M ME SECURA Insurance Hits $500 Million in Direct Written Premium SECURA Insurance, headquartered in Appleton, Wis., achieved a new milestone in its nearly 115-year history. The company reached $500 million in direct written premium, connected to profitable growth and its strong business partnerships with independent insurance agents over the years. “As a mutual company, we focus on long-term profitable growth,” said Dave Gross, SECURA’s President and CEO. “That’s critical for making business decisions that are in the best interests of our policyholders, agents, and employees. Premiums paid for insurance are placed in safe investments to assure those dollars will be available to pay claims.” Independent insurance agents in 12 states represent the company, which provides a broad range of commercial, personal, specialty, and farm-ag products. “This achievement shows that insurance customers trust the advice of their independent agents and those same customers know our employees will take good care of them during their entire experience with us,” added Gross. SECURA is rated A (Excellent) by A.M. Best for its excellent ability to meet policyholder obligations, and was named to Ward’s Top 50 for outstanding results in financial performance and consistency over a five-year period.
Mongarella Promoted to Director–Risk Management SECURA Insurance promoted Dom Mongarella to Director–Risk Management, effective Jan. 14, 2015.
Dominick Mongarella
In this position, Mongarella will continue to lead the company’s Risk Management team. He will be responsible for enhancing risk management services, and leveraging the knowledge and strengths of his team to support the company’s agent partners. Mongarella joined SECURA in 2011 as a risk management consultant and was promoted in March 2013 to supervisor.
“Dom’s collaborative style and strong communication skills helped him build an engaged and talented team that adds significant value to helping us write and retain quality business,” said Marty Arnold, Senior Vice President–Underwriting. “He possesses the leadership and knowledge to drive the exceptional level of service that we provide to our independent agent partners and policyholders.” Prior to SECURA, he worked as director of safety for the City of Jeffersonville in Indiana and senior loss prevention consultant with Willis/HRH. Mongarella
22 | FEBRUARY 2015
also served 21 years in the United States Air Force. He earned associate degrees in safety and sciences; audiovisual production; and instructor of technology and military science. Mongarella also holds numerous certifications, including the Certified Safety and Health Manager; Certified Workers’ Compensation Counselor; Property Risk and Insurance Specialist; and Member, American Society of Safety Engineers.
Company Announces A.M. Best affirmed A (Excellent) Rating A.M. Best affirmed the financial strength rating of A (Excellent) with a stable outlook for SECURA Insurance. This rating reflects its solid capitalization, historically profitable underwriting and operating results, and the benefits from cultivating long-term relationships with a strong agency force. A.M. Best specifically recognized the carrier for: • Long-standing regional business presence; • Strong agency criteria; • Broadening product and geographical spread; and • Ongoing pricing initiatives. “This rating validates for our policyholders, agents, and employees that they can rely on us,” said Dave Gross, President & CEO. “As a mutual company, our focus remains on taking care of our people, delivering on service, and maintaining long-term growth and stability. Our milestone of reaching more than $500 million in sales during 2014 also is an indication of our financial strength.” To learn more about SECURA, please visit secura.net.
Horton Awarded Healthiest Employer Award Business Journal of Greater Milwaukee recognized The Horton Group, an independent insurance and risk advisory firm, as a “Healthiest Employer” for a commitment to employee wellness. The Healthiest Employer awards program highlights organizations committed to creating a healthy workplace. The multicity program that includes over 4,000 participating employers; sharing critical wellness information on more than 60 million employees’ lives. Winners are selected based on their performance in executing six core values set by the Healthiest Employers LLC, of Indianapolis. The award assessment considers over 300 data points that aligned with the Healthiest Employer programs’ core values (leadership, communication, programming, foundation, planning and reporting). WISCONSIN INDEPENDENT AGENT
WS E N E H T N I S R E B M ME Planning is now underway for the 2015 golf fundraiser scheduled for Monday, June 15, at Prestwick Golf Club in Woodbury, Minnesota. The Business Journal of Greater Milwaukee featured the award winners. 2014 represents Trisha Ours accepts the Healthiest Employer at the Pfister Hotel in Milwaukee. the second consecutive year Horton earned this prestigious honor. Trisha Ours, a member of Horton’s worksite wellness team, accepted the award on behalf of the Horton team.
To learn more about SFM, please visit sfmic.com. Go to sfmfoundation.org for more information about the SFM Foundation.
Maggie Haddock Accepts Marketing Specialist Position at Integrity Insurance Tim McAdow, Director of Marketing and Strategic Planning at Appleton-based Integrity Insurance, announces Maggie Haddock has accepted a newly created Marketing Specialist position. Previously, Haddock held the role of Marketing and Public Relations Manager at the Fox Cities Performing Arts Center in Appleton. In her new role, Haddock will be responsible for external marketing, public relations and communications activity at Integrity, providing strategy and executing plans that engage Integrity agents and policyholders.
“We are proud to be recognized as a ‘Healthiest Employer’ for the second consecutive year,” said Ours. “Our team at Horton recognizes that the continuous investment in the health of their employees is a strategy that returns in dividends. Healthy employees are happier and more productive employees.” To learn more about The Horton Group, please visit thehortongroup.com.
SFM Foundation: Ladies’ Night Out Raises More than $13,000 for Scholarships In late 2014, the SFM Foundation raised more than $13,000 for scholarships at its fall fundraiser, Ladies’ Night Out — Shopping for Scholarships. Approximately 320 women attended the event, which was held in the Great Room of the Mall of America in Bloomington, MN. SFM Foundation is dedicated to easing the burdens on families affected by workplace accidents. To achieve Ladies’ Night Out at the Mall of America this, the Foundation provides post-secondary education scholarships to children of parents fatally or seriously injured on the job. All proceeds from the Ladies’ Night Out directly fund these scholarships.
Maggie Haddock
“Maggie has experience in developing and leading marketing strategy that will attract and engage existing and prospective customers using both traditional and digital channels,” reports McAdow. “I’m excited to have her join our team. Her expertise in marketing will enhance our service and provide additional value for all our stakeholders.”
A graduate of UW-Oshkosh, Haddock holds a Bachelor of Arts degree in Journalism with an emphasis in Advertising and Public Relations. To learn more about Integrity Insurance, please visit integrityinsurance.com.
Vice President Ed Felchner Retires ACUITY announced that Ed Felchner, Vice President - Personal Lines and Marketing, is retiring after 19 years with the insurer. “I have had the privilege of working with Ed for all of his 19 years at ACUITY,” said Ben Salzmann, ACUITY President and CEO. “He has been instrumental in guiding the success of our efforts in personal lines and marketing during a period of time in which ACUITY has grown five-fold in written premium and more than Ed Felchner CONTINUED ON NEXT PAGE
WISCONSIN INDEPENDENT AGENT
FEBRUARY 2015 | 23
S W E N E H T N I S R E B MEM top-line revenue,” said ACUITY President and CEO Ben Salzmann. CONTINUED FROM PREVIOUS PAGE
doubled our geographic footprint.” On January 12, ACUITY’s board of directors unanimously passed a resolution commending Felchner for his service to ACUITY and his highly successful contributions that have driven ACUITY to new levels of performance. Felchner’s career in insurance spanned nearly 50 years. At the age of 16, he began working in his uncle’s insurance agency, and he has held numerous positions in the industry over the years. His executive leadership roles prior to ACUITY included Vice President - Insurance Operations for Armed Forces Insurance Exchange, Vice President and Chief Underwriting Officer of the Millers National Insurance Group, and Vice President - Corporate Development, Vice President - Personal Lines, and Vice President - Marketing at Omaha Property and Casualty (OPAC).
Company Names New VP of Marketing and Personal Lines ACUITY announced that Shane Paltzer is promoted to Vice President Marketing and Personal Lines. In his new capacity, he will direct and oversee product and customer development efforts, regulatory compliance, market intelligence, and all line underwriting functions in personal lines. Paltzer began his career at ACUITY in June 1992 as a Personal Lines Underwriter. From 1994 to 1995, he served as a Commercial Lines Underwriter. In 1995, he was promoted to Area Sales Manager Shane Paltzer for northeast Wisconsin. In January 2002, he was promoted to General Manager in Sales. In that capacity, Shane managed ACUITY’s sales efforts across much of the company’s geographic footprint and led numerous strategic initiatives, including new state and agency expansion and ACUITY’s customer segment marketing program. A graduate of the University of Wisconsin-Oshkosh with a bachelor’s degree in finance, Paltzer holds the Chartered Property & Casualty Underwriter (CPCU) and Associate in Underwriting (AU) designations. He has also completed the Advanced Management and Leadership program at the University of Wisconsin FLUNO center and the Insurance Executive Development Program at the Wharton School of the University of Pennsylvania.
ACUITY Records Double-Digit Growth in 2014 ACUITY announced its 2014 growth results, reporting an overall gain of nearly $120 million in total written premium. The amount represented a 10.6 percent increase over 2013 and extended ACUITY’s multi-year track record of revenue gain. “In the past 36 months alone, ACUITY added over $400 million to our
24 | FEBRUARY 2015
ACUITY achieved robust growth across all lines of business and throughout the company’s operating territories. In 2014, the insurer wrote a record $220 million in new business, driven by increases in both personal and commercial lines. In personal lines, ACUITY marked an incredible 18th consecutive year of positive premium growth by writing $66 million in new business. In commercial lines, the company added $154 million in new business premium while achieving a quote success ratio of 41 percent, also an all-time record. As a result of ACUITY’s continued strong growth, the company has added more than 200 staff members in the past 36 months and passed the 1,000-employee mark in 2014. ACUITY continued work in 2014 on a 240,000-square-foot addition to its corporate headquarters to accommodate expansion. ACUITY is poised to continue its growth in 2015 due to the company’s competitive strengths and market positioning. In commercial lines, the national economic rebound favors two of ACUITY’s key sectors, construction and trucking, which make up over 60 percent of its commercial book. In personal lines, growth continues to be driven by higher-premium package policies, which run higher retention levels, as well as by geographic expansion and new sales initiatives, such as ACUITY’s innovative lead generation program for independent agents. “When ACUITY grows, everyone wins — our employees, agents, and policyholders,” said Salzmann. “We are incredibly thankful to everyone for their effort in helping us achieve another record-setting year, and we look forward to continued growth and success in 2015 and beyond.” To learn more about ACUITY, please visit acuity.com.
Seitzer Appointed Senior Field Representative for Berkshire Hathaway GUARD Berkshire Hathaway GUARD Insurance Companies recently added Belinda Seitzer as a Senior Field Representative to address targeted growth in the Midwest. Specifically, Belinda will serve producers in Wisconsin and Minnesota – two new states added by the insurer in 2014. Seitzer is responsible for identifying prospects for agency appointments while offering a wide range of services to existing members of the company’s distribution network, including providing information about available resources and new developments, monitoring production, and serving as a field liaison with underwriting, loss control, and claims staff. Belinda has been part of the Workers’ Compensation industry in the Midwest for over 15 years and has extensive experience at the executive level in marketing and business development. According to Director of Regional Sales Jim Lewis, “Berkshire Hathaway GUARD is anxious to increase our presence and our market share WISCONSIN INDEPENDENT AGENT
S W E N E H T N I S R E B MEM J.M. Wilson Hires Wisconsin Branch Manager in the region. We’ve enjoyed success in our original Midwest states, and we believe the addition of Belinda Seitzer to serve Minnesota and Wisconsin will help us further expand and develop our distribution network in that part of the country.” Lewis added, “We have agency appointments available; as a long-term, experienced insurance field person in the area, Belinda is the right person to help us fill those openings.”
J.M. Wilson is pleased to announce the addition of Jayne Hongisto as Branch Manager of their Madison, Wisconsin office. Jayne will plan the day-to-day operations of the Madison office, coordinate the staff, and work towards building relationships to foster growth with new and existing independent insurance agents.
To learn more about Berkshire Hathaway GUARD, please visit guard.com.
Jayne brings with her many years of experience in the Insurance Industry, where she’s worked as a Subrogation Specialist, Claim Representative, Field Claim Specialist, Commercial and Personal Lines Marketing Specialist, Senior District Sales Manager, and Insurance and Risk Manager. Jayne earned a Bachelor of Arts Degree from Viterbo University in Biology, a Master of Science Degree from Eastern Kentucky University in Risk Management and Safety, and an Associate in Claims (AIC) designation.
Two Agencies Join Robertson Ryan & Associates Robertson Ryan & Associates, Inc. announces that the ROBERTSON RYAN Jack C. Loyda Agency of Shorewood, WI, and Walston & ASSOCIATES, INC.
Insurance Associates Inc. of Kewaunee have joined Robertson Ryan effective January 1, 2015. The producers and employees of the Loyda agency have moved into Robertson Ryan’s downtown Milwaukee office. Kewaunee will become the 8th office that Robertson Ryan has in Wisconsin. Robertson Ryan also has offices in Des Plaines, Illinois, Memphis, Tennessee, and Fort Myers, Florida. To learn more about Robertson Ryan, please visit robertsonryan.com.
To learn more about J.M. Wilson, please visit www.jmwilson.com.
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FEBRUARY 2015 | 25
COMMENTARY FROM COUNSEL
LIQUID GOLD NO MORE
COW MANURE JOINS SEPTAGE AND BAT GUANO AS POLLUTANTS In February 2014, this column discussed three recent Wisconsin decisions (one from the Supreme Court and two from the Court of Appeals) that addressed whether certain substances fell under the definition of “pollutant” with respect to pollution exclusions in insurance policies. See the February 2014 Independent Agent. The article detailed the uncertainty that resulted from these decisions (to recap: bat guano and septage were found to be pollutants, while cow manure was not only found to be not a pollutant, but had its status elevated to “liquid gold.”)
To resolve some of the uncertainty that resulted from these decisions, the Wisconsin Supreme Court recently took up the Court of Appeals decisions involving septage and cow manure. On December 30, 2014, the Court issued decisions in Preisler v. Kuettel’s Septic Service, LLC, and Wilson Mutual Ins. Co v. Falk, in which it held that septage and cow manure, respectively, are both “pollutants” as defined by the policies at issue in those cases, and, therefore, the policies’ pollution exclusions bar coverage for damage resulting from those substances.
The Wisconsin Supreme Court, in reversing the Court of Appeals, held that “cow manure falls unambiguously within the policy’s definition of ‘pollutants’ when it enters a well” and, therefore, that coverage for the harm caused by the manure was precluded by the policy’s pollution exclusion. Background (2012 Hirschhorn Decision Involving Bat Guano) In 2012, the Wisconsin Supreme Court examined a pollutant exemption in a homeowner’s policy and determined that it excluded damage caused by bat guano from coverage. Hirschhorn v. Auto-Owners Ins. Co. involved plaintiffs who owned a vacation
26 | FEBRUARY 2015
home in Lake Tomahawk, Wisconsin. When plaintiffs attempted to sell the home in 2007, they discovered bat guano in between the home’s siding and walls that created a “penetrating and offensive odor.” After cleaning attempts failed, the owners had to demolish the home and they subsequently filed a notice of property loss claim. The home was insured under a policy which precluded coverage for any “loss resulting direct or indirectly from: . . . discharge, release, escape, seepage, migration or dispersal or pollutants.” The policy defined “pollutant” as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, liquids, gases and waste.” Waste was defined as “materials to be recycled, reconditioned or reclaimed.” Auto-Owners denied the claim based on the policy’s maintenance exclusion clause and later revised its denial on the additional ground that bat guano constitutes a “pollutant” as defined by the pollutant exemption clause. The circuit court, however, denied Auto-Owners’ motion for summary judgment, holding that bat guano accumulation is unlike “traditional pollution” covered by the exemption. Upon reconsideration, the circuit court excluded coverage, deciding that bat guano qualified as a “pollutant” because the odor “seeped or . . . disbursed throughout the residence to cause the loss.” The Court of Appeals reversed the circuit court’s determination, holding that, because a reasonable insured might interpret “pollutant” as to not include bat guano, the pollution exemption was not invoked. The Supreme Court, in reversing the Court of Appeals, attempted to reconcile this case with its previous Pollutant Exclusion cases, defining “irritant” and “contaminant” by reference to
its previous decisions, where it had concluded that under the plain language of the policy, “[t] he terms ‘irritant’ and ‘contaminant,’ when viewed in isolation are virtually boundless” and, thus, “[t]he reach of the pollution exclusion clause must be circumscribed by reasonableness”; but also, in a separate case, determined “that the ordinary meaning of ‘contaminant’ is ‘one that contaminates’ or ‘make[s] impure or unclean by contact or mixture.” Relying on these prior decisions, the Hirschhorn court held bat guano “[fell] unambiguously within the term ‘pollutant’ as defined by the…insurance policy” because: (1) “bat guano and its attendant odor indeed ‘make impure or unclean’ the surrounding ground and air space” and can cause “inflammation, soreness or irritability”, making it an “irritant” or “contaminant”; and (2) “waste” unambiguously includes bat guano because a reasonable person in the position of the insured would understand bat guano to be waste.”
Preisler v. General Casualty Insurance Company – Septage In the nearly unanimous Preisler opinion (only Justice Abrahamson dissented), the Supreme Court upheld the Court of Appeals’ decision, concluding that a reasonable insured would understand that decomposing septage leaking into a water supply is a “contaminant” and, therefore, a “pollutant” as defined by commercial and contractor general liability insurance policies and likewise excluded by the policies’ pollution exclusions. The Preislers, operators of a dairy farm, brought a lawsuit against their neighbors, the Kuettels, who operate their own farm as well as a septic service operation. The Kuettels’ facility stores, transports and disposes of septage and received permission from the Wisconsin DNR to apply WISCONSIN INDEPENDENT AGENT
COMMENTARY FROM COUNSEL septage as a fertilizer at a rate not to exceed 13,000 gallons per acre per week, with a total of 39,000 gallons per acre permitted annually. The parties discussed applying septage on the Preislers’ farm as fertilizer and did so for several years, apparently without incident. In 2008, however, the Preislers experienced problems with their well water and their cattle began to die at a higher rate. Testing showed that the Preislers’ well water contained elevated levels of nitrates, a bi-product of decomposing septage. The Preislers began their lawsuit in 2010, adding the insurance carriers of the Kuettels’ homeowners’ insurance and CGL policies. The CGL policies contained similarly worded pollution exclusion clauses that exclude harm “arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants.’” The policies further define “pollutants” similarly as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.” The circuit court agreed that the pollution exclusion clause applies to preclude coverage for alleged losses arising out of storage of septage and application of septage to farm fields alleged to have caused contamination of the water supply. The Preislers and Kuettels appealed, arguing that septage is not a pollutant and, therefore, the exclusion did not bar coverage. The Court of Appeals affirmed the circuit court’s determination. The Wisconsin Supreme Court, following its recent decision in Hirschhorn, followed a twostep analysis in determining that the Preislers’ claim was precluded by the policies’ pollution exclusions. The court first looked at whether the substance in question was a pollutant and then considered whether the alleged loss resulted from the “discharge, dispersal, seepage, migration, release or escape” of the substance. However, in Preisler, the parties did not dispute the second step in the analysis — that the alleged damage resulted from the “discharge, dispersal, seepage, migration, release or escape” of decomposing septage. Therefore, the Supreme Court only considered whether the decomposing septage is, indeed, a pollutant as defined by the policies. WISCONSIN INDEPENDENT AGENT
The Court also noted that the policies’ specific use of the word “contaminant” in defining “pollutant” should have provided clear notice to reasonable insureds, including the Kuettels, that their policies would not cover claims including decomposing septage seeking into water supplies. Agents should take heed of a passing shot one of the opinion’s footnotes, where the court states “[o]ne could wonder what conversation transpired between the insurance agent and the Kuettels yielding insurance policies that do not cover harm caused in the course of their chosen business. However, the actions of the insurers and their agents are not before us.”
Wilson Mutual Insurance Company v. Falk – Cow Manure In the 4-1 Falk decision (Justice Abrahamson again dissented; Justice Prosser did not participate), the Court was tasked with determining whether cow manure is a pollutant as defined by the relevant insurance policies. The Falk court overruled the Court of Appeals determination, holding that a reasonable insured would expect that cow manure is a pollutant.
he injury is caused by the discharge, dispersal, release, or escape of chemicals, liquids, or gases into the air from the ‘insured premises.’” The Farm Chemicals Endorsement also included a pollution exclusion. In early 2011, the Falks used manure to fertilize their fields, however, in May 2011, the Wisconsin DNR notified them that “the manure from [their] farm had polluted a local aquifer and contaminated their neighbors’ water well.” The neighbors demanded compensation and the Falks filed a claim with their insurer, Wilson Mutual, who denied coverage on the ground that cow manure is a pollutant excluded from coverage by the applicable policy’s pollution exclusion. The circuit court agreed with Wilson Mutual, denying coverage for any damage arising from the water contamination. The circuit court’s analysis focused on the fact that “[a] reasonable person in the position of the Falks would understand cow manure to be waste.”
The decisions in Preisler and Falk bring some consistency to Wisconsin law interpreting and applying pollution exclusions.
The plaintiffs in Falk owned and operated a dairy farm including over 600 cattle and 1670 acres of land. The Falks obtained a “farm” insurance policy from Wilson Mutual to provide property and personal liability coverage and it included a pollution exclusion that exempted from coverage losses resulting from the “discharge, dispersal, seepage, migration, release, or escape of ‘pollutants’ into or upon land, water or air” and “any loss, cost, or expense arising out of any … claim or suit by or on behalf of any governmental authority related to testing for, … cleaning up, removing … or in any way responding to or assessing the effects of ‘pollutants.’” “Pollutant” was defined in the policy as “any solid, liquid, gaseous … irritant or contaminant, including … waste. Waste includes materials to be recycled, reclaimed, or reconditioned, as well as disposed of.” The policy also contained a “Farm Chemicals Endorsement” which provides coverage for damages for physical injury to property if “[t]
The Court of Appeals, relying on the Supreme Court’s decision in Hirschhorn, reached the opposite conclusion, determining that, according to the policy’s plain and ordinary meaning as understood by a reasonable insured – namely a reasonable farmer – cow manure is not a “pollutant” under the policy exclusion. According to the appellate court, a reasonable farmer would not consider cow manure to be a “pollutant,” an “irritant,” a “contaminant,” or “waste” as defined in > Josh Johanningmeier the policy because, for is the IIAW’s General a farmer, “manure is an Counsel. Call the Legal everyday, expected Services Hotline at (877) CONTINUED ON NEXT PAGE
236-1669.
FEBRUARY 2015 | 27
LIQUID GOLD NO MORE
COW MANURE JOINS SEPTAGE AND BAT GUANO AS POLLUTANTS CONTINUED FROM PREVIOUS PAGE
substance … that is not rendered a pollutant under the policy merely because it may become harmful in abnormally high concentrations or under unusual circumstances.” The Wisconsin Supreme Court, in reversing the Court of Appeals, held that “cow manure falls unambiguously within the policy’s definition of ‘pollutants’ when it enters a well” and, therefore, that coverage for the harm caused by the manure was precluded by the policy’s pollution exclusion. Like in Preisler, the Court walked through the occurrence analysis and found the occurrence to be the seepage into the wells. The Court then looked to whether a “reasonable insured”
would deem cow manure to be a pollutant. Following the analysis in Hirschhorn, the Court considered whether an insured would consider cow manure to be a pollutant in the context of the occurrence, the seepage into the wells. The Court concluded what while a reasonable insured may not consider manure safely applied on a field to be a pollutant, a reasonable insured would consider manure in a well to be a pollutant and, therefore, the resulting damage was not covered due to the operation of the pollution exclusion in the policy.
Now What? The decisions in Preisler and Falk bring some consistency to Wisconsin law interpreting and applying pollution exclusions. However,
given the uncertainty in this area of the law over the past few years, the fact that the court has now looked at pollution exclusions three times in as many years, and the highly-nuanced opinions in Preisler and Falk, it remains to be seen whether new cases will create additional challenges and caveats to pollution exclusions. Preisler and Falk demonstrate that courts will carefully scrutinize the language in pollution exclusions and will consider the exact type of contaminant or irritant at issue to determine if the exclusion applies in a given instance. The decisions are also a good reminder to consider the position of a reasonable insured when discussing coverage options and to offer products that best suit the needs of the individual seeking coverage.
the We look for the best independent agents and build relationships that last the duration. We are committed to the independent agency system as the only means to deliver our products. Because of that, we work hand-inhand to help our agencies grow profitably.
Our agents set us apart. For information about becoming a Partners Mutual Insurance Agent please contact Brian Martin at 262.432.3439; Martin.Brian@PartnersMutual.com or Mike Ottman at 262.432.3418; Ottman.Michael@PartnersMutual.com.
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TECHNOLOGY
4 DATA MANAGEMENT NEEDS
FOR FRAUD DETECTION
A recent report by the Coalition Against Insurance Fraud suggests that insurers are pursuing predictive analytics and other fraud detection technology with added vigor. In fact, 95% of survey respondents said that they use anti-fraud technology, an increase from 88% in 2012. But insurers cited data integration and poor data quality as a major challenge in implementing anti-fraud technology. Many projects get off track before they even get started because of data access and data quality challenges.
Data, data everywhere and not a drop to analyze Insurers are brimming with data. One of the biggest challenges insurance companies face when implementing predictive analytics is gaining access to the right data sources. Efforts are hampered by multiple legacy claim applications, systems that are segregated by line of business, disparate homegrown SIU case management systems, and third-party vendor systems that house critical data like medical billing information. Much of the useful information is contained in lengthy unstructured text fields like claim notes. Hand-keyed data fields often contain spelling and transposition errors. Frequently, there is no universal key identifying individuals and entities across claims, policy, and billing systems. Of course, we are adding new highvolume sources every day, such as feeds from social media and telematics devices.
The investment made in the data cleansing process up front will pay significant dividends in the form of improved detection rates. While consolidating this data can be complex, narrowing the scope of the effort and using robust data integration and data quality tools can make this happen much faster and more cost-effectively. Addressing data quality and integration issues is critical to producing a successful model. WISCONSIN INDEPENDENT AGENT
Garbage in, garbage out Some fraud detection technology systems do not account for these data quality issues. If these issues are not addressed up front, a system can still be deployed and may even provide some value. However, users will forever be plagued by false positives, missed opportunities, and erroneous flags. The quality of fraud analytics depends directly on the quality of the input data. Here are four key steps to prepare insurance data for fraud analytics: 1. Integrate data silos. Core processing systems are designed to serve a specific purpose that often has nothing to do with aggregated data analysis. Even if they originate in different places, claims, policy, application, billing, and medical data sources need to be joined together for purposes of fraud analytics. Don’t forget to include legacy systems and other less formal “systems” that might be used during everyday business processes, like spreadsheets, watch lists, case-management applications, and shared file systems. During this stage, it’s critical to document the integration efforts and ensure that they are repeatable and auditable. This will be critical when you enable fraud analytics scoring in production. 2. Deal with missing and erroneous data. Do your systems contain individuals whose Social Security number is 123-45-6789 or 999-999999? Have you encountered a claim file with a missing telephone number? If these errors are ignored, they can have a dramatic negative impact on fraud analytic results. Leading data quality tools can help identify, repair, and replace missing or erroneous data. In some cases, the missing data is available in another system, while in other instances it can be inferred based on a combination of other sources. During this stage, it is also useful to standardize formats for common fields like addresses. 3. Resolve entities. Once data is aggregated from multiple systems, it is important to identify
whether the same individuals, companies, or other entities exist in multiple places. One system might capture name and Social Security number, while another system uses name and date of birth. Entity resolution techniques can be used to link these two records and identify them as the same individual. Entity resolution can involve simple rules, but the best results are seen when more advanced analytical techniques are used to determine the likelihood of matching. This step is important especially if social network analytics or link analysis will be used in the fraud analytics solution. A single person could have roles as an insured, claimant, witness, driver, vendor, and employee across multiple claims. Being able to link them is powerful in detecting suspicious activity. 4. Process unstructured text. By some estimates, up to 80% of insurer data is kept in text format. Some of the best information about a claim file is captured in the loss description or claim notes fields. But dealing with data isn’t always simple. Abbreviations, acronyms, industry jargon, and misspellings are commonplace and need to be addressed by a text analytics solution that contains a library of terminology specially designed for insurance data. During the analysis of text, additional model variables can also be created. This is a very powerful way to expand the scope of fraud analytics without having to include external data sources. Machine learning and naturallanguage processing techniques should be used to find and create useful variables for fraud analytic modeling. Effective data management is essential > James Ruotolo is an insurance fraud to every fraud analytics technologist, thought implementation. The leader and the principal investment made in the for insurance fraud solutions at SAS. Connect data cleansing process up with him on Twitter @ front will pay significant jdruotolo. This article dividends in the form of was published on insurancetech.com. improved detection rates.
FEBRUARY 2015 | 31
© 2015 Society Insurance
Fine coverage instead of fine print. Small detail. Big difference. At Society, we keep it simple and protect your customer’s outdoor property the same way we do their building—and that includes coverage for wind damage. In our experience, signage, fencing or satellite dishes are more likely to be damaged by wind than anything else. Ironically, some insurance companies don’t include this common risk in their outdoor property coverage. If you agree that details like these can make a big difference, give us a call at 888-5-SOCIETY or visit societyinsurance.com.
32 | FEBRUARY 2015
WISCONSIN INDEPENDENT AGENT
FOCUS ON CONTENT
IN WITH THE NEW:
WEB TRENDS FOR 2015 We may not be psychologically ready for the new year yet, but it’s time to take a look at the prevailing web trends for 2015 to make sure we aren’t missing a beat as we move forward into the new year. Here is a list of the features you should already have or be seriously considering for your website in the new year:
scrolling haters will need to make peace with this trend.
D www.pbs.org/newshour/spc/new-olderworkers/chapter-1-rethinking-retirement
1. Responsive sites are now mandatory. A new challenge includes designing for the small displays on smart watches.
6. Pinterest-style card design enhancements. More details are now possible to add visual interest to the layout we all love.
10. A personalized user experience. For example, Netflix shows you what you just watched and offers suggested movies and shows for you to watch.
2. Minimalistic buttons. Simple, clear buttons with colorful outlines and text that fill in to a solid color on the hover state.
7. The flat design trend continues. Subtle patterns and gradients are just fine to add visual interest when needed.
11. Parallax scrolling effects. This dynamic 3-D motion is a beautiful and fun way to improve engagement by up to 70%.
3. Typography has come of age. Services like Google Fonts and Adobe’s Typekit have helped to breathe new life into websites and mobile devices. Just keep an eye on load times and the number of font families to two or three at the most.
8. Watch for more microinteractions. These include popup signup forms and more subtle to not-so-subtle movements on a page for the calls-to-action.
12. The infographic is evolving. A webgraphic is an infographic that is broken down into smaller pieces to allow for parallax and responsive design, in addition to user interactions with multiple links. (Example: http:// futureofcarsharing. com.)
4. Full-screen beautiful background images and videos. Blur and color filter overlays allow text to be readable when it’s on top of these large images. 5. The long, scrolling page is here to stay. Fewer and longer pages are the new norm, so WISCONSIN INDEPENDENT AGENT
9. Interactive storytelling will live happily ever after. Use an overall story, data and interactions to help get your message across. Website examples of this include: D thinkgreenmeeting.com D www.inception-explained.com
Health, happiness and hipness in the new year. Cheers!
> Kurt Huber is the Senior Art Director at TMA+Peritus.
FEBRUARY 2015 | 33
FOOD FOR THOUGHT YOU WILL LOVE THIS NEW DISCOVERED LIST - PROVEN SAFE GUARANTEED RESULTS
Yale University studied many words in the English language and discovered the following to be the most powerful, especially when trying to sell or persuade. Here are the 10 words you should always consider using in your campaigns: 10. NEW 9. SAVE 8. SAFETY (or SAFE) 7. PROVEN 6. LOVE 5. DISCOVER 4. GUARANTEE 3. HEALTH 2. RESULTS 1. YOU Obvious words that are missing? FREE and SEX. They are still considered to be two of the most powerful words in the English language, but when it comes to advertising, they have been abused so much that they have fallen out of favor with consumers. Source: about.com
JUMPIN’ JACK FLASH IS A DINOSAUR
Naming the fossil of an extinct pig-like swamp creature after Mick Jagger might not sound like much Not Mick Jagger of a tribute to the aging rock ‘n’ roll star — unless it’s an honor bestowed by scientists. Ellen Miller, an associate professor of anthropology at Wake Forest University, paid homage to the pouty-lipped Rolling Stones frontman by giving the scientific name Jaggermeryx naida, or “Jagger’s water nymph,” to the fossil of a large-lipped animal she and colleagues discovered. “I like the Rolling Stones,” Miller said in a news release issued by Wake Forest. “I’m a huge Stones fan.” The deer-sized creature A Dinosaur’s Inspiration lived 19 million years ago in Africa, and is described by researchers as something of a cross between a long-legged pig and a slender hippo.
‘‘
Getting from point A to point Z can be daunting unless you remember that you don’t have to get from A to Z. You just have to get from A to B. Breaking big dreams into small steps is the way to move forward.” – Sheryl Sandberg, COO of Facebook
Source: nbcnews.com
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