Primary Agent - June 2011 - MD Edition

MARYLAND

INTHISISSUE: _____________ How to avoid the costly revolving door What an agency owes its producers

I’m celebrating our 100th year by planning for our next 100 years.

Chad Veach, Engineering Services Supervisor Today we’re expanding the use of new technologies to identify risks and train workers on how to avoid them. Tomorrow it could be the use of nanotechnology needing monitoring in the workplace or the development of smart systems to better match employees with their responsibilities. EMC Insurance Companies is committed to investing in the necessary resources to achieve our vision of being the best in loss control—today, tomorrow and in the future.

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www.emcins.com © Copyright Employers Mutual Casualty Company 2011 All rights reserved

“No bond, no job. No job, no commission.”

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10

Contents PRIMARY AGENT MAGAZINE

How to avoid the costly revolving door: Finding, managing and keeping the right producers

18

Producers: An agency needs them to survive. But to thrive, an agency needs producers with the right skill sets – and needs to manage those producers correctly. In this feature article, Al Diamond shares his lessons learned.

Page 10

What does an agency owe its producers?

Producer productivity can make or break an agency. And improving it requires introspection and tough decisions. Here, agency consultant Chris Burand takes a step back and offers a fresh perspective for moving forward.

Page 18

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

In every issue 3 4 5 6 8

Glance at Events Chair of the Board’s Message Member FAQ State News Coverage Corner

17 21 24 24 24

IA&B Partners Technology Update Advertisers Index Classified Ads 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 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 # 2011-6) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2011. 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.

Tri-State General Insurance Agency 1-800-556-7894

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Maryland * Pennsylvania * Delaware * DC * Virginia * New Jersey

Glance at Events J U N E

C A L E N D A R

Date

Topic

Location

6-9

CIC: Commercial Casualty Institute

Lancaster, Pa.

7

Dynamics of Service

Philadelphia, Pa.

7-9

DAIAB Convention

Rehoboth Beach, Del.

P&C Licensing Study Course

Mechanicsburg, Pa.

CISR: Commercial Property Course

Pittsburgh, Pa.

CISR: Agency Operations Course

Lehigh Valley, Pa.

15-17

James K. Ruble Graduate Seminar

Annapolis, Md.

16

CISR: Commercial Property Course

Lancaster, Pa.

28

Social Media Boot Camp

Pittsburgh, Pa.

CISR: Commercial Property Course

Philadelphia, Pa.

29

CISR: Commercial Casualty Course

York, Pa.

30

William T. Hold Seminar

Baltimore, Md.

15

[3]

Board of Directors Officers David Rosenkilde, CIC Chair of the Board Reisterstown, Md. Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P Vice Chair of the Board West Chester, Pa.

David B. Rosenkilde Sr., CIC

Chair of the Board’s M

E

S

S

A

G

E

Kathleen M. Glattly, ChFC, CLU, CPCU Immediate Past Chair of the Board Factoryville, Pa.

Members Joyce M. Bailey, CIC, CRM, CPIW Newark, Del. 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. John T. “Chip” Colwell Jr., CIC Corry, Pa. N. Lee Dotson, CIC, AAI Wilmington, Del. John L. Frankenfield Telford, Pa. G. Greg Gunn, CIC Lemoyne, Pa. Diana M. Hornung-Momot, ACSR Wilmington, Del. Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, Pa.

Solving the producer piece of the perpetuation puzzle The rising average age of the agency workforce should come as no surprise. (Just take a look around!) Nearly two-thirds of industry professionals are over 45 years old.

Regardless, many aging agency owners and principals are not prepared to perpetuate their firm. A common hindrance?

Finding — and keeping — qualified producers to whom to pass on a book of business.

IA&B hears you loud and clear. So mark your calendar for Oct. 4-5 and plan to attend the association’s annual Executive Management Conference, where producer management will take center stage.

For a preview, read the feature articles on the following pages and take away tips on finding, managing and keeping the right producers. Then attend the conference for a more thorough (and hands-on) look at what your agency can do.

Until next time, Dave

Robert S. Klinger, LUTCF Germantown, Md. Michael F. McGroarty Sr. Pittsburgh, Pa. Ann Gallen Moll, CIC Reading, Pa. Scott C. Rogers, CPIA York, Pa. Susan A. Sallada, CIC** Ft. Washington, Pa. David B. Wasson Sr., CIC State College, Pa. James M. Watkins* Dover, Del. King W. “Kip” White, LUTCF Fallston, Md. * IIABA National Director ** PIA National Director

[4]

Member FAQ QUESTION:

I understand nuclear losses are excluded on all insurance policies. If an act of terrorism occurred damaging a nuclear facility or with a dirty bomb, would the ensuing radiation property damage be covered if terrorism was purchased, or does TRIA also exclude nuclear? Are there markets available?

ANSWER: Let us look at the two questions successively.

Is nuclear included in TRIA terrorism insurance?

Nuclear, biological, chemical and radiological (NBCR) terrorist events were not included in the coverage afforded through the last TRIA reauthorization (TRIPRA). NBCR was part of the House bill, but did not make it in the final version that eventually passed.

A provision was inserted for Congress to study and report on availability and affordability, outlook and private insurers’ as well as state workers’ compensation funds’ capacity. The report was published in December 2008. Not surprisingly, the report highlighted that P&C insurers generally still sought to exclude NBCR coverage from commercial policies, although it was noted that the standard nuclear and pollution risks exclusions may be subject to challenges in court because they were not specifically drafted to address terrorist attacks. Workers’ compensation, group life and health insurers reported generally providing NBCR coverage because states typically do not allow them to exclude these risks.

Market response Reinsurance market In 2010, Guy Carpenter also published a report indicating that more than 80 percent of reinsurers offer additional terrorism coverage and two-thirds of those surveyed offer coverage for NBCR attacks, a marked change in underwriting from 2001. While this is reinsurance, it is interesting to see that there now is availability at the reinsurance level.

Insurance market It appears there is a small market for standalone NBCR: According to our sources, Hiscox US, Beasley US and Catlin London all can provide coverage, sometimes including timeelement exposure and denial of access for business interruption.

What is particularly interesting here is that a risk which was considered completely uninsurable by all accounts 10 years ago (including in testimonies provided to Congress) is now available, and the coverage is not even part of the mandate.

While probably limited at this time, it is a start … and a great demonstration of what the private can do.

DO YOU HAVE A QUESTION? 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!

State News Primary Agent | June 2011

Consider political contributions as “career insurance”

Who does not need a producer license?

To license or not to license. That is the question for many agency staff.

Maryland offers a clerical support exemption that may affect: w Insurance producers’ employees who exclusively perform managerial, clerical, administrative or similar office duties

To reach IA&B, think outside the (P.O.) Box Update your database to ensure communication reaches IA&B. The association eliminated its P.O. Box and changed its four-digit ZIP code.

New mailing address: 5050 Ritter Road Mechanicsburg, PA 17055-4879

How much would you spend to protect your profession – $50, $500, $1,000?

IA&B government affairs initiatives focus on state legislation and regulations that impact independent agents in Maryland.

Our influence in Annapolis is greatly enhanced when agents across the state speak with a unified voice and support agent-friendly state legislators through AgentPAC of Maryland.

AgentPAC is your state-based political action committee, and all contributions stay in The Old Line State. Large contributions are appreciated and come with special benefits, but if every licensed agent who is a member of IA&B gave just $10 for the year, we would raise over $23,000 in Maryland, almost double our 2011 goal of $12,500.

As this issue of Primary Agent went to press, we had raised $6,950, 56 percent of our annual fundraising goal.

You insure your property, your health, your life. Consider a contribution to AgentPAC to insure your career.

Read more and contribute at www.iabgroup.com/AgentPAC. [6]

w Individuals, if not paid commission, who obtain and forward information, enroll individuals, issue certificates under group insurance coverage or otherwise assist in administering group plans IA&B’s online resource explores which types of clerical tasks are exempt — and offers a warning about duties not specifically listed.

Read more at www.iabgroup.com/md/ licensing/producer.

WELCOME

New Members Bradley Atlantic LLC Forest Hill, Md. Lee Smith Insurance Agency Silver Spring, Md. Maury Donnelly & Parr Inc Baltimore, Md. Insurance & Investments Inc Rockville, Md. ICS-Insurance Inc Reisterstown, Md.

MIA implements new senior or retiree designation reg If you tout senior-specific designations or certifications, you may need to do some homework or print new business cards.

To curb abuses in the sale of Life and Annuity products to the senior market, the Maryland Insurance Administration (MIA) recently adopted a regulation that prohibits the use of certain designations unless certain conditions are met. Use of the words “senior,” “retirement,” “elder” or similar terms in the designation is particularly targeted. w If the designation was secured from The American National Standards Institute or The National Commission for Certifying Agencies, all you need to do is keep evidence that you successfully obtained the designation and are in good standing with the organization (including its continuing education requirements). w If your designation came from another source, you will need to have it validated or discontinue using it.

Use of the CIC and CISR designations is not impacted. The regulation follows a bill enacted Maryland General Assembly in the 2010 session.

Read more and access the regulation at www.iabgroup.com/md/ licensing/senior_desig.

Time’s up to adopt latest ACORD 25 Update your agency management system to avoid violations. The latest ACORD 25 Certificate of Liability Insurance form was released May 2010, which means it should have been in use

by May 31, 2011.

Agencies not using the 05/10 version should update their agency management system immediately to access it.

Certificates of insurance are a hot topic nationwide. Clients and third parties often pressure producers to alter or use outdated forms – which is prohibited.

The Maryland legislature passed a bill during the winter 2011 session to address the issue. IA&B will continue working with the Maryland Insurance Administration and state legislature to clarify the wrongdoing of those who alter, and those who request the alteration of, certificates.

Read more at www.iabgroup.com/md/certificates.

In memoriam: ~ Chuck Schaaf

Chuck Schaaf passed away April 24. A founding member of the Loesel-Schaaf Insurance Agency, in Erie, Pa., he served as the agency’s president and chairman of the board before retiring in 2002. Chuck volunteered for the PIA of Pennsylvania, Maryland and Delaware for many years, including his tenure as president.

He will be remembered for his generosity to the association and his local community – and for his gregarious personality.

[7]

Social Media in the Agency: Principles for the principals An effective social media strategy can be the 21st-century version of word-ofmouth advertising.

Smart use of the social Web presents many opportunities to spread the word of the value of independent agencies to a new and much larger network of potential clients.

To help principals understand how to apply best practices in social media within their agencies, IA&B has developed a new executive management seminar with insurance industry technology guru Steve Anderson. Social Media in the Agency is a full-day seminar scheduled for July 19 in Baltimore.

In this program, Anderson expands on the following principles and more: w Understanding the features and benefits of the most common social networking sites w How successful agencies are increasing leads and sales through creative use of the social Web w Leading the charge to get started in your agency w Developing a productive social media policy for staff To learn more, visit iabgroup.com/socialmedia.

Coverage Primary Agent | June 2011

CORNER

IS USING A CELL PHONE WHILE DRIVING “RECKLESS CONDUCT”?

JERRY MILTON, CIC

phone at the same time? Cell phone use while driving has become commonplace. We see people doing it every day. Some are talking on their cell phones, some are texting, some are checking e-mails, and some are surfing the Web.

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.

Punitive damages can be sought in almost any lawsuit filed in Pennsylvania, Maryland or Delaware.

However, the standard for establishing claims for punitive damages is often difficult to meet. Especially in Pennsylvania. That’s because the Pennsylvania courts have adopted the principle that punitive damages only can be awarded against persons to punish them for their outrageous conduct.

the restatement of Torts §908 (2) which permits punitive damages for “conduct that is outrageous because of the defendant’s evil motive or his reckless indifference to the rights of others.”

Pennsylvania courts have consistently stated, when awarding punitive damages, “the act or omission must be intentional, reckless or malicious.”

Are punitive damages justified when an accident is caused by the driver of an auto who was using a cell

The Supreme Court of Pennsylvania has adopted

[8]

Study after study shows that distracted drivers are just as dangerous, if not more dangerous, than drunk drivers. But people who would never consider driving drunk don’t think twice about talking on the cell phone or updating their Facebook page while driving down the highway or in congested traffic. Their behavior is dangerous, and in several states it’s illegal.

Recently, in Deringer v. Li, a judge in the Court of Common Pleas of Allegheny County overruled preliminary objections which would have thrown out a punitive damage claim in which the plaintiff alleged the defendant was using a

mobile device and caused an accident.

In this case, the plaintiff claimed the defendant was using a mobile device when he drove his auto into the rear end of a motorcycle operated by the plaintiff and was stopped. The plaintiff claimed that if the defendant was using the mobile device to talk, text or e-mail, then such conduct was reckless and justified the award of punitive damages.

The defendant filed preliminary objections seeking to dismiss the claim for punitive damages. The defendant argued that such conduct constitutes mere negligence. The defendant also

stated that the Pennsylvania legislature has not made cell phone use while operating an auto illegal.

damage award. The plaintiff will have to establish outrageous or reckless conduct.

The court disagreed and overruled the preliminary objections of the defendant. The court’s ruling in this matter is significant because the court was required to perform an analysis of whether the conduct of the driver (using a mobile device while operating an auto) could properly support a claim for punitive damages. Similar to cases involving drunk driving, just because the defendant was using a cell phone does not automatically entitle the plaintiff to a punitive

This case is far from over. Ultimately, it will be up to a jury to determine if punitive damages should be awarded.

If there is an award, it will probably subject to judicial review.

But maybe, just maybe, the threat of punitive damages may cause some folks to change their behavior.

Hopefully it does!

Y’all take care!

Jerry Milton S E M I N A R S E R I E S Navigating Contractual Liability and Certificates of Insurance Hagerstown, MD ........ August 9 Pittsburgh, PA............. August 18

Insuring Contractors Mechanicsburg, PA .... July 26 Philadelphia, PA......... July 27 Pittsburgh, PA............. September 28 Baltimore, MD............ October 6

For more details or to register, visit iabgroup.com/eduaction

[9]

AGENCY MANAGEMENT

How to avoid the costly producer revolving door Finding, managing and keeping the right producers

Producers: An agency needs them to survive. But to thrive, an agency needs producers with the right skill sets – and needs to manage those producers correctly. On the following pages, Al Diamond shares his lessons learned.

Primary Agent | June 2011

I don’t know about you, but producers have been the bane of my existence. I love them, and I hate them.

I know I had to have them in order to get new customers.

But every dog I pet seems to have some hair on him. If he was experienced, he was a “re-tread” going from agency to agency every few years or burning out and looking for a place to retire. If he was young, he didn’t know my business, or he didn’t know how to sell. Or he heard that our business was a ready source of income because of renewals, and he just wanted to get in on the gravy.

When I found experienced producers, they usually defined themselves as insurance professionals — prouder of their intimate knowledge of the products than their knowledge of selling.

If I was too discriminating, I didn’t get any employees.

If not, I found weaknesses in every selection for the months (and sometimes years) that they lasted before they (or we) determined that this wasn’t going to work. The success stories were few, and those were exceptions rather than the rule.

——————————————————————————————

Every owner will have different needs, desires and capabilities for insurance training, sales training and management. Those owners’ traits, strengths and weaknesses really define the kind of person best suited for the agency.

——————————————————————————————

Producer Agreement Toolkit Agencies must understand their rights under common and contract law to protect their core asset: policy expirations. To do so, introductory producer agreements

There had to be a better way to get producers and avoid very costly mistakes!

(with employees and independent

So I started building a producer selection and compensation system for myself starting with the selection process:

Producer Agreement Toolkit

w I defined the traits I was seeking and put them on paper. w I defined the industry knowledge I sought (whether from within our industry as a technician) or the industries I wanted a sales professional to penetrate. w I sought out testing systems that would test, not for insurance knowledge, but for the traits I sought and the drive and personality to sell. There are some really good ones out there (and some very mediocre systems, too). w I pre-wrote the interview questions because, frankly, I tended to talk too much and listen too little if I wasn’t working from a prepared set of questions.

[ 11 ]

contractors) are a must. IA&B’s explains the provisions that should be present – and the consequences if they’re not.

Access IA&B’s Producer Agreement Toolkit: www.iabgroup.com/PAtoolkit

AGENCY MANAGEMENT

e v a S the Date

This solidified in my mind exactly the kind of person I was seeking and gave me two tools to determine if the candidates were appropriate for my needs: the testing assessment and the interview questions that concentrated on the skills and traits that I sought. I even went so far as to note (for myself) the kind of answers I was seeking to the interview questions.

How to find them

Learn more about producer management and compensation at IA&B’s third annual executive management conference.

When:

Oct. 4-5, 2011

Who:

Agency owners and principals

What:

Guidance and implementation strategies from nationally recognized speakers, including Al Diamond, president of the Agency Consulting Group Inc. (and author of this month’s Primary Agent feature)

Where: Lancaster Eden Resort Lancaster, Pa. Look for additional details in the coming weeks in Agent Headlines and on www.iabgroup.com.

I decided not to look for the producers until after I had the selection process defined. That helped me determine where I would seek experienced salespeople, whether I wanted experienced insurance professionals or salespeople from other industries, and whether or not I wanted talented people new to sales or completely new to business.

Every owner will have different needs, desires and capabilities for insurance training, sales training and management.

Those owners’ traits, strengths and weaknesses really define the kind of person best suited for the agency.

If you are a strong agent, a personal performer but not a great manager, you may have to get an experienced insurance professional motivated by income potential or ownership potential.

If you are a strong planner and manager, you may want a fresh face to train in your way – in insurance and in sales – and market toward the strengths of the agency.

If you have target industries, you might want to find sales professionals from those industries and train them in the technical insurance products.

At different times, I needed different types of people and geared my search toward the type of producer I needed.

A warning about insurance company people: Many agents have come from the company ranks. Some have become successful salespeople.

However, most company people are better technicians than they are salespeople. They can certainly maintain a book of business and, if asked, they can generate a wonderful insurance proposal. Go after them if the most important thing to you is insurance knowledge. But test them carefully if you are seeking a high-energy sales professional to make sure you don’t disappoint the employee and yourself with the results.

How to pay them I’m not trying to equate producers with pets or test animals, but if you want a pet to learn a new trick, you reward them for doing it well and withhold the reward for nonperformance. Pavlov taught us that in his famous tests. You don’t reward a teetotaler for performance with free liquor, and if candy is all you have to offer as a reward, I wouldn’t suggest hiring any diabetics.

No matter how much they would enjoy the reward, it would be destructive.

[ 12 ]

Primary Agent | June 2011

What I am trying to get across is that you must hire producers who are motivated by money because that is the most appropriate reward we have for the sales of insurance products. The producer can and should be deeply concerned with the well-being of and service to the end-client.

That’s why we labeled our successful relationship sales program, the asset-protection model. We are and should be interested in protecting the assets of our clients. However, the producer must need and want growing financial rewards for his successes.

This sounds pretty simplistic. But, while everyone needs money to

sponsor his lifestyle, many people are not motivated by money.

Producers should be selected because they see money more as a measure of their success than as a fulfillment of basic needs.

That’s why the great salespeople don’t stop selling just because they are making a lot of money.

So the obvious way to pay a producer is based on commission income generated. However, we have learned that most producers, even the most successful, like most nonproducers, need a steady income source to protect and pay for their families and their own lives.

So we translated the commission income they generated into

salaries that are sensitive to the size of the book of business that they generate.

How to manage them While money is the great motivator and measuring stick, we found that the best producers are the ones who are not in the office. They spend all of their time with people that we do not yet insure. They also spend time with our clients, but that time is limited to making sure that the client is a) happy with our service, b) remains a loyal customer, c) purchases all other forms of insurance from us and d) gives us the names of his friends and business associates for us to contact using him as a reference.

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AGENCY MANAGEMENT

So the management process we use concentrates on defining the activity needed for the producer to achieve the number of sales (and corresponding commission to the agency and compensation to himself) and managing the producer to that level of activity.

Our marketing efforts are created totally to generate the leads that keep our producers’ sales funnels full of leads. Our marketing program attaches a 15-step, three-year marketing program to every prospect that only matures when the prospect

becomes our client or when the producer disqualifies the prospect from his prospect bank. ________________________________

The best producers are the ones who are not in the office…. The entire role of a producer is to make friends on behalf of the agency. ________________________________

COMMITMENT A PROMISE WE DON’T TAKE LIGHTLY

“Volunteerism is a rewarding commitment. This same feeling of gratification comes from my 16-year career in the insurance industry, working with experienced managers and underwriters and assisting our agents in being successful.”

Chuck Craycraft Branch Manager in Westerville, Ohio—and Habitat for Humanity volunteer Connect with Chuck on LinkedIn!

Managing General Agency Since 1920 Property/Casualty t Professional Liability t Surety Commercial Transportation t Personal Lines t Premium Finance

800.388.8178

jmwilson.com

How to motivate them Remember our example of Pavlov’s experiment and the training of our pets? A part of that formula that most agents forget is that treats are withheld if the desired activity does not take place. So we created a selfterminating producer contract that works in two directions: w It generously rewards producers for growth through a base-and-growth model of compensation (instead of through our grandparents’ antiquated new-and-renewal commission model). w It lowers compensation when the sales-call activity drops below the level that normally would generate sufficient new clients to provide the producers their expected or desired compensation levels.

Instead of an agent becoming more frustrated every month as he views his producers sitting in the office doing work that the service staff could and should do (probably more accurately), if a

COMMITMENT A PROMISE WE DON’T TAKE LIGHTLY

“Volunteerism is a rewarding commitment. This same feeling of gratification comes from my 16-year career in the insurance industry, working with experienced managers and underwriters and assisting our agents in being successful.”

Chuck Craycraft Branch Manager in Westerville, Ohio—and Habitat for Humanity volunteer Connect with Chuck on LinkedIn!

Managing General Agency Since 1920 Property/Casualty t Professional Liability t Surety Commercial Transportation t Personal Lines t Premium Finance

800.388.8178

jmwilson.com

[ 14 ]

MUTUAL BENEFIT GROUP Huntingdon, Pennsylvania www.mutualbenefitgroup.com

producer is not tracking the appropriate activity levels over a sustained period, the compensation is automatically decreased (until and unless the activity level resumes acceptable levels). The theory is that we can fix the problem of a producer not being able to sell through coaching, counseling and training. But we can’t fix a lack of motivation for (or the actual fear of) making prospect calls.

After all, the entire role of a producer is to make friends on behalf of the agency. If he makes friends and is knowledgeable, helpful and more useful than the prospects’ current insurance provider, it makes sense that we would eventually become their agent.

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Start with MBG, and you’ll finish with a winner.

For specifics on these topics and more, attend IA&B’s Oct. 4-5 Executive Management Conference. If you have specific questions or would like the author, Al Diamond, to tailor a producercompensation plan specifically for your agency, call the Agency Consulting Group, Inc. at 800-779-2430. _______________________________

Reprinted from The PIPELINE, the national newsletter for agency principals. The PIPELINE is published by Agency Consulting Group, Inc., a leading consulting firm for independent agents in the U.S. for over 30 years.

Call 800-7 79-2430, e-mail info@agencyconsulting.com or visit www.agencyconsulting.com for information about the content of this article or for PIPELINE subscription information.

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[ 15 ]

®

Service is our specialty; protecting you is our mission ®

Platinum Profile Insurance Agents & Brokers proudly recognizes Berkley Mid-Atlantic Group, LLC as one of its Platinum Partners.

IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

FEATURED PARTNER Berkley Mid-Atlantic Group, LLC

PRESIDENT & CHIEF EXECUTIVE OFFICER Kevin W. Nattrass

COMPANY LOCATIONS Home Office, Glen Allen, VA PA/OH Region, Harrisburg, Pittsburgh & Erie, PA Capital Region, Glen Allen, VA Carolinas Region, Charlotte, NC 1-800-283-1153

A.M. BEST RATING “A+” (Superior)

WEB SITE www.wrbmag.com

Berkley Mid-Atlantic Group's home office in Glen Allen, Virginia.

B

erkley Mid-Atlantic Group, LLC (BMAG) is a regional commercial property and casualty carrier organized into three full-service territories with local claim, underwriting and risk management teams located close to its customers and policyholders. BMAG’s policies are issued exclusively through independent agents serving clients throughout the Mid-Atlantic Region, including Delaware, Maryland, North Carolina, Ohio, Pennsylvania, South Carolina, Virginia and Washington, D.C. BMAG is a member company of W. R. Berkley Corporation, an insurance holding company founded in 1967 that is among the largest commercial lines writers in the United States.

BMAG takes a generalist approach to underwriting, with a focus on middle market commercial accounts within the service, manufacturing, retail, construction, wholesale and finance industries. Additionally, with its Marine and Select Market divisions, BMAG offers niche-oriented coverages for transportation, schools, social services and public entity organizations.

Our business approach is predicated on sound, disciplined underwriting practices, always “doing the right thing” for our agents and policyholders and is further exemplified in our core values of trust, integrity, agility and excellence. We are committed to “Insuring the Future of Business” through our independent agency relationships.

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?

PLATINUM LEVEL

BRONZE LEVEL

ACUITY Berkley Mid-Atlantic Group Donegal Insurance Group Erie Insurance Group Harleysville Insurance Highmark Casualty Insurance Co Insurance Agents & Brokers Service Group Inc

Aegis Security Insurance Co

MMG Insurance Company Millers Mutual Group Millville Mutual Insurance Co Mutual Benefit Group Ohio Casualty Penn National Insurance Selective Swiss Re The Main Street America Group Utica National Insurance Group

GOLD LEVEL

choose the sponsorship

Progressive

package that matches your

Contact the Member Sales Center at (800) 998-9644, (717) 795-9100 or visit us online at www.iabgroup.com to get started.

AmWINS Program Underwriters Inc Auto-Owners Insurance Company Briar Creek Mutual Insurance Company Builders Insurance Group Chubb Group of Insurance Companies Countryway Insurance Company Encompass Insurance First General Services Foremost Insurance Group Goodville Mutual Casualty Company Grange Insurance Companies Guard Insurance Group Harford Mutual Insurance Co Hanover Fire & Casualty Insurance Company Insurance Alliance of Central PA Inc Insurance Placement Facility of PA Keystone Insurers Group Inc Lebanon Mutual Insurance Company

To become an IA&B Partner,

commitment of support.

Agency Insurance Company

SILVER LEVEL Access Insurance Company Allied Insurance American Mining Insurance Co Cumberland Insurance Group Frederick Mutual Insurance Co Juniata Mutual Insurance Co PSBA Insurance Trust The Philadelphia Contributionship Westfield Insurance

Mercer Insurance Group Merchants Insurance Group Mercury Casualty Penn Millers Insurance Company 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 Insurance Company Zenith Insurance Primary Agent June 2011

AGENCY MANAGEMENT

What does an agency owe its producers?

Producer productivity can make or break an agency.

And improving it requires introspection and tough decisions. Here, agency consultant Chris Burand takes a step back and offers a fresh perspective for moving forward.

Primary Agent | June 2011

TT

his is the softest market the property and casualty insurance industry has ever experienced. To thrive, agencies must eliminate waste, work harder and work smarter.

Producer productivity is absolutely the key to thriving in this soft market. Producer productivity is not just producers selling enough – it is about selling enough efficiently. This means quality accounts. It means giving a work product to the staff that enables them to do their work efficiently or letting the staff collect the data for a cut of producer’s compensation. It means good producer management.

(Re)defining “producer” Greater productivity begins with a production team that includes only producers. Too many agencies employ people with the title “producer” who do not really produce.

If you want your agency to thrive in this market, answer the following question honestly: Are all of your employees with the title “producer” truly producers? Do not answer based on what you wish your producers did or what your producers should do.

What true value does each producer bring to your agency? The biggest mistake agencies make every single day is paying and treating non-producing producers as true producers. The results are excessive payrolls, damaged morale, shattered productivity and lousy profits.

These non-producing producers likely bring some value.

But they are not in the job that fits their particular skill set.

Athletic teams do not pay second and third string players the same as first string players, so why should an agency pay producer wages to an employee whose title is “producer” but who is really not a producer?

When agencies were flush, they could get away with this. They could — and they did — subsidize poor producers. Today, there is not enough extra revenue to continue subsidizing employees who are not completely pulling their weight. Management can push to get more and more out of them, but they are in the wrong job. It’s like trying to squeeze blood from a turnip. They are often good people with other valuable attributes, so perhaps a more appropriate job at a more appropriate wage can be designed for them.

Agencies expend a considerable amount of time, money and energy trying to get non-producing producers to produce, so once an agency helps these people find a different position that fits their skill set better, more resources can be focused on people who can sell.

[ 19 ]

The biggest mistake agencies make every single day is paying and treating non-producing producers as true producers.

The results are excessive payrolls, damaged morale, shattered productivity and lousy profits.

AGENCY MANAGEMENT

Supporting producers Once the production team consists entirely of producers, what resources does an agency owe its true producers?

1. A good customer service representative (CSR) when the producer’s production is sufficient to earn a CSR, but not before. By good, I do not mean a CSR who will do the producer’s work for him or her.

2. An agency owes established producers a fair wage for honest, good work. What is fair work? A true producer must generate at least $300,000 of self-produced commissions.

3. An agency with a good reputation.

4. A good IT system.

5. New producers deserve good training and mentoring. This is not only fair, but it is also smart producer management.

That’s it. Agencies do not owe their producers anything else.

They do not owe their producers an expense account, a car or even a lead list. These items arguably can make producers more successful, but that does not mean they are owed these perks.

And these items truly are perks.

What would happen if these perks increased as a producer’s book increased? When an agency increases producers’ perks as their books increase,

the agency is focusing its biggest resources on its most important assets, which makes a lot of sense. Agency expenses would decline if managed well because the value of the perks need not increase at the same rate as sales. If these perks are limited to reasonably sized books, these expenses are minimized.

________________________________

A benefit of good producer management is that morale increases for all but the less successful producers because employees see a fair, capitalistic system. An entitlement environment is eliminated, which also improves morale. ________________________________

These are all aspects of good producer management, and a benefit of good producer management is that morale increases for all but the less successful producers because employees see a fair, capitalistic system. An entitlement environment is eliminated, which also improves morale.

Management of the agency is easier because when producers gripe, the best answer is, “Produce more.” It creates a more competitive environment, pushing each producer to greater success.

[ 20 ]

In visiting dozens and dozens of agencies, I rarely have seen these practices. Those few that do practice good producer management achieve much greater success than those that do not. Many agencies forget that fair eventually must be based on results. The effort to be fair to all based on good faith effort simply is misguided. It’s not easy to make hard decisions.

However, it’s easier than having a problem and knowing that you are doing nothing about it every single day of the year.

Doing it right attracts highquality people who thrive in a fair, capitalistic system.

Doing it right enables your agency to thrive. _______________________________

Chris Burand is president of Burand & Associates, LLC, an insurance agency consulting firm.

Readers may contact Chris at 719-485-3868 or by e-mail at chris@burand-associates.com.

Author’s note: None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/ entities also should ensure that they comply with all applicable laws, rules and regulations.

Primary Agent | June 2011

Technology U P DATE

E&S MARKET MOVES TO ENHANCE EFFICIENCY Independent agents can be catalyst for further progress application supplements, created “proof of concepts” for real-time upload and download and published a roadmap for GAs on needed functionality for their websites.

Now we need to take these standard applications and technology demos and put them into practice throughout the E&S industry.

JEFF YATES Jeff Yates is executive director of the Agents Council for Technology (ACT), which is part of the Independent Insurance Agents & Brokers of America.

Jeff can be reached at jeff.yates@iiaba.net.

ACT’s website is www.iiaba.net/act. This article reflects the views of the author and should not be construed as an official statement by ACT.

Two years ago, ACT, AAMGA, NAPSLO and ACORD banded together to start the E&S Joint Working Group to bring much needed efficiency to the E&S market. We realized that many of the efficiencies we take for granted in the standard market were possible for excess and surplus lines as well, such as use of ACORD standard applications, realtime uploads of data, downloads and general agent websites with more functionality. We also understood that the E&S market is really important to

the independent agent with the mean agency placing 29 percent of its commercial lines revenue and 16 percent of its personal lines revenue with a market access provider, such as a general agent or wholesale broker (“GAs”) (2009 figures, 2010 Future One Agency Universe Study).

The E&S Joint Working Group & industry have made good progress over the last two years, but we stand at a crossroads right now. As I will describe further below, we have developed some standard ACORD E&S [ 21 ]

This is where the independent agents come in. Independent agents need to get involved and ask their GAs to accept the standard ACORD applications and supplements, rather than requiring a plethora of company-unique applications. It also is important for agents to push for real-time uploads and downloads from their GAs. The independent agents were the players that created the momentum for these improvements in the standard market and they need to be the catalyst in the E&S market as well.

Independent agents and their user groups also should encourage their vendors to implement the new ACORD professional/specialty

TECHNOLOGY UPDATE

applications and E&S supplemental applications promptly into their systems so that it is easier for agencies to use these forms. Below I describe the specific help we ask of independent agents and other E&S stakeholders to make these improvements happen in the E&S market.

Progress to date We have 353 E&S industry stakeholders – retail agents, general agents, wholesalers, E&S and program carriers and technology providers – participating in the E&S Joint Working Group. We have four active subgroups: one working on standards and forms, a second on interface (retail agent – general agent (multiple systems) – E&S carrier – and back), a third on efficiencies with Lloyd’s and Lloyd’s brokers and a fourth on communications.

At the recent AAMGA Technology Conference, which featured a presentation by the Joint Working Group, the attendance increased by about 100, and the buzz at the meeting was all about the ACORD standards: how to implement them and which vendor systems incorporate them.

There was also great interest in the round trip data interfaces that were demonstrated – from the retail agent’s agency management system to the GA’s agency management system to the E&S carrier’s rating system to the GA’s policy issuance system and then back to the GA for download to the retail agent.

ACORD, working with the Joint Working Group, has introduced two new E&S supplemental applications for vacant buildings (ACORD 106) and apartment buildings (105) and is about to vote on two additional supplements – Restaurant/Tavern (183) and the Liquor Liability Section (803).

In addition, ACORD has introduced a number of important professional/ specialty lines applications and supplements: Professional/Specialty Insurance Application (825), Directors & Officers Liability Section (807), Employment Practices Liability Insurance (827), Fiduciary Liability Coverage Section (828) and Miscellaneous E&O Section (832).

Also noteworthy at the meeting was the increased contingent of Lloyd’s brokers and representatives who attended and indicated their strong interest in increasing efficiencies with their business partners in the U.S. market. To tie all of these positive developments together, the Communications Subgroup unveiled the Joint Working Group’s new website (http://www.esjwg.org/) which is a great place for agents and other E&S stakeholders to go to learn more about the initiative and to join the effort.

Pushing for the use of ACORD standard applications Independent agents were instrumental in getting carriers in the standard market to accept ACORD applications – applications that have the great advantage of being automatically generated by their agency management systems. It is now important for agents to start to press their GAs to accept these ACORD applications where they fit for your E&S business. The GAs, in turn, will press the E&S carriers to accept them based upon the increased requests they get from their retail agents. If the retail agents make this an issue with the E&S community, the E&S stakeholders will get more involved in the ACORD process to generate additional E&S supplements where needed for frequently written lines of business. [ 22 ]

To the extent your GA needs additional information beyond the ACORD application to rate a risk or to determine appropriate exclusions, then the GA should follow up with the retail agent to get the needed additional information. Ideally, the retail agency would send the completed ACORD application directly to the GA from its agency management system using Real Time, and if the GA needs additional information, a pop up would appear for the agent to add the information. Or, the GA can send a real-time activity notification/alert or an email to the retail agent requesting the additional information.

It is also time for retail agents to start to use the new ACORD specialty/ professional applications and supplements and the published ACORD E&S supplements with their markets. The best way to get these ACORD forms more broadly accepted is for retail agents to just start using them. Think of the benefit of completing one ACORD application for a particular risk, rather than having to complete multiple carrier specific applications.

To the extent your agency management system provider has not yet incorporated these new ACORD forms in your system, please urge your vendor and user group to do so. In addition to the obvious advantage of being able to automatically generate the form, your system will now incorporate the necessary fields to store the data required to complete it.

Even if your agency management system does not yet incorporate these new ACORD applications, I encourage you to use them. As an agent, you can access the ACORD static forms by just registering on the ACORD website (www.acord.org). By becoming an

ACORD Advantage member at a modest cost, you can access ACORD fillable forms online.

Urging GA partners to provide real-time upload & download We have seen demonstrations where GAs can accept data from independent agents using Real Time and where GAs are able to download data back to the retail agent. We need to take these examples and make them the common workflows in the E&S market, just as they have become in the standard market. The best way to accomplish this is for independent agents to press their GAs to provide them with this functionality. GAs have a great incentive to provide the upload functionality as well, so that they do not need to re-enter the data on their

end and deal with the inevitable errors that will arise as a result. GAs that can provide their retail agents with these ease of doing business advantages will attract more business.

Getting involved in the E&S Joint Working Group I encourage retail agencies that write significant amounts of E&S and program business to get involved to help shape the future for this market.

Just go to the E&S Joint Working Group’s website mentioned above and click on “Contact Us.” It is also important, of course, for more GAs and E&S carriers to get involved.

It is wonderful to see the enthusiasm that has been generated among the E&S stakeholders as to the opportunities they have to enhance their ease of doing business with their

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retail agents, along with the opportunities they have to enhance the integration and functionality of their own systems.

Independent agents will play a key role from this point forward in the evolution of improved efficiencies in the E&S market. If they want to see ACORD applications replace company unique applications and want to have real-time upload and download with their GAs, then they need to start to push for these things with their business partners. Just as we have seen in the standard market, independent agents can make it happen, if they decide to get involved to make a difference.

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Workers’ comp gets its 15 minutes in the limelight And who said insurance was dry? The TV comedy Workers’ Comp began filming pilot episodes in Florida this spring.

The synopsis: A motley crew of employees at the family-owned Pinnacle Workers’ Compensation Insurance Co. handle “absurd and often-fraudulent insurance claims from injured workers.”

The script has drawn such well-known actors as Morgan Fairchild, Robert Carradine and David Proval to the cast.

IA&B Partners Program . . . . . . . . . . . . . . . . . . .17 Insurance Innovators Inc . . . . . . . . . . . . . . . . .23 Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC

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[ 24 ]

----------------------------------------------------------------———————------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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