Primary Agent - November 2011 - PA Edition by Insurance Agents & Brokers Service Group Inc

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PENNSYLVANIA

ALSO INTHISISSUE: _________________ Executive management conference recap

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TRUST.

For All That Matters

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over

HM Workers' Compensation*

Workers’ compensation solutions for both loss control and claims control. (That’s using our head.)

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technical & financial accuracy in claims processing

client retention

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*Performance statistics based on Highmark Workers’ Compensation Operational Performance – 2010 Report, April 2011. Coverage is underwritten by Highmark Casualty Insurance Company, Pittsburgh, PA, or HM Casualty Insurance Company, Pittsburgh, PA. Highmark Casualty Insurance Company may provide certain administrative and customer support services. The coverage or service requested may not be available in all states. MTG-2197 7/11

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Contents PRIMARY AGENT MAGAZINE

The agency house of cards: How proper producer compensation can put your house in order

Missed Al Diamond’s words of wisdom at last month’s executive management conference? Then read on and make his insight on producer compensation your ace in the hole.

Page 12

Giving teeth to producer management It’s a dog-eat-dog world out there. And finding, training and retaining the best agents can make the difference between leading the pack and straggling behind. IA&B’s executive management conference taught even the oldest dogs a few new management tricks.

Page 22

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

Get social with IA&B

In every issue 3 4 5 6 8

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

10 27 28 28 28

Coverage Corner IA&B Partners Advertisers Index Classified Ads Last & Least

Subscriptions: Non-member price: $2.25 per copy or $15 per year. All communications for publications, including news, features, advertising copy, cuts, etc., must reach the editor by 1st of month two months prior to publication. Advertising rates furnished upon request. Address inquiries to: Primary Agent Editor Mechanicsburg, PA 17055-0763 Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347 Periodical postage paid at Mechanicsburg, Pa. and additional entry post office. Postmaster: Send address changes to above address. Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2011-11) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2011. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before making any decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

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Glance at Events N O V E M B E R

C A L E N D A R

Date

Topic

Location

William T. Hold Seminar

Hagerstown, Md.

10 Ways to Get Sued Seminar

Mechanicsburg, Pa.

1-3

P&C Licensing Study Course

Lehigh Valley, Pa.

CISR—Personal Residential Course

Mechanicsburg, Pa.

CISR—Agency Operations Course

Philadelphia, Pa.

2-5

CIC—Personal Lines Institute

Ellicott City, Md.

CISR—Agency Operations

Salisbury, Md.

10 Ways to Get Sued Seminar

Lehigh Valley, Pa.

8-10

P&C Licensing Study Course

Pittsburgh, Pa.

9-12

CIC—Commercial Casualty Institute

King of Prussia, Pa.

CISR—Personal Residential Course

Lancaster, Pa.

14-17

CIC—Personal Lines Institute

Erie, Pa.

CISR—Personal Residential Course

Pittsburgh, Pa.

Best Practices of E&O Loss Control

Pittsburgh, Pa.

DAIAB Meeting

Newark, Del.

10 Ways to Get Sued Seminar

Baltimore, Md.

29-Dec. 1

P&C Licensing Study Course

Mechanicsburg, Pa.

10 Ways to Get Sued Seminar

Dover, Del.

Ruble Graduate Seminars condensed to two days for 2012 James K. Ruble Graduate Seminar attendees will enjoy substantial travel and lodging savings and reduced time out of the office next year. The Society of CIC Board of Governors announced a new condensed two-day format for James K. Ruble Graduate Seminars, beginning in 2012. The new format will maintain the same high quality standards and comprehensive curriculum as the two-and-a-half-day format. Graduate Seminars are advanced, specialized education programs for designated CICs and CRMs. Each seminar enhances designees’ level of knowledge about an advanced topic, taking them beyond the information shared in the Institutes. IA&B’s James K. Ruble Graduate Seminars offer a variety of agendas based on designee input for each date and location, allowing participants to tailor their educational experience. Additional Graduate Seminar dates and locations have been added this year in IA&B’s tri-state region. View the schedule at iabgroup.com/ruble. [3]

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Board of Directors Officers Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P Chair of the Board West Chester, Pa. Norman Basso, CPCU Vice Chair of the Board York, Pa.

Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P

Chair of the Board’s M

David Rosenkilde, CIC Immediate Past Chair of the Board Reisterstown, Md.

Members Joyce M. Bailey, CIC, CRM, CPIW Newark, Del. Henry “Butch” Bradley, Jr. Forest Hill, Md. Timothy P. Burris Thompsontown, Pa. N. Lee Dotson, CIC, AAI Wilmington, Del. John L. Frankenfield Telford, Pa. G. Greg Gunn, CIC Lemoyne, Pa. John B. Hollister Milford, Pa. Diana M. Hornung Hanby, ACSR Wilmington, Del. Jocelyn R. Howard-Sinopoli, CIC, CISR Butler, Pa. Robert S. Klinger, LUTCF, CPIA** Germantown, Md. Douglas A. Loesel, CPCU Erie, Pa.

The trump card Member agency owners and principals laid their cards on the table: When it comes to producer management, they feel like the deck is stacked against them. How can they find quality salespeople? And once they have them on board, how do they keep them and keep them selling — without breaking the bank? IA&B responded with last month’s executive management conference, where nationally recognized agency consultants Al Diamond and Lorie Guthrie Phair provided tips for finding, training and retaining the best producers … and attendees walked away with an ace (or two) up their sleeves. If you missed the conference, read the article on page 12, penned by Al, for a snippet of his advice. Then stay tuned to IA&B’s member communications for more on this topic in the months ahead. Remember, when the chips are down, your agents’ association is there for you. Bob

Michael F. McGroarty Sr. Pittsburgh, Pa. Ann Gallen Moll, CIC Reading, Pa. April E. Ressler, CIC Altoona, Pa. Scott C. Rogers, CPIA* York, Pa. David B. Wasson Sr., CIC State College, Pa. Lawrence A. Wilson, CIC, CPIA, CPCU, ARM New Castle, Del.

Driving members to distinction.

* IIABA National Director ** PIA National Director

[4]

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Member FAQ QUESTION:

Certificates: Is there boilerplate language that we could use to state that

we are not conducting a formal legal analysis of the contract? Is there also standard language that could be used when certificate holders request their own form rather than an ACORD certificate form?

ANSWER: You can never be too prudent when dealing with certificates, … and it feels as though using disclaimers, cover letters and other documents is as necessary to the agent as the certificate itself is to the client. Contract review When presenting your conclusions following the review of the contract’s insurance specifications, it is suggested to provide a cover letter that will also contain a disclaimer. First of all, you are not an attorney, so you certainly do not want to appear to conduct a legal analysis or provide legal advice without a license to do so. You also want to limit your comments to the insurance provisions contained in the contract. Finally, a number of requirements may not match current coverage selection or limits. Only proper endorsement of the policy could possibly do so, and the client must understand that the certificate is not a substitute for the policy. Ultimately, only the client’s decision to modify the policy would change his or her coverage. A sample “cover letter” addressing these points is available to members at www.iabgroup.com (go to Agency Operations/ Certificates of Insurance). Feel free to use this sample and modify it as needed. Non-ACORD certificate In addition, when certificate holders ask for a proprietary certificate, rather than an ACORD form, to be completed, certain questions should be answered and precautions taken. ◗ Is a non-ACORD form acceptable in the insured’s state? Currently, Delaware, Maryland and Pennsylvania do not require prior filing of P&C certificates of

insurance. Caution should still be exercised however. First of all, this could change in the near future. In addition, if you do business in other states, keep in mind that some states do not allow the use of certificate forms that have not been filed and approved by that state’s insurance department. ◗ Is the carrier willing to accept the certificate submitted? Depending on the circumstances, this may be more of a rhetorical question, since many carriers refuse to “see” the certificates in the first place. Be that as it may, you should check with carriers to see if they agree to honor any unique language on the non-ACORD certificate. ◗ What if the carrier says no? If the carrier does not allow you to execute the form, the use of a tailored cover letter is again a good idea. You could respond by providing an ACORD form and add language to the effect that the insurance company will not approve the certificate requested, and instead offer a copy of all in-force policies. Another sample provision is also available at www.iabgroup.com for members to use (go to Agency Operations/ Certificates of Insurance). More information on certificates of insurance is available online, including how to push back inappropriate requests which have become rampant in many states.

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!

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State News Primary Agent | November 2011

A note of gratitude Sincere thanks to the IA&B of Pennsylvania members who recently completed their terms on the organization’s boards of directors. It is due to the dedication and vision of volunteers like these that IA&B remains relevant and poised for the future.

John T. “Chip” Colwell, Jr., CIC Rossbacher Insurance Service, Inc. Corry, Pa.

Kathleen M. Glattly, CPCU, ChFC, CLU, AIM DGK Insurance & Financial Services Factoryville, Pa.

New online force for independent agents and carriers A new venture backed by the Big “I” and a number of carriers will begin an effort to capture more consumers who shop online for insurance. Consumer Agent Portal, LLC (CAP) was created to deliver digital marketing tools and services that increase the online market presence of the independent agency system in personal lines insurance. CAP will launch with a two-pronged approach. First, next month it will unveil an industry services Web solution to help independent agencies, brokers and carriers build their online brands and visibility in order to attract and interact with today’s digital consumer. Then, next year, CAP will deliver a complementary consumer website. This portal will be the only online shopping solution to give consumers real-time comparisons from the largest selection of independent insurance carriers, as well as the ability to select local independent agents or brokers for service, customization of policies and advocacy. Learn more: http://projectcap.info/

Susan A. Sallada, CIC Universal Service Agency, Inc. Ft. Washington, Pa.

[6]

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Reminder of reimbursement of defense cost endorsements As reported in Agent Headlines, new commercial endorsements dealing with reimbursement of defense costs are creeping into many renewals. Here is the reason why: In August 2010, the Pennsylvania Supreme Court ruled in American and Foreign Ins. Co. v. Jerry’s Sports Ctr., Inc. that a reservation of rights letter can only assert defenses and exclusions that are found in the CGL policy. In other words, if the policy is silent on the insurer’s right to reimbursement, a reservation of rights letter is not enough. Consequently, ISO filed the IL 01 20 “Pennsylvania changes – Defense Costs” with a May 2011 effective date. Some carriers now add this endorsement at renewal. Once the endorsement is added, a client defended under a reservation of rights letter would have to pay the carrier back for defense costs after it is determined that the claim was not covered. Initial guidance from the Insurance Department had been that carriers should disclose the modification to policyholders. Access more information on the case: www.iabgroup.com/pa/reimbt_defense

It’s a wrap for fall MAPs IA&B of Pennsylvania members charted the association’s course this fall at Member Agent Panel (MAP) meetings. The agenda allowed IA&B board members and staff to present a series of regulatory, operational and legislative topics, while asking MAP participants for input, experiences and recommendations. The No. 1 topic? Reclaiming market share. Twice a year, MAP volunteers meet at locations throughout the state to help steer IA&B’s research, resource development, legislative and regulatory action and more. The IA&B of Pennsylvania Board of Directors now will review the latest MAP feedback and set the association’s direction accordingly. Learn more about MAPs: www.iabgroup.com/get_involved

[7]

Trusted Choice® first steps Are you leveraging the Trusted Choice branding campaign? As of Sept. 1, all IA&B of Pennsylvania members are Trusted Choice agents. So now what? First things first. If you haven’t, log onto TrustedChoice.com/agents with your username and password (e-mail address and Big “I” ID number). Then update your agency profile under the My Account link. This allows consumers to find you via an online agency locator. While you’re on the website, take a look around and see what tools Trusted Choice has to offer your agency. And stay tuned to IA&B’s Agent Headlines, website and Primary Agent for additional opportunities. Learn more: www.iabgroup.com/trustedchoice

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Preventing Primary Agent | November 2011

ERRORS AND OMISSIONS

10 MORE TIPS TO AVOID E&O CLAIMS — PART 2 OF 2 CURTIS M. PEARSALL CPCU, AIAF, CPIA Curtis M. Pearsall, CPCU, AIAF, CPIA, president of Pearsall Associates Inc. and special consultant to the Utica National Errors & Omissions Program, supplied this article.

Last month, we reviewed the first set of 10 practical tips to avoiding Errors & Omissions claims. This month, we will review the second set of 10. Combined, these have significant potential to either reduce the likelihood of a claim being made against your agency or, if one does develop, be beneficial in the agency’s defense. As you will note, many can be easily implemented into your agency structure.

could be additions or deletions. While your staff may feel confident they took down the information correctly, mistakes do occur – and, at the time of a claim, your customer could deny requesting that change. Bottom line: Get customers’ coverage modification requests in writing. Ask them to e-mail you or stop in the office. This will help ensure there is no misunderstanding. Another highly used approach is sending customers an e-mail recapping the conversation as your agency understood it. In the written communication, ask customers to contact your agency promptly if their understanding of the conversation is different than yours.

Tip #11 – Don’t allow your receptionist to accept premiums. If customers come into your agency to pay their premium, it is strongly suggested they meet with the customer service representative/ account executive who handles that account to verify its status. There is the possibility the account could be in cancelled status and further action will be necessary.

Tip #13 – Perform monthly quality control. Are there any mistakes in your files? Probably. The problem is that you’re unsure which files the mistakes are in. If you knew, you would fix them.

Tip #12 – Get it in writing. Customers call every day to make policy coverage changes. These changes [8]

Finding these mistakes can oftentimes be accomplished using quality control (QC). This QC should be handled at least monthly and should involve a random sampling of each staff member’s files. Not only will you probably identify a file that needs some correction, you can also determine if the work is being performed accurately and within your agency’s time-period guidelines. Many agency management systems provide the tools to assist with performing QC. Tip #14 – Use exposure analysis checklists. Exposure analysis checklists are the closest thing to a “silver bullet” in avoiding E&O claims. For many years, the No. 1 cause of E&O claims has been failure to provide the proper coverage. Exposure analysis checklists provide a systematic approach to ensure you are asking your customer the necessary questions to identify the various exposures. In addition, these checklists contain extensive

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information for each of the more than 650 SIC codes. This will enable your staff to essentially become experts in various coverages and exposures. Within each class, you have access to a full narrative on the exposures. You will also be provided with a questionnaire that indicates pertinent questions, plus a client coverage agreement prompting you to review all the coverages and document the final disposition. If your customer declines a specific coverage, you will have concise documentation for your file. Tip #15 – Ensure binders are completed accurately/Mail policies out promptly. Until the policy is issued, oftentimes, the binder will serve as the basis for the settlement of any claims. Make sure it is completed promptly and accurately. When the policy is received, ensure it is accurate, and promptly get it in the customer’s hands. Tip #16 – Ensure insurance issues in a client’s divorce are handled with precision. These matters require strong focus because you are typically rewriting coverages for one or both persons. It is key that you look at the named insured definition as most personal lines policies are based on the named insured and the residence location. Make every attempt to meet with both parties to discuss the matter to better understand their needs and desires. Your primary goal is to secure the appropriate coverage for each party with no reductions. Tip #17 – Keep the acceptance sheet of your fax transmission. This tip is easily implemented. When sending a fax, keep the original copy of the cover sheet showing that the fax was accepted by the other party. In the event of a problem, this document could be quite important

in proving what you sent, when you sent it and to whom. The most common problem seems to arise when you sent a fax binding coverage and, when there is a claim early in the policy period, the other party states it has no record of receiving your fax and thus is not considering the coverage bound. This should alleviate that problem. Tip #18 – Get all necessary inputs when doing valuation calculations. In reviewing E&O claims involving property, the majority allege the agent did not correctly determine the proper limit and thus, at the time of the loss, the insured did not receive a proper settlement. If it is necessary for you to do the calculation, tremendous precision with all necessary information is required. Take the time to secure all necessary information. Inserting a disclaimer stating the value calculated is based on the information provided and is not a guarantee losses will be fully paid is also beneficial. It is also appropriate to include in the disclaimer that engaging a property appraiser is the most reliable way to calculate replacement costs for buildings and other structures. Tip #19 – Monitor the financial ratings of your carriers periodically. Your agency should have a guideline for the rating of carriers (including E&S) with which you will do business. Many agencies require A- or better. Have a designated person assigned to periodically check carriers’ ratings. They can check monthly or subscribe to a service that alerts the agency to changes. Carrier ratings do change – and don’t expect marketing representatives to tell your agency that their company’s rating has dropped. When the rating drops below a set corporate level (or becomes an NR rating), consider notifying your customers of this new rating and tell them what it [9]

means. There may be situations where you want to advise the customer that you strongly recommend replacing the coverage. Tip #20 – Document. Document. Document. While this is the last of the tips, it is by far the biggest issue impacting the direction in which an E&O claim will go. At the time of a claim, is your file well documented or is the documentation somewhat sparse and sketchy? Use your agency staff meetings to heavily stress the importance of timely and accurate documentation. Items to cover include: Customer interactions: Without documentation, it’s just hearsay. ◗ Requests to modify coverage: Pull the file to ensure you fully understand the request. Get the request in writing or send the customer an e-mail documenting what was requested. This will help alleviate any misunderstandings. ◗ Phone calls, including cell phones: Producers or anyone in the agency with a cell phone should be required to document any key business conversations in the agency management system. ◗ Declined coverage: When a customer declines a specific coverage, get that declination in writing. Once again, this will serve as vital protection should a claim arise down the road and the customer disavows declining the coverage. Through implementation of these 10 tips – and the 10 from last month – you definitely will enhance the E&O culture at your agency. This could help reduce the likelihood of E&O claims against you and help provide effective defense if a claim does occur.

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Coverage Primary Agent | November 2011

CORNER

WHEN IS PROPERTY IN YOUR “CARE, CUSTODY OR CONTROL?” JERRY M. MILTON, CIC Jerry M. Milton, CIC teaches and consults on industry issues. The legal profession recognizes him as an expert on insurance coverages. He is also the education consultant for IA&B, working with CISR, CIC and continuing education programs.

A “care, custody or control” exclusion is common in liability policies. The Commercial General Liability (CGL) policy excludes property damage to personal property in the care, custody or control of the insured; the Business Auto policy excludes property damage to any property in the care, custody or control of the insured; and, the Homeowners’ policy excludes property damage to any property in the care of the insured. This exclusion is so well known in the insurance industry, we have shortened it to “CCC.” Question 1: Why do we need all three – care, custody, control? Isn’t that a little redundant? I guess we want to make sure we cover the waterfront. Question 2: When is the property in the insured’s “care, custody or control”? Determining if property is in the care, custody or control of the insured, which would exclude coverage for damage to that property, is all too

often left up to the courts. And, as with many other provisions of our policies, the courts are often divided. Even our insurers who provide the coverage are not too sure. To prove my point, call your claims departments and ask them to clearly define “care, custody or control.” Good luck! The Illinois courts have devised a two-part test to determine if an insured has “care, custody or control” of another’s property: 1.

Was the property in the possessory control of the insured at the time of loss; and

Was the property a necessary element of any work performed?

The case of Bolanowski v. McKinney illustrates this test. The Illinois Appellate Court held that the “care, custody or control” exclusion did not apply with respect to musical instruments damaged by a

[ 10 ]

fire which occurred after a music group left their instruments at the insured’s lounge overnight. The court reasoned that the lounge did not exercise any right to maintain, move or protect the instruments and the lounge exercised no prerogative to do anything other than permit the music group to leave their instruments on the premises between shows. A similar ruling occurred in Accola v. Fontana Builders, Inc. The Accolas were sleeping in a house with their children when a fire broke out, destroying both the house and its contents. At the time of the fire, the house was owned by Fontana Builders and they were in the process of putting the finishing touches on the house. The Accolas were occupying the house under a 30-day temporary occupancy permit. Incidentally, James Accola is the owner and president of Fontana Builders. The fire was allegedly caused by some

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dirty and flammable rags left behind by a Fontana employee. The Accolas filed a claim against Fontana Builders for the loss of their personal property. Westfield Insurance Company, Fontana’s CGL insurer, denied the claim on the basis that the property was in the care, custody or control of Fontana. To strengthen their argument that the Accolas’ personal property should be excluded, Westfield pointed out that it was under the supervision of a Fontana employee – James Accola, the president. The trial court agreed with Westfield and granted summary judgment on its behalf, therefore dismissing Westfield from the lawsuit. The Accolas appealed the ruling. On appeal, the Wisconsin Supreme Court pointed out they had already found the “care, custody or control” exclusion to be ambiguous (Meiser v. Aetna Casualty & Surety Co.), and they have a test to determine if property is in the care, custody or control of the insured. (The Wisconsin test sounds familiar to the Illinois test.) Property is in the care, custody or control of the insured if it is under the supervision of the insured and it is a necessary element of the work performed. The Wisconsin Supreme Court agreed with Westfield that the personal property was under the supervision of a Fontana employee, but they failed to see how the personal property was necessary to the work of finishing the house. Therefore, the Supreme Court reversed the trial court’s summary judgment in favor of Westfield. One final thought. The “care, custody or control” exclusion applies to “the insured.” Therefore, only the insured that has care, custody or control of the property is excluded. The Separation Of Insureds condition of the CGL clearly states that the insurance applies

separately to each insured. An employee may have care, custody or control, but does the corporate entity? After reading this, I’m pretty sure you still don’t know when one person’s property is in the care, custody or control of another person. I’m not even sure that I know. I do know this: I’m tired of having exclusions that nobody knows what they mean. This includes insureds, insurers, agents and the courts.

Y’all take care!

Grocery and Convenience Store coverage in a five-minute phone call. Call. Quote. Bind. 1Ã }Ê/ * "½ÃÊV ÕÀÌi ÕÃÊ> `Ê«À «ÌÊV> ÊVi ÌiÀ]Ê À ViÀÞÊ> `Ê Ûi i ViÊ-Ì ÀiÊV ÛiÀ>}iÊV> ÊLiÊµÕ Ìi`]ÊL Õ `Ê> `Ê`i ÛiÀi`Ê Ì ÊÞ ÕÀÊi > Ê L ÝÊµÕ V ÞÊ> `Ê>VVÕÀ>Ìi ÞÊ`ÕÀ }Ê iÊv Ûi ÕÌiÊ« iÊV> °

CGL Coverage Available: UÊÊ*À >ÀÞÊ ÌÃÊÕ«ÊÌ ÊfÎÊ Ê Ê "VVÕÀÀi ViÉ }}Ài}>Ìi UÊÊ µÕ ÀÊ >L ÌÞÊ ÛiÀ>}iÊ>Û> >L i UÊÊfx]äääÊ i` V> Ê*>Þ i ÌÃÊ ÛiÀ>}i UÊÊ `` Ì > Ê ÌiÀiÃÌÃ UÊÊ ÝViÃÃÊ ÀÊ1 LÀi >Ê ÌÃÊÕ«ÊÌ ÊfxÊ * Available coverages and markets may vary dependent upon risk characteristics.

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The TAPCO Service Pledge U “A”-raÌe` o -a` iÌÌe` carrier U Co «eÌiÌive «rici g U aÃÌ «olicÞ ÌÕr aroÕ ` U - ÕÃe vi a ci g available U QÕic cla ÃÊ a `li g U f10 cre`iÌ Ìo ÞoÕr «erÃo alize` /A*CO Z Õc Ã 6iÃa `ebiÌ car` ÜiÌ eac «olicÞ U 6iÃa] aÃÌerCar` a ` ACH «aÞ e ÌÃ acce«Ìe`

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[ 11 ]

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More than 1,000 classes of P&C business written under binding authority.

800-334-5579 www.gotapco.com

G22698_12-21_Novembe2011 10/18/11 3:48 PM Page 12

AGENCY MANAGEMENT

The agency house of cards How proper producer compensation can put your house in order

Missed Al Diamondâ&#x20AC;&#x2122;s words of wisdom at last monthâ&#x20AC;&#x2122;s executive management conference? Then read on and make his insight on producer compensation your ace in the hole.

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Primary Agent | November 2011

he concept of fair and motivating producer compensation still eludes most agents who have found themselves over-compensating producers who are not generating the growth needed by the agency. The producers have generated a sufficiently large book of business that: a) They are earning a compensation level that they consider comfortable, b) They spend most of their time with their existing client base and have little time left for new business or c) They don’t have to hustle for new business any longer, letting whatever flow of referrals support replacement of lost business.

We have forgotten that the primary purpose of compensation programs is to fairly compensate producers for their productivity and to continue to motivate them to grow the agency’s book of business. The million dollar question is, “How do we provide a fair compensation for producers that influences and motivates them to continue to grow the books of business that they produce for us and that supports their financial needs?” The short answer is to provide the “carrot” of proportionately growing earnings tied to the growth of the books of business for which the producer is responsible. The rest of the answer is to also provide a “stick” that penalizes producers for stagnation and declining books of business. The average producer in the P&C industry in the U.S. earns between 30 and 35 percent of the commission dollar. New and smaller producers earn less, and some producers still earn more. Some higher compensation programs are warranted by the economies of scale evolved by larger produced books of business. But most high-level compensation plans are not warranted and result from producers sharply negotiating with agency owners who feel that they don’t have a choice. Remember, once you have negotiated high commission rates for producers without a just return to the agency through continuing growth, it is nearly impossible to go back. You will lose producers who refuse to return to logical and profit-generating compensation plans.

Producers with little experience or books of business Young producers with little or no books of business should be paid the minimum required to support their families until

[ 13 ]

The primary purpose of compensation programs is to fairly compensate producers for their productivity and to continue to motivate them to grow the agency’s book of business.

G22698_12-21_Novembe2011 10/18/11 3:48 PM Page 14

AGENCY MANAGEMENT

they generate sufficient books of business to properly support themselves. It is important to cover the producer’s family expenses because the pressure of insufficient compensation to meet expenses will translate to desperation when they face sales proposals. We all know that the clients can sense desperation and will refuse otherwise adequate proposals if they feel the producer is pressuring them. Producers on stable compensation to pay for their expenses should be expected to generate one times their earnings in their first year, two times their earnings in their second year and three times their earnings by the end of their third year. At that point they fit into the commissioned compensation program that pays 30 to 33 percent of revenue to the producers.

Tiered compensation Experienced producers still need incentives and goals. These are derived from the specific agency budgets that determine when a producer’s book of business has achieved the economies of scale to make higher profits for the agency. We typically analyze an agency’s financials and create three or more tiers of production, each of which is substantially more profitable for the agency. At each tier the producer’s compensation is increased in increments of 3 to 5 percent, and since the book has achieved the needed economies of scale, the

increase is from the producer’s first dollar. This is a great incentive for the producer to grow his/her book of business. Some agencies have doubled the number of tiers and increased the producer’s compensation a smaller amount at each level to provide between six and 10 levels of commission increase based on the producer’s growth and success. Of course, rules and exceptions exist, such as when a producer’s book of business decreases through a tier, and those are taken into account within the tiered compensation program.

————————————————

We make a serious mistake assuming that because a group of people have sold insurance in the past, that they remain producers for life. ————————————————

Taking down roadblocks Roadblock 1: We’re too busy to sell new business The first roadblock to producers increasing their books of business is that they claim to be too busy taking care of their current client base. For most producers, this roadblock is an excuse, not a reason. They claim

to be too busy because they put themselves in the position to service and administer to the client instead of being the relationship manager. The answer is to keep the clients satisfied without the time currently spent by the producer, leaving the producer free to generate more new business. The producer maintains the responsibility of relationship management. That includes generating new business through active referrals from every strong client relationship. But the agency should use an account executive to assume the daily control of the larger client (including several client visits each year for service and administration). Smaller clients should be serviced by CSRs who maintain regular contact with the clients by phone. While it is certainly more comfortable for producers to visit smaller clients, it is not cost justified. Producers can still make themselves available for special situations without spending an inordinate amount of time during the year with clients whose commissions don’t justify the attention. Account executives are a class of employee who manage a book of business, including building and maintaining relationships through customer visits, but do not sell new accounts as a normal part of their job. Account executives are very valuable to an agency because they can take the service load off the producers, permitting them to Continued on page 16

[ 14 ]

G22698_12-21.qxp:Novembe2011 10/18/11 5:22 PM Page 15

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G22698_12-21_Novembe2011 10/18/11 3:48 PM Page 16

AGENCY MANAGEMENT

Continued from page 14 continue to generate new business as the cornerstone of their jobs with the agency. The industry has begun adopting account executives from the ranks of CSRs who mature into customer relationship efforts, from insurance company employees who are technically competent but have never mastered sales skills, and from their own producer ranks when it becomes apparent that the producers are no longer writing new business as the primary part of their employment relationship with the agency. Account executives typically earn 15 to 25 percent of the book of business that they manage based on the complexity of the accounts being serviced, pegged

to that rate by the incentive to assume more clients, to retain as much as they can, and to crosssell vigorously to enhance the revenue base of their book of business without increasing the number of clients serviced. As a point of comparison, CSRs may earn 5 to 15 percent of the books of business that they service.

producer costs, an additional 20 percent for service and administrative staff, and 20 to 30 percent for operating and administrative costs, all that is left is the relatively slim profit margins available in most agencies. Where does it get the money to pay account executives?

The difference in personality between account executives (AE) and producers is that AEs are typically more detail-oriented but cannot effectively close sales as well as producers. While AEs are all that is needed for certain smaller, simpler accounts, larger and more competitive accounts require AE and producer presence. The AE controls the daily activity on the account and calls in the producer for sales punch as needed.

AE compensation comes from a combination of lower producer compensation from AE-serviced accounts and agency contribution to “seed” the producers to grow the agency’s overall book of business. Agencies have been known to lower the producer’s commission by all or part of the AE compensation justifying the reduction by the time that the producer gains to generate more and larger new accounts. Most AE workloads are comprised of one or more producers’ smaller but service-intensive clients. AEs are useless as leverage for growth if the producers simply use them as a convenient way to gain more leisure time.

If the agency is already spending a third of the commission dollar on

Roadblock 2: Lack of sales activity Many producers simply don’t spend enough time with prospects to generate sufficient sales to satisfy agency needs. If their problem is not lack of time due to the press of service needs of current clients (see AE section above), either they do not understand the need for sales calls, or they are not motivated enough to remain producers. Continued on page 18

[ 16 ]

G22698_12-21_Novembe2011 10/18/11 3:48 PM Page 17

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[ 17 ]

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AGENCY MANAGEMENT

Continued from page 16 You can show any producer the need for sales calls through a formula that translates producer compensation needs into sales, proposals and sales calls needed to accomplish the desired compensation level. Call or e-mail me (800-779-2430 or al@agencyconsulting.com), and I’ll send you the template for the calculation. Once that calculation is complete, you and the producer will know empirically how many sales calls need to be made every month in order for the producer to logically earn the amount he desires every year. But knowing how many sales calls need to be made doesn’t make the calls. We have evolved a pay-to-play concept for producer compensation that provides producers stable compensation based on their needs and their historical performance but will penalize producers by reducing compensation if they fail to meet the activity (sales call) requirements that they need to accomplish their sales goals. If a producer is a proven salesperson, he will make sales if given enough sales opportunities. However, the producer cannot make his revenue goals if he doesn’t see enough prospects to convert a fair number into sales. The pay-for-play concept defines the sales-call requirements by a producer’s own personal history. If a producer has successfully sold one account for every four

[ 18 ]

sales calls made historically, the tendency is for the producer to repeat his history. Based on the number of sales needed in a year

and the historical number of sales calls required to make a sale, we define the number of sales calls needed by the Continued on page 20

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G22698_12-21_Novembe2011 10/18/11 3:48 PM Page 20

AGENCY MANAGEMENT

Continued from page 18 producer in a year, and down to the number needed in each week, in order for him to make his sales goals. If the producer fulfills his sales-call requirements, we guarantee the stability of his compensation. We assume that he will sell sufficient accounts to justify his compensation. If not, it is up to his manager (the sales manager or agency principal) to help the producer by visiting prospects with him and observing any faults that may be stopping sales. The manager is to coach and counsel the producer to get him back in the groove of making sales. However, if you can’t get the producer to make enough sales calls to yield the right number of sales to fulfill his sales goal based on his own history, there is little a manager can do to motivate the producer. Since we are so loath to release producers who have “retired” from production into a service position, we let the pay-for-play program control the producer’s compensation level. If, in the role of producer, the employee fails to meet his sales call requirements for two months in a row, his base compensation is reduced by 10 percent. And that reduction continues for every two months that the producer does not meet his sales call responsibility.

In order to regain lost income, all the producer needs to do is to make up the sales calls missed. The assumption is, of course, that at appropriate sales call levels, the producer will sell sufficient accounts to justify his compensation and make his goals. If a producer realizes that he is no longer in the sales profession, he can adjust to account management at a lower but more stable compensation level that acknowledges that his role is to retain a book of business and cross-sell for enhanced revenues. We make a serious mistake assuming that because a group of people have sold insurance in the past, that they remain producers for life. When we feel that we have a staff of producers who aren’t selling, we generally stress ourselves over ways to rehabilitate them. Instead, if we realize that he producers are satisfied and are good at customer retention but have left the sales arena, we will recruit new producers and suffer less stress over “producers” who have left that arena. They can still be valuable employees, supporting their efforts by managing a book of business. However, once a long-distance runner puts on fifty pounds, it is unlikely that we can motivate him to be an Olympian again. We’re better off using him as a coach or recruiter since he certainly

[ 20 ]

knows how to run – but is no longer capable or desirous of running competitively. Treat producers who no longer sell like this. They are not bad people. They have just changed their priorities. ________________________________

Reprinted from the PIPELINE, the national newsletter for agency principals. The PIPELINE is published by Agency Consulting Group, Inc., a leading consulting firm for independent agents in the U.S. for over 20 years. Call 800-7 79-2430 for information about the content of this article or PIPELINE subscription information. E-mail: info@agencyconsulting.com Website: www.agencyconsulting.com

G22698_12-21_Novembe2011 10/18/11 3:48 PM Page 21

IF YOU HAVE THE TOOLS, WE HAVE THE INSURANCE.

Residential Contractors with up to five employees can find great deals on liability and tools insurance at Brokers Surplus Agency! We represent UTICA First Insurance, one of the largest writers of small contracting firms in the Northeast!

Blanket Additional Insured coverage and UTICA’s own “Toolbox Endorsement” which includes 7 bundled additional coverages saves your customers hundreds of dollars! Call or e-mail us today for a quick quote. Artisan program available in DE, MD, NJ & PA

Brokers Surplus Agency, P.O. Box 2849, Warminster, PA 18974 Call (215) 443-9900

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

[ 21 ]

G22698_22-28.qxp:Novembe2011 10/18/11 4:55 PM Page 22

ASSOCIATION AT WORK

Giving teeth to producer management Conference taught even the oldest dogs new tricks

Itâ&#x20AC;&#x2122;s a dog-eat-dog world out there. And finding, training and retaining the best agents can make the difference between leading the pack and straggling behind.

G22698_22-28.qxp:Novembe2011 10/18/11 4:55 PM Page 23

Primary Agent | November 2011

Executive management conference IA&B called in the big dogs for its third annual executive management conference, held Oct. 4-5 in Lancaster, Pa. Nationally recognized agency consultants Al Diamond and Lorie Guthrie Phair offered management-level training on producer management. Workshop topics ranged from identifying the new breed of successful producers (think: â&#x20AC;&#x153;relationship managersâ&#x20AC;?) and understanding the asset protection model of relationship selling, to managing in a way that connects motivations and rewards. The end goal? For attendees to cultivate

[ 23 ]

Nearly 150 members attended the two-day conference. They participated in over a half dozen workshops, networked with peers and talked shop with exhibitors. Stay tuned to Agent Headlines for information on the 2012 executive management conference.

G22698_22-28_Novembe2011 10/18/11 3:52 PM Page 24

ASSOCIATION AT WORK

Conference sponsors and exhibitors A special thanks to these companies whose generous support made the 2011 executive management conference possible.

Benefactor sponsors:

and unleash producers trained to hunt new prospects and cuddle up to current clients. “Members shared their frustration with finding and keeping good producers, and this conference answered their call,” said Bob Hall, chairman of the IA&B Service Group. “Participants walked away with realistic strategies for building an effective team.”

Harleysville Progressive

Partner sponsors: Agent Insider Agency Specialty Product Network Berkley Mid-Atlantic Group Cumberland Insurance Group Donegal Insurance Group FastCOMP.com Frederick Mutual Insurance Co. LIG Mutual Benefit Group Ohio Casualty Penn National Insurance Prime Insurance Company SehHey Westfield Insurance Xpress-pay.com [ 24 ]

Annual meeting Prior to the conference, the organization held its annual meeting – an opportunity to showcase the year’s achievements, recognize those who have made those accomplishments possible and position the associations for 2011. Attendees also used the time to connect with directors and peers to build their network of professional contacts and share opinions on the issues affecting the independent agency system.

G22698_22-28_Novembe2011 10/18/11 3:52 PM Page 25

Just because you missed last month’s executive management conference doesn’t mean you miss out on management assistance. As part of membership, IA&B offers a slew of resources. Check out the following tools online.

Our Apartment Program offers a great combination of

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Producer Agreement Toolkit

Five or more units are eligible for this great program. An optional Apartmentizer Coverage Endorsement is also available which includes 34 additional coverages such as: Landlord/Owner Furnishings Loss of Earnings Lock Replacement Utility Interruption Water Back-Up of Sewers & Drains and much more! Apartment program available in DE, MD, NJ and PA

This resource explains the different provisions that should be present in producer agreements and spells out the consequences of improperly drafted contracts. The resource is broken down into several components, each of which has a role to play in the preservation of an agency owner’s rights: trade secrets, restrictive covenants, compensation plan, enforcement and damages, employee vs. independent contractor, and sample producer agreements. | www.iabgroup.com/patoolkit

Brokers Surplus Agency, P.O. Box 2849, Warminster, PA 18974 Call (215) 443-9900

HR Solution© IA&B's HR Solution is a comprehensive collection of base human resource products and services designed exclusively for IA&B members for the development and maintenance of their agency’s HR program. The tools not only complies with federal law, but have been customized for state and insurance-specific laws and regulations. | www.iabgroup.com/HR

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

[ 25 ]

G22698_22-28_Novembe2011 10/18/11 3:52 PM Page 26

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 ◗

◗ ◗

◗

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 ◗ ◗ ◗ ◗ ◗ ◗ ◗ ◗ ◗

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)

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 ◗ ◗ ◗ ◗ ◗ ◗

Personal Automobile Homeowners Boat Dwelling Fire Renters Umbrella Liability

OPERATING TERRITORY We have more than 800 agencies across Pennsylvania, Maryland, Delaware*, New Jersey, Virginia, North Carolina, South Carolina*, Tennessee and Alabama*. *commercial lines only

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

“We strive to maintain the same values that our founders adhered to in 1919: hard work, 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 their agency revenues with us. Won’t you join us and grow with us?” — Kenneth R. Shutts President & CEO “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

G22698_22-28_Novembe2011 10/18/11 3:52 PM Page 27

Listed below are those companies that strongly support the independent agency system and Insurance Agents & Brokers. Thank you for your continued sponsorship.

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

DO YOU SEE YOUR NAME?

PLATINUM LEVEL

BRONZE LEVEL

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

Aegis Security Insurance Co

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

Encompass Insurance

GOLD LEVEL

choose the sponsorship

Progressive

package that matches your

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

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

To become an IA&B Partner,

commitment of support.

Agency Insurance Company

Mercer Insurance Group Merchants Insurance Group Mercury Casualty

SILVER LEVEL

Penn PRIME Municipal Insurance

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

Rockwood Casualty Insurance

Reamstown Mutual Insurance Company State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Motorists Insurance Group The Mutual Service Office Inc Travelers Tuscarora Wayne Insurance Company Zenith Insurance Primary Agent November 2011

G22698_22-28_Novembe2011 10/18/11 3:52 PM Page 28

Classified ADVERTISEMENTS BECOME A CO-OWNER OF A SUCCESSFUL INSURANCE AGENCY IN PITTSBURGH AREA One owner retiring. Minimum down payment needed $100,000. E-mail: INSUREPGH@aol.com

DISCOVER THE BENEFITS OF A PARTNERSHIP WITH FAYETTE INSURANCE ASSOCIATES Uniontown, PA 15401 Website: www.fayins.com Email: info@fayins.com

SOUTHEAST PA PRODUCERS & AGENCIES Professional agency since 1926 located in Feasterville, Bucks County, Pa. Call for confidential information and a review of our services. Contact Ray Reinard at (215) 375-8600, Ext. 119. 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .IFC Atlantic Specialty Lines, Inc. . . . . . . . . . . . . . . .19 Brokers Surplus Agency . . . . . . . . . . . . . . .21, 25 Guard Insurance Group . . . . . . . . . . . . . . . . . .21 Hanover Fire & Casualty . . . . . . . . . . . . . . . . . .15 Harford Mutual Ins Co . . . . . . . . . . . . . . . . . . .19 Highmark Casualty . . . . . . . . . . . . . . . . . . . . . . .1 IA&B AgentPAC . . . . . . . . . . . . . . . . . . . . . . . . .17 IA&B Partners Program . . . . . . . . . . . . . . . . . . .27 Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC MMG Insurance Company . . . . . . . . . . . . . . . .17 Penn National Insurance . . . . . . . . . . . . . . . . . .18 PennPRIME Municipal Insurance . . . . . . . . . . .15 Philadelphia Contributionship . . . . . . . . . . . . .19 Preferred Property Program . . . . . . . . . . . . . . .21 TAPCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

When fact is stranger than fiction Shirley MacLaine may have turned down the role of Diane Freeling in Poltergeist (for her Oscar-winning turn in Terms of Endearment), but her fascination with the supernatural lives on. According to Parade Magazine, the actress took out a $25 million insurance policy to cover herself in the event of an alien abduction. MacLaine is outspoken about her beliefs in reincarnation and extraterrestrials. She isn’t alone though. Recent tallies show over 20,000 U.S. residents have alien-abduction policies. Sources: Weird celebrity insurance policies, Investopedia ----------------------------------------------------------------———————------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.

[ 28 ]

G22698_IFC-IBC-OBC_Layout 1 10/18/11 3:58 PM Page 2

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

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 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. SM

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 been consistently recognized for excellence in customer service and to have one of the highest customer retention rates in the industry—more than 90 percent. 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.”

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