Resources Magazine Spring 2020 by resourcesmagazine

Contents COLUMNS

FEATURES

4 What is Actual Cash Value?

12 When It’s No Longer Business As Usual In this interview, William J. Hold, CRM, CISR,

David Walker, CIC, CRM, ARM, AAI, LIC, discusses this important definition; most think it is replacement cost minus depreciation, but this answer may be just the default response due to a lack of knowledge.

8 Fiduciary Liability Insurance: Under-Loved and Under-Utilized

Richard (Dick) G. Clark, CIC, CPCU, RPLU, and author of Executive Liability Insurance, considers the nuances of ERISA and its impact on insurance coverages and those executives who make internal employee benefit plan decisions.

14 The Health Plan 401(k) Has Arrived

Brian Gilmore, J.D., explores how Individual Coverage Health Reimbursement Arrangement (ICHRA)—a health plan alignment sponsored by employers to reimburse employees for the cost of individual market health insurance premiums—is becoming more popular and could be a future trend.

30 Do You Need Uninsured/ Underinsured Motorist Coverage If You Have Health Insurance?

Dwight M. Kealy, J.D., MA, CIC, AAI, examines how, in these difficult times, some people are trying to cut auto insurance costs by eliminating UM/UIM coverage, believing it is unnecessary if they have health insurance.

34 Actual Cash Value, Catastrophe, and Client Protection

Robert (Bobby) E. Shomo, MBA, CIC, gives advice from the lessons he and his agency have learned in writing Main Street property in his mid-sized rural Iowa town.

40 Workplace Flexibility and Remote Work Best Practices

Sharon Emek, Ph.D., CIC, provides an engaging review of remote work best practices for working at home, either under official directive or by personal choice.

CEO of the National Alliance, addresses how the COVID-19 virus has changed the way the world operates, and the innovative action The National Alliance has taken to provide learning solutions to participants.

22 Are you Asking the Right COVID-19 Questions for Your Clients?

Read about the Nat Alliance NOW podcast exploring risk management solutions already taking effect as insurance professionals navigate the COVID-19 pandemic.

38 Social Media for Your Insurance Agency: When, Why, and How

A new Nat Alliance NOW podcast looks at the significance of social media for insurance in an increasingly digital, consumercentric world.

46 Alex Factor—Student Success

Learn how Alex used the risk manage education resources of The National Alliance, in combination with Florida State University, to carve out a new career in risk management.

NEWS 26 Ask Bettie

Bettie fields the concerns of National Alliance participants and designees during the COVID-19 pandemic.

28 Research Associates

These outstanding organizations and individuals step up to support the important work of The National Alliance Research Academy and invite you to join them.

39 In the Spotlight

Congratulations to the Risk and Insurance 2020 Power Broker Winners.

47 Announcing Subscription Memberships

Big news from The National Alliance about the development of two new ways individuals and corporations can gain cost-saving online access to National Alliance designation programs and courses.

ALLIANCE@SCIC.COM • 800-633-2165

TheNationalAlliance.com

Dear Reader: e are in a new world which we do not like. For weeks, risk and insurance professionals, in addition to the rest of the country, have been trying to avoid spreading and/or contracting the COVID-19 virus through the avoidance techniques of quarantining ourselves in our homes, social distancing, and wearing masks—to name only a few. We find ourselves working from home, while at the same time caring for and educating our children, plus waiting in line six feet apart to enter stores. We are cooking more, endlessly washing our hands, and stockpiling toilet paper, hand sanitizer, and Clorox wipes. We worry about when will this end. You are also concerned about your professional development and maintaining those valuable designations you have earned from The National Alliance. And that is what this edition of Resources is all about—how you can continue your professional development during these times of isolation and separation. You do not want the COVID-19 pandemic to infect your professional development! For over fifty-plus years The National Alliance has maintained a leadership role in professional education within the insurance and risk management industry. The National Alliance is now stronger and more united than ever, using the key values of imagination, innovation, and integrity to keep all participants in our national programs in the forefront of everything we do. Obviously, The National Alliance has had to cancel or postpone classroom courses to maintain the safety of our participants and to comply with government directives. To compensate, we have expanded our online options to provide you with a wider selection of alternatives for these impacted classroom courses. The National Alliance will continue to update this selection for the duration of this national emergency. What are the online options available? • Online self-study options continue to be available; participants can use these at their own pace, any time of the day. Self-study options are available for the CISR and CSRM programs. These courses allow you to not only earn the respective designation, but also earn state CE credit. • The National Alliance also provides an entire array of online standalone, self-study programs in the William T. Hold Seminar series. These courses also qualify for state CE credit. • The National Alliance continues to offer online instructor-led CIC, CRM, and CPRM courses. The live instructor-led courses are generally conducted twice a week at a variety of times during the day and evening. Participants typically attend for two hours once or twice a day, depending on the course schedule. Participants can ask questions of the instructor during each presentation, and each session is recorded so participants can review the recording as many times as they wish. • The online Ruble MEGA Seminar is offered during the entire year, with 27 different sessions. The sessions offered include property, casualty, risk management, as well as in-depth subjects on specific industries. • As part of the response to the COVID-19 pandemic, Bill Toll, CIC, has The National Alliance has expanded online CISR course worked with offerings to now include live online instructor-led courses. The National These courses are typically one-day courses, although some agendas may span multiple days. Alliance in several capacities since For any questions regarding your update and attending 1986. In addition online courses, please reach out to The National Alliance to his work with by email at alliance@scic.com or chat with Client Support. The National Visit The National Alliance homepage at scic.com and click Alliance Research on the blue banner for the latest information and schedules Academy and regarding all courses. as the new Editor of Resources magazine, he is a National Sincerely, Faculty member and Educational Consultant for both classroom and William C. Toll, CIC online courses. Editor-In-Chief

Spring 2020 | RESOURCES 3

BACK TO BASICS

What is

Actual Cash Value? By David Walker, CIC, CRM, ARM, AAI, LIC

hat is “actual cash value”? This is a question I almost always ask when I am teaching commercial insurance classes. The answers vary (most of the time based on geography), but more often than not, the response is “Replacement cost minus depreciation.” Most participants are emphatic that this is the answer yet cannot definitively tell me the nexus of their response. In my opinion, this is one of those responses that has become a default answer due to either a lack of research or an acceptance of what someone has told them without fact checking them. Candidly, I completely understand the problem and how we got to this point. One final thing before we move on—for the purpose of this article, we are focusing on commercial insurance and, more specifically, building coverage. In a standard commercial property policy, the default valuation states: 7. Valuation We will determine the value of

RESOURCES | Spring 2020

Covered Property in the event of loss or damage as follows: a. At actual cash value as of the time of loss or damage, except as provided in b., c., d., and e., below. The “b., c., d., and e., below”

are limited to small losses ($2,500 or less) and clarify certain types of property (not specifically material to our discussion and this article). Now, as most of us are aware, the only time something is defined specifically within the insurance contract, it is either in “quotation marks,” bold, or italics. But you will notice that none of these are indicated in the policy. As such, we have just told the consumer that at the time of loss we are going to determine the value of their property on an actual cash value with no definition. The irony is that while we do not define actual cash value, the policy does define “replacement cost” as follows: G. Optional Coverages 3. Replacement Cost a. Replacement Cost (without deduction for depreciation) replaces Actual Cash Value in

the Valuation Loss Condition of this Coverage Form.

By the way, this is where we make the synaptic leap that, based on the definition of replacement cost, actual cash value must mean I receive “replacement cost minus depreciation,” but this simply isn’t the case. The purpose of this definition is to simply clarify what replacement cost is intended to be and to point out that this valuation clause replaces actual cash value but does not define it. So now we’re back to original question as to what is “actual cash value”? The simple answer is, since it is undefined in the contract, it will be subject to interpretation by the courts or by statute, and as such, the definition will vary from state to state. Now, to be fair, there are some states that, either via case law or statute, have defined actual cash value as “replacement cost minus depreciation.” However, as of the date of this writing, only seven states have done so. Once beyond those seven states, then it comes down to varying definitions based

on case law and statute that will use either the fair market value, the broad evidence rule, and typically the lesser of those two. Also bear in mind that there are some statesâ&#x20AC;&#x201D; Texas, for exampleâ&#x20AC;&#x201D;that will change all of these parameters depending on the peril, extent of damage, etc. The two valuation methods indicated above are fairly straight forward and have become more and more pervasive nationwide. Fair market value, while still subjective, is reasonably discernible. Essentially, fair market value is the price at which property would change hands between a willing buyer and a will-

ing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of the relevant facts. While rather subjective, the factors and resources available to determine the value are widely available via real estate appraisers, comparable properties, etc.

75/$65

Additionally, it would be prudent to check case law in your applicable state to determine how they define fair market value. The broad evidence rule is even more problematic. As the name would suggest, the broad evidence rule is an inclusive valuation

65/$55

75/$65

Learn More Earn More Errors and omission claims often result from a misunderstanding of the definition of actual cash value, in addition to other consequential terms. Similarly, as a risk manager, you can easily cost your organization thousands of dollars in uncovered losses if you do not understand valuing property. The National Alliance is here to help, with the CISR Insuring Commercial Property Course, the CIC Commercial Property Course, and the CRM Control of Risk Course. More subjects related to insuring property are available to you at Ruble Seminarsâ&#x20AC;&#x201D;particularly the online Ruble MEGA Seminar being conducted for the remainder of 2020. Take advantage of these educational resources and do not become a victim of a needless E&O claim or lamentable risk management decision.

149/$139

75/$65

29/$19

45/$35

55/$45

25/$15

Paperback Price / Digital PDF Price

The National Alliance Research Academy Publication Library NationalAllianceBooks.com

Spring 2020 | RESOURCES 5

BACK TO BASICS

method. It allows any evidence/ factors that tend to establish the correct estimated property value of a building or personal property. Examples of such evidence/factors may include: • Original Cost • Replacement Value

• Wholesale Value • Market Value • Economic and Functional Obsolescence • Condition and Physical Deterioration • Location • Use, or Sales and Purchase Offers

Paperback Price / Digital PDF Price

The National Alliance Research Academy Publication Packages NationalAllianceBooks.com

The Insurance Library Essentials Pkg. 195/$175

The Agency Value Pkg.

259/$239

The Insurance Professional Profile Pkg. 185/$165

The Managing People Pkg.

259/$239

The Dynamics of Selling Pkg.

148

RESOURCES | Spring 2020

As you can see, given the flexible nature of the broad evidence rule, this list isn’t exhaustive. However, the price for this flexibility precludes a specific and absolute test for determining exactly how much weight is, or should be, assigned to each potential factor affecting the final valuation. The amount of flexibility given to each claim will be handled on a case by case basis. In conclusion, the purpose of this article is to increase awareness and trigger us to look further into a clearer understanding of how Actual Cash Value is defined in the state, or states, where you work.

About the Author: Mr. David Walker, CIC, CRM, ARM, AAI, LIC David Walker began his insurance career in 1979 as an agent with Guarantee Mutual Life Insurance Co. In 1981, David joined Hartland Insurance Agency in Fenton, Michigan, as a producer, rose through the ranks, and currently serves as President and Principal of the agency. Throughout his career, David has been an active association leader at both the state and national levels. At the national level, David served for five years as the Director representing Michigan on the Big “I” National Board of Directors. He is Past-Chairman of IIABA. As a National Alliance Faculty member, David has taught many classes for CIC and CISR, and is a member of the CIC Board of Governors. David earned his CIC designation in 1996 and his CRM designation in 2014.

The NEWEST edition of Executive Liability Insurance: Evolving Times, Evolving Exposures, Evolving Insurance, by Dick Clarke, CIC, CPCU, RPLU, is now available! Learn what to look for in policies and what to look out for with exposures. Protect your clients and avoid E&O claims. Executive Liability Insurance Trendsâ&#x20AC;&#x201C; A Conversation with Dick Clarke TUNE IN to hear Paul Martin, CPCU, Commercial Academic Director for The National Alliance, interview author Dick Clarke, CIC, CPCU, RPLU, on why insurance agents and buyers of insurance coverage should be proactively discussing their need for Executive Liability Insurance.

Print and Digital Copies Available. Order Now at NationalAllianceBooks.com

EXPERT PERSPECTIVE

Fiduciary Liability Insurance:

By Richard (Dick) G. Clarke, CIC, CPCU, RPLU

s insurance products go, fidciary liability insurance is not old—the first policies emerged in 1975, following the passage of the landmark legislation known as the Employee Retirement Income Security Act of 1974 (ERISA). This legislation became effective on January 1, 1975, with oversight and regulation falling under the US Department of Labor (DOL). The need for comprehensive employee benefits reform was envisioned by New York Senator Jacob Javits, and after significant deliberation and modification of the original legislation, ERISA was signed into law by President Gerald R. Ford, on Labor Day, 1974. With only minor exceptions, ERISA applies to all employee benefit plans, but ERISA has been amended numerous times since its inception. Many of those amendments carry insurance implications. In fact, large numbers of both buyers

RESOURCES | Spring 2020

Under-loved and Under-utilized

and sellers of insurance coverages are unaware of the nuances of ERISA and its impact upon executives, particularly those who make internal employee benefit plan decisions. Let’s explore the specifics, look at the implications and effects of the insurance coverages associated with ERISA, and review emerging trends in claims. Mandated Insurance Section 412 of the original ERISA legislation requires insurance coverage—the only place in the legislation which does so. The insurance required was originally stated as a “fidelity bond,” but in the roughly 45 years since ERISA was implemented, this term has taken on more contemporary meaning. Today it is easily interpreted as “employee dishonesty” or “employee theft” insurance coverage. The original ERISA legislation also dictated a formula for computing the proper amount of this insurance cov-

erage, as follows: 10% of the assets of each employee benefits plan (plus 10% of anticipated plan contributions for the coming plan year), subject to a maximum limit of insurance of $500,000, per plan. In the early 2000s, a $1,000 minimum limit of required insurance was inserted into the law, and in 2008, another insurance-related feature was adopted. This legislative addition stipulated a maximum limit of insurance if employer stock was an investment option for employees, or, if employer stock was used to match employee contributions. The newly established maximum employee dishonesty insurance limit was $1,000,000. There was no requirement that this insurance should be in the form of a separate insurance policy, although some buyers of the insurance wish to keep the ERISA-required insurance separate from the organization’s commercial employee dishonesty insurance. If no separate policy is utilized, however, the

ERISA-mandated insurance must be clearly designated, and cannot be compromised by a lower limit of commercial employee dishonesty insurance which may be in place. Optional Insurance Although employee dishonesty insurance is the only mandated insurance under ERISA, Section 410(a) places significant responsibility upon an organization’s employee benefit plan decision-makers by stating that persons with discretionary judgment authority for employee benefit plans are considered “personally liable.” Section 410(b) states that such persons may choose to purchase liability insurance to satisfy this “personal liability.” THIS is the insurance product we’ve come to know as fiduciary liability insurance. Knowledgeable and concerned insurance professionals, as well as commercial risk managers, have come to appreciate this important insurance protection as a means of addressing the personal liability exposure issue. So, fiduciary liability insurance has emerged as the primary insurance product protecting executives for their personal liability under ERISA, although employee dishonesty insurance is the only insurance coverage actually mandated. Confusion with Other Insurance Products Students of insurance know there was another, somewhat similar insurance product that was available prior to the passage of ERISA: employee benefits liability insurance (EBL). By the early 1970s, it was recognized that human resources personnel were not infallible: mistakes could happen in handling employee benefit plans, such as those involving failure to enroll (or properly enroll) employees, misinterpreting employee benefits, and failure to make employeerequested changes in individual coverage aspects of employee benefit plans. The insurance product chosen

to address these administrative mistakes was EBL insurance. EBL was initially sold as a monoline insurance policy provided on a “claims-made” basis, with a modest limit of liability insurance and minimal underwriting of the exposures. Nowadays, EBL, which is still written on a “claims-made” basis, is often a “throw-in” on commercial general liability insurance policies. This frequently begs the technical insurance question: exactly how does it work when one has a “claimsmade” coverage endorsed onto an “occurrence” liability insurance policy? This conundrum of coverage applicability is just too complex to fully explain in this short article, but serious students of claims-made insurance coverage might want to take the time to work through the coverage applicability of combining a claims-made coverage endorsed onto an occurrence policy form. Almost always, EBL insurance is not underwritten, although an application is sometimes required for the underwriter’s file. The premium for EBL insurance is usually minimal, ranging from $200 to $500 annually. With very few exceptions, EBL insurance addresses “administrative mistakes” directly affecting designated employee benefit plans, and since EBL insurance actually pre-dated ERISA, the vast majority of EBL insurance specifically excludes liability under ERISA. This means EBL should be considered neither a duplication nor a substitute for fiduciary liability insurance. But that’s where a major misunderstanding lies: many buyers and sellers of insurance believe that EBL and fiduciary liability insurance provide essentially the same protection! Another insurance product sometimes confused with fiduciary liability insurance is the required employee dishonesty insurance. This confusion can be easily rectified, however, by realizing that there

is no liability insurance in employee dishonesty coverage, and there is no employee dishonesty coverage in fiduciary liability insurance. Fiduciary liability insurance is unique in providing protection for liability under ERISA. Even directors and officers liability insurance almost always excludes liability under ERISA (as do employment practices liability insurance and many professional liability insurance products). Structure of Fiduciary Liability Insurance Typically, a fiduciary liability insurance policy has two inseparable insuring agreements: 1) liability under ERISA and 2) coverage for adminis-

OUR N E X T DIFFERENCE MAKER!

Learn More! Spring 2020 | RESOURCES 9

EXPERT PERSPECTIVE

trative mistakes. Defense expenses are included, and generally subject to the policy aggregate limit (some policies will provide for a stated maximum limit of defense expenses outside policy limits, however). As important as the core coverage is, there are several potential extensions and/or enhancements of basic fiduciary liability insurance which provide unique protection for decision-making executives. These include the following:

protection.

1. Health Insurance Portability and Accountability Act (HIPAA) Civil Money Penalties. HIPAA is the federal legislation which mandates no employment discrimination on the basis of medical or health-related conditions. Further, HIPAA requires employers to fully secure and protect employee health/medical records, or risk a fine. Thus, having insurance protection for HIPAA civil money penalties is important

3. Section 502(c), (i), and (l) Fines and Penalties. There are various opportunities for the DOL to issue fines and penalties, including Section 502(c), (i), and (l). These fines are rare, but good fiduciary liability insurance will include coverage for fines and penalties under Section 502.

2. Settlement Program and Related Fees. A Settlement Program is a voluntary compliance resolution program administered by the Internal Revenue Service or Department of Labor. Generally, this is a settlement negotiated by these regulatory bodies and the insured organization, which may or may not include regulatory fees, penalties, or sanctions.

4. Affordable Care Act (“ACA”) Fines and Penalties. With the advent of the ACA in 2010, both

Learn More Earn More

The landscape of fiduciary liability insurance is continually changing. A lack of knowledge of the fundamentals and chronic changes in this important area of coverage can cause damage to a professional’s image and financial harm to an agency. The newest edition of Executive Liability Insurance, authored by Dick Clarke, CIC, CPCU. RPLU, has recently been published by The National Alliance Research Academy; it is an essential, valuable, comprehensive guide to the complicated executive fiduciary liability insurance coverages. The CIC Commercial Liability Course, the MEGA Ruble Seminar, and the PROfocus Executive Risk Course are also sources of beneficial executive/ fiduciary liability insurance information. Make sure you check out the Nat Alliance NOW Podcast, “Executive Liability Insurance Trends—a Conversation with Dick Clarke,” on the National Alliance website at www.scic.com. 10

RESOURCES | Spring 2020

individuals and employers were required to have acceptable health insurance in place (a rigid set of guidelines was enacted to assure breadth and reasonable cost of coverage, as well as providing for fines for non-compliance). The individual mandate of the ACA was effectively eliminated with the passage of the Tax Reform Legislation of 2017, but the employer mandate remains in place for employers with 50 or more employees. It is important to have a specific coverage extension to address ACA fines/ penalties. Fiduciary Liability Exposures There is little specific claims information relating to fiduciary liability claims paid, but we know that potential exposures include classaction suits relating to fees paid by employees [when it is not clear that employers are paying all fees associated with benefit plans, particularly, 401(k) plans and employee stock ownership plans (“ESOP”)]. In recent years, several prominent law firms have been known to solicit employee participation in classaction litigation aimed at employers and relating to administrative fees paid by employees. Additionally, litigation is possible in connection with inadequate communication from employers regarding benefit plans. Also, allegations have emerged in connection with “denial of benefits” and “misleading representations” pertaining to employee benefit plans. Misunderstanding Related to ERISA and Fiduciary Liability Insurance Among other possible reasons for underutilization of fiduciary liability insurance are the following: 1. Confusion with other insurance coverages, such as EBL and employee dishonesty insurance; 2. Failure to understand the

critical ERISA aspect of “personal liability;” 3. Asset sizes of employee benefit plans well beyond the limits of fiduciary liability insurance; 4. The belief that by outsourcing some facet of employee benefits administration to a third party, that the third party will have insurance coverage for the employer. Generally, while it is certainly possible to delegate some aspects of benefits administration to third parties, it is very difficult to delegate the responsibility placed upon decision-making

executives of the organization; and, 5. The mistaken belief that there would be some coverage for governance-related decisions in D&O insurance. Once the insurance seller has a solid working knowledge of fiduciary liability insurance, new production doors open and the possibility for strong insurance coverage emerges. Then, it’s just a matter of proper communication with the buyer to arrange effective fiduciary liability insurance!

President William T. Hold, Ph.D, CIC, CPCU, CLU Publisher/CEO William J. Hold, MBA, CRM, CISR wjhold@scic.com Editor-in-Chief Bill Toll, CIC btoll@scic.com Designers Guy Boccia Jeff Buck Becky Keeling Chuck Lickert Department Editors Dustyne Bryant, MBA, CIC, CISR dbryant@scic.com Paul Martin, CPCU pmartin@scic.com Bob Rogers, CLU, ChFC brogers@scic.com Sarah Warhaftig, J.D., CRM swarhaftig@scic.com

About the Author: Richard (Dick) G. Clarke, CIC, CPCU, RPLU Dick Clarke, a 48-year veteran of the property/ liability industry, retired as Senior Vice President of J. Smith Lanier & Co., in 2016. Dick is the proprietor of Dick Clarke Insurance Answers, a consulting firm, as well as an Educational Consultant and National Alliance Faculty member who teaches a variety of advanced Ruble Graduate Seminar subjects and other courses. Dick is also the author of all six editions of Executive Liability Insurance, the most recent of which has been published and is available at NationalAllianceBooks.com.

Mandy Whorton mwhorton@scic.com Marketing Lead Griselda Castillo Resources is published by The National Alliance for Insurance Education & Research, P.O. Box 27027, Austin, TX 78755-2027, 800-633-2165, Fax: 512-349-6194, Internet: TheNationalAlliance.com, email: alliance@scic.com. At present, Resources is available to dues-paid Certified Insurance Counselors (CICs), Certified Insurance Service Representatives (CISRs), Certified Risk Managers (CRMs), Certified School Risk Managers (CSRMs), Certified Personal Risk Managers (CPRMs), and affiliates of The National Alliance Research Academy. Entire contents Copyright © 2020, The National Alliance for Insurance Education & Research. All rights reserved. Material in this publication may not be reproduced in any form without permission. Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by The National Alliance, provided that the following words are included on any copy: “Reproduced from Resources with permission of The National Alliance for Insurance Education & Research.”

Resources is designed to provide accurate and timely information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in providing legal, accounting, or other professional services. If legal advice or other expertise is required, the services of a competent professional should be sought. The publisher has taken all reasonable steps to verify the accuracy and completeness of information contained in Resources. The publisher may not, however, be held responsible for any inaccuracies or omission of information in any article appearing in Resources. The National Alliance Standards of Conduct: scic.com/pub/media/docs/Standardsof Conduct.pdf

Spring 2020 | RESOURCES 11

DISTANCE LEARNING

We interviewed National Alliance CEO William J. Hold about how the company has adapted to the COVID-19 pandemic and what insurance professionals can expect from distance-learning. Mitch Dunford: The COVID-19 pandemic has changed the way educational organizations can provide the learning solutions our industry needs. Can you give us a summary of all of the online options currently available for National Alliance participants? William Hold: We have so many online options available right now. Participants can take a selfguided, self-paced course that includes online access to course content, including educational videos. All self-guided online courses have structured learning objectives for participants to work through at their own pace. Quizzes and interactivity are built into the self-paced courses so participants can take either a designation exam or review exam for CE credit. 12

RESOURCES | Spring 2020 RESOURCES | Spring 2020

We also developed a distancelearning solution because we know our participants really enjoy classroom experiences and being able to network with peers and faculty. We love and cherish our faculty! Through our online instructor-led courses, faculty provide participants with the same practical education, claims examples, policy language, and endorsement issues, just like they do in the classroom. Online instructor-led courses are live sessions done via webinar. Instructors will often switch between the material in the course notebook and descriptions of their own realworld examples. Many will point out various online resources where participants can find information in real-time. This experience allows the participant

the opportunity to interact with faculty, which is great. We’re also experimenting with chat features to encourage interaction, so participants can ask questions and get answers in real-time. You can raise your hand via chat and get called on. Mitch Dunford: Are all National Alliance designation programs available in both self-paced and instructor-led formats? William Hold: That’s correct. Our newest instructor-led offering is our Certified Insurance Service Representative (CISR) designation program. Before, the only option for CISRs was the self-guided, self-study approach. But now we’re experimenting and expanding the CISR schedule with live faculty. Some courses are broken up and others can be completed in one day. Mitch Dunford: The National Alliance cancelled the Orlando MEGA Seminar in June due to the pandemic. Is the MEGA

Seminar also available online? And, can you describe what participants may expect with the online MEGA Seminar? William Hold: The way the online MEGA came about is one of my favorite stories. About five years ago, two board members (Greg Massey and Brad Bornemann) asked us why weren’t doing the MEGA online. They thought the program quality was great but were busy and couldn’t travel. They wanted an online option. They pushed and pushed until we launched an online MEGA as a pilot to see what people thought. That was about two years ago. The pilot exploded and is now the largest program in the history of The National Alliance. The online MEGA is very similar to a classroom MEGA. There are multiple four-hour topics, and participants can choose which they want to attend. The online MEGA is spread over the course of a year, so participants don’t have to worry if they miss a topic. MEGA registrants have 12 months to complete 16 hours of continuing education for CIC, CRM, or CPRM designations. CISRs and CSRMs have 12 months to earn two years’ worth of designation update credit. Personally, this is how I earn my update. I love the fact that Greg and Brad pushed us to create the online MEGA. It’s helped me tremendously by allowing me to pick and choose different topics, hear different faculty members and perspectives, and also earn my update around my schedule. Mitch Dunford: How many of our participants have signed up for the online MEGA this year?

where someone can learn more about it. William Hold: For the past several months, we’ve been discussing the idea of offering corporate clients the option to pay one fee to gain 12 months of unlimited access to our courses. A learning solution like that would provide them with huge cost savings, especially if insurance professionals want to complete more than one program a year. With a subscription membership, the process to earn a designation is streamlined to the participant’s needs. Subscribers pay a onetime annual fee and work at their own pace to earn any of the designations. We developed two subscription levels to fit any budget. We think the subscription membership removes the fear of failure for a lot of our participants. It’s a no-brainer decision.

The COVID-19 pandemic is changing how the world operates. As with crises like severe weather events, or simple everyday disruptions like car accidents, the insurance industry consistently takes a leadership role in our country and communities. We’ve always responded with innovation, imagination, and integrity, and in our current crisis, when our clients and colleagues need us the most, we’re staying stronger and more united than ever. Stay safe. Keep learning. n

Mitch Dunford: Where can we learn more about all The National Alliance’s online offerings? William Hold: The website at scic.com is going to be the best place. On our distance learning page (http:// co.scic.com/distancelearning/), you can see all the online options available as well as the subscription pricing options. To keep our community safe and healthy, all classroom programs have been postponed until June 1st.

William Hold: Over 700 participants are currently registered. Mitch Dunford: A new subscription membership was released this year. Tell us about the new pricing options and

William J. Hold, MBA, CRM, CISR Spring 2020 | RESOURCES 13 CEO of The National Alliance

LIFE & HEALTH ADVISOR

The Health Plan

401(k)

Has Arrived

By Brian Gilmore, J.D. anuary 1, 1980, was a momentous day in the employee benefits field. It was the day Internal Revenue Code 401(k) went into effect, creating the first major opportunity for employers to offer defined contribution retirement plans to employees. January 1, 2020, marks both the 40th anniversary of the 401(k) plan, as well as the introduction of its successor on the health insurance side. This newly defined contribution health plan vehicle is referred to as an Individual Coverage Health Reimbursement Arrangement—or, more commonly, “ICHRA.” An ICHRA (pronounced “ICKrah”) is a health plan arrangement sponsored by employers to reimburse employees for the cost of premiums for health insurance products 14

RESOURCES | Spring 2020

purchased on the individual markets. Employers establish a set allocation and that amount is treated as a taxfree reimbursement to employees. Importantly, the ICHRA approach is not tied to employment, but to the individual market policies available to all Americans. The pre-2020 model depended almost entirely on the traditional employer-sponsored group major medical plan, best thought of as analogous to the traditionally defined benefit pension plan on the retirement side. While defined benefit pension plans were popular years ago, the vast majority of employers subsequently moved to defined contribution plans, mostly 401(k) plans. ICHRAs promise a similar shift in health insurance in the coming years. The Departments of Labor, Health and Human Services, and the Trea-

sury (the Departments) estimate that roughly 800,000 employers will offer an ICHRA in the initial ten-year period from 2020–2029; in the first five years alone, the estimate is that roughly 11 million individuals will be covered by an ICHRA.1 It is no secret that the small sliver of the American population in the individual market has never represented an actuarially desirable risk pool for insurance carriers. Given the Departments’ estimates, the movement to ICHRAs has the potential to significantly stabilize the individual market. The Defined Contribution Allure for Employers The 401(k) plan provided employers with the opportunity to exit the financial, accounting, and administrative demands of a defined benefit pension plan. Employers have been

searching for a similar exit ramp on the health plan side ever since. Employers have long desired something truly akin to the 401(k) approach where the employee directs the funds to an underlying product that is not maintained by the employer. In most 401(k) plans, the employee’s benefit is simply the result of the employee’s investment decisions in third-party products (typically mutual funds). The employer’s primary obligation with respect to those mutual funds is its fiduciary duty under ERISA to prudently select and monitor those designated investment alternatives. The ICHRA similarly directs employees to choose their own underlying product in the form of an individual health insurance policy. The ICHRA actually is more advantageous to employers than the 401(k) in this regard because the rules explicitly provide that employers have no ERISA fiduciary duties with respect to the underlying individual coverage as long as the employer meets a few basic requirements. The result for the employer is a very streamlined offering in the form of the ICHRA, with relatively few administrative or compliance requirements compared to a traditional group health plan. Plus, the employer cost is fixed at the amount of the employer’s ICHRA allocation to each employee, much in the same manner as a 401(k) employer nonelective or matching contribution. The Individual Market Allure for Employees While much of the focus on the ICHRA revolution is on employers, the main appeal for employees is two-fold: 1. Increased Plan Options: most employers offer only a handful of medical plan options, while employees looking for coverage on the individual market will have the full array of carriers and plan options available. While this prospect is less appealing in areas of the

country with less-than-flourishing individual markets, the injection of ICHRA-driven good risk and consumer demand should improve that outlook. 2. Portability: Typically, in a traditional group health plan, an employee’s only option to continue coverage when changing jobs is through COBRA. And when the employee moves to the new employer, the employee will almost certainly move to a (likely significantly different) plan offered by the new employer.

preserve those distinct spheres. Why Employers Didn’t Utilize the Individual Market Pre-ACA Pre-Existing Condition Exclusions: • Problem: The individual market permitted medical underwriting and pre-existing condition exclusions without the group market’s HIPAA portability protections and limitations on such practices for employees and dependents. • ICHRA Solution: The ACA has since prohibited medical underwriting and pre-existing condi-

In a labor field where ICHRAs could eventually become the predominant health plan offering by employers, employees would no longer be subject to the limitations of each employer’s small menu of group health plan options, and they will no longer need to change plans or carriers when moving to new employers or retiring before age 65. This Time It’s Different John Templeton is widely credited with the famous quote: “The four most dangerous words in the English language are ‘This time it’s different.’” In that vein, there should be a healthy dose of skepticism as to whether the ICHRA really is the silver bullet of defined contribution, 401(k)-style disruption. Ever since its rise to prominence in the World War II era and its labeling as a “historical accident,” commentators have predicted the downfall of America’s uniquely employer-based health coverage delivery system. What actually makes this time different is a confluence of factors that have finally aligned to unlock the individual health insurance market as a viable alternative for employers. The key to this analysis lies first in the historical dichotomy that has defined the individual vs. group markets since the wage controls of the World War II era, and more recently in the ACA’s strong push to

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Spring 2020 | RESOURCES 15

LIFE & HEALTH ADVISOR

tion exclusions in the individual market. Taxes: • Problem: World War II era wage controls led to employers increasing compensation through health coverage not subject to the caps, and Congress enacted Internal Revenue Code 106 to exclude the cost of coverage from employees’ gross income (the “historical accident”). No similar tax advantage exists for individuals purchasing coverage outside of an employer-based arrangement. • ICHRA Solution: ICHRAs permit tax-free reimbursement of employees’ individual policy premiums, and employees can pay any remaining portion of the premium pre-tax through the Section 125 cafeteria plan. Adverse Selection: • Problem: A market almost entirely exclusive of the prime risk pool: full-time employees. • ICHRA Solution: The gradual broadening of the risk pool as fulltime employees shift to individual market ICHRA plan offerings. Why Employers Didn’t Utilize the Individual Market Under the ACA (Before January 1, 2020) ICHRAs Prohibited: • Problem: The notorious “Friday the 13th Guidance” in 2013 (IRS Notice 2013-54; DOL Technical Release 2013-03), and “ACA Potluck Guidance” in 2015 (IRS Notice 2015-17; IRS Notice 2015-87) slashed employer opportunities to foster individual marketplace enrollment. The guidance prohibited employers from directly paying for or reimbursing individual market coverage (even on a non-tax-advantaged basis) at risk of a $100/ day/employee (or $36,500/year/ employee) excise under Internal Revenue Code 4980D. 16

RESOURCES | Spring 2020

• ICHRA Solution: President Trump’s Executive Order 13813 was designed to override the Friday the 13th Guidance—the ACA Potluck Guidance—and related individual policy reimbursement prohibition guidance to “allow HRAs to be used in conjunction with nongroup coverage.” The result is the establishment of the ICHRA through the final regulations applicable January 1, 2020. The Employer Mandate: • Problem: Employers subject to the ACA employer mandate (generally 50+ full-time employees) were required to offer employer-sponsored major medical group health plan coverage to at least 95% of full-time employees (generally 30+ hours of service per week) to avoid an Internal Revenue Code 4980H(a) penalty of $2,570 annualized multiplied by all full-time employees (reduced by the first 30). • ICHRA Solution: Offering an ICHRA to employees will be treated as an offer of coverage for ACA employer mandate purposes beginning January 1, 2020. Further, regulations confirm that ICHRAs can be designed to avoid all potential ACA employer mandate penalties by providing minimum value and being affordable in reference to the lowest cost silver plan for self-only coverage offered by the Exchange for the rating area of the employee’s primary worksite. ACA Increases Deductibility Threshold to 10%: • Problem: Employees attempting to access the individual market without employer assistance have faced an even worse tax landscape in recent years as the ACA increased the threshold for deductibility from amounts in excess of 7.5% of adjusted gross income to amounts in excess of 10% of adjusted gross

income. (Note that the Tax Cuts and Jobs Act temporarily reduced the threshold back to 7.5% in 2017 and 2018.) • ICHRA Solution: Employer reimbursements of individual policy premiums through the ICHRA are tax-free to employees. Any remaining portion of the premium not covered by the ICHRA can be paid by employees through pre-tax salary reduction elections under the Section 125 cafeteria plan. Limited Choices and Narrow Networks: • Problem: In many areas of the country, there have been relatively few choices available in the individual market (primarily the Exchange) where no robust ACA marketplace developed. Even where Exchanges have provided some reasonable level of choice, there is still a common issue of narrow network limitations that cause many to view the individual market as providing uncompetitive coverage closer to Medicaid than an employer-sponsored plan. • ICHRA Solution: Given the rapidity with which it is anticipated that ICHRAs will be adopted by employers, the individual marketplace will likely drive demand for carriers to supply a wider variety of individual policy options. The ICHRA Horizon Beginning January 1, 2020, employers can offer ICHRAs to employees as a tax-advantaged mechanism to reimburse employees for their individual medical policy premium costs. In the same manner as the introduction of 401(k)s exactly 40 years earlier on January 1, 1980, ICHRAs have the potential to radically transform the market that is currently dominated by traditional employer-sponsored major medical group health plans. Like 401(k) plans, ICHRAs will generally be less expensive, less administratively burdensome, and

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Spring 2020 | RESOURCES 17

LIFE & HEALTH ADVISOR

In Memoriam

Jerry M. Milton, CIC April 28, 1940 – April 3, 2020 Jerry Martin Milton, CIC, of Orange Beach, Alabama, died April 3, 2020, at the age of 79. Jerry was a native of McComb, Mississippi, and resident of Orange Beach, Alabama. During the greatest part of Jerry’s career, he worked for The National Alliance as a National Faculty member and Educational Consultant. During that time, he also served as an Academic Director, assisting with the design and development of commercial lines curricula. Jerry taught in all 50 states, plus Puerto Rico and the Virgin Islands. Jerry was often heard saying that working with The National Alliance had put him on the national stage as an education professional. While Jerry was a true student of the insurance business, he captured his audience with his “good ole boy” humor and presentation. Jerry was much appreciated by The National Alliance participants! 18

RESOURCES | Spring 2020

present less of a compliance challenge for employers than traditional group health plans. Employees may also soon discover that they relish the broader field of underlying health coverage options and greatly enhanced portability that ICHRAs offer, in the same way employees control the underlying investments and rollover opportunities of their 401(k) plans. The key advantage of the ICHRA is pairing the longstanding desire of employers to move to a defined contribution health plan approach with the tax-advantaged and penalty-free access to an individual market that can no longer impose pre-existing condition exclusions or medical underwriting. This combination is likely to spark nothing less than an ICHRA revolution and act as a correlated catalyst for the demise of the overwhelming predominance of the traditional employer-sponsored major medical group health plan.

84 Fed. Reg. 28888, 28968 (June 20, 2019) 1

About the Author: Brian Gilmore, J.D. Brian is the Lead Benefits Counsel at The ABD Team. He assists clients on a wide variety of employee benefits compliance issues. The primary areas of his practice include ERISA, ACA, COBRA, HIPAA, Section 125 Cafeteria Plans, and 401(k) plans. Brian received his undergraduate degree from the University of California, Berkeley, and his law degree from the University of San Francisco School of Law.

Learn More Earn More Attendance at the 16-hour (two-day) CIC Life and Health Course presents great opportunities to learn more about health plans and life insurance. Expertise in this area can add significant income potential to your agency. With life insurance, much of the servicing work is done by the carrier; nationally, only about ten percent of a typical agency’s total revenue comes from life and health commission income. At the MEGA Ruble Seminar, and other Ruble Seminars conducted across the country, life and health subjects are continually offered. Visit The National Alliance bookstore at www.scic.com to obtain a copy of the Research Academy publication, Life and Benefits Essentials. Also available at The National Alliance website is the Nat Alliance NOW Podcast, “COVID-19 Conversation, Part 1—How the Cares Act Affects Employee Benefit Plans.” Take advantage of missed income opportunities in the life and health arena and raise your agency’s revenue and profit.

For 30 YEARS, this publication has helped insurance agencies chart a course for improved GROWTH, PROFITABILITY, and PRODUCTIVITY. Compare your agency to industry norms and comparable agencies with respect to income and expense averages, productivity measures, and balance sheet ratios. Pinpoint where significant variances occur and focus your efforts where improvements can make the greatest difference. 192 pages + companion files for comparing your agency to peer agencies: income expense averages, productivity measures and balance sheet. Recommended reading for the CIC Agency Management Course

Print and Digital Copies Available. Order Now at NationalAllianceBooks.com

Spring 2020 | RESOURCES 19

In Memoriam

James T. Lawrence, CIC May 31, 1950 – March 27, 2020 Jim Lawrence of Duncanville, Texas, died March 27, 2020, at the age of 70. Jim was founder of Alliance Insurance Services, LLC, in Arlington, Texas, an independent insurance agency that has been in operation since in 1986. Jim is well-known for his insurance expertise and for his leadership, character, and kindness. He was a National Alliance Faculty member for over three decades, developing management curricula and teaching at CIC courses and James K. Ruble Seminars. He was elected to the CIC Board of Governors in 1997 and served as Chairman in 2002–2003, as well as serving on The National Alliance’s Texas Education Committee for six years. Jim always supported insurance continuing education and took great pride in preparing for every teaching event. He loved inspiring people and helping them reach their goals in life. A quote from Carl Jung paints a true picture of Jim’s dedication to teaching others; “One looks back with appreciation to the brilliant teachers, but with gratitude to those who touched our human feelings.” Forming bonds with people and developing a relationship with God was of utmost importance to Jim, and this showed in all his relationships. Jim’s faith, dedication, and generosity will be missed by all the insurance professionals who learned from him and were touched by his caring spirit. Our thanks to Jim for his friendship and the many contributions to the industry and The National Alliance. He was truly the “uncommon man.”

RESOURCES | Spring 2020

“I love learning about how businesses operate and the insurance industry is great for that. I realized that there weren’t as many people as passionate about the type of business I wanted to do. I saw that as an opportunity to start my own brokerage.”

PAUL GAGLIOTI, CIC

President – Diversified Risk CEO – Harbor.ai

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e are living in unprecedented times. COVID-19 has disrupted our daily lives worwide. How we work and socialize is now unfamiliar and uncertain. But the insurance industry can’t directly handle the response or fix what’s happening with the new coronavirus. In fact, insurance is just a piece of the larger risk management process. And prolonged risk management techniques are essential. With that in mind, what should we, as insurance professionals, be talking about? On the Nat Alliance NOW podcast titled, “COVID-19: A Conversation About Our Current Pandemic,” host Paul Martin, CPCU, sits down with Kyle Drawdy, CIC, CRM, Director of Risk Management at Northeast Florida Education Consortium, and Kelly Surles, CIC, CPRM, CISR, ACSR, personal lines expert at The National

RESOURCES | Spring 2020

Are You Asking the Right COVID-19 Questions for Your Clients? Alliance, to discuss risk management in the age of the new coronavirus. Even as insurance professionals seek to inform clients, a handful of risk management solutions are already taking effect. Martin, Drawdy, and Surles share a few that will likely hold more importance as we continue to navigate this pandemic together. One is avoidance. We’ve already seen entire school systems and universities closing to avoid the spread of the virus among students and teachers. But Drawdy asks about the everyday heroes working on the front lines—those at risk in such places as hospitals, pharmacies, and grocery stores. The insightful discussion touches on the importance of social distancing; when the crisis will really hit; and what other countries are doing to successfully control the spread—and why it’s working. Hear questions that risk management professionals must ask themselves, and

receive practical insight into how you can mitigate the risk in your own daily life at home. Nearly every business worldwide is innovating and adapting to a new reality. “Now is the time for us, as agents and risk managers, to set ourselves apart and be there for our customers—to be that person on the other end of the line offering support,” Surles says. And how long will this last? The podcast participants share a few estimates and advice for staying optimistic. “I can’t think of anywhere in our history where we’ve had so much adversity and challenges put upon us, but I also think that as a country, as individuals, we can come out of this stronger and better for it,” Drawdy says. As you wrap your head around what’s happening and consider the best risk management approach, make time to listen to this Nat Alliance NOW podcast.

The Nat Alliance NOW Podcast Series provides risk and insurance professionals with rich, nuanced conversations that deepen learning and ensure the successful completion of National Alliance programs. Monthly episodes feature active industry experts and guest hosts who explore trends and tackle challenging course content.

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Listen at

COVID-19: A Conversation About Our Current Pandemic

Insuring Aircraftâ&#x20AC;&#x201D; An Interview With An Expert

2020 Medicare Advantage Open Enrollment Period

Geeking Out With The Insurance Nerds

Navigating Medicare & Medicare Suplements

Retirement: The Risk Of Living Too Long

TheNationalAlliance.com

Q: “What are my online update o National Alliance Designee,

As a you have dozens of online choices for your update, your career path, and your future. Due to the COVID-19 pandemic, The National Alliance has suspended all classroom programs until further notice. So naturally, one of the most common questions designees have been asking us is, “What online options do I have for my update?” The answer is, literally, “You have dozens of choices!”

CIC

This is the perfect time to choose an online program for your update. It’s your career, your future, and your success at stake, so we have structured our programs to offer you a vast range of learning opportunities—now with more online options than ever before! The choice you make for your update is yours as you decide on the learning path that will best meet your specific career goals. You always have the option of repeating a class you’ve taken before,* whether to learn the latest developments or further master the knowledge for daily use. You can also start on the path toward your next designation, enhancing your credibility and reputation as a true professional, while opening doors to additional markets and job positions. But, that’s not all—your options also include dozens of advanced online programs. Ruble, PROFocus, and Hold Seminars allow you to dive deeply into specific risk and insurance topics. Update options for CIC, CRM, and CPRM designees are presented in our online instructor-led format. CISR, CISR Elite, and CSRM update options are offered in two formats: online instructor-led and online self-paced. The choices are YOURs.

Visit our website

TheNationalAlliance.com

for full details about all of your update options. * Repeating a course may not provide state CE credit hours.

Due to the COVID-19 pandem suspended all classroom pro

You still have many online

CRM

CPRM

Online Instructor-Led Update Options

CIC Course

CRM Course

CPRM Course

James K. Ruble MEGA Seminar

PROFocus Seminar

UPDATE

options?” A: Your career, your choice. Stay Safe– Keep Learning

mic, The National Alliance has ograms until further notice.

e options for your update.

CISR

Online Self-Paced Update Options

CISR Course

CSRM Course

William T. Hold Seminar

E L I T E

CSRM

Online Instructor-Led Update Options

ONLINE

CIC Course

CE Credit:

CRM Course

Refer to scic.com/ce-by-state for information about CE credit hours and requirements in your state.

CPRM Course

James K. Ruble MEGA Seminar

PROFocus Seminar

Must Be Dues-Paid

Earn Up to Two Years Update Credit

CISR

So many great choices! Click on the designation column headers on this spread to link to full listings of topic choices available for your update.

Get a Solid Start Remember, we also offer online programs for industry newbies (Introductory Series) and university students (University Associate Programs).

Do you have a question to “Ask Bettie”? Bettie Duff, Senior VP & Corporate Secretary, has been with us over 40 years and is the person to contact for information on just about anything related to operations and procedures. Email your questions to bduff@scic.com.

Dear Bettie:

With the shelter-in-place order and classroom courses discontinued for the time being, I want to know more about the online Ruble MEGA Seminar. I don’t understand how it works and would appreciate more information on this update opportunity.

I am sorry to say that I have not been able to meet my update requirement even though I registered for a classroom course prior to it being postponed. Had it not been, I would have been up-to-date. Will you allow additional time for me to schedule and attend my update? I worked hard for my designation and do not want to lose it. Please help! Mike, we have heard your request loud and clear! In fact, in order to assist you and others who had their plans changed due to COVID-19, we are offering additional time to complete your 2020 update. If your birth month falls between February 1st and through June 30th, you will be given through September 30th to complete your 2020 update. We understand that the challenges are great, and we want to help you during this time. I would encourage you to visit the website to learn more about our distancelearning options and other updates.

Hello Shelley, Thank you for inquiring about this special advanced online program. The first webinar for this year’s online Ruble MEGA Seminar was conducted on January 13th, and the seminar will continue through December 31st, 2020. There are 24 topics to choose from which are scheduled on different days, consisting of two 2-hour webinars conducted from 10:00a–12:00p (CST) and 2:00p–4:00p (CST). You can choose the topics that interest you the most and best fit your schedule. Some topics are repeated to enable you to attend depending on your availability. You must attend a total of 16 hours (four 4-hour topics), to complete your update requirement and obtain state CE credit. I encourage you to visit our website at TheNationalAlliance.com to learn more and to register. You are able to download the agenda to learn about webinar dates, faculty members’ information, and topic descriptions. We are happy to provide you with distancelearning options like the online Ruble MEGA Seminar during these challenging times. Shelley, I hope you will give this online opportunity serious consideration, and if you have any questions, please contact us at 800-633-2165 for assistance. We will be happy to answer any questions you might have. 26

RESOURCES | Spring 2020

Bettie J. Duff Senior Vice President/ Corporate Secretary The National Alliance for Insurance Education & Research The National Alliance for Insurance Education & Research is the nation’s premier provider of technical educational and professional development for insurance and risk management professionals.

James K. Ruble MEGA Seminars are respected throughout the industryâ&#x20AC;&#x201D;offering a variety of market-focused specialty, advanced, and high-interest topics.

15+ Topics

New topics added year-round. Select any four 4-hour topics to meet your CIC, CRM, and/or CPRM update.

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Each 4-hour topic is coverd in two live, instructor-led, 2-hour webinars.

High-Quality Instruction Convenience of a webinar with the spontaneity of a live instructor.

esearch Associates are organizations and individuals who have stepped up to support the efforts of The National Alliance Research Academy. These respected contributors understand the value of the research, publishing, and recruiting efforts conducted by The Academy. We are proud to partner with each and every one and invite you and your organization to join this prestigious list! As a Research Associate, you’ll contribute to our efforts to recruit into the industry new, more qualified, careeroriented students through the University Associate CIC (UACIC) and University Associate CRM (UACRM) programs at institutions of higher learning. You are also invited to participate in cutting-edge research projects, conducted by The Academy, documenting the latest industry trends and innovations. Collectively, we help to “raise the bar” for everyone in our industry. The National Alliance salutes our Research Associates for all of the ways they make us better—from generous annual contributions to their considerable expertise and leadership. New members in this extraordinary group are always welcome. To learn more about the benefits of becoming an Academy Research Associate (including a 10% discount on all Academy publications), contact Carol Crysup, CISR Elite, at ccrysup@scic.com or call 800-633-2165, ext. 6191.

RESOURCES | Spring 2020

HO NO

Research Alabama IIA

American Agents Alliance

American Automobile Association, Inc.

IIAB of Arizona

Calhoun, Thomson+ Matza, LLP

Coleman Search Group

PIIA of Colorado

PIA of Connecticut

PIA of Georgia

Hartland Insurance Agency, Inc.

HR&R Intergovernmental Pool Administration, Safety & Loss Control

INSURICA, Inc.

ISU Insurance Agency Network

Jerry Montgomery Memorial Research Fund

Kansas Association of Insurance Agents

MarketScout, Inc.

IA&B of Maryland

Massachusetts Association of Insurance Agents

McGriff Insurance Services

IIA of North Carolina

Ohio Insurance Agents

PIA of New Jersey

ReSourcePro

PIA of New York State

IIA&B of South Carolina

Insurors of Tennessee

William T. Hold, Ph.D., CIC, CPCU The National Alliance

Texas Capital Bank

ADD YOUR ORGANIZATION’S NAME TO THIS PRO

OUR

Associates Ask Bettie

Assurex Global

Bowen, Miclette & Britt

Brown & Brown, Inc.

BXS Insurance

CRC Insurance Services, Inc.

IA&B of Delaware

Dick Clarke Insurance Answers, LLC

Alex Lekhraj The National Alliance

Florida Association of Insurance Agents

William J. Hold, CRM, CISR The National Alliance

HUB International Insurance Company

IIA of Illinois

IIA of Indiana

IIA of Kentucky

PIA of Kentucky

Keystone Insurers Group, Inc.

The Main Street America Group

Marble Box

McGriff, Seibles & Williams

Michigan Association of Insurance Agents

Minnesota Independent Agents and Brokers Association

Missouri Association of Insurance Agents

PIA of Nebraska and Iowa

IIAB of Pennsylvania

Popular Insurance, LLC

PIA of Wisconsin

Zurich North America

IIA of Oklahoma

PIA of Virginia & D.C.

State Auto Insurance Companies

PIA of Washington/ Oregon

OUD GROUP: Contact Carol at ccrysup@scic.com

PATRA Corporation

Westwood Wealth Management

PIA of Indiana

Spring 2020 | RESOURCES 29

NICHE KNOWLEDGE

Do you need

Uninsured/ Underinsured Motorist Coverage if you have heath insurance?

By Dwight M Kealy, J.D., MA, CIC, AAI

o you really need Uninsured/Underinsured Motorist (UM/UIM) coverage if you have health insurance? In these difficult times, people are becoming increasingly creative when it comes to cutting costs. One suggestion I heard was to reduce auto insurance costs by eliminating UM/UIM coverage. The person proposed that UM/UIM is unnecessary if you have health insurance. With over 90% of those in the US now having health insurance coverage, I can see why this suggestion is appealing, but this cost-saving strategy is based on the misunderstanding that UM/UIM and health insurance cover the same things Health insurance is designed to cover 30

RESOURCES | Spring 2020

medical bills. UM/UIM coverage is designed to give the car that caused your damages the coverage you wish that car had. Although policies vary by carrier, UM/UIM is designed to provide coverage to another driver in the event you are in an accident with a vehicle that either has no insurance (UM) or has less insurance than is necessary to cover the damages (UIM). A vehicle that commits a “hitand-run” is also often included in UM/UIM coverage. The individuals that are covered by typical UM/ UIM policies include the insured, the insured’s family members, and any person occupying the insured’s covered vehicle. The damages covered often include bodily injury to a covered person and property damage

caused by an auto accident. Property damage includes damage, destruction, or loss of use to a covered person’s tangible property. To illustrate the difference between health insurance and UM/UIM coverage, imagine you or a family member is in a serious car accident with an uninsured vehicle. If you have health insurance, hopefully your medical bills will be covered. But what if you or your family member requires long-term care, suffers from lifelong extreme pain and suffering, is permanently disabled, or dies? These tragedies are not covered by health insurance policies, but could be covered under a UM/UIM policy if caused by someone with no insurance, insufficient insurance, or a hit-and-run.

Learn More Earn More Your clients are constantly coming to you for advice, and automobile insurance generates a multitude of questions. To stay current, The National Alliance offers you many choices; one is the CIC Personal Lines Course, and another is the CISR Insuring Personal Auto Exposures Course. Both provide a detailed study of the personal automobile policy and endorsements to help you give correct answers to your clientsâ&#x20AC;&#x2122; questions and avoid errors and omissions situations. The National Alliance Research Academy publication, Insurance Essentials, provides foundational details and acts as a primer for new employees to help prepare for CISR and CIC courses .

State California

Per Injured Person Limit $15,000

Population Rank 1

Population 37,747,267

Florida

$ 10,000

21,646,155

Pennsylvania

$ 15,000

12,813,969

$ 20,000

10,020,472

$ 15,000

8,922,547

$ 20,000

6,939,373

$ 15,000

4,652,581

Iowa

$ 20,000

3,167,997

Hawaii

$ 20,000

1,416,589

Total

107,326,950

Michigan New Jersey Massachusetts Louisiana

Spring 2020 | RESOURCES 31

NICHE KNOWLEDGE

Similarly, what if you or your business suffers property damage as a result of a car accident caused by someone with no insurance, insufficient insurance, or as a result of a hit-and-run? Imagine the driver hits a power pole that knocks out power to your business for a day, or you can’t access your business because your entrance is blocked by police investigators? This may qualify as loss of use of tangible property resulting from an auto accident. Therefore, this type of incident may be covered by UM/UIM, but would have nothing to do with health insurance. In evaluating whether or not you want to purchase UM/UIM coverage, you may want to know what are the odds that you will be in a car accident with an uninsured or underinsured motorist. Let us start with a look at the likelihood of being injured in a car accident at all— whether or not the other driver has sufficient insurance. • There is an average of six million car accidents in the U.S. every year. • More than 90 people die in car accidents every day. • Three million people in the U.S. are injured in car accidents every year. • Around two million injured in car accidents every year experience permanent injuries.1 According to the Insurance Information Institute, there were 40,231 deaths by vehicle accidents in 2017. That corresponds to a one in 103 chance of dying as a result of a vehicle accident.2 Now that we have a glimpse of the likelihood of being in an accident, you may want to know the likelihood of being in an accident with an uninsured motorist. This largely depends on where you live. The adjacent charts show the Insurance Information Institute’s 2015 list of the “Top 10 Highest and Lowest States by Estimated Percentage of Uninsured 32

RESOURCES | Spring 2020

Highest

Lowest

Percent % Rank State uninsured

Florida

26.7%

Maine

Mississippi

23.7

New York

New Mexico

20.8

Massachusetts 6.2

Michigan

20.3

North Carolina 6.5

Tennessee

20.0

Vermont

6.8

Alabama

18.4

Nebraska

6.8

Washington

17.4

North Dakota

6.8

Indiana

16.7

Kansas

7.2

Arkansas

16.6

Pennsylvania

7.6

D.C.

15.6

South Dakota

7.7

Motorists.” As you can see, if you’re in a car accident in Florida, there’s a one-in-four chance that the other driver has no insurance at all.3 Underinsured Motorists Even if the driver has insurance, there is a question as to whether or not the driver has enough insurance. Every state has a minimum auto insurance liability limit. However, one-third of the U.S. population lives in states where the required per person auto liability limit is less than the average cost for an inpatient stay at a hospital in the USA.4 A study funded by the Bill and Melinda Gates Foundation that was published in the January 2019 issue of a public health journal found that the average cost for an inpatient stay at a hospital in the US in 2016 was $22,543.5 Compare this with the minimum liability limit of $15,000 in California, Pennsylvania, New Jersey, and

4.5% 6.1

Louisiana; and $20,000 in Michigan, Massachusetts, Iowa, and Hawaii. In Florida, the per person auto liability limit is $10,000. This means that even if you are in an accident with someone who has insurance, in many cases, the insurance the other driver carriers will be insufficient to pay for the average inpatient stay at a hospital. The danger of using an example including medical bills is that it risks reinforcing the belief that UM/UIM is unnecessary for those who have health insurance. It is true that if you have perfect health insurance that covers all of the bills of your hospital stay, and you and your caregivers do not miss any work or experience any loss of income, and you do not experience any pain and suffering or die, your perfect health insurance in this perfect situation may have been enough for you. Unfortunately, there are no perfect accidents. A recent study found that 66.5% of personal

bankruptcies cited medical issues as the reason for the bankruptcy. Of these, 88% (58.5% of total bankruptcies) were specifically caused by medical bills. The remainder were caused by those who had to take time off of work and were not getting paid due to medical issues. With UIM coverage, you can give the driver who hit you the coverage you wish that driver had.6 Another danger of writing this article as an insurance professional who also happens to be an attorney is that I’ve heard people say that the only people who insist on others buying UM/UIM coverage are attorneys because attorneys want to go after the policies to get paid. It is true that most plaintiff attorneys get paid based on the amount that they are able to recover. If the attorney is able to help an injured party recover a larger amount, the attorney will get paid a larger amount. The typical fee for a car accident often ranges between 25% and 40% of the amount recovered. To this end, if you want to ensure that no attorney gets paid a large amount in the event that you or a loved one dies or is permanently disabled in a horrible car accident by an uninsured, financially insolvent driver, you could avoid purchasing a UM/UIM policy. This way, in a 1/3 contingency fee situation, instead of an attorney receiving $100,000 and your family receiving $200,000, you can ensure that both you and the attorney will receive nothing. When deciding on whether or not to purchase UM/UIM coverage, you can ask if you would want coverage in case you are in an accident with an uninsured or underinsured motorist that causes you or someone in your household to miss work, causes significant pain and suffering, causes a permanent life-altering disability, death, or property damage. This is what a UM/UIM policy is designed to cover. If you’re relying on health insurance, you probably have no coverage.

1. https://www.driverknowledge.com/ car-accident-statistics/ which points to other sources: http://www.cdc.gov/ Features/dsDistractedDriving/ http://www.distraction.gov/ http://www.ftpersonalinjurylawyers. com/blog/car-accident-statistics http://www.cdc.gov/motorvehiclesafety/seatbeltbrief/index.html 2. https://www.iii.org/fact-statistic/ facts-statistics-mortality-risk 3. https://www.iii.org/fact-statistic/ facts-statistics-auto-insurance 4. Automobile Financial Responsibility Limits by State (As of June 2019). Insurance Information Institute. 5. https://www.thelancetcom/ journals/lanpub/article/ PIIS2468-2667(18)302135/fulltext#tbl1 6. https://www.cnbc.com/2019/02/11/ this-is-the-real-reason-most-americans-file-forbankruptcy.html https://www.nasdaq.com/articles/

About the Author: Dwight M. Kealy, J.D., MA, CIC, AAI Dwight Kealy is an insurance attorney, expert witness, author of several books on insurance, and Professor of Law in the College of Business at New Mexico State University where students can earn a minor in Risk Management and Insurance. He received his CIC designation in 2007 and has been a faculty member with The National Alliance since 2011.

Learn More Earn More One of the great mysteries of independent insurance agencies is why so little attention is given to writing life and health insurance. In studies conducted by The National Alliance Research Academy, only ten to twelve percent of agency revenues come from life and health sales. Why is that percentage so small? A common belief is when you are talking about life insurance, you are talking about the end of someone’s life, and that can be unpleasant. But the real conversation is about providing for survivors. From a business point of view, life and health business helps to strengthen an agency’s business relationship and incumbency with a client. This increases the agency’s retention ratio and increases revenues. To increase your life and health knowledge, The National Alliance offers many choices. The CIC Life and Health Course provides exposure to many facets of the business. Additionally, there are a variety of Ruble Seminar subjects addressing advanced life and health topics, plus, The National Alliance Research Academy publishes Life and Benefits Essentials, providing a comprehensive introduction to these important products. On The National Alliance website’s Nat Alliance NOW page is a Website Resource listing US health insurance providers and their responses to the COVID-19 pandemic. Spring 2020 | RESOURCES 33

COVERAGE CORNER

Actual Cash Value, Catastrophe, and Client Protection By Robert E. Shomo, MBA, CIC

arshalltown, a midsized town of about 30,000 people and 10,000 households, is nestled in the midst of rural Iowa and its corn, soybeans, and hogs. Founded in 1862, it is a fair representation of rural Main Street America with many historic buildings and a downtown area featuring two to four-story brick buildings with shared walls and some interesting peculiarities. For example, a local bicycle shop can only access its third floor from the neighboring retail furniture store, which can only access the roof of their second-floor addition through the bicycle shop!

RESOURCES | Spring 2020

Our town is a living example of the term “moral hazard” as it applies in the scenario where a business owner can buy a three-story brick building with 13,456 square feet, built in the 1880s, for a whopping $152,500, and generate a replacement cost estimator (RCE) of $2,152,960. Every insurance agent working on rural Main Street America has been faced with the dilemma of properly insuring a risk like this! Our agency faced this quandary in 2010 when a client bought a fourstory brick building on Main Street in less than average condition for about $150,000. Our client owned properties in several towns across the state where we had his property coverage

blanketed on a replacement cost (RC) form. However, the client did not want to pay the premium associated with a $3,000,000+ RCE and asked that we insure this building for its actual cash value (ACV) in order to “protect his original investment.” We shared our concerns about using ACV to meet this objective, but as we also felt that adding this building to the blanket RC coverage form was not being completely fair to the carrier, we settled on a compromise: we were able to manuscript coverage on a functional replacement cost (FRC) form. In this unique situation, there was no plan to rebuild. Following a catastrophic event or significant loss,

the client intended to demolish the building, haul away the building materials, and donate the cleared lot to the city for development as a green space or use as a parking lot. The property was insured for $750,000 FRC and we worked with the carrier to make the entire limit available, if needed, for debris removal. In February 2012, this coverage was put to the test when an arsonist burned the structure, resulting in a total loss. The debris was determined by local officials to have an inseparable asbestos exposure, effectively rendering the entire debris removal as polluted and hazardous, which increased the expense to a surprising total—in the neighborhood of

$430,000. The $750,000 was sufficient to remove the building, recoup the owner’s initial investment, and gift our town with what is today a beautiful green space and park. The sheer dollar amount of the debris removal garnered our complete attention following that loss. What if we had written that building on an ACV form at $150,000? Property forms vary, but most limit the debris removal payment to 25% of the sum of the deductible plus the amount paid for direct physical loss up to the Covered Property limit, with the possibility of an additional $25,000 if the loss exceeds the covered property limit. In this case, the recoverable debris removal would have been limited to $62,500 (25% of $150,000 + the additional $25,000), which would have left my client stuck with a $367,500 debris removal bill after the insurance was paid. That scenario would have in no way “protected his original investment.” Following that fire, our agency re-evaluated how we insure Main Street to protects our clients’ original investments. We determined that we could not adequately do so with an ACV form, or at the very least, increasing the debris removal coverage. We made a firm decision to write Main Street businesses only on a replacement cost basis. We ran a list of our Main Street clients and updated our RCEs for each location while reviewing the chosen co-insurance percentage. Next, we reviewed policy forms for each carrier to determine how each carrier dealt with ancillary coverages so that we could get the debris removal to an appropriate level (usually between $250,000 and $500,000) with each carrier. We also reviewed other ancillary coverages such as Ordinance and Law, Business Income/Extra Expense, and Pollution Clean-up. Next, we looked at businesses that shared walls, and committed to insuring both sides of the wall with the same carrier in order to simplify the claim process and

remove the variable of two different carriers working to settle a claim on each side of the damaged wall. We took these results to our clients, sharing our concerns about “protecting their initial investment.” Some clients saw it as a revenue grab and countered with claims of being “insurance poor.” We held to our belief that our primary responsibility is to protect their net worth and the viability of their businesses in the event of a catastrophic exposure. We lost a few clients to other agencies who were more than happy to write a “cheaper” ACV policy where only the initial investment was insured, but overall, our clients trusted our thought process. Fast forward to 4:25 PM on July 19, 2018, when Marshalltown’s Main Street was struck by an EF-3 tornado packing 144 MPH winds and a 900yard debris path that was 8.26 miles long. The tornado came down Main Street, toppling the cupola from our historic county courthouse and generating a roughly $30,000,000 loss from that single claim! In addition, our agency absorbed numerous claims settled/reserved in excess of $1,000,000. The moral of the story is this: we couldn’t be more grateful for a 2012 fire loss that made us take a hard look at how we insured our book of business on Main Street America. We are now 1½ years removed from that event and it is clearly evident which businesses on Main Street carried RC coverage and which carried ACV coverage. Sadly, buildings written on an ACV form with significant damage stand untouched because the owners cannot afford to either fix or remove the structures. Business are closed and have gone bankrupt. What’s an owner to do when dealing with this equation: $200,000 of ACV property coverage, more than $1,000,000 of damage, and an estimate of $600,000 for demolition and removal? And don’t forget: all of these properties were Spring 2020 | RESOURCES 35

COVERAGE CORNER written with the intention of “protecting the client’s original investment.” We communicate to our agents every day that clients buy on price, but settle on coverage. We have to either answer why the premium is 10% higher or why our clients are hundreds of thousands of dollars short on coverage at the time of loss. We want to be able to sleep well at night, so we choose to sell coverage over price. But it is about far more than RC vs. ACV or the limit carried on the building. It is very important that we understand each carrier’s policy form and how each carrier handles ancillary coverages. Too often, today’s agent thinks we can just “Google” coverage questions rather than reading policy forms to understand how a specific policy responds to coverage or what exclusions and conditions apply. Each additional carrier contract gives us more options, but it also increases our exposure to know the differences between each carrier’s forms. For example: How much Debris Removal is included at the Coverage A limit? • Do I need to change the coverage form (ACV to RC)? • Does the building have a pollution exposure that might increase the cost of removing compromised debris?

• Do I need to purchase additional limits for Debris Removal? How does the carrier’s form address Ordinance & Law Coverage (O&L)? • Inside the Coverage A limit? – If so, what O&L issues are addressed in the city code that my insured might need to address? – If so, do I need to increase the RCE above 100% to reflect both the rebuild and O&L issues? • Outside the Coverage A limit as a separate limit? – If so, what O&L issues are addressed in the city code that my insured might need to address? – Do I need to purchase additional limits for O&L to meet this exposure? How does the carrier’s form address Business Income/Extra Expense (BIEE)? • How much BIEE coverage is needed? – What form/information do I need to determine the proper amount of BIEE? – Do I need to increase the limit? • How long will BIEE overage be needed? – Do I need to increase the time limitation? • Which BIEE form is most appropriate for my client? – Actual Loss Sustained (remember,

Learn More Earn More The CIC Commercial Property Course provides you with additional concepts of insuring your clients’ commercial property, as do the CRM Principles of Risk, Risk Control, and Analysis of Risk Courses. Property coverages are also reviewed in the PROFocus Large Commercial Course, as well as the CISR Insuring Commercial Property Course. Visit The National Alliance Research Academy’s bookstore on The National Alliance website to find P&C Insurance Essentials, which provides a solid reference on insuring property, and while you are at the website—browse the complete schedule of both online and classroom instruction for the above courses.

RESOURCES | Spring 2020

Businessowner policies limit ordinary payroll to 60 days)? >Do I need to increase the BOP’s ordinary payroll time limit? – Co-Insurance (be careful with how much self-retention)? – Monthly Limit of Indemnity (1/3; 1/4; 1/6); remember there is no carryover! – Agreed Value? – Maximum Period of Indemnity? Does my client share a wall(s) with another business? • Can I insure both sides with the same carrier? • What happens to the remaining business when one side or the other is a total loss and has to be demolished? As demonstrated in this article, Main Street businesses can rarely be provided with adequate protection in catastrophic situations by the use of ACV forms. As I mentioned earlier, I sleep better at night knowing that my clients are insured with RC. Amid the devastation and destruction of the tornado, our agency’s promise to our clients held fast—and when the wind is blowing at 144 mph—that’s saying something!

About the Author: Robert E. Shomo, MBA, CIC Bobby is President of ShomoMadsen Insurance, a Best Practices Agency recipient with five locations in Iowa. He is a managing partner, producer, and Human Resources manager. Prior to purchasing his first agency in 2005, Bobby spent six years on the company side, primarily in casualty claims with rotations in underwriting and loss control.

DYNAMICS SERIES

ONLINE DYNAMICS OF SELLING The Online Dynamics of Selling Course teaches

producers a proven, insurance-specific sales process that can help your confidence and closing ratios soar. Taught by sales mentors, this highly interactive 2-day course will help you improve your communication and negotiation skills, develop solid prospects, and overcome client objections without leaving your home or office!

AGENCY MANAGEMENT

Social Media

for Your Insurance Agency: When, Why, and How

Social media marketing can guide your insurance agency to more leads, promote consumer trust, and heighten engagement with your target audience. Sounds pretty good, doesn’t it? In the Nat Alliance NOW podcast, “Social Media for Your Insurance Agency,” Ashley Fitzsimmons, CISR, interviews Dani Kimble, Chief Marketing Officer at O’Neil Insurance, to discuss the significance of social media for insurance agencies in an increasingly digital, consumer-centric world. “We have the world at our fingertips and unlimited amounts of information,” Fitzsimmons says as she kicks off the podcast. “That means people are looking at your business before you even know they exist.” Your agency’s website and social media profiles are your first touch points with new clients, and we all 38

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know how important it is to make a good first impression—especially when it’s a company you need to trust with something as significant as your business or family. “The power of social media and digital marketing allows your efforts to become more of a brand experience and less of a flat traditional brand,” Kimble explains. The O’Neil Group is one among many agencies shaping their corporate brands to be more authentic, personal, and engaging. Kimble strives to create a living, breathing brand that tells a story—a brand that focuses on people and culture. “We sell an intangible object, and [buying insurance is] not the most enjoyable experience for people to begin with,” Fitzsimmons says. “But we need to figure out how to make it a better experience, and social media is the first place to start.” If you’re already active on social, this episode can help you tackle the deeper questions for Facebook, Instagram, and LinkedIn:

• When is the best time to post content? • How many hashtags should you add to an Instagram post? • Where do you find inspiration for your content? If you want to walk away with social media ideas for insurance agencies, you’ve come to the right place. The conversation even gets into the nitty gritty of personal branding. While it’s a huge opportunity, it doesn’t make sense for every agency or every agency employee. Kimble explains when a personal brand is worth exploring, and why that taps into the hiring process. Kimble adds another important takeaway: You won’t get results overnight when it comes to your social media marketing efforts. You must stay consistent and test everything. To learn how to make a big impact through social media, listen to this Nat Alliance NOW podcast now.

Congratulations to the ten CICs, six CRMs, and two CSRMs who have been recognized as a Risk & Insurance 2020 Power BrokerÂ®! Presenting The National Alliance designees named 2020 Power Brokers: Erika Almquist,

John Chino,

Justin Felker,

Maureen Gallagher,

CIC, CPCU Vice President, Client Advisor Manager

CIC Area Assistant Vice President

CSRM Area Senior Vice President

CIC, CRM, LIC, RPLU, CWCP, RM, CWCA, CWCC, CILMA, CRIS

Lauren Erickson,

CIC Area Vice President, Nonprofit Practice

Sharon Hammer,

CIC, CRM Client Advocate

Area Assistant Vice President

Adrienne Reid, CIC Vice President

Greg Scheinman, CIC Shareholder

Julie Reinhardt,

Tony Sandfrey,

CIC, CRM Senior Vice President

CRM Environmental Practice Leader

Brian Sebold,

Chris Smith,

CIC Senior Vice President

CIC, CRM Area Vice President

Spring 2020 | RESOURCES 39

INNOVATION

odern technologyâ&#x20AC;&#x201D; secure remote connectivity, the Cloud, collaborative software, VoIP phones, and smart phonesâ&#x20AC;&#x201D;is disrupting the way we work and providing opportunities for remote out-of-office work. Many managers and employees are already working outside the office using their personal devices, but typically on an ad hoc basis without clearly written remote work best practices. Employers may have implemented security measures to protect their systems and data, but they rarely address the larger trend issue of remote work, also referred to as telecommuting. Remote work best practices is not just about technology and security; it is also about the needs of people and companies. This guide will discuss the various types of remote work options and best practices for organizations to implement a successful remote work and work-life fit program. Technology has transformed every part of our work and life. The 9-to-5 workday has been rapidly disappearing as more employees do some of their job outside the office. According to a recent study done by the Society for Human Resource Management (SHRM), 59% of US employers allow employees to work from locations outside the office. This trend will continue to grow. Some employers still believe that a flexible work arrangement is strictly an employee benefit, but most have recognized that giving employees the ability to work outside the office has made employees more productive and has greatly benefited the business. It has also led to the blurring of personal and work-life and the expectation that we must always be available. Managers still have not overcome their concerns about employees working remotely. Many still believe that they can only manage people 40

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Workplace Flexibility

and Remote Work Best Practices By Sharon Emek, Ph.D., CIC

if they are physically in the office where they can see them, but research has shown that managing people by sight doesn’t guarantee productivity or quality outcomes. The new prevailing philosophy focuses on results, on meeting goals and completing tasks on time— whether all the work is done in the office, in a combination of in-office and remote work, or totally remote. The new best practices management approach focuses on outcomes, not suppositions. The emphasis is on flexible work arrangements and on finding and keeping talent, which may mean accommodating diverse physical locations and non-traditional work-life fit arrangements. According to the American Staffing Association’s Workforce Monitor statistics, SHRM, and other research, for most employees, work-life balance and schedule flexibility rank higher that pay. The Research on Working Remotely There is a sufficient body of research about the effectiveness of remote work/work-life fit programs. The findings are consistent. Companies that implement flexible remote work arrangements believe they benefit from: • Increased productivity; • Decreased employee turnover; • Increased ability to attract talent; • Decreased sick days; • Decreased overhead; • Reduced environmental imprint. Employees say: • They are more productive and get more work done. • They appreciate the flexibility. • They are happier because they enjoy the flexibility. • They feel more valued than those in the office. • They feel it is beneficial to their family and their well-being. • They have increased

job satisfaction. Overall, when people work from home, they start earlier and take shorter breaks. Contrary to popular opinion, they do not run errands at lunch, and they work until the end of the day. The Three Types of Remote Work Arrangements There are basically three types of remote work. • As-Needed Remote Work— someone who needs to work from home on an as-needed basis or a company emergency situation, e.g., a sick child, a challenging weather or a pandemic. • A Flexible Work Arrangement— someone who works from home part of the time on a regular basis. • A Remote Worker—someone who works from home 100% of the time. As-Needed/On-Demand Remote Work Every company faces a number of attendance issues. They can range from: • Office power outage • Inclement weather • An employee is ill • An employee has a sick family member • An employee has a personal appointment or home maintenance need requiring him/her to be at home. For an organization to function optimally, it should provide all employees with the option to work from home temporarily. If staff cannot get to the office because of inclement weather or if an employee has to stay home to care for a sick child, they should be able to work from home and not lose a personal day. By not providing all employees the ability to work remotely on an asSpring 2020 | RESOURCES 41

INNOVATION

needed basis, agencies lose valuable hours of productivity. Today, no one—not an employee or an employer—should lose valuable time if an employee misses a day in-office for a legitimate reason. By not allowing people to work from home on an as-needed basis, employees lose personal days; staff who cover feel overwhelmed; customers do not get the service they need, and the returning employee needs to play catchup. Everyone loses. Flexible Work Arrangements Flexible work arrangements accommodate the needs of employees and agencies. More companies are recognizing that to keep talent, they need to accommodate the life needs of their employees. Work-life fit comes in many sizes, such as: • Arriving later to work to see kids off to school, then working core hours at the office, returning when kids come home from school, and working at the end of the day to complete the hours needed for finishing the day’s work. • Working from home one, two, or three days a week to meet family and work obligations. A Remote Worker As local talent has become more difficult to find, companies have recognized that a fully remote qualified employee may be another option for recruiting talent. A fully remote worker works from a home office and may never or rarely come to the office. With the proper setup, qualified remote workers are highly productive. There are a few reasons why an employer should consider a remote worker: • Many employers have experienced the all-too familiar conversation with a productive employee who explains that she or he needs to resign because she or he is moving. Finding a qualified 42

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replacement for the departing employee and transferring the client relationship is far more difficult than setting up that employee to work from home. And for the employee, finding a new, satisfying job may be very difficult. With today’s technology, no excellent employee needs to resign because she/he is moving. • Many employers can’t find the talent within driving distance to their backyard. An experienced remote worker is more effective and far less costly than settling for a revolving door of the wrong talent. Creating a Successful Remote Work Program An effective flexible remote work program must meet the needs of both the company and the individual. A flex-work arrangement is, of course, not for every employee. Some people prefer only working in the office and some don’t have the discipline to work from home. From a pragmatic and customer-service perspective, all companies should implement the “As Needed/On-De-

mand Remote Work” option. It is the easiest to implement, monitor, and see results. These are some recommended steps management should take in determining what options might work for the organization. 1. Evaluate each of the positions and determine if an employee’s physical presence is required full-time, part-time, or never, except for periodic meetings. 2. Decide which remote work programs might be viable work options for you. 3. Identify which employees have sufficient institutional knowledge and experience to be considered for a flex/remote work arrangement. 4. Evaluate the different communication and collaborative tools such as Skype and GoToMeeting. 5. Develop a guide for each type of remote work option. 6. Decide on a pilot program and on a trial group of staff for the pilot. For example, the pilot program might allow a trial group to work from home one day a week, scheduling the home days on different

days so that they are not all working from home on the same day. 7. Schedule a company-wide meeting to discuss flex-work arrangements and the positions and level of experience that a flex-work arrangement would be suited for. Afterwards, have managers meet with each of their eligible staff to determine the level of interest in a work-flex arrangement. 8. Train the entire staff on how to use the communication and collaborative tools. 9. Implement, monitor, and evaluate the pilot program. Below are some of the key areas to include in a Remote Work Guide. Crucial are the home office setup and security, which are further outlined below. • A description of the various remote work arrangements; • Corporate policies and proce dures for remote work; • Company-wide and department meeting times; • Rules and guidelines for family during work hours, such as interruptions, noise, etc.; • Child-care policy; • Home office setup requirements; • Security requirements; • Home computers maintenance guidelines. Include helpful hints for employees when they work from home, such as: • Taking quick periodic breaks • Taking time to eat lunch • Know when to stop and log out • Reinforcing work rules with family, friends, and neighbors The Home Office Whether an employee works at home on an as needed/on-demand basis, on a regular flex-schedule, or via telecommuting, a home office should be setup in a separate room where the door can be closed so as not to be disturbed while working.

Most homes today already have some type of home office setup. The home office should include the following: • A desk large enough for computer and other equipment. • A PC or laptop with a minimum of 4GB RAM, a webcam, speakers and a second monitor. Hardware requirements can vary depending on the remote connection setup desired. • Multiple monitors for efficiency. • High speed modem with a wireless router. The download (DL) and upload (UL) speed should be sufficient to support both the remote applications required and an internet phone. The current recommended DL speed is 50 mbps and upload speed 20 mbps. • A smartphone or VoIP handset or headset. Most companies today use a VoIP phone systems. A VoiP phone system can provide the ability for calls to be forwarded to a smart phone, transcriptions of the call in an email, and the use of a handset or headset through a wireless internet router from a remote location. For flex-work and full remote work arrangements, the employee should be provided with a VoIP handset or headset. This acts like an extension on the company’s phone system. • For the best connection possible, outdated equipment should be replaced. Cable modems from internet providers are typically available to be swapped out at no charge. Cable modems should be replaced every year or so. Router technology has advanced signifi cantly in recent years and newer models offer tremendous speed and reliability over their predeces- sors. Security Security should not be left to the employees to implement on their devices. Security should be controlled and managed by the employer.

1. For employees who may occasionally work from home, provide them with remote access from their home computer to their office desktop. 2. For employees who work from home a few days a week or all of the time, provide them with a dedicated inexpensive laptop that is secure and setup just as you would an employee’s desktop at the office. 3. Basic security measures should be implemented whether a company supplied laptop or an employee’s

Stay Tuned! Spring 2020 | RESOURCES 43

INNOVATION

home desktop or laptop: • The user sign on must have a strong password with a mini mum of eight characters, including a combination of capitals and lower case letters, numbers, and a special character. If there are others in the household who use the desktop or laptop, they must have a separate sign on. • The desktop or laptop must be configured to manually enter passwords to the organization’s system and any website logins. • Client information is confiden- tial. If there are others in the household using the same desk top or laptop, the employee must sign off the remote session or business applications when- ever the employee leaves her/his desk. • Login details and passwords should not be written on pieces of paper and never written on a sticky note and stuck to a computer screen. • The employee must have a secure, private wireless connection. • Microsoft and operating system updates should be working properly and updating automatically. • A paid version of anti-virus software should be installed and renewed annually. • A Microsoft firewall, or another firewall that may come with the

antivirus, should be on and active. • If a provided laptop, the employee should not be allowed to download other applications without permission. If the employee’s desktop or laptop, the policy should be that employee can only download applications that come from reliable sources. Because applications (e.g., games, mobile apps, coupon sites) may contain viruses or malware, it’s important to know and trust the source of an application before downloading it. 4. Clear procedures should be written and followed for logging off and closing the computer when not in use. 5. Educate and train employees on security issues and requirements. 6. Establish a periodic schedule to check all remote devices. Making it Work The following management principles are essential to a successful flexible remote work program; they are also the qualities of good management for all employees: • A team culture. • Strong, committed managers. • Clear, precise, and measurable goals. • Results-based performance evaluation. • Clear expectations about work

Learn More Earn More These are new and different times for all of us, and many of us are adjusting to working remotely for the very first time. To assist you in maintaining your relationships with your clients and carriers, listen to the Nat Alliance NOW podcast, “Remote Working Technologies for Insurance Professionals.” Find it on The National Alliance website at www.scic.com. Retain and expand your business as much as possible during this time of separation. 44

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schedule availability. • Consistent and uniform methodology for communicating regularly. • The right tools to get the work done. Some Helpful Tips • Rotate days at home so that a certain percentage of staff is always in the office or schedule mandatory days in the office. • Make sure expectations are clear. • Check productivity and performance regularly to determine if it is not working for someone. A flexible or remote work arrangement may not be right for everyone. • Keep remote workers in the loop just as if they were in the office. • Establish consistent methodology for communicating. • Have the staff add their photos to Outlook and Skype. • Use Skype for instant messaging and video capability to talk instead of email or phone for all staff, whether remote or in-office. Some Pitfalls to Avoid • Avoid micromanaging—the #1 deterrent to productive and successful remote work. • Not communicating on a regular basis. • Not inviting remote staff to meetings. • Not checking the activity reports to see productivity. • Not spot checking the actual work being done. Whether in the office or working from home, if you provide employees with clear expectations, realistic metrics for success based on results, and the proper tools to get the work done, they will get it done.

Summary To keep and attract talent, all companies will need to have a policy with best practices to accommodate work flexibility. Research has clearly shown that for most employees who have any type of remote work arrangement, they: • Met their goals more reliably • Were more productive • Were happier • Were healthier • Experienced less stress Businesses have benefited greatly as well with increased productivity, talent retention, and lower overhead. We all recognize that the latest advances in technology has disrupted many industries; but we haven’t fully recognized how it is disrupting how and where we work, as well as how we will manage people. All businesses will need to adapt to flexible work arrangements to find and keep talent and adapt to managing people without borders. New employee generations will expect it,

and because we are living longer, so will older employee generations expect it, as they will work beyond the historical 65-year retirement age. The future work paradigm will be that the right work with the right person can be done from anywhere. Bibliography World Economic Forum, “A New Study Shows Just How Beneficial Remote Working Can Be,” August, 2019, https://www.weforum. org/agenda/2019/08/companiesbenefit-when-employees-workremotely/ Harvard Business Review, “Is It Time to Let Employees Work from Anywhere?,” August, 2019, https:// hbr.org/2019/08/is-it-time-to-letemployees-work-from-anywhere Owl Labs, “State of Remote Work 2019,” https://www.owllabs.com/ state-of-remote-work/2019?hs_ preview=jWDXIXgj-13385250578 Inc., “A 2-Year Stanford Study

Shows the Astonishing Productivity Boost of Working From Home,” April, 2018, https:// www.inc.com/scott-mautz/a2-year-stanford-study-showsastonishing-productivity-boost-ofworking-from-home.html

About the Author: Sharon Emek, Ph.D., CIC Sharon is founder and CEO of Work At Home Vintage Experts (WAHVE). WAHVE (www.wahve. com) is an innovative contract talent solution that matches retiring, experienced insurance, accounting and human resource career professionals with a company’s talent needs. Spring 2020 | RESOURCES 45

INNOVATION

Alex Factor, UACRM–

A Student Success Story

lex A. Factor recently graduated from Florida State University (FSU) in Tallahassee with a Bachelor of Sciences Degree in Risk Management and Insurance. Alex began his college career as a marketing major. In his sophomore year, he took an introductory course in risk management and quickly became engaged with the problemsolving nature of risk management. He changed his major and never looked back. Alex believes some people have a stereotypical view of risk management being tied solely to insurance. They are unaware of the industry’s recent expansion into an entirely unique and amazing area of corporate risk management. He looks forward to the endless opportunities to implement controls, build frameworks, and assist with compliance in the finance, consulting, public sector, and other areas of the economy. Through the University Associate 46

RESOURCES | Spring 2020

program at FSU, Alex has earned a University Associate Certified Risk Manager (UACRM) designation from The National Alliance. Alex contends he earned one of best insurance and risk management degrees in the country. He goes on to state, “What helps the students excel and stand out are the partnerships with key organizations. Specifically, the partnership with The National Alliance for

Insurance Education & Research.” Alex is confident his UACRM designation will take him far in his risk management career. The UACRM Program recognized Alex as one of a selective and unique group of individuals who demonstrate a mastery of risk management as well as strong work ethic and determination. What excites him about entering the insurance and risk management community is the industry’s unparalleled confidence in young professionals. Alex states, “There is so much trust and faith in the millennial generation. I know I will have the ability to grow at an accelerated pace.” Next, Alex plans to begin his career as a risk analyst at PNC Financial Services in Pittsburgh, Pennsylvania. His first year will consist of training and rotating through different departments. In 2021, he believes he will be selected to manage risk in operational, credit, or data. Alex wants to eventually obtain a Master’s Degree in Enterprise Risk Management.

NEW Become a Subscription Member

Announcing a New Yearly Subscription Membership for Individuals and Corporations s part of its continuing innovation, The National Alliance has developed yearly subscription memberships for individuals and corporations. There are two categories of subscription memberships—intermediate and advanced—and each membership provides users with online access to The National Alliance’s designation programs and courses. Both individuals and corporations have an assortment of choices in levels of access and features. Both intermediate and advanced subscription memberships give you access to National Alliance Membership plus online access to advanced webinars, selected Resources magazine articles, Introductory Courses, and the CISR (Certified Insurance Service Representative) and CSRM (Certified School Risk Manager) designation programs. The advanced subscription membership provides online entry to courses leading to the CIC (Certified Insurance Counselor), CRM (Certified Risk Manager), CPRM (Certified Personal Risk Manager) designations, in addition to the Ruble Seminar series of advanced subjects. Be assured, all appropriate online courses provide the same level of state continuing education credit as do The National Alliance classroom courses. No matter the choice made, subscription members profit from online access to The National Alliance’s educational insurance and risk management programs. Those with subscription memberships are assisted by The National Alliance’s learning management system, making it easier to monitor and manage professional development on an individual or corporate scale. Subscription memberships may be purchased online at The National Alliance website, www.scic.com, and insurance agencies and brokerages as well as insurance companies may use the website form to inquire about memberships for multiple users. Subscription memberships require a 12-month commitment and offer a potential cost savings of up to 75 percent. Details regarding educational options available for intermediate and advanced individual and corporate memberships are also available at The National Alliance website. Please visit the website to learn more about this unique innovation in membership.

Spring 2020 | RESOURCES 47

I MY BOSS !

Stay Safe. Keep Learning Online. The COVID-19 pandemic has changed how the world operates. As with any crisis, we respond with innovation and commitment, keeping your safety as our priority. To keep you thriving during this difficult time, The National Alliance for Insurance Education & Research now offers many online distance-learning programs, spanning from introductory courses to the most advanced topics in our industry. We will get through this together.

NEW ONLINE OPTIONS

Resources Magazine Spring 2020

Articles inside

Resources Magazine Spring 2020

Ask Bettie

Social Media for Your Insurance Agency: When, Why, and How

When It’s No Longer Business As Usual

Research Associates

Are you Asking the Right COVID-19 Questions for Your Clients?

Announcing Subscription Memberships