Primary Agent - September 2010 - MD Edition

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MARYLAND

IN THIS ISSUE ________________ Q&A with Steve Anderson Cyber coverage


Harleysville CustomPak

SM

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If you’re looking for a knockout sale in the first round, put on the gloves and start writing CustomPak business with Harleysville today. For more information, call 800.523.6344, ext. 5016, visit www.harleysvillegroup.com, or contact your local Harleysville office.

BUSINESS | HUMAN SERVICES | INLAND MARINE | AUTO | HOME | LIFE/EMPLOYEE BENEFITS | FLOOD


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Evelyn Frisch, Ext. 227 evelyn@brokerssurplusagency.com


Contents

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PRIMARY AGENT MAGAZINE

The social networking train has left the station: Industry expert talks Web. 2.0 Like it or not (and understand it or not), there’s no denying social networking’s explosive takeoff over the past year. The social Web is transforming how we connect with family, friends and customers. IA&B’s Q&A with Steve Anderson shares expert insight on the industry’s adoption of social strategies.

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Page 12

Cyber coverage: the new ‘must-have’ in the P&C portfolio? Cyber insurance may sound best suited for Vulcans or Klingons. But humans, the future is here. Read on to learn how to live long and prosper from the sales opportunities these new exposures present.

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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

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

15 19 28 28 28

Glance at Events 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 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 # 2010-9) 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.


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

We know times in the construction business are tough and that even the best of clients are having problems. That’s why when your client needs a bond Commonwealth Surety should be the first call you make. With our “A” Rated Treasury Listed bonds we can provide the bond you never thought you could get. Why shop around, get buried with paperwork and hear excuses? If we can’t write the bond nobody can! We specialize in bonding those “less than perfect” clients, without cash collateral or Letters of Credit, and we’ll get you that “YES” that you want to hear in 24 hours or less. We’ve been writing bonds for small and midsized companies for over 20 years. No bond is too big or too small. And by the way, we’ll even write that bond for your perfect clients. Call now and get results not excuses. TOLL FREE: 1-800-886-7760 FAX TOLL FREE: 1-800-566-7761

The place for the hard-to-place Bonds


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.

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.

David B. Rosenkilde Sr., CIC

Chair of the Board’s M

E

S

S

A

G

E

Up to the challenge I am beginning my term as chairman of the IA&B Service Group at a pivotal time. A stubborn soft market, increased regulatory pressures, strengthening direct-writer competition, and rapidly advancing technology are weighing on independent agents. But these challenges present IA&B with an opportunity — an opportunity to guide and support members. And your association is ready and willing to take on that role. This fall, as the new directors accept their board posts, IA&B will host a technology-themed Executive Management Conference. Seminars will cover agency management systems, data security, electronic document management and social networking. Consider this the beginning of IA&B’s technology dialogue … and one of the ways the association is striving to elevate member agencies in challenging times. I encourage you to learn more about the conference by reading the Q&A with Steve Anderson, contracted advisor for curriculum development, on page 12. And then I invite you to attend the Executive Management Conference — as well as the immediately preceding IA&B Annual Meeting — Oct. 26-27 in Lancaster, Pa.

James M. Watkins* Dover, Del.

There is no doubt that tests and trials await. But know that your association is behind you, providing programs, products and services to support you and your agency.

King W. “Kip” White, LUTCF Fallston, Md.

Until next time,

* IIABA National Director ** PIA National Director

Dave

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Member FAQ QUESTION: I have a lingering dispute with one of my carriers. How do I move on to arbitration?

ANSWER: First, you must understand the distinction between arbitration and mediation and check whether your agency agreement provides for one or the other.

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Blacks’ Law Dictionary defines arbitration as “a method of dispute resolution involving one or more neutral third parties who are usually agreed to by the disputing parties and whose decision is binding.” Mediation, on the other hand, is “a method of non-binding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution.” Obviously, the major distinction here lies in the fact that mediation is non-binding, whereas arbitration is binding. Since arbitration is binding, it is particularly important to be confident in both the neutrality and expertise of the arbitrators. One significant aspect to take into account is the selection process for the arbitrator(s). More often than not, agency agreements that address dispute resolution do so with an arbitration rather than a mediation provision. If so, the provision should state how to proceed, how many arbitrators will be involved, and how they will be selected. This will tell you what your next step should be in order to get your dispute resolved.

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Things to keep in mind — whether you have had a dispute or not: w When you review an agency agreement, take a look at the dispute resolution provision: Some agreements could be fairly loose and simply state that each party will select its own arbitrator and the two selected arbitrators will have to agree on a third one. Other agreements may point to a specific entity, such as the American Arbitration Association (AAA) for selection of the arbitrator(s). What you want to avoid is anything that could call into question the neutrality of the arbitrators. As an example, an arbitration provision that selects arbitrators exclusively from current or past insurance company staff may raise to the level of being questionable, at least from the perspective of an agency. A more balanced provision would allow selection from all sorts of experienced insurance industry professionals, thus including the producer community, insurance consultants and others. Also keep in mind that many disputes revolve around contractual issues. An arbitrator may not have a specific insurance background, but may have a general business background. Such an arbitrator could be fine for your situation. w Once the arbitrators have ruled in favor of one party, that party can immediately claim whatever damages were awarded by the arbitrators. Should one party not comply with the terms of the

arbitrators’ decision, the decision can be entered as a judgment of the court. This means that the judgment is part of the court’s docket, and collection proceedings can take place (e.g. sheriff’s sale). One parting thought: While arbitration provisions have thus far rarely been an issue, remember that IA&B reviews agency agreements at no charge to members.

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!

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


Primary Agent | September 2010

State News Politically charged

WC hit-or-miss “other states coverage”

September brings two ways for IA&B members to flex their political muscles.

Clients venturing into New York may not fully appreciate recent Workers’ Compensation (WC) changes ... and certainly won’t appreciate finding out the hard way.

Get out and vote The Tuesday, Sept. 14 primary election ballot will include several top-tier races, including:

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).

w Governor’s office w U.S. Senate seat w All U.S. House seats w All members of the state

Members are encouraged to review IA&B’s online overview of the requirements — or, better yet with the many tripping hazards laying in the path of WC insurance, attend Jerry Milton’s upcoming seminar.

Senate and House of Delegates Strengthen AgentPAC An election year means strain on political action committee (PAC) finances. The only way to keep IA&B’s AgentPAC healthy and viable through the November election is with support from member agents. Visit www.iabgroup.com/de/pol_act_ctr/index.html to learn more.

Learn more: www.iabgroup.com/MD/WC/NY One Maryland stop remains in Jerry Milton’s WC seminar series: Sept. 30 in Hanover. The workshop covers more about “other states coverage,” as well as correcting experience mod errors and independent contractor issues. Learn more: www.iabgroup.com/education/sp_work_ comp.html

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Oct. 1 marks the spot Oct. 1 marks the effective date of several pieces of legislation resulting from IA&B’s advocacy work in Annapolis. Take note of the following laws, all effective Oct. 1: WC exemption for non-close corporate officers: A member-driven initiative that brings increased flexibility for both agents and their clients, HB 405 includes IA&Bamended language allowing for up to 5 officers of a non-close corporation to elect to be exempt from WC coverage. Premium increase notice for commercial/WC policies: HB 249 simply specifies that an independent agent must also be notified by the carrier of increased premiums for commercial/WC policies. A company can satisfy this requirement by notifying the agent through its electronic database/communication system. Fidelity bonds: HB 702 amends last session’s fidelity insurance requirement to allow for the use of fidelity bonds.

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Allowing for the inclusion of bonds streamlines the process, as they are easier and quicker to issue and allow for broader coverage of individuals. Condo policy cancellation: HB 1514 brings cancellation notices for condo policies into line with the insurance article, providing more consistency and clarity for agents. Cell phone ban: Agents should note and advise clients that cell phone users will be required to use a hands-free device while driving. First-time violations dictate a $40 fine. However, drivers can be pulled over only if they commit another offense, such as speeding. A separate bill was passed that also prohibits texting while driving. What’s next? Legislation increasing auto policies’ minimum BI limits, a major win this session for IA&B, will take effect Jan. 1, 2011. In the mean time, IA&B’s Public Affairs Committee is already at work developing its legislative agenda for the 2011 session.

Pa. license-renewal conversion continues, trips up carriers Pennsylvania’s transition to birth-month license renewals has caused a documentation snag for carriers. Carriers track producers’ license expirations and most, if not all, licensees (including non-residents) have been afforded an extension resulting from the birth-month-renewal conversion. Therefore, non-resident producers holding a license in Pennsylvania should be prepared to provide an updated license to carriers. For producers whose license renewed between Jan. 1, 2010 and up to Apr. 17, 2010, the license renewed at its previous expiration date (issue date). All CE credits were due by the normal date. However, the new license was issued with a new expiration date (last day of the birth month). In other words, the date conversion was handled through the renewal process. For producers whose license renews on Apr. 18, 2010 and later, the current licensing cycle will be extended to the last day of the producer’s birth month. The renewal invoice will be sent 45 days in advance of the new renewal date.


Preventing Primary Agent | September 2010

ERRORS AND OMISSIONS

WRITING COMMERCIAL AUTO? When an E&O claim happens, it can be huge!

CURTIS M. PEARSALL CPCU, AIAF, CPIA Curtis M. Pearsall contributed 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 this article or your Errors & Omissions coverage, contact IA&B at (800) 998-9644 or by e-mail at iab@iabgroup.com.

If your agency writes commercial business, there is a good chance you write Commercial Auto for many of those customers. For some of those risks, the vehicles may be more private passenger autos, while for others the exposure may include vans and trucks of various sizes. Bottom line, while “errors or omissions” when writing Commercial Auto only amount to around 6 percent of all E&O claims, when the claims happen, they tend to be much larger than other coverages. While writing Commercial Auto for your customers is not overly complex, it certainly does require knowledge — not only of the coverages, but also of your customer, what the vehicles are used for and who is using them. Effective use of an Exposure Analysis Checklist is strongly recommended. One of the main issues with a Commercial Auto policy is the symbols used to indicate what vehicles are included in the coverage.

The applicable symbols are expressed in numbers, ranging from “1” to “9.” Symbol “1” is the broadest – providing coverage for any auto. Thus, if your customer were to lease a vehicle for a particular job, symbol “1” would provide coverage. On the other hand, symbol “7” is only for vehicles listed on the policy. There would not be coverage for leased or nonowned vehicles with this symbol. Symbol “9” is only for non-owned vehicles. Thus, having a discussion with your customer and getting answers to these questions will be beneficial when requesting that coverage be structured appropriately. Other Commercial Auto issues “Drive Other Car” coverage/the Named Insured. Offer the owners of the business (where the business is the named insured) additional “Named Insured” status or “Drive Other Car” coverage. Should a businessowner be injured while as a pedestrian or as a [8]

passenger in another vehicle, this coverage would be needed to collect Uninsured Motorist (UM) or Underinsured Motorist (UIM) coverage from the Commercial Auto policy. Limits issues. Because of the size of commercial vehicles, especially trucks, the damages can be significant when a claim occurs. While limits of $1,000,000 may sound like a lot, claims involving bodily injuries can certainly be more than that amount. Thus, offering an umbrella policy is highly recommended. Should the insured want lower limits, obtain a sign-off. This sign-off will be a solid defense should a major claim occur and the insured alleges you had not provided the proper coverage. When providing an umbrella, be sure to satisfy the underlying limit requirements. Adding or deleting the wrong vehicles from a policy. If the Commercial Auto fleet is sizeable, maintaining an accurate list can be challenging. When the


customer requests a modification to the policy — whether adding or deleting a vehicle — get the request in writing. This not only includes the vehicles in question, but the coverage specific to those vehicles. Request that the customer provide the VIN # for the vehicles being modified. It also is recommended strongly that, when mailing the policy to your customer, you advise the customer in writing to read the policy/endorsement to ensure there are no mistakes. As stated previously, if you have symbol “7” coverage and accidentally deleted the wrong vehicle, there is sure to be a problem should that vehicle be involved in a claim. Replacement of coverage. If a customer presents an unwanted exposure (such as claims activity, problem drivers, etc.), it may be necessary for you to replace that account. If the account presents some challenges, aggressively pursue a replacement policy as soon as you know the carrier is going to get off that account. If it appears that finding replacement coverage may not be possible, promptly advise your customer. As you will note in the claim discussed below, not keeping the customer informed can result in a significant E&O claim against the agency. Issuing certificates/evidence of coverage for vehicles that are not covered. If requested to provide proof of coverage by issuing a certificate or ID card, pull the file to make sure the vehicle is still on the policy and that the policy is still active. Remember, too, that the certificate is not a policy and should only reflect the coverages actually on the policy. In this E&O claim, the client’s Commercial Auto policy was going to be non-renewed, and the agency told the client it was going to be difficult to

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place the risk with a new carrier. The agency could not find a new carrier and told the client the day before the coverage was to expire that replacement coverage could not be found. The client had to take vehicles off the road for two weeks until coverage could be secured from another agent. The customer was essentially out of business. The client sued the agent, stating the agency did not keep the client properly informed of the situation, and claimed $679,000 in lost revenue. Although it was believed this was a defensible case, the case went to trial. The jury awarded $500,000 in damages, offset by 40 percent negligence on the client, bringing the award down to $300,000 plus interest. In addition, the jury awarded $500,000 for a violation of business

law based on alleged misrepresentation. Counsel did not believe the judge would allow the $500,000 award for a business law violation to stand, and a hearing on that issue was set for two weeks after the verdict. The plaintiffs approached counsel right after the verdict and said they were willing to negotiate before the Court ruled on the business law violation. The case settled for $350,000. When writing commercial lines, you will be asked to provide Commercial Auto coverage for the majority of your customers. Take the time to educate your staff and your customers on Commercial Auto. This will go a long way toward ensuring you do the proper job each and every time.


Coverage Primary Agent | September 2010

CORNER

CONTRACTS AND CERTIFICATES OF INSURANCE

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.

One of your clients has just been hired to do a job. The owner of the project required your client to sign a contract which spells out the terms, conditions and costs of the job, as well as the penalty for non-compliance. I don’t need to tell you that the contract your client signed was written by the owner’s attorney. Therefore, it’s written in favor of the owner and is designed to protect owner. The contract has a section titled “Indemnification.” Under that section your client has agreed to save and hold the owner harmless for certain losses, claims and expenses arising out of the job. Following the Indemnification section, the owner’s attorney listed the policies of insurance that your client must procure and maintain – Commercial General Liability, Pollution Liability, Commercial Auto, Workers’ Compensation and Builders’ Risk. In addition to requiring certain policies of insurance, the contract also lists specific

conditions that must be satisfied by those policies: w Limits (CGL limits must be project specific and dedicated solely to your client’s ongoing and completed operations on this job); w Owner as additional insured; w All policies of insurance carried by your client must be primary and non-contributory; and w Waiver of subrogation in favor of the owner. Prior to the commencement of any work, your client is required to provide the owner with certificate(s) of insurance evidencing compliance with the provisions of the insurance requirements. Certainly, the contract between your client and the owner of the project is a legal agreement. Likewise, the contract of insurance between your client and the insurance company is a legal agreement, subject to the terms and conditions of the [ 10 ]

insurance contract. Do the insurance contracts satisfy the terms of your client’s contract with the owner of the project? Probably not! First of all, the indemnification provisions of the contract with the owner may be broader than the coverage provided under the insurance policies. Insurance may pay some, but not all, of the obligations assumed in the indemnity agreement. Insurance is completely independent of the obligation to indemnify. Now you have to issue a certificate of insurance. Just exactly what is a certificate of insurance? Blacks Law Dictionary defines a certificate of insurance as a “document evidencing fact that an insurance policy has been written and includes a statement of the coverage of the policy in general terms.” Will the certificate meet the requirements of the indemnity agreement? Probably not. Will the certificate stipulate that all of the insurance requirements have been met? No.


What does the certificate really show? Many folks say it is a snapshot of the policy coverages and limits at the time the certificate was issued. I disagree. The certificate will show the limits that were in effect when the policy was issued. However, because of previous claims, the aggregate limits of the policy may have been reduced, unless the proper endorsements are attached. Can there be a conflict between the certificate and the policy? What if the contract required that the owner be named as an additional insured for both ongoing and completed operations? Will the insurance company comply? Maybe for ongoing operations, but maybe not for completed operations. How do you indicate this on the certificate – owner as “additional insured” or owner as “additional insured for ongoing operations only”? If there is a conflict between the certificate and the policy, which document prevails – the certificate or the policy? The large majority of courts have ruled in favor of the policy. However, a few courts have stipulated that the terms of the certificate override the terms of the policy. Currently 35 states, including Pennsylvania and Maryland, have passed laws or regulations or issued bulletins governing certificates of insurance. Pennsylvania Notice 200902, issued Feb. 13, 2009, and Maryland Bulletin 08-34, issued Nov. 7, 2008, address the penalties for issuing a certificate that does not accurately reflect the terms and conditions of the insurance policy. Penalties could include revocation of license as well as monetary fines. One final thought: I hope all of you are using the new ACORD Certificate of Liability Insurance (ACORD 25 2009). The cancellation provision states, “Should any of the above described

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policies be cancelled before the expiration date thereof, notice will be delivered in accordance with the policy provisions.” This is great wording. If the policy is cancelled, now the certificate holder is subject to the same terms as the named insured.

Y’all take care! Editor’s note: Learn more about certificates of insurance on IA&B’s Web site. Visit iabgroup.com and choose “Agency Operations” from the menu bar.


TECHNOLOGY

The social networking train has left the station Industry expert talks Web 2.0

Like it or not (and understand it or not), there’s no denying social networking’s explosive takeoff over the past year. The social Web is transforming how we connect with family, friends and customers. The following pages offer expert insight on the industry’s adoption of social strategies.


Primary Agent | September 2010

S

teve Anderson is serving as an advisor for curriculum development for IA&B’s Oct. 26-27 Executive Management Conference (see page 14). A nationally recognized authority on insurance technology and a licensed independent agent for 30 years, Anderson will present sessions on social media, agency management systems and technology trends. Here, Anderson talks with IA&B about social networking (think: Facebook, Flickr, LinkedIn, Twitter and YouTube, to name a few) and the independent agency system. IA&B: Independent agents, as a whole, have been slow to adopt social networking. What do you see as the biggest stumbling blocks? Steve: Probably the biggest issue that comes up is agency owners saying they’re just going to waste their time. There’s hesitation to let staff access Facebook, YouTube and LinkedIn, and there’s skepticism that these are business tools as opposed to personal, stay-in-touch tools. Also, agency owners ask, “What are the E&O implications?” and “How do we manage it?” Those are the most common objections I hear.

———————————————————————— “These are just different ways of doing the networking [agents] have always done.” ———————————————————————— It’s very similar to when owners first brought Internet into agencies. They worried that staff would spend all day buying books on Amazon or surfing the net. Yes, it can happen. But agency owners can manage expectations, explain that this is not for personal use but for interacting with clients. And they can treat problems as an exception, not the rule. Some think this is just fun for kids, but user demographics suggest that’s not the case. It’s becoming fairly evident that agencies are successfully using these tools for prospecting and keeping in touch with clients. It’s just a learning process. IA&B: You were an early adopter of the social Web. What were some of your hesitations, and how did you overcome them? Steve: Yes, I was a fairly early adopter. Certainly with Twitter and some of the other tools, I wondered “So what?” Part of [my hesitation] was, “Do I have time to do this?” and “How much information do I want out there?” That’s one question that, even today, people need to ask: “How comfortable am I sharing information?”

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Social media primer Connecting on LinkedIn. “Friending” on Facebook. Following on Twitter. Curious what the buzz — and the jargon that goes along with it — is all about? Here’s a brief synopsis of a few top social spaces. LinkedIn (www.linkedin.com): The aim of this site is to connect professionals. Users create a resume-like profile and then reach out to past and present colleagues to create an online directory of contacts. They can also reach out to their connections’ connections to create new contacts and join in online discussions. Chamber of Commerce dinners are so yesterday. Now people rub elbows electronically and network online. Facebook (www.facebook.com): This site also encourages users to create profiles (called “walls”) and connect with acquaintances (called “friends”). The focus is more social than professional, and users send messages, play games and post pictures, links and status updates. They join groups and endorse (called “like”) people, products and companies. Forget the class reunion. People young and old reunite with old friends and share photos online. Twitter (www.twitter.com): This site allows users to post text-based messages (called “tweets”), with a maximum of 140 characters, in answer to the question “What are you doing?” Users post status updates and links, and they track (called “follow”) other users’ posts. While posts are public for everyone to read, users can send private notes (called “direct messages”) to other users. Gotta know something pronto? Twitter is where it’s at. From news to babble, information is shared at lightening speed.


TECHNOLOGY

IA&B’S EXECUTIVE MANAGEMENT CONFERENCE Welcome to the information age, where advancements occur at a more rapid pace – and have a greater influence on daily existence – than ever before. The independent agency system is not immune. In fact, technology is acting as an equalizer, affecting agencies regardless of sales volume or staff size or carrier representation or lines of insurance sold. Members spoke, and IA&B recognizes the uncertainties, frustrations and learning curves that these advances created. In response, the 2010 Executive Management Conference is dedicated to technology. The two-day event brings together industry experts on agency management systems, data security, electronic document management and social networking. Seminars offer management-level education with the end goals of improved efficiency and compliance. Consider this conference the start of IA&B’s technology dialogue. The association remains committed to helping members navigate these unchartered waters in the months and years to come.

EMC2.0: Relevant technology for independent agencies Oct. 26-27, 2010 Eden Resort, Lancaster, Pa. Details and registration are available at iabgroup.com/EMC2010.

I liken a number of these tools — Facebook, Twitter and, from a professional side, LinkedIn — to the networking agents have built their business on. These are just different ways of doing the networking they’ve always done. Agents tell me that they don’t want to tweet about what they had for lunch. Neither do I. I talk about what is of value and what is of interest.

__________________________ “People want to buy from people they know. One of the things [social networking] allows is for people to get to know us better.” __________________________ What I have found is that with all of these tools combined together, I feel more connected with people than ever before. I’m able to see what’s going on. When I talk to people – and I still do – the conversation changes. Instead of asking, “How was your weekend?” I can say, “I saw you were at a play, how was it?” The conversation goes to another level more quickly because I already know some information. For agencies, people want to buy from people they know. One of the things [social networking] allows

continuted on page 16

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Glance at Events S E P T E M B E R

C A L E N D A R

Date

Topic

Location

1

Workers’ Comp Seminar

Mechanicsburg, Pa.

2

Workers’ Comp Seminar

Dover, Del.

8

William T. Hold Seminar

Altoona, Pa.

CISR—Commercial Casualty Course

Allentown, Pa.

Member Agent Panel

Gaithersburg, Md.

CISR—Commercial Casualty Course

Philadelphia, Pa.

Member Agent Panel

Bowie, Md.

Member Agent Panel

Towson, Md.

CISR—Personal Auto Course

Mechanicsburg, Pa.

Member Agent Panel

Mechanicsburg, Pa.

CISR—Personal Residential Course

Mechanicsburg, Pa.

Member Agent Panel

Altoona, Pa.

CISR—Agency Operations Course

Mechanicsburg, Pa.

CISR—Personal Residential Course

Hunt Valley, Md.

Member Agent Panel

Meadville, Pa.

Member Agent Panel

Cranberry Twp., Pa.

CISR—Commercial Property Course

Mechanicsburg, Pa.

Member Agent Panel

Greensburg, Pa.

17

CISR—Commercial Casualty Course

Mechanicsburg, Pa.

21

Member Agent Panel

Moosic, Pa.

Member Agent Panel

Breinigsville, Pa.

P&C Licensing Study Course

Allentown, Pa.

9

13 14 15

16

21-23 22

CISR—Personal Residential Course

Cranberry Twp., Pa.

Member Agent Panel

Horsham, Pa.

Member Agent Panel

Frazer, Pa.

22-25

CIC—Commercial Casualty Institute

Harrisburg, Pa.

23

E&O Best Practices Seminar

Cranberry Twp., Pa.

Member Agent Panel

Dover, Del.

27-29

James K. Ruble Graduate Seminar

Erie, Pa.

28

CISR—Personal Residential Course

West Chester, Pa.

Workers’ Comp Seminar

Allentown, Pa.

William T. Hold Seminar

Wilkes-Barre, Pa.

Workers’ Comp Seminar

Philadelphia, Pa.

Dynamics of Service

Columbia, Md.

William T. Hold Seminar

Mechanicsburg, Pa.

Workers’ Comp Seminar

Baltimore, Md.

29 30

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TECHNOLOGY Continuted from page 14 is for people to get to know us better. It creates a better relationship, which is what we always say that we want to do. People are skeptical because it’s new and different. They think it’s just for kids, but it’s not. It’s relationship building. IA&B: As a consultant, you help agencies improve marketing and efficiency. How does social networking fit into that process?

Read more online IA&B’s Web site is rich with resources. Find the following social networking tips, tools and insights by visiting iabgroup.com, selecting “Technology” from the menu bar, and then choosing “Other resources.” w How to engage the changing insurance consumer w Is there a blog in your future? w Social networking’s value to insurance agents and brokers — making the case w Tools for the successful agent of tomorrow

Steve: There are several aspects. For example, agencies can utilize Facebook advertising and Facebook pages. Facebook advertising is perhaps the best online tool an agency has because ads can target just the audience the agency wants to reach. It’s inexpensive compared to Google and other advertising possibilities. It allows an agency to get their name in front of a specific group of people. A Facebook page allows for an extension of an agency’s Web site. It’s a community platform to have conversations. Most agencies aren’t utilizing it quite yet, but a few are and really are starting conversations. And when a client likes the agency’s page, all of the client’s friends see that. It’s part of networking. It’s not a quick fix, but it’s building a community and having people know you’re there. Over time, people want to interact.

[ 16 ]

IA&B: From a management perspective, what should be considered before launching a social Web presence? Steve: It needs to fit into an agency’s overall strategic plan. Determine what the agency’s marketing plan is, and then look at how social Web tools can help.

__________________________ “People are skeptical because it’s new and different. They think it’s for kids, but it’s not. It’s relationship building.” __________________________ Initially, an agency can assign someone — someone who likes to learn — and give them time to experiment and test and then see what makes sense for the agency to do. If the agency is a large commercial agency, Facebook is probably not worth a whole lot. That’s more of value for a personal agency or a small commercial one. However, LinkedIn would allow that large commercial agency to interact and research. It depends on the agency strategy as far as what makes sense. Although most every agency should think about a blog, how to set it up and have people write. Most agencies get really nervous when they think about writing and worry that they don’t have


Primary Agent | September 2010

enough material. In reality, they have plenty of material. Questions from clients and information in proposals can be repurposed. It all goes back to overall strategy – why and what you want to do with it. As I mentioned before, a stumbling block for management is “Will it be abused?” That’s why it’s important to have clear expectations and guidelines [for staff]. Most of it should already be in an Internet usage policy, so reemphasize that. IA&B: Surely you’ve seen agencies that use the social Web well – and those that do not. What overriding lessons can you share?

Steve: Those who succeed have experimented and failed and kept at it. There’s no one way to do it. It’s how you create a community and interact.

__________________________

questions and creating a conversation. You don’t want people to think you’re trying to sell something. Instead, create relationships so when people have an issue or problem, they will come to you.

“Those who succeed have experimented and failed and kept at it.” __________________________ One thing that’s key to success is not sending out marketing messages. This is not about sending direct mail letters or blasting out e-mails. [Social networking] is about answering

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Platinum Profile Insurance Agents & Brokers proudly recognizes The Main Street America Group as one of its Platinum Partners. IA&B Platinum Partners dedicate the highest level of sponsorship to our organization. FEATURED PARTNER The Main Street America Group CHIEF EXECUTIVE OFFICER Tom Van Berkel, Chairman President and CEO CORPORATE HEADQUARTERS Jacksonville, Fla. Regional Offices Grand Rapids, Mich. Indianapolis, Ind. Jacksonville, Fla. Keene, N.H. Richmond, Va. Syracuse, N.Y. Claims Service Center Auburn, Mass. A.M. BEST RATING “A” (Excellent)**

T

he Main Street America Group’s rich history began in 1923 when we formed our company to serve the insurance needs of Grange fraternity members in New England. Today, Main Street America serves the insurance needs of individuals, families and small businesses in 25 states. We provide a full line of competitively priced personal lines and commercial lines products and services, as well as fidelity and surety bond products, and annually write nearly $815 million in premium. Through our five “A” rated property and casualty carriers — NGM Insurance Company, Old Dominion Insurance Company, Main Street America Assurance Company, MSA Insurance Company and Great Lakes Casualty Insurance Company, as well as our Grain Dealers Mutual Insurance Company affiliate, we partner with

more than 1,500-plus independent agents to provide superior, personal service to more than 600,000 policyholders. As a founding company partner of Trusted Choice®, Main Street America is 100 percent committed to the independent insurance agent, as you are our sole channel of distribution. We strive to meet the needs of our customers (agents), and our customers’ customers (policyholders), better than anyone else in the market. To become our customer and represent Main Street America, please visit www.msagroup.com and click on the “Become a Main Street America Agent” link. **A.M. Best’s rating of “A” (“Excellent”) applies to The Main Street America Group. Ratings listed herein are as of April 1, 2010, are used with permission of A.M. Best, and are subject to changes by the rating service. For more information about ratings, please access www.ambest.com.

“Independent agents have more than 50 percent of the overall market. You offer your customers choice, expertise and advocacy. No one else can offer that. This is why consumers prefer your distribution channel.” — Tom Van Berkel, Chairman, President and CEO


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

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

PLATINUM LEVEL

BRONZE LEVEL

ACUITY 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 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.

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 Insurance Placement Facility of PA Keystone Insurers Group Inc

Allied Insurance MMG Insurance Progressive

Lebanon Mutual Insurance Company

SILVER LEVEL

Mercury Casualty

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

Penn Millers Insurance Company

Mercer Insurance Group Merchants Insurance Group

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 September 2010


COVERAGES

Cyber coverage: the new ‘must-have’ in the P&C portfolio? Businesses from the local doctor’s office to Fortune 1000 rely on IT

Cyber insurance may sound best suited for Vulcans or Klingons. But humans, the future is here. Read on to learn how to live long and prosper from the sales opportunities these new exposures present.


Primary Agent | September 2010

I

f current trends continue, cyber insurance coverage just may take its place alongside workers’ compensation, general liability, fire and auto insurance in the core commercial property and casualty package, meaning a business would be foolish to open its doors without it.

The reason is simple. Virtually every modern enterprise —from the local doctor’s office or supermarket to Fortune 100 corporations — lives and breathes on its information technology applications, databases and computer systems. When IT goes down, business screeches to a halt. Indeed, for businesses such as online retailers, brokerages and some financial firms, the IT and data assets are the entire business — every bit as critical as the factory and warehouse are to the hard-goods manufacturer, or the vehicle fleet to a trucking company. Imagine Amazon.com or a regional bank trying to do business without their databases and computer systems. As more and more companies — and their insurers — are realizing, this reliance on IT creates a hornet’s nest of risks that can result in crippling losses that conventional, turn-of-thecentury P&C insurance coverages won’t respond to. These new issues call for a new category of coverage.

_________________________________________________ Reliance on IT creates a hornet’s nest of risks that can result in crippling losses that conventional, turn-of-thecentury P&C insurance coverages won’t respond to. _________________________________________________ The new risks On the one hand is the issue of first-party losses. These might include business interruption, which could be caused by a flood or fire in a data center, or malicious hacking by a disgruntled employee or even a cyber-crook half a world away. Traditional P&C insurance might help replace some of the lost hardware or compensate for physical damage to the data center. Yet there is no coverage for the onerous costs of restoring data, reinstalling software, or for lost revenue, since standard P&C packages typically exclude such losses completely. It means a company could be out of business for days or weeks, while also being responsible for costs of restoring the IT functionality. Perhaps even more ominous are the all-new liability exposures inherent in IT operations. A raft of relatively new regulations and legislation makes companies responsible for safeguarding

[ 21 ]

Putting cyber insurance on the books Congress is considering several pieces of legislation that would address cybersecurity and related insurance coverages. Of the bills currently in the hopper, most would address Internet security and lay the groundwork for government and private-sector collaboration. Some also would require an executive branch report to Congress on “the feasibility of creating a market for cybersecurity risk management.” SB 2489, introduced in June and sponsored by Sen. Joe Lieberman (I-Conn.), already passed out of committee and is awaiting a full vote on the Senate floor. It calls for a cybersecurity-oversight entity to be housed within the Department of Homeland Security. A companion bill, HR 5548, has yet to see movement. A competing Senate bill, sponsored by Sen. Kit Bond (R-Mo.), would allow the President to create (and the Senate to confirm) an independent oversight position. This legislation has yet to be taken up in the chamber. Note: This legislative update was current as this issue of Primary Agent was compiled. Since then, Congressional activity may have advanced or altered cyberliability legislation.


COVERAGES

personal and confidential data they collect as part of everyday e-commerce operations. Companies are liable for customer credit card numbers, financial transactions, medical history, credit information and other sensitive data. Regulations ranging from HIPAA (the Health Insurance Portability and Accountability Act) for health care information to SarbanesOxley and an array of state laws provide stiff penalties for companies that mishandle data, permit leaks or unauthorized access, or otherwise fail to safeguard sensitive information, which conventional insurance will not cover.

____________________________ Thanks in part to an overall soft market, capacity for cyber coverage is abundant at this point. ____________________________ There is also the risk of being sued by third parties for somehow allowing — or failing to prevent — unauthorized access to sensitive information. An example of this would be an overseas hacker who infiltrates an online shopping Web site and steals hundreds of thousands of customer credit card numbers. The Web site now faces claims

from angry customers for unauthorized charges made on their credit cards, as well as claims from banks that issued the cards for costs incurred in canceling and reissuing them. Traditional insurance simply will not apply here. The new reality is that criminals, terrorists and insiders are beginning to recognize that the real Achilles heel of today’s companies and organizations is the IT side of their businesses. Secrets, sensitive data and inside information have now become their prime targets.

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Driving members to distinction

Continued on page 24


Get Ready Pennsylvania. Here Comes ACUITY !

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COVERAGES

Continued from page 22

The insurance options Since common P&C insurance coverage doesn’t respond to most IT and privacy-related losses — and are in fact specifically excluded in most forms — major carriers and specialty insurers are now offering an array of cyber products designed to address the critical gaps. These cyber products—usually called “Network Security and Privacy Liability” policies—tend to vary significantly from carrier to carrier, as the markets try to discern what provisions and terms prove most attractive to enterprise customers at different

levels of risk. The situation is similar to where employment practices liability insurance was just a few years ago. The Network Security and Privacy Liability policies are generally designed to address first-party risks and third-party liability — sometimes in the same policies, sometimes separately. First-party coverage typically includes: w Business Interruption w Data Restoration w Cyber Extortion Payments w Crisis Management Expenses

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w Media/Intellectual Property w Regulatory Actions w Expenses to Notify Affected Parties w Expenses to provide credit monitoring w Forensic costs to determine how the breach occurred w Transmission of a virus/worm w Loss or damage to an organization’s own network, or e-theft The third-party side usually addresses liability arising from network and information security, privacy liability and electronic media. Depending on the nature of a company’s operations and IT structure, insureds can negotiate a number of coverage enhancements that address situations not covered in the core policy. 1. Coverage could be extended to cover the actions of “rogue” employees, authorized staff acting in an unauthorized manner, or to independent contractors or outsourcers. 2. Coverage could also be extended to cover off-line or non-electronic data that contains sensitive or private data, and is somehow breached or released. 3. First-party expenses might also be negotiated for the costs of restoring a network Continuted on page 26

[ 24 ]


Call for info 877-390-7475 Visit us online www.absolute-risk.com

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We are known for our ability to provide products that are comprehensive and cost effective. Our capable, experienced staff stands ready to assist you with many kinds of insurance placements. In addition, we have access to many aggressive “small business” markets that can provide fast, competitive products for you.

Construction Q Q

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We’re looking for strong partners. Find out how to do business with us, it’s easy.

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Help is on the Way….


COVERAGES

Continuted from page 24 after a breach, investigations of the breach, costs of workarounds, or short-term services to restore functionality. 4. Defense costs, civil penalties and fines due to regulatory actions, as well as amounts that must be deposited into redress or settlement funds.

is facing increased underwriting scrutiny is the financial institutions segment.

____________________________ The more businesses rely on information technology as an engine for operations and communication, the more crucial it becomes to protect IT assets with the right coverage. ____________________________

Underwriting cyber Thanks in part to an overall soft market, capacity for cyber coverage is abundant at this point; however, one sector that

In addition to evaluating basics like revenue, employee count and the nature of the business, underwriters take into account

the technical safeguards a company has in place, its overall privacy and security policies — and occasionally, the recommendations of an outside consultant or security auditor. Underwriters may also require certain upgrades to procedures or technology as a condition of the insurance. In designing insurance coverage for an enterprise, agents and insureds should start with a thorough assessment of potential risks and vulnerabilities of the existing systems, perhaps with the help of a security specialist, and then secure the appropriate insurance coverage.

IF YOU HAVE THE TOOLS, WE HAVE THE INSURANCE.

Residential Contractors with up to 5 employees can find great deals on liability insurance at Brokers Surplus Agency. We represent Utica First Insurance, one of the largest writers of small contracting firms in the Northeast, and we can give you a free quote on all your coverage needs! Call or email us today!

Make Our Experience, Your Advantage.

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

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Join our team today. Contact us to learn more:

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[ 26 ]


EIC

Network Security and Privacy Liability insurance is just another important component of a risk management strategy in today’s business environment. The more businesses rely on information technology as an engine for operations and communication, the more crucial it becomes to protect IT assets with the right coverage.

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

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

________________________________

Rick Grimes and Karen Kuger authored this article.

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¿W sharing program that includes production incentives.

Rick Grimes is an executive vice president for Professional Risk Solutions, a wholesale insurance broker that places directors and officers, errors and omissions and cyber security and liability coverages headquartered in Somerset, N.J. Mr. Grimes may be reached at rick@prsbrokers.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.

Karen Kutger, vice president and branch manager for the Philadelphia branch of Professional Risk Solutions, may be reached at Karen@prsbrokers.com.

This article originally appeared in National Underwriter.

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Maryland * Pennsylvania * Delaware * DC * Virginia * New Jersey [ 27 ]


Classified ADVERTISEMENTS 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.

LOOKING TO BUY! Agency in Snyder, Union and Northumberland Counties. All inquiries kept confidential. Call Gary at (570) 524-7670.

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Absolute Risk Placement . . . . . . . . . . . . . . . . .25 Brokers Surplus Agency . . . . . . . . . . . . . . . .1, 26 Cumberland Insurance Group . . . . . . . . . . . . . .3 Cumberland Insurance Group . . . . . . . . . . . . .24 Elizabethtown Insurance Co . . . . . . . . . . . . . . .27 Goodville Mutual Cas Co . . . . . . . . . . . . . . . . . .5 Harford Mutual Ins Co . . . . . . . . . . . . . . . . . . .26 Harleysville . . . . . . . . . . . . . . . . . . . . . . . . . . . .IFC

10 most dangerous drivers by profession* 1.

Attorney/Judge – Why chase ambulances if you can bring them to you?

2.

Financial professionals – Do they cover their cars with a “tarp”?

3.

Government worker (GS6) – Fender benders are a little known GS6 requirement.

4.

Bartender or Waiter – It’s just a different way of getting served.

5.

Other – Professional – AKA “I was hit by that ‘other’ guy.”

6.

Dog Groomer – Following the rules of the road must be a real pet peeve.

7.

Marketing/Advertising – If they have road rage, can we call them “Mad Men”?

8.

Barber/Stylist – Mostly likely to cut you off.

9.

Coach – Always crying foul.

10.

Nurse – Bedside manner: Great! Roadside manner: Yikes! Least dangerous drivers? Athletes and homemakers. * Compiled from 2010 insurance.com data.

IA&B Partners Program . . . . . . . . . . . . . . . . . . .19 IA&B Series Ads . . . . . . . . . . . . . . . . . . . . .22, IBC

Source: www.insurance.com

Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC LIG Insurance Co . . . . . . . . . . . . . . . . . . . . . . . .17 Penn National Insurance . . . . . . . . . . . . . . . . . .11 Preferred Property Program . . . . . . . . . . . . . . . .9 Tri-State General Ins Ag . . . . . . . . . . . . . . . . . .27 [ 28 ]

----------------------------------------------------------------———————------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.


2010 EXECUTIVE MANAGEMENT CONFERENCE EMC2.0: Relevant Technology for Independent Agencies

Join IA&B for its Executive Management Conference. In an age where technological advances are changing the ways you do business, you can’t afford to be left behind. IA&B will show you how to harness the power of technology through agency management systems, data security, electronic document management and social media to make your agency more efficient and productive. Visit iabgroup.com/EMC2010 for program details.

Driving members to distinction



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