MARYLAND
IN THIS ISSUE ________________ 3 Homeowners’ policy gaps that sell How to escape the commodity trap Chasing a dream with IA&B’s Market Options
Stability Security Sensibility Formerly LG Insurance
(source by www.ambest.com)
Business Owners Program Commercial Package LIG Umbrella Policy
NJ
Leading Insurance Services, Inc. US Manager for Leading Insurance Group Insurance Co., Ltd.
Leading Insurance Group Insurance Co., Ltd. is a licensed commercial insurance carrier providing competitive rates on property and casualty insurance to business owners in NY, NJ, CA, IL and PA. We spare no effort in providing our utmost products and prompt service for any and all of your insurance needs. Building and Building Owners Business Personal Property Dry Cleaners Retail Stores Pharmacies Pizzerias / Takeout Apartments Convenience Store Risks Liquor Stores LRO Buildings
Office Building Distributors Condo / Co-op
LIG offers up to $ 5,000,000 above LIG BOP and Package
400 Kelby St., 15th Floor Fort Lee, NJ 07024 T. (201)720-2100 F. (201)720-2119
CA
505 N. Brand Blvd. Ste 1025 Glendale, CA 91203 T. (818)254-1040 F. (818)254-1039
marketing@ligmsi.com
www.ligicus.com
Listed below are those companies that strongly support the independent agency system and Insurance Agents & Brokers. Thank you for your continued sponsorship.
WHAT IS IA&B PARTNERS? The IA&B Partners program gives company and allied businesses the opportunity to demonstrate their commitment of support to independent agents and receive maximum market exposure. As an IA&B Partner, you will also realize the benefits of IA&B membership to help you succeed in the insurance industry.
DO YOU SEE YOUR NAME? To become an IA&B Partner, choose the sponsorship package that matches your commitment of support. Contact the Member Sales Center at (800) 998-9644, (717) 795-9100 or visit us online at www.iabgroup.com to get started.
PLATINUM LEVEL
BRONZE LEVEL
Berkley Mid-Atlantic Group Erie Insurance Group Harleysville Insurance Insurance Agents & Brokers Service Group Inc Millers Mutual Group Millville Mutual Insurance Co Mutual Benefit Group Penn National Insurance Selective Swiss Re The Main Street America Group Travelers Utica National Insurance Group
AAA Insurance
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Insurance Alliance of Central PA Inc
Ohio Casualty Progressive
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SILVER LEVEL Aegis Security Insurance Co American Mining Insurance Co Cumberland Insurance Group Donegal Insurance Group Frederick Mutual Insurance Co Harford Mutual Insurance Co Juniata Mutual Insurance Co MMG Insurance Company Private Client Group PSBA Insurance Trust The Motorists Insurance Group Westfield Insurance Zenith Insurance
Agency Insurance Company Allied Insurance Briar Creek Mutual Insurance Company Builders Insurance Group Capitol Insurance Company Chubb Group of Insurance Companies Companion Property & Casualty Group Countryway Insurance Company Encompass Insurance Foremost Insurance Group Friends Cove Mutual Ins Company Goodville Mutual Casualty Company Grange Insurance Companies Hanover Fire & Casualty Insurance Company Insurance Placement Facility of PA Lebanon Mutual Insurance Company Mercer Insurance Group Merchants Insurance Group Mercury Casualty Penn Millers Insurance Company Penn Prime Municipal Insurance PMSLIC Insurance Company Reamstown Mutual Insurance Company Rhoads & Sinon LLP Rockwood Casualty Insurance State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Mutual Service Office Inc The Philadelphia Insurance Companies Tuscarora Wayne Mutual Insurance Company UPAC Insurance Finance Primary Agent January 2010
Contents
12
PRIMARY AGENT MAGAZINE
Three Homeowners’ policy gaps that sell How to win clients and influence coverage: Exude expertise and build trust by shedding light on common homeowners’ gaps.
Page 12
16
I3 – Issues, implications, interventions Producers, beware: The “commodity trap” will spin you in a constant whirlwind of 90-day bidding cycles. The escape? Identification of consumer risks and solutions that show value and differentiate offerings.
Page 16 New member profile: Chasing a dream with IA&B’s Market Option Program
22
New IA&B member Nichole Leibensperger found the association’s RLI personal umbrella policy appealing, and within a matter of months, she became the association’s highest policy-count producer.
Page 22
In every issue
Mission Statement Primary Agent delivers ideas to help Insurance Agents & Brokers’ members negotiate their unique position as guardians of trust between insurance consumers and companies while facing the challenges of maintaining a small business. Primary Agent also supports IA&B’s mission to preserve and advocate the American Agency System.
1 4 5 5 6 7
IA&B Partners Chair of the Board’s Message Member FAQ Glance at Events State News New Members
8 10 15 20 21 24
Preventing Errors & Omissions Coverage Corner Classified Ads Technology Update Advertisers Index Last & Least
Subscriptions: Non-member price: $2.25 per copy or $15 per year. All communications for publications, including news, features, advertising copy, cuts, etc., must reach the editor by 1st of month two months prior to publication. Advertising rates furnished upon request. Address inquiries to: Primary Agent Editor PO Box 2023 Mechanicsburg, PA 17055-0763 Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347 Periodical postage paid at Mechanicsburg, Pa. and additional entry post office. Postmaster: Send address changes to above address. Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2010-1) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.
Copyright 2010. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before making any decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.
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Maryland Office: Kay Schneck 410-337-9295; 800-392-3771 Servicing MD, DE
commercial lines products * Rated “A-” excellent by A.M. Best To become a Merchants Agent, contact:
Tina Schaedler
Sam Guarnieri
Regional Manager
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Western Pennsylvania
Eastern Pennsylvania
1-800-462-1077
1-800-322-8608
ext. 3253
ext. 2200
tschaedler@
sguarnieri@
merchantsgroup.com
merchantsgroup.com
www.merchantsgroup.com
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A-Rated Carrier Now Appointing New Producers in Pennsylvania, Maryland & Delaware! (More states to be added in the near future.)
Business Insurance— CPP, BOP Monoline Fire, GL Competitive pricing—All Lines MSO rates and policy forms Personal lines roll overs will be considered Commercial auto for artisan contractors, retailers and wholesalers Contractor’s policy rated on number of employees, not payroll Internet rating system No minimum premium requirement for our producers Fast and friendly service for our customers from company staff
To get started, please contact Dick Riddle, CPCU Knightbrook Insurance Company P.O. Box 686, 927 West Main Street Valley View, PA 17983 Office: Cell: Fax: E-mail:
215-249-1394 215-272-1442 215-249-1395 richard.riddle1@comcast.net
Board of Directors Officers Kathleen M. Glattly, ChFC, CLU, CPCU Chair of the Board Factoryville, Pa. David Rosenkilde, CIC Vice Chair of the Board Reisterstown, Md.
Kathleen Glattly CPCU, CLU, ChFC, AIM
Chair of the Board’s M
E
S
S
A
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Robert J. “Buc” Cawley, AAI Immediate Past Chair of the Board Wexford, Pa.
Sales smarts for a new year
Members Norman F. Basso, CPCU York, Pa. Vincent D. “Chip” Boylan Jr., CPCU Rockville, Md. Henry “Butch” Bradley, Jr. Crofton, Md. Timothy P. Burris Thompsontown, Pa. M. Scott Clemens, CIC, CPCU, CLU, ChFC Souderton, Pa. John T. “Chip” Colwell Jr., CIC Corry, Pa. G. Greg Gunn, CIC Lemoyne, Pa. Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P West Chester, Pa. Diana M. Hornung-Momot, ACSR Wilmington, Del. Linda A. McCann, AAI, CPCU, CPIW Salisbury, Md. Michael F. McGroarty Sr. Pittsburgh, Pa. Scott C. Rogers, CPIA York, Pa.
It’s a new year. Time for fresh starts, new goals and meaningful resolutions. So what better topic for the January issue of Primary Agent magazine than sales? IA&B is here to help jump-start your 2010 sales spike. Read Chris Boggs’ “Homeowners’ policy gaps that sell” for the three common gaps that are likely to get you hired. Then flip to Scott Addis’ article for how to position yourself beyond a commodity in customers’ minds. Finally, turn to page 22 to read a member agent’s success story with IA&B’s Market Option Program. Want even more? Log onto iabgroup.com and access the Agency Marketing and Branding section of the Web site (under the Agency Operations tab). There you’ll find resources to help your agency, as a whole, bring in new business and round out accounts. Welcome to 2010. Make it your year. And make IA&B your go-to resource. Until next time, Kathleen
Susan A. Sallada, CIC** Ft. Washington, Pa. William D. Schneider, CPCU, ARM* Pittsburgh, Pa. Robert A. Walbeck, CIC Homer City, Pa. David B. Wasson Sr., CIC State College, Pa. James M. Watkins* Dover, Del. King W. “Kip” White, LUTCF Fallston, Md. John S. Yasik, CIC Newark, Del. * IIABA National Director ** PIA National Director
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E
Member FAQ QUESTION:
?
We are attempting to get as paperless as possible. Previously we kept copies or the actual signed forms and applications, depending on company guidelines. Are PDF copies attached in our agency management
Q the scanned record can be converted into reasonably legible written form within a reasonable time upon request; and Q there should be appropriate protection from loss and adequate controls and testing of the electronic records.
them for one reason or another?
For more specific information, you can access a short Q&A that addresses electronic record retention at iabgroup.com. Go to Agency Operations, then Record Retention.
ANSWER:
DO YOU HAVE A QUESTION?
Provided you have not, in your agency agreement, agreed to keep the forms as originals, you should be fine with scanned copies, as long as the software used to scan meets the requirements that are associated with any electronic record retention.
E-mail it to us at iab@iabgroup.com. Please use “Primary Agent FAQ” in the subject line of your message. You can also fax your question to (717) 795-8347. We look forward to answering your questions!
system legally binding if we would have to produce
In a nutshell, those requirements include: Q no modification from the original is possible in the digital version (in the case of PDFs, it could depend on which version of the software you are using);
Glance at Events J A N U A R Y C A L E N D A R Date
Topic
Location
19
CISR — Personal Auto
Pittsburgh, Pa.
20
William T. Hold Seminar
Mechanicsburg, Pa.
CISR — Personal Auto
Pittsburgh, Pa.
William T. Hold Seminar
Philadelphia, Pa.
Legal and Ethical Responsibilities of Insurance Personnel
Salisbury, Md.
Best Practices of E&O Loss Control
Dover, Del.
21
26
Primary Agent | January 2010
State News ‘Tis the season for New Year’s resolutions — IA&B floats a few ideas your way
In the spirit of a new year, and of the reflections and goals it brings, IA&B has compiled a few resolutions for you. These farranging pledges will improve everything from your agency operations to the outlook of the independent agency system. Review them. Prioritize them. And make them happen in 2010.
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Resolution No. 1: Get politically charged.
Federal regulation and systemic risk, health care and estate tax. No doubt, independent agencies are in the political fray. And the outcome of these and other state and federal contests could drastically affect the way you conduct business. Resolve to make your voice heard in 2010:
Q Visit IA&B’s Web-based Political Action Center to bone up on key issues and reach out to legislators.
Learn more: Visit iabgroup.com and choose Political Action Center from the menu bar. Resolution No. 2: Hope for the best, prepare for the worst.
From an innocuous water-main break to a ravaging electrical fire, myriad emergencies can jeopardize your agency operations. A prepped game plan helps you rebound as quickly — and inexpensively — as possible. Resolve to improve your agency’s ability to bounce back.
Q Press candidates for their position on insurance matters during this election year. (Look to the February Primary Agent magazine for an election preview.) Q Give to AgentPAC and support candidates who understand agents’ perspectives.
Use IA&B’s Emergency and Business Continuity Planning Manual to develop a personalized plan. Simply enter your business contacts, operational needs and critical functions, and the tool will provide customized guidelines, timelines and recommendations for a crisis. Best yet, your manual is stored online, so you can access it anytime, anywhere with an Internet connection. Learn more: Visit iabgroup.com, choose Agency Operations from the menu bar and click the Emergency Planning link. Resolution No. 3: Put your trust in knowledge.
Holding money in a fiduciary capacity opens doors to legal and regulatory requirements … not to mention investment risks. Luckily, a little education can ward off big noncompliance penalties, such as license revocation. Resolve to become compliant and secure your fiduciary accounts. Look to IA&B’s Fiduciary Responsibilities Resource for direction. The three-part tool explains what your fiduciary duties
are, how to stay compliant and which accounts maximize FDIC protection. Learn more: Visit iabgroup.com, choose Agency Operations from the menu bar and click the Fiduciary Duties link. Resolution No. 4: Cover your book’s back.
Producer agreements are good business practice. They can protect an owner’s book of business and the book’s value. Of course that assumes the owner put proper provisions in place. Resolve to utilize producer agreements for all they’re worth. Read IA&B’s expanded Producer Agreement Toolkit to protect your book and its value. You’ll learn how to establish trade secrets, restrictive covenants and compensation plans, as well as strategies for assessing damages. Use it to weigh the pros and cons of the employee and independent contractor classifications and to access a sample agreement for each. Learn more: Visit iabgroup.com, choose Agency Operations from the menu bar, click Employee Management and then select Hiring and Managing Employees.
WELCOME
New Members FAM & M Insurance Inc. Chestertown, Md. Freedom Insurance Agency Inc. Eldersburg, Md.
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Primary Agent | Janaury 2010
Preventing ERRORS AND OMISSIONS
SURPLUS LINES CONSIDERATIONS
LINDA C. PRIDEMORE AAI, CPIW Linda C. Pridemore, AAI, CPIW is an E&O marketing representative for Utica National Insurance Company. Insurance Agents & Brokers Service Group Inc. is the exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania. For questions regarding this article or your Errors & Omissions coverage, contact IA&B at (800) 998-9644 or by e-mail at iab@iabgroup.com.
Having handled Commercial Lines coverages as a CSR, producer and agency principal, I have encountered accounts with so much “hair” on them that I had to place coverage with carriers I was not directly appointed with. From time to time I have been forced to seek the services of our helpful Surplus Lines brokers. Have you ever faced this dilemma? In today’s soft market, a lot of accounts traditionally written in the Surplus Lines markets are being written by standard carriers. But if you began your insurance career during this current market cycle, you will be surprised when it changes. The hard market can come upon us overnight, and when it does, standard carriers will withdraw from writing some of these “hairier” risks. And some of these risks will really surprise you when they are non-renewed. There are some important issues that you need to be prepared for when you begin placing those accounts with the Surplus Lines brokers.
Issue No. 1: binding authority The first issue to remember is that you do not have an appointment with these carriers, thus you have no binding authority. What does that mean? Well, for instance, in order to bind the coverage, you must seek the written authorization from the broker who has the appointment. Do not indicate to your customer, in any way, that they have coverage until you have it in writing from the broker. Saying “Don’t worry, we’ll replace your coverage” may get you into E&O trouble. It is best to say “We are searching other markets to replace your coverage and will advise you when and if we find that coverage and what the new terms will be.” Get started early and keep your customer informed of your progress, or inability if that’s the case, to replace the coverage. Watch your expiration dates. Never let that expiration date go past without contacting the insured and having a binder in hand
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or written acknowledgement that coverage has been placed elsewhere. Never let your insured assume you have “handled” the replacement of their policy. Issue No. 2: coverages The second issue to remember is that the coverages you ask for on an application may not be the same coverages that you receive a proposal for from the broker. For instance, let’s say that you provide coverage on a building that is being non-renewed and must be placed in the Surplus Lines market. Currently, you provide Building, Contents, and Actual Loss Sustained Business Income with Special Form Perils coverages, Agreed Value clause, as well as Equipment Breakdown (the old “boiler & machinery” coverage). The Surplus Lines carrier may only provide Named Perils coverage with a co-insurance clause. The Business Income coverage may have a co-insurance clause or a quarterly or monthly limitation, or perhaps Business Income is excluded
all together. They rarely provide Equipment Breakdown coverage.
non-admitted carrier before you can have coverage bound.
How will you know what to present to your insured?
Issue No. 4: taxes and fees A fourth issue is that these policies will require a Surplus Lines tax, local or municipal tax and usually a “policy fee” by the broker. Often these fees are not refundable upon cancellation of the policy. Also, most policies will contain a minimum-earned clause in which 25 percent, or the entire premium, is considered fully earned the moment coverage is bound with them. Your insured needs to understand these conditions before binding.
You must read the proposal offered by the Surplus Lines broker very carefully. If the coverage isn’t spelled out by the broker, request it. Be sure to review carefully any attached endorsements proposed. If coverage form numbers appear on the proposal but the forms are not attached, ask for them. If you are unsure what they mean once you have read them, ask the broker to explain. Then get it in writing. If it still isn’t clear, ask your business associates or your local agency association for help. Once you understand the coverage offered by the broker, prepare the proposal for your customer and explain what is being presented and how it differs from the coverage they had previously. If they choose to accept the proposal, get their signature of acceptance. Issue No. 3: non-admitted carriers The third issue to remember is that these carriers are usually non-admitted. What does that mean? It means that they do not have direct approval by the Bureau of Insurance in your state and that the company itself is not provided coverage by the State Guarantee Fund. Their financial condition to pay a claim is not protected. You must watch the financial rating of the carrier you will present to your insured. Many states require written declinations from three standard carriers before coverage can be placed with a non-admitted carrier. They often require your insured’s signature that he or she is aware that the coverage is being placed with a
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Issue No. 5: premium A fifth issue related to premium is that these carriers require payment in full.
Since this is the surplus lines market, they do not offer payment plans. Should your insured not be in a position to pay the entire premium, taxes and fees up front, you may need to obtain premium financing through a financing company. Premium financing has issues of its own that we cannot cover in this article. Watch for future columns that will discuss the perils of premium financing. In the meantime, be prepared that when the market turns and you need to place some business in the Excess Lines market, a little forethought on your part can prevent excess headaches.
Primary Agent | January 2010
Coverage CORNER
AN UPDATE ON THE ACC
JERRY MILTON, CIC Jerry M. Milton teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages. He is also the education consultant for IA&B, working with CISR, CIC and continuing education programs.
First of all, what is the ACC? That’s insurance talk for the anti-concurrent causation clause found in most of our policies. It’s a clause that’s been in our policies for the past 25-30 years. But like so many other policy provisions, it’s one that we didn’t pay much attention to. That is, until the hurricanes of 2004 and 2005. Especially Katrina. That’s when we learned what ACC meant. The introductory paragraph of the Exclusions section of the ISO Commercial Property Special Causes Of Loss Form states: We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. The ISO Homeowners’ policy Exclusions section states: We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other
cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area. After they introduce the Exclusions section with this anti-concurrent cause paragraph, both the Commercial Property and Homeowners’ policies list several exclusions (Ordinance Or Law, Earth Movement, Governmental Action, Nuclear Hazard, Utility Services, War And Military Action, Water, and Fungus, Wet Rot, Dry Rot And Bacteria). Obviously, following the hurricanes, the issue was wind versus water. Water (flood) damaged the first floor of your building. Wind ripped the roof off the building. What’s covered? According to the ACC clause – nothing! Did the wind damage occur concurrently with the flood damage? I think the answer has to be, “Yes.” Following the hurricanes of 2004 and 2005, insurers used the ACC clause to deny all
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loss, even when there was clear evidence of wind damage. Unfortunately for the insureds who had suffered such loss, the 5th U.S. Circuit Court of Appeals sided with the insurers in many of these cases. These rulings had a major impact on insurance coverage throughout the United States since more than 50 percent of the U.S. population lives near a coastline. Following some of these decisions enforcing the ACC clause, attorney Richard “Flip” Phillips said, “An insurance company can always come up with some contorted interpretation to deny coverage if it just does not want to pay.” Well, things have changed. At least in Mississippi. On October 8, 2009 the Mississippi Supreme Court, in a 9-0 decision, ruled that a Homeowners’ policy covers wind damage from a hurricane even when water contributes to the loss. The Court found that the language in the policy may exclude all damage when it is
caused by a combination of wind and water acting together. But if the wind damage and the water damage can be distinguished, the ACC clause does not apply.
UnderwritingYour
In their opinion the Court said: No reasonable person can seriously dispute that if a loss occurs, caused by either a covered peril (wind) or an excluded peril (water), that particular loss is not changed by any subsequent cause or event. Nor can the loss be excluded after it has been suffered, as the right to be indemnified for a loss caused by a covered peril attaches at that point in time when the insured suffers deprivation of, physical damage to, or destruction of the property insured. An insurer cannot avoid its obligation to indemnify the insured based upon an event which occurs subsequent to the covered loss. The insured’s right to be indemnified for a covered loss vests at time of loss. This ruling by the Mississippi Supreme Court reverses the earlier rulings made by the 5th U.S. Circuit Court of Appeals. However, in Mississippi, the Supreme Court opinion prevails because insurance contracts are governed by state law. This is a Mississippi opinion. Not Pennsylvania, Maryland or Delaware. Not even Alabama. Will other states follow Mississippi’s lead? I certainly hope so! We don’t need the kind of mess we’ve had for the past four or five years. Y’all take care!
Success
SM
GIVING PROPERTY OWNERS CONFIDENCE TO BUILD UPON. Years ago, Mike Serluco had a national company insuring his growing property development business. “But they go the way the wind blows,� he says. Then Independent Agent Don Kingsbury, of Christian Baker Insurance Agency, Lemoyne, suggested a local insurer with a stronger commitment to building owners – Millers. “It’s very, very important for an investor to have an insurance partner, and that’s what I call Millers,� Mike says. With the few insurance claims he’s had, “Bing, bam, boom – it’s done and taken care of.� Adds Kingsbury, “With Millers, they actually listen to what you have to say. And not only do they know this industry, they offer package policies at a good price, and they back it up with excellent claims service.� Smart business people, independent agents and Millers...truly partners in protection. .*--&34 .656"- (3061 t 805 N. Front St., Harrisburg, PA 17108 'BY t NJMMFSTJOTVSBODF DPN *OTVSJOH ZPVS CVTJOFTT UISPVHI .JMMFST $BQJUBM *OTVSBODF $PNQBOZ *OTVSJOH -JHIU .BOVGBDUVSJOH t 0GGJDFT t 4NBMM 3FTUBVSBOUT t 3FUBJM 4UPSFT 4USJQ .BMMT t "QBSUNFOU #VJMEJOHT
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SALES
Three Homeowners’ Policy Gaps that Sell How to win clients and influence coverage: Exude expertise and build trust by shedding light on common homeowners’ gaps.
Primary Agent | January 2010
C
hecklists, coverage gaps and preparation were discussed in Chris Boggs’s previous article, “Gaps that sell,” which ran in the October 2009 issue of Primary Agent. As explained in that article, there are two classes of coverage/exposure gaps: 1) those that will almost certainly result in the winning of the client when presented; and 2) those that don’t necessarily win the client but rather serve to cement the agent/client relationship. In homeowners’, there are three coverage gaps common enough to apply to a majority of homeowners’ insurance clients.
Homeowners’ policy gaps likely to get the agent hired Skillful introduction and explanation of the following three common coverage gaps will likely result in the addition of a new client. Further, each of the three listed gaps is easily closed and, as an added bonus, with minimal increases in premium:
Once the Barbie Jeep
1. Personal Injury Coverage;
leaves the insured location,
2. Water Backup from Sewers and Drains/Sump Overflow; and
liability protection ceases.
3. “Miniature” Recreational Vehicles (i.e. Barbie Jeeps and other battery power vehicle). Personal Injury Coverage. Ever gotten into an argument with someone and called them something in public not exactly suitable for printing? What about the neighborhood rumor mill, ever passed along a juicy piece of information without first checking the facts? These are examples of “personal injury” as defined in insurance terms. Libel, slander and defamation of character are the best known of the personal injury offenses. The Internet has upped the ante on the need for personal injury protection. Posting an opinion to a Web site, blogging about an individual or business or simply forwarding a damaging email could result in a personal injury suit. The problem is personal injury is not covered in the unendorsed homeowners’ policy. An endorsement is required to gain the needed protection. Personal injury protection is garnered by attachment of the HO 24 82 (or equivalent state-specific or proprietary) endorsement. Coverage is not limited to libel, slander and defamation of character, but is also extended to any offense commonly considered personal injury (in insurance terms) including: invasion of privacy, wrongful entry into or wrongful eviction from a premises (all three could be useful if the
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SALES
insured is a lessor or landlord), false arrest, false imprisonment or malicious prosecution. How important is personal injury protection? In January 2008, a real estate developer sued a blogger for $25 million because of something he said on his blog. People seem to be easily offended and more than willing to air their “hurt” feelings in court; most clients will readily admit this to be true. Simply pointing out this obvious, yet not covered loss exposure along with its easy fix can win a new client.
__________________________ Any insureds that depend on a sump pump to keep their basement living areas dry have a specific exposure to an excluded hazard. __________________________
Water Backup from Sewers or Drains/Sump Discharge or Overflow. Most insureds assume that damage caused by water backing up in a drain or caused by the breakdown of a sump pump is covered by the “standard” homeowners’ policy; and they are upset when they find otherwise — usually when it’s too late. My neighbor woke one morning to find that his downstairs guest bath had backed up during the night, spilling out into the hall — ruining several square feet of hardwood and some furniture. Seeing the devastation from the
top of the stairs, my neighbor tore down the stairs, slipped and slid across the wet floor putting his foot through the drywall. He wasn’t hurt, but he was mad when his claim was denied under the “Water Damage” exclusion. Luckily, the reason for the backup was improper work done by a plumbing contractor so at least there was coverage under the contractor’s liability policy for the property damage.
homeowners’ policy for any bodily injury or property damage the kids cause. However, once the Barbie Jeep leaves the insured location, liability protection ceases. Exclusion “A.2.d.” of Insurance Services Office’s (ISO’s) homeowners’ policy specifically excludes from protection the use of any self-propelled motor vehicle owned by the insured when it is being operated off the insured location.
A second class of insureds subject to the standard water damage exclusion is those using sumps and sump pumps. Any insureds that depend on a sump pump to keep their basement living areas dry have a specific exposure to an excluded hazard. Filling this gap is as easy as attaching an endorsement. All that is required is the attachment of the HO 04 95 (or applicable state-specific form).
__________________________
Miniature Recreational Vehicles. Insureds with young children likely have a miniature recreational vehicle or two of some kind; a “Barbie Jeep” or some other battery-powered vehicle used to cruise the backyard, and sometimes the street, with their friends. Both of my daughters have them as do all the kids with whom they play; it’s fun watching them race and play, until they turn them into bumper cars. As long as the insured’s children are on the “insured location” (as defined by the policy), liability coverage is extended from the
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Posting an opinion to a Web site, blogging about an individual or business or simply forwarding a damaging email could result in a personal injury suit. __________________________
Once my daughter leaves our yard, any injury or damages she causes with her new batterypowered, three wheel “go-cart” (for lack of a better term) are excluded. This little vehicle races along at about 10 miles an hour and could really do some damage if she ran over the neighbors or their kids. If sued for these injuries, not to mention the parental “emotional distress” suit that would certainly accompany it, an unendorsed homeowners’ policy would provide no protection. ISO created the HO 24 13 (Incidental Low Power Recreational Motor Vehicle) endorsement for just this exposure. This endorsement
Primary Agent | January 2010
alters the homeowners’ policy to extend protection when these miniature recreational vehicles are being used off the insured location, subject to a few conditions. However, the promulgation and availability of the endorsement does not guarantee its use (just like any endorsement); some carriers do not offer this form, leaving the insured without the availability of protection. Knowing which carriers will and will not offer the endorsement could, itself, be a great selling point and path to a new client.
agent’s expertise and professionalism; it also builds trust on the part of the client.
Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA ©Insurance Journal, InsuranceJournal.com and MyNewMarkets.com
_________________________
Exploiting gaps in protection demonstrates to the client the
Classified ADVERTISEMENTS AGENCY MANAGER Manage and grow mid-size agency, primarily personal lines, located in Southeast PA. Equity position with eventual purchase opportunity. Send resume in confidence to: Editor #202, PO Box 2023 Mechanicsburg, PA 17055.
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SALES
3
I – Issues, implications, interventions Your best strategy to escape the commodity trap
Producers, beware: The “commodity trap” will spin you in a constant whirlwind of 90-day bidding cycles. The escape? Identification of consumer risks and solutions that show value and differentiate offerings.
Primary Agent | January 2010
B
arney is a 30-year-old producer. He is intelligent and highly motivated. He is technically proficient, having obtained his CIC and ARM designations. As a former college athlete, Barney has strong competitive instincts and a passion to win.
I had the pleasure of meeting Barney at a workshop in Atlanta two years ago. I was extremely impressed with his professionalism, inquisitive nature and passion for excellence. He made a positive first impression. Upon returning to my office in Philadelphia after the workshop, I was pleasantly surprised to receive a phone call from Barney. Barney confided in me that he was extremely frustrated with the insurance business and considering leaving the industry. He was tired with competing in the “commodity trap” — the 90-day insurance bidding process. He stated, “For the first time in my life, I have begun to lose confidence in myself. I am not used to playing a game where I have so little impact on the outcome. I do not like to lose.”
Commoditization occurs when
Understanding the commodity trap Barney was fighting an uphill battle against commoditization. Commoditization occurs when the consumer perceives little or no distinguishable difference between products, services and resources. When this happens, price becomes the primary differentiator.
the consumer perceives little or
Picture commoditization as a disease that eats away at your knowledge, wisdom and professionalism. It is so cruel and debilitating that it strips away the value proposition of the most seasoned producer — his or her professional purpose for existence — to a number. Barney’s condition was exacerbated due to the fact that he was playing the majority of his game within the 90-day bidding cycle.
price becomes the primary
Barney gave me his stats. He had been a producer for four years. His new business “hit ratio” was 25 percent, and he was averaging $50,000 in new business revenue per year. His book consisted of 35 clients with revenues totaling $200,000. Barney dejectedly stated, “I feel like I’m spinning my wheels. Just when I win a new piece of business, it feels like I’m competing to keep one. One comes in the front door; one tries to go out the back door. Although my retention is 90 percent, about 40 percent of my accounts go to market each year.” Barney rarely got referrals and put in 60 to 70 hours per week. His work/life balance was going to be an issue as he had a child on the way. He made $60,000 per year.
Overcoming consumers’ perception trap My first inclination was to help Barney calm down. I had to make him realize that he was not to blame. He was simply caught in the “commodity trap” and fighting through the consumer’s “perception trap.” His anger, frustration and loss
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no distinguishable difference between products, services and resources. When this happens, differentiator.
____________________________ The treatment for commoditization can be aided when we realize that we sell intangible products. The less tangible, the more powerfully and persistently the judgment about a product can be shaped by packaging. ____________________________
SALES
of confidence were typical reactions to the outcome of commoditization. A dose of reality put Barney at ease. I asked him to ponder three simple but powerful questions and call me back in a week. The questions were: Q To what degree does the middle-market consumer have the time and ability to identify exposures? (0 low to 5 high) Q To what degree does the typical insurance agent or broker assist his or her client with exposure identification? (0 low to 5 high) Q To what degree does the middle-market consumer enjoy the traditional insurance bidding process? (0 low to 5 high) I also gave Barney a study by Huthwaite, the acknowledged thought leader in the sales performance industry. Huthwaite viewed more than 35,000 sales transactions over a 12-year period and determined that the consumer was willing to pay a premium, redefine the buyer/ seller relationship, erect barriers to the seller’s competitors and establish the seller as a trusted advisor when two primary activities occur:
Moving beyond the bidding game Barney called back a week later. I was amazed by the excitement in his voice. His disposition had changed dramatically.
The next year showed amazing results for Barney: His career took off, and he did $200,000 in revenue the first year he used the I3 system. Other indicators also showed dramatic improvement including, but not limited to, new business hit ratio, retention and outside competition on key accounts. He now receives three to five referrals per week. I am pleased to report that Barney has a handle on commoditization. He loves the business and plans to remain in our industry for years to come. Oh, and by the way, he had a baby girl.
He said, “I get it! I must stop playing the 90-day bidding game. The three questions you gave me last week made me realize that I need a process to enable my clients to identify risk issues with solutions outside the boundary of the insurance transaction. If this can be accomplished, I will be playing a different game than my competitors.” Barney had figured it out.
Engaging in a reality check
Over the next month, Barney worked feverishly and enthusiastically to design a differentiated process focused on the identification, measurement and mitigation of risk. I gave him a formula entitled I3. The I3 process stood for issues, implications and interventions. Barney was on his way to creating a system that would dramatically improve his professional image, income and work/life balance. Barney now had a renewed purpose and passion for the business.
The treatment for commoditization can be aided when we realize that we sell intangible products. The less tangible, the more powerfully and persistently the judgment about a product can be shaped by packaging. It is essential that the package is positioned in a way to force the consumer to change his or her perception about it. To determine if you have been commoditized, I encourage you to see if the following five statements relate to you: Q I seem to be losing my passion for the insurance business. Q I cannot seem to change the consumer’s perception of me.
Q Seller reveals to the buyer an unrecognized problem, and
Q I often get angry and frustrated with the 90-day bidding process.
Q Seller establishes for the buyer an unanticipated solution. © 2007 Addis Intellectual Capital, LLC. All Rights Reserved.
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Primary Agent | January 2010
Want more Addis advice?
Q The insurance transaction is getting in the way of my ability to learn the customer’s business and its “issues.” If you are commoditized, take a few moments to consider the lessons learned by Barney. Barney was able to escape the “commodity trap” when he realized that: Q The consumer perceived him as a commodity. Q The consumer does not like buying insurance. Q The middle-market consumer needs help identifying exposures.
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Q His competition is not adequately helping the middle-market consumer to perform exposure identification.
as one of the 25 Most Innovative Agents in America. To learn more about the I3 system, contact Scott at saddis@beyondinsurance.com, (610) 945-1019 or www.beyondinsurance.com.
MBER CU
Q The consumer does not see me as a trusted advisor like his or her CPA, attorney or banker.
Scott Addis, author of “I3 – Issues, implications, interventions,” will serve as keynote speaker at the Delaware Association of Insurance Agents & Brokers 2010 Convention.
OUP
I3 – Issues, implications, interventions. This may be your best and most powerful weapon to escape commoditization.
__________________________ The author, Scott Addis, is the president and CEO of The Addis Group and Addis Intellectual Capital, LLC (AIC). AIC is a coaching and consulting company with the purpose of transforming the process that insurance agents, brokers and carriers use when working with clients. Scott is a recognized industry leader who has been named Inc. Magazine’s “Entrepreneur of the Year” as well [ 19 ]
Celebrating 165 years of service
◆
1844 - 2009
Primary Agent | January 2010
Technology U P DATE
TOOLS FOR THE SUCCESSFUL AGENT OF TOMORROW
ANGELYN S TREUTEL CPA Angelyn Treutel is treasurer, vice president and chief information officer of Treutel Insurance Agency, as well as chair of the Agents Council for Technology (ACT). Angelyn can be reached at angelyn@treutel.com. ACT is part of the Independent Insurance Agents & Brokers of America, and its Web site can be found at www.independentagent.com/act. For more information about ACT, contact Jeff Yates, ACT Executive Director at jeff.yates@iiaba.net. This article reflects the views of the author and should not be construed as an official statement by ACT.
Everywhere you go, everyone is talking about social networking. What is going on and what can it do for your agency? Benefiting from social networks Social networking saves you money. As agents, we have a reputation for being rather frugal. Most of the tools available for social networking are free. All you have to do is
invest a little of your time or enlist the help of an enthusiastic agency co-worker. With social networking, agents can reduce the cost of using print advertising: no more newspaper ads, phone book ads and painting on a roadside bench. The market reach is phenomenal. Think about how many people read a newspaper in your home town — in my town it is
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around 10,000. Then check how many people in your area use Facebook — in my area it is 67,000. Networking today Social networking is merely an extension of how agents have conducted business in the past. The successful agent of yesterday invested in a storefront and used community networks to develop referrals and
prospects. Printed advertising abounded in newspapers, magazines and phone books. Business cards were used as a calling card and a convenient way to remind prospects how to contact you on the office phone. Agents used print media to emphasize their expertise and encourage clients to visit them in the office. Wow, how times have changed. Today’s consumers want convenience and everything at their fingertips. Successful agents are reaping the benefits of having an integrated Web site which presents an outward face to the online consumer. This extends the brick-and-mortar storefront and reaches out into the Internet marketplace. Using online profile pages like Facebook (www.facebook.com), Google (www.google.com.profiles) and MerchantCircle (www.merchantcircle.com) helps drive consumers to your agency Web site for a broader reach at any time of the day or week. Agents are able to provide more convenience to their clients and prospects by using customer portals, e-mail, text messaging and mobile phones.
opinion of a trusted peer group or from their own connections/friends. With social networking, agents have more opportunity to showcase themselves as a consumer advocate. Measuring success Don’t let the desire to measure ROI stop you from getting started. There are many ways to measure the success of embracing social media. Using a free tool like Google-Analytics (www.google.com/analytics) allows you to measure easily the impact of your Web site and your online advertising campaigns. The tool tracks site usage, which pages are viewed, how much time viewers spend on each page, which search engines or other sites were used to find your agency, which keywords were used to locate your site and more. Tools like Web site Grader (www.Web sitegrader.com) are available to evaluate objectively the effectiveness of your site and provide you with constructive ways to make it better. Implementing Web 2.0 Relevant and fresh content on your agency Web site is critical, and the more partner sites that link to your agency site, the better.
The concept of networking may h ave shifted from being exclusively face-to-face to one of cyberconnections, but networking is something that all agents are very comfortable with, because agents are good at building relationships. Social networking allows you to connect with more contacts than would be humanly possible to meet in person. Plus, the connections increase exponentially with the ease of online referrals from one of your connections to all of their connections. And, frankly, many modern consumers distrust print media when they are researching products. They prefer to obtain the
Sign up for local search on Google (www.google.com/local/add) and Yahoo (http://edit2.ls.sp2.yahoo.com/csubmit/). Have your site listed by local partners and organizations like your local Chamber or church or business club. Keep your Web site interesting for your clients and prospects. Consider using RSS feeds (automatic feeds of fresh news and content from another Web site) and add a blog on interesting consumer and community topics. To leverage the time commitment required to maintain your social networking presence, you may want to
consider a rotation schedule to tie all of your efforts together. On some frequency, update Facebook to share tips, use LinkedIn to keep up with reading, topics, trips and professional networking, and use Twitter to communicate pertinent updates. Use e-mail for sending out newsletters, and offer chat/text messaging capability. Each week, update your blog to add interesting stories and consumer tips. At least monthly, update your Web site to include news and events, and be sure to link to all of your social network sites to your Web site to complete the cycle. Making it happen Social networking and marketing put more tools in your toolbox and give you a broader market reach for very little expense. Use your Web site to supplement your physical office. Analyze your Web site traffic and make upgrades to improve your close ratio. Use social networking as your virtual business card to expand your community outreach, enhance your networking presence, get more prospects and turn them into clients. What do you mean you haven’t started using social networking to make your agency better? You need to jump right in. Ready … set … go!
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Preferred Property Program . . . . . . . . . . . . . . . .9
SALES
New member profile: Chasing a dream with IA&B’s Market Option Program New IA&B member Nichole Leibensperger found the association’s RLI personal umbrella policy appealing, and within a matter of months, she became the association’s highest policy-count producer.
Primary Agent | January 2010
N N
ichole Leibensperger found her way into the insurance industry as many people do. By accident.
“Insurance chooses you,” she quips.
ABOUT IA&B’S MARKET OPTION PROGRAM
She was between jobs and questioning if Corporate America really called to her when an acquaintance told her about a front-office position with an independent agency. She decided to give it a shot, and within a month the self-described overachiever earned her license.
IA&B offers members access to RLI personal umbrella and home business insurance through its Market Option Program.
“Betsy [Tribendis] studied with me after class in the hotel,” says Leibensperger of her IA&B licensing-preparation instructor, “and then I studied every morning from 4-6 a.m.”
Personal umbrella highlights:
Leibensperger’s determination paid off: She passed the Pennsylvania exam and began selling, and within no time she built a strong book of business. After a few years of “making someone else a lot of money,” she decided to hang out her own shingle. And so Chase Insurance Associates – aptly named in recognition of Leibensperger chasing her dream – in Sinking Spring, Pa. was born.
Q Stand-alone policies Q Liability limits up to $5 million Q Broad underwriting guidelines Q Self-underwriting application Home business highlights:
Running with RLI Her positive experience with IA&B’s licensing-study course led Leibensperger to the association when she opened her agency. She immediately became a member, purchasing E&O coverage through IA&B and sending her staff to the association’s licensingpreparation course … taught by Betsy Tribendis, of course. _________________________________________________________
Q Stand-alone policies Q General liability coverage up to $1,000,000 Q Business personal-property protection (home and temporarily off-premises) Q Loss-of-business income protection up to 12 months
“The RLI rates are fabulous, and the product is great.” _________________________________________________________
Then Leibensperger took advantage of IA&B members’ access to RLI Personal Umbrella, part of the Market Option Program. Sales took off, and within a matter of months, she became the association’s highest policy-count producer. “The RLI rates are fabulous, and the product is great,” she says. Leibensperger also touts the product’s stand-alone aspect — which allows insureds to maintain their homeowners’ and auto coverage with their current carrier(s) — and its ability to insure multiple investment properties.*
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Q Medical payments up to $5,000 per customer injured on premises In the fall of 2009, RLI launched PUP Special with expanded underwriting criteria. For more information, visit iabgroup.com or contact IA&B’s Member Service Center at (800) 998-9644, option 0.
SALES
Chase Insurance Associates has zoned in on real estate investment clients, and RLI — along with IA&B service — have proved an ideal match. “The staff has been excellent, and the product sells itself,” shares Leibensperger. “Whenever I had questions, the knowledgeable staff was there with an answer.”
Giving credit “Business has exploded,” says Leibensperger. She credits her staff, customer service and the companies — such as RLI — with which she writes business. But it’s obvious that her ambition and outlook play a big role, too. “While we work hard for what we have, I believe we’re all given gifts,” she says, motioning to her office. “It’s all about taking care of those gifts.”
*In October, RLI expanded its underwriting offerings to include up to 10 properties via its new PUP Special program.
“Ugly” smile insured for $10 million Heidi Klum’s legs. Keith Richards’ left-hand middle finger. Santa’s beard. And now, seemingly oxymoronic, … drum roll, please … Ugly Betty’s smile. Aquafresh White Trays recently insured America Ferrara’s smile for $10 million. The lead actress on the “Ugly Betty” sitcom, Ferrara signed as spokeswoman for the company’s Smiles for Success program, which underwrites dental work for needy women. Lloyd’s of London wrote the policy.
Sources: Insurance Journal, PRNewswire
-------------------------------------------------------------------------------------------------The Last & Least column is dedicated to the industry’s oddities — from creative claims and kooky coverages, to (tasteful) jokes and strange stories. Submit yours to iab@iabgroup.com, subject line: Last & Least. The editor will happily protect sources’ anonymity upon request.
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IA&B Wishes You a Prosperous New Year