Primary Agent - November 2010 - MD Edition

MARYLAND

ALSO INTHISISSUE: ________________ 11 ways ISO Homeowners’ 2011 alters coverage Member profile

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Contents

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PRIMARY AGENT MAGAZINE

Attaching a dollar amount to an agency One time. One and one half times. Two times. Multiple of commissions.

Multiple of revenues. Multiple of earnings.

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Do these so-called benchmarks and thumbnail measures have any bearing to the value of your or any other agency?

Page 12

Member profile: Unexpected loss, unexpected valuation It was December 2007, and Brenda Antis was mourning the unexpected loss of her father … and facing an unexpected agency valuation process.

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In every issue

Mission Statement Primary Agent delivers ideas to help Insurance Agents & Brokers’ members negotiate their unique position as guardians of trust between insurance consumers and companies while facing the challenges of maintaining a small business. Primary Agent also supports IA&B’s mission to preserve and advocate the American Agency System.

4 5 6 8 10 18

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

21 24 28 28 28

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 PO Box 2023 Mechanicsburg, PA 17055-0763 Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347 Periodical postage paid at Mechanicsburg, Pa. and additional entry post office.

Postmaster: Send address changes to above address.

Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2010-11) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2010. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before making any decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

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

David B. Rosenkilde Sr., CIC

Chair of the Board’s M

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Agency reflections It’s November: time to reflect on our lives and count our blessings.

Members Norman F. Basso, CPCU York, Pa. Vincent D. “Chip” Boylan Jr., CPCU Rockville, Md. Henry “Butch” Bradley, Jr. Crofton, Md. Timothy P. Burris Thompsontown, Pa. John T. “Chip” Colwell Jr., CIC Corry, Pa. G. Greg Gunn, CIC Lemoyne, Pa. Diana M. Hornung-Momot, ACSR Wilmington, Del. Michael F. McGroarty Sr. Pittsburgh, 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

On the professional front, it may be hard to find a bright spot in the lingering soft market. But we’re trimming the fat and streamlining operations. We’re honing our skill sets and nurturing client relationships. And all of this, in the long run, makes us stronger.

Amidst today’s challenges, another area in need of reflection is your agency’s value. For the reasons we anticipate — retirement planning, transferring stock and securing outside capital — and for those we don’t (think: dissolution of a partnership or death), a valuation is necessary.

This issue of Primary Agent magazine answers the questions our members so often ask: How far out must I plan for perpetuating my agency? Is there an easy formula I can use to benchmark my agency’s value? When and why should I have my agency valued?

I encourage you to take a few minutes and read the feature article, prepared by valuation expert Al Diamond for IA&B members, and reflect on your agency: what your agency’s earning potential is today and what it will be in the future.

And, of course, I encourage you to take time away from the office and to enjoy the company of those for whom you are most thankful.

Happy Thanksgiving to you and yours, Dave

[4]

Member FAQ for filing the affidavit if a risk is found on the export/exportable list: Is it the Surplus Lines licensee or the retail producer?

ANSWER: The answer to this question is state-specific. And before answering it, let’s talk briefly about the export list.

?

The “export,” or “exportable list,” is a list of risks that are inherently so hard to place that the state regulator has waived the diligent search requirement for those risks. As a result, the (generally three) declinations from admitted carriers are no longer needed in order to access the Surplus Lines market.

In every state, the export list is different.

And the process to access the Surplus Lines market can be different too. So, let’s look at our three states.

Delaware currently does not have an export list at all. All submissions need the diligent search to be performed, and three declinations to be received from admitted insurers before placing the risk in the Surplus Lines market.

Of note to Pennsylvania members: w The export list is revisited every year, and IA&B always provides comments gathered from members in order to expand the list based on market needs. This has been done successfully over the years. Next time you are asked for your feedback, let us know what risks never can find a home in the admitted market. w The book “Compliance Pitfalls: How to Avoid Costly Fines and Penalties” contains an entire chapter dedicated to proper Surplus Lines submissions. The book is based on

IA&B’s Pennsylvania compliance seminars highlighting the top 10 producer violations and how to prevent them.

More information on Surplus Lines placements is available at www.iabgroup.com (go to Agency Operations / Surplus Lines).

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!

STRONG RELATIONSHIPS PRODUCE RESULTS There is no better time to become part of The Cumberland Insurance Group Team. We are now appointing agents in Central Pennsylvania.

Commercial and Personal Lines Competitive Commissions Exceptional Customer Service Financial Strength Experienced Underwriters Marketing Support

ND INS LA I N E R V

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Pennsylvania also has an export list.

When a risk is on that list, the “1609-PR” (or three-declination) affidavit no longer needs to be provided. A different form,

OUP

Contact Amber J. Ayrer at 800-232-6992, ext. 1237 or aayrer@cumberlandgroup.com

Celebrating 166 years of service [5]

A

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Maryland has an exportable list available. It is part of the Surplus Lines regulation (COMAR 31.03.06.10.) and is available for review on IA&B’s website as needed. Interestingly, while the regulation specifically states that an affidavit executed by the originating producer is required, the Maryland Insurance Administration stated that it has discontinued filing that affidavit and simply expects the agency to keep a record in the agency file. Other affidavits are still filed, but not this one.

however, must be filled out by the Surplus Lines licensee to indicate that the risk is on the export list. The form in question is the 1604-E.

MBER CU

QUESTION: Who is responsible

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1844 - 2010

State News Primary Agent | November 2010

New laws in effect As a reminder, Oct. 1 marked the effective date of several pieces of legislation resulting from IA&B’s advocacy work in Annapolis.

WC exemption: The bill included IA&Bamended language allowing for up to five officers of a non-close corporation to elect to be exempt from WC coverage.

Premium notice increase: An independent agent must be notified by a carrier of increased premiums for commercial/WC policies. Notifications via an electronic database/communication system suffice.

Fidelity bonds: Last session’s fidelity insurance requirement has been amended to allow for the use of fidelity bonds. This addition should streamline the process since bonds are easier and quicker to issue and allow for broader coverage.

Recap of producer licensing changes

Reminder: Mind Maryland’s producer licensing changes (enacted in 2008) to avoid last-minute CE scrambling or, worse yet, loss of license. Recently implemented changes include: w 24 CE credits are required each renewal period; w 8 hours of “training” are required before marketing long-term care insurance; w 3 ethics credits are required of all producers; w the grandfathering exemption for renewal CE was cut off for producers reaching 25 years after Oct. 1, 2008; and

Condo policy cancellations: Cancellation notices for condo policies are now in line with the insurance article, providing more consistency and clarity.

[6]

w CPCU, CIC and other designees are no longer exempt from licensing exams.

Learn more: www.iabgroup.com/md/2008_ licensing_changes

NFIP floats lower premiums

Out-of-state WC hurdles

Reminder: Policyholders may qualify for – and receive notification of – FEMA’s extension of the National Flood Insurance Program’s (NFIP) Preferred Risk Policy (PRP).

The list of states that are complicating carrying workers’ compensation (WC) coverage across state lines continues to grow. Read up on what your clients (and, in turn, you) need to know.

To qualify for the lower-cost PRP, the building must have been newly designated in a Special Flood Hazard Area due to a map revision on or after Oct. 1, 2008. The extension lasts for two years following the effective date of the map change.

Massachusetts

Agents’ to-do list: w Understand the changes in anticipation of clients’ questions; w Ensure the PRP extension is granted if it is to a client’s benefit; and

The latest state to throw a monkey wrench into WC coverage, Massachusetts now requires businesses that provide evidence of coverage under item 3.C to submit the new Form 154 to any licensing and/or permitting authority before conducting work that requires a license or permit.

Access Form 154: http://www.mass.gov/Elwd/docs/dia/ forms/f154.pdf Note: As this publication went to print, changes to Form 154 were pending.

w Revisit flood insurance quotes for anyone who was affected by a map change and rejected coverage.

Learn more: www.iabgroup.com/md/features/NFIP_ floats.html

New York

Incidental exposures in New York can no longer be handled by listing the state in item 3.C of the WC policy.

Instead, out-of-state employers are required to carry a full, statutory New York State WC policy. Translation: When an employee goes to a conference in New York, New York must be listed in item 3.A (assuming the carrier is licensed in the state).

Neighboring news Pa. surplus lines licenses: birth-month renewal conversion

Renewal changes are in store for Maryland producers who hold nonresident surplus lines (SL) licenses in Pennsylvania. New individual SL licenses now will be issued for a minimum of two years and expire on the last day of the licensee’s birth month, following the process already under way for producer licenses.

Existing Pennsylvania SL licenses also will convert from a Feb. 28 to a birthmonth expiration date.

Act 14 of 2010, which implements various changes to the SL statute, went into effect in late September. Members holding a SL license are encouraged to read the Pennsylvania Insurance Department’s FAQ. Visit www.ins.state.pa.us and select “Services for Producers” from the lefthand navigation bar. Click the “Notices and Information” link.

Learn more: www.iabgroup.com/MD/WC/NY

A note of gratitude Sincere thanks to Linda McCann who recently completed her term on the association’s board of directors. It is due to the dedication and vision of volunteers like Linda that IA&B remains relevant and poised for the future.

Linda McCann Bay Shore Insurance, Inc. Salisbury, Md. [7]

WELCOME

New Members The Moran Group LLC Severna Park, Md.

Preventing Primary Agent | November 2010

ERRORS AND OMISSIONS

DON’T TAKE BUSINESS INTERRUPTION COVERAGE FOR GRANTED CURTIS M. PEARSALL CPCU, AIAF, CPIA Curtis M. Pearsall provided this article on behalf of Utica Mutual Insurance Company in Utica, N.Y. Insurance Agents & Brokers Service Group Inc. is the exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania.

For questions regarding your Errors & Omissions coverage, contact IA&B at (800) 998-9644 or iab@iabgroup.com.

When meeting with a prospect or current customer on a commercial account, it will no doubt include a discussion of Property, Liability, Workers’ Compensation, Auto and Umbrella coverages. These are probably the most traditional coverages upon which your customer is focused. Yet will there be discussion regarding Business Interruption? This is an extremely important coverage.

Unfortunately, it also generates its share of E&O claims. Starting now, make sure the matter of Business Interruption is not taken for granted.

Based on the type of customer with which you are working, there is potential the account will be eligible to be written on a Businessowners’ package policy. A benefit of BOP policies is that they provide a form of Business Interruption coverage.

Traditionally, the coverage responds if an emergency disrupts or destroys the business – and not only compensates for lost income and expenses incurred when

a company is forced to vacate its premises due to disasterrelated damage, but also covers operating expenses, such as payroll, which continue even when business activities have ceased. Sounds good and definitely provides some key coverage, but as we will discuss later in this article, there are gaps that must be considered.

Be alert to any co-insurance clauses pertaining to Business Interruption as some carriers include them.

If a co-insurance clause applies, providing an example detailing the impact of being underinsured is valuable. It also provides strong E&O protection if there is a loss and the insured suffers a co-insurance penalty and alleges the concept of co-insurance was never explained. As you will note by the following E&O claim, when moving an account from one carrier to another (even though both were written on a BOP), it is extremely important to identify any coverage differences and bring them to the customer’s attention.

[8]

In this case, the agent failed to duplicate coverage for a client. The client had a BOP policy with a $1,400,000 limit on Business Interruption with no co-insurance with Carrier A. On renewal, the agent switched the coverage to Carrier B. The policy was written with the same limits, but with a 100 percent co-insurance clause. The agent missed the change.

A loss occurred, and the claimed shortfall was more than $800,000, due to the application of co-insurance.

There was a suit between Carrier B and the client as to the coverage, and the agent was brought into the litigation.

Carrier B mistakenly put an endorsement on the policy which in essence removed co-insurance, even though the declarations page showed 100 percent co-insurance.

Utica was able to convince Carrier B to contribute a significant amount, and the case was settled with Utica paying $135,000.

Ask and explain Another common area involving this coverage that seems to generate E&O claims

is that while many clients may have Business Interruption coverage, oftentimes they do not have the right amount. Whether the account is new business or an existing customer, review each customer’s Business Interruption needs annually. To do this effectively involves asking key questions to determine the proper coverage(s) and limit.

Since the current coverage is typically based on a projection made the previous year, with the changes in the economy there may be — and probably are — circumstances where the coverage and limit from last year is no longer adequate. Even though the economy has struggled, not all industries have been hit the same.

You might actually find situations where your client projects sales to increase over the next year. This could be due to their introduction of a new program or their involvement in a new segment where they project a sales increase. Factor in these changes when determining the coverage and limit. Not updating the limit could leave your customer underinsured.

Many carriers provide a list of essential questions that will help determine what coverage should be proposed and at what limit.

Questions such as: w Can the business operate at a temporary location rather than suspend operations? w Could your client’s business be interrupted because of a loss at one of its suppliers? There is coverage under the BOP Business Interruption form for this circumstance. w If your client is a landlord, could they suffer a Business Interruption loss?

w Would the customer suffer a loss if one of their service providers — electrical, fuel, water, heat, refrigeration, communication, etc. — suffered a loss? There is coverage under the BOP Business Interruption form for this circumstance.

Is there a need for Extra Expense Insurance?

Are there any new state Ordinance or Law requirements or code upgrades that could delay the customer from getting back in business?

As noted in the claim example, the issue of co-insurance is important.

It is also essential to identify and explain the issues of: Waiting periods: These can be fairly common with different duration periods. Any losses incurred during the period directly following an event will not be covered. Try securing coverage without a waiting period.

To determine the appropriate limit for this coverage, work with the customer or their accountant. Virtually all carriers will provide a Business Interruption worksheet (some provide an automated version) if requested.

Does your agency look like it did a year ago? As your agency has changed, so have your customers’ businesses. Having the necessary dialogue on updating their Business Interruption coverage is the professional thing to do.

Business Interruption is an extremely important coverage. Make sure it is not taken for granted. Provide your customers with assistance in understanding how the coverage works and what type best fits them.

Specific clauses that could impact the settlement of a claim: This includes any exclusions/limitations/ war clauses, etc.

A great tool to use to help you, your staff and your customers better understand each type of Business Interruption coverage is the various Exposure Analysis Checklists. If interested, contact your Utica Underwriter to secure information on obtaining these tools at significant discounts.

Impress upon your customers the importance of good recordkeeping.

This proper planning and attention to detail will be extremely beneficial and valuable to them in the event of a loss. It should provide them with a quicker and fairer settlement. A well-thought-out disaster plan should also be recommended.

[9]

Goodville Mutual New Holland, Pa. Partnering with the finest independent agents for over 80 years Contact Fred Macy, CPCU fred.macy@goodville.com 800-448-4622 goodville.com

Coverage Primary Agent | November 2010

CORNER

HOMEOWNERS’ 2011

JERRY MILTON, CIC Jerry M. Milton teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages. He is also the education consultant for IA&B, working with CISR, CIC and continuing education programs.

The Insurance Services Office (ISO) has filed a revision to the forms and endorsements under the Homeowners’ Policy Program. All revised forms will have an edition date of May 2011. The revised forms have been filed to be applicable to all policies written on or after May 1, 2011 in Pennsylvania and Delaware and to all policies effective on or after May 1, 2011 in Maryland.

Many of the revisions have been made for editorial purposes and therefore should result in no change in coverage. However, several of the revisions definitely will have an impact by either broadening coverage or reducing coverage. Those revisions that will change coverage are outlined and discussed below.

Personal Property Located in Self-storage Facilities Coverage C – Personal Property has been revised with the introduction of a sublimit of 10 percent of the Coverage C limit for personal property located in self-storage facilities.

This is a reduction of coverage.

A new endorsement, Increased Amount Of Insurance For Personal Property Located In A

Self-Storage Facility (HO 06 14), has been introduced to provide for the purchase of an increased amount.

Electronic Equipment And Business Property Limits A new sublimit of $250 has been introduced under Coverage C – Personal Property Special Limits of Liability for antennas, tapes, wires, records, disks or other media that are in or upon a motor vehicle and are used with electronic equipment that reproduces, receives or transmits audio, visual or data signals. This is a reduction of coverage.

The Coverage C – Personal Property Special Limits of Liability $500 sublimit for personal property used for business purposes while away from the residence premises has been increased to $1,500.

This is a broadening of coverage.

Damage By Animals Currently, Section I – Perils Insured Against exclude coverage for loss caused by birds, vermin, rodents, insects and animals kept by an insured. Reference to “vermin” has been deleted, and “nesting or infestation, or discharge or release of waste products or [ 10 ]

secretions, by any animals” has been added. This is a reduction of coverage.

Theft Peril The Theft peril under Section I — Perils Insured Against currently provides coverage for personal property of an insured who is a student while the property is at a residence the student occupies, as long as the student has been at the residence at any time during the 60 days prior to the loss.

This reference to 60 days has been increased to 90 days. This is a broadening of coverage.

Motor Vehicle Exclusion The motor vehicle provision under Section I – Property Not Covered and the Motor Vehicle Liability exclusion under Section II – Liability have been revised to more explicitly express the coverage applicable for motor vehicles used to service a residence.

For coverage to apply to a motor vehicle under the current Homeowners’ policy, it must be “used solely to service an insured’s residence.” The new provision provides coverage if “used solely to service a residence.” This is a broadening of coverage.

Toy Vehicles Provision Currently, the exceptions to the Motor Vehicle Liability exclusion do not address toy vehicles designed to be used by young children. An exception to the Motor Vehicle Liability exclusion has been introduced to cover owned battery-operated, low-speed (up to five miles per hour) toy vehicles used off an insured location. This is a broadening of coverage.

Expected Or Intended Injury Exclusion Currently, the Expected Or Intended Injury exclusion does not apply to bodily injury resulting from the use of reasonable force by an insured to protect persons or property. This exception to the exclusion has been revised to include property damage resulting from the use of reasonable force by an insured to protect persons or property. This is a broadening of coverage.

Loss Assessment Coverage Endorsement (HO 04 35) This endorsement has been revised to delete the special limit of $1,000 that applies to assessments that result from a deductible in the policy of insurance purchased by a corporation or association of property owners. This is a broadening of coverage.

Replacement Cost Loss Settlement For Certain NonBuilding Structures On The Residence Premises Endorsement (HO 04 43) This endorsement has been revised to provide replacement cost coverage on swimming pools, therapeutic baths and hot tubs that are inground or semiinground, with walls and floors made of reinforced masonry, cement, metal or fiberglass. Currently these type structures are settled on an ACV basis.

This is a broadening of coverage.

Limited Coverage For Theft Of Personal Property Located In A Dwelling Under

[ 11 ]

Construction Endorsement (HO 06 07) This is a new endorsement that can be used to provide limited coverage for the theft of personal property located in a dwelling under construction. If added, this endorsement is a broadening of coverage.

Canine Liability Exclusion Endorsement (HO 24 77) This endorsement has been introduced to exclude liability coverage for any canine specifically described in the

endorsement that is owned by or in the care, custody or control of an insured. If added, this endorsement is a reduction of coverage.

The above review of the major changes is based on ISO’s general explanations of policy intent. However, as stated by ISO, it does not necessarily reflect every insurer’s view or control any insurer’s determination of coverage for a specific claim.

Y’all take care!

AGENCY MANAGEMENT

Attaching a dollar amount to an agency The valuation process

One time. One and one half times. Two times.

Multiple of commissions.

Multiple of revenues.

Multiple of earnings.

Do these so-called benchmarks and thumbnail measures have any bearing to the value of your or any other independent or captive, retail or wholesale, P&C or L&H insurance agency?

Primary Agent | November 2010

The answer is yes ‌ and absolutely not.

Just about every agent facing a merger, acquisition, divestiture or stock or book valuation seeks a simplified measure of value, one that generalizes the value of his own agency or others. Most have heard that agencies were being sold for one time, two times or some other multiple of commissions, revenues, earnings or some other gauge of income, gross or net.

The problem with multipliers Unfortunately, the only way to use industry averages and benchmarks to value a business is if most businesses in the industry are similar enough to validate using generalities.

And the insurance agency industry has proven that individual entities can be so dissimilar that their values cannot be interpolated from simplistic industry averages.

Take this simple (and all too frequent) example: Two insurance agencies within a few miles of each other are both at $1 million of revenue. Agency No. 1 is 50 years old and reached $2 million in revenue about 10 years ago. For five years it was relatively stable, but then income began slipping regularly until it became a $1 million book of business. The owners are both near 70 years old, and the employees are either in their late 60s or are new to the agency. The loss of business is a sign of the aging of a client base, and most lost business was the result of clients retiring, selling their businesses or dying. ___________________________________________________________

The base of determining an agency’s current value is its earnings potential into the future. ___________________________________________________________

Agency No. 2 began five years ago with two young producers going off on their own. The staff and owners are in their thirties and forties, as are most of the businesses and clients that they insure. They owners spend a great deal of time and effort marketing and planning for growth.

Would a benchmark or average sale price of agencies apply to both (or either) of these businesses?

Why insurance agency valuations are unique The valuation of an insurance agency is constructed differently from that of a commercial building or of that of a service business, like a dry cleaner. While conditions could

[ 13 ]

Long gone are the days when the value of an agency was calculated in terms of multiples of commissions or revenues.

AGENCY MANAGEMENT

When valuations come into play Agency valuations are rarely obtained simply to satisfy an owner’s curiosity about the value of his business. Every valuation has a purpose.

Buy-sell agreements and estate planning: A track record of agency valuations lends credibility and support to the final valuation in the event of an owner’s demise.

Employee Stock Ownership Trusts, buy-ins and buy-outs: The current value is needed for stock value or stock transfer purposes.

Outside capital: The agency valuation tells the bank, insurance company or outside investor, on an annual basis, whether the return on investment is justified by the business performance.

Retirement planning: A valuation determines if offers (internal or external) are fair and in accordance with the market value.

Death, partnership dissolution or divorce: The value satisfies legal entities by determining the fair market value for internal transfer, sale or dissolution. (See the member profile on page 21.)

– A.D.

change that would render common value methods for the building or dry cleaner invalid under certain circumstances, most buildings and businesses like dry cleaners exist in a relatively stable environment and enjoy commonalities with other relatively similar buildings and businesses. Insurance agencies are so different from one another that, while industry averages exist, they do so only as a point of reference, not as a measurement tool.

Take three different agencies of $1 million in revenue. One is a general agency insuring primarily personal lines with 1,000-1,500 small premium customers each renewing annually. Another is a life insurance agency that continuously must sell new business in order to maintain its revenue level because renewal commissions are small and of limited duration.

The third is a specialty commercial agency writing 50 large, high-profile accounts. If the last 100 agency values reviewed averaged 1.25 times revenue when their values were divided by their revenue bases, could you then interpolate that these three agencies were also worth 1.25 times their respective revenues? Of course not.

An insurance agency value must depend on its future earnings power under whatever conditions are demanded by the reason for

[ 14 ]

the valuation. This implies that an agency can bear different values under different circumstances. ______________________________

Insurance agencies are so different from one another that, while industry averages exist, they do so only as a point of reference, not as a measurement tool. ______________________________

For instance, the value of an agency depends on its historical and projected future performance, based on the continued similar performance (or with planned changes) of its owners and staff. On the other hand, the same agency being valued for sale due to its owner’s retirement will depend on the conditions under which the purchasing entity would cause the purchased agency to generate earnings for the new owners. If the owners required the agency location to remain open and staffed, the revenue potential is different than if the location could be closed and the staff and customer base integrated into the purchasing business.

How a valuation is calculated In the creation of a proforma for valuation, the historical growth, expense and profitability of the agency as a whole are determined. This

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AGENCY MANAGEMENT

Perpetuation timeline Agents often ask when they should consider perpetuating their agency.

Consider this parable: Two homeowners desire to sell their neighboring houses and retire to a warmer climate. Neither is exactly sure when he wants to move.

During summer, while one polishes his golf game, the other landscapes his property and repaints his house. During winter, while one travels to exotic climates, the other discards the clutter in his house and garage and makes every room more attractive. In spring, while one complains about the market, the other begins to contact interested parties about the sale of his home.

Who will sell his home faster? For the most money?

The agent who prepares his agency for sale by “landscaping” and “discarding the clutter” will achieve more value than the agent who decides to get out on a whim.

For an agency, this preparation means grooming the number and quality of staff that any perpetuator, internal or external, would be happy to have working for him. It means cleaning accounts receivable and discarding clients who don’t pay premiums for long periods of time. And it means cultivating a track record of business retention and new business acquisition that proves the agency is strong and vibrant.

Internal agency housekeeping should be done one to two years before the potential sale. And, for those agencies that have minimal customer growth, another three years should be added to implement and reap the benefits of new marketing strategies.

– A.D.

[ 16 ]

includes tracking every revenue line over the past five years and every expense line over the same period. Agency owners and their staff help to determine what, if any, changes have taken place that would alter the revenue or expense track. With this information, revenues and expenses are projected (by line), and profit projections are made for at least the next five years.

Agencies that perform valuations each year find subtle changes take place in revenue projections or expense projections depending upon the agency’s historical results.

The profits of the agency in the future become the basis for the valuation (along with the hard net worth of the agency). If you question whether this method of valuation makes sense, ask yourself this question: Would you pay more for a business than your reasonable expectation of the profits that the business will generate to you over a reasonable period of time? Well, neither would anyone else.

Risk factors that impact valuation Unless an agency is being valued for a very specific purpose (internal perpetuation, bank loans, specific sale), values are projected as fair market values. This typically projects the agency’s performance into the future with conditions similar to its current conditions unless otherwise noted. However, your projections are not complete until you add or

subtract from the final valuation in accordance with risk factors that would affect the particular agency. While hundreds of 250 risk factors add and subtract value from an insurance agency, they fall into a few major categories that you can use yourself when valuing your own or other agencies:

UnderwritingYour

Aging This category involves the ages of the remaining employees or owners and the aging of a book of business. If you’re valuing an agency whose employees are all nearing retirement or that’s book of business reflects a generally older population, the risk factors in that agency are higher. The sale, ownership transition or perpetuation of that agency will be more difficult: Employees must become accustomed to a new method of operation, and customers may have loyalty to departed principals.

Book of business In this realm of judging risk, determine whether the agency’s revenue base is concentrated in a few large accounts or is spread over many smaller accounts, personal or commercial lines.

A large spread of business makes for a safer transition of an agency.

Methods of operation Is the agency automated or manual? Does it carry high receivables, or is it historically a strong collector? Are the procedures efficient, or is there much redundancy in the

[ 17 ]

Success

SM

GIVING PROPERTY OWNERS CONFIDENCE TO BUILD UPON. Years ago, Mike Serluco had a national company insuring his growing property development business. “But they go the way the wind blows,� he says. Then Independent Agent Don Kingsbury, of Christian Baker Insurance Agency, Lemoyne, suggested a local insurer with a stronger commitment to building owners – Millers. “It’s very, very important for an investor to have an insurance partner, and that’s what I call Millers,�

Mike says. With the few insurance claims he’s had, “Bing, bam, boom – it’s done and taken care of.� Adds Kingsbury, “With Millers, they actually listen to what you have to say. And not only do they know this industry, they offer package policies at a good price, and they back it up with excellent claims service.� Smart business people, independent agents and Millers...truly partners in protection. .*--&34 .656"- (3061 t 805 N. Front St., Harrisburg, PA 17108 'BY t NJMMFSTJOTVSBODF DPN *OTVSJOH ZPVS CVTJOFTT UISPVHI .JMMFST $BQJUBM *OTVSBODF $PNQBOZ *OTVSJOH -JHIU .BOVGBDUVSJOH t 0GGJDFT t 4NBMM 3FTUBVSBOUT t 3FUBJM 4UPSFT 4USJQ .BMMT t "QBSUNFOU #VJMEJOHT

AGENCY MANAGEMENT

handling of customers and paper? Is the decision making centralized or delegated?

Depending on the answers to these questions, you either add or subtract risk from the value of the insurance operation.

Summary Insurance agencies are not mysterious or difficult businesses to understand. However, the variations in the operation of insurance agencies require specialized knowledge to value without potentially costly missteps.

Be careful of the pundits and publications that report multiples of commission, revenue or earnings as the “average” value calculation for agencies. It is easy to work backwards and take fully matured values and divide them by commissions, revenues or earnings (raw or proforma). But the only way it makes sense is working backwards. _______________________________

With 42 years of insurance experience, Al Diamond, president of Agency Consulting Group, Inc., has become the industry’s

pre-eminent authority on agency valuation. Besides running a thriving agency consulting practice for independent agencies throughout the United States and Canada, Al acts as an expert witness on agencies’ values and practices and authors “PIPELINE,” a monthly national newsletter for agency principals.

Al and his staff welcome questions about agency valuation; internal or external perpetuation; strategic, tactical and marketing planning; and any phase of agency operations.

Contact them at (800) 779-2430 or al@agencyconsulting.com, or visit www.agencyconsulting.com.

Glance at Events N O V E M B E R

C A L E N D A R

Date

Topic

Location

2-4

P&C Licensing Study Course

Mars, Pa.

3

William T. Hold Seminar

Hagerstown, Md.

4

CISR—Agency Operations Course

Hanover, Md.

8-11

CIC—Commercial Casualty Institute

Erie, Pa.

10

CISR—Personal Residential Course

Erie, Pa.

10-12

James K. Ruble Graduate Seminar

Lancaster, Pa.

11

CISR—Personal Residential Course

Coraopolis, Pa.

15-18

CIC—Commercial Property Institute

King of Prussia, Pa.

16

Dynamics of Service Seminar

Mechanicsburg, Pa.

16-18

P&C Licensing Study Course

Malvern, Pa.

17

CISR—Personal Residential Course

Lancaster, Pa.

E&O Coverage Standards Seminar

Mechanicsburg, Pa.

William T. Hold Seminar

Salisbury, Md.

18

E&O Coverage Standards Seminar

Linthicum, Md.

19

E&O Coverage Standards Seminar

Newark, Del.

[ 18 ]

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

FEATURED PARTNER Erie Insurance CHIEF EXECUTIVE OFFICER Terry Cavanaugh President and CEO CORPORATE HEADQUARTERS Erie, Pa. A.M. BEST RATING A+ Superior WEBSITE www.erieinsurance.com

I

t’s the rare individual who is motivated by a genuine desire to help others. And it’s the rare company that puts that principle into practice.

At Erie Insurance, we’ve been helping people make things right since 1925, working side-by-side with the best independent agents in the business.

Our agents and employees are energized by a clear sense of purpose, performing to the best of their ability, because they know the work they do benefits millions of customers’ families and businesses. It’s part of SM being Above all in SERVICE and it’s why we’re so committed to the independent Erie agents who live and work in the communities they serve.

On the strength of these relationships, Erie Insurance has risen to become one of the nation’s most respected property/casualty and life insurers.

Today, we’re a Fortune 500 company

operating in 11 states and the District of Columbia. Erie has more than 4 million property/casualty policies in force, more than $13 billion in assets and more than $39 billion in life insurance in force. We’re the 19th largest property/casualty insurer in the United States, based on total lines net premiums written, and the 13th largest auto insurer, based on direct premiums written. A.M. Best rates Erie Insurance A+ Superior.

We are both proud and humbled to have received recognition by J.D. Power and Associates for “Highest in customer satisfaction with the auto insurance shopping experience — three years in a row.” We’re also one of “Ward’s 50 Top Performers” — the Ward Group’s annual ranking of more than 3,000 insurance companies based upon financial performance.

Erie Insurance’s founding principle was to provide its policyholders with

as near perfect protection, as near perfect service as is humanly possible, and doing so at the lowest possible cost. That same principle guides us today.

We still adhere to disciplined underwriting, fair pricing and a prudent investment philosophy.

We still practice the Golden Rule — treating others as we want to be treated.

We still thrive on the Erie family spirit, employees and agents working together as a team for the good of our customers and the communities we serve.

At our core, we still believe the truth in our founder H.O. Hirt’s words: “Success in business is not a matter of tricks or gimmicks…it is just a matter of simple common sense, mixed with just plain decency.”

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.

FEATURED PARTNER

OFFICERS

Penn National Insurance

Kenneth R. Shutts President and CEO

COMPANY STRENGTHS w

w w

w w w w w

Commitment to the independent agency system with strong agency relationships Competitive products and pricing Enhanced ease-of-doing-business through intuitive, powerful automation tools Superb agency force Underwriting consistency in the marketplace Financial strength Outstanding claims service with high customer satisfaction Knowledgeable and experienced employees

PRODUCT LINES BUSINESS w w w w w w w w w

Businessowners’ Program (BOP) Property General Liability Inland Marine Business Automobile Workers’ Compensation Umbrella Agents’ Umbrella Surety & Fidelity

Christine Sears, CPCU Executive Vice President and COO Gregory R. Stine Sr. Vice President and CFO/Treasurer Karen C. Yarrish Sr. Vice President, Secretary and General Counsel Robert B. Brandon Sr. Vice President, Underwriting Operations

COMPANY LOCATION Harrisburg, Pa. (home office)

A.M. BEST FINANCIAL STRENGTH RATING A- (Excellent)

w w w w w

Personal Automobile Homeowners Boat Dwelling Fire Renters Umbrella Liability

OPERATING TERRITORY We have more than 750 agencies across Pennsylvania, Maryland, Delaware*, New Jersey, Virginia, North Carolina, South Carolina*, Tennessee and Alabama*. *commercial lines only

— Kenneth R. Shutts President & CEO

SUBSIDIARY Inservco: a leading regional third-party claims administration firm providing integrated risk management services to more than 500 self-insured customers in Pennsylvania, New Jersey, West Virginia and Maryland.

PERSONAL w

“We strive to maintain the same values that our founders adhered to in 1919: honesty, integrity, dependability, and consistency in our approach to the insurance market. We sell only through independent agents, and we continue to seek appointments with agents looking for a strong, regional carrier. Our executive team spends extensive time in the field, building relationships with our agents, listening to their needs, and creating corporate strategies to help them grow, profitably, with us. Won’t you join us and grow with us?”

AGENCY APPOINTMENTS AVAILABLE Contact marketing@pnat.com or visit online at www.PennNationalInsurance.com

“We offer our agents stability, consistency, responsiveness, and long-lasting personal relationships — rare traits in today’s propertycasualty insurance environment. Our regional structure allows us to respond more effectively to local market conditions and to offer our agents access directly to decision-makers. And our larger size among regional insurers gives us the financial resources and technology expertise to compete with the national carriers with our easy-to-use, efficient automated services. Our automation and competitive pricing in personal insurance has enabled our agents to place more business with us over the last few years, and our broad portfolio of business insurance products and consistency in the marketplace offers agents compelling reasons to trust us with their commercial business.”

— Christine Sears Executive VP & COO

Listed below are those companies that strongly support the independent agency system and Insurance Agents & Brokers.

Thank you for your continued sponsorship.

WHAT IS IA&B PARTNERS? The IA&B Partners program gives company and allied businesses the opportunity to demonstrate their commitment of support to independent agents and receive maximum market exposure. As an IA&B Partner, you will also realize the benefits of IA&B membership to help you succeed in the insurance industry.

DO YOU SEE YOUR NAME? To become an IA&B Partner, choose the sponsorship package that matches your commitment of support.

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

PLATINUM LEVEL

BRONZE LEVEL

ACUITY Berkley Mid-Atlantic Group Erie Insurance Group Harleysville Insurance Insurance Agents & Brokers Service Group Inc Millers Mutual Group Millville Mutual Insurance Co Mutual Benefit Group Ohio Casualty Penn National Insurance Selective Swiss Re The Main Street America Group Travelers Utica National Insurance Group

Aegis Security Insurance Co

GOLD LEVEL

Insurance Placement Facility of PA

Allied Insurance MMG Insurance Progressive

SILVER LEVEL Access Insurance Company American Mining Insurance Co Cumberland Insurance Group Donegal Insurance Group Frederick Mutual Insurance Co Harford Mutual Insurance Co Juniata Mutual Insurance Co PSBA Insurance Trust The Motorists Insurance Group Westfield Insurance Zenith Insurance

Agency Insurance Company Auto-Owners Insurance Company Briar Creek Mutual Insurance Company Builders Insurance Group Chubb Group of Insurance Companies Encompass Insurance First General Services Foremost Insurance Group Goodville Mutual Casualty Company Grange Insurance Companies Hanover Fire & Casualty Insurance Company Insurance Alliance of Central PA Inc

Keystone Insurers Group Inc Lebanon Mutual Insurance Company 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 Mutual Service Office Inc Tuscarora Wayne Insurance Company Primary Agent November 2010

MEMBER PROFILE

Unexpected loss, unexpected valuation

I

t was December 2007, and Brenda Antis was mourning the unexpected loss of her father … and facing an unexpected agency valuation process.

Antis’s father intended for the family-run business, Walton & Suder Insurance Agency in Greensburg, Pa., to transfer to his daughter upon his passing. A buy-sell agreement was in place: His shares would go to his wife, who would sell them to Antis.

The surprises continued.

Antis first turned to the agency’s regular accountant, only to learn that he wasn’t certified in valuations. From there she began searching for certified accountants and

“We thought we had our i’s dotted and t’s crossed,” shares Antis.

What they hadn’t known was that they would need an agency valuation to settle her father’s estate — and that the Pennsylvania Department of Revenue would need to approve it — before they could move forward.

“I had the right to buy his shares,” says Antis. “We were OK there, but we didn’t know that we would need an accountant to value the agency for the state’s seal of approval.”

her everything. It became a lot of work for us and required a lot of time. I had to fill out a 25-page document.”

The accountant then determined two separate valuations, since the agency actually consists of two corporations: The shell, Walton & Suder, holds company contracts, while the branch locations handle the day-to-day operations. Both valuations were based on fair market value since they were done for tax purposes to settle the estate.

In total, including the eight or nine months the Commonwealth took to approve it, the agency valuation process lasted two years.

found their services came with higher price tags than standard accounts’. She shopped around and settled on someone local.

“She didn’t know our agency,” says Antis of the new accountant. “We had to give

[ 22 ]

“We could’ve wrapped it up in six months if we had prepared ahead of time,” explains Antis.

Today Antis and her husband are the agency principals.

They lived and learned and already are preparing a new perpetuation plan — complete with an agency valuation — for the day they retire.

IF YOU HAVE THE TOOLS, WE HAVE THE INSURANCE.

EIC ELIZABETHTOWN INSURANCE COMPANY 56 N Market Street, Elizabethtown, PA 17022 www.e-townins.com

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SERVICE and STABILITY since 1844 Does your agency need a carrier that provides outstanding service to both you and your clients?

We offer products to protect your personal and commercial lines clients. Our service is outstanding, our pricing is competitive and we do not use credit scores as part of our underwriting process. Our FRPPLVVLRQ VFKHGXOH LV UHZDUGLQJ DQG ZH RIIHU D SUR多W sharing program that includes production incentives.

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Contact: Dennis Marsaglia, Ext. 230 dennis@brokerssurplusagency.com Evelyn Frisch, Ext. 227 evelyn@brokerssurplusagency.com

If you would like to learn why a partnership with EIC is a great choice for your agency, please contact Lynn Reynolds at lreynolds@e-townins.com or call her at 800-736-8112, extension 404.

Stability Security Sensibility Formerly LG Insurance

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Leading Insurance Group Insurance Co., Ltd. is a licensed commercial insurance carrier providing competitive rates on property and casualty insurance to business owners in NY, NJ, CA, IL and PA. We spare no effort in providing our utmost products and prompt service for any and all of your insurance needs.

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Primary Agent | November 2010

Technology U P DATE

HOW TO USE TECHNOLOGY TO REDEFINE TODAY’S ECONOMY DANIEL BURRUS Daniel Burrus is considered one of the world’s leading technology forecasters and strategists. He is the founder and CEO of Burrus Research, a research and consulting firm that monitors global advancements in technology driven trends to help clients better understand how technological, social and business forces are converging to create enormous, untapped opportunities. The New York Times has referred to him as one of America’s top three business “gurus” in the highest demand as a speaker.

For more information on the services and products offered by Daniel Burrus, please visit www.burrus.com.

Today we’re in an era of technology-driven transformation. That means you can attain higher profits when you use technology to redefine your products, your services and/or how the industry in general works.

Unfortunately, most companies are using technology only one way — to

lower costs and become more efficient. They view technology as a way to “do more with less,” “streamline the workflow” and “trim expenses.” Sound familiar?

case, technology becomes a tool of creation. You can create new products, new services and entire new markets, which then creates new jobs and careers.

While that is certainly one good use of technology, you can also use it to redefine the marketplace as well as your products and services. In this

Why is this important?

Currently the United States is digging out of the worst recession since the 1930s, and the global economy is

[ 24 ]

suffering its worst setback in decades.

The key to recovering is all about jobs and how to create them. You don’t create jobs by increasing productivity; you create jobs by creating new products, services and markets. So even though we have a statistical recovery, we have a human recession.

As such, recovery can’t be jobless.

readers and media players. Like Amazon.com, Apple has redefined themselves as well as their industry.

The bottom line is that we can use technology to eliminate jobs or create them. It’s time for businesses to focus on redefining as a tool for job creation. If you’re ready to start redefining your company so you can grow your business and stay profitable as you create jobs for years to come, consider the following guidelines.

w Where is the direction of the future going based on

Know where you’re going Look at your product, service or industry and see how you can use technology to redefine it. The classic example is Amazon.com. When they first started the business, they used technology to redefine how people sell books. But they didn’t stop there.

They then expanded to other products and redefined how nearly everything is sold. Then they redefined again.

They developed a large IT, logistics and warehouse system, and they now rent out their enterprise IT platform and warehousing space to other companies. So they are not only redefining an industry; they’re also redefining themselves.

Another example is Apple. Back in early 2000, before they launched the iPod and iPhone, most people thought Apple was quickly going out of business. That’s when the company redefined themselves around music.

Later they redefined again with the iPhone, which is telecommunications.

Now they’re doing it again with the iPad, which has launched another revolution as they redefine ebook

[ 25 ]

technology? (For example, getting more energy efficient and going green are both long-term trends. Virtual marketing and social networking also represent long-term trends.)

So when it comes to your company and your industry, ask yourself some key questions, such as:

w Based on where your customers and your industry are going, is there a way to use technology to create new opportunities?

w What is growing and what is shrinking?

continued on page 26

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TECHNOLOGY UPDATE

Understand how technology is affecting your customers Look at how technology is affecting your customers in your industry right now. But don’t just look at productivity.

Look at the overall customer experience as well as who is buying your offerings. For example, in the late 1970s, when ultra light aviation was born, the first ultra light aircrafts were basically hang-gliders with engines. The FAA decided, due to the size and weight of the plane, people didn’t need a pilot’s license to fly an ultra light aircraft. As a result, the first ultra light manufacturers targeted that demographic — people who wanted to fly but who didn’t have the time or money to get a pilot’s license. One company, UltraSports, thought they could attract a better customer, so they asked, “Why not redefine the product, the customer and the market?”

Rather than target those who wanted to fly but didn’t have a license or the income to afford buying an aircraft, UltraSports decided to target commercial jet pilots and flight instructors for their ultra light aircrafts.

After all, these pilots were the best pilots, they loved to fly and they had money; however, because of their jobs, flying had become more automated and less fun. Then UltraSports went one step further and redefined the ultra light aircraft itself by adding a stick and rudder and instrument controls. They made the ultra light fly like an airplane rather than a hang-glider, which better appealed to their new target market.

UltraSports went on to become a national leader in their first year, all because they redefined who their customer was and then made product changes accordingly.

So when it comes to your customers, ask yourself some key questions, such as: w Is there a better customer?

For example, maybe you’re selling to a customer who can only afford low-margin products and services. w Who is your ideal customer? w Is there a customer you don’t have but should have? w Could you redefine your product and attract that customer? w Is there a way to use technology to enhance your product or service in some way that opens up a market or creates a new market for you … and thus new jobs?

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Take competition seriously Look at the specific ways in which you compete in the marketplace as well as what makes you unique. Then decide how technology can redefine the way you compete. For example, when was the last time you bought something from the Polaroid Company? At one time, they were the king of instant photography. But then technology and digital photography changed their industry, and the way they competed (instant photography) changed … but Polaroid didn’t change with it. Instead, they made the mistake many businesses do: They used technology to get more efficient and lower their costs.

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Service is our specialty; protecting you is our mission ®

Similarly, the Kodak Company was failing for over a decade. Finally, they looked at how they competed in the past as well as what it would take to compete in the future. That’s when they embraced digital photography.

And while they still have some traditional film labs across the country, it’s their digital products division that’s profitable today. The moral: The longer you wait to redefine how you compete, the harder it is to survive.

However, when you pinpoint a way to use technology to create new products and services, you add new revenue streams and new jobs.

So when it comes to competing in a technology-driven age, ask yourself some key questions, such as:

w Is there a way you can use technology to redefine how you compete? w Is there a way you can use technology to change your product or how you service people? w Is there a way you can use technology to redefine your customer’s experience?

A (re)defining moment Staying ahead during a technologydriven transformation is indeed possible. It’s all about looking at where your customers are going rather than where they have been. It’s about looking at where technology is evolving and how it is shaping the

market, not where it used to be. When you ask the right questions and take action on what the answers reveal, you can use technology to redefine your company, create new jobs and experience higher profits than ever before.

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If you would like to place a Classified Advertisement, simply fax your ad on company letterhead to (717) 795-8347, and we will take care of the rest.

Ad Index ACUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 Brokers Surplus Agency . . . . . . . . . . . . . . . .1, 23 Commonwealth Ins Co . . . . . . . . . . . . . . . . . . .15 Cumberland Insurance Group . . . . . . . . . . . . . .5 Elizabethtown Insurance Co . . . . . . . . . . . . . . .23 Goodville Mutual Cas Co . . . . . . . . . . . . . . . . . .9 Harleysville Insurance . . . . . . . . . . . . . . . . . . .IFC IA&B Partners Program . . . . . . . . . . . . . . . . . . .21 IA&B Series Ad . . . . . . . . . . . . . . . . . . . . . . . . .IBC Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC LIG Insurance Co . . . . . . . . . . . . . . . . . . . . . . .23 Miller Mutual Group . . . . . . . . . . . . . . . . . . . . .17 Penn National Insurance . . . . . . . . . . . . . . . . . .11 Preferred Property Program . . . . . . . . . . . . . . .26 TAPCO Underwriters . . . . . . . . . . . . . . . . . . . . .25 Tri-State General Ins Ag . . . . . . . . . . . . . . . . .IBC [ 28 ]

Preventing the marijuana business from going up in smoke A handful of the over two dozen states with medical marijuana laws allow for marijuana dispensaries and collectives. While these businesses are only legal under state law, the federal government has not targeted them.

Never one to miss an opportunity, the insurance industry has taken notice of this budding business.

According to a Sacramento, California-based insurance broker, approximately six carriers now write coverage under an enhanced business owners’ policy.

Sources: PIA National, A.M. Best

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