August 2016 Wisconsin Professionsal Agent

professional agent AUGUST | 2016

What’s Inside?

Badger Blast....................... 11 Sales Success.................... 16 Successful Writing............ 18 E&O Prevention.................. 19 Get Your Employees.......... 20 To Sell Education Section.............. 22 Legislative Conduit............ 30 Three Deadly Words......... 32 Claims Made vs.................. 34 Occurance

Digital Editions of PIAW Magazine Available at www.piaw.org

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From the

President Brian MacGillis, CPIA — President, PIA of Wisconsin

Greetings!

Thank you for the incredible privilege of serving as your 2016-2017 PIAW President. My name is Brian MacGillis and I am the owner of MacGillis Agency in Fredonia. My insurance background began as an intern at an insurance company where I filed and reviewed replacement cost estimators and old claims — certainly not the most glamourous of beginnings. I was hired out of college by Partners Mutual and became the Marketing Representative. This was a job that I enjoyed immensely.

I love the game of golf, but since my dream of joining the PGA tour never came close to fruition, I decided to move into the family business and join MacGillis Agency in 2010. The agency was started by my grandfather James (JJ) MacGillis and perpetuated by my father Pat and my mother Jan. I purchased the agency from them and now enjoy all the headaches and joys that come with being an agency owner. My wife Libby is a Lutheran School Teacher and we have 3 children, Jack, Nate, and Charlotte. My side job includes being a “professional little league and dance recital” chauffeur.

My PIA path was started by my friends Neil Neff and Don Hady, both former field representative of the year winners.

They had me placed on the PIA’s Automation Committee and the 1752 Club to replace them. Over the years I have had a front seat to watch the YPC committee give away tens of thousands of dollars in scholarships to aspiring insurance professionals. I have witnessed our legislative efforts have profound impact on pending legislation. As the PIAW Membership Committee Chair, I have seen our association grow in number while other professional associations

throughout the state struggle to succeed. Great things are happening at PIAW! Over the next 12 months, it is my hope that you will take something from these articles an experience, a concept, or an idea that you can put in use in your own agency, or at the very least, my article can be some scratch paper that you can use to take a few notes.

As a 6 year PIAW Board Member, I have observed our members utilize the benefits of our association. These benefits include the new agent umbrella offering, legal hotline, sample employee/producer contracts, PIA’s Conduit, competitive errors and omissions offerings, and legislative work in Madison and Washington D.C. As we are thrust into another election cycle, it is imperative that our organization stand strong and advocate on the behalf of the independent insurance agencies in our state. While you and I are busy writing insurance policies away from each other, know that our association is there to ensure that we have a favorable insurance climate from which to operate business.

My agency has been a member of the PIA for many years and it is my goal while I am currently filling the ‘President’ seat, to keep finding ways to enhance your association, not remake it. “Life is like riding a bicycle. To keep your balance, you must keep moving.”— Albert Einstein. I am proud to serve as your PIAW President this next year and welcome your input on how to keep our fantastic organization moving in the right direction.

GERMANTOWN MUTUAL INSURANCE COMPANY W209 N11845 Insurance Place PO Box 1020 Germantown, WI 53022-8220 Phone (262) 251-6680 Fax (262) 623-3130 www.gmic.com

SERVING POLICYHOLDERS AND INDEPENDENT AGENTS IN WISCONSIN SINCE 1854 AUGUST 16 3

Memos from

Madison Ron Von Haden, CIC — Executive Vice President, PIA of Wisconsin

We Will do Our Best to Help You QUESTIONS , We get tons of questions.

ONE OF THE things that keep our jobs interesting at PIAW is the phone calls and emails from you. I enjoy our conversations and learn a lot about what’s going on in the marketplace as well as challenges your clients and daily agency operations present to you. We take great pride and satisfaction in being able to help you find answers for some of those challenges.

Having us as a resource is one of the primary benefits of your membership. Your questions deal with anything from regulatory issues, claim settlement issues, coverages, legislative actions, agency operation procedures, agency valuation or perpetuation and a host of other topics. We do our best to get you an answer but there are times when we are stumped and we have to refer you to appropriate sources that may be of assistance.

Questions seem to run in bunches and common threads tend to develop during certain periods of time. It may be beneficial to provide a short list of common questions you have been asking lately: Q. Can I charge fees to consumers (Health insurance and P&C), either as the sole source of revenue from a sale or in addition to a commission?

A. The short answer is, “Yes.” Section 628.32 of the Wisconsin State Statutes, titled Disclosure of Intermediary’s Compensation, states that an intermediary may not accept compensation from an insured or both from an insured and another source due to the insured’s purchase of insurance or for advice regarding the insured’s insurance needs or coverage unless the intermediary, before the insured incurs an obligation to pay compensation, clearly and conspicuously and in writing discloses to the insured all of the following:

fact that the intermediary will also receive compensation from the other source.

Q. How long should I keep my agency records?

A. Ins 6.61 of the Wisconsin Administrative Code, titled Intermediary Records, states a common length of time of 3 years for all policyholder records, cash receipts and disbursement records, commission statements, personnel records and others. However, prudence dictates that you keep records for as long as you feel you might want them. For example, for tax records, ask your CPA; for claims records or possible E&O situations, keep as long as you feel comfortable; for contract records, keep past the life of the contract. If in doubt…keep the records.

Q. What is “rebating” or an “unfair inducement”?

A. This can be a tough one. Many times we have to refer specific situations to the Commissioner’s office for a ruling.

In Statute 628.34 (2) Unfair inducements, it states that . . . ”No insurer, no employee of an insurer, and no insurance intermediary may seek to induce any person to enter into an insurance contract or to terminate an existing insurance contract by offering benefits not specified in the policy….”.

In previous rulings, offering relatively low value inducements for the opportunity to quote a policy or providing a referral has been acceptable but everyone that gets a quote or gives a referral should be able to receive the gift. You cannot “tie” any inducement to the purchase of insurance. Before you offer anything for a quote or referral, check with the Commissioner’s office for a determination.

a. The amount of compensation to be paid by the insured, excluding commissions paid by the insurer to the intermediary.

Of course, Brenda handles hundreds of inquiries about continuing education issues and Darcy’s E&O department is always hopping. If you have a question, give us a call or send an email and we will do our best to help you. That’s what you pay dues for.

b. If compensation will be paid by another source, the

AND REMEMBER . . . a true friend stabs you in the front.

I wanted to have a career in sports when I was young, but I had to give it up. I'm only six feet tall, so I couldn't play basketball. I'm only 190 pounds, so I couldn't play football.

And I have 20-20 vision, so I couldn't be a referee. — Jay Leno

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From the

Boardroom Jodi Cordes, CIC, CRM – Vice President, PIA of Wisconsin

Cyber Attack — Information You Should Know According to a recent Cyber & Data Security Risk survey report completed by Marsh & McLennan 50% of all small to midsize companies reported being the target of a cyber attack. Even more important is that 60% of all cyber attacks last year struck small to medium sized businesses.

This stuff is really happening in the big cities, and the small towns in Wisconsin. Recently, our City of Lake Geneva put together an educational session on Cyber Security for local business operators. The speaker was an agent from the FBI’s Internet Crime unit in Milwaukee. From those couple hours, I learned a lot of frightening information; good information for us agents to share with our customers when talking about Cyber Liability (which I am sure you are all discussing with clients along with hired/non-owned auto liability and EPLI coverage, right?)

The first part of the conversation should be education or identifying what the potential risk is. A crazy fact is that most of the cyber attacks are probably coming from outside of our country. Korea, China, Russia and Iran are where many of the attacks originate. They are not just after the large corporations either. Hackers are finding it easier to attack the small to middle sized business because they typically do not have full time IT department, or have securities/procedures in place to stop an attack.

The #1 threat is spear phishing which is specific to a person.

The attacker makes contact with employees and gains their trust (often by simply offering an innocent looking link in an email. Once the employee clicks on it, a RAT (Remote Administration Tool) is now in their computer. The hacker can access customer files, company data, pictures, web cam to take pictures of you, access your microphone to hear you even off line, screen shots to see what sites you go to, get passwords, and even take over your computer. This is some really frightening stuff. Think about if this happened to a computer of a bookkeeper or the president of the company.

The second part of your conversation should be to analyze where your client may have a threat and discuss ways to control the threat. Here are some recommendations to help minimize an attack.

- Install Microsoft EMET software. There is a free version.

- Turn on Auto Updates so antivirus softwares are automatically updated.

6 AUGUST 16

- - - - - -

Never open suspicious attachments/hyperlinks (xcel, doc, jpeg, etc.)

Look for spelling errors. (Since many attacks come from overseas they tend to have many spelling errors translating into English language.)

Look at who the email is from. If it doesn’t make sense with the subject manner, delete without opening.

Hover over hyperlinks prior to opening. Verify the website address makes sense with subject manner.

Never click on pop ups.

Be aware of “watering hole attacks” these are sites that are less protected that hackers pray on. They infect the site and when you go there it attaches malware to your computer and they start watching everything you do on your computer.

Portable Devices - Beware of malicious apps.

- Beware of foreign “updates”.

- “Man in the Middle” attacks are fake wi-fi hot spots.

- Disable geo tagging photos, especially when uploading to social media. These include the longitude/latitude of exactly where you are, where your kids are, where your house is, etc.

- Disable Bluetooth when not in use.

- Use a different phone when traveling out of the country (FBI says especially China) - If foreign officials ask for your device, assume your hard drive has just been copied.

Obviously these lists can go on and on forever. But I found these to probably be the quickest, easiest things that many of us don’t even think about.

After you scare the client from ever using their computer or mobile device again, then you can have the conversation of how there are insurance tools to help them in the event that they are attacked. Many of these cyber insurance carriers also have resources to help the insured implement additional safety precautions to minimize the threat.

Lastly, once you have identified, analyzed, addressed control measures and implemented a company policy, then monitor the program. Hire a reputable pentester at least once a year to find weaknesses in the system.

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OCI Administrative

Actions Ted Nickel — Commissioner of the Office of Insurance

Madison, WI—OCI has taken the following administrative actions. In many of these cases the respondent denied the allegations but consented to the action taken. Any forfeitures paid in these administrative actions are deposited in the Common School Fund which is administered by the Board of Commissioners of Public Lands. The earnings from this fund are distributed to all public K-12 schools in Wisconsin and are used by school libraries to purchase books. Copies of the administrative action orders may be viewed online at https://ociaccess.oci.wi.gov/OrderInfo/OrdInfo.oci.

OCI is responsible for overseeing the operations and marketing of insurance companies and agents in Wisconsin. OCI encourages anyone with a question or a complaint regarding an insurance company or agent to contact the office at this tollfree telephone number: 1-800-236-8517.

Allegations

and

Actions Against Agents

Vanessa Alicea, 2112 W. Layton Ave., Apt. 134, Milwaukee, WI 53221, had her application for an insurance license denied. This action was taken based on allegations of failing to disclose a criminal conviction on a licensing application.

Kevin P. Blaney, 2248 High Meadows Ln., Neenah, WI 54956, had his insurance license revoked. This action was taken based on allegations of owing delinquent Wisconsin taxes.

Jodi S. Campbell, 2402 Wildwood Ave., Ste. 200, Sherwood, AR 72120, had her application for an insurance license denied. This action was taken based on allegations of failing to disclose previous administrative actions taken by the state of Wisconsin, criminal convictions, and unpaid delinquent Wisconsin tax obligations on a licensing application and providing false information on a licensing application.

Willie A. Hardy, 8650 W. Douglas Ave., Milwaukee, WI 53225, had his insurance license revoked. This action was taken based on allegations of owing delinquent Wisconsin taxes.

Scott O. Hicks, 2813 Shefford Dr., Madison, WI 53719, had his application for an insurance license denied for 15 days. This action was taken based on allegations of failing to disclose a criminal conviction on a licensing application.

Marie Huff, W126 County Rd. C., Apt. B, Brooklyn, WI 53521, had her application for an insurance license denied for 31 days. This action was taken based on allegations of failing to disclose a criminal conviction on a licensing application.

Carla B. Kelley, 117 12th Ave., Monroe, WI 53566, had her

application for an insurance license denied. This action was taken based on allegations of having criminal convictions that may be substantially related to insurance marketing type conduct, failing to disclose criminal convictions on a licensing application, having unpaid civil money judgments, providing false information on a licensing application, failing to apply for a federal crime waiver, and failing to respond promptly to inquiries from OCI. Jennifer J. Kimball, 1328 Morningstar Dr., Apt. 9, Janesville, WI 53546, had her insurance license revoked. This action was taken based on allegations of owing delinquent Wisconsin taxes.

Sierra R. Knuth, 422 1st Ave., Antigo, WI 54409, had her applications for an insurance license denied. This action was taken based on allegations of failing to accurately complete a licensing application, providing incomplete and misleading information on a licensing application, having criminal convictions that may be substantially related to insurance marketing type conduct, and failing to respond to inquiries from OCI. Lawrence “Larry” H. Krause, 10816 84th St., Pleasant Prairie, WI 53158, had his application for an insurance license denied. This action was taken based on allegations of failing to disclose criminal convictions on a licensing application, failing to accurately complete a licensing application, and failing to respond promptly to inquiries from OCI. Tony S. Lazzar, 8432 W. Betty Terr., Niles, IL 60714, had his insurance license revoked. This action was taken based on (continued on page 10)

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OCI Administrative Actions (continued from page 8)

Karlreese L. Sims, 9650 Edgefield, Roscoe, IL 61073, had his insurance license revoked. This action was taken based on allegations of owing delinquent Wisconsin taxes.

allegations of engaging in unfair insurance trade practices by submitting falsified advertising expenses for reimbursement to an insurance company and failing to respond promptly to inquiries from OCI. Stephanie LeMahieu, 16 1/2 W. Main St., Evansville, WI 53536, had her application for an insurance license denied for 31 days. This action was taken based on allegations of failing to disclose a criminal conviction on a licensing application and having an unpaid civil money judgment.

Nathaniel G. Long, 2159 S. 66th St., West Allis, WI 53219, had his application for an insurance license denied. This action was taken based on allegations of owing delinquent child support.

Austin J. Marion, 2810 N. Park Drive Ln., Apt. 7, Appleton, WI 54911, had his insurance license revoked. This action was taken based on allegations of owing delinquent Wisconsin taxes.

De’Shaun U. Saunders, 4221 7th St. SE, Washington, DC 20032, had her application for an insurance license denied. This action was taken based on allegations of owing delinquent child support.

Paul C. Schuelke, W182 N8838 Duke Ct., Menomonee Falls, WI 53051, had his application for an insurance license denied for 15 days. This action was taken based on allegations of failing to disclose an administrative action taken by the state of Wisconsin on a licensing application.

Lonnie R. Shilts, 2628 8 1/4 Ave., Chetek, WI 54728, agreed to pay restitution in the amount of $10,796.20 plus 2% interest.

This action was taken based on allegations of violating annuity marketing and sales laws.

Jennifer L. Smith, 733 Sixth St., Menasha, WI 54952, had her application for an insurance license denied. This action was taken based on allegations of having criminal convictions that may be substantially related to insurance marketing type conduct, having unpaid civil money judgments, and failing to obtain a federal crime waiver.

Craig J. Smogoleski, 1390 Greenway Terr., Unit 1, Brookfield, WI 53005, had his application for an insurance license denied.

This action was taken based on allegations of owing delinquent child and family support.

Satta B. Thor, 4642 Hayes Rd., Apt. 1, Madison, WI 53704, had his application for an insurance license denied. This action was taken based on allegations of failing to disclose criminal convictions on a licensing application, having criminal convictions that may be substantially related to insurance marketing type conduct, having pending felony charges, and having unpaid civil money judgments.

Kyle J. Weik, 9464 Fairhaven Ave., Chili, WI 54420, had his application for an insurance license denied for 15 days. This action was taken based on allegations of failing to disclose a criminal conviction on a licensing application.

Jermaine E. Williams, 324 Dover Way, Sun Prairie, WI 53590, had his insurance license revoked. This action was taken based on allegations of owing delinquent Wisconsin taxes.

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PIA of Wisconsin’s Young Professionals Club Welcomes You to Join Us on Friday, October 14th 2016 for an Evening of Pizza & Drinks at our Badger Blast Brewery & Comedy Club Event, the Night Before the Badger vs. Ohio State Game! Family and Friends Welcome!

Register Now – Only 50 Spots Available Agenda: 7:00 p.m. Bus leaves the Baymont Inn for Brewery 7:30 p.m. – 9:15 p.m. – Capital Brewery for pizza and beer 9:30 p.m. – 9:45 p.m. Bus to the Comedy Club 10:30 p.m. – 12:00 a.m. Comedy Club Show 12:30 a.m. – Bus back to the Baymont Inn

Cost: $40.00 per person (Includes: transportation from & to hotel, beer & pizza at the brewery, comedy club ticket) (Drinks not included at the comedy club, Hotel room cost not included)

Hotel Information: Baymont Inn & Suites Madison West/Middleton WI West 8102 Excelsior Dr, Madison, WI 53717 Phone: (608) 831-7711 Room Rate: $79 .00 for both 10/14 & 10/15 (No two night minimum required, room rate guaranteed through 09/14/16) Name/Guest Name(s): _____________________________________________________________________________________ Agency/Company: __________________________________________________________________________________________ Mailing Address: ___________________________________________________________________________________________ Phone: __________________________________ Cell #: ____________________________________________________________ Fax: _____________________________ Email: ____________________________________________________________________ Method of Payment: # People _______

Total amount: ___________

Check ______ Credit Card ______

Card # _________________________________________________ Ex Date _____________________ Cancelation Policy: Full refund if PIA Office is notified in writing by September 15th 2016 no refunds after September 15th 2016 only substitutions.

Please Mail, E-mail or Fax Back to: PIA of Wisconsin, Inc. 6401 Odana Rd. Madison, WI 53719 E-mail: mpenn@piaw.org • Fax: (866) 203-7461• register online at www.piaw.org AUGUST 16 11

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AUGUST 16 15

How Far are you Willing to go to

Make it in Sales

by John Chapin

I am of the belief that pretty much anyone can make it in sales if they are determined enough.

Assuming someone does not have brain damage or some other major mental hindrance, sales can be learned. I am proof of that. After struggling in school and being an abysmal failure at the onset of my sales career, if I can be successful, you can too. After all, as a former president once said, this isn’t rocket surgery. Granted, some personality types and skillsets are more cut out for sales but the bottom line is: if you are committed, you can be successful. That said, what must you be willing to do to be successful in sales? By the way, when I talk about being successful, I’m talking about really making it which means you’re in the top 5% of salespeople, not simply scraping by and paying your bills.

Three commitments you must be willing to make to be in

start by saying that you, and only you, are responsible for

the top 5%:

your development as a salesperson. Hopefully you work for a company that sends you to seminars, brings in sales train-

Commitment #1: personal and professional development

ers, runs sales meetings in which sales skills are worked on,

The most important element of your personal and profes-

your sales abilities. That said, there are companies that do

sional development is acquiring superior sales skills. Let me

not do these things and ultimately the responsibility for

16 AUGUST 16

and otherwise gives you the tools and resources to develop

developing your sales skills lies with you, not your company.

So, are you currently reading a book a month, or a week, to develop your sales skills? Are you going to seminars, listening to audio programs, and watching video on how to sell? If you aren’t, you need to start. You have to be spending at least an hour a day learning sales and developing your sales abilities. You need to practicing, drilling and rehearsing your presentation, answers to objections, closes, and everything else involved in the sales process. Also, you must being willing to invest your own money in some of the above resources if necessary. Even if you are a veteran, you have to continue to hone your abilities and get better. We’re all familiar with the saying, “When you’re green you grow and when you’re ripe you rot.” The world is simply changing too fast, competition is getting fiercer, consumers are getting more educated, and as a result, you must continue to develop yourself and your sales abilities.

for? Are you willing to turn over every stone, pull out all the stops, continue to follow up, and keep going when you hear “no”, or “we’ve decided to go with the competition”? Are you willing to do what the chiropractor in San Francisco did before he opened his practice when he called on over 20,000 homes and businesses Monday through Sunday for seven months in order to let people know he was opening an office?

I’m not saying the above will be necessary, in fact, that level of action most likely won’t be, however, in the case that it is, are you willing to go that far? Are you committed at a level in which you say, “I don’t care what it takes to be successful and feed my family and make my dreams come true, I’m willing to do it?” If you have that kind of commitment, nothing can stop you from being a major sales success.

Some final ideas to keep in mind when striving for sales success: first, the most important tasks you do are: prospect-

Commitment #2: time

ing, presenting, closing, and building relationships with

Next, how much time are you putting in? If you’re relatively new to sales, you need to be putting in 3 to 4 hours a day prospecting, in addition to skills development mentioned above, following up, presenting, closing, building relationships, and other miscellaneous items that come up during the day. Yes, this is a long work day. So are you willing to come in at 6 a.m. and work until 11 p.m. and work weekends if necessary? In order to be in the top 5%, you need this level of commitment. As a veteran with an established business, you may work fewer hours, but especially when you are just starting out in sales, or in a new industry, or with a new company, you have to put in the hours.

your top 20% accounts. Those items should take up 90% of

Commitment #3: willingness to do whatever it takes legally and ethically

Finally, how far are you willing to go to be truly successful in sales? Are you willing to make 100, 200, or 300 calls a day if necessary? Are you willing to stand in the mall or on a street corner in NYC and pitch people walking by? Are you willing to do whatever it takes to beat the competition and go the extra mile delivering much more than you’re getting paid

your day.

Next, stop looking for quicker, easier, less painful ways to be successful and decide that you’re going to make the contacts and do the hard work. Many salespeople let an e-mail suffice for a phone call or in-person visit. While technology can make us more effective staying in touch and following up, an e-mail will never replace an in-person call or phone call. Most e-mail, social media, and other technology has simply given people false hope that there’s an easier way than facing fear, stepping out of their comfort zone, and contacting people live.

John Chapin is a sales and motivational speaker and trainer. If you would like him to speak at your next event, or would like his monthly newsletter, go to: www.completeselling.com. John has over 28 years of sales experience as a number one sales rep and is the author of the 2010 sales book of the year: Sales Encyclopedia. For permission to reprint, e-mail: johnchapin@completeselling.com

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AUGUST 16 17

Trim the Fat for

Successful Writing

Good writing commands your attention and keeps you engaged. What's the key?

Think "Less is more." You've got to carve away the superfluous to get to the essentials, whether you're telling a story or explaining a sales contest. Here are some pointers to keep your writing tight: • Define your mission. What's the purpose of your letter/memo/e-mail/report? What are you trying to accomplish and what is it you want your readers to take away from your writing?

• Write the ending first. For your first draft, start with the main point that you want readers to take away.

Then write the beginning. Now write a middle section that transports your readers from the beginning to the end. This method of writing prevents you from falling prey to the writer's common pitfall: rambling.

• Pare the draft. You should start with an estimated work count for your document. If your initial draft has too many words, start trimming. If it has WAY too many words, find whole sections to delete. Cut any words that do not directly support your mission.

• Tweak sentences. Consider each sentence individually. Look for redundancies, unnecessary details and descriptions, and jargon. Can you eliminate some words or substitute one word for three?

• Read it again. This is your final step. Pretend you're reading it for the first time. Can anything else be eliminated — Words? Sentences? Whole points and paragraphs? Don't stop until you can't find anything left to remove. — Adapted from the Poynter Online website 18 AUGUST 16

How Strong is Your Errors & Omissions Prevention Culture?

by Curtis M. Pearsall, CPCU, AIAF, CPIA President – Pearsall Associates, Inc., and Special Consultant to the Utica National E&O Program Assessing an agency’s errors and omissions (E&O) risk management culture is easier said than done. While there is no real established formula that provides a grade, there are some valid ways to determine where the agency is on the continuum to achieving a solid E&O prevention culture.

Staff Assessment and Training Agencies don’t make mistakes. People do. Start with an assessment of the agency’s staff. Does each staff member possess the necessary expertise and knowledge to professionally perform his or her duties? This evaluation should be done for each staff member.

The results will help to determine if more training is needed. The insurance industry is constantly evolving with new coverages and forms, so dedicating a significant amount of energy to staff training helps ensure that they have the proper level of education on technical knowledge, systems, sales training, etc.

An additional evaluation, focused on E&O prevention commitment, should also be performed. Agencies with employees truly committed to E&O loss prevention have achieved a solid step in the right direction.

Job Descriptions In addition to having knowledgeable and professional employees, a strong E&O prevention culture includes employees knowing what is expected of them via documented job descriptions. Without job descriptions, there is the chance that staff members will do what they think they should. This increases the risk that certain tasks and activities will not be completed because the staff may think “that’s not my job.”

Each employee should be aware of what role he or she plays and how various functions are to be performed. It is common for an agency with a strong E&O culture to have a written procedural manual. Without it, staff will handle a task the way they want to.

Consistency is a key word in defining a strong E&O culture. The potential for inconsistency increases without a manual defining how the task should be done.

Exposure Analysis Checklists A major cause of E&O claims involves the failure to provide the proper coverage, so a strong E&O culture should include the use of exposure analysis checklists. These lists are often referred to as “the closest thing to a silver bullet in E&O loss prevention” and will help an agency to truly know its clients. This evaluation will heavily determine the next steps in the sales cycle.

Job Performance An important yet often overlooked area involves an ongoing review and evaluation of the staff’s job performance. Having the right people and a solid game plan does not guarantee success. To a large degree, the agency’s success depends heavily on whether the staff performs the necessary tasks using the expected procedures. Insurance agencies are fairly complex organizations and, for this reason, they need an internal audit process that periodically verifies to what degree staff members are meeting the firm’s expectations.

Without this auditing process, mistakes will occur that can have a significant cost to the agency.

The development of a strong E&O prevention culture and commitment doesn’t just happen. It requires a concerted effort from the leadership and every member of the team.

AUGUST 16 19

Motivation Beyond

Commission

3 Ways to Get Your Employees to Sell

by Bob Phibbs

Motivating employees — it’s always tough in any business.

Your goal is to be the go-to name in your field or industry, but you know you haven’t got a snowball’s chance in hell of seeing that level of success unless you can truly engage your customers and clients and keep them interested in your products and services.

And the only way to do that is to get your employees to engage those customers, to get them to commit to creating an exceptional experience for visitors so they do business with you, instead of buying from a competitor.

The big question is: How to get your employees to focus on the customer?

Employee motivation is an elusive creature.

Motivating employees is perhaps the hardest thing any manager ever has to work toward. You worry that you’re not connecting, that your words don’t resonate deeply with your employees, and you struggle to figure out a magic formula.

And that’s good…

That’s because employees don’t come hard-wired to perform well in a vacuum. Unless you can find a way to connect powerfully with your crew, your sales are doomed to failure.

It may appear easier to just pay them more. But many times, no matter how much you pay them, after a period of time, their self-motivation wanes. That’s because when you employ people, you are also taking on all of their innate hardships and challenges; the things they deal with at home, along with the things that keep them up at night.

You are taking on the whole person, for all of the good and the bad that brings.

Their natural tendency is to do less and less unless someone encourages them to do more.

When it’s time to open the business and welcome your cus20 AUGUST 16

tomers each day, it becomes your daily challenge to help your employees put their best face forward, focus on serving the customer, and keep their eyes on the goal of closing as many sales as possible.

For some companies, this challenge is settled by simple performance metrics: Dollars. You close X number of sales, you get more money in your paycheck. And in many high-end sales environments, a commission or performance bonusincentive sales metric makes sense.

But if you find yourself in a position where commissionbased sales don’t work for your company, you still have to find new ways to motivate your employees.

Here are three ideas to help motivate your sales associates that don’t involve paying them based on the number of units they move.

1. Give Them Luxury For your best performing associates, it is great to give them a little bit of something special. Maybe it’s a box of especially good chocolates at the end of a hard week. Maybe it’s a bottle of Scandinavian water they weren’t expecting. Maybe it’s a 30-minute massage.

Maybe it’s just a handwritten thank you note from you, the boss, who they look up to, mailed to their house.

Ultimately, it doesn’t really matter what the luxury is. It only matters that you took the time to think of them and thank them for their amazing work in an impromptu fashion.

People want to feel important. If you have good people on your team, make them feel important, and they are more likely to stay on your team.

To put a finer point on it, the more important or special that you make them feel, the more likely they will make your customers feel important. A caveat: don’t publish your crite-

ria or you will have to do it each and every time much like a contest which defeats the purpose.

2. Give Them Time Time is our most precious resource, and there is no sweeter way to reward one of your sales team than to give them a few hours of their time back.

So for your top performer this month, give them a half or full extra day off—with pay. Do it without any fanfare. Just let this person stay home, sleep late, take care of their kids, or go to a movie while you cover their shift. Don’t make a big deal about it. It’s not a contest; it’s a gift that you are giving them.

And when they come back, they will be refreshed.

3. Give Them Space If you’ve seen the movie Office Space, then you understand the importance of a red stapler. It represents something that is yours. Even if it’s only a stapler, you have earned it.

Office space—literally—can feel very much the same. It is home. When you designate physical space to an employee, you are telling that person that they have a place here. A permanent place. They matter.

This is not a small thing.

For your best associates, carve out a place in the back to set their photos of their kids and their dogs, a place for them to pin ridiculous things they might print out from Facebook— whatever. The ultimate goal is to let employees feel at home when they are at work.

This only works if you hire people who themselves have some internal motivation. You can’t motivate a rock to move—no matter what you try. If you feel stuck with certain unmotivated employees, don’t give up on motivation but do get rid of the rock-like employees.

When you have done the hard job of whittling down your applicants, onboarding them to your culture and giving them sales training, your number one job is to see what helps them stay motivated and change it up often. That way it keeps everyone wondering what they will get for hitting a goal, doing a good job or extending themselves for your customers’ benefit.

And that’s great motivation for everyone, not just your sales team.

Bob Phibbs is the CEO of The Retail Doctor, a New York consultancy. As a speaker, sales consultant and author of The Retail Doctor’s Guide to Growing Your Business, Bob has helped thousands of businesses since 1994. With over thirty years’ experience beginning in the trenches of retail and extending to senior management positions, his presentations are designed to provide practical information in a fun and memorable format. For more information on Bob, please visit www.RetailDoc.com.

AUGUST 16 21

education

Certified Insurance Service Representative Open to Anyone!

8 WI CE Credits New Course #69332

INSURING COMMERCIAL PROPERTY

Commercial property insurance is one of your business customers’ greatest concerns. You’ll improve your cross-selling abilities with up-to-date knowledge of commercial property coverage, and reduce E&O exposures. This course gives you the skills to address these issues with greater ease and confidence.

• Fundamentals of Commercial Property Insurance • Building and Personal Property Coverage Form • Causes of Loss Forms • Basics of Time Element Insurance

august 16 • Waukesha

• Basics of Commercial Inland Marine Insurance

CLASS SCHEDULE Course Instructor

Gloria Thompson, CIC Minneapolis, MN

Instruction Group Lunch Optional Exam

8:00 a.m. – 3:45 p.m.

12:00 p.m. – 12:45 p.m.

$170 Per Course Includs Lunch

4:15 p.m. – 5:15 p.m.

Register at www.piaw.org or call 800-261-7429

O n -L i n e e d u c a t i O n

Open to Anyone & Everyone !

For The New Employee - No CE 6-8 Week Virtual Classroom •

• • •

New Agency Employee Orientation Delivering Quality Service Personal Lines Coverage Basics Commercial Lines Coverage Basics

Pre-Licensing Education Webinars: 2-3 WI CE, No Exam, No Proctor •

Over 20 Topics

Hot Topics: 4 WI CE • • •

Variety of Coverage Topics Ethics Flood

All 9 CISR Courses – 8 WI CE All 5 CIC Institutes – 20 WI CE 22 AUGUST 16

www.piaw.org

education

Certified Insurance Service Representative Open to Anyone!

8 WI CE Credits New Course #69367

INSURING PERSONAL AUTO EXPOSURES

After taking this course, students will be able to assist clients in identifying their exposures and more effectively advise them in the processes of analyzing, obtaining and modifying their personal automatic policies.

• • • • • •

Introduction to the Personal Auto Policy Liability Coverages Medical payments/Personal Injury Protection Uninsured/Underinsured Motorists Coverage Coverage for Damage to Your Auto Coverage for a Rented Vehicle

SEPTEMBER 14 • ROTHSCHILD SEPTEMBER 15 • MADISON

CLASS SCHEDULE Instruction

Course Instructor Denise Semrow CIC, CISR, ASI SECURA Insurance

Group Lunch Optional Exam

8:00 a.m. – 3:45 p.m.

12:00 p.m. – 12:45 p.m.

$170 Per Course Includes Lunch

4:15 p.m. – 5:15 p.m.

Register at www.piaw.org or call 800-261-7429

Certified Insurance Service Representative Open to Anyone!

7 WI CE Credits Course #69328

INSURING PERSONAL RESIDENTIAL PROPERTY

This course gives you the expertise you need to guide your customers through the often complex and confusing process of purchasing homeowners insurance — and help them make decisions that insure their most valuable assets.

• • • •

Introduction to the Homeowners Policy Homeowners Policy Section I SEPTEMBER 20 • Waukesha Homeowners Policy Section II Tenants, Unit-Owners, and the Dwelling Policy

$170 Per Course

CLASS SCHEDULE Instruction Group Lunch

Course Instructor

Nicole Broch, CIC, CISR Springfield, IL

Optional Exam

8:00 a.m. – 3:45 p.m.

Includes Lunch

12:00 p.m. – 12:45 p.m.

4:15 p.m. – 5:15 p.m.

Register at www.piaw.org or call 800-261-7429

AUGUST 16 23

education

33 Topics in 2016! Each Approved for 2 or 3 WI CE Credits. Live. No Test. No Proctor.

Visit the Education tab at piaw.org for a complete list of topics, descriptions, webinar demo, and to register.

Several approved for Utica credit. Ethics is offered each month.

Fee per Webinar: $55 PIAW Member, $70 Non Member – Includes WI CE fees.

August 2016 Webinar Schedule TITLE & WI CE

DATE

TIME (CST)

INSTRUCTOR

And the CHAOS Continues: The Evolving World of Contracts, Hold Harmless, Add. Insureds and Other Stuff 3 CE # 1011189

8/8

12-3p

Jerry Hargrove, J.D., CIC, CPIA, SCLA, FCLA, PICS, LICS

Ethics: Taking it to the Streets 3 Ethics CE # 70999, Utica Approved

8/11

1-4p

Chris Amrhein, AAI

The Ever-Evolving Affordable Care Act (ACA) 3 CE # 71018

8/15

12-3p

Jerry Rhinehart, CIC, CLU, ChFC, RHU

Contractors: Insuring the Liability Exposures 3 CE # 70757

8/16

12-3p

Catherine Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS

Annuities: Turning Assets Into Income 3 CE # 71013

8/17

8-11a

Karin Klaassen, CLU, LUTCF

Top Twelve Coverage Countdown: Answers, Evaluations & Revelations 3 CE # 1010873

8/17

12-3p

Chris Amrhein, AAI

Get in the Ring: Property Claims, Fights and Decisions 3 CE # 71014

8/18

12-3p

David Viola, CIC

Man vs. Machine: Cyber Exposures and Insurance Solutions 3 CE # 1011190

8/23

8-11a

Jerry Hargrove, J.D., CIC, CPIA, SCLA, FCLA, PICS, LICS

Commercial Property Claims that Cause Problems 2 CE # 1010877

8/23

2-4p

Terry Tadlock, CIC, CPCU, CRIS

Leases & Contracts Versus the Insurance Policy 3 CE # 1010872

8/25

8-11a

James Harrison ,J.D., CIC, CPCU, CLU, ChFC

How to Be the Agent Advocate at Claim Time 3 CE # 1010878, Utica approved

8/25

12-3p

Chris Amrhein, AAI

Personal Lines Complications: Because “Simple” is Just Too Darn Easy 3 CE # 71017

8/29

1-4p

Kevin Amrhein, CIC

Executive & Management Liability 3 CE # 1010876

8/30

12-3p

Catherine Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS

Register online at piaw.org or call 1-800-261-7429.

24 AUGUST 16

Contact Brenda for in-house webinar opportunities. bsteinbach@piaw.org

Contact Brenda to become a sponsor of this fantastic sales education series. bsteinbach@piaw.org

CPIA Sustain Success — June 2016 Congratulations to the scholarships recipients, shown here enjoying the course.

AUGUST 16 25

education

2016 CPIA Scholarship Sponsors — Thank You!

education

STAND OUT! Set yourself apart with the CPIA designation.

The PIA of Wisconsin is a proud sponsor of the Certified Professional Insurance Agent (CPIA) professional designation program. The CPIA designation is comprised of a series of Insurance Success Seminars. These three, one-day workshops teach practical "before", "during", and "after" the sale techniques for insurance producers, sales managers, account managers and company marketing representatives. Completion rule, 3 years from first course. No exams. You do not need to commit to all three to attend one.

Participants leave with ideas that will produce increased sales results immediately. In fact, The Insurance Success Seminars are guaranteed: Implement the principles covered in these sessions and experience a 20% increase in personal production within six months, or your registration fee will be refunded!

To maintain the CPIA designation: fulfill a bi-annual update by attending one of the three core seminars, an Advanced Insurance Success Seminar, a Pro-to-Pro Retreat, or maintain an active Level 2 or Level 3 membership in the AIMS Society. The CPIA designation is approved by Utica Mutual as part of the premium discount program.

The AIMS Society is a national organization dedicated to providing i nteractive marketing and sales training, ongoing resources and networking opportunities to insurance professionals. www.aimssociety.org You can attend the CPIA courses in any order. No Test. Approved for 7 Wisconsin CE credits.

CPIA 1 - Position for Success

CPIA 2 - Implement for Success

CPIA 3 - Sustain Success

During this program, participants are encouraged to focus on internal and external factors affecting the development of effective business development plans.

Factors discussed include a review of the state of the insurance marketplace; analysis of competitive pressures; necessary insurance carrier underwriting criteria; and consumer expectations and understanding.

During this session participants will be provided with specific tools for analyzing consumer needs; will learn to utilize risk identification techniques to gather pertinent prospect information; will develop skills necessary to assimilate information gathered into a customized protection program; and will participate in exercises designed to promote effective delivery of proven solutions.

This program focuses on fulfilling the implied promises contained in the insuring agreement. Students will review methods of providing evidence of insurance coverage; will discuss policies and procedures for controlling E&O including policy review and delivery, endorsements, claimsprocessing, and handling of client complaints. This course includes a review of the Professional Expectations; the Law of Agency; and Legal and Ethical Standards.

WI CE Course # 65338

WI CE Course # 65340

WI CE Course # 65339

Course Schedule 8:30 – 4:00 Lunch On Your Own 12:00 – 12:45 Registration Fee per Seminar: Includes Seminar Materials, coffee a.m. & soda p.m.  PIAW Member $165.00 or $172.00 includes WI CE fee  Non Member $200.00 or $207.00 includes WI CE fee CPIA 1 – April 12, 2016

CPIA 3 – June 16, 2016

CPIA 2 – December 14, 2016

Holiday Inn West Waukesha, WI

Radisson Appleton, WI

Crowne Plaza Madison, WI

26 AUGUST 16

Register: www.piaw.org 1-800-261-7429

Gives You the Credit You Deserve!

The following PIAW education classes are approved for the Utica premium credit.

• Any CIC Update • CIC Agency Management • CISR Agency Operations • Dynamics of Service • Select PIAW Webinars • PIAW Conducted Ethics and E&O Seminars (classroom or in house) To register online and view upcoming CE courses visit www.piaw.org

Please contact Darcy at PIAW to find out how you can benefit from Utica’s E&O Loss Control Program. dbrown@piaw.org or 1-800-261-7429

There is

more than one thing

Step Up To Elite Status CISR Elite, That is.

For CISRs who aspire to be more-who seek to distinguish themselves as Elite.

When you love what you do, and want to be the best, It’s time to step up. it time to Become a CISR Elite.

new at piaw.org

PIA of Wisconsin now offers: Certified Risk Manager (CRM) Courses and Ruble Specialty Seminars.

800-261-7429

www.piaw.org 800-261-7429 AUGUST 16 27

education

Utica

education

Certified Insurance Counselor Each Approved for 20 Wisconsin CE Credits

COMMERCIAL property September 21-23, 2016 Crowne Plaza Milwaukee Airport 414-764-5300 $105 PIA room rate through 8/2/16

December 13-15, 2016 Crowne Plaza — Madison, WI 888-233-9527 $103 PIA room rate through 11/12/16

• commercial property coverages & endorsements • COMMERCIAL PROPERTY CAUSE OF LOSS FORMS & ENDORSEMENTS Terry Tadlock, CIC, CPCU, CRIS

• agency organizations • understanding & managing financial strength • Agency planning Rebecca Lathrop, CIC, CPIA

• TIME ELEMENT COVERAGES Patti Gardner, CIC, CRM, CPCU

• human resources • AGENCY PRODUCTIVITY & EFFECTIVENESS William Toll, CIC

• commercial inland marine coverages • commercial crime • businessowners policies Patrick Deem Sr., CIC

WI CE Course # 69299

agency management

Day One: 8:00 – 5:15

Day Two: 8:00 – 5:00

• LEGAL & ETHICAL RESPONSIBILITIES John Dismukes, CIC, CPCU, AAI, AIS

WI CE Course # 69155 4 of 20 are Ethics and Utica Approved Day Three: 8:00 – noon, Optional Exam 2:00 – 4:00

$405.00 per institute. Register at www.piaw.org or call 800-261-7429.

28 AUGUST 16

education

PEOPLE WHO EARNED THIS ALSO EARNED MORE

30,900 MORE OF THESE

PER YEAR.

If you’re looking to jump start a new career or make more with the one you are in, education is your best investment. Now, more than ever, it is important to invest in your greatest assets—yourself and your people. According to The National Alliance Producer Profile, commercial lines producers with the Certified Insurance Counselor (CIC) designation earn 30% more than those without the designation. To learn more about the CIC Program, call or visit us on the web.

The most successful training programs for insurance professionals

Register at www.piaw.org or call 1-800-261-7429

CIC Ruble seminars Exciting update options, they fill up quickly.

August 25 & 26 | Legal Concepts|Crowne Plaza – Milwaukee, WI October 26 & 27 | Graduate | Radisson – Green Bay, WI* 16 WI CE (*Includes 4 optional Ethics)

visit www.piaw.org or call PIA at 1-800-261-7429

There are no secrets to success.

It is the result of preparation, hard work, and learning from failure. — Colin Powell

AUGUST 16 29

I realize the importance of political contributions to the future of the Professional Insurance Agents of Wisconsin and our customers. I want to be part of the process leading to success in achieving PIA’s goals in the Wisconsin Legislative arena. Please hold my contribution as a deposit in the PIA Legislative Conduit account to be used at my direction. I understand that I will be contacted in the future, by telephone, email or direct mail, to authorize the use of these contributions. I will be asked to respond with my signature on appropriate authorization forms.

Name:___________________________________________________________________________________ (Please Print)

Primary Employer:________________________________________________________________________ (required to disburse any contributions greater than $100, by Wisconsin Law)

Business Address:_____________________________ City:_____________ State:_______ Zip:__________ Home address:________________________________ City:____________ State:_______ Zip:___________ Business phone:______________________________ Home phone:_________________________________ Email address:_____________________________________ Contribution amount:____________________ Credit Card Payment Name on card:_________________________________ Signature:__________________________________ Amount:______________ Card Number:_________________________________ Exp. Date:____________ Billing address on card:_____________________________________________________________________ City

State

Zip

Contributions are NOT tax deductible for income tax purposes. Donations must be made from Personal accounts only.

NO Corporate or Business Checks or Credit Cards accepted Return to: PIAW Legislative Conduit Account PIA of Wisconsin, Inc. ● 6401 Odana Rd. ● Madison, WI 53719 Fax: 608-274-8195 ● www.piaw.org ● Email: rvonhaden@piaw.org

30 AUGUST 16

Don’t just insure. Assist.

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BUSINESS AUGUST 16 31

The Three

Deadly Words

When Spoken, They Can Spell Career Disaster

by Todd Cohen

The English language has an unending supply of words and phrases that are built to create conversations that convey meaning and leave impressions. How you use and deliver these words makes a huge impression on people and leaves them thinking and feeling a certain way about you.

Every conversation is a selling moment that constructs lasting images in others’ minds. Considering how important first impressions can be, there are three words that are absolutely deadly to sales, your career and your very psyche. These three words, when uttered, send an extremely negative message to everyone around you. These words—just nine simple letters and one apostrophe—can have an incredibly detrimental 32 AUGUST 16

effect on your ability to create new relationships, establish credibility and attract others. Ready….? Here they are: “I’m just the…”

These three words by themselves send a very strong message about how you feel about yourself and how you view your

value and contributions to your organization. “I’m just the” sets up a cascade of unflattering perceptions and opinions in the mind and hearts of the people being spoken too. It creates an indelible image that you have little to no value.

6.

It’s competitive out there! When you use these words you don’t differentiate or set yourself apart in any way.

You might as well say “Please ignore me and talk to the next person.” When people attempt to engage you in conversation, believe that they want to try and find some

But that’s just the tip of the iceberg in regard to these three, seemingly harmless little words. They can negatively impact you in a number of ways.

1.

This expression is one you are so wired to say, and it sends the message that “I don’t matter”. It’s akin to saying, “Please don’t take me seriously”. There is another dimension to the very damaging effects of these words. Imagine you are approached by your supervisor, manager or a colleague and they ask you some questions about a situation. The questioning could be entirely innocent or pointed—eliciting a defensive response in the form of “I’m just the” in an attempt to deflect blame or responsibility. These words are an intentional or unintentional way to defer accountability. It’s the unconscious way these words are used that set you up for failure and disengagement.

common ground. Your job is to engage with others and to display an open willingness to taking the conversation to a deeper level.

7.

It’s all about attitude and mindset. “I’m just the…” speaks volumes about your attitude and mindset.

Whether accurate or not; once the message is sent then perception is set. Perception becomes reality and then it becomes very hard to turn that ship around. Don’t make things harder on yourself than need be. Perception is reality.

8.

It does matter what people think! When you were growing up did your parents ever say, “It doesn’t matter what others think?” While that may be true in certain situations, when it comes to selling yourself, explaining your position or seeking consensus it does matter what

2.

3.

4.

5.

It’s similar to using “but” when you should say “and”. Using the word “but” is a bad idea because it negates everything that has been said up to that point.

The same result occurs when you say, “I’m just the”. You make it harder on yourself to get what you need, and it drastically affects your ability to leave a lasting, positive impression. You must engage people to further your goals. Let them know you matter!

It sends the clear message that you don’t have confidence in what you do and how you contribute every single day. One of the most common questions in business is, “What do you do?” When faced with that question, you typically have a few seconds to make your mark. Don’t waste that opportunity by starting with “I’m just the”.

It telegraphs your insecurities. Everyone has them, and anyone who suggests that they are not insecure at some level is actually insecure. Secure people are ok with their insecurities and face them with courage and determination. Life can be hard enough without adding to it with these three words.

Clients and decision makers like confidence. Project confidence and be able to articulate what you do quickly (your value proposition) and capture people’s imagination and passion. Don’t squander that golden opportunity with the following answer …”I’m just the” and then your title. Snoozer.

people think. Please be very careful about your word choice when you are engaged in a conversation. Don’t make it easier to be dismissed by others by uttering the words ‘I’m just the”.

9.

Respect. When you hold yourself accountable and refuse to hide behind “I’m just the” you show the world that you accept responsibility for your position or your opinion on a situation—regardless of outcome. Avoiding “I’m just the” will earn you respect and admiration.

If you have ever wondered why you have not gotten something you want, consider that your use of these three words might have been the roadblock in your mission. Attitude is everything. Even if you have not said them aloud, you may still be telegraphing this mindset. Watch your words and watch what happens.

You are important and vital. Tell the world!

Todd Cohen, CSP is an accomplished and sought after speaker, sales culture expert and author of Everyone’s in Sales and Everyone’s in Sales; STOP Apologizing. Todd’s dynamic and motivational presentations are based on the foundation that regardless of career path or position, everyone is a salesperson. Since 1984, Todd has led sales teams to deliver more than $850 million in revenue for leading companies including Xerox and Thomson-Reuters. For more information or to book Todd Cohen for your next meeting please visit www.ToddCohen.com.

AUGUST 16 33

Claims-made vs. Occurance Trigger

How to Advise Your Clients

by Dan Corbin, CPCU, CIC, LUTC PIA’s Director of Research

When advising your clients about the types of insurance policies available to help them should a claim be made against them, do you know what to tell them? Below is a review of differences between an occurrence and claims-made policy and the advantages and disadvantages of each type of policy.

The tail policy Generally, the policy with a long tail is an occurrence liability policy. With this policy, the covered event (an occurrence) must take place during the policy term. Once that condition is met, a claim arising out of that occurrence will be covered regardless of when it actually is presented.

The insured could be sued during the policy period or five years later (the tail). In either case, coverage for the suit under that policy would apply just the same. An occurrence policy requires us to keep track of one (occurrence) date in relation to the policy term in order to determine whether coverage has been activated.

While this policy has a long tail, it has the misfortune of not having a nose. The nose is coverage for occurrences that take place prior to the effective date of the policy. (The nose also is referred to as “prior acts” coverage.) With an occurrence policy, the insured will need a policy for every occurrence in the past that leads to a claim. A business that has been operating for 20 years will need 20 continuous policies to obtain full protection for all claims that proceed past occurrences during that 20 years.

The trigger For many types of injuries, it is not difficult to identify the precise trigger for insurance coverage because the injury and the event causing the injury appear simultaneously. For example, an auto accident or a slip or fall normally will cause immediate injuries traced to one moment in time (when the event occurred).

However, the kinds of latent injuries that typify long-tail claims are not so easy to pinpoint within a specific policy 34

AUGUST 16

term. Latent injuries caused by asbestos, silica, beryllium, formaldehyde, toxic wastes, pharmaceuticals and medical procedures can lead to trigger confusion. Is the trigger the moment the first contact (or mistake) was made? When the cumulative damage was done? When the diagnosis was made? Or, when the person’s suffering began? Courts have come up with more than one theory regarding this trigger question, as described below: Exposure theory Under this theory, coverage is triggered by the entire period of time that a claimant is exposed to harmful conditions. If exposure occurs over many years, then every policy in force over those years could be triggered.

Manifestation theory Under this theory, coverage is triggered by the time that the injury manifests itself, when the claimant knew or a claimant should have known of the illness or injury. Presumably, this would limit the trigger to one policy period.

Injury-in-fact theory Under this theory, coverage is triggered by the time injury actually occurs, which may be some time other than the exposure to harmful conditions or the manifestation of injury. When this theory is applied, multiple policies may be required to respond to a claim.

Continuous theory Under this theory, coverage is triggered continuously from the first exposure to harmful conditions through to the manifestation of the illness or injury. All policies in force during the exposure and manifestation would be triggered,

as well as all policies in between when the illness or injury was developing.

While the stacking of multiple policies triggered by the exposure theory, the injury-in-fact theory and the continuous theory produces desirable results for the claimant, the insurance industry does not find this outcome manageable from an actuarial point of view. In addition, insureds who do not maintain complete records of past policies are left without the ability to enforce the coverage they had. Even if a 20-yearold policy can be found, a lot can happen to an insurer in that period. Also, the limits may be inadequate by present standards. The insured could end up liable to the claimant without sufficient insurance protection.

The nose policy As an alternative, the insurance industry conceived a way to make a single policy respond with contemporary limits to a claim presented during the current policy term. For exposures having long tails, insurers now offer a claims-made policy instead of an occurrence policy. This policy bundles past occurrences (the nose) into present coverage. It responds to a claim first made (Look for clarification in the policy on what is meant by “first made”) during the policy period, or any extended reporting period, for an occurrence that falls after the retroactive date but before the expiration date of the policy.

Professional liability insurers used this concept years before general liability insurers took an interest in it. Insurance producers need to be familiar with claims-made policies, if only to understand their own insurance agent/broker errorsand-omissions policies.

You might find it curious that a policy designed for long-tail claims does not feature tail coverage (coverage beyond the policy period). This is because it looks backward to prior occurrences, when such occurrences produce injuries having long tails, to provide coverage for a claim presented today.

Most state laws have limited the types of risks that can be insured on a claims-made policy. Consequently, the Insurance Services Office Inc. claims-made commercial general liability policy (CG 00 02), which was introduced in 1986, stays on most insurers’ shelves. The types of risks that are written on a claims-made basis are: environmental liability; professional liability; medical malpractice liability; directors & officers liability; employment practices liability; fiduciary liability; excess liability; products liability; completed operations liability; employee benefits liability; and large risks qualified by some threshold for size. Some of the covered events in the insuring agreements of these policies are expressed as occurrences, E&O, accidents, wrongful acts, negligent acts or incidents.

By referring to the claims-made policy as a nose policy, one might assume that unlimited prior occurrence coverage is available to the insured. In contrast to the Pinocchio character, the nose on a claims-made policy theoretically starts out long, but can be shortened. Full-nose coverage is achieved by specifying in the policy that no retroactive date (retro) will limit coverage for past occurrences. To shorten the nose, a retroactive date may be entered on the declarations page to indicate that no occurrences prior to that date will be covered for claims presented during the policy period. The nose can be 20 years, five years or one year. In fact, the nose can be cut off entirely by stating the policy’s effective date as the retroactive date, leaving the policy both noseless and tailless.

Ideally for the insured, the nose should cover the entire period that the insured has an exposure to loss that is not covered by other insurance. Generally, this will be the entire time that the insured has been in business or the time the insured was functioning in a capacity subject to liability. If the insured was covered by occurrence policies for a portion of this time, the nose should be long enough to span the gap between the expiration date of the last occurrence policy and the inception date of the claims-made policy. The nose must fill the gap because the occurrence policy will not respond to an occurrence that falls after its expiration date. (For that matter, neither the claims-made nor occurrence policy covers occurrences that fall after the expiration date of the policy.)

The implanted tail There is one thing about claims-made policies that will keep you and your clients on your toes at policy inception and renewal time—the retroactive date is a negotiable item. As a result, an opportunity exists for the insurer to cut off part or the entire nose. Anytime the nose is insufficient to cover the entire period at risk, there is cause for alarm.

At policy inception time, the applicant is at the mercy of the marketplace; one insurer may offer adequate nose coverage (if, in fact, any do) and another may not. If the last policy was an occurrence policy, there is no gap to cover with the nose coverage so the retroactive date will likely be the effective date.

Since the premium on a claims-made policy increases each year as another year of nose coverage is added to each successive renewal (usually these premium increases are phased out after several years; five years with the ISO CGL policy), the insured might request an advanced retroactive date to keep the premium lower at policy renewal time. More likely, the insurer will initiate moving the retroactive date forward to preclude nose coverage for the prior policy period(s). (continued on Page 37) AUGUST 16 35

There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else. — Sam Walton

36 AUGUST 16

Claims Made (continued from page 35) This is when extended tail coverage comes into play. Most claims-made policies offer (i.e., state law often compels them to offer) some type of basic extended reporting period and supplemental extended reporting period. The BERP (short tail) comes automatically without charge and the SERP (long tail) may be purchased as an option. The length and terms of these tail coverages can vary by state, by line of insurance and by the insurer, so careful analysis is required. Thus, when the retroactive date is advanced, a SERP may be purchased to cover the gap with tail coverage; ideally, with one covering an unlimited time period. Should the SERP provide unlimited tail coverage, the claims-made coverage for the risk embraced by the SERP then becomes the equivalent of occurrence coverage.

ment. Each of these will end some or all of the tail coverage. In

There are other underwriting actions besides moving the retroactive date, which could leave an insured vulnerable. An insurer might terminate the policy; substitute an occurrence policy; or carve out of coverage a specific accident, product, work, location or operation with some type of laser-beam endorse-

required by state law. Unfortunately for policyholders, unlimited

order to provide seamless coverage, an occurrence policyholder requires continuous coverage in the past and a claims-made policyholder requires continuous coverage into the future (assuming there is full nose coverage). When an insurer chops off the nose or eliminates coverage with an underwriting action, the need to purchase a SERP is certain to follow.

Minimum standards Many states promulgate minimum standards for claims-made policies. Often, the period offered in the BERP and SERP found in the ISO claims-made commercial general liability policy (the form frequently used for teaching purposes) is more generous than extended tail coverage is more difficult to obtain in most markets than may be suggested by the terms of the ISO policy.

Reprinted with permission from PIA Management Services Inc.

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