Pennsylvania Primary Agent - March 2016

JANUARY MARCH 2016 | PENNSYLVANIA

BRIDGING THE GENERATIONAL DIVIDE

PERPETUATION PLANNING

Renew Online IABforME.com/renew Your membership expires March 31

OUR

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Get even more details at

millersinsurance.com/evenmore 800.745.4555 Rated A- (Excellent) by A.M. Best Rated A Prime (Unsurpassed) with Demotech ©2016, Millers Mutual Group, Harrisburg, PA

IN THIS

ON THE COVER 12

THE GENERATIONAL DIVIDE Millennials are coming of age just as our agencies face a mass exodus. Our Futures Program aims to engage – and keep – them in the independent agency system.

ALSO 18

DEATH OF AN INSURANCE SALESMAN Chris Burand offers perpetuation planning for the unthinkable: the unexpected death of an agency owner.

IN EVERY ISSUE 2 3 4 6 8 10 11 IBC IBC IBC

Chairman of the Board’s Message Ask Our Experts Preventing Errors & Omissions Coverage Corner State News Platinum Profile IA&B Partners Advertiser’s Index My Events Classified Ads

Periodical postage paid at Mechanicsburg, Pa. and at additional mailing offices. Postmaster: Send address changes to Insurance Agents & Brokers, 5050 Ritter Road, Mechanicsburg, PA 17055.

Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2016-3, is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

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Copyright 2016. 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 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. 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 IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

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CHAIRMAN OF THE BOARD’S MESSAGE

REFRAMING CHALLENGES AS OPPORTUNITIES “ONLY THE WISEST AND STUPIDEST OF MEN NEVER CHANGE” – CONFUCIUS

C

INSURANCE AGENTS & BROKERS 5050 Ritter Road | Mechanicsburg, PA 17055 800-998-9644 | IABforME.com

OFFICERS Chair of the Board

Robert S. Klinger, LUTCF, CPIA Vice Chair of the Board

hange is rarely easy and rarely comfortable. But it’s inevitable to maintaining relevance. Our prospect base is skewing younger, and the needs and expectations of those within it are changing. The same goes for the young blood entering the workforce. So it’s critical that we, as champions of the independent agency system, evolve, too.

In many ways, it feels like the future is already here: Baby Boomers’ retirement dates are slipping by, while young agents can be difficult to find – let alone to keep – on staff. Member agency owners consistently report their perpetuation concerns, and our board has had many subsequent conversations about what IA&B can do to help attract and retain qualified employees and to support the industry’s longevity in general.

Michael F. McGroarty Sr. Immediate Past Chair of the Board

Diana M. Hornung Hanby, ACSR

MEMBERS 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.

Bryan C. Hanes, JD Hagerstown, Md.

John B. Hollister Milford, Pa.

Those of us on the board, along with the IA&B staff, have several initiatives in the works. One is the launch of the Futures Program, a program tasked with developing today’s young agents into tomorrow’s leaders. (Read more on page 12.) Another is the creation of an online career center with a resume bank for job seekers currently within and outside of the industry and a jobs board specific to independent agency positions. Look for more details in the months ahead.

Also, be on the lookout for your 2016-17 IA&B membership invoice (due by April 1). Over the past year, your association has chalked up some impressive accomplishments – lobbying against a new tax on agents’ commissions, creating additional online professional training opportunities, and expanding the library of customizable consumer-education flyers, to name a few. And with initiatives like the Futures Program and online career center on tap for the year ahead, IA&B membership is as valuable as ever before.

The industry is in flux, but change doesn’t need to connote something ominous.

Let’s look at our challenges as opportunities – opportunities to evolve together.

On behalf of the IA&B board and staff, we look forward to supporting your agency, and the independent agency system as a whole, in the year ahead. n

Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, Pa.

David C. King Lancaster, Pa.

Douglas A. Loesel, CPCU Erie, Pa.

Crag S. Mader

Gambrills, Md.

Ann Gallen Moll, CIC Reading, Pa.

Mark J. Monroe

West Chester, Pa.

Joseph R. Pastor, CPCU, AAI Oil City, Pa.

Richard M. Rankin, CIC Lancaster, Pa.

April E. Ressler, CIC Altoona, Pa.

Scott C. Rogers, CPIA* York, Pa.

Glenn R. Strachan

Ft. Washington, Md.

Lawrence A. Wilson, CIC, CPIA, CPCU, ARM** New Castle, Del.

J. Marshall Wolff, CIC, CPCU Easton, Pa.

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

Robert S. Klinger, LUTCF, CPIA Chairman of the Board

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MARCH 2016

Ask Our Experts

Question: Can we get flood coverage for a building under construction?

The customer is building a home at the beach. It is expected to take six months to complete.

Answer:

Y

es, you can. Flood insurance can be written on a building under construction based on the pre-construction drawings.

• The policy will need an elevation certificate before it can be renewed, so it must be under continuous construction.

• The deductible is doubled until the building is walled and roofed.

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.

This is covered in detail in the NFIP manual, under General Rules – section 3 (page GR5), available on FEMA’s website (http://www.fema.gov/flood-insurance-manual). n

This month’s answer was provided by Claire Pantaloni, CIC, CISR, our industry affairs director, with assistance from Rita Hollada, our flood instructor and resident flood expert.

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PREVENTING ERRORS & OMISSIONS

BEWARE OF HIDDEN COVERAGE GAPS ON CONTRACTOR GENERAL LIABILITY

By Utica National E&O Program

W

e’ve seen an uptick in Errors & Omissions (E&O) claims filed against insurance agents who write liability coverage for contractors. Some insurance carriers strip out coverage for suits from other contractors and subcontractors, which leaves your contractor customer responsible for defense and indemnity on contractual liability, third-party over actions, etc. And which puts you in danger of getting sued.

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Writing general liability for contractors can be a risky proposition for insurance agents. Follow these precautions to reduce your E&O exposure.

When you are examining coverage, look to see if contractors or subcontractors: • Have been excluded • Are added as insureds, which takes away coverage if a contractor or subcontractor makes a claim against the policyholder

MARCH 2016

Writing general liability for contractors can be a risky proposition for insurance agents.

Watch out if you see contractors and subcontractors added to: • The Employers Liability Exclusion Employers Liability (excerpt from ISO CGL)

“Bodily injury” to:

(1) An “employee” of the insured arising out of and in the course of:

a. Employment by the insured; or

b. P erforming duties related to the conduct of the insured’s business

• The definition of “Employee” (standard ISO wording) “Employee” includes a “leased worker.” “Employee” does not include a “temporary worker.”

• The “Who is Insured” section • An additional insured or other endorsement Excess and Surplus Lines carriers and insurers using nonstandard forms may have other policy provisions that eliminate coverage. Ask for a copy, or get in writing, from the carrier that coverage quoted does not eliminate coverage for contractors and subcontractors. Pin down what is being offered before binding to avoid gaps.

To minimize the chance of an E&O situation:

their General Liability policy to ensure coverage is sufficient in the event of a claim alleging contractual indemnification or other allegation.

• Do not make any representations on a Certificate of Insurance that contractual indemnity is covered under your customer’s liability policy.

• When moving coverage from one carrier to another, do the “mirror test.” Confirm that the new coverage does not contain a more restrictive Employers Liability Exclusion or a broader definition of who is considered as an “employee” before binding coverage. If the policyholder insists on purchasing the narrower coverage, confirm in writing to your client that they have chosen limited coverage. n

The Utica National E&O Program supplied this article. Our sales center 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.

BUILDING CONTRACTOR COVERAGE KNOWLEDGE CHECK OUT of our online resource center for Jerry Milton’s take on the insurance requirements for contractors and subcontractors. In particular, he looks at: • The indemnification provision and waiver of subrogation many contractors include in their contracts with subcontractors • The CGL endorsements that exclude coverage for a contractor arising out of actions of an uninsured subcontractor IABforME.com/resource_center/ contractors_ins

• Never make any representations that another party will be afforded coverage under a General Liability policy for contractual liability such as a general contractor.

• Advise your customer to have their corporate attorney review all construction contracts and

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COVERAGE CORNER

PRIOR WORK COVERAGE EXCLUSIONS

By Jerry M. Milton, CIC

S

ome insurers that write liability coverage for contractors have begun placing coverage restrictions in their policies for any work (completed or uncompleted) performed by the insured prior to the inception of their policy.

Commercial General Liability (CGL) policies usually provide completed operations coverage. If written on an occurrence basis, the policy that’s in effect when the injury or damage occurs is the one we look to for coverage, no matter when the work was performed.

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The injury or damage occurred today, but the work was performed years ago.

The work was performed five years ago, but the insurer writing the contractor’s CGL today when the injury or damage occurs has to respond even though their policy became effective only six months ago. When the work was performed the contractor was insured with another insurer, or possibly, uninsured.

Insurers do not like this exposure.

Therefore, they are attaching a prior work exclusion endorsement. These MARCH 2016

endorsements exclude all prior work, or in a less restrictive form, all prior completed work. The good news is that some of the insurers that are attaching this endorsement have an exception that the exclusion does not apply to prior work of the contractor performed during the period of time the contractor has been continuously insured with that insurer. The language of this exception should read similar to the following: If this is a renewal policy and coverage has been continuous with us without

interruption, and for the purpose of this exclusion only, the policy inception date shall be deemed to be the inception date of the first continuous policy issued by us.

In June 2010, House Bill 1394 became law in Colorado.

One provision of that bill renders prior work exclusions void if the contractor had no knowledge of the loss prior to the inception of the insurance policy. The passage of this law has caused many insurers to cease writing contractors’ liability and the market to harden. As of this date, no other state has passed a similar law.

Never forget, the state’s statute of repose stipulate how long contractors can be held strictly liable for injuries or damages arising out of their work. The statutes of repose for our three states are: Pennsylvania – 12 years Maryland – 10 years

CIC CORNER Don’t’ take your knowledge for granted.

Attend Certified Insurance Counselor (CIC) institutes to learn how coverages work in the real world from nationally recognized instructors who’ve been there.

Among those instructors is perennial favorite Jerry Milton, CIC, author of our monthly Coverage Corner column. Catch Jerry discussing Commercial General Liability policies and contractors’ liability at CIC institutes and update seminars throughout the region in 2016.

CIC – Commercial Casualty Institute “Commercial General Liability” with Jerry Milton • Sept. 26-29 – Erie, Pa.

Delaware – 6 years One possible solution for the contractor is to require all subcontractors to agree to defend and indemnify the contractor for claims arising out of their work, purchase liability insurance and add the contractor as an additional insured. If the subcontractor’s CGL policy does not have a prior works exclusion, the contractor would have coverage for claims arising out of the subcontractor’s work even if there is a prior work exclusion in the contractor’s policy.

If your insurer has attached a prior works exclusion endorsement, you want to make sure that they have an exception for this exclusion for the period of time the contractor has been continuously insured with them. Then you must refrain from placing the contractor’s CGL with another insurer, unless that insurer will cover all prior work.

James K. Ruble Graduate Seminars “Insuring the Liability Exposures of Contractors” with Jerry Milton • April 11-12 – Cranberry Township, Pa. • Aug. 8-9 – Hershey, Pa. • Aug. 17-18 – Ellicott City, Md. As a reminder, the CIC designation requires completion of five institutes and passage of five corresponding exams within five years. Ruble graduate seminars go beyond the required curriculum provided in the CIC program and can be used to satisfy your annual CIC update requirement.

Y’all take care! n IABforME.com/CIC

Jerry M. Milton, CIC, teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages.

He also serves as our education consultant, working with our CISR, CIC and continuing education programs. Catch him at one of our upcoming seminars: IABforME.com/MyTraining.

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STATE NEWS

NAZARETH MUTUAL AGREEMENT FIRST TO EARN NEW IA&B SEAL OF APPROVAL We recently unveiled a new process to review agency contracts that will help agents and companies start off on the right foot. Rather than analyzing agency agreements after they’ve hit the streets, we’re offering to review the agreement upstream, making the launch more seamless.

NAMED DRIVER ONLY POLICIES LIKELY HERE TO STAY Carriers likely will continue to offer Named Driver Only auto policies in the Keystone State. The state Supreme Court’s recent denial of an injured plaintiff’s petition for appeal firmly established the validity and enforceability of Named Driver Only auto policies in Pennsylvania.

A Named Driver Only policy – for what is usually a significantly reduced premium – limits coverage to only those drivers listed as named insureds. This is in contrast to a customary policy which affords coverage to not only the named insured(s) but also to residents of the household and anyone who operates the insured vehicle with permissive use.

If you write for carriers who offer Named Driver Only policies, it’s likely the application and policy will contain express, conspicuous warnings to the insured regarding the limited coverage afforded under the policy. However, given that loaning a vehicle to a relative or friend seems like a natural and reasonable thing to do, whether it’s to help her out when her car is unavailable or if there’s an emergency, it may be worthwhile to: 1. Reiterate to the insured the limitations associated with a Named Driver Only policy 2. Have the insured sign-off acknowledging such policy coverage limitations

MORE ON AUTO The Pennsylvania Motor Vehicle Financial Responsibility Law is laded with E&O tripping hazards. Learn how to avoid them by attending our new “PA Auto Coverages – Avoiding E&O Potholes” seminar, coming to Philadelphia, Lancaster and Mechanicsburg this year.

IABFORME.COM/OTHERCOVERAGES

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MARCH 2016

HOW IT WORKS After we review the draft agreement, we discuss with company reps what their goals and rationale are and provide the agents’ perspective in return. This allows the company to secure a Seal of Approval from IA&B showing that, in our eyes, the agreement comports with industry standards under the American Agency System. If it doesn’t, having knowledge of potential issues allows the company to anticipate and address any ambiguous or non-standard provisions of the agreement before it’s presented to the independent agency community.

The process is completely voluntary, but by submitting the proposed agreement for review ahead of release, the launch may trigger fewer questions and concerns and eliminate a lot of the hassle that comes with implementing wholesale changes.

WHO RECEIVED THE FIRST SEAL First to earn the IA&B Seal of Approval is Nazareth Mutual. The company reps expressed an interest in the process, and after consultation over important provisions and their possible interpretation, amended their original contract to clarify their intent in a way that more closely followed independent agents’ rights and obligations. The

carrier was very forthcoming and positive in its approach, and we are very pleased to award our first Seal of Approval to Nazareth.

WHAT IT MEANS FOR YOU Please note that the Seal of Approval is not a substitute for reading the agreement. Agents should always read their agency agreements, which should outline and define items that need to be incorporated in their agency practices, including the extent of their authority (think binding, certificates, premium payments, etc.), how much E&O they should carry or to what extent they agree to indemnify the carrier. Agency agreements also describe essential rights, such as book ownership, that unwittingly could be contractually relinquished if the agreement is reviewed casually or not read at all.

In the months ahead, we will also work to provide you with educational guidance on agency contract review, including common provisions and what they are meant to accomplish, that will help facilitate your understanding. Don’t worry: It’s still much better than reading an insurance policy!

TAKING AGENTS’ INSIGHT TO CONGRESS The countdown is on for the Big “I” National Legislative Conference. Dozens of IA&B of Pennsylvania member agents will join approximately a thousand independent agents from across the nation on April 13-14 in Washington, D.C. The annual event allows independent agents to have face time with their federal lawmakers and share their insights on hot topics as agents and small-business people.

• PP 23 40 10 15 – Public Or Livery Conveyance Exclusion Endorsement • PP 23 41 10 15 – Transportation Network Driver Coverage (No Passenger) • PP 23 45 10 15 – Limited Transportation Network Driver Coverage (No Passenger)

RIDESHARING ENDORSEMENTS, ADVISORY NOTICES HIT THE STREETS ISO endorsements that clarify coverage – or the exclusion of coverage – for those who drive for transportation network companies, such as Uber and Lyft, took effect in Pennsylvania this winter.

In preparation, ISO released the following advisory notices to policyholders late last fall: • DLP0061015 Personal Umbrella Liability Policy Public or Livery Conveyance Exclusion Revision Advisory Notice to Policyholders • PP0121015 Public or Livery Conveyance Exclusion Revision Advisory Notice to Policyholders ISO made the countrywide filings in the spring of 2015, but as with all ISO filings, implementation varied by state approval and carrier adoption.

The multistate filings included the following forms: PAP FORMS FILING PP-2015OTNFR “Introduction of a Reinforced Public or Livery Conveyance Exclusion and Related Optional Coverage Endorsements”

PUP FORMS FILING DL-2015-OTNFR “Introduction of a Reinforced Public or Livery Conveyance Exclusion” • DL 99 12 10 15 – Personal Umbrella Liability Policy Public Or Livery Conveyance Exclusion Endorsement It’s worth noting that despite varying effective dates, the filing numbers (showing the 10 15 date) did not change.

WELCOME NEW MEMBERS D. W. INSURANCE AGENCY LLC Jenkintown, PA LANE AGENCY LLC Allentown, PA ROBERT S. MASEYCHIK AGENCY INC. Scranton, PA T. W. COOPER INSURANCE LLC Plumsteadville, PA THOMAS INSURANCE SERVICES INC. Pittsburgh, PA

Watch for a recap in Agent Headlines.

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PLATINUM PROFILE

Insurance Agents & Brokers proudly recognizes Penn National Insurance as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

WE’RE IN THE PEOPLE BUSINESS.

A

t Penn National Insurance, our employees have one common focus: building relationships. From listening and responding to our agents’ feedback to mentoring a newly employed staff member, we believe that it is our relationships on all levels that make our company stand out from the rest.

Relationships are critical to our business model, because we believe that the independent agent channel provides the absolute best means of delievering our services and products. We want to be our agents’ first choice in providing their clients with insurance coverage and we promise delivery of superior services when needed.

We focus our time, attention, and resources on delivering superior financial strength and stability, a comprehensive product portfolio, and most of all, doing what’s right for policyholders.

OUR STRENGTHS A regional insurance company serving 11 states with a broad range of commercial and personal insurance products. We employ approximately 850 people in offices in Harrisburg, Pa. (headquarters), and offices thoughout our territory. We have earned Best Places

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to Work designations in Insurance, IT, Pennsylvania and two regional programs.

A financially strong company with a Financial Strength Rating of A- (Excellent) from the A.M. Best Company. The company wrote $666 million in direct written premiums in 2014, and had total assets of $1.7 billion.

A commitment to seamless automation enhancements that allow our agents and policyholders to interact with us effortlessly.

A community-service oriented company known for generous philanthropy, including $3 million to public schools during the last decade.

A business partner that sells its products only through local, independent agents, supporting local business growth and stability.

OUR MISSION We deliver superior property and casualty insurance products and services through independent agents. In doing so, we provide financial security to businesses and individuals that assists them in managing their risk. n

MARCH 2016

FOCUSED ON RELATIONSHIPS FEATURED PARTNER Penn National Insurance HEADQUARTERS Harrisburg, PA A.M. BEST RATING A- (Excellent) OUR OPERATING TERRITORY

PARTNERS PROGRAM

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.

PLATINUM LEVEL

BRONZE LEVEL

ACUITY

Aegis Security Insurance Co

Berkley Mid-Atlantic Group

Agency Insurance Company

Donegal Insurance Group

AmWINS Program Underwriters Inc

Erie Insurance Group

ARI Insurance Companies

Harleysville Insurance

Auto-Owners Insurance Company

Insurance Agents & Brokers Service Group Inc

Bailey Special Risks Inc

Liberty Mutual Insurance

Briar Creek Mutual Insurance Company

MMG Insurance Company

Conemaugh Valley Mutual Insurance Co

Millers Mutual Group

Countryway Insurance Company

Mutual Benefit Group

Encompass Insurance

Penn National Insurance

Foremost Insurance Group

Swiss Re

GMI Insurance

The Main Street America Group

Goodville Mutual Casualty Company

United Fire Group

Guard Insurance Group

Utica National Insurance Group

HM Workers’ Compensation

Brethren Mutual Insurance Company

Insurance Alliance of Central PA Inc

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.

GOLD LEVEL

Amerisafe Progressive Westfield Insurance

Insurance House Insurance Placement Facility of PA Keystone Insurers Group Inc Lackawanna Insurance Group Lebanon Valley Insurance Company Merchants Insurance Group

SILVER LEVEL

Mercury Casualty

Access Insurance Company

Millville Mutual Insurance Co

American Mining Insurance Co

PennPRIME Municipal Insurance

Cumberland Insurance Group

Reamstown Mutual Insurance Company

Farmers Mutual Insurance Company of Western Pennsylvania

Rockwood Casualty Insurance

Frederick Mutual Insurance Co Juniata Mutual Insurance Co

State Auto Mutual Insurance Company TAPCO Underwriters Inc The Motorists Insurance Group

MAPFRE Insurance

The Mutual Service Office Inc

PSBA Insurance Trust

Travelers

Selective

Tuscarora Wayne Group of Companies

The Philadelphia Contributionship

Zenith Insurance

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THE GENERATIONAL DIVIDE

BUILDING BRIDGES IN THE INSURANCE INDUSTRY 12

MARCH 2016

By Karen Robison

Millennials. They make up our country’s largest living generation. They account for one in three American workers.

They boast a collective global spending power of $2.45 trillion. And they suffer from more analysis than any who have come before them. (A Google search of “Millennials” yields “about 18 million results” in 0.43 seconds.) Yet despite the extensive scrutiny of it, this generation is bucking systems left and right and creating uncertainty every step of the way.

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O

urs is not the only industry to struggle with how to relate to this generation, these consumers and employees born between the early 1980s and the early 2000s.

From a sales perspective, automakers, cable TV companies, brick-and-mortal retailers and homebuilders all feel our pain.

And from an employment perspective, The Hartford’s 2015 Millennial Leadership Survey found that the insurance industry has good company: Key businesses across the board (think: retail, construction and manufacturing) are not attracting young talent.

What makes the independent agency system’s Millennial conundrum particularly ironic is that we are an aging workforce with a declining market share. We need young blood – as employees and as customers – to survive, but we’re slow to adapt and hesitant to engage with this generation whose experience feels so foreign to us.

Many of the traits that young people look for in a career easily can be found in an insurance agency.

Interestingly, the feeling is mutual. According to Gallup, the Millennial generation is the most likely to be actively disengaged with their insurance company. And, quite frankly, many – nearly three in four of them per The Hartford survey – consider our industry “boring.” When it comes to employment, enter more irony: Many of the traits that young people look for in a career – work-life balance, flexible schedule, competitive benefits,

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MARCH 2016

Expect big things in workers’ compensation. Expect to save a third of your clients 30% or more. Most classes approved, nationwide.

For information call (877) 234-4450 or visit auw.com/us.

Š2016 Applied Underwriters, Inc., a Berkshire Hathaway company. Rated A+ (Superior) by A.M. Best.

Insurance plans protected U.S. Patent No. 7,908,157.

collaborative culture, the ability to help others, leadership opportunities – easily can be found in an insurance agency.

So where do all of these misconceptions, coincidences and conflicts leave us? And where can we, as an industry, go from here to bridge the gap between perceptions and reality, between Millennials and all who came before them?

There are no easy answers, but there is hope. After all, this isn’t the first time there has been a generational divide, nor is it the first time that the independent agency system has received a daunting prognosis. But independent agents are known for their ingenuity, entrepreneurship and intrepidity – some of the very characteristics associated with Millennials. At IA&B we, along with many other organizations in our industry and beyond, are working to address the divide. Here, we share how.

EXPLORATION Our IA&B Boards of Directors are made up of member agents, the vast majority of them agency owners, who are well aware of the need to engage Millennials as customers and employees – and well aware of the challenges to making that happen. So it was no surprise when they pinpointed a young agents’ initiative as a strategic priority for IA&B.

(some informally, during happy hour) with member agents in the Millennial age bracket. Our goals were to determine young agents’ needs and to learn how we could improve our organization’s offerings to benefit young agents and, in turn, their agencies and the industry at large.

Several reassuring things came out of our discussions. For one, young agents share our concerns about perpetuation and the lack of interest in insurance careers among their fellow Millennials, and they want to be a part of the solution. While some of them followed their family into the business, others shared that they stumbled into it unexpectedly (two we spoke with were plucked from restaurant jobs at an agency owner’s favorite diner).

But regardless of their start or their time in the industry, they unilaterally agreed that working in an independent agency is a rewarding, worthwhile career choice.

Another encouraging point was that, despite their differences – rural versus urban, small shops versus large agencies, producer versus ownership track – there were commonalities in the experiences and needs of the young agents with whom we spoke.

In fact, three consistent asks became clear: 1) Community – a way to connect and collaborate with other young agents and to expand their professional network

In the spring of 2015, we began our research: comparing notes with other agents’ associations and holding focus groups

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MARCH 2016

Young agents share our concerns about the lack of interest in insurance careers among their fellow Millennials, and they want to be a part of the solution.

2) Training – professional development of sales and leadership skills 3) Mentorship – an opportunity to learn from seasoned producers After we gleaned these three takeaways, we presented our findings to the boards of directors – who gave a resounding “go for it!” that set us on our path to addressing young agents’ needs.

DEVELOPMENT Despite the collective enthusiasm from everyone who learned of our plans, we maintained a measured, deliberate approach to engaging Millennials.

First up, we needed a meaningful label for the initiative. What’s in a name? Quite a bit, we learned after talking with young agents, our board members and other agents’ associations.

Incorporating “young agents” into the group’s title carried negative connotations for some (particularly a handful of more mature producers who remembered raucous times from early in their careers). And to others, it diminished the group members’ contributions and value. Instead we wanted something that spoke to their potential and significance. In the end we decided to name the initiative the IA&B Futures Program and bestow upon it an overarching mission: developing today’s young agents into tomorrow’s leaders.

Next, we tackled the request for a community. In the fall of 2015, we launched a Futures Program Facebook group to provide young agents with a place to post and discuss, share and respond to topics pertaining to their experiences in the industry. Within the first three months, over 125 young agents joined and enthusiastically began discussions on a range of topics: intergenerational workplaces, industry technology, recommended reading and – yes – a few cartoons and memes.

With the Facebook group gaining momentum, we set our sights on our next initiative: meeting young agents’ consistently reported need for professional development. We held another focus group to discuss training specifically and came away with

the framework for a young agents’ conference. Again, we heard the need for sales training and leadership development, along with in-person networking opportunities to supplement the online community developing in the Futures Facebook group.

As a result, plans are now underway to hold a Futures Program Conference in the fall of 2016.

The final leg of our initial, three-pronged focus for the Futures Program is the creation of mentorship opportunities. Many new producers cited feeling like they were left to navigate their jobs without someone to coach them. And while they found value in connecting with other young agents, they yearned for someone with more experience to answer their questions and provide advice. And in some cases, they shared that they would find more value in having a mentor from outside of their agency.

Development of concepts to pair young agents with more seasoned counterparts is in its infancy. Obviously the logistics are complex – and the concerns over poaching young talent are legitimate. But the need is there. Echoing what we heard in our focus groups, new commercial producers surveyed for the 2015 edition of the National Alliance Research Academy’s Producer Profile study cited struggling with “lack of support” more than anything else other than “cold calling prospects.” No doubt, pinpointing solutions to the lack of guidance for young agents will require creativity, time and agency owners’ buy-in.

INNOVATION When we look at the pending perpetuation crisis facing our industry, it’s only fair to recognize that solutions will not emerge overnight. Time, perseverance and collective support are all vital components to meeting current young agents’ needs and then using what we learn to recruit and retain new Millennials.

Stay tuned (IABforME.com/Futures) as we expand and develop additional ways to support tomorrow’s leaders today. n

Karen Robison is public relations director for IA&B.

MARCH 2016

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MARCH 2016

DEATH OF AN INSURANCE SALESMAN PERPETUATION PLANNING FOR THE UNTHINKABLE

By Chris Burand

I have unfortunately worked with the families, estates and partners of several agency owners who have passed away.

Most, but not all, of the deaths occurred unexpectedly. In all cases, the person who passed left their families, estates and partners with far more problems than necessary.

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I

f you passed away tomorrow, would you leave the people around you with unnecessary problems?

AGENCY VALUE One of the worst situations I absolutely dread is when I have to tell a family the agency is not worth anything near what the recently passed relative (usually the father) told them it was worth. Agency values are not what they once were. So telling your family they can get two times is wrong, and while possibly innocent, it is still cruel.

Do you really own your agency?

And as more and more clusters develop and even age, this is going to be a bigger and bigger problem.

Get your agency valued using real world values so everyone’s expectations are realistic. Put yourself in their shoes. The income from the agency will be eliminated upon the sale. Will the agency’s sales price be enough to support their standard of living?

Being proactive also brings to light things that can be done to increase the value. One of the saddest examples is bad debt. I have seen a number of agency owners die with sizeable accounts

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MARCH 2016

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receivable that were totally uncollectible and quite old. I have seen these debts total 20 percent, 25 percent, even 30 percent of the agency’s commissions. Even if an agency is worth some high multiple, those bad debts have to be deducted.

Another horrible situation is a widow learning that her husband did not really own all the business on the books. He always meant to get around to fixing his producers’ contracts but died before he did. Also, there have been situations where all the important accounts are written by the deceased and there is no one in the agency to take over those accounts. Those key accounts most likely will not stay with the agency and, therefore, the value is not going to be what the estate may have thought.

Or another example: keeping lousy books. It is not imperative for an owner to keep good books and good data. It is smart, and it is a good business practice, but it is not imperative. However, if a person dies and the books are poor, the agency is not going to sell for full price. Who will pay full price for an agency for which no one knows the true income and the true state of its balance sheet?

What happens when a person dies with a bad buy-sell agreement with their partner?

Unless luck and goodwill are in plentiful supply, nothing good happens.

I know many readers are thinking these things never happen, but they do. How do you know you do not have similar issues if you have not gone through the process of having your agency valued by a competent agency appraiser? As one client said not long ago, “I didn’t realize I had so many holes in my data until you valued it and I understood why you need that information.”

AGENCY OWNERSHIP Do you really own your agency? I have seen a number of situations where the agency’s contracts were so poorly written that the agency did not clearly own the business on its books.

Maybe the owner knew this at one time and had forgotten because nothing bad had happened. On a day-to-day basis, it didn’t really matter. But when the agency is being valued, especially when it is being valued because the owner has died, it does matter, and that is not when anyone wants to discover the problem. As more and more clusters develop and even age, this is going to be a bigger and bigger problem.

BUY-SELL AGREEMENTS What happens when a person dies with a bad buy-sell agreement with their partner? Unless luck and goodwill are in plentiful supply, nothing good happens. The partner may have been the greatest, most unselfish person on earth, but is his or her family just as unselfish? This is important because at least for a time, the dead partner’s family will be partners too.

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FIND A VALUATION CONSULTANT THAT FITS AUTHOR CHRIS BURAND touts the importance of proactively determining your agency’s value. We recently expanded our online directory of consultants to include their business model and pricing range. Peruse the list to find one that meets your needs.

IABforME.com/agency_perpetuation/consultants

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For example, what happens when the surviving partner realizes the buy-sell agreement poorly defines value? This may leave the door open for the dead partner’s estate to claim whatever value they desire. I have seen, more than once, claims of two times PREMIUMS! It is not always that the other side is greedy; often they are just uneducated about the insurance world. Combine that with grief and a feeling of immense vulnerability, and it may mean they won’t want to settle for a reasonable value.

Another great example is where the agency’s balance sheet is poor and the estate’s trusted advisor discovers some rule of thumb that agencies are worth some multiple of commissions, but he fails to understand that balance sheet deficits, especially trust ratio deficits, must be deducted. If you have ever tried to buy out a partner at full price while the agency has a trust ratio deficit, you will know how difficult it is to make payroll and other payments.

LAST BUT NOT LEAST The readers of this article have the opportunity to fix a wrong before the wrong occurs. The pain survivors feel when a loved one and partner dies is already immense. Why exacerbate it by leaving them a business in a mess? n

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

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

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 should also ensure that they comply with all applicable laws, rules and regulations.

PITTSBURGH I-DAY

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WEDNESDAY, MARCH 30TH, 2016 Doors Open at 8:00 AM You Must Be Registered to Attend.

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Judy Dodds

Dale Beatty served in all positions of a Field Artillery Unit until 2003 when he was selected to become the full time National Guard Readiness NCO for the Statesville Unit. SSG Beatty was deployed to Iraq in 2004.

Business Development Manager 302-299-4776 or email at: jdodds@aaamidatlantic.com ©2015 AAA Insurance

MARCH 2016

CLASSIFIED A DV E R TI S E M E N TS

My Events

SOUTHEAST PA PRODUCERS & AGENCIES

March and April 2016 DATE TOPIC

LOCATION

MARCH 2016 1-3

Life & Health Licensing Study Course

Mechanicsburg, PA

7-10

CIC Life & Health Institute

Erie, PA

8

William T. Hold: Condo Concepts & Coverage

Mechanicsburg, PA

14-15

James K. Ruble Graduate Seminar

Ellicott City, MD

16

DAIAB Company Appreciation Night

Newark, DE

16

CISR Agency Operations

Pittsburgh, PA

16-19

CIC Commercial Casualty Institute

Wilmington, DE

30

William T. Hold: Choices for Commercial Coverage

York, PA

William T. Hold: Choices for Commercial Coverage

Allentown, PA

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.

If you would like to place a classified advertisement, please contact Laura Gaenzle at Laura.gaenzle@theygsgroup. com or (717) 430-2351.

APRIL 2016 5 6

CISR Miscellaneous Personal Lines

Mechanicsburg, PA

11-12

James K. Ruble Graduate Seminar

Pittsburgh, PA

12

E&O Risk Mgmt.: Meeting the Challenge of Change

Mechanicsburg, PA

13

CISR Commercial Casualty I

Philadelphia, PA

13

E&O Risk Mgmt.: Meeting the Challenge of Change

Allentown, PA

14

CISR Personal Auto

Wilkes-Barre, PA

19

CISR Commercial Casualty II

Frederick, MD

19-21

Property & Casualty Licensing Study Course

Mechanicsburg, PA

20

CISR Commercial Casualty II

Waldorf, MD

20

William T. Hold: Condo Concepts & Coverage

Altoona, PA

AD INDEX

20-23

CIC Personal Lines Institute

Allentown, PA

26

William T. Hold: Condo Concepts & Coverage

Pittsburgh, PA

26

Mistakes that Lead to E&O

Baltimore, MD

AAA Mid Atlantic............................................................24 Applied Underwriters..................................................15

27

CISR Commercial Casualty II

Erie, PA

27

William T. Hold: Choices for Commercial Coverage

Reading, PA

27

PA Auto Coverages—Avoiding E&O Potholes

Philadelphia, PA

28

William T. Hold: Choices for Commercial Coverage

Baltimore, MD

Berkshire Hathaway Guard Ins Cos .............23 EMC Insurance Companies..................................21 IA&B Partners Program............................................11 I-Day Pittsburgh..............................................................24 Interstate Insurance Mngmnt Inc.................OBC Millers Mutual Group.................................................IFC Preferred Property Program.................................23