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Getting Great Coverage Should Be A Piece Of Cake

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DEPARTMENTS 4 September 2021 • New Hampshire

In brief

9 Tech 15 Sales 29 E&O 33

Ask PIA

Readers’ service and advertising index

39 Officers and directors directory

COVER STORY 18 Avoid the panic What you need to know to be prepared

FEATURE 25 Have the right plan for your agency PIA has the tools to help

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, Crystal Ringler and Calley Rupp. 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 Patricia Corlett Vol. 65, No. 8 September 2021

IN BRIEF

FIVE MINUTES WITH …

How the NFIP’s Risk Rating 2.0 affects agents, clients The National Flood Insurance Program’s new premium rating methodology, Risk Rating 2.0 will go into effect Oct. 1, 2021, for new policies, but for policies that renew between Oct. 1, 2021, and April 1, 2022, the Rating 2.0 rates also are available, if they are beneficial to policyholders. PIACT’s and PIA National’s past President Tim Russell, CPCU, is the chairman of the Flood Insurance Producers National Committee. He was involved in developing the program. Recently, we asked him some questions about the development process and how the program affects agents and their clients.

mile away from the flooding source in that AE zone, the current rating plan would develop the same exact premium for both houses.

Tim Russell, CPCU Chairman Flood Insurance Producers National Committee

What was your part in developing the NFIP’s Risk Rating 2.0? The Flood Insurance Producers National Committee provides the Federal Insurance and Mitigation Administration with expertise in the areas of flood insurance product design and development, producer education, the realities of marketing and servicing the NFIP, and the community/buyer temperament. FIPNC also provides professional advice and counsel on all issues related to insurance agents’ involvement in the NFIP. The FIPNC committee is made up of flood insurance experts from the three major agent associations, as well as representatives from the Association of State Floodplain Management. FEMA/FIMA started planning Risk Rating 2.0 about four years ago. They have included FIPNC in the planning and development of RR2.0 since the beginning. How does the new program differ from the previous one? RR2.0 is a far more equitable way of pricing flood insurance. There are several ways that the current rating system subsidizes premiums (e.g., pre-FIRM rates, grandfathering). One of those ways is by lumping houses into flood zones. For instance, an AE flood zone might stretch from the flooding source to a mile away from that flooding source. If you were to have the same exact house—say a 1,500 square foot ranch home built in 1950 with a basement— located 250 feet from the flooding source or located a

Obviously, the two houses have a different flooding risk, yet they are charged the same premium. Effectively, the homeowners a mile away from the water are overpaying for their flood insurance. And, the owners of the house that is closer to the flooding source are underpaying— subsidized by the premiums paid by the homeowners a mile away.

RR2.0 corrects this discrepancy by rating the policy based on a house’s individual location. In addition to distance to the flooding source, RR2.0 recognizes the type of flooding source. For instance, is the flooding source an ocean, a lake, a river, or an urban setting with lots concrete and nowhere for the water to run off? In addition to the distance from and the type of the flooding source, RR2.0 considers the property’s individual ground elevation (thanks to additional data sources beyond the traditional flood map), the cost to rebuild, the occupancy, construction type, foundation type, first floor height, number of floors and prior claims history. How will agents be affected by these changes? What do they need to know to better advise their clients about the NFIP and flood insurance? Like most human beings, insurance agents tend to be averse to change. There is a fear of the unknown. The best way to address this is to embrace the change and to get educated! To help, FEMA and FIMA have developed RR2.0 training (for details, see www.agents.floodsmart. gov/agents-guide/risk-rating). The more you know, the better you can help your clients. One of the things that I believe agents will like about RR2.0 is that it will be much easier for an agent who is unfamiliar with flood insurance to rate a policy. You will no longer need to know the house’s flood zone, and you will no longer need to input the information from a Flood Elevation Certificate (unless it is beneficial to the policyholder). This is because the rating engine is pulling in a lot of information on the home based on its address.

PROFESSIONAL INSURANCE AGENTS MAGAZINE

(continued on page 6.)

BY THE NUMBERS

Preparedness

Make sure your insureds prepare for floods Superstorm Sandy and Hurricane Irene were devastating to the Northeast. Do your insureds know the importance of flood insurance? Here’s some information you can use to start a thoughtful conversation with them.

TAKE ANOTHER GOOD LOOK AT THE COST OF SANDY & IRENE DAMAGES

FATALITIES

CLAIMS

SUPERSTORM SANDY

$74.8 billion

285

1.5 million

HURRICANE IRENE

$15.8 billion

855,000

ARE YOUR INSUREDS PREPARED?

FLOODS AND THE NFIP NFIP policies by state*

30 days

*includes commercial policies

3,314

Time it takes for an NFIP insurance policy to take effect

43% Homeowners who believe their standard HO policy covers flooding

7,724

170,185

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FIVE MINUTES WITH … (continued from page 4.)

NFIP and Risk Rating 2.0 The NFIP provides

$1.3 TRILLION in coverage

5 MILLION+ policyholders in 22,500 U.S. communities. for

Between 2015-2019,

40% OF NFIP FLOOD

CLAIMS came from properties OUTSIDE HIGH-RISK FLOOD AREAS.

RISK RATING 2.0, the first big update to NFIP’s system since the ’70s, provides CLEAR, SOUND, EQUITABLE RATES.

FEMA COORDINATED WITH EXPERTS from the U.S. Army Corps of Engineers, U.S. Geological Survey, the National Oceanic and Atmospheric Administration, the insurance industry and actuarial science TO ALIGN WITH FEDERAL REGULATIONS, SYSTEMS, AND POLICIES.

Tips for clients considering flood insurance

1" OF WATER can cause $25K IN HOME FLOOD DAMAGE. FLOODS PREDICTED

The flood policy doesn’t provide coverage for A COUCH, COMPUTER OR TELEVISION IN A BASEMENT THAT FLOODS. They’d be covered if inside the home, above ground.

Hopefully, this ease of doing business will lead to more agents being comfortable with rating flood insurance and an uptick in policy count. An agent also will be able to assign a policy from a house’s seller to the buyer and switch Write-Your-Own policies at the same time. For instance, currently a flood policy written with USAA can only be assigned to the buyer if the buyer also is a USAA member. Under RR2.0, an agent can assign the policy to the buyer and transfer the policy to his or her WYO company. To do this, the agent will only need to know the prior policy number and the National Association of Insurance Commissioners’ code for the issuing company. One thing I think agents will think is cool is that on the declarations page it will show the current premium as well as the actuarial sound premium. Currently, the actuarial sound premium is kind of a mystery. Now, we will be able to tell our clients that they are paying X now, but the premium will eventually grow to Y. The increase will grow at the current statutory limits of 18% a year for a primary house or 25% for a secondary or rental house. The maximum premium for a single-family home under RR2.0 is $12,125. How will the new NFIP RR2.0 affect clients? Under RR2.0, 23% of current policyholders will receive immediate decreases upon renewal. An additional 66% will receive an average increase of $0-$10 per month. Seven percent of policyholders will have an increase of $10-$20 a month, while only 4% of policyholders will see an increase over $20 per month. I believe that policyholders who know their true risk (or actuarial sound) premium will lead to more policyholders mitigating their houses against flood loss. The policyholders will receive premium credits for mitigation, whether that is raising the house, raising the machinery, flood venting, etc. Is there anything else you’d like to share? World peace.

A building’s replacement cost is the COST TO REBUILD A SIMILAR HOME at today's materials, labor, and equipment costs.

We can get behind that! Thank you, for taking the time to talk with us, Tim.

All statistics provided by FEMA

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Are your clients protected in case of a pirate raid? Now before I lose you at the start, hear me out. If pirates attacked your clients’ homes and loved ones or their offices and employees tomorrow, would they have the right insurance coverages? Since this is a purely fictitious scenario—and many of these coverages often are dependent on the specific issues in a case—what would or would not be covered if pirates attacked could vary. However, it’s important to have discussions about these insurance coverages with your clients. Pirates often steal, break things, harm or kill people, or they could occupy a home or office building for an extended period. It is vital to think ahead to this or other possible perils to ensure your clients have the proper insurance coverage before they need it, because after an event takes place … well, you are out of luck.

TECH

KATHERINE SLYE-HERNANDEZ, PH.D. PAC coordinator and public policy analyst, PIA Northeast

Private needs In case of a pirate attack at their homes, the first type of insurance you should ensure your clients have enough of is homeowners/renters insurance. While the basic policy will offer some protection if the pirates steal something, you might want to consider asking your clients some questions about their house and belongings to see if they need

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additional coverages for valuables, such as jewelry—a popular item for pirates to loot. Additionally, should the pirates set your client’s house ablaze, the policy would respond, but again you will want to make sure the coverage the client pays for reflects any recent changes to the house, such as an addition. After a fire is not the time for a client to find out he or she doesn’t have enough coverage to replace everything. Another type of insurance your clients need—in case pirates target them—is auto insurance, which if your clients have cars, they already should have since most states (except New Hampshire) require it as a matter of law. However, you

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might want to review your clients’ policies with them to ensure they have the right coverages to protect themselves because standard auto policies do not cover everything. Should the pirates set your client’s car on fire or vandalize it in any way during their raid, he or she might need rental auto coverage to cover transportation costs while the car is being fixed—something that most clients probably do not know is not standard in all auto policies. This might be a good time to discuss the benefits of comprehensive coverage with your clients, even if they do not owe anything on the car, because this typically covers fire and vandalism. Should the pirates steal your client’s car, comprehensive coverage would protect the client the most and would provide some sort of claim payoff if the car is unrecovered and deemed a total loss. One coverage that is not standard—and one that clients probably don’t think of—is personal property coverage, which would help replace items left in the car when it was set on fire or stolen. You should check with your clients to see what items they typically leave in their cars and explain that such items will not be covered without personal property coverage. Finally, you might want to ask your clients if they have life insurance in case the pirates decide to … well, you know. Nobody wants to leave their family without money should they meet an untimely demise at the hand of the pirates.

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Business needs At home is not the only place your clients need to be concerned about a pirate raid. They also could come after them at the office, so you need to help ensure your clients have

proper coverage for their buildings and employees—especially since they might be surprised what insurance won’t kick in in this situation.

damage is more than CPI covers, your client would need to pay the difference. However, this is when umbrella coverage can be helpful. If the CPI is maxed out, the umbrella policy would kick in to cover the difference up to the excess policy limits.

One of the biggest concerns is that the pirates might harm employees during a raid on a business. Workers’ compensation insurance would cover any injuries sustained by employees. Workers’ compensation insurance covers injuries that employees sustain while they are performing their job duties. Any injuries sustained in a pirate attack of the business would be covered, as the employee would have been injured in the course of their employment (even if pirates don’t have anything to do with their job).

Now that we’ve covered the employer and its employees, what happens if there are nonemployees present in the office at the time of the raid? This is when a general liability policy shows its value. A GLP will cover harm to customers or nonemployees should something happen at a business. While this is normally a slip-and-fall situation, you might be able to convince the insurance company that a pirate raid also should be covered if customers are harmed in your

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If the pirates’ raid leaves an office in an unusable state—and the business will lose income while the damage is being repaired—your clients’ businesses should be covered for loss of income under their business interruption insurance in their commercial property insurance—if a pirate raid fits into the policy’s definition of “covered loss,” and pirate raid is not excluded in the policy. Your clients also should have coverage if the pirates occupy their businesses. BI covers not only lost profits, but many of the expenses a business continues to incur—even while it is closed. Rent or mortgage, employee wages and taxes are all business expenses that typically are included in BI coverage. Even if the BI policy picks up the tab for the employer’s loss of income, it will not pay for repair costs. Therefore, your clients need enough coverage in their commercial property insurance policies. The CPI would cover any damage the pirates might have caused to furniture, equipment, or the building itself. If the

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client’s business, especially if the business had been warned the attack was coming.

Conclusion While a pirate raid might seem like a far-fetched event, the actions pirates take—looting, setting buildings and property ablaze, and general destruction—are all things that could happen to your clients’ house, personal property, or businesses—and without the right type of coverage in the right amount, they could end up with uncovered damage. Nobody wants to have a fire and realize their house was underinsured or have their car stolen and find out they don’t have rental auto coverage. Sharing this information with your clients now can help you get past the conversation that focuses on the barebones policy with the lowest premium available, and instead focuses on the value of insurance and how it can help clients in the long run. Slye-Hernandez is PIA Northeast’s PAC coordinator & public policy analyst.

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What do customers expect from salespeople? Sales managers and their reps spend a lot of time focusing their efforts on spotting and following up on prospects and customers who are, hopefully, the best fit for their business. Much of sales training and strategy is devoted to getting the right fish in the boat. Although we say the customer oversees the sale, it this true? What we do in practice can be quite different. We fail to ask a valid question: What do customers expect from salespeople?

What sales reps expect from customers We all know what we expect from customers—or at least we think we do. We want them to give us their attention, give us a fair hearing, and be open to our recommendations and pay what they owe us. Some customers live up to

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this standard and some don’t make the cut. Just about everyone in sales also works to make sure customers like them, which is the cornerstone of a good relationship.

SALES

JOHN GRAHAM Principal, GrahamComm

That’s not all. They also expect customers to be frank and open, even though some have an agenda they keep well hidden, leaving us guessing and suspicious. Whether accurate or not, most sales reps expect buyers to believe

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their representations are in the customer’s best interest. All this shouldn’t be surprising to anyone in sales, since this is how most reps like to think of themselves.

What customers expect from sales reps Even so, all this is only half the story. What’s missing is at least equally or more important today when it comes to success in sales. In the current state of the economy—and taking into consideration what consumers have been going through during the pandemic—what do customers expect from salespeople? No. 1: Customers want to do business with someone who understands them. Working with a salesperson is like dating, except for one major difference: The conversation goes from “Hi, I’m Bob. Should we get married now, or see how things go in the next seven minutes?” If customers are going to spend time with you, they expect some indication of instant friendship or compatibility that tells them it’s going to be OK. They’re going to be comfortable. This is what people mean when they say, “That’s a great salesperson.” If this message isn’t clear, they’re gone. No. 2: Customers expect a salesperson to be responsive to their situation. Or, to put it another way, many customers want to tell you their story as the way for you to understand and help them. Don’t cut them short and plow ahead with your own spiel. If you do, they will be offended and feel rejected. Most customers know what they want to say, but they may not know how to SBP_PIA_HalfPageAd_052720_x1a.pdf

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express it. They are hoping that you will figure it out. If you do, they will reward you by giving you the sale. No. 3: Patience sends the message to customers that you want the sale. It’s not what you say, but how you act that shows people you understand them. It’s time to slow down, both in terms of your manner and how fast you are speaking. It takes time for information to be absorbed. That’s why consumers don’t want to be rushed or pushed. No. 4: Customers expect salespeople to be reliable. Or, to put it more accurately, there are no second chances—customers don’t come crawling back. They know their options; and they know they’re not alone. Social networking is empowering. They trust their friends, relatives and neighbors, which just

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happens to be an interesting description of small communities—places where people watch out for each other. When a salesperson gets a bad reputation, the news spreads fast. No. 5: Customers expect salespeople to be a resource. There is only one reason Jeff Bezos oversees one of the largest retailers in the world: Consumers are wooed by convenience (immediate gratification). Something happens in the human brain when we see the words, “You’ll have it tomorrow.” But, there’s another part of the brain that pulls toward due diligence—taking responsibility for making good decisions. Finding a salesperson who fuels that desire by sharing his or her knowledge and expertise, along with a give-and-take, is immensely rewarding.

No. 6: They expect you to be candid with them. Some people in sales think it takes painting a perfect picture of what they’re selling to make the sale. It isn’t. Everyone knows nothing is perfect. What’s refreshing is when a salesperson says, “This is a terrific product. My customers are more than satisfied with it, but it’s important that you follow the periodic service instructions. If you like, we’ll send you reminders.” Customers equate candor with honesty and transparency. No. 7: Customers expect follow-through. It’s a useful way to judge a salesperson’s performance before signing the order. “I’ll get back to you late this afternoon with answers to your questions,” says a smiling rep, who gets busy and forgets about it and then blames someone else. Whatever picture the customer had of the salesperson changed, and not for the better. All of this may be obvious to both customers and sales reps. Perhaps. But even physicians can turn their backs on the Hippocratic Oath to do no harm, and some salespeople play by their own rules—which may not be life threatening, but does harm, nevertheless, both to them and their customers. Graham of GrahamComm is a marketing and sales strategy consultant and business writer. He is the creator of Magnet Marketing, and publishes a free monthly eBulletin, No Nonsense Marketing & Sales Ideas. Contact him at jgraham@ grahamcomm.com or johnrgraham.com.

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AVOID

THE PANIC What you need to know to be prepared

here always is a chance that any number of different types of disasters could bring your agency to a grinding halt. Additionally, the insurance industry also has an added demand of regulatory compliance and considerations for your clients’ sensitive data, so it’s critical that you are prepared for anything that may come your way.

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Disaster preparedness means that you are ready and able to recover your business functionality quickly and with minimal interruption in the event of a catastrophic event. In this article, we will focus on the different types of disasters that could befall your independent insurance agency, the importance of having a backup plan and a disaster recovery plan, as well as the regulations you need to consider when creating these plans, and how to practice and test your recovery plan to ensure that you’re ready to respond. When it comes to affecting business continuity, there are three main disaster categories: accidental, environmental and adversarial. Each of these types of disasters can threaten your agency in different ways, but a common thread among them is that they can all cause massive continuity issues if you’re not prepared to handle the threat once it strikes.

Accidental disasters Accidental disasters happen—as the name implies—through accidental means. This can include physical damage to equipment, such as a co-worker who spills something on a piece of hardware or drops something and breaks it. It also could include software-related accidents, such as if a co-worker accidentally clicks on a malicious link or downloads an email attachment that releases malware into the network. Although this kind of disaster happens without malicious intent, the damage it can inflict on your network and your agency can be substantial. By damaging your hardware—especially servers that house your backups—or your internal network that safeguards access to your sensitive data and the personal information of your clients, you are risking significant business downtime, compromising sensitive data, and potentially violating local, state and federal regulations—all of which could lead to costly fines and even the total closure of your agency.

Environmental disasters Environmental disasters are business disasters that results from adverse weather and location-based conditions. For example, if your office—where you house your network servers—experiences a flood due to a hurricane; or experiences structural damage from a tornado or earthquake; or even experiences a massive network and power outage due to a storm, then you are facing the loss of your essential business data due to the loss of your hardware and backups. Most on-site backups require a consistent flow of power, constant network connectivity, and a climate-controlled environment to ensure that none of the hardware overheats. If any of these elements are impacted by environmental factors (say, lightning strikes your building), then the integrity of your backups and critical business functions are compromised, and you face the potential of downtime and a costly (and lengthy) recovery process in order to get everything back up and running.

Adversarial disasters Adversarial disasters often are described through terms like cybercrime and ransomware. These kinds of disasters differ from the other two we’ve described 20

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because they are intentional and deliberate, and the intention of the people who deploy these attacks is to damage your agency and compromise sensitive data for financial gain. Often, accidental disasters—such as a co-worker clicking on a suspicious link or downloading a file attachment from an email—can lead directly to a cyberattack by giving the criminals access to your network and internal files through the use of malware. They are then able to gather your sensitive information and customer data, and often block your own ability to access it in the process. Often, these criminals will demand a ransom in exchange for the return of this data, which can be costly for your agency and damaging to your reputation. Even if you do pay the ransom, there is no guarantee that you will get your data back, or that it won’t be shared on the dark web to other criminals who can purchase it and use it to perpetuate further crimes. In the insurance industry, you often deal with a significant amount of information that can be used against your customers, including personal identification information such as Social Security numbers, banking information, and information regarding personal assets and valuables. This is the kind of information that cybercriminals love to use against you, and it also is the kind of information that can cause irreparable damage to your agency if it falls into the wrong hands.

The right steps These types of disasters sound scary, and while they can be catastrophic to your business, there also are several steps you can take and measures you can put into place to mitigate these

consequences and ensure that you’re ready for whatever comes your way. One of the first things to know about disaster preparedness is that it is vital to have both a backup plan and a disaster recovery plan. Many businesses assume that these plans are interchangeable—but a backup plan is part of your larger disaster recovery plan, and it is critical that you have both.

tion over several months or even years. That’s why having multiple backups is so critical to your business. You always want to make sure you have another means of accessing your data if something happens to your backup. While there also are many different ways to house your backups, including servers, external hard drives, and even the cloud, we recommend utilize multiple formats for your backups, just to ensure that you are able to restore your information regardless of the situation.

Disaster preparedness and the industry Now, when it comes to disaster preparedness, you need to consider some additional factors that are specific to the insurance industry.

When it comes to backups, the best way to ensure that you are prepared to recover quickly following one of these catastrophic events is to utilize the 3-2-1 Backup Rule. This rule follows the basic principle of redundancy, which means having multiple copies of your backup to ensure that you always have a plan B, or even a plan C, if you find yourself facing a disaster. According to the 3-2-1 Backup Rule, you need to have three different copies of your backup, located in two different places, with one of those places being off-site or in the cloud.

The insurance industry is a favorite target of many cybercriminals—primarily due to the wealth of customer data available. In fact, between 2018 and 2019, the number of patient records that were compromised due to hacking rose by 41.4%—and it is on track to rise even further due to COVID-19.1 When it comes to making sure that your agency has the proper disaster preparedness and recovery plan in place, you need to make sure that you are housing and backing up your data in accordance with all regulations pertaining to your business. Depending on the type of insurance you provide to your clients, you could be faced with a variety of different regulations with which you need to stay in compliance.

To illustrate the importance of this, let’s look at the example of an environmental disaster. If your data backup is stored entirely on a server located in your main office building, then the moment something happens to damage that office building and the hardware within, you face the probability of losing everything you have backed up on those servers.

If you provide health insurance or have clients who operate in the health care industry, then you need to make sure your data backup and storage methods are in compliance with HIPAA and any other local, state, and federal regulations related to health care data. Similarly, if you provide insurance to clients in the financial sector, you will need to ensure that you are in compliance with regulations outlined by your state’s insurance department to ensure that the sensitive financial information your agency has stays safe from any kind of exposure or security breach. Additionally, businesses that operate within New York state or have access to customer data from New York state must abide by the SHIELD Act to remain in compliance.

If you don’t have another copy of that backup that you can use to restore all of your critical business data and processes, then you are facing the prospect of having to manually recreate all of the information stored on those damaged servers. This can be an impossible task in some instances, especially if that was the only place you stored that informa-

With insurance, the quantity of data that your agency holds and the amount of sensitive customer information that you are entrusted with makes it more critical than ever that you have the right disaster preparedness plan setup to maintain compliance with any and all regulations that govern your business and customers, so that you can be confident in your ability to provide the most secure environment to keep that data safe and protected.

3-2-1 Backup Rule

The insurance industry is a favorite target of many cybercriminals— primarily due to the wealth of customer data available.

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Disaster recovery plan

Act now

Now that we’ve covered the different factors associated with disaster preparedness in the insurance industry, let’s talk about what exactly goes into creating a disaster recovery plan.

Disaster preparedness isn’t a simple process, but it is something that your agency needs to do to maintain continuity and avoid falling victim to consequences including loss of revenue, damage to reputation, fines and penalties on the local, state and federal level, and even complete business closure.

Having a disaster recovery plan is essential for maintaining business continuity if, or more likely when, your business falls victim to a disaster. As we mentioned, having a backup plan and maintaining multiple backup copies and accessibility options is the only way you can ensure that you’ll be able to restore all of that business information and customer data in the event of a disaster. However, without having a plan in place around how you’ll restore those backups, where you’ll restore them to, and who in your organization is responsible for each aspect of the recovery process, you could find yourself with your data locked up and no way to access it. When creating a disaster recovery plan, you need to consider several factors for restoring your agency back to being fully operational. These factors include: • How long is your agency able to be down while your backup is being restored? • What kind of hardware will you need to restore your backups successfully, and what will the costs be to obtain and maintain this hardware? • How can you ensure that you have the right security measures in place during the restoration process, so that your data doesn’t fall victim to a breach while you’re in the process of restoring it? • Who in your organization will be responsible for the actual restoration process? What will be the responsibilities of each department or employee during this time to ensure the most minimal impact to your business’s ability to function? As you consider these factors, the final plan that you put together should be housed in something called a runbook. A runbook is a guide that walks you through each step of the disaster recovery process, including what happens the moment a disaster occurs; what each team member needs to do to fulfill his or her role in the recovery process; and what kind of contingency plan, or plans, are in place in case of any issues during the recovery process. [EDITOR’S NOTE: For more information on how to create your agency’s disaster recovery plan see the feature article in this issue of PIA Magazine.] Once this is all documented and the plan is created, you still need to make sure that everyone is ready and able to put this plan into action the moment your business falls victim to a disaster. This requires regular practice scenarios to make sure that everyone involved knows their responsibilities and can fulfill them as quickly as needed. These practice sessions should be done multiple times per year, and the more vulnerable your business is to disaster, the more frequently you should be practicing your disaster recovery plan. Additionally, you should be testing your plan and your hardware regularly to look for any holes in the process or weak points that may have cropped up or been overlooked previously. It’s better to identify these earlier and proactively fix them, rather than discover these issues when you’re in the middle of an actual disaster scenario.

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Taking the time now to make sure you’re aware of and prepared for whatever might come your way is how you can set yourself apart from the competition and ensure that your agency, business systems and data remain standing after that tornado (or other disaster) even if your building isn’t! Madden is the marketing strategist for TAG Solutions, a leading provider of IT services, cybersecurity, and unified communications in the Albany, N.Y., region. She is a Chicago native with over a decade of experience overseeing all aspects of the marketing process, and she has been leading the development of new marketing initiatives at TAG Solutions from day one. In addition to overseeing its recent rebranding and new site launch, she is responsible for all email, website and content marketing efforts. Reach her at amadden@tagsolutions.com. HealthITSecurity, July 2020 (bit. ly/3wmf6TP)

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Have the right plan for your agency PIA has the tools to help Insurance professionals spend a large part of their day warning their clients about the importance of flood insurance, earthquake insurance, life insurance and other insurance options to protect themselves and their property. After the last year-and-a-half, probably everyone in the country can admit that a disaster—a sudden event, such as an accident or a natural catastrophe, that causes great damage or loss of life—can happen with little warning. It also can come at us in ways we hadn’t considered in the past.

Info Central; Storm Info Central; and member communications. These resources are found on the PIA website (www.pia.org) under Tools and Resources. In addition, if you have questions unanswered by these resources, you can contact PIA’s Industry Resource Center at resourcecenter@pia.org or (800) 424-4244.

While much has changed, there is one thing that has remained the same. Preparation and planning for an event that will disrupt your agency and its workflow beforehand will allow you to continue with your business operations during and after a disaster—whether it is caused by weather, other humans or a pandemic. As part of your PIA membership, you have access to tools that can help you develop a disaster plan and business recovery plan.

In recent years, more hurricanes and tropical storms have been heading up the East Coast. Every hurricane season, we are reminded that bad weather, natural disasters and more can happen anywhere at any time. Having a plan in place before a storm happens is vital to determine how your agency will function after a storm arrives in your area. Pre-disaster preparation gives you the chance to review your inclement-weather policies, have trial runs and update actions/responsibilities accordingly. If, based on your most recent office disaster plan, Caitlin is supposed to bring vital information home with her before a storm is scheduled to hit your area—but Caitlin left

These resources include the Agency Preparedness & Recovery Plan; the Flood Insurance Tool Kit; Hurricane

Agency Preparedness & Recovery Plan

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your agency six months ago—does Dani (her replacement) know it is now her responsibility to protect the data? Remember, events that can affect an agency go beyond major natural disasters or terrorist attacks. They can include having your computer system down for weeks; a fire that destroys your records; local power outages; localized flooding; a civil authority refusing access to your business due to a riot or other civil commotion; a chemical spill or leak; a nuclear accident; or unsafe conditions at nearby properties. Maybe you have thought about creating a disaster and recovery plan for your agency, but you don’t know where to start. Perhaps you have a plan, but you aren’t sure it is as comprehensive as it could be. PIA’s Agency Preparedness & Recovery Plan can be downloaded easily on to your computer, so you can customize it to your agency-specific needs. Divided into six sections (plan development; office resources and personnel issues; external business considerations; post-event activities; consumer information; and an appendix), the plan helps you to: • assess your agency’s vulnerability to potential risks, • identify key contacts and their contact information, • create a catastrophe contingency budget, • identify critical business functions, • establish a back-up plan (for data), • design an evacuation plan (for employees), • create a shelter-in-place plan, and • establish a claims process (for clients). Your agency’s plan should address the internal workings of your agency, as well as how you are going to continue operations and respond to your clients’ concerns and needs in the post-event aftermath. A disaster and recovery plan is not a one-time deal. After you create the initial plan, you should conduct a mandatory annual review to account for new information and to make sure everyone in your agency is familiar with the plan and knows his or her responsibilities.

Flood Insurance Tool Kit According to the Federal Emergency Management Agency, flooding is the most-common natural disaster in the U.S. Moreover, more than 40% of the National Flood Insurance Program flood claims come from properties outside the high-risk flood areas. To help association members with their questions regarding flood insurance, PIA provides them with access to its Flood Insurance Tool Kit. This information can help you advise current and prospective clients, and answer their flood-risk related questions. Like all of PIA disaster-related resources, this tool kit is updated as needed with news about floods (federal and state-specific) and the NFIP; legislation (e.g., Homeowners Flood Insurance Affordability Act of 2014 and BiggertWaters National Flood Insurance Reform Act of 2012). It also has information on the community rating-system, flood maps and elevation certificates, agent training materials, and consumer marketing materials. The NFIP has

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announced its new premium rating methodology, Risk Rating 2.0, which will go into effect starting this October. For the latest on Risk Rating 2.0, see the related article on page 4 of this issue of PIA Magazine.

Storm/Hurricane Info Central PIA keeps track of winter storms and hurricanes that may threaten its membership. A tool kit for each includes information about an imminent storm (e.g., snow or hurricane, respectively). They provide information for before and after the storm, and offer tips for both your agency and your clients on how to prepare and what you should do in the aftermath. PIA’s Hurricane Info Central also includes a live Twitter feed to the National Hurricane Center’s updates on named storms, so PIA members can track the storms as they make their way up the East Coast.

Member communications PIA recognizes that each event (natural or manufactured) is unique. As different events unfold, PIA will post information on PIA Northeast News & Media (www.blog.pia. org) post on Facebook, Twitter and LinkedIn; and send out emails to make sure you have the information you need, in a format that you can access. If you haven’t done so already, contact PIA’s Industry Resource Center with your agency’s emergency contact person and a cell phone number that PIA Northeast can use if it needs to get in touch with you. We promise to use this information only in a true emergency.

Consumer content You have made a promise to help your clients on their worst day. This promise is kept easily when the event is unique to a specific client, but if your agency is affected by a shared event, you still need to keep that promise. To make sure your clients are as informed about any disaster that might affect them, all the resources and tool kits listed above also have a number of resources that are designed to educate your clients. There also are links to marketing materials that you can send to them (many of which have sign-offs for declined coverage that you can use in the event of an errors-and-omissions claim). If you want more information about PIA’s marketing materials, consumer content or are interested in creating your own marketing/education campaign, contact PIA Design & Print at design.print@pia.org or (800) 424-4244, ext. 338. Or, for more information, you can log on to www.pia.org/design&print. Remember: A little planning now goes a long way later. Your association will be with you before, during and after the events that Mother Nature or others may throw at you, so you can concentrate on getting your agency back in order and fulfilling the promise you have made to your clients.

Trick-or-Treat for CE

October is right around the corner—and PIA wants to fill your CE bowls. Earn a ton of continuing-education credits this October with PIA’s upcoming webinars! Learn about a variety of important topics—like ethics, and business income and the pandemic.

Check these out: Oct. 5, 2021| 9 a.m.-noon

Ethics: Responsibilities and Practical Challenges NYCE: 3 BR, C1, C3, LA, LB, LSB, PA, PC NJCE: 3 ETH |CTCE: 3 LRE | CEU: N/A VTCE: 3 Ethics

Oct. 13, 2021| 10 a.m.-1 p.m.

Insurance Agents Professional Liability: Why? How? Where?^FF^UN NYCE: 3 BR, C1, C3, LA, LB, LSB, PA, PC NJCE: 3 GEN |CTCE: 3 PC CEU: 3 Producer PROD

Oct. 19, 2021| 9 a.m.-noon Business Income and the Pandemic

NYCE: 3 BR, C3, PA, PC | NJCE: 3 GEN CTCE: 3 PC | CEU: 3 Gen Ins Prin PROD VTCE: 3 General

Oct. 20, 2021| 10 a.m.-1 p.m. Employment Practices vs. Employment Benefits vs. Employment Liability Issues

NYCE: 3 BR, C1, C3, LA, LB, LSB, PA, PC NJCE: 3 GEN CTCE: 3 PC | VTCE: 3 General

Oct. 21, 2021| 9 a.m.-noon

Insurance Trivia: Testing Your Personal and Commercial Lines Knowledge NYCE: 3 BR, C3, PA, PC | NJCE: 3 GEN CTCE: 3 PC | CEU: 3 Gen Ins Prin PROD VTCE: 3 General

^FF–This course has been approved for E&O loss-prevention credit by Fireman’s Fund. ^UN–This course has been approved for E&O loss-prevention credit by Utica National. Call the PIA E&O Department for details.

Czupryna is editor-in-chief of PIA Magazine.

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The growing concern of insurance to value Several recent industry articles have noted that many personal and commercial properties are potentially vastly undervalued and underinsured. An article from GenRe, authored by James Kenworthy and Shannon Dowd, reported that upward of 60% of houses and 70% of commercial buildings are undervalued—primarily because the cost of building materials has risen significantly over the last six to 12 months.1 Regarding the increase in cost for building materials and construction, the GenRe article, and a recent Wall Street Journal article2 noted the following: • cost for lumber is up 50% to 100%; • cost for labor is up 8%; • the cost of crude oil—a major component of paint, roof shingles and flooring—is up 80% (from October 2020);

addition, agencies should require customers to sign any applicable statement of value forms. Valuing contents has long been an issue because of the lack of standard industrywide tools available to evaluate most contents exposures. This is another area in which customers must play a pivotal role in determining their property limits. Issues including the following have been noted:

• PVC production/availability costs have risen (due to recent hurricanes).

• machinery and equipment reconstruction costs that may be significantly more expensive as replacement parts might no longer be available;

The potential for claims issues

• contents customized for the operation; and

• the costs for granite, insulation, concrete blocks and bricks are at record levels; • apartment construction costs are up $9,000 per unit; and

For many years, errors-and-omissions claim statistics have shown that issues involving personal property (e.g., HO, Dwelling coverage) and commercial property have been a leading cause of E&O claims. Because the values traditionally are higher in commercial property, the losses can be among the most significant, so simply applying an increase property limit factor at renewal may not be enough. This means that virtually every agency likely has some customers whose property insurance values are insufficient—potentially resulting in claim issues at the time of a loss.

Choosing limits and your role in it Virtually every E&O carrier follows the premise that customers should choose their own property values, with agents/brokers, outside appraisers and various valuation services offering information customers can reference. This provides an element of protection for the agency if a problem arises. On commercial accounts, it is highly recommended. And, it is suggested that a property disclaimer be provided annually to commercial accounts. In PIA.ORG

E&O

CURTIS M. PEARSALL, CPCU, CPIA President, Pearsall Associates Inc.

• discounts and concessions may no longer be available from suppliers/original equipment manufacturers. Some articles raise serious concerns for agents who use various insurance-to-value tools and benchmarks as these tools may be outdated and not reflect current market conditions. Plus, it is important to distinguish between replacement cost and reconstruction cost. The key item addressed and factored into some valuation tools states that reconstruction cost includes, “additional expenses related to repair and restoration contractors’ fees, the construction process itself, the loca29

tion of the property, demolition costs and debris removal.” These factors create a higher valuation than a new construction. Agents should have conversations with their customers about this issue, which can help to minimize the problem if a customer suffers a loss that is not adequately covered. Pearsall is president of Pearsall Associates Inc. and special consultant to the Utica National E&O Program. Utica National Insurance Group and Utica National are trade names for Utica Mutual Insurance Company, its affiliates and subsidiaries. Home Office: New Hartford, NY 13413. This information is provided solely as an insurance risk management tool. Utica Mutual Insurance Company and the other member insurance companies of the Utica National Insurance Group (“Utica National”) are not providing legal advice, or any other professional services. Utica National shall have no liability to any person or entity with respect to any loss or damages alleged to have been caused, directly or indirectly, by the use of the information provided. You are encouraged to consult an attorney or other professional for advice on these issues. © 2021 Utica Mutual Insurance Company

Design+ Print

GenRe, March 2021 (bit.ly/3qSZUfI)

Wall Street Journal, March 2021 (on.wsj.com/3yu5bgg)

(800) 424-4244 design.print@pia.org pia.org/design&print

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Wrong lessors, PPACA tax notices and more Extended liability Q. We have a client who is building a new house on a vacant lot he owns. Currently, he is renting a house and he has an HO-4 policy. We asked the carrier if this HO-4 extends liability to this currently vacant piece of property and if this liability coverage will stay in place during construction. The carrier uses the ISO HO 00 04. This is its response: Liability is extended at no extra charge to vacant land as long as the vacant land is included in the declarations listed and listed as an additional premises. Once the land is no longer vacant (i.e., construction begins, liability will no longer be extended). It sounds like the insured should consider a builders’ risk for the new house. Is this accurate? A. In a word, no. To support this, let’s look at the current ISO HO 00 04 policy, specifically at the definitions, and pay particular attention to “insured location.” 4. “Insured location” means: e. Vacant land, other than farm land, owned by or rented to an “insured.” So, we see here that the vacant land is an insured location. f. Land owned by or rented to an insured: on which a one- or two-family dwelling is being built as a residence for an “insured.” So, we see here that if land is owned by the insured (and in this case he does own the land) and he is in the process of building a new residence, then that land is then considered an insured location and is, therefore, given the rights the policy affords. There is no provision that it must be listed as an additional premise. I think there may be some confusion over the wording used; you are not extending coverage to another location. Rather, this location is included in the definition of an insured location, so coverage is afforded automatically.—Dan Corbin, CPCU, CIC, LUTC

the lessor was named in the thirdparty suit. The insurer will not defend the lessor because it is not the one listed on the policy. Is there anything I can do to resolve this without an errors-and-omissions claim? A. For liability coverage, the lessor does not need to be named to be covered for vicarious liability. Item c. under “Who is insured” provides automatic coverage to “anyone liable for the conduct of an ‘insured’ described above but only to the extent of that liability.” Since the lessor is named in the suit, under these circumstances, coverage applies without being named on the endorsement. [Update: Ultimately, the insurer reversed its denial and defended the lessor.]—Dan Corbin, CPCU, CIC, LUTC

Waive DOL overtime Q. Can my employees waive their right to overtime?

Incorrect lessor named

A. No. The overtime requirement may not be waived by agreement between the employer and employees.

Q. I quoted a commercial automobile policy for someone using a copy of the prior policy. The lessor for a scheduled vehicle was not the current one, so the new policy did not list the correct name on the Lessor–Additional Insured And Loss Payee endorsement. An accident occurred and

Furthermore, while an employer is permitted to have a policy in place whereby overtime work is not permitted, such policy would

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PIA TECHNICAL STAFF Have a question? Ask PIA at resourcecenter@pia.org

not override an employee’s right to compensation for compensable overtime hours that are worked—even if it is done in violation of the business’s policy. —Bradford J. Lachut, Esq.

Damage to property of others

3,462

Ask PIA questions answered last year

“I appreciated the detailed response. As usual, the PIA Industry Resource Center is very helpful regarding delicate matters.” —Daniella Kirfeld Interwest United Insurance

PIA’s highly qualified technical specialists can answer: • Legal • Industry • Coverage • Legislative • Regulatory … and other questions fast!

Q. We have had two of our clients sustain damage to their houses at the hands of others. Since there was no question of liability in either of these cases, we suggested that they submit their claims to the insurance company of the responsible party. In both cases, the insurance companies told our clients that their loss would not be settled at replacement cost, and it suggested they collect under their own homeowners policy for the replacement cost and let their company subrogate the loss. Are they correct? A. Yes. This would derive a greater payment of loss and the process of making a claim will likely be easier and smoother. The homeowners policy settles on replacement cost and third-party tort liability for property damage generally settles on actual-cash value.—Dan Corbin, CPCU, CIC, LUTC

PPACA employee tax notices Q. I have a client who has 75 employees. What type of tax information does my client have to provide to employees to comply with the requirements of the Patient Protection and Affordable Care Act? A. Large employers (considered those with 50 or more employees) are required to report to the Internal Revenue Service information about the health care coverage they have offered to full-time employees using the form found at www.irs.gov/pub/irs-pdf/f1094c.pdf. That same information must be included in a statement that is provided to employees. The form for the employee statement can be found at www.irs.gov/pub/irs-pdf/f1095c.pdf. Employees may use the information in the statement to determine whether they are able to claim the premium tax credits. Instructions for filling out both forms can be found at www.irs.gov/pub/irs-prior/i109495c--2014.pdf. Both the employer statement and the IRS statement must be filed with the IRS annually, no later than Feb. 28 (March 31, if filed electronically) of the year immediately following the calendar year to which the return relates. This is the same filing schedule applicable to other information returns commonly filed by employers, such as Forms W-2 and 1099. Employers are required to furnish a statement to each full-time employee by Jan. 31 of the calendar year following the calendar year for which the information relates.—Katherine Slye-Hernandez, Ph.D.

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You Focus on Business

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

Get Your Quote Call (800) 424-4244, ext. 408 | Web www.pia.org

Employee Benefits for Insurance Agencies Let the PIA Members’ Choice group benefits program take care of your agency.

Medical Dental/vision LTD with Reliance Standard Term life with Reliance Standard

PIA’s curated programs for member agencies and brokerages feature carrier selection, flexible coverage, top-notch customer service, and claims assistance when you need it.

Get your quote today! (800) 424-4244 | memberservices@pia.org

PIANH Company Partners Premier

Supporting

As of publication date. For more information go to pia.org.

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When disaster strikes, we’re here for you and your clients. We help clients recover their homes and businesses. And we help you retain your relationships. Water damage restoration Fire/smoke and soot Mold remediation Moving and storage Contents cleaning HVAC and duct Odor removal

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v i c e s o f c T, i N c .

Norwalk office:

Danbury office:

West Hartford office:

3 Duke Place South Norwalk, CT 06854

29 Starr Road Danbury, CT 06810

635 New Park Ave., Ste. 3A West Hartford, CT 06110

(800) 442-7978 Toll free (203) 853-6524 fax

(203) 743-3103 Phone (203) 853-6524 fax

(860) 231-7900 Phone