Primary Agent - September 2012 - PA Edition

PENNSYLVANIA

INTHISISSUE ___________: 2012 election preview The Big “I”: a voice in D.C. Meet IA&B’s lobbyist Public affairs committee in action

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Contents PRIMARY AGENT MAGAZINE 2012 election overview Polls, predictions and political commentary have dominated the news for months, so it’s no surprise to anyone that this year’s elections will be pivotal ones at both the state and federal levels. Whether the political parties in power are able to retain their majority hold and if so, to what extent, will have a major impact on the social and economic initiatives considered in the coming years.

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Page 10 A voice in Washington, D.C. Member agents are represented by a bustling government affairs office and powerful political action committee in Washington, D.C. Here, the Big “I” staff chronicles its work — and successes — on Capitol Hill.

Page 16 Getting to know IA&B’s lobbyist

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As IA&B’s lobbyist, Lauren Brinjac helps to maintain the association’s daily presence in Harrisburg. With expertise in association legislative work, she employs her strong relationships with legislators and their staff, as well as with the Insurance Department, to advocate on IA&B members’ behalf.

Page 24 In the driver’s seat: How members steer IA&B’s legislative efforts IA&B works to put the agent’s perspective first. And who better to drive the association's efforts than agents themselves? The IA&B of Pennsylvania Public Affairs Committee serves as the primary arm of the association’s board of directors and is tasked with executing the organization’s advocacy program.

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

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In every issue 2 3 4 6 8 15

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

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IA&B Partners Technology Update Tools You Can Use Advertisers Index Classified Ads Last & Least

Subscriptions: Non-member price: $2.25 per copy or $15 per year.

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Address inquiries to: Primary Agent Editor 5050 Ritter Road 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 # 2012-9 is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

Copyright 2012. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial, insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult with competent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before making any decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in Primary Agent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B. Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&B endorsement of the products and/or services.

Board of Directors

Norman F. Basso, CPCU

Officers

Chair of the Board’s

Norman F. Basso, CPCU Chair of the Board York, Pa. G. Greg Gunn, CIC Vice Chair of the Board Lemoyne, Pa.

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Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-P Immediate Past Chair of the Board West Chester, Pa.

Strengthening our collective voice in a time of change

Members Joyce M. Bailey, CIC, CRM, CPIW Newark, Del. Henry “Butch” Bradley, Jr. Forest Hill, Md. Timothy P. Burris Mifflintown, Pa. N. Lee Dotson, CIC, AAI Wilmington, Del. Michael P. Ertel Columbia, Md. John L. Frankenfield Telford, 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. Michael F. McGroarty Sr. Pittsburgh, Pa. Craig S. Mader Gambrills, Md. 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.

September often marks change: change in seasons, change in school year and, here at IA&B, change in leadership. Beginning this month, I assumed the role of chairman of the IA&B Service Group. It is a role that I look forward to fulfilling over the next 12 months.

One of the benefits of IA&B membership — and one of the reasons that keeps me personally invested in our association — is legislative advocacy. As busy professionals, we do not have the time necessary to affect change in Harrisburg and Washington, D.C. But we do have state and federal government affairs teams who work on our behalf, monitoring legislation and regulations, meeting with elected officials and ensuring independent agents’ voices are heard.

I encourage you to review this issue of Primary Agent magazine to learn about a few of the many ways IA&B works on your behalf at the state and federal capitol buildings. And furthermore, I encourage you to support that advocacy work with a contribution to AgentPAC — your association’s political action committee (PAC).

As a fellow IA&B Board member once told me, “If we are not willing to financially support the PAC that protects our business and the independent agency system, then who will? It will be one of your best investments.”

As the November elections approach, we face a time of change in Harrisburg and Washington, D.C. But despite the unknowns, you can trust that your association will work diligently on your behalf, no matter what those changes may be.

Until next month, Norm Editor’s note: To support to AgentPAC, visit www.iabgroup.com/AgentPAC.

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

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Member FAQ QUESTION: My customer is dissolving his company: If there are no assets because the corporation is no longer in existence, what is the risk to the customer, and why should he purchase discontinued operations coverage?

ANSWER: This is a great follow-up question to last month’s column (August 2012) on the need to secure discontinued operations coverage for a retiring customer with an occurrence-based CGL policy.

First, and most importantly, we would encourage you to tell the customer to review the issue with the attorney in charge of the company’s dissolution. This issue is clearly rooted in law (it speculates on the company’s inability to be sued post-dissolution), and it would be better suited for the customer's attorney to review and answer. In addition, note that the answer can vary from state to state, based on the type of entity (profit v. non-profit), on the business structure (LLC, corporation, partnership, et al), or on the type of dissolution (voluntary, administrative or judicial); all this, again, to illustrate the fact that the attorney should be involved to provide direction as to the extent and duration of potential liability (and consequently the need for coverage).

The question, however, does have merit for producers, if only to provide guidance on how to overcome the objection. This particular question happened to pertain to a Pennsylvania customer, but let’s take a quick look at some conditions applicable to the voluntary dissolution of a corporation in all three states in IA&B’s footprint.

In Pennsylvania, the statute allows an action to be brought forth against a dissolved corporation or its directors, officers or shareholders, if the action is brought within two years of the date of dissolution, or other time limit provided by law, up to two years.

In Delaware, a corporation continues beyond its expiration for three years for the purpose of prosecuting or defending suits. In addition, once filed within the threeyear timeframe, the corporation will continue until any judgment, order or decree has been fully executed.

In Maryland, the corporation continues to exist for the purpose of paying, satisfying and discharging any existing debts or obligations, collecting and distributing its assets, and doing all other acts required to liquidate. Any suit brought prior to filing the articles of dissolution must be

fully executed. Once the articles of dissolution are accepted by the state, new suits are barred. Maryland’s dissolution process, however, is lengthy and can take several years, during which a suit could be brought against the entity.

With regard to the extent of liability, in Pennsylvania and Delaware, the shareholder's liability is generally limited to the pro rata share of the asset distribution. Maryland, on the other hand, is less clear, and does not expressly indicate a limitation.

Again, this is obviously a cursory and narrow review. With circumstances changing slightly, so could the answer. The bottom line is that, regardless of the circumstances, producers should: 1. Encourage the customer to discuss the issue with the attorney handling the dissolution 2. Always offer discontinued operations coverage to the customer 3. Document both the offer and the customer’s decision You should refrain from advising the customer on how much insurance to secure. The customer should make the decision by himself, or based on his attorney's advice, but not based on yours. Otherwise, whether and how your customer chooses to secure discontinued operations coverage could suddenly be redirected to your own E&O carrier if the coverage happens to be insufficient or inexistent.

To read why a customer who is retiring from business and had an occurrence-based CGL policy needs a discontinued operations policy, read part I in the August 2012 issue of Primary Agent.

DO YOU HAVE A QUESTION? Email it to us at iab@iabgroup.com. Please use “Primary Agent FAQ” in the subject line of your message. You can also fax your question to 717-795-8347.

We look forward to answering your questions!

State News Primary Agent | September 2012

IA&B scores education award — again IA&B is proud to announce that the association once again has been recognized by the Independent Insurance Agents and Brokers of America for the quality of its professional development programs. The Big “I” recently presented IA&B with a bronze Excellence in Insurance Education (EIE) Award.

WELCOME

New Members Casper Insurance Agency Pittsburgh, Pa. The Virtus Group LLC Harrisburg, Pa. Louis Desimone Jr Insurance Agency Inc Downingtown, Pa. Foglia Insurance Inc Philadelphia, Pa. Walter Mark Agency Inc Canonsburg, Pa.

The EIE awards celebrate and recognize state associations and staff who have made significant contributions to education for their members and the industry in the key area of class offerings, continuing education, professionalism, designation offerings, industry collaboration, planning goals, marketing, resources and more.

Taking the high ground to success IA&B members are invited to the 2012 Executive Management Conference in Gettysburg, Pa. on Oct. 30-31. Attendees will take away the tools, resources and knowledge needed to win the battle for insurance business. Plus they’ll enjoy historic fun, to include a visit to the National Military Park Museum. www.iabgroup.com/emc2012

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Chopper for Charity races into America’s living rooms Trusted Choice® will enjoy prime-time attention on the Sept. 17 episode of “American Chopper” on the Discovery Channel. The show will chronicle the Orange County Choppers’ creation of a Trusted Choicethemed custom motorcycle to raise money for Make-A-Wish®.

Trusted Choice, the consumer branding program for independent insurance agents and brokers, commissioned the Chopper for Charity as part of a yearlong fundraising effort. The campaign launched in August with a Facebook initiative: For every “share” from facebook.com/TrustedChoice in August, Trusted Choice donated $10 to Make-AWish. (While the final tally wasn’t available before this magazine went to print, a similar social media drive last year netted $170,000.)

The Trusted Choice Chopper for Charity now will travel the country — including a stop at the IA&B Executive Management Conference, Oct. 30-31 in Gettysburg, Pa. — with proceeds benefiting Make-A-Wish.

Neighboring news Attn. producers with clients who are Maryland employers The National Council for Compensation Insurance (NCCI) — the designated licensed rating and statistical organization in Maryland, as compared to the Delaware Compensation Rating Bureau — filed a change in its Experience Rating Plan formula effective starting with 01/01/2013 renewals. As a result, some clients’ mods will change, even without a change in their loss experience, and this will impact their overall premium. www.iabgroup.com/md/ ncci_mod

Considering recording calls?

Hold the phone Recording telephone calls is a tempting way to reduce E&O exposure and improve customer service. But before an agency begins (or continues) the practice, it is worth knowing: w Is it legal to record conversations in Pennsylvania? w Is customer consent required and, if so, how can it be obtained? w Do an agency’s producers, CSRs and other staff need to provide consent?

IA&B’s new member resource shares the do’s and don’ts of telephone recording. www.iabgroup.com/pa/ record_phone_calls

Getting the most CE out of your designation update Taking the same institute two years in a row will update your designation — but not count towards continuing education (CE) if it is taken in the same licensing period. While producers are generally pretty cognizant of their designation update requirements as well as their CE requirements, it is not unusual to have interference between the two. To avoid learning at the last minute about missing credit hours, agents should ensure that the courses or institutes taken are different from one update to the next. www.iabgroup.com/ producer_licensing/pa/ce

Court ruling expands meaning of “household” in homeowners’ policies The interrelated issues of coverage and “where an insured resides” have been somewhat clarified, to the benefit of insureds, as a result of a recent Superior Court decision. In Miller v. Poole, the court ruled that, unless adequately defined in a homeowners’ policy, “residents” of an insured’s “household” could be interpreted to include relatives who live at the insured’s premises, regardless of whether or not the policyholder is also present.

The dispute in this case was based upon the meanings of the words “residents,” “residing” and “household,” none of which were defined in the homeowners’ policy and none of which are presently defined in any of the ISO homeowners’ policy forms. IA&B’s legal brief provides more details. www.iabgroup.com/miller_poole

Fannie Mae publishes FAQ to clarify lender requirements for condos Members’ collective condo headache may be subsiding. Following the last update to Fannie Mae’s Servicing Guide, producers have encountered difficulties in providing policies and evidence of insurance forms that meet lender requirements. Major issues included the use of guaranteed replacement cost wording and expecting the insured value to be determined by the insurer.

This summer Fannie Mae issued an FAQ to clarify its position. While imperfect, the FAQ is an improvement: It acknowledges that the coverage does not have to be “as determined by the insurer” and suggests methods to estimate the amount. Determining 100 percent of the insurable value of the building still can be elusive, but the FAQ gives some flexibility back to the mortgage loan originator in accepting the amount of coverage. Finding an acceptable amount for all parties, in collaboration between the insurer and the borrower, may be easier than it has been in recent months. Producers can access the FAQ and use it in their discussions with the lender. www.efanniemae.com (search HO-6 master/blanket)

Mapping out IA&B’s future The association’s Member Agent Panels (MAPs) will reconvene this Sept.17-26 in nine locations across Pennsylvania for their fall meetings. MAPs bring together members to weigh in on industry issues and provide feedback on IA&B’s activities and direction. Input then heads to the board of directors for consideration and planning.

Preventing Primary Agent | September 2012

ERRORS AND OMISSIONS

ENCOURAGE CLIENTS TO READ THEIR POLICIES CURTIS M. PEARSALL CPCU, AIAF, CPIA Curtis M. Pearsall, CPCU, AIAF, CPIA, president of Pearsall Associates Inc. and special consultant to the Utica National E&O Program, supplied this article.

Insurance Agents & Brokers Service Group Inc. is the

When an errors & omissions (E&O) claim occurs, the file, for the most part, will heavily determine the direction the claim goes. Solid documentation in the file will help the agent’s defense, while little or sketchy documentation could very well hurt the agent’s odds of prevailing. At that point, as the old expression goes, “It is what it is.”

exclusive agent for the Utica E&O program in Delaware, Maryland and Pennsylvania.

For questions regarding this article or your E&O coverage, contact IA&B at 800-998-9644 or iab@iabgroup.com.

The key for agents is to proactively take the initiative to implement various loss control measures; in other words, try to impact the direction an E&O claim could go before it occurs. It may be too late afterward.

A common strategy E&O carriers use when defending a customer involves the client’s duty to read the policy. Even though this duty imposed on the client may not be applied in every state, an agency initiative centered on this issue can still prove beneficial.

Read and understand In the vast majority of states, the duty for the client to read the policy states the client must read and understand policy content, provisions, duties and exclusions.

Typically, there is a requirement that if the client has any questions, does not

In the vast majority of states, the duty for the client to read the policy states the client must read and understand policy content, provisions, duties and exclusions. understand the coverage or discovers the coverage is not what they thought was requested, the client should contact the agency to make any additions, alterations and

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modifications to the policy.

Some states take it a step further, requiring the client to reject the policy if the policy terms are unacceptable.

So what should the agent do?

To bolster this presumption of the insured’s assent to the policy terms, the agent/broker should promptly send the complete policy to the insured and in the cover letter urge the insured to fully review the policy — including the declarations and endorsements — for accuracy and, to the extent the insured has any questions on policy contents, the policyholder should immediately contact the producer.

It is important to note that client ignorance or a statement such as “I didn’t have the time” are not valid defenses for the client.

This letter should be general, such as: Dear “Client,” Enclosed please find the renewal of your Businessowners’ package written with XYZ Insurance Co. You will be receiving your premium invoice shortly.

It is important that you take the time to read this policy to ensure your understanding of the limits and the coverages. If there are any questions or you wish to make any changes to this policy, please contact the agency promptly.

The limits of insurance have been selected by you, and we can’t guarantee that the limit selected will be sufficient in the event of a major loss. Higher limits are available upon your request.

Thank you for your confidence in our agency; we appreciate your business.

Sincerely, Once again, it is best to keep the cover letter general and not restate limits and coverages in it. The theory behind this is if you “recap” the limits and coverages in the cover letter, you are essentially telling your client he or she does not need to read the policy because you are telling them what’s in it.

Obviously, an agency may choose to personally deliver policies. If this is the case, it is still suggested that a cover letter be included with the policies and brought to the attention of the party to whom you are delivering the policies.

Tremendous benefits Another common scenario involves a policy that will be sent directly to the customer from the carrier. If this is pertinent in your situation, it is still highly recommended that you use the above letter with a slight modification. Instead of stating “enclosed please find your renewal,” a phrase such as the following could be used: “You will be receiving the renewal of your Businessowners’ policy directly from the carrier, XYZ Insurance Co. When you receive it, it is important…”

There are tremendous benefits to this approach. Hopefully, the coverage provided is what was requested. If not, the client should discover those areas of concern upon review. For example, if the client asked for full coverage or remarked “protect me for whatever can happen,” they will now find every policy has exclusions and limitations.

The benefits to your agency are also tremendous. It shows you want your customers to understand their coverage, and there may be situations where a customer asks for coverage modifications that result in a program that better suits their needs. It is better to resolve these issues before the claim occurs than after. Lastly, there are many E&O claims where such a letter dramatically determined the direction of a specific E&O claim.

This type of initiative can probably be implemented without too much additional work or expense. This extra step could just make a big difference if an E&O claim comes knocking at your door.

Read up on what the courts have to say about clients’ duty to read their policies. www.iabgroup.com/pa/duty_to_read

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Coverage Primary Agent | September 2012

CORNER

PERSONAL AUTO OR BUSINESS AUTO?

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.

For the past 37 years, I’ve stood in front of a lot of insurance folks and discussed the Personal Auto Policy or the Business Auto Policy. One of the issues that usually causes some confusion is employees driving their personally owned autos, companyowned autos or rented autos on company business.

Which policy applies — Personal Auto, Business Auto or both? Who’s covered by the employee’s Personal Auto Policy? Who’s covered by the employer’s Business Auto Policy? Those are the usual questions.

Business Auto policies for coverage. But, who’s covered by each policy?

covered “auto” you own, hire or borrow, except:

Situation No. 1: Employees using their personally owned autos on company business The ISO Personal Auto Policy (PAP) defines an “insured” as:

(2) Your “employee” if the covered “auto” is owned by that “employee” or a member of his or her household.

1. You or any “family member” for the ownership, maintenance or use of any auto or “trailer.”

3. For “your covered auto,” any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.

If our own people are somewhat confused, I have to assume that employees and their employers don’t understand how their auto policies apply to the business use of employeeowned autos, companyowned autos or rented autos. When employees use their autos, company autos or rented autos on business, we may have to rely on both the Personal Auto and

The ISO Business Auto Policy (BAP) defines an “insured” as: a. You for any covered “auto” b. Anyone else while using with your permission a

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(5) A partner (if you are a partnership) or a member (if you are a limited liability company) for a covered “auto” owned by him or her or a member of his or her household.

Both the employee and the employee’s company are covered under the PAP, and the ISO PAP does not exclude the business use of private passenger autos, pickups, vans or trailers.

However, the company’s BAP covers the company only (if Symbol 1 or 9 for liability). In order to cover employees using autos they own, rent or borrow on company business, the

Employees As Insureds endorsement (CA 99 33) must be added to the company’s BAP. Situation No. 2: Employees using company-owned autos The ISO Personal Auto Policy (PAP) defines an “insured” as: 1. You or any “family member” for the ownership, maintenance or use of any auto or “trailer.”

4. For any auto or “trailer” other than “your covered auto,” any other person or organization but only with respect to legal responsibility for acts or omissions of you or any “family member” for whom coverage is provided under this Part. This Provision (B.4) applies only if the person or organization does not own or hire the auto or “trailer.”

with respect to legal responsibility for acts or omissions of you or any “family member” for whom coverage is provided under this Part. This Provision (B.4) applies only if the person or organization does not own or hire the auto or “trailer.”

The ISO Business Auto Policy (BAP) defines an “insured” as: a. You for any covered “auto” b. Anyone else while using with your permission a covered “auto” you own, hire or borrow….

liability). The employee can be covered under the BAP by adding either the Employees As Insureds endorsement (CA 99 33) or the Employee Hired Autos endorsement (CA 20 54).

When both policies apply, which one is primary and which one is excess?

Employee using personally owned auto: PAP is primary, BAP is excess.

Employee using company-owned auto: BAP is primary, PAP is excess.

Employee renting an auto: PAP is primary, BAP is excess.

Y’all take care!

Who rented the auto? The employee.

Therefore, the employee’s PAP covers both the employee and the company, but the company’s BAP covers the company only (if Symbol 1 or 8 for

The ISO Business Auto Policy (BAP) defines an “insured” as: a. You for any covered “auto” b. Anyone else while using with your permission a covered “auto” you own, hire or borrow….

In this situation the company’s BAP covers both the company and the employee. The employee is also covered by the PAP if the company auto is a private passenger auto, pickup or van, but the company is not covered since it owns the auto.

Situation No. 3: Employees renting autos for business The ISO Personal Auto Policy (PAP) defines an “insured” as: 1. You or any “family member” for the ownership, maintenance or use of any auto or “trailer.”

4. For any auto or “trailer” other than “your covered auto,” any other person or organization but only

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At Harford Mutual, we’re committed to being here for our independent agents and policyholders. Accessible. Experienced. Accountable.

Responsive. That’s Harford Mutual. That’s what mutual success is all about.

Learn more about opportunities for mutual success with Harford Mutual at harfordmutual.com.

GOVERNMENT AFFAIRS

2012 election overview

Polls, predictions and political commentary have dominated the news for months, so itâ&#x20AC;&#x2122;s no surprise to anyone that this yearâ&#x20AC;&#x2122;s elections will be pivotal ones at both the state and federal levels.

Whether the political parties in power are able to retain their majority hold and if so, to what extent, will have a major impact on the social and economic initiatives considered in the coming years.

Primary Agent | September 2012

P

redicting election winners is always risky business.

With the ubiquity of the Internet and the 24/7 news media, one gaffe or political faux pas can turn the tide of public opinion swiftly. One thing is clear however: Voting patterns over the course of the last several elections have painted a picture of an American public increasingly dissatisfied with both political parties. In the 2010 midterm elections, the Republican Party made sweeping gains across the country, picking up 63 seats in the U.S. House of Representatives and six seats in the U.S. Senate. These results were clearly indicative of the American public voting against the party in power at that time. But interestingly, exit polls at the national level after the 2010 elections indicated that more than half of the voters had an unfavorable view of the Republican Party at the time of the election. In the face of ever increasing voter angst and fracturing within the political parties, will the pendulum swing back this year?

There’s a long list of state and federal races to watch in 2012. Here are some factors to consider as IA&B agents analyze the current field of candidates:

President Whether President Obama will be relegated to the ranks of one-term presidents after the votes are counted in November is by far the biggest question mark in this election cycle.

The Supreme Court recently upheld the President’s major first-term initiative, the Patient Protection and Affordable Care Act. With Republicans, including Mr. Romney, vowing to repeal the law if given the opportunity (meaning a Republican-controlled House, Senate and White House), it looks like voters will have the final say on healthcare reform.

Mr. Romney’s message on this divisive issue will be particularly interesting as the presidential debates get underway given his support of the same kind of individual mandate during his term as governor of Massachusetts was just upheld at the national level.

Pundits are placing varying degrees of importance on the Supreme Court ruling vis-à-vis the November elections, but look for it to be galvanizing force for the Republican Party nonetheless as it encapsulates the “big vs. small government” debate that is the heart of the difference between the two major political parties.

Anything can, and most likely will happen over the next few months. At the time of this writing, several major factors are still unknown such as Romney’s choice of running mate and

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Insure the future of your profession A well-established, well-funded political action committee is your insurance against legislation that may negatively impact your industry and makes it easier to educate and influence legislators on the issues IA&B supports.

Show your commitment to the preservation of your profession by making an AgentPAC contribution today.

It’s a small premium to pay. www.iabgroup.com/AgentPAC

GOVERNMENT AFFAIRS

the debate performances of the two candidates, along with what is sure to be an unprecedented level of fundraising.

National polls show the two candidates being neck and neck with President Obama ahead by only a few percentage points.

Although Pennsylvania has voted for the Democratic candidate in the last five presidential elections, the battle to win the state is likely to be closer than it’s been in recent years. Neither candidate has great approval ratings at the moment, so the election most likely will boil down to whom Pennsylvania voters dislike less.

primary earlier this year and will face Republican Tom Smith in the general election this fall.

Smith, a wealthy former coal company owner who founded the Armstrong County Tea Party, won a hotly contested five-way primary race earlier this year, beating both a former state representative and the endorsed candidate of Gov. Tom Corbett.

The race, with its large field of little known candidates failed to excite the Republican base within the state. With name recognition and decent approval ratings in his favor, polls over the last few months have shown Sen. Casey winning re-election by a significant margin.

U.S. Senate Current U.S. Sen. Bob Casey is running for re-election with his first term nearly under his belt.

In 2006, he ousted two-term conservative Sen. Rick Santorum with 59 percent of the vote.

It was the first time a Democrat from Pennsylvania had been elected to a full term in the U.S. Senate since 1962. Casey easily won the Democratic

The battle to win Pennsylvania is likely to be closer than it’s been in recent years. Neither candidate has great approval ratings at the moment, so the election most likely will boil down to whom Pennsylvania voters dislike less.

U.S. House of Representatives Democrats will struggle to net the 25 seats necessary to win back control of the U.S. House of Representatives in November.

This struggle trickles down to the Pennsylvania congressional delegation where Republicans currently hold 12 seats to Democrats’ seven. Further complicating the Democratic comeback effort in the state is congressional redistricting.

Done once every 10 years after the federal census, redistricting will play a big role in this year’s election. Pennsylvania lost a seat in the 2010 census, bringing the total number of congressional districts down from 19 to 18. The new district maps moved quickly through the GOP-controlled state legislature in Pennsylvania and eventually won approval, strengthening Republican control of some of their more vulnerable seats and pushing blocs of Democratic voters more closely together.

The new map merged two Democratic districts in southwestern Pennsylvania, pitting incumbents Rep. Mark Critz and Rep. Jason Altmire against each other. Although Rep. Critz won the tough primary battle, he now faces Republican lawyer Keith Rothfus in a district that favored Sen. John McCain in the last presidential election.

Rothfus will be a strong competitor, too, only narrowly losing to Rep. Altmire in 2010.

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Primary Agent | September 2012

Another casualty of the redistricting process was Rep. Tim Holden, the longestserving member of the Pennsylvania congressional delegation, having first been elected in 1992. Holden, a “Blue Dog” or conservative Democrat, lost out to lawyer Matt Cartwright in the primary election in a newly redrawn, more liberal district.

Cartwright should be able to carry his win through the November election against Republican challenger and Tea Party activist Laureen Cummings, as Democrats make up 56 percent of registered voters in the 17th district.

Democrats’ best shot at picking up a new seat might be in the 8th district, Bucks County, a swing district where incumbent Republican Rep. Mike Fitzpatrick lost his seat in 2006 before winning it back in 2010.

Fitzpatrick’s opponent is Kathy Boockvar, a legal aid attorney who ran unsuccessfully for Commonwealth Court last year.

State legislative races In Harrisburg this year, all 203 seats in the House of Representatives and half of the state Senate, or 25 seats, are up for re-election. Currently, Republicans control the state House, Senate and governor’s office for the first time since the 1990s.

“Bonus Gate,” or the investigation started by then Attorney General Tom Corbett into illegal campaign activity within the state

legislature, has dominated state political news this session and recently claimed two sitting legislators, one Republican and one Democrat. Sen. Jane Clare Orie (R-Allegheny) and former Speaker of the House Rep. Bill DeWeese (D-Greene) were convicted of multiple felonies, including theft of services, and sentenced to jail time. Both resigned earlier this year.

Redistricting has been a major issue at the state legislative level just as it has at the congressional level, though the November state elections will be held based on the existing map drawn in 2001.

The new map created by the state’s five-member Legislative Reapportionment Commission was thrown out by the state Supreme Court in January of this year, amidst accusations of egregious gerrymandering. The court’s decision held that the new map contained unnecessary splits of municipalities and was thus unconstitutional. The reapportionment commission has since approved another map, though at the time of this writing, the state Senate’s 20-member Democratic caucus just filed a legal challenge to the new plan.

The Senate, considered by many to be the more stable side when it comes to the two legislative chambers, has a 30-20 Republican majority and likely will remain in Republican hands during the next legislative session.

[ 13 ]

Democrats will struggle to net the 25 seats necessary to win back control of the U.S. House of Representatives in November. This struggle trickles down to the Pennsylvania congressional delegation.

On the more volatile House side, Republicans hold a comfortable majority (112-91) as well.

Although Gov. Tom Corbett has low approval ratings across the state, the state’s budget has been passed on time during each of the first two years of his term, and he has succeeded in passing some of his major initiatives this year, including corrections system reforms, which may help Republicans retain their hold.

What does this mean to you?

IA&B agents have a strong team in Washington D.C. this election cycle that remains in constant contact with both current members of the U.S. House and Senate as well as election challengers in order to determine who best understands the interests of agents and brokers at the national level. Read more about the Big “I” team and the importance of contributing to InsurPAC on page 16.

GOVERNMENT AFFAIRS

At the state level, there has been a remarkable amount of turnover in Pennsylvania’s General Assembly over the last several years, creating a legislative body with less institutional memory and less dependence on party leadership. Therefore, it is more important than ever for IA&B to project a strong voice with individual legislative members, through active lobbying, grassroots advocacy and meaningful levels of AgentPAC contributions.

AgentPAC resources are always strained in election years because legislators rely heavily on organizations like ours to help support their re-election bids. If we want to have an impact on elections, now and in the future, AgentPAC is the only method we have to compete with the other interests across the state that are making their voices heard in the political process. There are numerous six and seven-figure PACs operating in Pennsylvania, and the only way AgentPAC can keep its head above water and protect your interests in Harrisburg is with support from agents like you. Supporting AgentPAC expands IA&B members’ political influence beyond their individual districts because the PAC supports candidates across the state who will vote on the issues critical to the insurance industry.

The bottom line is that agents need to get politically involved in the 2012 election and remain involved throughout the

[ 14 ]

legislative session. The best way to start is by getting out and voting in the general election occurring on Tuesday, Nov. 6. Pro-agent legislators have a much better change of

being elected if you are engaged and participating in the process. ________________________________

By Lauren Brinjac, government affairs director for IA&B

From the friendly voices of our customer service staff to the personal visits by our territory managers and underwriters to the promptness of our claims adjusters, we are told time and again …

Our people set us apart.

That’s why our agents trust our experience, strength and service. Visit our website to find out about becoming an agent with us.

Business t Surety t Auto t Home

www.PennNationalInsurance.com

Glance at Events SEPTEMBER CALENDAR

Date

Topic

Location

5

CISR—Commercial Casualty Course

Erie, Pa.

6

William T. Hold Seminar

Pittsburgh, Pa.

10

CISR—Personal Residential Course

Mechanicsburg, Pa.*

11

CISR—Personal Auto Course

Mechanicsburg, Pa.*

Employment Relationships Seminar

Newark, Del.

CISR—Agency Operations Course

Mechanicsburg, Pa*.

CISR—Personal Residential Course

Pittsburgh, Pa.

CISR—Commercial Casualty Course

Wilkes-Barre, Pa.

12-15

CIC—Commercial Property Institute

Harrisburg, Pa.

13

CISR—Commercial Property Course

Mechanicsburg, Pa.*

CISR—Personal Residential Course

Altoona, Pa.

14

CISR—Commercial Casualty Course

Mechanicsburg, Pa.*

25

CISR—Personal Residential Course

Philadelphia, Pa.

CISR—Agency Operations Course

Lancaster, Pa.

26

Dynamics of Service Seminar

Baltimore, Md.

27

CISR—Personal Residential Course

Salisbury, Md.

CISR—Commercial Casualty Course

Pittsburgh, Pa.

12

*CISR Marathon Week

IA&B On-Demand Training Education from IA&B is now available online when and where you want it.

Visit iabgroup.com/on-demand for more information.

[ 15 ]

GOVERNMENT AFFAIRS

A voice in Washington, D.C. How the Big “I” represents member agents

Member agents are represented by a bustling government affairs office and powerful political action committee in Washington, D.C. Here, the Big “I” staff chronicles its work — and successes — on Capitol Hill.

Primary Agent | September 2012

W W

hile member agents are hard at work — maintaining their book of business, responding to clients and carriers and running their agencies — lobbyists are hard at work as well, representing them and their interests in Harrisburg and Washington, D.C. That’s the beauty of association membership: Members’ voices are heard even when they are not, and cannot, be present.

In addition to the IA&B government affairs team that works on a state level, members are represented by lobbyists from the Independent Insurance Agents and Brokers of America (IIABA or the Big “I”), who work in Washington, D.C. The following pages detail their work.

Tracking a typical day The day in the life of a federal lobbyist is, among many other things, long and hectic. Fundraisers kick off the day early and cap it off late. The planned — testimonies, in-person meetings and conference calls — are interspersed with the unexpected (but not uncommon) media requests, calls from Congressional staff and grassroots initiatives. Moments behind a desk are few and far between.

On an early summer day, IA&B caught up with Charles Symington, senior vice president of government affairs for the Big “I.” He shared his schedule — a typical one when Congress is in session, particularly in an election year.

8 a.m.

Attended a fundraising breakfast with House Majority Leader Eric Cantor (R-Va.).

9:30 a.m.

Returned to the office for a meeting with Jen McPhillips, senior director of federal government affairs and lead lobbyist on crop insurance, about an amendment by Sen. Kirsten Gillibrand (D-N.Y.) to transfer $5 billion dollars from the federal crop insurance program to the food stamp program.

Decided to launch a second oppositional grassroots campaign through Big “I” associations in approximately 15 rural states, as the amendment would come up for a vote within 24 hours.

[Editor’s note: The amendment was defeated later that day by a 33-66 vote.]

10 a.m.

Met with Ryan Young, senior director on federal government affairs and lead on health care reform, to discuss the pending U.S. Supreme Court decision on health care reform, what the Big “I” response will be to the various scenarios and how Congress will react.

[ 17 ]

The ABCs of the Big “I” PAC InsurPac is the political action committee (PAC) of IA&B’s national affiliate, the Big “I.” InsurPac allows the government affairs team in Washington, D.C. to support pro-agent candidates on the federal level.

InsurPac is one of the largest federal PACs in the insurance industry and the largest, by far, for property-casualty agents. In the 2010 election cycle, more than 5,000 independent agents from across the nation supported the committee, helping it raise $1.9 million.

InsurPac distributed over $1.6 million to a total of 265 races. Of those, 248 supported candidates won for a remarkable 93 percent victory rate.

As the federal government exercises more and more power over small business, the future of the independent agency system becomes more dependent on its engagement in the federal political process.

Support InsurPac by logging into www.iiaba.net, choosing Government Affairs from the menu and then scrolling to InsurPac.

GOVERNMENT AFFAIRS

10:30 a.m.

Met with Nathan Riedel, vice president of political affairs, to compare notes on some of the more competitive House races that came up during the breakfast meeting with Leader Cantor.

11 a.m.

Met with John Prible, vice president of federal government affairs, to discuss the proper response to a press inquiry on flood insurance and agent licensing reform.

Noon Hosted a fundraiser in the Big “I” Capitol Hill Office for Rep. Patrick McHenry (R-N.C.), a member of the House Financial Services Committee and subcommittee chairman for the Committee on Oversight and Government Reform.

At the same time, Big “I” lobbyists attended three other fundraising lunches, including one for Congressman Gary Peters (Mich.-D), who is also on the House Financial Services Committee, that was hosted by the chair of the New Democrat Coalition, Congressman Joe Crowley (D-N.Y.).

2 p.m.

Participated in a conference call interview with IA&B staff members for an article that will run in their association magazine.

3 p.m.

Met with Nathan Riedel and a candidate running for the House of Representatives in Indiana to discuss where he stands on small-business issues.

4:15 p.m.

Squeezed in desk work!

6 p.m.

Along with the other Big “I” lobbyists, attended a total of six evening events: four receptions and two dinners for senators and congressmen.

“No one knows how important relationships are more than independent insurance agents,” said Symington. “[Our PAC] allows our federal lobbying team … to establish or re-establish relationships with elected officials and their senior staff.”

by the House Financial Services Committee and Senate Committee on Banking, Housing and Urban Affairs.

“Over the last three weeks, we conducted nearly a dozen meetings with Senate staff on NARAB II,” shared Symington.

“Some of those meetings were with coalition partners from the industry, and some of those were just Big ‘I’ meetings.”

During the same time period, the Big “I,” along with the National Association of Insurance & Financial Advisors and the Council of Insurance Agents & Brokers, spearheaded a joint letter to all senators in support of the bill. Ten trade associations added their signature to the letter of support.

Flood insurance

Prioritizing the issues At the time of IA&B’s interview with Symington, the Big “I” government affairs team was focused on several legislative and regulatory initiatives.

Details follow.

Agent licensing The National Association of Registered Agents and Brokers (NARAB II) legislation would provide for efficient nonresident licensing while preserving state insurance regulation and consumer protections. As of late June, the legislation had been introduced in both the House and Senate and was awaiting consideration

[ 18 ]

The last full-scale reauthorization of the National Flood Insurance Program (NFIP) occurred in 2004. In the past decade, the program experienced 13 last-minute reauthorizations and four extended lapses. Through it all, the Big “I” government affairs team has lobbied for stability for the program.

“We’ve been conducting a large number of meetings, with Senate staff mainly but also some in the House, on flood insurance extension reform legislation,” said Symington in late June, about a quarter of the way into the latest short-term extension.

Primary Agent | September 2012

The team also arranged recently for Jon Jensen, an independent agent from South Carolina and chairman of the Big “I” government affairs committee, to testify before the Senate Banking Committee on the need for a long-term reauthorization and reform of the NFIP. [Editor’s note: Soon after the writing of this article, a five-year reauthorization and reform bill was passed by the House and Senate.]

Crop insurance The Farm Bill, which designates funds to the Federal Crop Insurance Program, is set to expire on Sept. 30. In addition to the grassroots advocacy efforts outlined above to squelch a harmful amendment, the Big “I” Government Affairs Team recently arranged for two agents to testify on the importance of the crop insurance program.

Federal regulation The newly created Federal Insurance Office within the Department of Treasury is tasked with playing a role in international insurance issues and serving as an information source to Congress and the president.

Federal Advisory Committee on Insurance, which advises the Federal Insurance Office.

Health care The federal health care reform law includes a medical loss ratio provision which stipulates that carriers must spend 80-85 percent of premium dollars on health care services, leaving just 15-20 percent for all “non-claims costs” — to include agent commissions.

Despite the failure of previous legislative and regulatory efforts to address the issue, the Big “I” government affairs team continues to argue that commissions are passed 100 percent to third parties and, therefore, are pass-through fees that should not be included as administrative expenses.

“We’ve been supporting a more insular piece of legislation on medical loss ratios that would exclude agent commissions from medical loss ratio calculations,” offered Symington. “There is a bill in both the Senate and the House that we’ve been strongly supporting, so we’re spending a lot of time on that.”

Taxes

“Our main mission is to ensure that the Federal Insurance Office does not experience any mission creep or become a precursor to a day-to-day federal regulator of insurance here in D.C.,” said Symington.

The tax cuts enacted in 2001 and 2003 received a two-year extension in 2010 but once again are slated to expire at the end of this year. The Big “I” government affairs team is poised to advocate for another extension in the coming months.

As part of this work, the Big “I” government affairs team continues to provide support to a member agent who serves on the

“A lot of our members … file at the individual rate, so if those tax cuts aren’t extended, they’re going to see a huge tax bill coming their

[ 19 ]

way next year,” explained Symington. “We’ll spend a lot of time on that during any lame-duck Congressional session that occurs after the elections in November.”

Flexing political muscle “No one knows how important relationships are more than independent insurance agents,” said Symington. “[Our political action committee] allows our federal lobbying team to attend fundraising events morning, noon and night here in D.C. And at each of these events, we are able to establish or re-establish relationships with elected officials and their senior staff.”

These relationships, of course, do not guarantee votes, but they do guarantee a seat at the table when issues that stand to affect independent agents are discussed.

Strength in numbers InsurPac is one of the largest federal trade association political action committees (PACs) in the nation. In the 2010 election cycle, the PAC distributed over $1.6 million dollars to 265 federal campaigns and hosted or co-hosted over 60 fundraising events, many of which were held in the Big “I” Capitol Hill conference room. Those dollars went to support the campaigns of Republican and Democratic congressmen and senators, as well as candidates for federal office.

“InsurPac boasts an impressive bipartisan track record,” shared Symington. “It’s not what party you come from. It’s not whether

GOVERNMENT AFFAIRS

we get very aggressive with that. Four of the five that we went against lost their reelection bids, so we like to think that InsurPac played a role in that.â&#x20AC;?

youâ&#x20AC;&#x2122;re an incumbent or a challenger. Itâ&#x20AC;&#x2122;s â&#x20AC;&#x2DC;Do you support the independent agency system?â&#x20AC;&#x2122;â&#x20AC;?

PAC in action InsurPac commands attention in Congress, thanks in part to its impressive track record.

During the November 2010 elections, InsurPac scored a 93 percent congressional victory rate in 265 races.

Supporting the Big â&#x20AC;&#x153;Iâ&#x20AC;? efforts

â&#x20AC;&#x153;In the last election cycle, 2010, InsurPac opposed five sitting members of Congress who supported federal regulation of insurance,â&#x20AC;? shared Symington. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s one of our top issues, so

The Big â&#x20AC;&#x153;Iâ&#x20AC;? could not make the legislative and regulatory strides it has without the support of member agents.

And itâ&#x20AC;&#x2122;s member agentsâ&#x20AC;&#x2122; contributions â&#x20AC;&#x201D; large and small â&#x20AC;&#x201D; that add up to that impressive pool of money that allows the Big â&#x20AC;&#x153;Iâ&#x20AC;? to be heard so clearly in Congress. To do your

part, visit www.iiaba.net, choose Government Affairs from the menu and then scroll to InsurPac*. *Note that you must be logged into as a Big â&#x20AC;&#x153;Iâ&#x20AC;? member to view the Support InsurPac link. For a reminder of your user ID and password, email logon@iiaba.net.

________________________________

By Karen Robison, public relations director for IA&B

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[ 20 ]

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

FEATURED PARTNER HM Insurance Group PRESIDENT Mike Sullivan President & Chief Operating Officer COMPANY LOCATION Home Office – Pittsburgh, with regional locations in Camp Hill and Philadelphia WEBSITE www.HMWorkersComp.com

HM

Workers’ Compensation offers a smart approach to coverage – helping to control loss through dedicated service teams; a preferred, cost-saving network; and effective physician-to-physician case management. To ensure the best outcome for all involved, we work side-by-side with our clients, helping to reduce the incidence of injuries in the workplace and return employees to their jobs as quickly as possible.

We know that effectively managing Workers’ Compensation coverage is essential to our clients’ financial success. Using our expertise to control and reduce Workers’ Compensation costs from all angles, we develop and implement customized, effective programs that incorporate loss control, case management, network discounts, proactive risk management techniques and return-to-work programs. We manage the entire

process to help keep employees safe and healthy, while generating cost savings that our clients depend on to help keep their companies financially strong. The outcome is clear in our operational performance results and our approach to service.

Through our network savings program, total claims costs were reduced by 56 percent in 2011, and we passed that savings on to our clients. We also achieved greater than 99 percent technical and financial accuracy when processing both lost time and medical claims.* Such accomplishments, along with our commitment to service excellence, have helped us earn high levels of client satisfaction.

HM Workers’ Compensation coverage is marketed in Pennsylvania, and we target low-to-medium hazard industries with four wall exposure, including health care, social services,

Mike Sullivan administrative offices, banks, physicians, service industries, property management, machine shops, restaurants, retail/wholesale stores and manufacturing. Our loss cost multiplier ranges offer flexibility that helps price each account on its own merits. HM Workers’ Compensation is underwritten by either Highmark Casualty Insurance Company or HM Casualty Insurance Company, member companies of HM Insurance Group. *Performance statistics based on HM Workers’ Compensation Operational Performance — 2011 Report, March 2012.

Platinum Profile FEATURED PARTNER ACUITY PRESIDENT & CHIEF EXECUTIVE OFFICER Ben Salzmann

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

COMPANY LOCATION Sheboygan, WI A.M. BEST RATING “A+” (Superior)

S

ince opening its doors for business in Pennsylvania in 2010, ACUITY has been writing personal and commercial lines accounts at a record-setting pace. In fact, written premium for the insurer is up an astonishing 92 percent in the Keystone State through the first six months of 2012.

The credit for ACUITY’s growth in Pennsylvania goes to its select group of independent agents. And, according to President and CEO Ben Salzmann, no company is more committed to agents than ACUITY. “For 87 years, we have done business exclusively through independent agencies,” he says. “We bring our experience and dedication in building strong partnerships to agents in Pennsylvania.”

“Agents always know what to expect when they do business with ACUITY,” adds Wally Waldhart, Vice President - Sales and Communications. That includes ACUITY’s unwavering focus on providing the technology, products, and value-added services that make the insurer a powerful business ally.

“Almost all insurance carriers either are sound in relationships or technology, but rarely both,” says Salzmann. “We bring that unique combination of the two, along with franchise value in Pennsylvania, which makes us a highly coveted market for independent agents.”

On the technology front, ACUITY has focused on developing and investing in ease-of-business solutions for

Acuity President & CEO, Ben Salzmann

agents. ACUITY provides real-time, online policy quotation and application, and automatically issues and delivers policies to agents within seconds in both personal and commercial lines. The company has recently introduced “ACUITY share,” which allows an agent and policyholder to view applications and rating details simultaneously from different locations.

When it comes to building relationships, no company does more for independent agents than ACUITY. Over the past five years, agents have earned 100,000 continuing education (CE) credits thanks to ACUITY’s free CE courses, speaking tours, and in-agency training. Additionally, ACUITY knows the bottom line is vitally important to agents as well. “We pay more in contingent commissions as a percentage of written premium than our peers,” Waldhart reports.

With strong growth and profitability, ACUITY offers independent agents remarkable financial stability in an otherwise unstable market. A fiercely independent company firmly

committed to remaining mutual, ACUITY is also remarkably well-run: the company is rated A+ by both A.M. Best and Standard & Poor’s and has been named to the Ward Top 50 Best-Run Companies for 13 consecutive years.

ACUITY also offers independent agents stability in staffing, with a remarkable voluntary turnover of under one percent. Salzmann credits this achievement to being a great place to work. In fact, ACUITY is ranked as the top mid-sized employer in the nation by the Great Place to Work Institute.

As a result of its comprehensive and well-rounded strategy, ACUITY provides consistency and security in an industry marked by wide market swings and financial uncertainty.

“We are a healthy, strong, stable, and truly regional mutual carrier,” Salzmann says. “We are thankful to Pennsylvania agents for the trust they have placed in us, and we are incredibly optimistic about our continued success in the state.”

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

Thank you for your continued sponsorship.

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

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

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

PLATINUM LEVEL

BRONZE LEVEL

ACUITY Berkley Mid-Atlantic Group Donegal Insurance Group Erie Insurance Group Harleysville Insurance HM Insurance Group 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

Lebanon Valley Insurance Company

Progressive Westfield Insurance

Merchants Insurance Group

Agency Insurance Company 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 House Insurance Placement Facility of PA Keystone Insurers Group Inc Mercer Insurance Group Mercury Casualty Penn PRIME Municipal Insurance

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

Reamstown Mutual Insurance Company Rockwood Casualty Insurance State Auto Mutual Insurance Company TAPCO Underwriters Inc The Brethren Mutual Insurance Company The Motorists Insurance Group The Mutual Service Office Inc Travelers Tuscarora Wayne Insurance Company Zenith Insurance Primary Agent September 2012

GOVERNMENT AFFAIRS

Getting to know IA&B’s lobbyist

As IA&B’s lobbyist, Lauren Brinjac helps to maintain the association’s daily presence in Harrisburg.

With expertise in association legislative work, she employs her strong relationships with legislators and their staff, as well as with the Insurance Department, to advocate on IA&B members’ behalf.

Primary Agent | September 2012

Name: Lauren Brinjac Title: Government Affairs Director, Insurance Agents & Brokers Education: Pennsylvania State University, B.A.

Q. Why did you become a lobbyist?

A. I’ve always been interested in the political process and the strategies and players involved. It’s great to be a part of the process and be able to directly impact public policy. Plus, if you like writing and speaking (and arguing), it’s a great field in which to work.

Q. How did you enter the field?

A. I entered the field about six years ago, working in the legislative department of the Pennsylvania Bar Association.

While I was there, I gained experience in a variety of areas from bill analyses and direct lobbying to PAC administration and grassroots initiatives. Although the Bar may have different positions from IA&B on a few issues, the fundamentals of managing a government affairs program within an association remain the same and I learned a great deal during my time there.

Q. What do you like most about your job?

“Good relationships are about give-and-take, and I want IA&B to be a place where legislators can turn if they have

A. II like learning about members’ ideas and issues, then taking those positions to the Capitol in hopes of affecting public policy. It can be a long, drawn-out process at times, but ultimately very rewarding. Along the way, I’m able to meet and interact with a variety of intelligent, interesting people from diverse backgrounds, including IA&B members, legislators and staffers, and fellow lobbyists.

Q. How long have you represented IA&B? A. August marked my one-year anniversary with IA&B. Q. What do you consider your greatest accomplishment(s) while representing IA&B members?

A. Generally, I think I’ve been able to help build IA&B’s profile within the legislature and prove that IA&B not only lobbies on issues, but is also a resource to legislators wanting another perspective within the insurance industry. I think that’s critically important because good relationships are about give-and-take, and I want IA&B to be a place where legislators can turn if they have specific questions on insurance issues.

[ 25 ]

specific questions on

insurance issues.”

GOVERNMENT AFFAIRS “A strong political action committee enables me to build relationships with legislators to better represent the collective Q. What legislative/policy issues do you anticipate will affect Pennsylvania’s independent insurance agents in the coming year?

A. This is, of course, an important election year, and the make-up of the General Assembly could change in a few months, affecting the political climate in the state and the issues that end up being considered next year. Regardless of how this plays out, we’ll continue to talk to legislators about the issues that are important to agents and brokers and hopefully see some movement on legislation for which IA&B has been advocating for awhile, such as increasing minimum auto liability limits. The minimum limits issue gained some momentum this session, and hopefully, we can build on that in the next legislative session.

Also, now that the Supreme Court has upheld the Patient Protection and Affordable Care Act, Pennsylvania needs to move quickly on the establishment of the mandated individual and small group health insurance exchanges. It’s going to be quite a lot of work in a short amount of time, for the Pennsylvania Insurance Department, the legislature and the interest groups involved. We’ll remain engaged throughout the process to ensure that the exchanges do not disrupt the private marketplace and that the role of agents and brokers is preserved.

Q. What are your goals for the next year?

A. My goals for the coming year are to further my knowledge of the insurance industry while continuing to promote the interests of agents and brokers in the legislature. I also want to increase AgentPAC fundraising so that we can be more influential and involved in future state elections.

Q. What can agents do to assist your efforts?

A. IA&B is a member-driven organization, and its legislative priorities evolve from what members see happening around them in their businesses and with their clients. Anything member agents can do to let me know what’s important to them not only as insurance professionals, but also as small businessmen and women is always helpful and very much appreciated.

[ 26 ]

interests of agents and brokers, and that’s really what this is all about.”

Also, I would be remiss if I didn’t mention again the importance of agents contributing to AgentPAC. A strong political action committee enables me to build relationships with legislators to better represent the collective interests of agents and brokers, and that’s really what this is all about.

Q. Is there anything else you’d like to share with the IA&B membership?

A. I’ve had a great first year at IA&B meeting members and learning about the interests of insurance agents and brokers. I’m looking forward to another great year.

In the driver’s seat How members steer IA&B’s legislative efforts

IA&B works to put the agent’s perspective first. And who better to drive the association's efforts than agents themselves?

Current committee members: Chairman Frank R. Cosner, Jr., The Pidcock Agency, New Hope William J. Griffin, Jr. Griffin & Griffin Financial Services Fairview Village Robert B. Hallman, Sr. Hallman Agency, Freeport George Komelasky Paist & Noe Insurance, Richboro

T

he IA&B of Pennsylvania Public Affairs Committee serves as the primary arm of the association’s board of directors and is tasked with executing the organization’s advocacy program. The committee is focused on the advancement of members’ common political and legal interests.

Anywhere from three to 10 members, including a board director, are appointed to the committee by the chairman of IA&B’s board. They serve to two-year terms on a staggered schedule to ensure an appropriate mix of new and experienced agents take part concurrently.

The committee is responsible for overseeing the advancement of the legislative, regulatory and legal collective interests of members in the public affairs arena.

This includes representing the association’s interests, providing oversight to AgentPAC and developing positions and strategies. Given their expertise and knowledge base, committee members are often IA&B’s go-to agents for resources or testimony before legislators or regulators on insurance issues.

Current issues for the public affairs committee include: w Implementation of the federal health care law in Pennsylvania, specifically the state health exchange and how to best preserve the role of the insurance producer

Shannon Lipniskis Hutton-Blews Insurance Services Marion Center

w Promulgation of limited lines licensing bills that would extend the ability to sell certain types of insurance (e.g., coverage for storage units) without the same education and licensing requirements currently met by agents

Neil P. Robertson Avis Insurance, Lititz

w Continued efforts to increase the minimum auto limits in the state to better protect the properly insured

Scott C. Rogers Glatfelter Insurance Group, York

w Efforts to work with the Pennsylvania Insurance Department on changes to the surplus lines statute, specifically, ways to remedy the tri-declination affidavit

Robert A. Walbeck R E Walbeck Agency, Homer City

w Ways to address certificate of insurance abuse

Stephen H. Wetherill The Hirshorn Company, Philadelphia

IA&B is always looking for a few good men and women to serve on this vital committee. Contact the IA&B Member Service Center at 800-998-9644, option 0, or e-mail iab@iabgroup.com to express interest.

J. Marshall Wolff Kressler Wolff & Miller, Easton

[ 27 ]

Primary Agent | September 2012

Technology U P DATE

“BRING YOUR OWN DEVICE” OPPORTUNITIES AND RISKS Employees expect it, but employers need to manage the risks

DANIELLE JOHNSON Danielle Johnson is the vice president, director of information technology at InsurBanc, which IIABA and the W.R. Berkley Corporation established to assist independent agencies with their specific banking needs. This article reflects the views of the author and should not be construed as an official statement by ACT.

What is BYOD? Many workers today expect the companies they work for to allow them to use their personal mobile devices and personal computers at the office and/or to provide remote connectivity to the office via personal devices.

Technologists dub this trend “bring your own device” (BYOD).

“The consumerization of IT revolution — sparked by the iPhone — has shifted the IT culture so that the users are the ones getting the latest, cutting-edge technologies first, and they want to bring those devices to work.”

— PC World Magazine, Dec. 20, 2011, Tom Bradley “Pros and Cons of Bringing Your Own Device to Work”

[ 28 ]

Why is BYOD important?

Mobile devices — along with their applications and on-the-go Internet access — provide attractive options for speed, connectivity and productivity. Many people wouldn’t think of spending their workday without a Blackberry, iPhone, Android, iPad or other device to access company

Primary Agent | August 2012

systems and data. Most important, senior managers want to use these devices and are using their organization’s technology more because of them.

Many employees see their own personal devices as superior to those provided by their employers.

Employees also tend to believe they are more productive if allowed to use their own devices for work and data syncing between office and home.

Thus, BYOD is significant because employee-owned devices are now accessing company systems and being used for work purposes, which presents security and privacy concerns to the employer.

Employers see the inherent value in a more mobile, more connected and more productive workforce. Many employees and managers have no problem connecting and addressing work issues after hours and/or on the weekends. It can be considered a motivational strategy.

What are the security risks?

BYOD mobility offers access to enterprise data, systems and corporate email. Employees can store and process data and connect to networks.

While BYOD may be considered necessary and convenient, this type of connectivity can raise significant data security and privacy concerns which lead to potential legal and liability risks.

Consider: 1. The device gets lost or stolen with access to company data and systems.

2. The device contracts a virus or has malware installed that can obtain company logins and data from that device.

3. The personal device user — however good his/her intentions are — can in effect be circumventing company security standards.

Employers see the inherent value in a more mobile, more connected and more productive workforce.

4. The company cannot control the use of the personal device should the employee allow children or friends to use the device.

5. The employee may use the device to place files in personal applications in the cloud which may not be secure.

6. The employee plugs a mobile device into the USB port of his or her office computer thereby transmitting a virus to the office desktop.

Here are some facts to consider when trying to balance personal device access with security: Employees don’t perceive the risk.

Many employees perceive the use of their own devices at work as placing no extra burden on technical support.

[ 29 ]

But dealing with any data or system security issue requires know-how and technical resources.

Executives perceive the risk but aren’t fully ready. In August 2011, a Deloitte webcast poll of more than 1,000 U.S. information technology and business executives found that 28 percent of respondents believe there are unauthorized personal digital assistants (PDAs) and/or tablets connecting to company systems, especially to email servers.

About 87 percent of respondents think their systems are at risk for a cyber attack originating from a mobile security lapse, the poll reported.

The same poll found 40 percent of respondents are unaware of whether their organizations have strategies or controls to enforce mobile security.

Further, it found that only 24 percent of respondents believe that “all devices connecting to my intranet are authorized.” Only 17 percent reported that they monitor for rogue connections.

Malware is on the move. Malware that targets mobile devices is increasing, reported IBM Security Solutions researchers in a fall 2011 whitepaper. Citing an IBM security research report, the whitepaper presented statistics showing that mobile operating systems vulnerabilities tripled from 60 to a projected 180+ from 2009 to 2011.

Enterprise systems and mobile systems are catching up with each other. While many corporations have for years allowed Blackberry-based access to email and other company systems, users are now demanding that

TECHNOLOGY UPDATE

iPhone/Android-based smartphones and tablet computers be provided access to these same services.

How do you proceed once BYOD is determined necessary?

Since there are risks to the mingling of personal devices and work systems, companies must take the lead in assessing and managing the risks so as to safeguard their systems and data. Some simple steps include:

9. Place controls over access to and use of the company’s wireless Internet. For example: Do not broadcast your wireless SSID, restrict access to employees only using MAC address filtering in the router and invoke WPA 2 on the router.

1. Institute a strong written BYOD policy that is consistent with the organization’s employee handbook policies such as the IT policy and acceptable use policy.

2. Determine which data to protect.

3. Define what devices will be supported.

4. Determine which employees need remote access via personal devices.

Do not open BYOD participation beyond those employees that have a strong business reason for mobile access.

5. Define security requirements.

6. Train and educate employees concerning policy and BYOD use.

7. Monitor employee mobile devices for compliance with your organization’s policy.

8. Secure employee’s authorization to “wipe” the employee’s mobile device remotely (restore to the original factory state), as a condition of giving access to any of the business’s systems.

Security solutions If an enterprise is allowing employees to use their own mobile devices, the following security measures should be implemented.

1. Require strong phone startup PIN which is at least six to eight characters long. If not supported, use the maximum allowed. Reduce the PIN-required timeout setting to no longer than 10 minutes.

2. Require specified encryption and anti-malware software on each device.

3. Require and install mobile tracking software/applications which allow online access to track the location of a lost/stolen phone and the ability to perform a lock/scream and/or remote data wipe. Secure employee’s authorization to take these actions on the device if the device is misplaced, lost or stolen,

[ 30 ]

as a condition to giving the employee access to the business’s systems and data.

4. Do not allow “broken”/”rooted”/“jailbroken” devices on your network. These phones have removed limitations installed on the phone by the carrier allowing the user to run apps and files not approved by carriers. This process opens the device up to security risks.

5. Large enterprises monitoring multiple devices and platforms should consider mobile device management (MDM) software.

MDM software centrally controls and protects the data and configuration settings for all mobile devices in the network. MDM also can provide a secure document delivery platform and end-to-end data transmission encryption.

The opportunities of BYOD are present — and here to stay. As an analogy, home security is more complex for a bigger house with more entrances and windows. So too is systems security more complicated as smartphones and other remote devices present new entry points to be analyzed and protected.

All of the security tips presented here are simply guidelines to aid agencies in diminishing security and privacy risks and managing them.

However, none can be guaranteed 100 percent effective.

Tools

YOU CAN USE

CAPITOL CONNECTION olitical junkies and casual observers alike find value in IA&Bâ&#x20AC;&#x2122;s Capitol Connection newsletter.

Emailed monthly while the state legislature is in session and as warranted throughout the rest of year, the publication focuses on the state and federal issues poised to affect members as small-business owners and producers. The newsletter cuts through the clutter of Capitol Hill happenings and shares the specifics of what members need to know and how IA&B is working on their behalf.

P

Video synopsis Links for more details

Concise updates AgentPAC news

Legislator profile

Look for Capitol Connection in your inbox on the last Tuesday of each month during the state legislative session.

Peruse the highlights in your email, or click on the links to read more about any legislative or regulatory issue.

[ 31 ]

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Marijuana plants stolen, insured left high and dry Barbara Tracy’s homeowners’ policy included theft coverage for trees, shrubs and other plants, so when 12 of her marijuana plants were stolen, she submitted a claim. Her insurer, USAA Casualty Insurance Company, paid $8,801 on the claim, but Tracy sued, stating that the plants were worth $45,600.

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[ 32 ]

Tracy argued that Hawaii law allowed her to possess and cultivate marijuana and, therefore, she had an insurable interest.

USAA argued that Tracy had no insurable interest because it would be illegal to use the insurance payout to buy marijuana and that it would be illegal to require an insurer to cover marijuana due to the federal Controlled Substances Act (CSA).

The U.S. District Court for the District of Hawaii first held that Tracy had an insurable interest due to state medical marijuana laws. But the court then ruled that federal law — including the CSA, under which marijuana is prohibited — trumps state law and, therefore, an insurance policy covering marijuana plants would be an illegal contract and unable to be enforced.

Source: IRMI Personal Lines Pilot, Tracy v. USAA Cas. Ins. Co.

----------------------------------------------------------------———————------The Last & Least column is dedicated to the industry’s oddities — from creative claims and kooky coverages, to (tasteful) jokes and strange stories. Submit yours to iab@iabgroup.com, subject line: Last & Least. The editor will happily protect sources’ anonymity upon request.

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