2022 March PIA New Jersey by PIA Northeast

March 2022 • New Jersey

IN THIS ISSUE 9

The NFIP's legacy

Your best year for sales

A better customer experience with claims

•

OVER

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DEPARTMENTS March 2022 • New Jersey

In brief

Tech

Sales

E&O

Ask PIA

Officers and directors directory

Readers’ service and advertising index

COVER STORY 20 Guidance through the claims process A carrier’s perspective

FEATURE 27 Build a better customer experience with claims Partner with carriers that offer innovative tools

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, David Cayole, 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. ©2022 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 David Cayole Vol. 66, No. 3 March 2022

IN BRIEF

FYI

Please don’t slam the door shut Dan Corbin, CPCU, CIC, LUTC, director of research, PIA Northeast

The claim-reporting door must be shut at some point, but it doesn’t have to produce unnecessary harm to the policyholder. In case you don’t yet see where I’m going, I’m talking about “claims-made and reported” policies. Claims-made In these policies, the claim must be made during the policy period (or the extended reporting period) for a wrongful act (or occurrence) that took place after the retroactive date, but before the termination date of the policy. The policyholder is obligated to give notice of the claim as soon as practicable. That phrase leaves the reporting deadline open to interpretation and gives insurers cause for concern. They found themselves prejudiced by late reporting, forcing them into expensive litigation to get relief. So, the claims-made and reported policy was conceived to close the door on reporting. Directors & officers, errors-and-omissions and professional liability policies are anything but standard and often they are written by unauthorized insurers. That makes the job of a producer more difficult. While the policyholder is supposed to read the policy and decide whether specific terms meet expectations, I’m sure you want to try to give the policyholder advanced disclosure of important provisions, including reporting requirements of the claims-made policy. Claims-made and reported Most claims-made and reported policies require that claims be reported during the policy period or the extended reporting period (both automatic and optional). In most cases, the extended reporting period is only applicable if the policy is canceled or nonrenewed by the insurer or the policyholder (other than for reasons of nonpayment or material misrepresentation). However, if the policy is renewed, this language would slam the door for reporting at the end of the policy period and the automatic extended reporting period would not be triggered. Coverage gap Allow me to illustrate the absurdity of this language: Dave has a 2021 professional liability policy and renews it in 2022. He has paid premiums for two consecutive policies that will cover a claim made in either year for a wrongful act that took place after the common retroactive date. Suppose Dave receives a demand for monetary damages, sent to his office by regular mail or email during the last week of 2021. Dave does not actually see the demand until Jan. 1, 2022, due to

his holiday activities. He immediately reports the claim in writing to the insurer and is denied for late reporting under the 2021 policy and the 2022 policy. There is no coverage under the 2021 policy because the written notice was given after the policy period ended. Also, there is no coverage under the 2022 policy because the claim was received prior to its policy term. Dave paid both premiums and gets no coverage under either policy. You might think that this provision wouldn’t be enforced by a court. However, a U.S. Court for the District of South Carolina sided with the insurer in GS2 Engineering & Environmental Consultants Inc. v. Zurich American Insurance Co. and Steadfast Insurance Co. [2013 WL 3457098 (D.S.C., filed July 9, 2013)]. The court stated that the policy by its express terms only offered the extended reporting period in the event the policy terminated. Prior, pending litigation A similar problem can occur with a “prior and pending litigation” exclusion that applies to the inception date of the current policy term. This date is absolute and does not require the insured to have actual knowledge of the suit prior to the inception of the policy. In what may be called a “blind-sided” lawsuit, the insured has no knowledge of the grievance until the suit is served. However, it may have been filed shortly before the “prior and pending litigation” exclusion date. Once again, the policyholder is caught in the gap of a closing door. Grace period enhancement Not all insurers adhere to the strict wording of the extended reporting period that limits its applicability to terminated policies. You will find relief for this coverage gap in many policies, but the enhancement language may not be located in the same section. Sometimes the grace period for reporting on a renewed policy will be found in the insuring agreement. Or it will be in the duties of the insured following a loss. Finally, it can be found in the extended reporting provision. I can imagine nothing more frustrating to a policyholder than to pay premiums for continuous coverage and yet be denied a claim over some technicality involving circumstances out of the policyholder’s control. The grace period for reporting is like the pneumatic door closer for the “claims-made and reported” policy. This article has been adapted from QS90796, which can be found in the PIA QuickSource library.

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BY THE NUMBERS

REPUTATIONALDAMAGE Since 2018, Uber has been repairing its reputation after paying over $20 million in settlements for claims related to sexual harassment, workplace discrimination and unethical workplace conditions. This is just an example from one company—reputational damage can affect any business, of any size. What you need to know to protect your agency:

What is iT and how can you prevent it?

What is reputational damage? Occurs when a business loses financial and social capital after actions taken, or words spoken or written, damage the business’s reputation.

Vessels for reputational damage Employees

Social media

Every employee can be a liability.

If an employee or the public post negative comments about the business on social media, or if negative content is posted to the business’s own social-media channel.

For example: An employee who spreads misinformation, or writes and publishes prejudicial statements; A CEO who is charged with sexual misconduct at work.

Price gouging If a business is caught inflating costs of products or services.

Cyberbreaches Loss of data causes customers to lose trust in the business.

Reputational damage claims Average claim Cost: $50,000

5% of annual

small-business claims are for reputational harm

Reputational harm ranks first in the top 10 costliest claims

Mitigate the risks take care

of your employees and clients

Invest in: Commercial general liability insurance

Ensure that

Cyber security liability

Train your staff

Employment practices liability insurance and

your business embodies its values in sexual harassment prevention

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FYI

The signed commercial insurance application Robert M. Sullivan, Esq., partner, Sullivan & Klein LLP

Many insurance professionals persist in a practice followed by agents and brokers for many years. In contrast to their processing of personal-lines applications, a number of agents and brokers fail to obtain a signature of the insured on commercial applications for insurance. Complex applications, schedules and other information are amassed in an attempt to place crucial insurance programs for customers.

• commercial insurance applications should be updated and checked for omissions, so no sections are simply left blank;

Generally, agents and brokers acknowledge an awareness of the importance of the accuracy and completeness of such applications, but many insurance professionals neglect the most basic of steps: requiring the insured customer to certify that the commercial application information is correct and complete.

• any changes to the application should be initialed by the insured; and

The value of a complete application Unfortunately, incomplete or incorrect application information frequently becomes the basis for insurer disclaimers of coverage, placing the agent or broker in the posture of being forced to defend all of the information included or excluded from the application. For example, omitted loss history or cancellations may become characterized as asserted material misrepresentations, forming the basis for legal action by the insurer, claiming a right to rescind the insurance contract.

• copies of the signed applications should be carefully maintained and updated on a regular basis to assure accuracy.

The simple practice of obtaining insured signatures on commercial applications satisfies a basic goal: to keep insurance agents and brokers out of the inevitable controversies surrounding alleged misrepresentations of application information.

The value of a signature The goal should be to obtain written certification from the insured applicant that the representations on the application are complete, accurate and current.

This practice should allow an agent or broker to successfully contend that the insured should be responsible for the information contained in the insurance application.

With such a valuable result, this simple loss-prevention practice seems well worth the price of asking for a simple signature.

An insurer’s challenge of the represented nature or scope of the insured’s business operations could embroil an agent or broker in a dispute concerning the consequences of assessing increased premium or cancellation of coverage, based on true facts not revealed in the application.

A signature on a commercial application by an insured’s representative is crucial to reaching the goal of keeping the agent or broker from becoming enmeshed in this sort of dispute. Best practices A number of steps are recommended to ensure that the insured applicant will take responsibility for his or her own representations, including the following: 6

• the insured should be asked, in writing, to sign the application, cautioning the insured that he or she should read the entire application carefully and contact the agent or broker with any questions or corrections;

Sullivan concentrates his practice in the defense of agents and brokers, complex insurance litigation and regulatory matters. Reach him at (212) 695-0910. PIA members have access to Sullivan’s E&O expertise in the defense of insurance agents and brokers in professional liability and complex insurance litigation. To take advantage of this PIA-member benefit, pose a question through the PIA Industry Resource Center via email at resourcecenter@pia.org.

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A legacy: The past, future of the NFIP rating system Traditionally, a legacy is something that is handed down from one generation to the next. In the legal world, it is literally an amount of money or property left to someone. More philosophically, a legacy can be an idea, mission, or purpose that future generations are asked to either pick up or reject. Bringing this idea to the insurance industry: The National Flood Insurance Program will enter a new era on Friday, April 1, 2022. On this date, the Legacy Rating System—the system that has defined the NFIP for much of its existence—will be retired. The question is: With its retirement, what legacy is the old rating system leaving behind?

TECH

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

History The NFIP has been in existence since 1968, but the history of flood insurance starts even earlier. For the first quarter of the 20th century, flood insurance was provided by the private market exclusively. However, in the late 1920s, extensive flooding along the Mississippi River caused private companies to rethink their appetite for flood risk.

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Thereafter, the private market shortly dried up (pun obviously intended). For the next 40 years, flood insurance—as we know it—largely did not exist. Instead, flood damage was paid for by federal disaster relief packages. Finally, by the mid-1960s—after a period of about 18 months in which Congress had passed six different disaster relief bills—it had had enough and passed the appropriately named National Flood Insurance Act of 1968.

Agency, which runs the NFIP. The maps provide information on the likelihood of flooding in a particular community. The higher the risk of a flood in a FIRM, the higher the insurance premium.

Since its inception, one of the hallmarks of the NFIP is that a building’s flood rates are based on the elevation of property within a given community’s Flood Insurance Rate Map or FIRM. The FIRM is the official flood map of a community, which is created by the Federal Emergency Management

While the creation and use of FIRMs has been important in setting rates, FIRMs have had issues. They are updated infrequently, which means many communities do not have relevant flood information on which to base construction decisions. In addition, no matter how recently a FIRM has been updated, it does not consider certain critical features important to determine the actual risk that a particular building would experience flooding (i.e., the distance of a building from a water source, the different types of flooding, and the cost to rebuild). This results in buildings within the same flood zone having substantially the same rate, even if their individual risks of flooding are much different. In other words, some buildings in a FIRM pay more for flood insurance than their risk represents, while others pay less.

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In part, due to inequalities in flood mapping, the NFIP’s current legacy is one of crippling debt. The NFIP is funded by premiums. When claims exceed premiums, the NFIP is forced to borrow money from the U.S. Treasury—which for most of its history, it did infrequently. That changed in 2005, when Hurricane Katrina hit the Southeast United States. The NFIP claims damage during that year exceeded $17 billion and the program was never the same again.1 Currently, the NFIP is $20 billion in debt—but only after $16

billion was forgiven by the federal government in 2017.2 The NFIP will enter a new era when the Legacy Rating System is retired in April. Under the Legacy Rating System, generally rates were determined by a FIRM zone, base flood elevation, and foundation type. All NFIP polices issued or renewed on or after April 1, 2022, will be subject to a new rating methodology referred to as Risk Rating 2.0. The defining feature of this new rating methodology, which went into effect on Oct. 1, 2021, for all new policies, is that it will use a different set of rating variables. Risk Rating 2.0 will use a host of different variables, including: • distance to a flooding source, • flood type, • ground elevation, • first floor height, and

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• claims history. FEMA, which has given Risk Rating 2.0 the tagline of “Equity in Action,” has stated that by using Risk Rating 2.0, it will better be able to equitably distribute premiums for all policyholders based on a particular building’s value and unique flood risk.3

What does this mean for policyholders? Change is coming. Moving away from FIRMs also is a move away from subsidized rates, another legacy of the NFIP. According to FEMA, 23% of current NFIP policyholders will see an immediate premium decrease due to the new system. Of course by my math, that leaves another 77%—what about them? Sixty-six percent of policyholders will see a relatively small increase

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in premium of $10 or less per month. Another 7% of policyholders will see increases between $10-$20 per month. While 4% of policyholders will see an increase of $20 or more a month.4

How agents can help their clients Since Risk Rating 2.0 considers more rating variables compared to the Legacy Rating System, insurance producers may discover that premium quotes for both new and renewal business are exponentially higher than under the old system.

Producers will need to be prepared to talk to their clients about these potential rate increases. The good news is that subsidized rates are not completely disappearing. While quotes may give the impression of drastic premium increases immediately, under existing law, rates for individual policyholders cannot increase by more than 25% per year. Eventually, policyholders will have to pay the actuarially sound rate; but increases will be gradual year after year until they reach the actuarially sound levels.

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A combination of subsidized rates, low purchase rate by consumers, and outdated flood maps has left the NFIP with a legacy of crippling debt. The question now is: Will Risk Rating 2.0 continue this legacy or reject it for a different, yet uncertain future? Lachut is PIA Northeast’s director of government & industry affairs.

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The NFIP was created by the federal government out of necessity. As originally created, it was supposed to be an innovative public-private partnership that would not only provide flood insurance, but encourage responsible construction in floodprone areas. Unfortunately, that vision never materialized completely.

FEMA (bit.ly/3GueIIx)

Congressional Research Service, 2021 (bit.ly/34FzC9B)

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FEMA (bit.ly/3fm3QAK)

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Your best year for sales? Six tips to make it happen Do you want to make this year your best year in business and sell more than you’ve ever sold before? If so, here are some ideas that will help you achieve this goal. Tip No. 1: Determine why it’s critical you have a great year. What are you capable of if you set your mind to it? Pretty much anything, right? So, whether you will have your best year will pretty much come down to how compelling your reasons are for making it happen. Find your why in positive reasons for making this your best year and negative consequences if you don’t. The start of all great achievement is a burning desire in your heart and soul that simply must be fulfilled—so, dig deep, and find all the possible reasons you can for making it happen. Tip No. 2: Plan to make it happen. What does your best year look like from a numbers standpoint? How many new customers and how much business from

current customers do you need? How many prospects do you need? How many phone calls do you need to make, how many doors do you need to knock on? Ultimately, how many sales do you need to make to have your best year? Once you know the answers to these questions, you can make your business linear. You need annual, monthly, and weekly goals, all broken down to daily activities.

SALES

JOHN CHAPIN President, Complete Selling

Tip No. 3: Take massive action and be disciplined. Speaking of activity, the most successful salespeople are

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people of massive action. They also are super disciplined, and work on only high-payoff activities 80% of the time. The most important activities of a salesperson are: prospecting, presenting and closing. The fastest way to build business is by calling on tons of people both in-person or on the phone. Not email. You’ve got to get out and network, meet people, knock on doors, and ring phones. Your biggest problem is not enough people know about you. Do everything necessary to reach out to and introduce yourself to a ton of qualified prospects. Business and sales is a contact sport—it’s a numbers game. The more people you talk to, the more business you will do. Part of massive action is working harder. The harder you work—by making more sales calls—the more your sales will increase. Want to increase sales by 20%? Simple, increase your sales calls by 20%. If everything stays the same— your contact rate, your closing ratio, the quality of prospects you’re calling on, your sales skills, etc.—and you simply call on more people, you will increase sales automatically by the percentage of increase in the number of calls you make. So, what that means is: whatever percentage increase it will take to have your best year, simply increase your calls by that number and by the law of averages you’re guaranteed the result. It takes lots of discipline to stick to these activities during prime calling hours. You’ve got to make hitting your numbers your No. 1 priority every day. This means you’ve got to guard your time closely against your biggest enemy: distractions. Distractions come in many forms: phone calls from friends and family, text messages, email chimes, social media, chasing a fly around your office for five minutes, paperwork you should be doing off-hours, and other urgent/unimportant tasks that steal your attention during the day. While most of these distractions simply pop up, many of us also are guilty of intentionally placing distractions smack in the middle of our day. Don’t do that. Don’t schedule doctor’s appointments, appointments with your financial planner, CPA, or anything else at these times. Obviously, there are times when you can’t avoid this, but you want to stick to this rule as much as possible. Also, don’t do paperwork and other non-time sensitive activities during prime calling time. Put up two signs, one in your office and one in your car, that include the question, Am I working on my most important sales activities right now? If it’s 5 o’clock in the morning and the answer to the question is “No,” that’s fine. If it’s Wednesday, at 11 a.m., and most of your prospects are on a standard work schedule, and the answer to the question is “No,” that’s an issue. Tip No. 4: Get better at selling. If you get better at all aspects of selling (e.g., getting to the decision makers, getting their attention, finding their pain, creating solutions, differentiating yourself, and building rapport and long-term relationships), then an increase in sales calls will grow sales exponentially. Even if you only get better in one or two areas, your sales will increase at a higher rate than if you simply increase the number of calls. Tip No. 5: Get rid of excuses and change limiting beliefs. Excuses and limiting beliefs are two of the biggest roadblocks to having your best year. If you have some excuses, keep in mind that whatever excuse you have, someone on the planet has had it worse and overcome it. Get to work and find the solu16

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tion. As Henry Ford said, whether you believe you can or can’t, you’re probably right. If you are having challenges it is due to incorrect or limiting beliefs. Find someone who’s successful doing what you want to do and copy their beliefs and their actions. Tip No. 6: Be uncomfortable and scared every day. To grow personally and professionally you must step out of your comfort zone and face your fears every day. The inability to deal effectively with fear and discomfort and not make the necessary number of sales calls is the main reason people fail in sales. The solution is to get comfortable being uncomfortable and to act despite fear. Make that call you’ve been putting off for months. Forget the email and go see that prospect in person. Find the biggest, scariest prospect you can, and make the call. You know which dragons you’re afraid to face. Go face them. Ultimately, you’ll discover that your dragons aren’t as bad as you think— it was just your imagination giving in to fear and discomfort. Finally, remember that life is pretty much 100% mental, the only roadblock between you and where you want to go is in your head. You can have your best year of business ever if you’re committed. But, make no mistake: it’s going to take hard work and sacrifice. The only questions are: Are you willing to put in the time, effort, energy, and money that’s necessary? Are you willing to give up the excuses and other crutches and pay the price to get it done? If so, put on your helmet, fasten your seatbelt, and go make this year your best year ever! Chapin is a motivational sales speaker, coach and trainer. Reach him at johnchapin@completeselling.com.

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ndependent agents have relationships with various insurance carriers. Each carrier has its own set of tools and resources to help agents educate their clients about what will happen when they file a claim—before, during and after. By working together, agents and their carriers can help to ensure that the claim process goes as smoothly as possible for their insureds. PIA Magazine spoke with Jim Wucherpfennig, the head of property claim at Travelers, to discuss his company’s claim process and best practices for agents, which they can use to better their relationships with all their carriers.

Jim, thanks for taking the time to chat with us about the claim process from the insurance carrier’s perspective. First—while all claims are important to those affected by them—in the claim process are all claims equal? If not, how do they differ? We triage and assign claims based on severity. For example, from a property perspective, we manage minor damage claims like loose siding or shingles, all the way up to major catastrophes that result in total losses. When we deal with major catastrophes, we combine policy information with highly accurate satellite maps and aerial images. Then, we can estimate damage with a high degree of accuracy—even before insurance adjusters are able to

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enter the area. This helps our claim professionals start the claim process earlier and help our customers faster. Travelers has made significant investments in artificial intelligence applications to help improve the customer experience and resource deployment after catastrophic property events like wildfires and wind/tornados. For wildfire damage, we use high-resolution aerial imagery coupled with a proprietary deep machine-learning model. By using imagery from before and after a fire—in concert with our proprietary AI model—we can identify which customers’ houses or businesses are damaged. In certain cases, such as the recent Colorado fires, we were able to assist some customers before they had a chance to return to their homes and assess the damage. In the case of wind severity damage, we leverage the same functionality from our wildfire solution to determine potential losses from events like tornadoes and hurricanes. Our claim team uses this information to understand where to deploy resources needed to assist customers with the damage assessment process, which means we use only Travelers employees to adjust claims. This tool—in combination with our right-touch and technology tools and platforms—enabled us to close over 90% of our personal insurance claims within 30 days during 2021.

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For simple claims, we usually can manage the entire process virtually—using apps and mobile technology to inspect and evaluate the damage and facilitate payment— often in the same day. The above illustrates a basic tenet: Being able to determine severity allows us to deploy and assign the right claim professional, with the proper expertise, to the right claim.

Most people think the claim process starts when a client picks up the phone and calls his or her agent after something has happened, but can you talk about what should be happening before a claim even happens? We like to take a proactive approach to claim management—helping inform our customers about potential risks and how to take the proper steps to avoid them. We have a robust set of resources1 that discuss some of the most typical claim situations—hurricanes, tornados, wildfires, etc.—and what customers can do before a claim even happens. Our agents can use these resources to help better educate their clients. Once a claim occurs, can you tell us about the ideal claim process? And, how an agent can help? Like our customer engagement strategies, we also make available the same resources to our distribution partners. Usually, our agents have the most intimate knowledge about our customers, so we want to empower them and to put them in the best possible position to communicate with their clients. We also have rolled out a tool that provides agents and brokers with before-and-after photos of areas affected by disasters. Searchable, high-resolution aerial images often are available within one or two days after a catastrophic event—normally before anyone can access the location physically. This enables agents and brokers to notify customers quickly about the condition of their property and begin the claim process when necessary. We give agents tools and resources that they can share directly with their customers and even content

they can repurpose for digital outreach—like through their own social-media channels. Ideally, we want agents to encourage customers to report losses directly to us. That direct loss reporting is the first step in helping us assign the right resource to a claim. Based on the severity, we can use our broad suite of digital tools to help facilitate the claim process—including inspection, payment, and resolution. For example, with the recent Colorado wildfires, nearly 80% of our payments were made electronically—getting funds like additional living expenses and other advancements to customers more quickly—sometimes in the same day. Does the process you’ve outlined in the previous answer change depending on the type of claim? If so, how? Yes. During major catastrophe events, we can activate our catastrophe response teams who can assist local office staff to directly assist customers. These resources provide us with the ability to respond rapidly to a disaster anywhere in the country. When needed, we can add resources from our catastrophe response team and reposition employees from around the country so we’re able to quickly connect with our customers—even during times of simultaneous catastrophe events. We have claim professionals with a broad array of specialties, too—from claim professionals with contents expertise, to major-case claim professionals who are trained to understand some of the most complex claim situations—like those involving major property damage or total losses. Are there any hacks that insurance agents should know about when it comes to the claim process? Every carrier has its own resources, and agents should take advantage of them. Our partners can tap into our customer resources and not feel compelled to create their own content. This co-branded content can help agents stay nimble, and be in the driver’s seat and help best manage the relationship with the customer. From a property perspective, agents can leverage Travelers’ vast partner network to help customers further. Travelers has partnered with a company with a digital platform, which allows customers to communicate with reputable contractors in their area, easily select the best contractors for their needs and track key milestones during the repair process. Partnerships like these help us give our customers an even more transparent and convenient process. How would you advise an agent who may be filing his or her first claim with an insurance company? Get to know your local claim team and the type of resources they have that can help you. Learn about your carriers and their digital capabilities and direct-loss reporting options. These tools can help agents give the best and most timely service to their customers. We know that customers have frequent questions about whether they should even file a claim. That’s why Travelers has a loss consultation process. Our loss consultants are trained, experienced insurance professionals who understand the claim process and who can provide a preliminary assessment of damage. These claim professionals are supported by data, analytics and technology that

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help them offer valuable information to policyholders. During a consultation, the consultant can view a policyholder’s policy details and history. This allows the consultant to explain the policyholder’s potential coverage and any other relevant policy information accurately. These consultants can help policyholders assess the appropriate actions they can take after a loss. Do you have any advice for the veteran agent who has filed numerous claims throughout his or her career? Customers are more informed than they’ve ever been, and they are becoming more digitally savvy quickly. Agents who stay ahead of the technology curve can remain relevant and be in the best position to help facilitate the right dialogue between the customer and the carrier. How can working together during the claim process strengthen the relationship between the agent and the carrier? How does this benefit the client? The better the claim process, the better the customer experience. That can translate into a better overall experience for the carrier, the agent, and the customer. Travelers has several digital capabilities that agents can discuss with customers that are designed to facilitate a more frictionless claim experience. For example, Travelers has partnered with a company that assists in assessing property damage. It converts smartphone photos of any property into an accurate 3D model, gathering precise measurements of a building’s exterior, including its roof, siding and windows. This allows Travelers claim professionals to inspect damages without the risks that come with climbing ladders, and policyholders can use the program to submit their information without having to schedule an on-site inspection. In addition, Travelers uses drones to inspect roofs of residential and commercial properties in everyday claim situations, as well as in response to catastrophes. This helps our customers recover from losses more quickly by expediting roof inspection, payment and repair. Drone use also improves the safety of our field claim and risk control professionals by reducing the need to climb roofs and enter potentially hazardous areas. Drones also increase the effectiveness of damage assessments by making it possible to see more, faster and go places that were previously inaccessible. In sum, if the customers have positive claim experiences, then most likely, they will view their agents as a trusted business partner and will more than likely recommend their agents to friends and family.

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The carrier can benefit too, because if the carrier processes claims in a timely way, the agent is more likely to view the relationship positively and potentially place more business with that carrier. Final thoughts? For many customers, they may go their entire lives without ever having to file an insurance claim. We understand the process can be stressful and is sometimes emotional—especially in catastrophic situations that involve major damage. Understanding coverages is important. Customers should evaluate their policies regularly and assess if any of their needs have changed— then talk to their agents to make sure they have the right coverages in place. The last thing a customer wants to have happen during the claim process is to discover that he or she is underinsured or perhaps not covered at all for a particular loss. Agents need to work with their customers beforehand, so they understand that they need to have their information ready—names, policy information, contact information, date of loss and description of what happened—which is a critical part of the claim process. In addition, it is helpful to have receipts and other documentation related to the claim. Finding the right service provider to help make repairs also is vital. This is the customer’s choice, but we want to help them make the most informed decision. Being informed and maintaining communication throughout the process is key—for the agent, the carrier and the insured. Czupryna is PIA Magazine’s editorin-chief. 1

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Building a modern claims experience. WE’RE COMMITTED TO A MODERN, INDUSTRY-LEADING CLAIMS EXPERIENCE In coastal states, it’s no secret how important the claims process is. SageSure is committed to delivering on the promise made with each policy. That’s why we’ve built an in-house team dedicated to an exceptional claims experience backed by industry-leading technology—so customers can spend their time focusing on what matters most. Our new claims experience features: • Streamlined claim assignment and communication • Pre- and post-event customer text messaging • Digital payments • Virtual inspections • Committed direct repair networks • And more to come Hear about our new claims department at SageSure.com/SupportingClaims

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Insureds file claims every day. However, catastrophic weather events often test the capabilities and capacity of insurers to process and pay claims in a timely manner—and they can stand as a benchmark for how professional, independent insurance agents and their carriers handle their claims processes. Moreover, they can identify areas of strength—and areas that may need improvement. For example, take the storms of 2021. Winter Storm Uri led to roughly $2.8 billion in residential property losses and generated an estimated 368,000 claims.1 Hurricane Ida not only battered the Gulf Coast, but its remnants caused flooding and fatalities as far north as Connecticut, New Jersey, New York and Pennsylvania. As the year ended, deadly tornados in Kentucky and five other states caused billions of dollars in property damage. In the aftermath of these devastating events, claims professionals want to handle claims quickly and in a way that meets consumer expectations for a fast, seamless experience driven by digital technology. Regardless of what causes a policyholder to file a claim— severe weather, an accident or a fire, etc.—insurance

producers and insurance carriers know that the No. 1 challenge in the claims experience is communication. We want to provide policyholders with timely updates on the status of their claims, to help them understand what they can expect next, and to have the emotional intelligence to communicate with someone who’s worried about their house, car or property and how it will get repaired. Additionally, today’s policyholders have customer experience expectations based on their experiences with other sectors, many of which use apps, social media and other digital tools to communicate. In recent years, technological advances have given the insurance industry new tools to automate large portions of the claims process, streamline processing time, reduce costs, and, most importantly, improve the customer experience. These tools are helping to transform a process that was traditionally manual, cumbersome, and complicated. However, many carriers have struggled to integrate these new tools into their processes due to both internal and external challenges that include things like compliance concerns and integration with legacy systems. Today, when we buy online, we know when our order is labeled for shipping, when it is on the truck and when PIA.ORG

it arrives at our house. When policyholders file claims and they don’t get the customer experience they expect, their views of their agents, insurance carriers—and the industry as a whole—can turn negative. The primary issue is that processing claims is more complicated and difficult to replicate for each customer than processing an order through Amazon. Every house, loss, and therefore, claim can be different—but there still are significant opportunities to provide customers with transparent communication proactively. The independent agents who connect clients with insurers that also can meet those high expectations will add value to the policyholder experience, improve their retention, and create positive word-of-mouth in their community. One of the best ways to improve the customer experience is to give policyholders options to understand their claim through the channel of their choosing at any point in the process—whether they prefer phone calls, online status updates, texts or emails. By building these communication channels into a claims management system, carriers can ensure customers have options while also ensuring all communication is captured within the claim.

Modern claims management platforms A best practice for insurers is to utilize modern claims management platforms that automate processes and enable proactive communications through technology and channels customers want. Whether in the aftermath of a catastrophic storm or an isolated homeowner loss, customers want and need this level of transparency. These platforms can automate and streamline the endto-end claims process and facilitate the payment of approved claims, ensuring customer satisfaction. Giving adjusters the time and tools to help policyholders through the claims process is a vital step toward improving the customer experience. Modern claims management platforms can support this by automating simple tasks once handled by adjusters. Taking simpler tasks out of the equation frees up adjusters to focus on communicating and setting expectations with policyholders, as well as handling more complex tasks. Data availability is another key factor for a successful claims management platform. A claims team with accurate, real-time data can gain insights quickly and turn them into action. Advanced, well-designed data analytics, predictive modeling, and machine learning can do things like flag claims at risk of not meeting compliance or service guidelines; help choose the right inspection methods in a catastrophe situation; and detect when a customer may be having a negative experience that needs to be recovered. Agents should look to insurers that employ staff with the skills and experience to analyze and act on their data. While this includes traditional insurer personnel, forward-looking insurers have expanded this category to include those with experience in adjacent fields like climatologists, wind engineers, geologists and software engineers.

Choosing the right tech tools The number of new technologies and vendors that have arisen in the InsurTech space is remarkable. In 2020, there was $7.5 billion in global funding for 28

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the sector, with property/casualty accounting for 45% of that total.2 Home monitoring, aerial imagery and advanced weather analytics are just a few of the technologies influencing claim processes. However, while these tools can be transformative, no one technology has emerged as a silver bullet within claims. Instead, multiple forms of innovation available throughout the process allow insurers to build tool kits for adjusters and other claims professionals—which allows them to choose the right resources for the job. Use of aerial imagery, particularly for catastrophic events, is now a best practice for many insurers. Drone, fixed-wing aircraft or satellite imagery can provide a view of otherwise inaccessible areas while also allowing carriers to see an event’s impact at scale. When combined with artificial intelligence that can compare pre- and post-loss imagery, claims professionals can assign claims to the right inspection resource quickly, get payments out early, and provide more accurate damage assessments. Ensuring that virtual inspections are available is another technologybased best practice. Virtual inspections allow customers to participate in the assessment process by submitting photos, video and other data to carriers. Virtual inspection tools3 can offer applications that allows for remote damage assessment through a policyholder’s smartphone. With just a few photos from the customer, the program generates a 3D model of a damaged property. Then, the claims team can generate measurements, prepare an estimate, and issue payments based on the virtual inspection.

A third tool insurers should want in their tool kits involves weather analytics. These tools enable insurers to track a storm path before and after it arrives, enhancing the precision and speed with which a claims team can respond to catastrophic events. They also allow weather data to be overlayed with policies in force, giving insurers a clearer picture of the potential or past event. Weather data can improve communications with policyholders by allowing insurers to message customers before and after a storm, triage resources and then determine how those resources should be placed in response to an event. This ensures the carrier has both the adjusters and the vendors needed to support customers deployed to the right areas as quickly as possible.

The link to loss control Home monitoring also is an emerging tool for claims professionals and is a key topic for agents to discuss with their policyholders. Traditional devices have included alarm systems and video monitoring, but emerging technology allows for an even more nuanced risk management for the home. Some devices offer app-driven technology that attaches to a home’s water line to provide real-time monitoring of water usage and monitors for irregularities. They can spot leaks before they are visible and help control leaks and water-related claims.4 This helps to assure customers that their houses are protected. If a leak does happen, they won’t have the larger expense and typical challenges experienced after the damage from a leak becomes visible.

Through this type of home-monitoring technology, the insurance industry soon could have roofs that can tell us they’re damaged and plumbing systems that tell us they are leaking. In this way, it not only helps to limit potential damage and the extent of claims, but also serves as a form of loss control to prevent damage before it occurs. Policyholders will continue to demand greater communication, transparency and responsiveness from their agents and insurers—whether they are facing damage from a catastrophic event or an isolated incident. By partnering with insurance carriers and managing general agents who take this more holistic approach to modern technology, agents will be setting their clients up for a smooth claims process and providing the customer experience their policyholders expect. As chief claims officer, Reese is focused on building SageSure’s claims function to manage the end-to-end claims lifecycle with partners while implementing analytics, technology, and claims handling best practices. Reese holds a bachelor’s degree in international politics and Arabic from Georgetown, a master’s in risk management and insurance from Florida State University and the CPCU designation. Reach her at cat.reese@sagesure.com. 1

Insurance Council, 2021 (bit.ly/3Gprrwd)

Boston Consulting Group, 2020 (on.bcg.com/3tOdLaD)

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Were you prepared for the hard market? Without question, agencies around the country are reporting a wide variety of issues that are symbolic of a hard market. These issues include increased premiums, reduced capacity, restrictive policy terms, and stricter underwriting from the carriers. While the impact of the current market will vary based on the location of the agency and its customers, it is fair to say all agents are dealing with a different market today as compared to five years ago. How agencies deal with the hard market will impact the degree at which the market affects their bottom line. There are several best practices that agencies should note. Start with the agency staff. Since it has been a while since the insurance industry has experienced a tightening, there is a good chance the agency has employees who have never been through a hard market and may not understand how to deal with it. Because there is a possibility that this market will cause some emotion from policyholders, counsel the agency staff on how to deal with customers who have just been advised that their premiums are increasing by 10% to 50% or higher—based on the specific type of customer and the line of business affected. It is suggested to meet with the staff, discuss the issues, and train the employees accordingly. Communication with your customers is key. There is a good chance that you have customers who have been affected negatively by the COVID-19 pandemic. As a result, communicate with them on what their upcoming renewals will look like, and what they can expect in the way of pricing and coverage terms. Many customers have never experienced a hard market before, and they may not understand the issues that result from one. Reduction of limits. It is possible that customers may want to modify their coverage through options such as reducing their limits or increasing deductibles, especially in various lines—such as umbrella, professional liability, and directors & officers—that have been hit harder by the current market. When this happens, make sure these discussions with your customers are well documented and memorialized, not only in your agency file, but with communication sent to the customers. More restrictive policy terms. With the COVID-19 pandemic, carriers likely are including various communicable disease exclusions to clarify the lack of coverage. There may be additional restrictions for which agents need to be on the lookout. While admitted carriers generally are required to notify customers when they are reducing coverage, surplus-lines carriers are not required to do PIA.ORG

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

so. There is a chance that you will find a new exclusion or coverage change when you receive the renewal proposal from the wholesaler. It’s possible that this will happen days before the account renews, so agents should try to be proactive in asking their wholesalers what type of policy coverages they can expect. In addition, with the chance the surpluslines industry will see an increase in application activity, agents should look to get their applications to their wholesalers as early as possible. To make sure the account is being worked on, conduct periodic followup with the wholesaler. Moving coverage to a new carrier. If the marketplace prompts a need to remarket the account, agents should be sensitive to doing a comparison between the expiring coverage and the proposed replacement coverage with reductions brought, in writing, to the customer’s attention. Encouraging the customer to read his or her policy is strongly suggested. This marketplace will affect virtually every agency. The better prepared agency staff members are for all the issues they will face will determine to what degree the agency is affected. Pearsall is president of Pearsall Associates Inc. and special consultant to the Utica National E&O Program.

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Negotiated claims, lack of permit claims and more Claim denial deadline Q. Our client has a business interruption claim arising from an incident that happened months ago. The company dragged its feet, then finally told the insured’s attorney that it will deny the claim, but it won’t put it in writing. What are the rules applying to company claims-settlement time frames? A. In general, first-party claims under property/liability policies (except auto physical damage and personal injury protection claims) must be paid within 30 calendar days from receipt by the insurer of properly executed proofs of loss [N.J.A.C. 11:2-17.7(c)(1)]. However, the fair-claims settlement regulations [N.J.A.C. 11:2-17.1, et seq.] do not apply to claims submitted by the insured under commercial property and liability policies with annual premiums more than $10,000. If the insurer is unable to settle the claim within this time frame, it must send the claimant written notice by the end of the 30-day period, stating the reasons additional time is needed, plus additional notices every 45 days thereafter, until all elements of the claim are either honored or rejected. (These notice requirements do not apply after a claimant has filed a lawsuit pursuant to the claim.) [N.J.A.C. 11:2-17.7] Any denial of a claim, or offer to compromise a claim, must be confirmed in writing [N.J.A.C. 11:2-17.8].—Dan Corbin, CPCU, CIC, LUTC

Claims inquiry should not be considered a claim Q. If an insured makes a claim inquiry on a policy, not to file a claim, but only to ask a what-if or hypothetical question, can the carrier act on that insurance policy? A. No. Chapter 235 of the Laws of 2001 enacted a prohibition against insurers categorizing an inquiry by the insured as a claim for the purpose of determining adverse claims experience. This includes an inquiry for information regarding the insured’s homeowners insurance policy or coverage for a particular loss under that policy [N.J.S.A. 17:29B-4.1]. For more in-depth information, see, Commercial-lines and homeowners policyholder protections in the PIA QuickSource library.—Bradford J. Lachut, Esq.

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Negotiated claims settlement Q. My client was involved in an automobile accident that was completely the fault of the other party. My client has received a letter from the adjuster of the other party’s insurer offering a compromise payment. The letter claims that the insurer had not received a notice of loss, and it couldn’t contact its insured. Can an insurer make such an offer?

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A. Yes. However, your client does not need to accept it. An insurer is entitled to prompt notification of a claim and the cooperation of its insured. Failure to do so renders the claim subject to denial. (Your client should check to see if the insurer met the state’s legal threshold in its effort to contact its insured.) The alternative to accepting a compromise offer is to try to sue the third party. However, that will involve retaining a lawyer, who would have to locate the responsible party, drag the person through court proceedings without the benefit of insurance protection; and, after a successful decision, find a way to collect the damages. Our best advice is to have your client evaluate the amount of the offer against the challenges of pursuing

the responsible party. Your client always can try to negotiate a higher compromise.—Dan Corbin, CPCU, CIC, LUTC

Denial of homeowners claim for lack of building permits Q. Could an insurer deny a homeowners policy claim for damage caused by a condition in improvements made to the house for which the homeowner neglected to get the proper building permits? A. The typical homeowners insurance policy does not exclude coverage for dwellings, or their upgrades or improvements, that have not been built according to current building code. However, recovery is limited to the value of the damaged property, not the value of property as it should have been built according to code. Nevertheless, most policies will provide some limited additional coverage (usually 10% of the dwelling limit) for costs that are incurred due to the enforcement of a building ordinance or law. Also, an insurer may be willing to increase this ordinance or law coverage limit for additional premium. A dwelling, and its upgrades and improvements, that are known to be built out of compliance with the current building code, and are deemed to be unsafe, could become an underwriting issue—so, the insurer may refuse to renew the policy if the house is not first brought up to code.—Dan Corbin, CPCU, CIC, LUTC

Patent infringement claim Q. Our insured has been charged with patent infringement. Will this be covered under Coverage B of the ISO Commercial General Liability Coverage form? A. It’s not likely, particularly since “unfair competition” and “piracy” were taken out of the definition of advertising injury. This occurred when the Insurance Services Office Inc., transplanted Personal Injury and Advertising Injury Coverage from the 1981 edition of the GL 04 04 Broad Form Comprehensive General Liability endorsement to the 1985 edition of the simplified CG 00 01 Commercial General Liability Coverage form.

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Even under the “unfair competition” and “piracy” language, the allegations against the insured would need to be constructed carefully to invoke a defense for patent infringement.

Since then, the ISO has revised the CGL form even further to preclude claims based upon allegations of patent infringement. In fact, even covered torts, such as copyright, trade dress or slogan infringement, are expressly limited to an advertisement, as defined in the policy. The ISO seems to be keeping the intruding patent infringement claims out of the equation. Patent infringement insurance responds specifically to lawsuits claiming patent infringement in the U.S., brought against an insured that manufactures, uses or distributes a covered product; and it is available from specialty markets.—Dan Corbin, CPCU, CIC, LUTC

Completed operations liability Q. Could you please clarify the relationship between contractual liability and the additional insured endorsement regarding completed operations coverage? A. The current ISO additional insured endorsements do not provide coverage for completed operations unless the Additional Insured– Owners, Lessees or Contractors– Completed Operations (CG 20 37) endorsement is used. Instead, if the indemnification in the governing contract includes damages for completed operations (or covers “all” damages and does not exclude completed operations) and, if the indemnification agreement is enforceable, then the contractual coverage of the named insured would respond to a completed operations claim.—Dan Corbin, CPCU, CIC, LUTC

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Hardenbergh Insurance Group

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Roger C. Butler, CIC

Mark Anthony Associates

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Barclay Group

Community Insurance Associates Inc.

J.S. Braddock Agency

Dependable Insurance Agency

Corporate Insurance Agency Inc.

Fallivene Agency Inc.

Davies & Associates

Glenn Insurance Inc.

E&K Insurance Group

JBL Trinity Group Ltd.

GJEM Insurance Agency Inc.

Kando Service Agency Inc.

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George Lista

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Merwin & Paolazzi Insurance Agency Inc.

SAS Insurance Agency Inc.

Beckerman & Co.

New Jersey Agents Alliance

Sungenis Insurance Agency

Louis Beckerman, CIC, CPCU

Vozza Agency Inc.

Van Pelt & Son Agency Inc.

Diamond Club ($1,000-$1,999) ADP Partners Insurance Agency Inc. Blum & Walsh Group Inc. Insurance Center of North Jersey Liberty Insurance Associates Inc. M&F Insurance Agency

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Lloyd “Rip” Bush Jr., CPIA

Samuel A. Wierman

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