Primary Agent - July 2014 - DE Edition

ALSO IN THIS ISSUE: Job descriptions — an HR insurance policy When are ISO endorsements mandatory?

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Contents PRIMARY AGENT MAGAZINE

The end of the world as we know it

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The rapidly growing Internet of Things (IoT) stands to impact the insurance industry in ways that we, admittedly, cannot yet imagine. IoT supplies the “big data” about which we’ve all heard, and that influx of information creates opportunities and challenges alike for our data-hungry industry. Read on for an understanding of the trend and what it could mean to insurance in the not-so-distant future.

Page 12 Coverage risks in the age of the ‘Internet of Things’ New technologies create new risks, and new risks create the possibility of coverage disputes. Here, attorneys from Hunton & Williams discuss the growing risks associated with the Internet of Things, what coverage gaps could exist, and how insurers may respond.

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22 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.

Get social with IA&B

What makes a great agency website?

One of the most common questions independent insurance agencies ask is “What makes a great agency website?” This question comes in various flavors. Sometimes, it focuses on a single facet of the site itself such as design. At other times, it is more general in nature such as “making my website perform better.” Read on to learn the commonalities of successful agency websites.

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In every issue 2 3 4 6 8 11

Chair of the Board’s Message Ask Our Experts State News Preventing Errors & Omissions Coverage Corner IA&B Partners

19 22 26 IBC IBC IBC

My Events Technology Update H.R. Headquarters Advertisers Index Classified Ads C’mon, get appy!

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 5050 Ritter Road Mechanicsburg, PA 17055-0763 Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347 Periodical postage paid at Mechanicsburg, Pa. and at additional mailing offices.

Postmaster: Send address changes to above address.

Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2014-7 is published monthly by IA&B Service Group Inc., a subsidiary of IA&B. Copyright 2014. 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.

Board of Directors Officers G. Greg Gunn, CIC Chair of the Board Lemoyne, Pa. Diana M. Hornung Hanby, ACSR Vice Chair of the Board Wilmington, Del.

G. Greg Gunn, CIC

Chair of the Board’s M

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G

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Norman F. Basso, CPCU Immediate Past Chair of the Board York, Pa.

Members Henry “Butch” Bradley, Jr. Forest Hill, Md. E. Stephen Burnett, CIC, ARM Wilmington, Del. Richard F. Corroon, CPCU Wilmington, Del. N. Lee Dotson, CIC, AAI Wilmington, Del. Michael P. Ertel Columbia, Md. John L. Frankenfield Telford, Pa. John B. Hollister Milford, Pa. Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, Pa. Robert S. Klinger, LUTCF, CPIA+ Germantown, Md. Douglas A. Loesel, CPCU Erie, Pa. Michael F. McGroarty Sr. Pittsburgh, Pa. Craig S. Mader Gambrills, Md. Ann Gallen Moll, CIC Reading, Pa. Joseph R. Pastor, CPCU, AAI Oil City, Pa. Richard M. Rankin, CIC Lancaster, Pa. April E. Ressler, CIC Altoona, Pa.

The future could be here sooner than you think As I write this message, news outlets are buzzing about a new Pew Research Center report predicting what amounts to be the end of the world as we know it by 2025.

Apparently, wearing Google Glass or relying on a Nest Thermostat won’t seem so far-fetched a decade from now. Researchers predict we’ll live our lives through a web of Internet-connected gadgets.

We’ll control our home lawn sprinklers from work and receive notification at home if a pipe bursts at the office. Minus cars flying (although rumor has it they’ll be driving themselves by then!), we’ll live like the Jetsons.

All joking aside, as insurance professionals, we don’t have the luxury of ignoring these trends. Our clients trust us to recognize their exposures and to advise them accordingly. And if this new trend of remote-access, interconnected everything truly is set to explode — the Pew report suggests we’ll nearly quadruple the number of Internet-connected devices by 2020 – we’ve got our work cut out for us. This month’s Primary Agent magazine includes feature articles that delve into into the subject and what it could mean to our industry.

Now please don’t get me wrong; I’m not an alarmist. But I am a pragmatist. And I’m also someone who recognizes that in times like these, perhaps more than ever before, there is great value in the collective power of an agents’ association to advise us on trends and support us in our efforts to (forgive me) live long and prosper.

Until next time,

Scott C. Rogers, CPIA* York, Pa. David B. Wasson Sr., CIC State College, Pa. Lawrence A. Wilson, CIC, CPIA, CPCU, ARM** New Castle, Del.

G. Greg Gunn, CIC

* Pa. IIABA National Director ** Del. IIABA National Director + Md. PIA National Director

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Ask our Experts QUESTION: One of my carriers is adding an endorsement to the renewal and telling me that it is an ISO mandatory endorsement and that they can’t do anything about it. Another carrier is not adding it. Both use ISO. Is it mandatory or not?

ANSWER: ISO “mandatory” endorsements always cause significant confusion … to which you can add that there is often abundant miscommunication accompanying their release. When ISO labels a form as mandatory in a state, it doesn’t mean that it is mandatory for every ISO member to use. Nor does it mean that it is mandated by law or regulation.

Ultimately, the nature of the form will likely dictate how important it is to your insured: Is it an addition of coverage?

A reduction in coverage? A policy administration issue?

Depending on the nature of the change, statutory or regulatory provisions could mandate specific disclosures.

As a result, the carrier may have to provide notification to the insured in addition to the filing.

How is the carrier identified? w A few carriers that are ISO members are identified as “automatically following” ISO. If the endorsement is filed as mandatory by ISO, then the form would be mandatory for those carriers, and they are correct in stating they have to adopt the endorsement.

According to the regulators, however, the number of carriers “automatically following ISO” is the exception rather than the rule.

HAVE A QUESTION? ASK OUR EXPERTS! Rely on our experts to answer your most perplexing questions. Visit the Ask Our Experts section of IABforME.com (find the link in the website footer) to submit your question and review answers to other frequently asked questions. Or email your question to us at IAB@IABforME.com. We look forward to hearing from you.

w Most ISO-member carriers are identified as not automatically following ISO, in which case they file with the regulator that:

1) they will be following the ISO filing, or

2) they will submit a different filing. The filing can be that they won’t add the form, that they will add it with a different effective date, or that they will add it with amendments.

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Primary Agent | July 2014

State News Flanked by IA&B leadership and staff, Gov. Markell signed HB 104 into law.

Governor signs our priority certificates legislation Effective Aug. 5, improper use of certificates of insurance will be prohibited under Title 18 of the Delaware Code. No longer will law-abiding producers be torn between onerous requests from clients and third parties to amend certificates and the regulatory (and E&O) constraints that forbade it.

Our priority legislation – passed by the General Assembly on March 25 and signed by the governor on May 7 – prohibits the: w Request of a certificate that does not accurately reflect the underlying policy w Issue of a false or misleading certificate or one that purports to alter, amend or extend the coverage provided by the insurance policy

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w Use of a certificate to warrant that a policy complies with the insurance or indemnification requests of a contract The legislation also enables the Delaware Department of Insurance to issue cease-and-desist orders and to assess fines against those who request false or misleading certificates.

Your IA&B government affairs team championed this legislation throughout the past two legislative sessions, working to gain the support of lawmakers, regulators and members of the lending and banking communities.

IABforME.com/certificates

Momentum grows for TrustedChoice.com In a boon to TrustedChoice.com, Travelers just joined the ranks of investing carriers. TrustedChoice. com connects members with online consumers seeking a new agent or coverage. And with online-rating capabilities set to launch in Delaware soon (the date was undetermined as this magazine went to print), shoppers will be able to receive multiple quotes (from Travelers and other partnered carriers), select a carrier and choose the independent agent with which they wish to work.

As a reminder, you already have a basic listing as a member benefit.

By purchasing an Advantage subscription, you become eligible for the impending online quoting, priority listing and an enhanced profile in search results seen by TrustedChoice.com shoppers.

When Travelers, along with Motorists, signed on this spring, they joined Project CAP’s six other investor carriers: Central Insurance Companies, The Main Street America Group, Safeco, Selective, State Auto and Westfield Insurance. In total, these carriers have invested over $50 million in Project CAP since 2011.

IABforME.com/TC_CAP

More bang for the UIM buck

Convention recap Over 200 member agency employees and insurance company representatives met in Dewey Beach June 4-5 for our 57th annual convention.

The event kicked off on Wednesday with a golf tournament at Kings Creek Country Club, followed by a reception at the new Hyatt Place Dewey Beach.

Day two included CE-approved workshops presented by nationally renowned instructors Rita Hollada, CPCU, CIC, CPIA, and Jerry Milton, CIC, as well as the association’s annual awards luncheon, where the following individuals were recognized: N. Lee Dotson, Bellevue Insurance Services LLC, Wilmington – Wharton-Ranalli Leadership Award Mario D’Andrea, Travelers – William H. Lehnert Jr. Award LeeAnne Henderson, Lyons Insurance Agency, Wilmington – Delaware Oustanding CSR of the Year Daniel Armistead, Newark – Joann Scott Memorial Scholarship Kyle Plusch, Middletown – Joann Scott Memorial Scholarship

WELCOME

New Members EZ Term Insurance Agency Newark, DE

A sincere thanks goes to all who attended, sponsored and otherwise supported the event. Watch for photos in the next issue of Primary Agent.

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Delaware’s recently amended state law allows innocent insureds involved in motor vehicle accidents to access their underinsured motorist (UIM) benefits, regardless of the negligent driver’s insurance policy limits. The change stems from amendments to the UIM statute, which took effect over the winter.

Our new online resource on the lifted UIM restrictions shares more details, including background on what prompted the change, an example of how the old law negatively affected innocent insureds, and links to the full text of the updated law and the legislation that implemented it.

IABforME.com/UIM_modify

Track state trends in independent agents’ market share Learn how independent agents stack up to their competition. Our customary summary of the latest Big “I” market share report is available.

The document provides an in-depth comparison of various distribution channels and various lines of insurance and Delaware-specific market share data for 2012.

IABforME.com/ market_share_report

Primary Agent | July 2014

Preventing ERRORS AND OMISSIONS

DON’T LET YOUR AGENCY GET SUNK BY AN E&O CLAIM INVOLVING WATERCRAFT The Utica National E&O Program supplied this article.

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 E&O coverage, contact IA&B at 800-998-9644 or IAB@IABforME.com.

The dog days of summer have arrived, so there is a strong likelihood that many customers will be looking to get out on the water. As a result, these customers will be contacting your agency to make sure their watercraft coverage is in order.

Know the differences While there is a good chance the premium for this exposure under a HO policy will be less, there is also a good chance the coverage will be less. As the saying goes, “You get what you pay for.”

Important questions to consider include:

Agents must be aware of any limitations or exclusions in the homeowners’ policy regarding issues such as the engine size and length of the watercraft.

If the watercraft is eligible for coverage under the homeowners’ policy, liability protection may be provided, yet typically physical damage coverage is not. This is potentially an important issue based on the watercraft’s price.

Statistics indicate that in 2012 there were 5,870 thefts of various types of watercraft in the United States, so this is a definite exposure. As one could imagine, jet skis were No. 1 (23 percent) on the theft list, followed by

w Will the watercraft be insured on the homeowners’ policy or via a standalone policy? w Do your customers know the differences?

How about the agency staff? w How knowledgeable are you on what those differences are?

Now is a great time to brush up on those differences so your customer can make an educated decision.

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runabouts (16 percent), utility (fisherman/sedan types), cruisers and then sailboats.

In addition, when insured under a homeowners’ policy, there may not be any coverage for injury to passengers and others, or any coverage for the trailer and accessories.

Once again, this could be a potentially significant exposure.

Yet these two exposures are just a few of the differences. To ensure your customers are more adequately covered – or to at least give them the option to consider – alert them to the benefits of insuring their boat or yacht with a specialty carrier. Here are some additional coverages and exposures that are often automatically included or included for a fee with the specialty carriers: w Roadside assistance if the insured’s vehicle becomes disabled while towing his or her boat

w Coverage for fishing equipment and other personal effects such as water skis

The agent went through another broker to secure replacement coverage with “Company Y.”

w Fuel-spill coverage (Your clients may be legally liable. Do they have the necessary coverage?)

The insured informed the broker that the yacht was stored in the water. The broker completed the application and indicated that the yacht was on land. The policy was issued with a warranty that the vessel was dry docked. The yacht sank while at dock during a storm and the carrier denied coverage.

The agent had received the policy, recognized the problem with the warranty (dry vs. wet dock) and had intended to discuss it with his client and broker. However, the policy sat on the agent’s desk for two weeks and then the loss occurred. Thus, the client never saw the policy.

w Wreckage removal w Medical payments (even for water skiers) E&O claims involving watercraft have involved a variety of issues including: w Territorial restrictions – This can involve specific territories, such as Cuba. In addition, some watercraft policies have limitations that exclude coverage in certain types of water (fresh water vs. salt water) or sizes of water (rivers and lakes vs. larger bodies of water such as the ocean). w Hull coverage – Claims have arisen because the coverage wasn’t written on an agreed-value basis.

Agreed value is certainly broader than actual cash value. w Insufficient limits – Major accidents can occur. Secure high limits and schedule this policy under the umbrella. w Not understanding the binding guidelines relating to the age of the vessel – What are the specific survey requirements?

Attention to detail is critical when insuring this type of exposure.

Consider the following claim and how it could have been avoided: The agent wrote a marine policy for a longtime customer to cover the customer’s yacht. The previous policy was with “Company X.”

The claim was for $1,300,000.

While the broker certainly has some liability, the agent is also to blame for not acting on the discrepancy. The case was settled for $750,000, with the agent responsible for 50 percent of that amount.

Tips to consider Such E&O claims can be avoided.

Consider these tips: Completing the application – Sit down with the customer to review each question and explain the coverages in detail. If the customer does not choose the broadest protection, get his or her sign-off for the declined coverages. After the application is completed, require (don’t simply request) that the customer thoroughly review the application’s questions and answers and, if everything looks in order, require the customer to sign the application.

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Receipt of the policy – The agency should review the policy to ensure it matches what was requested. Whether you personally deliver the policy or mail it, include a cover letter advising the client to review it to make sure everything is in order. As evidenced by the claim example above, this should be handled promptly as time could be an issue.

Education and training – Both your staff and your customers can benefit.

The goal is to be certain the staff understands all of the coverages and how they apply. Spend a few minutes in the next week to review your agency’s approach to insuring the various types of watercraft.

Include this as a topic in your next newsletter for customers and as a topic on your website and social media blog or posting. Spell out the benefits of a specialized policy as compared to securing the coverage via the homeowners’ policy. It’s also a great topic to include in your personal lines reviews to ensure that customers know the differences.

Before the phone starts ringing, take the time to get up to speed and learn the finer points of insurance for watercrafts. This could ensure that your agency doesn’t “go down with the ship” in the event of an E&O claim.

Primary Agent | July 2014

Coverage COR N E R

WORKERS’ COMPENSATION – WHEN AND WHERE ARE THEY COVERED?

JERRY M. MILTON, CIC Jerry M. Milton, CIC, 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.

Over the years I’m sure you’ve been asked numerous times, “Will he be covered by workers’ compensation if he does this?” Or the question may have been, “Will she be covered by workers’ compensation if she does that?” They then describe what “this” or “that” is.

centers and conference facilities.

In July 2011, the company asked Mr. Gravette, who lived in Idaho, to travel to the Gaylord National Resort and Convention Center in National Harbor, Md. for work. On July 10, Mr. Gravette was injured around midnight when he slipped and fell while dancing at the Pose Ultra Lounge & Nightclub located on the resort premises. There was no indication that he was intoxicated at that time.

After hearing what “this” or “that” is, there is a temptation to answer those questions with a “yes” or a “no.” Folks who are smarter may respond with “possibly” or “maybe.” However, the correct answer is, “I just don’t know.” The following Maryland case is a perfect example of workers’ compensation coverage applying to an employee’s injury when, to the naked eye, it appears it should not.

Mr. Gravette filed for workers’ compensation benefits. Both the Maryland Workers’ Compensation Commission and the Prince George’s County Circuit Court rejected his request. The trial judge for the circuit court found that, unlike eating and bathing, dancing at a nightclub wasn’t “reasonably incidental to the travel required by the employer.”

Dallas E. Gravette worked as an audio visual technician for Visual Aids Electronics Corp., which is based in Germantown, Md. They provide audiovisual rental and staging services to hotels, resorts, convention

A three-judge panel of the Maryland Special

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Court of Appeals unanimously reversed the Commission’s and the lower court’s rulings. In reaching their decision, they noted similar cases in which injuries suffered during “reasonable and foreseeable” recreational activities were deemed compensable. Because Mr. Gravette’s dancing took place on the premises of the hotel, and it was not considered dangerous or out of the ordinary, the Court of Appeals ruled he was entitled to workers’ compensation benefits.

The lower court’s decision was reversed and the case was remanded to the Maryland Workers’ Compensation Commission for further consideration.

Are you covered for workers’ compensation benefits if you’re injured while dancing at a nightclub at midnight?

Most of us would want to say “no”. However, the Maryland Special Court of Appeals said “yes.”

Y’all take care!

Good people Make great partners!

Quote a middle market account with Harleysville, and watch your circle of trusted advisors grow in a hurry. First, there’s your field underwriter, who’ll understand your client’s business and recommend the right coverage. Next, your risk services specialist, who’ll assess the hazards of your client’s operation and propose solutions to address the challenges.

And finally, when the account is especially large or complex, our claims business consultant can meet with your client initially, then later to discuss specific losses and trends. For contractors, manufacturers, wholesalers and more, team with our middle market professionals once and you’ll call us again and again. To learn more about this and other benefits of a Harleysville appointment, call 800-523-6344, ext. 5016, or visit our website.

Scan this tag to be sent directly to the agency recruitment section of our corporate website.

Busines s | In land Marine | Person al | Life/Employee Ben efits | Flood | Human S er vices | www. harleys villegroup.com

Platinum Profile Insurance Agents & Brokers proudly recognizes Mutual Benefit Group as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

FEATURED PARTNER Mutual Benefit Group CHIEF EXECUTIVE OFFICER Steven C. Sliver, President and CEO HOME OFFICE LOCATION Huntingdon, Pennsylvania A.M. BEST RATING A- (Excellent)

S

ince 1908, the grandfather clock in the lobby of Mutual Benefit Group’s headquarters has steadily measured the minutes of 106 years of service to policyholders.

And for just as many years, Mutual Benefit has steadily relied on independent insurance agents to market its products, remaining committed to a valued partnership with hometown experts who know how to provide their neighbors with uncommon service.

“One of the ways Mutual Benefit demonstrates its commitment to the independent agency system is through its Inner Circle agency recognition program. I’ve been enjoying the opportunity to celebrate with this year’s honorees,” remarks Kevin O’Brien, who joined Mutual Benefit in January 2014 as senior vice president of insurance. “The Inner Circle program rewards agents who consistently display the ability to grow profitably in a tough market while providing exceptional customer service. It’s a way for Mutual Benefit

to show these agents how much we appreciate their dedication to their clients and to the industry.”

The Inner Circle Program provides increased compensation for agents meeting specified premium growth and loss ratio targets. In addition, they receive recognition among their clients, community, and peers. Agents who attain long-term membership qualify to receive the Inner Circle commemorative grandfather clock, a symbol of consistency, reliability, strength, and stability, traits that Mutual Benefit and its policyholders appreciate, traits that Mutual Benefit seeks to model as well.

Agencies who qualified for Inner Circle membership this year based on 2013 results are Affolder & Associates Inc., Pittsburgh, PA; Beiler Insurance Agency Inc., Gap, PA; Indiana Insurance, Indiana, PA; Jack M. Shuck Agency Inc., Huntingdon, PA; C. Kenneth Grant Inc., Coatesville, PA; Malagise & [ 10 ]

Kevin O’Brien Senior Vice President of Insurance

Associates Inc., Bridgewater, PA; Nelson Insurance Services Inc., Eldersburg, MD; Peebly Insurance Inc., Greensburg, PA; Strickler Insurance Agency Inc., Lebanon, PA; and Wolfe Agency Inc., Ford City, PA. “We congratulate this year’s Inner Circle agents, and thank them for their exceptional representation in the insurance industry,” says O’Brien. “Just as we see our agents as valued partners, we hope programs like Inner Circle will help agents see Mutual Benefit as a key partner who is committed to helping them grow their agencies.”

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 IABforME.com to get started.

PLATINUM LEVEL ACUITY Berkley Mid-Atlantic Group Donegal Insurance Group Erie Insurance Group Harleysville Insurance HM Insurance Group Insurance Agents & Brokers Service Group Inc Liberty Mutual Insurance MMG Insurance Company Millers Mutual Group Millville Mutual Insurance Co Mutual Benefit Group Penn National Insurance Swiss Re The Main Street America Group Utica National Insurance Group

GOLD LEVEL

ISU Insurance Agency Network Progressive Westfield Insurance

SILVER LEVEL

Access Insurance Company Allied Insurance American Mining Insurance Co Burns & Wilcox Limited Cumberland Insurance Group Farmers Mutual Insurance Company of Western Pennsylvania Frederick Mutual Insurance Co ICW Group Insurance Companies Juniata Mutual Insurance Co PSBA Insurance Trust Selective The Philadelphia Contributionship [ 11 ]

BRONZE LEVEL Aegis Security Insurance Co Agency Insurance Company AmWINS Program Underwriters Inc Auto-Owners Insurance Company Bailey Special Risks Inc Briar Creek Mutual Insurance Company Chubb Group of Insurance Companies Conemaugh Valley Mutual Insurance Co Countryway Insurance Company Encompass Insurance Foremost Insurance Group GMI Insurance Goodville Mutual Casualty Company Guard Insurance Group Hanover Fire & Casualty Insurance Company Harford Mutual Insurance Co Insurance Alliance of Central PA Inc Insurance Placement Facility of PA Keystone Insurers Group Inc Lebanon Valley Insurance Company MAPFRE Insurance Merchants Insurance Group Mercury Casualty Mutual Aid Exchange Penn PRIME Municipal Insurance Reamstown Mutual Insurance Company Rockwood Casualty Insurance State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Motorists Insurance Group The Mutual Service Office Inc Travelers Tuscarora Wayne Group of Companies United Fire Group Zenith Insurance Primary Agent July 2014

TECHNOLOGY

The end of the world as we know it On the cusp of the Internet of Things

The rapidly growing Internet of Things (IoT) stands to impact the insurance industry in ways that we, admittedly, cannot yet imagine.

IoT supplies the “big data” about which we’ve all heard, and that influx of information creates opportunities and challenges alike for our data-hungry industry. Read on for an understanding of the trend and what it could mean to insurance in the not-so-distant future.

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Primary Agent | July 2014

T

he terminology is daunting: the Internet of Things (IoT).

Sounds very futuristic, very foreign … very geeky. But, truth be told, IoT is already all around us, influencing our daily lives.

And we’re just on the cusp.

International IT consultant Michael Mayr calls IoT “one of the biggest technological leaps of the last 100 years,” while technology insurer OneBeacon estimates that today there are 10 billion connected devices – and that the number will increase five-fold by 2020. As surmised by industry trade publication American Agent & Broker, “IoT will change every part of the insurance value chain, including product design, pricing, underwriting, service and claims.”

So what is this mysterious development? Essentially, IoT is machines talking to machines over the Internet.

The in-vehicle telematics devices that drive usage-based insurance?

That’s IoT. Those new Nest “smart thermostats” that track forecasts and activity to reduce energy usage? IoT. How about that app that locates a misplaced smartphone? Yep, IoT.

A boon for underwriting, risk management “The Internet of Things will change the property and casualty business,” predicts Donald Light, of researching and consulting firm Celent.

IoT will allow for the collection of an extraordinary amount of data — the more that machines interact, the more information that can be tracked. (Enter the “big data” term you keep hearing about.)

Among the changes for the P&C industry are the positive impacts on underwriting and risk management that will be created by insurers’ access to the wealth of data. Light of Celent elaborates: From an insurance perspective, what is new and different and critically important about this data is that it can provide a much more accurate picture of the exposures, hazards and risks of what is being insured. These analytically driven findings create a second critically important consequence of the IoT: Insurers can create feedback and control processes to command or request things to change their loss-related behavior and performance.

IT consultant Mayr takes the concept one step farther. He predicts an opportunity for insurers to use the data to create and offer customized insurance products and services — a move that he believes will improve insurers’ image, moving them away from “being risk insurers … toward being ‘smart life companions.’” Sam Friedman and Michelle Canaan of the Deloitte Center for Financial Services agree, citing in a recent research report that measuring consumer behavior, for example, can lead to insurers being more relevant in consumers’ everyday lives, increasing their number of touch points and allowing them to “better understand, serve and retain customers.”

With technology such as in-vehicle telematics, some insurers are already jumping into the game. “The genie is out of the bottle,” write Friedman and Canaan. They predict that insurers’ use of “behavioralbased telematics” and other data gleaned from IoT in underwriting [ 13 ]

“IoT will change every part of the insurance value chain, including product design, pricing, underwriting, service and claims.”

TECHNOLOGY

only stands to grow and expand beyond its current usage for auto insurance and into other lines, personal and commercial alike.

of a certain chemical.” Malicious acts aside, this use of IoT could prove deadly in the event of faulty equipment or commands.

Challenges in spades

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Despite the opportunities for the insurance industry, everything decidedly isn’t coming up roses in relation to IoT.

While on the surface the data accumulated from IoT seems appealing for underwriting and risk management purposes, digesting big data brings big challenges.

Recognizing new exposures By default, IoT will create new risks, and accurately identifying and adequately covering these exposures will require extensive research and development.

As Mayr explains, IoT creates “threats for which there are currently no standard operating scenarios or security concepts.”

These threats come in many forms. For one, as (woefully under-protected) Internetconnected devices and the amount of data they transfer increase in number, so do the number of entry points for hackers to gain personal information. OneBeacon Technology Insurance President John Wurzler cites the late 2013 Target data breach, when hackers accessed point-of-sale software through an HVAC contractor. Most commercial and even new residential HVAC systems (once again, enter Nest) allow for external monitoring through the Internet, which creates new entry points to siphon data.

It doesn’t stop at property loss or loss of income: The threats stemming from IoT could lead to bodily injury as well. Wurzler points to medical “devices that monitor certain functions through an Internet connection and then automatically dispense medication or adjust body levels [ 14 ]

——————————————— Needless to say, the myriad exposures related to IoT are hard to identify, much less quantify.

Sorting through big data While on the surface the data accumulated from IoT seems appealing for underwriting and risk management purposes, digesting big data brings big challenges. Operationalizing massive quantities of information is no small feat. Deloitte’s Friedman and Canaan explain, “The trick, of course, is determining exactly how [big data] … might translate into a valid predictor of risk.”

Furthermore, this assumes that insurers can access the information gleaned from IoT. IoT is advancing much quicker than regulators, so how the government and the courts respond to the concept of funneling vast amounts of data

Partners.

You and your clients. You and Harford Mutual. We’re committed to protecting their business and building yours.

That’s what mutual success is all about.

Explore P&C insurance opportunities at HarfordMutual.com

Primary Agent | July 2014

insurance industry pursue an operating strategy that makes it smaller? And furthermore, if reduced premiums are materially large, will the industry accept a smaller role in the economy? Will it find alternative sources of revenue that build on the loss reduction role in the IoT?

is still unknown. The same goes for consumers. In a January 2014 survey conducted by Deloitte, half of the respondents indicated that they were not in favor of insurers tracking data, such as their driving habits, for use in underwriting. The desire for privacy — however fleeting — remains.

Reducing risk Taken (admittedly) to the extreme, one could even question the insurance industry’s viability in a world of IoT. American Agent & Broker author Hannah Bender writes:

Contemplating tomorrow

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As technology evolves at an exponentially increasing pace, we find ourselves standing on the edge of a vast sea of changes ad that IoT will bring: According to a Pew Research Center report released in mid-May, IoT will thrive by 2025, creating a completely “wired” existence.

But how far and how fast the impacts of IoT will reach our industry depends on insurers’ rate of adoption, regulators’ response and – perhaps most importantly – consumers’ receptiveness.

While industry experts and technology forecasters debate how quickly and drastically IoT will impact our lives, one thing is clear: The world is changing, and our industry must be poised to change with it.

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[ 15 ]

COVERAGES

Coverage risks in the age of the ‘Internet of Things’

New technologies create new risks, and new risks create the possibility of coverage disputes. Here, attorneys from Hunton & Williams discuss the growing risks associated with the Internet of Things, what coverage gaps could exist, and how insurers may respond.

[ 16 ]

Primary Agent | July 2014

T

he “Internet of things” is here. According to Cisco, sometime during 2008, the number of things connected to the Internet exceeded the number of people. Cows, corn, cars, fish, medical devices, appliances, power meters — practically any item imaginable has been or can be connected. Eventually, we will be able to “sync” an entire home so that its heating system is programmed to adjust to weather patterns and inhabitants’ activities, its dishwasher automatically orders soap refills, its refrigerator is always stocked with milk (or beer), and maybe even its lights blink on and off when important emails are received.

These are just a few examples of what can be done with “the Internet of Things” (“IOT”) — ordinary objects and devices able to process and transmit information based upon their environments that they then communicate to servers running algorithms designed to anticipate and address user needs. Businesses ranging from small startups to long-standing conglomerates are now embedding adaptive “smart” technologies into even mundane products, including window shades, light bulbs and door locks.

While IOT devices create obvious value, they also expand risk. In effect, we are creating an “infrastructure for surveillance,” that constantly generates critical, sometimes exceptionally private, data transmitted for use on servers perhaps thousands of miles away.

Although the benefits of this infrastructure are evident, the risks can be hidden within a technological “black box.” The degree to which our well-being depends upon the integrity and security of networks, software and data will increase exponentially.

If an IOT device malfunctions, or if data or software is compromised or lost, individuals and businesses may suffer devastating losses.

Dosages of critical medication might be missed, for instance, or needed medical treatments omitted. In fact, the risks posed by IOT have already attracted the attention of regulatory authorities. This past June, the U.S. Food and Drug Administration surveyed the industry and decided to update its guidance on cybersecurity for IOT medical devices and the Federal Trade Commission held a symposium addressing IOT issues on Nov. 19.

As use of these products continues to expand, such risks will be realized and manufacturers will look to their insurers for defense and indemnity protection. Coverage for products liability is typically provided under liability policies, which can be written on an occurrence or claims-made basis. Liability of the manufacturer of a malfunctioning fire alarm that fails to alert homeowners of a fire should be covered under such policies, as should bodily injuries or property damage caused by other defective products, including products that are part of the IOT. Injuries from such products may result not only from a device’s failure to work but also from a network’s failure to provide communications as needed. These failures, as well as the more traditional product failures, should continue to be covered if insurance is to continue to serve its function and transfer financial risk.

[ 17 ]

While IOT devices create obvious

value, they also expand risk.

———————————————

As always, new technologies create new risks, and new risks create the possibility of coverage disputes.

———————————————

COVERAGES

Liability policies generally define the products’ risk to include all bodily injury and property damage occurring away from premises you own or rent and arising out of your product or your work except: 1. products that are still in your physical possession; or 2. work that has not yet been completed or abandoned.

The policies define “your products” to be any property (other than real property) manufactured, sold, handled, distributed or disposed of by the insured and to include warranties or representations made at any time with respect to the fitness, quality durability, performance or use of your product; and the providing of or failure to provide warnings or instructions.

Liabilities for malfunctions of IOT products appear to fit squarely within this definition. There are, however, some complications that insurers might put forward were they interested in denying coverage, and policyholders will need to examine their insurance proactively to avoid the uncertainty and cost of coverage litigation.

Coverage for IOT risk is complicated by the fact that the devices add value and efficiency by communicating with each other and distant servers on which data is stored and algorithms run. Indeed, this interoperability is the critical and promoted feature of IOT products. To see how this can complicate the coverage question, let us take a concrete example.

Let us imagine a refrigerator — the eFridge — that communicates data concerning the products it holds. When combined with complementary devices — called eShelves — it is able to keep track of all food in the kitchen.

The refrigerator also keeps track of its states, including its internal temperature, and transmits its state data and food stocked to a server maintained by smartKitchens Inc., at a distant location. On this server the data is stored and analyzed by an algorithm designed by smartKitchens’ software engineers. The algorithm, based upon eFridge state data and data on stocked food, generates recommended recipes for the week so that all food is used before it is spoilt.

The recommendations sent from the server to the eFridge appear on a screen on the refrigerator’s front door.

There are two Internet transport protocols, TCP and UDP. The latter is often used when broadcasting within a network is needed (as it is so that the eShelves can be configured) and can be cheaper to implement, but it is also less reliable because communicating devices receive no notice when UDP datagrams — the electronic containers of transmitted data — are lost or dropped. The eFridge is designed to use UDP, and the software engineers have developed their algorithm to deal with the problem of dropped datagrams as follows. Rather than generating a warning that there is incomplete information, the algorithm assumes that the refrigerator’s state is consistent with the average state maintained over

[ 18 ]

the prior two weeks. This is done to avoid multiple appearances of “error” messages on the eFridge door/screen and to increase customer satisfaction.

Now imagine that one week the server fails to receive datagrams regarding the state of the refrigerator on Monday, during which for some unknown reason the temperature inside the refrigerator exceeded room temperature. Unfortunately, as of Monday, the refrigerator contained a pound of mussels, which as a result of the temperature change are spoilt.

Data concerning this temperature increase were not received by the server, and therefore the algorithm, having been designed to assume that the temperature was maintained at its average, recommends a recipe for Wednesday of Mussels Provençale. As a result, the consumer sustains a very serious case of food poisoning and naturally seeks compensation from smartKitchens, which demands coverage from its insurer. Is smartKitchens covered?

The event appears to be squarely within the sort of products liability coverage that product manufacturers and distributors expect. There is a product away from the insured’s premises that made a “defective” recommendation and caused bodily injury. As such, there should be coverage.

But an aggressive insurer could construct an argument to the contrary. They might contend that in fact the injury was caused by the algorithm, not the refrigerator, and that had the algorithm been designed to indicate through

Primary Agent | July 2014

an error signal that data had not been received, there would have been no recommendation of Mussels Provençale on Wednesday. Insurers might contend that the algorithm constitutes “work that has not been completed or abandoned,” pointing to the fact that the engineers have the ability to change the algorithm to address the possibility of spoilt mussels and that therefore the risk is not within the product’s coverage.

Such an argument should ultimately fail. The fact that smartKitchens’ software engineers can update the algorithm does not mean that they have not “completed or abandoned” it for purposes of

the insurance policy. Moreover, liability policies generally provide that “work which requires further ... correction ... because of defect or deficiency, but which is otherwise complete, shall be deemed completed.” In fact, here, smartKitchens let the algorithm run as it was designed to and it did so. Nonetheless, although the insured should eventually obtain the benefit of coverage, that could very well be only after protracted and expensive litigation, reducing the value of the insurance purchased.

There is another argument as well the insurer might make.

Since about 2003, liability policies have generally included an exclusion — exclusion p, on

the Insurance Services Office Inc. form — barring coverage for damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data.

As used in this exclusion, electronic data means information, facts or programs stored as or on, created or used on, or transmitted to or from computer software, including systems and applications software, hard or floppy disks, CD-ROM[s], tapes, drives, cells, data processing devices or any other media which are used with electronically controlled equipment.

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COVERAGES

An insurer might contend that the problem was created, not by the eFridge, but by the loss of electronic data, when the packets were dropped. They might use this argument to contend that coverage is barred.

Again, however, the insured should prevail were the insurer to make such an argument.

The algorithm functioned as it was designed. It did not fail to process data, but processed data exactly as intended. It was merely responding as designed to an unfortunate consequence of the decision to implement the UDP protocol. But here too, the insured is likely to find itself in an expensive coverage dispute, depriving the insured of the value of the insurance purchased.

As always, new technologies create new risks, and new risks create the possibility of coverage disputes. These disputes should be resolved in the insured’s favor, as it is the responsibility of an insurer to draft policy language to clearly and unequivocally exclude risks. This rule has special force where, as in our example, there is an expectation that liability for products would be covered.

It should, in other words, be the responsibility of underwriters to understand the products they insure and clearly state if they do not desire to cover an attendant risk. Nonetheless, as the use of IOT devices continues and expands, the past has taught that we can expect to see risks expand and insurers attempt to restrict coverage.

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[ 20 ]

Lon Berk is a partner in Hunton & Williams’ insurance counseling and litigation practice. He counsels clients on issues arising out of cyber insurance and has written and spoken extensively on the topic.

Paul Moura is an associate in Hunton & Williams’ Los Angeles office where he focuses on insurance recovery matters and related litigation.

This article presents the views of Lon Berk and Paul Moura and does not necessarily reflect those of Hunton & Williams or its clients, or Primary Agent magazine.

The information presented is for general information and education purposes. No legal advice is intended to be conveyed; readers should consult with legal counsel with respect to any legal advice they require related to the subject matter of the article.

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Primary Agent | July 2014

Technology U P DAT E

WHAT MAKES A GREAT AGENCY WEBSITE?

MARTY AGATHER Marty Agather, CPCU, ARM, penned this article. He works for Consumer Agent Portal, LLC (CAP) as the Senior Vice President for Client Development. CAP builds and maintains TrustedChoice.com, a consumer facing website which connects insurance buyers with the independent insurance channel along with providing digital marketing services to independent insurance agencies and companies.

This article reflects the views of the author and should not be construed as an official statement by ACT.

One of the most common questions independent insurance agencies ask is “What makes a great agency website?” This question comes in various flavors. Sometimes, it focuses on a single facet of the site itself such as design. At other times, it is more general in nature such as “making my website perform better.”

A 2014 report, Beyond Referrals: How Today’s Buyers Check You Out, by the Hinge Research Institute of Reston Virginia, provides sobering data about the importance of websites. Hinge surveyed more than 1,000 business buyers of professional services. The average buyer reviewed more than three different sources

to ‘”check out” a new provider of professional services. Reviewing the provider’s website was the primary method that buyers researched, with 81 percent of respondents using a website review as a way to determine the quality of the service provider.

Although a discussion of insurance agency websites may be very broad, a great agency website does a few things very well. A great agency website has these characteristics: w Is professional in design w Generates visitors to the site w Gets clients and prospects to act

[ 22 ]

If your website isn’t doing all three of these well, then you should have a to-do item of “review and improve our website” in your 2014 marketing plan.

Great websites exhibit professionalism Eighty plus percent of your prospects are reviewing your agency web site as part of their due diligence. Does your web site show your agency in the best possible light? If you were going to have your neighbors and professional acquaintances over for a holiday gathering, wouldn’t you want your home to be clean, well decorated and welcoming?

Primary Agent | July 2014

A professional website has a number of attributes: w Appealing visual design w Relevant content for the target audience w Lack of errors w Evidence of honesty and integrity w Prominently displays agency contact information

Finally, your agency’s brand and brand promise should be reflected in your website. If you promise excellent service, do you have a self-service capability available and is it easily found? Do you have “click to chat” available for clients to use for quick questions?

Reasonable people can disagree on what denotes style and taste.

That is why some prefer Victorian, and others like Mid-century Modern.

Thus, not all great websites need to look alike, but they should share some common traits. The site should appear up-to-date. Declutter your pages. Use images, preferably unique; not the stock photos that are on every other site.

Great websites attract visitors The only way your website has any value to your clients and prospects is if they see it. The number one challenge for too many independent insurance agencies is that potential visitors cannot find their website.

Therefore the number of visitors per month is only a few dozen. Analysis of many insurance agency websites reveals that the only search term that the website does well for is the name of the agency, which means that the only way buyers will find them is by using the agency name.

Your content should be original and focused on your target audience. If you have one or more specialties, consider developing a unique page on your website for each. A professional site is error-free. Edit your content; check the links.

Think about this in the context of that old-school favorite, the Yellow Pages print directory. It is the same as the Smith Agency placing its name in the alphabetical listing but not in the “Insurance Agency” section of the book.

Make sure that visitors can contact you. If you don’t have contact information on every page, make sure the “Contact” link is obvious on each page. To demonstrate your integrity and trustworthiness, show your association memberships and accreditations on your home page.

Recent comScore data indicates that 70 percent of insurance shoppers start their research on the Web. The primary way people research is by using a search engine like Google, Bing or Yahoo. In order for a customer to find your agency’s website, it is imperative that your agency display on Page 1 of a search result.

w Reflects your agency’s brand and the differentiators that make your agency unique

One of the most effective ways to gain consumers’ trust is to showcase testimonials from your clients. Online shoppers are looking for validation of their choice. Testimonials of how your agency helped other clients provide that validation.

An agency can get first-page web search ranking through various means. The easiest and most costly way is to purchase advertising.

Another way is to carefully engineer your website using techniques such as Search Engine Optimization. [ 23 ]

Effective use of social media can both get your agency on the first page of search results and provide links for a customer or prospect to jump directly to your web page. Participation in local directories offers another way to have prospects and customer find your site. Rich media such as video is another avenue for getting on the first page of search results.

While advertising on the Web is a quick way to get prospects to your website, it is also an easy way to spend big money without an appropriate return on investment.

Internet advertising takes the form of many names and techniques, but the two most common are Pay Per Click (PPC) and Cost Per Thousand (CPM).

With PPC, every time a customer clicks on your advertisement, you pay. With CPM, you pay every time a customer sees your ad. Common to all Internet advertising is the need to get the prospect to respond to your ad. For this reason, you should leave these advanced techniques to agencies that have optimized their websites and are using website analytics tools.

Search engine optimization (SEO) is a complex science. Search engines are constantly changing how they determine which 10 of the thousands or millions of webpages will be the most relevant to the searcher and, therefore, deserve a coveted spot on Page 1 of search results. If you want your agency to perform well in searches, you have to get a myriad of details right and be able to change as the search algorithms change.

There are no easy fixes. Take claims of performance with a healthy dose of skepticism, and ask for proof.

The Agents Council for Technology (ACT) has been on the forefront of helping agencies with their social media for the past four to five years.

TECHNOLOGY UPDATE

And while social mediais a great way to connect with insurance buyers, it is also a strategy to get your agency to Page 1 of search results. It isn’t easy, but if your post gets ”liked” or ”Plus One” enough, it can bring attention and Page 1 rankings.

Rich media is another way to help consumers find your agency. A picture is worth 10,000 words and possibly thousands of shares or likes. Ryan Hanley, an agent with The Murray Group in Albany, New York, says that the agency post on Facebook that got the most engagement was the one with members of the agency clustered around the filing cabinet with the “office dog” standing on top of the cabinet and getting ready to jump.

Finally, don’t forget Mobile! In a recent IIABA Young Agent’s webinar titled “A Strategic Approach to Enhancing Your Agency’s Online Presence,” Matt Marko, Marketing Process Manager for Progressive Insurance, states, “Having a mobile optimized website isn’t a nice to have, it is something you have to have.”

Matt points out that 50 percent of insurance shoppers now start their shopping on a mobile device and 64 percent of shoppers will leave your site if you have not optimized it for mobile use.

Great websites encourage action A common misconception regarding insurance websites is that as soon as a visitor arrives, that visitor is going to buy a policy. While this might happen once in a blue moon, most visitors arrive at a website and immediately do one thing: Hit the back button.

Think about your own recent web browsing experience. Many of the links you clicked took you to a page that had little if anything to do with

your interest, and you immediately hit the back button. But if you find a page or site that matches your interest, you scan, read a bit and perhaps click to another page on the site.

The first action that you want visitors to take upon landing on one of your web pages is to NOT back away. Then, you’d like them to stick around a bit and find out if your agency can help them.

A key way to encourage action is to talk specifics rather than generalities.

Which of these two statements is more powerful?

1. “The Doe Agency specializes in managing our clients’ risks. Ask us to help.”

2. “The Doe Agency’s long association with the Injection Molding Society of Illinois has taught us that many molders don’t have enough coverage for clients’ molds. Call today for an explanation of how the destruction of customers’ molds could cost you thousands of dollars.”

The specificity in the second statement tells plastic injection molding accounts how they might have an exposure that isn’t adequately covered and shows the agency’s expertise. For this reason, we suggest having several pages on your site devoted to the niches of your agency’s specialties.

Analytics is the process of measuring the performance of your site.

Google provides a no-cost analytics package that can answer questions such as these: w Which of your pages attracts visitors, and where do prospects and customers spend their time?

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w Do more visitors download the white paper when it is on the home page or when it is on the personal autopolicy page?

Start slowly with your analytics.

Initially, the sheer capabilities can be overwhelming.

The final way to encourage your visitors to take action is to remove the number of options they have.

If you are going to provide online quoting, put the “Get a Quote” button on a page with a bit of supporting text but no other options. Don’t offer the prospect the option to “Join the Newsletter,” “Read Our Blog” or “Visit Our Facebook Page.” All of those are things you might want them to do, but when they are ready to get a quote, don’t let them get distracted and do something else. Place those options on different pages or in the footer where they won’t distract from the main call to action.

Conclusion This brief overview addresses some of the more common areas where great websites stand apart from the far more common run-of-the-mill varieties.

A great website is a marketing and sales resource for the agency that publishes it. It represents the agency 24 x 7 and can be a strong differentiator, explaining to customers and prospects alike why the agency is the right organization to manage the client’s risk. It presents your agency in detail, but allows customers and prospects the option to explore at their leisure, with no pressure.

A great website is designed to be found by interested prospects.

Attracting the kind of business that you want requires making choices about whom your agency specializes

in and building your site to speak in detail to those customers and prospects. Search engine optimization techniques will move your website up in the rankings, but don’t forget other methods of getting your agency to Page 1 of a search result.

A great website gets your prospects to act. Building your site correctly, measuring the actions of your visitors and modifying as needed will get customers and prospects to take the actions that lead to account rounding and new business.

competitive climate in which the agency operates. A rural agency can spend far less to attract visitors easily than a metro agency with lots of competition from other independent agencies and the captives. The investment of time, effort and capital to develop a great website will generate returns for your agency.

If your existing website isn’t generating sales opportunities for your agency, you should begin the process of identifying the goals for a new site today.

Any agency can attain a great website at a cost competitive rate.

To do an adequate job, the agency should budget a reasonable figure based upon agency goals and the

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H.R.

Primary Agent | July 2014

H E AD Q U ART E R S

JOB DESCRIPTIONS – AN HR INSURANCE POLICY

KAREN H. DIGIOIA Karen H. DiGioia provided this article on behalf of Mosteller & Associates, IA&B’s contracted human resources consulting firm. Reach out to Karen for more information on FLSA compliance or with other human resources questions.

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compilation of products and services – available exclusively for our member agencies – that simplifies establishing or improving your human resources program.

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One of the more difficult aspects of HR administration is the creation and upkeep of job descriptions. It sounds like a simple task – document the responsibilities of and requirements for each position. However, this documentation process is so daunting that many of us find a simple solution to it — we don’t do it.

Before I launch into information that will (I hope) make the process simpler, let’s talk a little bit about why job descriptions are important.

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Why create job descriptions What is a job description?

Seems like a simple question – a document that lists the basic responsibilities and requirements for a job. But it’s important to back up a little bit.

At its most basic level,

a job description is a communication tool. This is why it’s important. It’s not about the document.

It’s about communication!

Think of job descriptions as an HR insurance policy – ensuring that you have clearly “covered” —————————————

Think of job descriptions as an HR insurance policy — ensuring that you have clearly “covered” all aspects of a job and communicated them to your employees.

——————————————

all aspects of a job and communicated them to your employees.

To begin with, the process of writing a job description ensures that you, as the business

[ 26 ]

owner or manager, have thought fully about the expectations for a job.

Many of us have concepts in our minds about what we expect, but the act of putting these thoughts into words will enable us to communicate them clearly with others.

The end result of this process, a clearly written job description covering the primary responsibilities and expectations now becomes a communication tool – a document that is at the heart of many important conversations with your employees.

How to use job descriptions A job description should be used when hiring/orienting a new employee or promoting an employee into a new position. A detailed review of the job description with the employee ensures

Primary Agent | July 2014

that they have a clear understanding of their responsibilities and your expectations. Job descriptions eliminate the need for mind-reading on the part of the employee and also decrease the possibility that, at some point in the future, the employee says “I never knew I was responsible for that.” Having your employees sign off on their job description, keeping a copy in your file and giving them one for theirs is an HR best practice that will ensure you’re never in the position to hear “I didn’t know….”

A job description should be a part of every performance discussion you have with your employees. When preparing to provide feedback, whether through an annual review process or another performancerelated conversation, the manager should first review the job description to ensure that they begin with a clear picture of the job in their head. This is also a perfect time to make any updates that may be necessary.

(can often be found online), the Job Description Analysis, Template and Sample, all found in HR Solution (IABforME.com/emp_mgmt). Then, talk with and observe your employees who are doing the job. Ask them to fill out the Job Description Analysis form if you feel this is appropriate and helpful. Finally, start writing.

Job identification information This includes basic information for identifying the job: position title (make sure it’s unique for the position), department, reporting and salary level information. This is generally the easy part.

Job summary This provides a brief, concise description that summarizes the overall purpose and objective of the position and the results that are to be accomplished. It should be no longer than one to three sentences and should answer the following questions:

Finally, in the unfortunate circumstance that you have to take disciplinary action, the job description serves as the basis of these conversations and your “proof” that an employee was aware of their responsibilities and your expectations.

w Why does this job exist?

Hopefully I’ve sold you on the importance of this sometimes underappreciated document. Let’s move on to talk about the key sections you should cover in your job descriptions and hopefully, simplify the process for you going forward.

You may find that it’s easier to write the summary after you’ve completed the following section.

Where to begin To get started, gather any information that you may already have that’s related to the job – things like old job descriptions, sample job descriptions

w What is the person in this job responsible for accomplishing? w What is the overall end result of the job?

Essential duties and responsibilities This section provides a list of accountabilities (generally between five and seven) that covers the tasks, duties and responsibilities that are most important to get the job done, listed in priority order and inclusive of quality and quantity standards. This is not an exhaustive list of every task

[ 27 ]

Job description demo Learn more about the importance of job descriptions and access a sample through HR Solution — our membersonly, proprietary collection of human resources products and services. Simply visit IABforME.com/emp_mgmt, follow the links to the Administrative Guide, and then find a 13-page section on job descriptions.

performed. Some tips as you work through this section: w Structure your sentence in the following manner: Verb/Object/ Explanatory Phrase w Use active verbs in present tense w Use descriptive/explanatory words that clarify why, how, where and how often For example: Manage (verb) expenses (object) in adherence to approved budget (explanatory phrase) Minimum qualification – education, knowledge, competencies and experience These topics can be broken up into several sections or combined under a single Minimum Qualifications section.

Some tips for this section: w State the minimum qualifications (education, specialized knowledge, previous work experience) needed to perform the job

H. R. HEADQUARTERS

w Can state preferences as well as requirements w Include required certifications/ licensing w To ensure that the things you are listing as “required” truly are, look at your current incumbents – if they don’t meet the “requirements” you’ve listed and are doing the job successfully, perhaps you’re overstating the requirements w Specify experience that can be substituted for formal education Supervisory responsibilities This section should detail any supervisory authority that resides with the position, including titles which report to this position, if applicable.

Physical and mental job requirements

What did that all mean? Here’s an example that will hopefully make it clearer: Frequently (frequency) lifts, carries or otherwise moves and positions (nonprejudicial language) objects weighing up to 25 pounds (intensity) Typically (non-prejudicial language) bends, stoops and crouches on a regular basis (frequency) to adjust setting on machinery (operational linkage) Working conditions If the position has any unusual working conditions, they should be stated in the job descriptions. Some examples include: w High or low temperatures w Excessive noise w Close quarters

level of the work being performed by employees assigned to this job title. This is not an exhaustive or comprehensive list of all duties, tasks and responsibilities. Employees will be expected to perform duties that do not appear on the job description. Management reserves the right to amend and change responsibilities to meet business and organizational needs as necessary.

Additionally, this does not establish a contract for employment.

Conclusion There’s no way around it — writing job descriptions (or “HR Insurance Policies”) takes time and effort.

However, my hope is that this column has helped clarify why it’s a process that’s well worth the time and effort and also has simplified the process a bit.

This section details the physical and mental demands of the position and ensures compliance with the ADA. Some tips here include:

w Contact with hazards Most commonly, this section will read “typical office environment.”

Remember, as part of your IA&B membership benefits, you can contact me for advice and clarification. You can reach me at 610-779-3870 or via email at karen@mostellerhr.com.

w Detail the physical demands for successfully performing principal responsibilities (walking, sitting for long periods of time, visual acuity, lifting, etc.)

Approvals and acknowledgement

Happy “policy” writing!

w Use non-prejudicial words such as “typically” to acknowledge the possibility that alternate manners of performance may be reasonable, as determined on a case-by-case basis w Give reference to frequency, intensity and/or duration to help establish the level of the work demand w Provide operational linkage to establish the importance to the job

This final section generally includes signoff by the manager who wrote the job description and also the signature of the employee, providing verification that the employee has read and understands the job description (this should be completed when an employee is hired or transferred into a job and each time the job description is revised).

Disclaimer As a job description is generally considered a legal document, each one should include a general disclaimer statement. For example: The above job description is intended to describe the general nature and

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Classified ADVE RTI S E M E N T S

SOUTHEAST PA PRODUCERS & AGENCIES Professional agency since 1926 located in Feasterville, Bucks County, Pa. Call for confidential information and a review of our services. Contact Ray Reinard at 215-357-8600, Ext. 119.

SALES AGENT/PRODUCER Community Insurance, a thriving independent insurance agency in Lancaster, Pa. is seeking a motivated sales agent. Ideal for a newly licensed agent looking to take that next step or a seasoned producer seeking the most competitive markets in the industry.

Bring your P&C and/or Life & Health talents to a proven industry leader.

Forward resume and cover letter to: Tom@CommunitySure.com If you would like to place a Classified Advertisement, simply fax your ad on company letterhead to 717-795-8347, and we will take care of the rest.

Ad Index ARI Insurance Company . . . . . . . . IFC Coastal Agents Alliance . . . . . . . . . . 25

Description: HootSuite allows you to share and schedule posts from up to five social network accounts — including Twitter, Facebook, LinkedIn and Foursquare — all from one app.

Maintaining your agency’s social presence just became less time consuming and complicated.

Cost: Free Customer rating: iTunes.com:

Google Play:

Harleysville Insurance . . . . . . . . . . . . 9

Prerequisite: First visit hootsuite.com and set up an account.

This will provide a dashboard from which you can manage multiple social network accounts from your desktop computer.

From there, download the app to take your show on the road.

IA&B Partners Program . . . . . . . . . . 11

Learn more: hootsuite.com

Guard Insurance Group . . . . . . . . . . 25 Harford Mutual Insurance Co . . . . . 14

IA&B . . . . . . . . . . . . . . . . . . . . . . . . . 21 Interstate Insurance Mngmnt. . . . OBC Penn PRIME Municipal Insurance . . 20 Preferred Property Program . . . . . . 15

________________________________________________________________

The “C’mon, get appy” column aims to uncover apps that can benefit you at the office and, in some cases, at home as well.

Submit suggestions to IAB@IABforME.com, subject line: Primary Agent submission.

8F ,OPX UIF %SJMM If you have clients involved in the rapidly expanding Marcellus Shale natural gas industry—and who doesn’t these days?—Interstate has the coverages you need for water haulers, dumps and other ancillary classes.

If your client hauls any commodity for the natural gas drilling industry, Interstate can insure them!

Marcellus Shale Coverages r " 3BUFE $BSSJFST r &YUSFNFMZ $PNQFUJUJWF 3BUFT r 8SJUJOH "DDPVOUT PG "MM 4J[FT r 0XOFS 0QFSBUPST UP -BSHF 'MFFUT

In Pennsylvania, Delaware, Indiana, Kentucky, Maryland, Michigan, New Jersey, Ohio, Virginia & West Virginia 2307 Menoher Blvd. Johnstown, PA 15905 814-255-7878 1-800-452-0297 Fax 814-255-6010

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