2021 April PIA Vermont by PIA Northeast

April 2021 • Vermont

PAGE 20

INSURANCE

PREMIUM

FINANCING for the P/C market

You and your clients need to understand its inner workings

IN THIS ISSUE 9

Electronic document delivery

Understand social movements

Value professional partnerships

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DEPARTMENTS 4 April 2021 • Vermont

In brief

9 Tech 15 Sales 31 E&O 35

Ask PIA

Readers’ service and advertising index

COVER STORY 20 Insurance premium-financing for the p/c market You and your clients need to understand its inner workings

FEATURE 27 Increase your business through partnerships The value of professional relationships for independent agents

Statements of fact and opinion in PIA magazine are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the Professional Insurance Agents. Participation in PIA events, activities, and/or publications is available on a nondiscriminatory basis and does not reflect PIA endorsement of the products and/or services. President and CEO Jeff Parmenter, CPCU, ARM; Executive Director Kelly K. Norris, CAE; Communications Director Katherine Morra; Senior Magazine Designer Sue Jacobsen; Editor-In-Chief Jaye Czupryna; Advertising Sales Executive Susan Heath; Communications Department contributors: Athena Cancio, Alexandra Chouinard, Patricia Corlett, Darel Cramer, Roberta Lawrence, Zack Littrell and Crystal Ringler. Postmaster: Send address changes to: Professional Insurance Agents magazine, 25 Chamberlain St., Glenmont, NY 12077-0997. “Professional Insurance Agents” (USPS 913-400) is published monthly by PIA Management Services Inc., except for a combined July/August issue. Subscription rate for members is $13 per year, which is included in the dues; subscription rate for nonmembers is $25 per year. Professional Insurance Agents, 25 Chamberlain St., P.O. Box 997, Glenmont, NY 12077-0997; (518) 434-3111 or toll-free (800) 424-4244; email pia@pia.org; World Wide Web address: pia.org. Periodical postage paid at Glenmont, N.Y., and additional mailing offices. ©2021 Professional Insurance Agents. All rights reserved. No material within this publication may be reproduced—in whole or in part—without the express written consent of the publisher.

COVER DESIGN Zack Littrell

IN BRIEF

FYI

The positive power of outreach and meetings Grace Bauer, president and owner, The Grace Bauer Group Inc.

From working in the office, to working remotely, to returning to the office, or establishing a hybrid work structure, agency principals are searching for what to do next. While many agencies may be doing well, there are some overwhelmed agents who do not know what to do next. Here are some tips to help your agency succeed. Thank you so much Just a simple, appreciative “thank you” makes a huge difference in the success of your agency. That positive reinforcement among staff members increases efficiency and productivity—and employees are happier. In these different times, work toward making employees happy. The importance of meetings Most employees may feel meetings are a waste of time, but they are vital now. Some employees still are working remotely. They need that communication from the office to keep them updated on the status and success of the agency. Keep employees in the loop. Do not be afraid to tell it like it is. When employees understand what is going on, the morale goes up, employees feel more a part of the agency, and they will give you that extra assistance you may need to help the agency succeed. Full-staff meetings Try to have weekly 30-minute meetings with the full staff. Talk about agency issues, how the agency is doing, ask each employee how he or she is doing. Most importantly, review your marketing plan, producer sales program, yearly account reviews or account-rounding programs. This will help you keep the sales going and maintain business. If you are a larger agency, then hold separate weekly meetings for each department (e.g., commercial lines, personal lines, life-health-employee benefits). Saving time—interruptions When employees ask questions, if the questions can wait, ask employees to bring them to the weekly meeting— that way you can teach all employees at the same time. Limiting interruptions will increase efficiency. Just one interruption is an errors-and-omissions opportunity waiting to happen. We cannot afford quick interruptions in our day—especially when quoting, reviewing policies, or simply processing an endorsement. Financials Do not forget to meet with your accounting department or manager to review how the business is doing financially. Review financial reports as well as reports on cancella-

tions, sales, etc. Reviewing these reports and making adjustments is critical to the success of the agency. Management Have a weekly meeting with management, too. Try to have the meeting away from the office. Give managers the opportunity to review their issues with agency principals and to keep updated on all departments. As an agency principal, you will know the agency is being run properly, and you know the potential of critical issues. With the pandemic, it might be hard to leave the agency for a lunch or an outside meeting; however, try to make the meeting relaxing and fun. Managers will feel more relaxed about sharing important issues, and, of course, you want to instill that close relationship in the management team. Productivity Again, when working through these various meetings, make sure they are 20-30 minutes and have a concise agenda. To make them fun, consider giving candy bars to the employees who kept their emails updated. Send a fun gift to employees working from home, and try and find ways to engage employees working remotely. Increase sales Finally, at sales meetings discuss successes, challenges and goals. Learn from one another. In these times, our sales procedures are different. Research successful sales techniques online, talk to each other, and formally put together an updated sales program. Your most valuable asset Think about the time, money and efficiency you will reap when you keep employees updated, and knowledgeable about what they need to do to succeed. As an agency principal, you are ensuring employee accountability and remember, your employees are your most valuable asset. Is your agency selling? Recently, an individual in the insurance industry asked me, “How can anyone be selling during these times?” Well, you better be selling—whether it’s account rounding, cross-selling, performing the yearly account review, or developing that critical marketing plan—think what would happen if you did not. Bauer has worked with over 2,000 agencies in the U.S., and continues to assist agencies in increasing efficiency, saving time on training, securing consistency and preventing E&O. Reach her at gbauer@gracebauer.com.

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BY THE NUMBERS

Returning to work after COVID-19 While many employees are eager to return to their offices, employers need to instill confidence in their employees about their safety, and create a seamless transition from remote work.

How employees feel … Prior to the release of the COVID-19 vaccine, 21% of U.S. employees say they would not consider getting vaccinated. It’s unclear whether employers will have the right to expect their employees to get vaccinated, so it’s crucial to make sure your employees are safe.

eager to return to the office in some capacity

have returned to the office and have experienced ineffective preventative measures like:

trust their employers to make informed choices regarding when to reopen the office

Concerns

54% of employees are worried about COVID-19 exposure at work:

worried about not knowing when a sick person arrives

worried about proper ventilation worried about office overcrowding

… and, wHat employers sHould do. It’s increasingly crucial to ensure employees’ needs and wants are kept in mind when planning to reopen.

Allow employees the choice to work remotely, even after the office reopens

Use a private survey for employees to fill out every day that includes questions about their current state of health. See your state government’s resources for guidelines.

Inform your employees of mitigation measures the office is making

Ensure the office is a safe environment for work and prepared for their return

• •

•

Space out work stations Ensure the office’s ventilation system will not increase the chance of exposure If a sick person contaminates the office, make sure you communicate with your employees while maintaining the privacy

• •

Stock up on supplies Consider distributing a message to your employees that will make them feel welcome

Make sure you follow the guidelines outlined by the federal and local governments regarding your office’s reopening. Returning to the office—whether partially or entirely—is a huge goal. It’s important to do it right. PIA.ORG

NEWS TO USE

The recent iOS update, and its effects on marketing Maria Grimm, founder, Relly

You may have heard buzz about the new Apple iOS update that happened in February. But, what is it and why is everyone talking about it? It’s just a simple update, right? The answer is yes.

people for following you with a private direct message that encourages them to join or sign up for other marketing materials you have available, such as your monthly newsletter or an upcoming webinar. For example:

However, once a user installs this update, Apple will require apps to ask for permission to track user activity. It also will give users the option to limit apps from collecting their data.

Hey [insert name], we’re so grateful you’re a part of the @yourhandle Instagram community. We hope our posts inspire you. Check out our monthly email with more great advice you need to run your business. Get it here: [insert link].

While this is good for the users, it might not be good for businesses—especially for small business that use Facebook’s ads center. With the loss of the third-party data from sources like Facebook Pixel, which tracks user activity on a website, Facebook says that small businesses could see a cut of over 60% in their sales for every dollar they spend. Now that you know what the iOS update will do and how Facebook believes it will affect small-business marketing efforts, let’s look at how you can diversify your marketing strategy. Prepare for the update Prior to the update, Facebook provided a list of actions small-business owners could take to prepare for the iOS update, including: • Verifying website domain in Facebook to help avoid any future disruption of website campaigns. • Picking eight most relevant events (i.e., actions people take on a website, such as signing up for a newsletter, adding to cart or viewing a key page). Diversify your marketing strategy With third-party cookie data dwindling, the rise of firstparty data is making a comeback. With information you collect directly from your audience, you can connect and deepen relationships with your most valuable and effective marketing tool: your past and current customers. Did you know it costs five times as much to acquire a new customer than it does to retain an old one? Taking the time to create content and engage with your current customers via email, calls, handwritten notes or on social media, is one of the easiest ways to grow your business. Some simple things you can do include the following: Be responsive. Not only should you answer every single direct message you receive on your social-media channels, but also you should use this as an opportunity to thank 6

Make lists. Segment your customers and prospects via email distribution lists. By segmenting your lists, you can tailor your messaging and email marketing campaigns to provide content specific to that audience, such as helpful tips, industry updates or additional services and products. This helps the customers feel that the message they’re receiving was customized specifically for them. Use the power of LinkedIn. LinkedIn ads might be the best kept secret in the marketplace. Not only can you get more value for your ad, it’s also a great place to generate tangible leads. For example, if you are an independent agent looking to grow your client base, you might try targeting businesses with a company size of two to 10 or 11-50 employees. You could continue to narrow down your audience by targeting specific job titles, like owner, or job functions, like administrative. While your audience may not be spending nearly as much time on LinkedIn as they do on Facebook, they are more likely to be in a buying mindset while scrolling through LinkedIn, which is why LinkedIn is the No. 1 social network for lead generation for businesses. Utilize tracking codes. Consider installing first-party tracking codes on your website with free platforms like Hubspot. These tracking codes can help you attribute contacts to specific ads or be more specific about who sees your Facebook, Google or LinkedIn ads. In summary, the iOS update can be a good thing for businesses. It’s a move that is forcing you to not put all your eggs in one basket, like your marketing tactics. In the digital age, platforms and algorithms are changing constantly. The more diversified your marketing strategy is, the easier it is for you to reallocate your assets. Grimm is founder of Relly—an online member-based portal that makes marketing easier and more effective for smallbusiness owners.

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An engaging article on e-delivery of documents Let’s discuss the electronic delivery of insurance documents. Please don’t leave! I promise this will be painless (mostly). I know that the electronic delivery of insurance policy documents is not a new phenomenon. You probably have sent thousands of documents electronically. Why would you need to read an entire article on electronic delivery of insurance documents? That is a good question. Let me answer that question with a question of my own: You may have sent thousands of documents electronically, but are you sure you did so correctly? While a federal law to address this issue passed in 2000, PIA Northeast still fields many questions each year on this topic. So, give me five minutes now—it could save you time and money down the road.

TECH

BRADFORD J. LACHUT, ESQ. Director of government & industry affairs, PIA Northeast

Chekhov’s federal law The federal law—the Electronic Signatures in Global and National Commerce Act (E-Sign1)—established the legal validity of electronic records and signatures. Since then, every state in the country has adopted laws that mirror E-Sign.

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While E-Sign, and the state laws that it spawned, created the legal validity of electronic documents, they specifically do not require anyone to be forced to accept them. Instead, the law requires that prior to sending any insurance document to an insured,2 the insured must first give his or her consent to receive the information electronically. Not only that, but consent must be given in a specific manner.

If the information is on your agency’s website, than the consent form should be accessible there. This also means that perhaps paradoxically, a hardcopy consent form with a “wet signature” wouldn’t be valid.

Prior to sending any insurance documents electronically, agencies are required to provide their insureds with a consent statement to acknowledge. They are required to send the consent statement in a manner in which the future insurance documents will be sent. In English, this means if an agency is going to email information to the insured, the consent form should be emailed.

The content of the consent statement needs to address the how, what and what-happens-when of electronic delivery.

The consent statement first needs to address how the insureds will access the electronic documents they will be sent. From a practical standpoint, this means that the statement should include information on any hardware or software necessary to access the electronic documents. This may include ensuring your insured has a valid email address, a reliable internet connection, and the ability to open PDFs. Remember, this requirement does not end when the notice is sent. Instead, an agency has an ongoing responsibility to notify the insured of any change in the hardware or software requirements needed to access or retain the electronic records. Any change in hardware and/or software triggers the need to send another consent statement.

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Of course, the consent statement needs to provide more information than just hardware and software requirements. It also must serve to provide the insureds with information on what documents they are consenting to receive electronically. Arguably, this is the most important piece of the consent statement. It provides the insured with key information, and it serves to protect the agency sending the information. Wording is vital—if an insur-

ance document is not mentioned in the consent statement, then technically, it cannot be sent electronically. A poorly worded statement often leads to an agency sending multiple consent statements to an insured to make sure all relative documents are addressed. For this reason, it is wise to word this section as broadly as possible to encompass as many documents as possible. An example of a sufficiently broad statement: “Your consent to electronic records applies to all policy documents, applications or any information related to your policy.”

However, if the producer is permitted to charge a fee for a document and the document is available electronically, but a paper copy is requested, a fee may be imposed. A common example of this practice would be providing certificates of insurance for clients.

But, wait there’s more! We have been discussing the requirements of the initial consent notice, but the responsibility of the agency actually extends beyond. When a document is furnished electronically, the insured must be notified of the significance of the document, if it is not immediately evident. In addition, the insured must

What-happenswhen While the purpose of the consent statement is to get an insured’s permission to send documents electronically, this notice also must address the insured’s right to withdraw that consent. Under the law, insureds can withdraw their consent at any time. The notice must inform the insureds of this right, and how they can withdraw their consent. As an example, a statement like: “You may withdraw your consent to receive your records electronically at any time by sending an email to the following address …,” would sufficiently address this requirement. Going hand in hand with the ability to withdraw consent, is a prohibition against being penalized for doing so. Specifically, if an insured opts to receive hardcopy documents, he or she cannot be charged a fee for those copies. This prohibition only applies to those documents that a producer would otherwise be required to furnish for free. Most policy documents would fall into that camp.

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be notified of the right to request a paper version of the document. When sending the initial notice or subsequent electronic documents, everybody in your agency should make sure they are documenting the steps they have taken. While not required by law, a good best practice is to request a return receipt on all electronic communications. This makes proving consent much easier if there is an issue down the road.

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An engaging article on e-delivery of documents While agencies have been sending documents electronically for years, 2020 was the year that delivering documents electronically went from a convenience to a necessity. The sheer volume of electronic communications now requires that agencies review their consent procedures from time to time to make sure they are in compliance with the law. Spending a few minutes to make sure your electronic delivery procedures are sound will prevent many headaches later. As the father of American insurance, Benjamin Franklin said, “an ounce of prevention is worth a pound of cure.” Lachut is PIA Northeast’s director of government & industry affairs. Because all law titles need to have some clever acronym.

I am using the term insured here as shorthand for any consumer to whom you would be sending electronic information.

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Understanding today’s social movements If you look at the news and social media, the stories that flood your feed this past year include polarizing politics, government shutdowns, environmental disasters and social movements taking place across the country. If you take a moment to look around you, you’ll find businesses—both new and established—are fighting to keep their doors open and carry on operations as usual. Mental health concerns are a prime topic in this environment, as well. Unusual circumstances have created a unique situation in which people— whose voices were once cast in silence—are finding the courage to speak up and spread awareness. And, whether it is about politics, social injustices, or discrimination and sexual harassment taking place in the workplace, peoples’ voices are heard now more than ever.

In the words of bestselling author, Dianna Hardy, “It only takes one voice, at the right pitch, to start an avalanche.” Considering the landscape of today’s workplace this quote couldn’t ring more true.

SALES

AMANDA PUPPO CEO, MarketReach Inc.

According to the U.S. Equal Employment Opportunity Commission, the number of color-based discrimination lawsuits1 filed by employees against their employers has been on the rise. In recent events, Qual-

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comm, a large corporation that employs nearly 37,000 people, has been on the receiving end of a racial diversity lawsuit. This occurred when a Qualcomm shareholder filed a racial-diversity derivative claim against the company’s board for failing to include a single African American on the board or among the company’s senior officers. This lawsuit follows a series of similar ones filed against tech powerhouses, Oracle and Facebook. Having technology at our fingertips gives us access to the world at a swipe’s notice. As coverage increases, so does awareness—which means that as more reports of discrimination and sexual harassment cases are covered in the news, the more that people will realize that they are not alone. Per the EEOC, the percentage of total charge receipts including a claim for sexual harassment increased by 10.1% over the past five years.2 Employees are speaking up. Making headlines, Baltimore’s Union Craft Brewery removed an employee accused of sexual harassment. Coincidentally, most claims against breweries involve sexual harassment—and to a lesser degree—discrimination. As breweries fight to save reputation (e.g., hiring a human resources manager, and hiring consultants to improve the company’s culture, or providing training about workplace harassment), social movements—such as Black Lives Matter and the #MeToo movement—work to expose injustices and spread awareness. However, the COVID-19 pandemic remains the top story. This unusual situation has provided people of all different backgrounds a platform to be heard. Employers are reading the same headlines as their employees. To save face, employers are attending the same training classes as employees, in order to protect themselves and their businesses against discrimination and harassment lawsuits. The No. 1 reason for a discrimination lawsuit in 2019 was retaliation.3 And, out of all the retaliation claims filed against employers, the EEOC determined that 66.9% of them had no reasonable cause.4

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Now what? How do employers take the extra steps to protect their workplace? The answer is employment practices liability insurance. EPLI protects employers against claims made by workers who have sued the company for violating their legal rights as employees. And, while large corporations may be more susceptible to having a higher frequency of lawsuits filed against them, smaller companies—now more than ever—need the same kind of protection. Now is a good time to have conversations with your clients about the importance of EPLI and their businesses. [EDITOR’S NOTE: If you have purchased your agency’s E&O policy through PIA Northeast, you may be able to add EPLI coverage via endorsement. Contact the Member Services Department at (800) 424-4244 or memberservices@pia.org.] Also, your agency should commit to creating a safer work environment for all its employees. Employees, as well as their employers, should feel equally empowered. Puppo is the owner of 20-year-old New Jersey-based MarketReach Inc., which specializes in setting qualified sales meetings for insurance agencies and allied suppliers. In addition, MarketReach offers integrated marketing services to support a full sales pipeline such as LinkedIn Connection & Awareness program, monthly email newsletters, and sales collateral. For more information, log on to MarketReachResults.com.

PIA digital news

Distributed as a member-exclusive benefit.

Contact Susan Heath: sheath@pia.org (800) 424‑4244, ext. 231 116465 1119

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DAVID COOKSLEY CEO, Quikfuzion

INSURANCE

PREMIUM-FINANCING for the property/casualty market

You and your clients need to understand its inner workings

he business of financing insurance premiums is nothing new. Premium-financing has been around for over 50 years, and it represents big business. The combined annual loan volume for U.S. commercial- and personal-lines premium exceeds $50 billion and exhibits a steady growth path each year. Like the agency market, the insurance premium industry continues to consolidate. According to Colannade Advisors, “the top six premium-finance companies control over 75% of the commercial-lines premium-finance industry; all but one is owned by banks.”

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Insurance premium-finance companies, and the installment payment programs they make available to the personal- and commercial-lines markets, make it easier for agents to sell insurance. Many carriers do not offer installment programs, or the insured may find the carrier’s installment payment terms not acceptable. Premium-finance companies provide alternative finance programs that improve the insured’s cash flow by offering lower down payments or longer payment terms. Premium-financing is becoming a must-have option, given the explosion of the excess-and-surplus market and the captive market. Also, premium-financing allows agencies to write more business when the market hardens. When a policy is financed, typically the borrower is required to make a down payment ranging from 15% to 25% of the annual policy premium. The remaining balance owed to the insurance carrier(s) then is financed by the premium-finance company. Premium-finance agreements are subject to individual state statutes that have their own rules to govern limits on finance charges, fees and cancellation processes. These rules allow the premiumfinance company to place a lien against the insurance policy with the right to cancel the insurance policy if the borrower defaults. If a policy is canceled, the insurance carrier must refund the unearned premium and return it to the premium-finance company. Most property/casualty policies that are financed through premium-finance companies are for commercial risks, but there are premium-finance companies that handle personal-lines policies as well. The premium-finance companies we are talking with today focus on improving sales and service through technology, such as e-signature and electronic payment collection. These technology features are more important than ever given COVID-19 and the remote work conditions. First, we will discuss personal-lines premium-financing with Ariel Fischer, senior vice president at The Premins Co. The company was founded in 1965 and is under its third generation of family management. It facilitates insurance premium-financing for commercial, personal and assigned-risk policies. The Premins Co. is licensed in New York, New Jersey, Connecticut, Pennsylvania and Florida. Next, we ask Justin Berry, regional president Midwest/Central at FIRST Insurance Funding about premium-financing for commercial lines. It is the largest premium-finance company in North America with over $7 billion in premium-financing to the commercial-lines industry. FIRST Insurance Funding is part of Wintrust, a financial services company with combined premium-financing exceeding $10 billion. It provides premium-financing on a national level, with a focus on improving sales and service through technology.

The Premins Co. Many agents are probably not aware that you can premium-finance a personal-lines policy today. Many carriers offer direct bill, so what are the driving factors for an insured to choose premium-financing? Fischer: We do finance some direct-bill policies, but most financed personal lines are agency-billed, such as homeowners or auto policies. The agents benefit

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in several ways. First, commissions can be paid up front rather than gradually over the months. Second, depending on the state, financing offers additional revenue sources for agents. Lastly, agents can monitor their insureds easily to assist with retaining their commission and deepening the relationship with their insureds. From the insured’s perspective, financing offers lower down payments with longer payment terms. Is there a minimum premium required to meet eligibility requirements to premium-finance a personal-lines policy? Are there any types of personal lines that cannot be financed? Fischer: No minimum requirements required. We do not finance health and life insurance policies. Most direct-bill policies cannot be financed, as the return premiums (the collateral for financing) would be sent directly to the insureds rather than the finance company. Typically, what kind of down payment is required for a personallines policy and does it vary by state or line of business? Fischer: Down payments for personal lines vary widely depending on the risk, size, state, and type of policy. For example, a New York Auto Insurance Policy requires a 15% down payment, while an E&S homeowners policy may call for a 20% or 25% down payment. What happens if an insured does not make his or her payment on time? Is the agent or broker who placed the policy at any financial risk? Fischer: An agent is not held liable for a late payment or cancellation. Rules governing late payments vary

according to state laws, but typically, the insured is given several days grace period before an intent to cancel is sent. If the payment is still not made, then eventually we will use our power of attorney to cancel the policy for nonpayment. Do you offer any kind of technology to help agents and brokers place and service business? Fischer: We offer brokers and agents a wide array of technological options to assist with servicing their clients. Our most important asset is our custom-built website, which allows brokers to easily create and sign quotes, remit credit card or e-check payments, and track their insureds. Our goal is to give our brokers the tools they need to get answers quickly and efficiently. We are always improving our systems to keep up with the changing environments. Are you seeing any new trends developing given COVID-19 and the remote-work conditions? Fischer: While the insurance industry was slowly moving toward digitalization, COVID-19 certainly has expedited this process. We have seen a big shift in the way all players in the insurance industry view digital acceptance. From digital signatures, to Automated Clearing House payments, to email—everyone is relying less on mail and paper. If you have a borrower who lives in New York as his or her primary residence, but also owns a vacation property in another state in which you are not licensed, can you still provide the premium-financing? Fischer: Our company can only finance policies in states in which we are licensed, but we are happy to add more states if the demand is present.

FIRST Insurance Funding What do you see as the driving reason for the uptick in commercial-lines financing? Berry: Several conditions are driving an increase in demand for financing of commercial premiums. Hardening of the market, which creates higher premium costs, combined with the uncertainty of the economic outlook is causing insureds to need more cash-flow options. There has been an increase of policy types being pushed into the excess-and-surplus market, as well as into captives. Usually, these markets require all or most of the premium to be paid in full. Additionally, carriers are not offering appealing direct-bill options. Is there a minimum premium or maximum amount you can loan for commercial lines? Are there any types of commercial lines that cannot be financed? Berry: FIRST offers loans of all sizes. Our flexibility enables us to offer loans for smaller businesses online, and agencies and carriers online up to multimillion-dollar loans for large commercial enterprises. We finance all lines of commercial accounts with risk and minimum-earned as factors that determine down payment and number of installment terms. FIRST even offers agency loans for acquisition, perpetuation and new producer hires. What is the average down payment required for a premium-finance policy written through your company, and does it vary by state or line of business? Berry: Standard terms that are offered are 15% down payment and 10 installments. Subject to credit approval, the most favorable terms we offer are 12 equal payments. The states do not have any specific requirements, but our underwriting team does look at many different variables when considering the risk level, including if the policy has a minimum-earned premium. What happens if insureds do not make their payments on time? Who is responsible for the financial risk? Berry: Our goal is to figure out a solution to keep the agency/insured relationship intact. Our dedicated team of asset management professionals looks at every possible solution to help the insured stay current on payments. As a result, we have one of the lowest cancellation rates in the premium-finance industry. We work closely with the agents, but they have no financial risk on good faith accounts placed with us. Do you offer any kind of technology to help agents and brokers place and service business? Berry: Our online system gives agencies the ability to offer their clients an installment payment plan with every policy they quote. We can collect the signatures, down payment and future installment payments electronically by credit card or direct debit. Agencies can manage their entire book of business with FIRST online and view reporting, without printing a single piece of paper.

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Are you seeing any new trends developing on commercial-lines premiumfinancing given COVID-19 and the remote work conditions? Berry: COVID-19 disruption has transformed the premium-finance industry. Insureds and agents need a completely contactless, paperless quoting, and loan process that is easy to use. FIRST already had introduced our electronic signatures and down payment collection service to agencies prior to the pandemic, but we saw a dramatic increase in adoption. We continually collect user feedback to customize our process for individual agency workflows and processes. Additionally, we are growing partnerships with InsurTech and online platforms

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to offer turnkey payment options using our application programming interface solutions. Do you write on a national level? Berry: Yes. FIRST will write a record $10 billion in loans for commercial and life policies this year due to a combination of factors. Demand for cash-flow solutions has grown not only due to COVID-19 and increased cost of premiums, but low interest rates make financing insurance premiums a sound financial strategy.

Look for the right partner These are just two of the insurance premium-finance companies that do business in the PIA Northeast footprint. However, building a strong relationship with a primary premium-finance partner is a recommended best practice for highgrowth agencies. Look for a partner that offers your team education on how to talk proactively with clients about cash flow in a consultative way. Work with a partner that is focused on innovation and investing in new integrative technology solutions that give an agency the freedom to work remotely—wherever your team and insureds are located. All these factors will make it easier for your agency to write more business. Quikfuzion is an InsurTech company that has developed a robust, web-based agency management platform designed to replace older and more expensive agency management systems. Prior to Quikfuzion, Cooksley was CEO of Xcipio, which created the industry’s first real-time comparative rater that was sold to Fiserv. He spent 20 years in the insurance agency side, specializing on mid- to large-sized commercial accounts.

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Increase your business through partnerships The value of professional relationships for independent agents Your role, as independent agents, is to apply risk management principles to each situation, explain potential exposure and loss, and offer different techniques to help insureds mitigate exposure. You know insurance is a people-centric business. You prepare your insureds with the proper tools and reduce stressors for them. Part of your reward is the satisfaction from helping people and making that human connection. While being an independent agent can be extremely rewarding on many levels, you know it is not easy. You often find yourself operating in an adverse environment, and facing industry challenges such as raising rates, increasing competition, and changing customer preferences. While usually having no control over these pressures, you must be resilient and able to take hits while staying steadfast and focusing on growth. Question: How do the best do this? Answer: By always providing outstanding service to your clients. When the dust from the COVID-19 pandemic settles, we recognize that it is vital to remain focused on those things that will grow the business—a never-ending process. The foundation of your success as an independent agent is maintaining your relationships with clients and with

carriers. However, just as critical are the deep relationships you create with other professionals. These business partners bring new opportunities and, more importantly, they allow you to offer a range of help to clients. Creating partnerships with other professionals who regularly refer high-quality clients is the optimal way to build and grow a substantial business. Professional business partners serve two purposes for independent agents: 1. they help you grow your business; and 2. they enable you to serve clients better. People often connect with an independent agent to have more choices. Insureds understand you represent many different insurance companies that offer a wide variety of coverage options and price points. With your connections and knowledge of appetites and markets, people understand that agents often find a better value than most potential customers might find searching on their own. People also may choose an independent agent because they want a more personal touch than they believe they may get from captive insurers or direct writers. When we asked independent agents why they are in the insurance business, many answered it is because they remain dedicated to helping people. Since brokers and PIA.ORG

agents strive to do that on many levels, professional business partners can help provide the entry point to a greater level of service. Therefore, it becomes crucial to have trusted professional partners at your disposal.

Optimal partners Independent agents often work with a host of different business sectors that help them grow their business. To serve client needs best, you may need to work with other insurance agents to access coverage that is not within your expertise. In our research for this article, it became apparent. It is now commonplace for agents to cross-market and sell through other agencies. Many have long-term relationships with partner agencies. To give clients valuable support in related areas, independent agents also may work with accountants, attorneys, real estate agents, property managers and financial planners. By having a team of experts available, independent agents can offer their clients a coordinated one-stop approach for all of their business and personal insurance needs as well as their financial, tax, investment and business matters. The importance of business partners who willingly open doors to introduce prospects in a spirit of reciprocity should not be underestimated. It becomes abundantly clear that a potential client referred from these professional sources already has a comfort level that will not be earned through an initial cold call or letter. The client already has vetted the agent through their relationship with the trusted partner.

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Developing a successful relationship does not require a high degree of complexity. The key ingredients are mutual trust and respect, both wanting to be relationship-based, have common needs, and long-term potential.

Desired qualities for partners When it comes to establishing trusted professional partners, your peers look for professionalism, experience and expertise. Certainly, personality is a factor since we need to be comfortable working with each particular individual. Look for professionals who are like-minded and have the same work ethic. PIA Northeast member Peter Vardakis of Merwin & Paolazzi Insurance Agency, shares what he looks for in a professional partner, “Most important is that they have the same work ethic I do. Anything less just undermines my relationship with my clients. Another quality I look for is those referral partners that feel that no account is too small. Every new account is an opportunity, and that is the mindset that I expect from my partners.”

Building professional relationships It takes time to build meaningful professional partnerships. As the saying goes, you do business with people you know, like and trust. The same holds with insurance agents and the professionals you choose to engage. It may take years of active networking, whether in Chambers of Commerce, business referral organizations, or another group forum to build valuable connections. As

you may have observed, as successful agents’ books of business mature, networking continues to be valuable to them as they grow the business and strengthen relationships with professional partners. Like many industries, most business is referral based, whether from clients, customers or other professionals. It is important to keep those relationships strong. Greg Roth of the Roth Agency, explains the importance of relationships. “It’s all about relationships. That is the way it is for any independent agency. All my business is referral based. Existing clients and professional partners are both centers of influence. They influence other business owners and individuals.” Casting a wide, but meaningful, net is an effective way to build a network. PIA Northeast member Denny Klein of Rand Feuer Klein, explains how using this approach has helped him provide service for his clients and build his business. “I apply the concept of matrix marketing. Let’s use the analogy of how a spider builds a web. It must have a wide enough reach to catch its prey and survive. I use a matrix of relationship-building opportunities. I leverage those as much as possible. You never know when an opportunity will come. If you are not continuously developing relationships, you won’t be building your business.”

Agents and trusted partners work together When trusted partners get inquiries or discuss areas for which they cannot provide services, they reach out to the independent agents with whom they have relationships. Because these professional relation-

ships are not supposed to be a one-way street, trusted advisers provide referrals to each other. This should keep the best interest of the client at the forefront. PIA Northeast member Bruce Blum of Blum & Walsh Group/T.E. Freuler Agency, explains his agency’s approach with his partners. “For our mutual (or potential) clients’ benefits we build a team of services so each one of their advisers knows what is going on and can weigh in with their opinion and suggestion on any particular issue. Having this approach, the client will hopefully avoid any gaps or pitfalls in his or her personal or business dealings.” Roth shared a recent inquiry he received from a divorce lawyer. Roth and a financial planner received the following information: The clients are a divorced couple aged 70 and 73. “The bottom line is they were picking our brains to create a payout upon the death of the ex-spouse,” said Roth. “Our dealings were collaborative, so we worked together to solve a problem.” Blum highlights how he advises clients and refers them to other professionals. “We review many types of leases and contracts. We advise clients to change various sections regarding the requirements of the insurance provisions contained within these agreements. We then suggest they consult with other professionals, such as lawyers or accountants.”

Get started Here is a look at some examples of how agents may work with attorneys to provide coverage at certain milestones for a business or an estate—for example, a business entity can choose to purchase key-person insurance or life insurance. Such a policy provides cash in the event of the death of a named individual or partner. With a buy-sell agreement in place, owners can choose to invest in life insurance on each other. This allows the owners to buy the balance of the business upon the termination of the agreement. Or, consider planning ahead for when estate taxes become due. Rather than needing to liquidate assets, the proceeds of an insurance policy can be used to pay the necessary estate taxes. Finally, as your clients need estate planning, legal services, accounting services, and financial planning, collaborating with other professionals becomes a natural choice. At the end of the day, your success as an independent agent is dependent upon building a relationship-based business with carriers and clients that becomes enhanced with professional partners. Since insurance is not a commodity but a service, fulfilling the promise of future service becomes paramount. The best way to execute against that promise is to be there when you are needed while providing as much support as possible. Relationships with professional partners enhance that promise, and allow the delivery of solutions that might not be provided otherwise. Brown is CEO and chairman of Paradigm Associates LLC. Tucker is the owner of Noesis Marketing, located in Montclair, N.J. Reach Tucker at (973) 783-3983. Paradigm Associates LLC, headquartered in Cranford, N.J., has locations throughout the U.S. Paradigm provides both agencies and carriers with strategic, executive and sales development processes. For more information, visit www.ParadigmAssociates.US, or call (908) 276-4547.

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E&O Coverage

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PIA is here to help you navigate through uncertain times, so let’s make sure you have great errors-and-omissions coverage at a competitive price.

Why PIA Is the Best Choice for E&O • Our professional liability and cyberliability programs are designed for your agency’s needs and risk exposures • Critical coverage options—especially important when many agents are working remotely • Top-rated, stable E&O carriers • Experience & expertise from our team

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Don’t be scared of E&O— know it and respect it

If you look at all E&O claims over the course of any given year, you will see that 50% to 60% of those claims against agencies are closed with no loss payment. This statistic shows the difference an agency can make to minimize its potential to be found negligent if a customer makes an E&O claim.

A great starting point is to understand the legal liability standard of insurance agencies. Just because it is alleged that the agency committed an “error or omission” does not necessarily mean that the agency was negligent, and the legal standard for agencies is heavily built on the premise of negligence. An important element within this legal standard of care includes the agents being responsible for procuring the insurance requested by the agency customers, or advising the customers of their inability to do so. For example, if the customer did not ask for flood insurance, there is a good chance the agency will not be found to be negligent for not providing it.1

Make the commitment

Other fundamental issues include the following:

A common theme of E&O classes is “Document, document, document.” However, there is much more to the equation.

Be aware of the words/phrases you use. Whether spoken or in writing,

If one were to poll 100 agency staff members—who just came out of an errors-and-omissions class—how many do you think would comment on how scary the world of E&O is? How many agency owners now would be tempted to put a “For Sale” sign on the front lawn of their agencies? The answer to both questions probably would reveal how scary they find E&O. This is truly unfortunate. While E&O can be, at times, somewhat intimidating to agency staff, embracing it and understanding how the agency can truly minimize its E&O claims potential are key to addressing that fear. After all, an agency needs to sell insurance. Being petrified of E&O could cause one to hesitate to talk with customers for fear of an E&O claim lurking around the corner. Being scared of E&O is not the answer. Respecting E&O is, and working to understand the world of E&O is important. Staff members need to know what drives E&O claims, and what they can do to meet this challenge head on.

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as an agent you can be held responsible for what you tell a customer. This also speaks to the importance of knowing your product and accurately representing it.

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Remember all facets of documentation. This is not simply documenting the conversation with the customer, but also memorializing back to the customer, in writing, the essence of that conversation. In addition, the documentation in the agency system should be handled promptly and with sufficient detail. Every agency staff member should live by the motto, “if it is not documented in the file, it didn’t happen.”

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Perform exposure analysis (for new and renewal business). This process is designed to identify any changes/issues that your customers are experiencing so there can be a conversation on how to address those exposures. While the agency technically is going to be held responsible for procuring the coverage the customer requests, how much insurance will you sell if you wait for the phone to ring?

your staffing needs! We’ve created

the Agency Staffing

Assistance Program—

Consistency is vital. Execute your role based on the manner in which it is detailed in the agency procedure manual.

an online member

Customer accountability should be every agency’s goal. This includes requiring the customer to sign the application attesting to the accuracy of the information. What’s more, when customers decline various coverages/limits, confirm their decision back to them. This will be key if a customer changes his or her story after a problem develops.

service that helps you find and keep good employees.

Commit to education. Every staff member in the agency should be committed to furthering their education, whether that involves technical information or various soft-skills issues. Be honest. As Warren Buffett stated: “It takes 20 years to build a reputation, and five minutes to ruin it. If you think about that, you’ll do things differently.” The more everybody understands E&O and what drives E&O claims, the more they will respect it and not be scared of it. It is up to the agency as a whole and each staff member to make that commitment. This assumes that the legal liability standard of an insurance agent in the jurisdiction in question is merely to procure the requested coverage in a timely manner, and notify the customer if the insurance agent is unable to procure the requested coverage; and that there is no “special relationship” between the insurance agent and the customer.

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Floods and basements, ride hailing and more Flood coverage for basements

Ride hailing

Q. Under the National Flood Insurance Program flood policy, what items are covered in the basement of the dwelling?

Q. If my clients are considering working with a ride-hailing service, how should I advise them?

A. The Building Property coverage includes the following items: • foundation walls, anchorage systems and staircases attached to the building; • central-air conditioners; • cisterns and the water in them; • drywall for walls and ceilings (in basements only); • nonflammable insulation (in basements only); • electrical outlets, switches and circuit-breaker boxes; • fuel tanks and the fuel in them, solar-energy equipment, well-water tanks and pumps; • furnaces, hot-water heaters, heat pumps and sump pumps; and • clean-up expenses. The Personal Property coverage includes the following items: • washers and dryers; • food freezers and the food in them (but not refrigerators); and • portable and window air conditioners. Neither the Building Property or Personal Property coverages include: • paneling, bookcases and window treatments such as curtains and blinds; • carpeting, area carpets and other floor coverings such as tile; • drywall for walls and ceilings (below lowest elevated floor); • walls and ceilings not made of drywall; and • most personal property such as clothing, electronic equipment, kitchen supplies and furniture. You can find this information in the NFIP Summary of Coverage—as well as in the Standard Flood Insurance Policy–Dwelling Form.—Dan Corbin, CPCU, CIC, LUTC

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A. You should let them know that— despite what they may believe—their own personal automobile insurance policy may not cover them in these types of situations, so they must contact their personal automobile insurance company before they start working with ride-hailing services.

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The typical personal automobile liability policy excludes coverage for a livery business conducted via a personal vehicle. It is common practice for insurance carriers to include a question on their initial insurance application or renewal questionnaire, which states: “Are you currently, or have you previously, worked with any ride-hailing services?”. So, in essence, it is best to err on the side of caution and encourage your clients to contact you to discuss their individual policy to determine what coverage, if any, would respond to these types of ride-hailing situations. The Insurance Services Office Inc., introduced three personal auto policy endorsements in 2015 (see QS90813—ISO introduces three new TNC endorsements in the PIA QuickSource library).—Bradford J. Lachut, Esq.

Town water-line connection Q. If an underground water pipe that connects from the town/city water line to a house breaks, does the HO-3 provide any coverage for the damage? A. The ISO form HO 00 03 provides no coverage for damage to an underground water pipe line. The policy specifically excludes coverage under the Section I “wear and tear” and “mechanical breakdown” exclusion A.2.c.(6). However, ISO introduced a new HO 06 69 Utility Line Expense Coverage endorsement in 2020 (check for state approval) that provides coverage for direct physical loss to a utility line for certain specified perils. In the endorsement, a utility line is defined and includes a water line. Limited coverage also will be provided for Loss of Use and Ordinance or Law. Limit options are $10,000, $25,000 and $50,000.—Helen K. Horn, CIC, CPIA, CISR

Solar panels Q. My client is installing solar panels. How will the homeowners policy respond with coverage for them? A. There is coverage for solar panels—the question is where is it found in the policy. If the panels are going to be attached to the dwelling permanently, they would be covered under Coverage A–Dwelling. However, the limit of Coverage A will need to be increased to reflect the value of the panels. For example, if the dwelling was insured for $200,000 and $50,000 worth of panels is added, the insured should increase the Coverage A limit to $250,000. If your client decides to install a solar farm, and does not attach the panels to the dwelling, then coverage will be found in Coverage B–Other Structures. Again, the limit of Coverage B will need to be adequate to replace the solar panels.—Dan Corbin, CPCU, CIC, LUTC

Real time vs. comparative rating Q. I keep hearing about real time and comparative rating; but, I’m unsure what each of these terms really means and how they differ. Could you explain these terms for me? A. Real time implements an overall objective to make doing business easier, encompassing many different agency functions, including comparative rating,

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billing inquiry, claims inquiry, personal- or commercial-lines download, etc. Real time is a major timesaver that can expedite a variety of these transactions. The basic definition of real time is the ability to click on a button from a client file in your agency management system or comparative rater for immediate access to carrier information on that client. Comparative rating is the ability for insurance professionals to see a sideby-side comparison of the rates for the carriers they represent without having to go in and out of carrier websites and enter data multiple times. Comparative-rating vendors consider real time in their products when they use industry standards to transmit rating information from the agency management system straight through to multiple carriers’ rating engines and return quotes—generated by the companies. Comparative-rating vendors sell a product that is separate from the agency management system and may or may not integrate directly with the agency management system. Comparative-rating vendors do not all offer the same options. Some are national firms, others regional; some offer both personal and commercial lines, while others only offer one or the other. Generally, vendors are working to expand the companies they work with, the states where they can provide rates and the lines that can be rated. For more information, see QS90545–An agency guide to comparative premium systems in the PIA QuickSource library. Both of these products offer capabilities that can increase agency efficiency, develop better workflows, save time and, ultimately, increase your agency’s bottom line.—Katherine Slye-Hernandez, Ph.D.

Flood Insurance + Uninformed Client =

comm - flood Recipe For E&O Lawsuit Welcome to cooking with PIA! Today we are going to be preparing the prefect E&O lawsuit. Let’s take a look at the recipe: • 1 policyholder who thinks they have coverage for a loss, when in fact they do not • 4 cups celery, chopped • 1 large gap in insurance coverage • A dash of one insurance agency that did not provide notice to its client of the potential gap in coverage

than they are to experience a loss due to fire. There are roughly 126 million households in the U.S. As of 2018, only 5,178,978 were insured by an insurance policy from the National Flood Insurance Program—a decrease from 5,700,235 policies about 10 years ago. So, there are at least 120 million households not covered by flood insurance. Many homeowners mistakenly believe that they have flood coverage under their homeowners policy. Of course, we know this is not true. So, what does it create? A gap in coverage. And, as we know from our recipe above, when there is a gap in a client’s insurance coverage, that is when an insurance producer gets sued.

When mixed together, this is the recipe for one hearty errors-andomissions lawsuit against your agency. Make sure you pay your agency’s E&O deductible!

How does all of this factor into selling your clients flood insurance?

Let’s change the recipe a bit:

The frequency of coastal flooding has doubled in the past 30 years and the national average precipitation is at historic highs. This creates a situation in which a person living in a 100-year floodplain is twice as likely to experience a flood loss over the course of a 30-year mortgage

• 1 policyholder who thinks they have coverage for said loss, when in fact they do not • 1 insurance agency that sent notices to its clients about the importance of purchasing flood insurance

When mixed together this recipe creates a meaningful touchpoint for agents and their clients—which simultaneously helps the agent educate their clients, helps the agent sell more insurance policies, and provides protection for the agency in the event of an E&O lawsuit.

PIA can add a little flavor to the recipe To help you educate your clients, PIA Design & Print has floodrelated materials and consumer content that you can personalize for your agency’s individual needs. Or, we can create a marketing piece that is unique to your agency. These materials can include sign-off options—should your clients decline flood insurance—which will offer your agency additional protections against an E&O claim. Additionally, we can print and mail these resources to your client list, which we will keep confidential. PIA Design & Print offers a collaborative design experience tailored for insurance agencies. Give us a call today.

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