2021 March PIA Vermont by PIA Northeast

March 2021• Vermont

PAGE 20

Welcome the next

GENERATION into your agency Craft the narrative, and showcase the hidden benefits of the industry

NEXT GENERATION 5

The new hiring process

UBI: Privacy vs. savings

Technology can attract talent

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DEPARTMENTS 4 March 2021 • Vermont

In brief

9 Legal 15 Sales 31 E&O 35

Ask PIA

Readers’ service and advertising index

COVER STORY 20 Welcome the next generation into your agency Craft the narrative, and showcase the hidden benefits of the industry

FEATURE 25 Information technology trends in insurance Use them to find future insurance professionals

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” 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. ©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 Roberta Lawrence

IN BRIEF

FYI

New hires? Review your agency’s workflow first An agency’s workflow is the key to its success. It is a guide to instruct staff members on how to perform their duties, and how to use the agency’s computer system efficiently. When hiring new employees, your first action should be to review your agency’s workflows. The best way to make new employees effective employees is to make sure they follow your agency’s processes before they have a chance to develop bad habits. Identify your workflow needs Start with six areas: accounting, new business, renewals, endorsements, audits and cancellations. Accounting. Small agencies with one-person accounting departments need an accounting workflow—so, if that one person isn’t in the office, the work still happens. Your accounting workflow should include your agency’s essential accounting functions, including how to enter a check, how to make a deposit, and how to reconcile a statement. New business and renewals. With up-to-code new business workflows, any employee should be able to verify a producer’s progress with a prospect. Manage your new business by asking your producers to identify and document their prospects. For renewal workflows, include where quotes have been sent. Endorsements. In your endorsement workflow, make each follow-up on a change request an activity. In your management system, designate the first change request activity as “CHGR,” then identify successive follow-up extensions as “CHGR2,” “CHGR3,” etc. These activities document what the customer service representative has done—tracking the agency’s level of service, and how many change requests it took to generate an endorsement. Audits. To avoid paying audits out of pocket, you need a strict audit workflow. Use your audit workflow to set deadlines for the return of uncollected audits. If a client hasn’t responded with a payment or a dispute by the deadline, send the uncollected audit back to the company, so it can take the responsibility to collect. Cancellations. Use general cancellation workflows to ensure consistent service. Agencies should include in their cancellation workflows a no-contact stance regarding late notices on direct-bill policies and financed policies. Prepare for the new workflows A workflow is only as accurate as the system or procedure it describes, so before you write your workflows, make sure your systems are up-to-date and customized.

Create activities for each function your agency regularly performs, and label these activities with useful descriptions. You want labels that describe the action you are taking, not the method you use to perform the action. Use categories like “change request,” and in the notes for activity write “per phone call received.” Write the workflows Recruit a committee to write the workflows. Invite your accountants to sit in on every meeting involving transactions. Producer contribution is a necessity when writing the new-business workflow. Then, have all employees list the duties they perform and the steps they take to complete them. Group employees who perform the same tasks, and instruct them to consolidate three or four of their common duty lists. The revised lists will be your submitted workflows. Each workflow has two parts: an overview and a step-bystep guide. The overview outlines the activities you want to document. Here, you will include directions to access the necessary form letters to complete each activity. The step-by-step section is a detailed instruction booklet. When appropriate, include scripts in your workflows. List the questions that staff should ask prospects. This will enable even new employees to complete intake forms. Implement the workflows The committee members should review the drafts of the workflows and approve them. Then, they should be distributed to all employees who should sign-off that they have received and reviewed them. Then, make workflow compliance mandatory and conduct audits regularly to monitor adherence. Devise a system that employees can use to report workflow deficiencies to management. Establish repercussions for ignoring workflow procedures. Workflows ensure that your clients receive consistent, quality service. Agencies that follow well-crafted workflows collect more accurate data and experience fewer errors-and-omissions incidents than their less structured counterparts. Workflows are great training tools. They track performance. Not only will your workflows reveal which employees are underperforming, but they will spot underachieving carriers. Adapted from QS90484, which in the PIA QuickSource library (pia.org).

PROFESSIONAL INSURANCE AGENTS MAGAZINE

BY THE NUMBERS

Changes in hiring practices According to the U.S. Bureau of Labor Statistics, the unemployment rate decreased to 6.3% in January, compared to 6.7% in December. In January, notable job gains occurred in professional and business services and in both public and private education. So, people are hiring, but how has COVID-19 affected the hiring process?

WHAT CANDIDATES ARE SEEKING REMOTE WORK At the beginning of the pandemic, March 2020 APPLICATIONS FOR REMOTE WORK LEAPED

54% 46%

JANUARY

FEBRUARY

A QUICK REPLY

TECH SAVVY FIRMS

MARCH

of Generation Z skip companies that use OUTDATED RECRUITMENT METHODS

20%

Apply here

applied for a job on A MOBILE DEVICE

of Gen Zers expect an offer 1 week after the first phone screen MOST IN 2 WEEKS

FINDING NEW TALENT NETWORK

70%

OF OPENINGS AREN’T ADVERTISED Applicants network with friends, neighbors, LinkedIn, etc. to get the job

USE TECH An app that pulls from MULTIPLE SOURCES OF TALENT can narrow the list faster

Who gets interviewed? APPLICANTS WITHOUT REFERRALS

3 IN 100

get interviewed

USE AN AI CHATBOT Pre-screen your short list with a few questions

APPLICANTS WITH REFERRALS

HALF

get interviewed

Date Time

SCHEDULE ELECTRONICALLY Applicants schedule a date, you simply interview

THE NEW INTERVIEW/HIRING PROCESS

73%

accept a job WITHOUT MEETING COLLEAGUES IN PERSON VIDEO INTERVIEWS allow social distancing

64%

ONBOARD REMOTELY with quality resources and support

REMOTE ONBOARDING helps people join remote teams

NEW EMPLOYEE BENEFITS In addition to flexible hours/remote work, potential hires are looking for additional employee rights, like paid sick and family leave. Some states and local governments developed sick leave insurance and coverage for hourly workers. To keep up with the latest requirements for employee benefits, see PIA’s HR Info Central (pia.org/IRC/hrinfocentral). PIA.ORG

ASSOCIATION NEWS

Let PIA help in your quest for new talent The next generation of insurance professionals relies on the current generation to help them start their adventures into the insurance industry. Insurance professionals need to seek out those who are looking for employment, and extol the benefits of working in insurance. They need to help the next generation see beyond outdated concepts and stereotypes about the industry and those who work in it. And, PIA has created resources to help its members do this. Support the industry It is up to independent agents to clear up misconceptions that permeate outside the insurance industry. These misconceptions include the idea that all insurance jobs are dull desk jobs, with little room for advancement and little community involvement. If you are part of the independent agency system, you know you are a part of your community; and you are the person who stands next to someone who has suffered a terrible loss, tells the person it’s going to be OK, and then works to make sure he or she gets the claims check. You also know the industry is as dynamic as a person wants it to be. A job in insurance can vary daily, and there are chances for promotions and compensation growth. You know all this. However, when was the last time you shared this information with someone who was new to the workforce and who was looking for a job? Even if they just consider joining the insurance industry for a short time, there’s always the chance that a short-term stretch in the insurance industry will turn into a long-term career. It’s important to get the word out about how rewarding a career in the insurance industry can be. PIA offers resources to help members coordinate their efforts to be an advocate for careers in the insurance industry. All of these resources can be found on the PIA website (pia.org). ASAP PIA’s Agency Staffing Assistance Program provides members with the tools to recognize, recruit and train new employees. Posted on the PIA website, ASAP has links to online job sites and recruitment agencies throughout your state; sample promotional brochures; sample job descriptions and classified advertisements. ASAP also offers advice on how to develop an in-house internship program, interview tips and questions and more. One way to introduce new blood into the workforce is to establish an internship program. Many higher education 6

entities require professional work experience as a requirement for graduation. Internship programs range in intensity, from an informal mentor program to a formal or enhanced internship. During an informal program, a principal provides coaching, listening, advice, sounding board reactions or other help in an unstructured, casual manner. Whereas a formal or enhanced internship offers an ongoing, planned partnership focusing on helping interns reach specific goals over a designated period. PIA’s ASAP website offers members information on whether they should create an internship program in their office; how to establish an internship program; an orientation checklist; sample evaluation forms; and more. For more information on ASAP, log on to the PIA website, click “Tools and Resources” then “Agency Staffing Assistance Program.” Steps to Success To help the many professionals who have switched career tracks to enter the insurance industry, PIA developed its Steps to Success. This online tool kit is designed as a one-stop shop for PIA members’ specific business considerations to help them navigate the challenges new businesses face. PIA members can log on to the tool kit (on the PIA website under “Tools and Resources”) to access information on agent licensing; business planning; financial planning; sales and marketing; office organization; personnel management; internal workflow; technology; and more. Be involved These tools can help PIA members reach the next generation of professionals to encourage them to join the independent agency system. Be active in the recruitment of the next generation of insurance professionals. Infusing your agency with new talent will benefit your new employees and your agency. You will be able to pass on your experience and knowledge of the insurance industry and mentor someone who is joining the profession. In return, these new employees will have an understanding of how individuals in their generation think; what they consider important; and how they would like to communicate with your agency. You can use this input, not only to find new employees, but also new clients for your agency. It’s a win-win situation.

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Smart. Different. Better.

The UBI question: Privacy versus savings Almost everyone has shopped online in the last decade. Even those who manage to resist the lure of two-day delivery probably have priced appliances or scouted sales on various websites before purchasing the items at a physical store. This means they have been bombarded with advertisements for those same products as they navigate news sites, social media and email. As an insurance and government affairs attorney, it is likely that I have seen every insurance advertisement marketed to people in the region (probably pinpointed to the nine-digit ZIP code). Online advertisements are targeted because people are willing to let websites track their activity to better sell products. You have probably clicked the “accept all” button when a pop-up window informs you that the website uses cookies to enhance user experience. What is this enhanced user experience? It is better advertisements for products we just searched for or, based on our browsing

LEGAL

CLARE IRVINE, ESQ. Government affairs counsel, PIA Northeast

history. The debate over the usage of customer data has erupted in recent years and has become unavoidable— just like certain advertisements for products on Instagram that are eerily similar to what you just looked for on Amazon. We know that we are being tracked—according to the ads I see, my profile tells companies that I read a lot about insurance, and I have been shopping for a new coat.

What happens when this theory is applied to insurance? Specifically,

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what privacy do people forfeit by allowing their insurance companies to track their driving under the promise of a more accurate automobile insurance rate? We have all seen the TV ads that promise someone who only drives one mile a day in a circle a discount rate of insurance. Some car makers are considering including such devices in vehicles, sparing drivers from making the decision and immediately saving them money on their insurance. Beyond many obvious questions, there is the legal conundrum this sets up—what do drivers give up by allowing their automobile insurers to track every trip they take?

Insurers have used data for as long as they have offered insurance. Technology has enhanced the amount of data used to evaluate a risk. Anyone who has insured a teenage driver or has had an accident claim knows how factors such as age and driving history affect a person’s automobile insurance rates (especially if a teenage boy had an accident claim). Usage-based insurance adds data points to all the information already used to tailor premiums to the individual policyholder. One of the most popular selling points for UBI has been the ability to track the miles driven—especially with so many commuters working remotely and often with their kids at home. Technology can track the miles driven and the time of day one drives, making it easy to promote potential discounts for people who may drive far less than they once did. Beyond miles driven and the time of day the driver is on the road, technology can track where people drive and how well they get there. Rapid acceleration, hard braking and hard cornering can be captured and incorporated into the driver’s insurance policy. In the process of gathering current data on an individual driver, the insurance company may develop a profile of every place the vehicle goes at what time of day and the route taken.

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Data, data, data

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The right to privacy? With the information collected by telematics, an insurance company suddenly knows more than your name, birthdate, credit score, and driving history. Carriers would have an easy opportunity to know where

you go at any time of day with GPS coordinates to know your every stop and turn. While many people may shrug at that—after all, most drivers use a map application for directions that keeps track of where they park and nearby police cars—there are the basic data privacy concerns that have led states to require certain protections of personal information, and then there are the broader legal concerns.

comes pre-installed or the owners adds it themselves, the drivers know about the tracking or accepts vehicles with it installed. These issues likely do not concern most people. They are law-abiding citizens who are good drivers with nothing to hide, and who only know how to get to work because of their preferred mapping application. However, UBI has not been fully tested regarding how it provides data for incidents such as car accidents and broader crimes. A company obtaining and retaining so much data on drivers raises a number of issues regarding the

The Fourth Amendment of the Bill of Rights guarantees Americans the right to privacy. This amendment requires law enforcement to obtain warrants to search people’s residences and other areas where they have the expectation of privacy. Generally, this expectation extends to one’s vehicle. During routine traffic stops, law enforcement officers may glance into the vehicle, but they cannot legally search it without a warrant. If they see something to suggest evidence of a crime in the vehicle, the officers can use that observation to request a warrant. However, the officers could just ask to search the vehicle and many people would agree to the request. By allowing the search of their vehicle, the drivers effectively waive their right to privacy. This same right extends to the tracking of the vehicle’s movements. While cars drive on public roads in plain sight of other drivers, the U.S. Supreme Court has held that that does not eliminate the requirement that law enforcement obtain a warrant to place a GPS tracker on a car.1 More broadly, the vehicle owners’ expectation of privacy extends to the exact tracking of their vehicles. At least, it does until the vehicle owners willingly use the technology to track their vehicles’ movements. Whether the technology

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privacy of drivers. When it comes to other technology, law enforcement has obtained warrants to demand companies cooperate with investigations. Who can assume that the same agencies will not soon see value in the driving data for their own investigations?

birthdates, Social Security numbers, account numbers, security codes, and biometric records used in connection with personal identifiers.

Customer … or product?

Data collected from telematics in vehicles falls outside these definitions, although they still would fall under the requirements for proprietary business records. That allows companies to use their discretion when sharing the data with other companies—especially if consumers have consented to sharing such data.

In a letter describing his company’s privacy policy, Apple CEO Tim Cook wrote: “When an online service is free, you’re not the customer, you’re the product.”2 Most companies that provide free services online obsessively collect data on users to sell to advertisers, that can then make it easy for customers to buy stuff from the advertisers. The company running the website makes its money on the data collected on users rather than the users buying anything from it directly. Even if insurers obsessively track driver data, people pay for their policies. In the present, this distinguishes auto insurance from such online services. Yet, the data that is collected has value to data analytics companies beyond setting insurance rates. For example, a national fast food chain may see the value in knowing every detail of how people in an area drive, to make its own decisions regarding new locations or advertising. A major data analytics firm had effectively confirmed that response when the CEO of a national insurance company said there was potential in selling customer data obtained from telematics.3 The CEO even compared the selling of customer data to the same practice by a major technology company. Recent privacy laws mandate disclosure of such practices, including online, and require online users to consent to the collection and sale of their data. They do not ban or greatly restrict such practices. In the insurance industry, laws such as the New York cyber security requirements for financial services companies and the National Association of Insurance Commissioners’ insurance data-security model legislation, focus on the protection on nonpublic information. These laws focus on data such as

these addresses handy Email> Keep to reach PIA electronically General pia@pia.org

Industry Resource Center resourcecenter@pia.org

Conference conferences@pia.org

Member Services memberservices@pia.org

Design + Print design.print@pia.org

Publications publications@pia.org

Education education@pia.org

Young Insurance Professionals yip@pia.org

Government & Industry Affairs govaffairs@pia.org 116889

PROFESSIONAL INSURANCE AGENTS MAGAZINE

What now? Usage-based insurance is in its infancy. Like all other policies, the rates must be approved by state insurance departments. And, it remains to be seen how many drivers will be interested in such programs. While giving up certain privacies raises red flags, many people still click “accept all” when the inevitable disclosure about data tracking appears online. How many policyholders will do the same when it comes to insurance, especially with the lure of a better insurance rate? For the time being, UBI may dangle the promise of lower rates for safe drivers, but someone has to pay more for the rates to make mathematical sense. Someone may get a better rate, but many drivers are likely better off being classified in broad groups and benefitting from rates being based on historical data. Irvine is PIA Northeast’s government affairs counsel. 1

U.S. v. Jones, 565 US __ (2012)

Gadgets360, 2014 (bit.ly/3bz3XrO)

Insurance Journal, 2015 (bit.ly/3nBfych)

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Are your producers not producing?

SALES

JOHN CHAPIN President, Complete Selling

I was talking with a friend who owns a business and he repeated something I’ve heard from a lot of business owners recently. He said, “Every year around my insurance expiration date, I have anywhere from three to six insurance agents—in addition to my current agent—show up looking to quote my insurance. You know how many showed up this year? Zero.”

The only acceptable reason on this list is the first one. That said, once the employee has been with your agency for more than six months, he or she can no longer use this excuse.

Why are so many producers not producing? Here are some of the reasons:

So, what causes producers to fall into the other categories on the list? Maybe they lack work ethic or mental toughness; are two years from retirement, so they lack motivation; are in their comfort zone because they have

1. They’re brand new. 2. They aren’t putting in the necessary hours. 3. They aren’t doing enough of the right activities. 4. They aren’t new, but even after years of being in the business they still don’t know what they’re doing, and they’ve never made an effort to SBP_PIA_HalfPageAd_052720_x1a.pdf 1 5/27/20 2:24 PM learn.

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enough money to pay the bills; are getting paid, even if they aren’t hitting their goals; or aren’t cut out for sales. Regardless of the issue, here are the solutions to make sure you have producers who actually produce: • Hire correctly from the start. • Set rules and expectations up front and hold people accountable to them. • Supervise your people. Micromanage rookies, lightly coach top producers. • Have a sales system and sales process in place. • Provide training, tools and resources. Sales training is the most important. • Have support staff in place so 80% or more of the producer’s prime selling time is spent on sales activities. • Provide the right environment—one that is positive, supportive, and free from negativity, gossip and other childish behaviors. • Have a good relationship with your producers. • Know what motivates and demotivates them, and use that knowledge wisely. Of all of these solutions, hiring correctly is vital. Why? Winners find a way to win even when the circumstances are dire. You can throw them into almost any situation, and they’ll figure it out. On the other hand, you can give the wrong person every break and helping hand in the world, and he or she still will find a way to underperform.

Winners find a way to win even when the circumstances are dire. You can throw them into almost any situation, and they’ll figure it out.

Regarding training: I’ve also found that about 35% of producers need mentaltoughness training in addition to sales training. This is because, even if you can get someone who is afraid to make the calls, he or she still will fail because most communication is nonverbal. If the producer lacks belief and conviction, he or she won’t get anywhere. To prove my point, I know an insurance producer, who has been in the business for 15 years who recently increased his sales by 638% in a year by combining mentaltoughness training and sales skills training.

How does all of this factor into my friend’s comment at the beginning of this article? In my experience, 60% to 80% of producers look for any distraction, any reason to avoid the discomfort of hard work. The pandemic has provided them with an excellent excuse because it gives them seemingly valid reasons to stop making sales calls. Let me give you another example: This past Columbus Day I called an agent who I’ve been working with for a couple of months for our phone call that we have every Monday, at 9 a.m. I got her voicemail and left a message to call me. About an hour later,

PROFESSIONAL INSURANCE AGENTS MAGAZINE

she sent me a text that read: “Our agency is closed today. Email me another day this week that works for you, or let’s chat next Monday! Have a great day!” My rule has always been, if your customers’ businesses are open then you’re open—even if your office isn’t. Here is what I know about Columbus Day—and similar holidays, for the insurance agent in the story and many other salespeople—almost all the businesses they call are open, there’s less traffic and it’s easier to get to the decision makers. Additionally, since most producers aren’t working, you’ll stand out. That’s a win, win, win, win. You don’t train people to think proactively. They come to you with that ability already or they don’t. If it’s not in their blood, when you ask people to call during a pandemic or on Columbus Day, they either will laugh because they think you’re joking or they will say OK and then dismiss your directive. So, do your best to hire hard workers who are positive and self-motivated, and who like people. Then provide as many of the bullet-pointed solutions discussed in this article, so they have the training and tools to be successful. Chapin is a motivational sales speaker, coach and trainer. For his free eBook: 30 Ideas to Double Sales and his monthly articles, or to have him speak at your next event, go to www.completeselling.com. He has over 33 years of sales experience as a No. 1 sales representative and he is the author of the 2010 sales book of the year Sales Encyclopedia (Axiom Book Awards). Reach him at johnchapin@completeselling.com.

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March Has Never Looked Better

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FRANK PENNACHIO Principal, Oceanus Partners, a ReSource Pro Company

Welcome the next

GENERATION into your agency Craft the narrative, and showcase the hidden benefits of the industry

ne of the critical challenges facing insurance agencies is the emerging talent gap. The average age of insurance agents is 59, which means close to a quarter of them will retire in the next few years. So far, millennials and Gen Zers (referred to as Next Generation in this article) have not been flocking to the profession.

PROFESSIONAL INSURANCE AGENTS MAGAZINE

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The retail insurance world is well suited for these young people, but the profession has failed to craft and deliver the right story. Historically, the insurance profession has been perceived as a slow, stodgy and boring. The dramatic pace of change in the industry mostly has flown under the radar. Fortunately, powerful forces are shaping the insurance industry in ways that align with the interests and demands of the Next Generation agents. These include: • cost reduction and efficiency gains; • product innovation; • increased use of data analytics; and • rewarding the Next Generation’s desire to do good.

Cost and efficiency Robotic process automation is gaining traction at all levels of the insurance value chain. This offers the Next Generation an opportunity to jettison routine, mundane tasks to machines while they focus on higher-level demands for their intellectual capital. Automation is taking on more and more of the boring activities.

Product innovation Freeing up the Next Generation from the monotony of filling out forms enables them to engage in more advanced work, such as making recommendations to mitigate risk and supporting product innovation. Millennials are not only an in-demand workforce, but they are also the largest demographic group of insurance buyers with more than 72 million strong. Gen Zers are not far behind, representing approximately 20% of the U.S. population. It is no secret that the Next Generation demonstrates strikingly different buying behaviors than previous generations—so they are best suited to assist in the design and distribution of insurance products and services. They want the insurance purchasing experience to be as simple as buying on Amazon, as easy to understand as an Apple product and for insurance to be as tailored to their needs as Spotify and as reliable as Yelp. And, they want what they want when they want it, preferably without speaking to a human. Failing to attract the Next Generation into the process of satisfying the demand for new and different insurance products and services will be a recipe for losing market share.

Data analytics The Next Generation also welcomes the power that comes with an enhanced level of data analytics. They have grown up in a data-driven world and experience the influence of algorithms on a daily basis. They would much rather offer prospective and current clients data-driven insights, as opposed to taking a, this-is-what-we-usually-recommend, or this-is-the-way-we’ve-always-doneit approach. In addition to reducing or eliminating the mundane and boring parts of the job, the excitement of developing and delivering new products and services, and cracking the code of improved predictions and recommendations with 22

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data analytics, the insurance industry offers much more to the Next Generation. Millennials and Gen Zers actually can make a positive a difference for their clients and in their communities. This aspect of the insurance profession rarely is shared with new recruits. We live in a world of increasing risks and complexity. Until recently, we rarely discussed losses and risks arising from infectious diseases, ransomware, and weather events related to climate change. In addition, insurance contracts are changing constantly, adding new levels of complexity. It is increasingly difficult for insurance professionals to transfer risks from businesses and consumers to insurance companies properly.

Desire to do good The vast majority of insurance policyholders are at risk and do not know it. When they are provided with this compelling narrative—and given the opportunity to fix it—the members of the Next Generation will welcome the ability to create safety and security in an environment of danger and uncertainty. Making a difference matters to this generation more than it does to members of the previous generations. The Next Generation desires to build and restore—to do good. Few, if any, professions are better positioned to fill that need. Many of the people whose homes and businesses were destroyed by the wildfires in California and the hurricanes in Louisiana will not recover financially because they were not adequately insured. There is a space to be filled, and the Next Generation seems to embody the characteristics to fill it.

Too many members of the Next Generation see the insurance profession as series of tasks in which one gathers information, shares that information with an insurance company to get a price, and then shares that price with a prospective or current customer. Yet, done right, this is a helping profession. When insurance agents do their jobs well, their clients are better prepared to recover from what may be the worst day of their lives.

Continue to craft the narrative When you are interviewing your next round of potential employees, make sure you highlight some of the hidden benefits of working in the insurance industry. Generally, the Next Generation members are known for their tendency to become easily bored in a position and to move from job to job to sustain their interest in work. They likely will appreciate and embrace the complexity of selling and servicing insurance. There is an array of ever-changing challenges that must be overcome for them to serve their clients properly. They need to know that this is not a profession in which someone is likely to experience monotony or tedium. This profession is clearly one in which someone cannot learn it all. The risks they address on behalf of their clients always are changing and the ways to manage them are in a state of flux, as well. In addition to aligning with the social consciousness of the Next Generation, insurance agents typically are well paid for their work. With nearly half of the workers in the United States making less than $32,000 a year, insurance agencies

offer potential for incomes in the top 5% to 10% of all workers. Also, Next Generation agents will find their employee benefit packages to be more robust than many other professions. Many Next Generation workers are saddled with student loans and feel they must defer the purchase of a house or wait to start a family—working in an insurance agency offers a way to accelerate those choices. Unlike many other sales jobs, insurance agents enjoy the benefits of residual income. With most sales jobs, you have to start over every year. Your income in the previous year has no bearing on your income for the coming year. Insurance agents have an opportunity to build a book of business. In addition to being paid for new business, insurance agents are remunerated for the clients they brought on board in previous years for as long as they still are clients of the agency.

Insurance agents have an opportunity to build a book of business. In addition to being paid for new business, insurance agents are remunerated for the clients they brought on board in previous years for as long as they still are clients of the agency.

Another appealing aspect of this profession is that the demand for insurance agents is high. The role comes with a unique set of challenges, so not everyone is the right fit. As a result, the Next Generation will find a red carpet awaiting them, and lots of offers and options. Finally, Next Generation agents also will find this profession provides them with the opportunity for flexibility and autonomy in their roles. Work-life balance and the independence to do the work in a manner unique to them fits well in this profession. Their time is their own to deliver results in the way they choose. Additionally, there are many ways to engage in this profession. Some agents choose to go upstream and work on large, commercial, highly complex, and hazardous accounts. Others prefer to work with high-net-worth individuals to protect their personal assets. And, others choose to go into small commercial and personal lines. These are just a few examples of the sundry ways to build a career in this profession. One of the greatest benefits of this profession is the ability to pick your clients. Insurance agents get to spend their day with people of their choosing. Typically, they are not required to provide service to just anyone who calls or walks in the door. Few professionals have the option to decide which types of people, industries or professions will fill their day.

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Insurance agencies are highly compatible with the demands and desires of the Next Generation of agents. Two decades into the 21st century, insurance agents are experiencing exciting changes—mundane tasks are being automated; new products are being developed; and data and predictive analytics are playing larger roles by enhancing decision making, judgments and recommendations. And, it is truly an industry that can help people and organizations when they need it the most. This profession is connected at the hip with every change in society and the economy. Challenges that need young professionals are arising every day. We can only imagine what is coming next. Soon, the Next Generation will grapple with the risks arising from autonomous vehicles, drone deliveries of online purchases, and the emergence of risks we have not yet imagined. One thing is certain. Next Generation insurance agents will find this profession provides financial, intellectual and emotional rewards. It will be hard to be bored.

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Pennachio spent more than 25 years as a retail commercial agent and agency owner, earning the reputation as a specialist and expert in workers’ compensation. A principal in Oceanus Partners, a ReSource Pro Company, he works with independent insurance agents and insurance companies to implement a consultative sales approach to win business by reducing or eliminating potentially life-changing risks for clients.

JOE YETTO President, Tag Solutions

Information technology trends in insurance

Use them to find the next generation of insurance professionals

The insurance industry is always evolving, and this includes information technology trends. As the industry grows and changes, there is going to be a need to adapt to new technological advances in order to stay current and avoid obsolescence. With the COVID-19 pandemic, many industries have had to change how they do business, and insurance is no exception. As insurers look to grow their businesses, they need to be able to attract a new generation of insurance agents. The next generation of insurance professionals is mostly younger and is more accustomed to using technology in their everyday lives. In order to appeal to this next generation of agents, existing agencies and insurers need to make sure that they have the technology to meet those changes. We’ve researched some of the biggest IT trends and innovations that will affect the insurance industry in 2021. This will help you bring your business into the new age of insurance technology; attract the next generation of insurance agents; and also attract your next generation of clients.

No. 1: Tailored, personalized products. One of the biggest trends that we expect to see in 2021 is the need for more personalized and customized insurance options. With millennials making up the largest percentage of the population, they are leading the demand for insurance products that fit their individual needs. Insurers will need to adapt to this model. Customers don’t necessarily want to buy insurance in the traditional, prepackaged sense. They want to be able to pick and choose the different aspects of their policies and only include the features and coverage that they specifically need. Additionally, many of these millennial customers are now old enough to be decision makers at their companies and in their industries, which could affect the way that commercial insurance agents sell their products as well. The days of a one-size-fits-all policy are part of the past. Customers want to know that they’re spending their money on products that fit their specific needs and more importantly, their budgets. Younger agents, especially millennials, will know first-hand how important it PIA.ORG

is to have a product that covers what they need and what they can afford. By offering personalized products, these new agents will be more attracted to an environment in which they can help tailor their products to each individual customer. No. 2: Data-driven insurance. Insurers now have more options than ever to design premiums and insurance policies for consumers based on significantly more data than ever before. Data gathered from social media, credit reports, and IoT (Internet of Things) devices, will allow insurers to get an excellent picture of each individual and their level of risk before determining the cost of a policy for them. For example, data gathered from a fitness tracker can be used to provide customized health and life insurance to a customer and incentivize them to maintain a higher level of wellness in exchange for lower insurance costs. Telematics can monitor the driving habits of customers to determine their level of risk and provide a plan for their specific needs. Insurers will have more opportunities than ever to really get to know their customers’ behaviors and habits in order to make sure that the insurance policy fits the individuals. Just as millennials are changing how they shop for insurance, the next generation of agents will want to rethink how they can provide the best products to their customers in the most innovative ways. No. 3: Automation and AI. Automation and artificial intelligence software will see an increase in implementation, especially when it comes to things like underwriting and risk assessment, which also will help to reduce the risk of error and fraud. Automation already has taken hold in some aspects of the insurance process, but trending shows that agents will rely much more heavily on these technologies in 2021 and beyond. It provides more convenience for customers and allows agents to focus more on innovating and expanding their product portfolios. By making routine tasks faster and more streamlined, agents provide a higher level of service and value for the customers. Additionally, this will lower costs on the part of the insurer because it will eliminate the need for so many workers in the insurance process. And, with the next generation of agents joining the workforce, being able to demonstrate that they will be able to really work with their customers instead of being bogged down with paperwork, it will provide a workplace that is more attractive to these new agents. No. 4: Extended reality. While this is still an emerging technology, extended reality is one of the most exciting innovations that we will see in the insurance industry. Instead of having to physically go to a site and examine damage from a claim, agents and assessors will be able to virtually examine a scene and assess the damage without leaving their office. This will improve efficiency in providing resolution to claims and a higher level of service to customers. Additionally, this kind of technology would make it easier to attract and train new agents in what to look for when examining damage to insured property, which will lead to a higher rate of growth as new agents and assessors join the industry. There are examples of this starting to emerge in the use of drones to help agents evaluate property claims, which dramatically speeds up the processing and payment of claims.

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No. 5: Cyber security improvements. As with all technological advances, an increase in innovation also requires an increase in security for those innovations. Cybersecurity is something that will require significantly more focus in 2021. With cybercrime anticipated to be a $6 trillion business this year, insurers need to make sure that they are implementing all of the necessary protections to ensure that their networks and sensitive customer and policy data is safe from cybercriminals. Additionally, keeping in compliance with all regulations for insurers is critical to stay secure. One of the biggest expenses in 2021 that most insurers anticipate is an increase in cyber security policies and protections. Cybercriminals have taken advantage of the pandemic by hacking into companies in highly regulated industries, and insurers need to implement the highest levels of security for their data. No. 6: Blockchain technology. One of the growing trends in insurance is the use of blockchain technology, which provides benefits in the form of smart contracts. These contain all of the terms of the coverage, like a paper contract, but a smart contract is self-executing. This means they track claims, update conditions, even transfer premiums back to the customer for anything that is no longer covered. This frees up a significant amount of time for the insurer and provides a huge level of transparency for the customers. Additionally, these smart contracts are stored in a decentralized location, meaning that it cannot be accessed or manipulated by just one person. Data is added chronologically, and every action is tracked and recorded. So, if unauthorized users

try to access any of the data stored in the blockchain, the system will block them from accessing the data, and record the date and time of any attempted breaches. This real-time tracking provides an extra level of security and helps to ensure that sensitive data is kept safe and secure. No. 7: Remote workforce. We have seen the need for remote working during the COVID-19 pandemic, but by allowing agents to provide service remotely, even after the pandemic, there will be an increase in new talent and growth within the insurance industry. Agents will not be limited to their specific area when looking for new jobs or opportunities. However, as we mentioned in this article, with new technology comes the need for new security. Allowing agents to work remotely will require establishing standards and requirements to ensure that all customer and policy data is secure from wherever the agent is located. Cyber security training and awareness also will need to be covered so that agents are aware of the risks they could face and the consequences of a cyber security breach—especially from a regulatory standpoint. Still, more agents, especially those who are just entering the workforce, prefer to have the ability to work remotely and be more flexible. Additionally, this opens up a much larger pool of new agents who can be hired as the geographical barriers to employment are removed. No. 8: Cloud migration. Although this was beginning to be adopted before 2021, we expect to see more insurers migrate to the cloud in the near future. There are significant benefits to this, including the ability to have greater access to data and analytics from anywhere; less

reliance on physical machines for storing customer and policy information; and the ability to innovate and adopt new technologies more quickly. It also provides a faster and more intuitive experience for the customers and allows insurers to enter new markets and provide new products more quickly than relying on outdated hardware and software. Again, with the increase in cloud migration, there is also an increased need for security to ensure that all sensitive data is protected and safe from cybercriminals. Agents need to make sure that they are in compliance with all federal and state regulations to avoid a data breach. No. 9: Virtual customer experience. Customers are hesitant to meet with insurance agents face-to-face right now due to the pandemic, and it’s likely that this trend will continue. Agents need to be accessible through virtual means, which is going to lead to a huge increase in the adoption of video conferencing, digital document management, and mobile capabilities. Customers need their agents to meet them where they are, and they need to know that their coverage will not suffer due to an inability to meet physically. Additionally, the reliance on mobile technology has led to an increase demand for being able to manage policies and claims through mobile applications or mobile-friendly websites. The most successful agencies and insurers will be the ones that can anticipate the needs of their customers and that can make every part of the insurance process as easy as possible for all parties involved. Many new agents are used to doing a significant number of interactions through a virtual environment—whether it’s ordering groceries, talking to a doctor, or communicating via video conferencing. The ability to work with customers without needing to be in the same office is an attractive option that would resonate with the next generation of agents. The world of technology is shifting constantly, and innovations are emerging all the time. In order to stay competitive and secure, agencies and insurers need to stay updated on these new trends and monitor their customers’ behavior to see what they can do to improve the customer experience. Last year provided us with a year of unforeseen challenges and opportunities, and as we continue in 2021, we only can expect more innovation and growth in the IT sector. As the next generation of agents emerges, staying on the cutting edge of technology and demonstrating the ability to adapt and grow based on that technology will be the key to attracting and retaining these new agents, which will help the entire insurance industry grow and prosper in the future. Yetto is president of TAG Solutions. Reach him at www.tagsolutions.com. To help agencies comply with various states’ cyber security regulations, PIA Management Services Inc., has partnered with TAG Solutions to offer an assessment and compliance program. See the PIA website (pia.org) for more information.

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CURTIS M. PEARSALL, CPCU, CPIA

Policy implications related to COVID-19, be alert For those of you who subscribe to various sources that provide daily compendiums of insurance issues, a topic at the forefront relates to how the insurance industry is addressing the often lack of business interruption coverage for businesses affected by the coronavirus (COVID-19) pandemic. How that plays out will be determined over time. For now, the industry is showing clear signs of reacting to various COVID-19 exposures on a going-forward basis. This exposure is obviously a significant one that carriers seem to have every desire to avoid. Recently, ISO developed its Communicable Disease Exclusion. This exclusion applies to Coverage A–Bodily Injury and Property Damage Liability and Coverage B–Personal and Advertising Injury and similarly states for both that:

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This insurance does not apply to: Communicable Disease (BI/PD/ Personal Advertising Liability) arising out of the actual or alleged transmission of a communicable disease. This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the: a. Supervising, hiring, employing, training or monitoring of others that may be infected with and spread a communicable disease; b. Testing for a communicable disease; c. Failure to prevent the spread of the disease; or d. Failure to report the disease to authorities.

Some key issues Here are some issues and best practices that you should consider for your agency. Whether carriers will include this endorsement (or one of their own) on upcoming renewals. Depending on how this is viewed, admitted carriers probably will need to issue a conditional renewal notice advising the insured (and you as the agent) that the upcoming renewal will include some type of COVID-19 exclusion. If the coverage is with an excess-and-surplus market, it is important to note that the standard conditional renewal notice requirement does not apply to them. They

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should note this on their renewal proposals. Special attention should be paid to identifying an exclusion pertaining to this issue. Securing a specimen form would be prudent to review the exclusionary language fully.

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Communicate this information to your client. It might be best not to rely on only one approach to accomplish this. Contact your client as soon as you are made aware of the carrier’s plans to include language of this type. If the conversation is verbal, follow up in writing to memorialize the conversation. It is possible that this exclusionary language may not be an issue of concern for every client. Document those conversations.

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Include on your agency proposal a reference to the exclusion and ensure that the reference is noted in the discussion. Listing exclusions on proposals has been an approach used for many years and has been found to generate additional sales opportunities. When listing exclusions, it is best to state: “Exclusions include, but are not limited to, the following.”

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Policy checking. Policy checking is an under-appreciated errors-and-omissions risk prevention technique. Agents doing a more thorough job of policy checking could have avoided many E&O claims. On the COVID-19 issue, agents should look for the inclusion of any specific exclusionary language. It may be a specific endorsement number and name, or it may involve the carrier refiling its liability coverage form to include this language. The change of edition dates should be a red flag that a substantive change was made. It is important also to note any exclusionary language on any umbrella/excess liability coverage forms.

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A recent news article addressed U.S. businesses facing a potentially emerging legal threat related to COVID-19 from claims that workers brought the coronavirus home and infected relatives, which one risk analysis firm said could cost employers billions of dollars. There already have been some lawsuits from this take-home exposure, which likely explains some of the language in the ISO exclusion. The article noted that between 7% and 9% of the roughly 200,000 U.S. COVID-19 deaths so far (at the time this article was written) are believed to stem from take-home infections. The estimated potential for these lawsuits could be significant. Allegations that the business failed to adopt proper safety measures will be common. On a side issue, yet still important, is how states are going to handle providing businesses (as well as health care workers, schools, etc.) with some form of immunity. This would prevent lawsuits arising from exposure, transmission or contraction of COVID-19 or any other virus mutation from essentially happening unless there is demonstrated reckless, intentional or willful misconduct on the part of the businesses or entities. A number of states already have passed this type of legislation with more likely to follow.

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Sump pumps, insured contracts and more Sump pump Q. A client just completed a $25,000 basement-refinishing project. She is looking to make sure she has adequate coverage for it. Aside from flood coverage, is there any other coverage that would protect her from water damage?

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to apply only when legally liable or without regard to legal liability, and on either a primary or an excess basis.—Dan Corbin, CPCU, CIC, LUTC

A. The ISO homeowners policy can be endorsed with the Limited Water Back-Up And Sump Discharge Or Overflow (HO 04 95; HO 23 85 NY) form, which states:

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We will pay up to the Limit Of Liability shown in the Schedule for direct physical loss, not caused by the negligence of an “insured,” to property covered under Section I caused by water, or waterborne material, which:

Q. A claimant’s vehicle was parked and a neighbor backed into it. The neighbor’s insurer is denying payment. Can an insurer deny payment for damages to a claimant’s vehicle if the claimant’s vehicle was uninsured at the time?

1. Originates from within the dwelling where you reside and backs up through sewers or drains; or

2. Overflows or is discharged from a: a. sump, sump pump, or b. related equipment. Beginning with the 2011 edition of this endorsement, the previous fixed limit of $5,000 was expanded to a selection of limits ($5,000, $10,000, $15,000, $20,000 or $25,000).—Dan Corbin, CPCU, CIC, LUTC

Garage operations Q. I have a client who operates a garage where he services all different kinds of vehicles, from family cars to trucks, ATVs and even forklifts. If any of these vehicles are damaged while under my client’s care, custody or control, would there be coverage? A. Yes, if the policy includes garagekeepers coverage. This coverage protects a garage business (bailee) for its legal obligation to pay the customer (bailor) for damage to his or her vehicle (bailed property) when such damage results from the servicing, attending, repairing, parking or storing of the “customer’s auto.” A “customer’s auto” is broadly defined as “a land motor vehicle, trailer or semi-trailer.” The insured can cover damage caused by collision with another object (also including overturn of the vehicle). In addition, the insured has the option to cover all other causes (comprehensive) or just the specified perils of fire, lightning, explosion, theft, and mischief or vandalism. Coverage can be triggered PIA.ORG

A. There is nothing in the ISO Personal Automobile Policy (PP 00 01) form to allow an insurer to deny liability coverage to an uninsured vehicle.—Helen K. Horn, CIC, CPIA, CISR

Primary language on certificates Q. If primary coverage already is built into most subcontractors’ general liability policies, why won’t insurers allow us to add primary language onto a certificate? A. Since the policy states that coverage is primary unless it falls within the exceptions described under item b. of 4. Other Insurance, 35

I see no reason not to offer a statement on the certificate that coverage is primary. However, most certificate holders also require noncontributory insurance, which is the real problem. The policy is noncontributory only if the other insurance is excess, which is controlled by the additional insured’s policy. To state that coverage is unequivocally noncontributory would be altering the terms of the policy and, therefore, would be unacceptable without an endorsement. In order to accommodate the request for noncontributory insurance, the ISO introduced in 2013 a new optional Primary and Noncontributory–Other Insurance Condition (CG 20 01) endorsement.

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Another option is to add the Waiver of Transfer of Rights Against Others to Us (CG 24 04) endorsement to the policy, which will waive the subcontractor insurer’s right of contribution. It states, “We waive any right of recovery we may have against the person or organization shown in the Schedule …” and “any” right includes the right of contribution. So, when this endorsement is attached, the right of contribution is waived and coverage is provided on a noncontributory basis.—Dan Corbin, CPCU, CIC, LUTC

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Amendment of insured contract Q. Could you explain the changes in the Amendment of Insured Contract Definition (CG 24 26) endorsement? A. Item f. of an “insured contract” as defined in the ISO commercial general liability policy covers any tort liability assumption involving bodily injury or property damage.

—Daniella Kirfeld Interwest United Insurance

The 2004 revision contained in the CG 24 26 endorsement limits those assumptions only to when the damages are caused, in whole or in part, by the named insured or someone acting on behalf of the named insured. Consequently, unless the named insured has some culpability, there is no contractual coverage.

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In contrast, the unmodified “insured contract” coverage in the policy applies even when the indemnitee is solely at fault.

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Keep in mind, this endorsement has no impact on construction risks in Connecticut (C.G.S.A. 52-572k), New Hampshire (RSA 338-A:2), New Jersey (N.J.S.A. 2A:40A-1) and New York (GOL 5-322.1) because they have anti-indemnity statutes (i.e., when the court will not enforce a governing contract that indemnifies an indemnitee for his or her sole fault). Under these circumstances, there is no need for contractual coverage. However, Vermont does not have an anti-indemnity statute, so coverage will be affected by this change.—Dan Corbin, CPCU, CIC, LUTC

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As work environments shift and evolve, our member-exclusive market access can entertain hundreds of class codes, offer a low minimum premium, and provide quick turnaround for you and your small-business clients. PIA’s NumberONE Comp market is now entertaining artisan classes, such as:

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