Resources Magazine Fall 2018 by resourcesmagazine

Hot Topics. Expert Faculty. Open to All Insurance and Risk Management Professionals.

What is PROFocus?

The PROFocus Series is based on the renowned James K. Ruble Seminars. These specialty courses have been renamed and updated to build your industry-specific business and increase your income. Tap into business essentials and get answers to your most challenging questions about the specialty area you are in or would like to move into. Bring your colleagues along to brainstorm new ideas and approaches! Enrich your niche or build a new one with PROFocus—in either a classroom or instructorled online format. Open to ALL insurance and risk management professionals, these advanced programs are great opportunities to complete your update while you expand your skills and your business. Take a look at a few of the upcoming 2018 PROFocus Seminars:

RESOURCES | Fall 2018

Cyber Risk | Oct. 4–5, 2018 | Atlanta, GA • Identification of the most commonly missed exposures • Risk finance options for cyber exposures • Protecting sensitive and private client information against security breach • First-party and third-party coverages examined Large Commercial | Oct. 9–29, 2018 | Instructor-led Online • Property and casualty issues for the large account • Disaster preparedness planning • Adding value with risk management • Alternative funding mechanisms Contractors | Nov. 8–9, 2018 | Phoenix, AZ • Construction contract analysis • Who is an insured?—for contractors • The contractors’ CGL Policy • Contractors’ property exposures and coverages

Go to scic.com/profocus for the complete PROFocus lineup.

Contents

TheNationalAlliance.com

FEATURES

COLUMNS

8 Difficult Clients Are a Part of Business

4 Embracing Change

Carletta Clyatt—SVP with Omnia Group Suggestions for soothing the savage beast customer

16 Experiential Education—the Butler University (Captive) Way

Dr. Victor A. Puleo, Jr., CIC, CFP© An innovative learning strategy delivers valuable hands-on experience

28 Interested in Internships?

C. Darren Brooks, Ph.D., Cassandra R. Cole, Ph.D., Alexandra Massey, M.A., and Lynne McChristian Representatives from the FSU College of Business share considerations and keys to success

Tom Barrett, CIC, AAI Positioning your business for the future

Scott Bushnell, CPA From the basics to business interruption

Richard S. Pitts, J.D. Looking ahead at a burgeoning market

12 Helping Your Commercial Clients Through a Property Claim

22 Marijuana—New Markets and Legal Uncertainty 32 New Curriculum for School Risks

Sara Naus, CSRM, discusses new Specialty Risk Management courses designed to address threats faced by schools

34 What Are the Trade Secrets of Today’s Agencies? Everyday People Doing Extraordinary Things

Superheroes are a part of our culture’s popular consciousness. In most superhero movies, an Olympian team bands together to meet an overwhelming threat to Earth, leaping every obstacle with a single supercharged bound. But when a life-changing disaster hits a real-life community or a personal hurdle intervenes, everyday heroes go into action with a singlemindedness that is motivated by purpose, integrity, and heart. We, at The National Alliance, like to call these everyday insurance and risk management standouts—Difference Makers. To pay homage to some of the Difference Makers in our midst, we’ve developed a new Difference Makers website feature containing the stories of everyday heroes. Integral to their accomplishments, each Difference Maker’s Learning Path is included with their amazing histories. Find out how the education they gained throughout their careers challenged them, inspired them, and opened doors along the way. Go to scic.com/difference-makers. One of our featured Difference Makers— Cristina Pedraza-Martinez, J.D., CPA, CIC

Roy L. Phillips, CIC, CISR, AAI, CPIA Identifying data that represents economic value to your agency

NEWS 19 Cultivating Talent

The National Alliance’s University Associate Program

25 Update at the Dallas MEGA

Choose from 19 topics over 4 days

27 Learning Horizons

Free webinars as a benefit; streamlining courses

33 Ask Bettie

Online update options for CISRs

37 In the Spotlight

Industry accolades and achievements alliance@scic.com • 800-633-2165

AGENCY ACUMEN

s we continue to witness the transition of insurance distribution within our industry, the role of an agent has taken on a new perspective. In the old days, we could get by just being visible, purchasing ads in print and on air, being active in our community and positioning ourselves as the locally preferred vendor for insurance. It worked well for decadesâ&#x20AC;&#x201D;and then the world changed. The new industry perspective positions us as a trusted advisor and counselor, rather than a vendor or order taker. As sales orgaComplacency nizations, we must is killing get over the idea that being in business for many tenured a long time equates agencies; those with being the first choice for those seekthat will thrive ing insurance products in the future in our communities. Complacency is killing recognize that many tenured agenthe industry cies; those that will thrive in the future has changed recognize that the and will change industry has changed and will change along along with it. with it. This new perspective requires that we do many things well, and that we do them differently from the way that business was conducted in the past. Here are just a few of the ramifications of the changing business model (and some thoughts and questions about what your agency should do about it): Client Selection. From a risk management perspective, client selection is critical. Purposely identify who your prospects and clients should be. Once you have a targeted group, anything falling outside of your target parameters should be ignored. 4

RESOURCES | Fall 2018

BY TOM BARRETT, CIC, AAI

Adjusting to Marketplace Changes. While numerous figures are cited, there appears to be somewhat of a consensus that autonomous cars, a rise in ondemand transportation, Millennials’ preference for shared ownership, and the shifting of liability to manufacturers will shrink the auto insurance marketplace significantly by 2050. How will your agency replace the decline in personal auto commissions? Consumer Demands. Today’s buyers will not spend time driving from agency to agency, shopping for the best prices. Our insureds are Our insureds are technologically driven and demand “selftechnologically service” options and driven and the ability to explore products and make demand “selfbuying decisions during service” options non-traditional business hours. Crafting a strong and the ability digital presence for your to explore agency with availability 24/7/365, mobile products and applications, and a make buying robust website are a must. decisions during Social Media=Social Capital. Get out there and get visible!

non-traditional business hours.

Business Planning. The new environment requires a business plan with clear revenue targets, multiple lines of coverage per risk, as well as an active and constant marketing plan that includes a strong digital presence. Customer Buying Experience. The new battlefield for independent agents is “the customer buying experience.” Have you looked at the buying experience through your prospects’ eyes? Continued.

Fall 2018 | RESOURCES

The Customer Relationship. Another key to the buyer relationship is a constant presence through regular visits, digital media, and through staying connected. On average, 68% of the business you lose each year is due to customers feeling ignored. Have a customer relationship plan in place to enhance relationships and drive cross sales and referrals. Understand and Define Acquisition Expenses. The most inefficient activity for an agency is writing policies as requested—one at a time. Make the most of the time investment by generating an adequate return on your investment for each new account. Creating In other words, do tangible the math! Focus on six to nine lines per solutions and account, rather than a solid value two to three, with a revenue target differentiates per account. This you from the will result in higher retentions, longcompetitors by term relationships, replacing the improved efficiencies, and profitability for price-driven sale you and your carrier.

with a valuedriven solution.

Sales Process. There is a real need to better define the sales process in your agencies. Today, the minimum knowledge that an agency must have regarding each prospect is understanding the pains or problems the prospect is experiencing, the value system that drives his/her buying behavior, the level of rapport/relationship you have with the prospect, the relationship with the incumbent agent or broker, the competition, and the rules of engagement. That may sound like a lot, but understanding these dynamics will push the expected close ratio from

RESOURCES | Fall 2018

the industry average of 25% to a 70% range. Training and Education. Agency personnel will need to be prepared for these changes. They will need proper training to become professional advisors with expertise and an acumen focused on total risk management solutions. Agencies today must understand that they have multiple parties to serve. They have current clients, future clients, underwriters, and agency staff all interacting in this fast-paced dynamic world. It requires high levels of automation and planning to keep things moving in the right direction. The agency culture evolves around “solutionbased” presentations for each customer that address the problems that were identified in your sales process. Creating tangible solutions and a solid value differentiates you from the competitors by replacing the price-driven sale with a valuedriven solution. Today, we are operating at “the speed of life!” Our marketing efforts don’t end with Facebook, LinkedIn, a website, and a mobile app. Those have become necessary tools to play the game, but playing to win now includes video presentations for specific coverages, a YouTube channel for custom videos, client promotional testimonials, and marketing videos intro-

ducing prospects to our resources and capabilities. Other videos can provide a welcome from the agency, become a part of the onboarding process for a new client, help with coverage explanations, explain agency capabilities and resources, introduce team members, and provide coverage-specific information. The more affluent personal lines and small business clients are digitally underserved, and there is a tremendous opportunity for agencies to get active in this space. As insurtech continues to create seamless ways to utilize technology, the opportunities will be enormous. Going forward, we suggest developing deeper relationships with fewer people, focusing on building valuable relationships with those that matter, working cross sales and referrals diligently, aggressively targeting a defined marketplace, and automation, automation, automation! One question we always ask ourselves is: “What are the 10,000-pound marketing gorillas doing in my area?” Some of the answers are: shared integrated calendars, policy upload portals, CRM software, video capabilities, digital and mobile capabilities, integrated video-text-email messaging, online client surveys, renewal report auditing, educational videos, portfolio review templates, and automated marketing.

Learn More, Earn More The National Alliance offers a variety of resources to help you learn about the finer points of implementing planning and positioning a business to succeed. The CIC Insurance Company Operations course provides a look at important strategic decisions made by executives and the functions of vital company departments, and the CIC Agency Management course covers agency planning and effective productivity. You can also hear the author of this article, Tom Barrett, teach Dynamics of Sales Management, September 24–26, in Erie, PA. For other dates and locations, go to the course schedule at scic.com. To have this content on hand, order Dynamics of Selling: The Diagnostic Appointment DVD at nationalalliancebooks.com.

hen Insurance Business America magazine published their list of 2018 Top Producers, we were delighted— but not at all surprised—that so many of those chosen for the honor participate in National Alliance programs. The National Alliance delivers the caliber of training that the best agencies and carriers rely on to bring their new producers, not only up-to-speed, but rocket them to the top of their profession, returning a great value on investment. Programs like the Producer School, now called the Dynamics Master Sales Class (details on page 11), and the other Dynamics Series courses, do not just focus on sales skills—they revolutionize a participant’s understanding of his or her own personality style and the art of relationship building, transforming every career aspect. National Alliance programs also deliver essential, technical coverage knowledge, providing the grounding and detailed expertise that top producers need to back up their insurance-specific sales skills.

As an independent agency, our strength is in our relationships. Our opportunity is face-to-face. Our weakness is spending time and effort in the wrong distribution channel. Our threat is trying to compete with online vendors. As an organization, we constantly position winning resources to stay on the leading edge of insurance distribution. We embrace change with the mindset of a “total solution,” and encourage you to do the same. Good luck and good selling! n

About the Author: Tom Barrett, CIC, AAI Tom Barrett is President of the Midwest and Southeast regions of SIAA, Inc. Tom serves on the National Faculty for the Dynamics Series: Dynamics of Selling, Dynamics of Sales Management, and Dynamics of Company/Agency Relationships. Your comments and communications are welcome to Tom at tomb@siaa.net.

2018 TOP PRODUCERS According to Insurance Business America Magazine

28%

30%

Are National Alliance Designees

58%

Have Completed a Dynamics of Selling Course

Have Participated in National Alliance Programs

Are Producer School Graduates

IBA Top Producer Criteria Commissions made in 2017

>$ 750,000

Stats for IBA’s Top Producers

80%

Years of Experience in the Industry

Have 11 or More

386

Average Number of Clients

17%

Have Fewer Than 10

829

1.8 million

Average Number of Policies Written

Average Commission Revenue

Fall 2018 | RESOURCES

SALES SALESSAVVY SAVVY

nyone who has worked in agency sales or service has a story about a difficult client or two—or twenty. The good interactions may far outweigh the bad, but those bad ones really stand out. Some people insist on being… ”memorable.” Who knows what makes a client difficult? Some may just be having a bad day. Some are naturally cranky and impossible to please. Some people may even enjoy it! On top of being a trial for agency team mem8

RESOURCES | Fall 2018

bers who are just trying to help, these difficult interactions sometimes have other consequences. Despite best efforts by agency staff, a client may demand to talk to management, spreading the bad feelings and misery around. In the worst-case scenario, they may no longer buy your product or services, or even worse, may bad-mouth your company to friends, family, acquaintances, and on social media! It’s true—sometimes none of this can be avoided. Whether due to company policies or somebody’s bad day, a difficult

interaction is a foregone conclusion. No matter how helpful you want to be, or even how helpful you actually are, some just won’t appreciate it. Instead, they’ll insist on holding you responsible for outcomes you can’t control. Other times, the client’s frustration can be redirected, allowing the situation to be de-escalated and hopefully preserving the relationship for another day.

An Ounce of Prevention…

How can you avoid having your day made—memorable?

It is possible! And the savviest agency team members know how: Listen, listen, and listen some more. Listening is one of the most efficient ways to learn what clients want and how best to satisfy them. Doing this well is a skill that comes naturally to many, but can be learned by most. It’s normal to react quickly to frustrated people or to plan what you’re going to say next, but try to wait. Being quiet while the client unloads, not only helps you understand the problem fully, but

by Carletta Clyatt, The Omnia Group, Inc.

Know your stuff…Being a subject matter expert can go a long way in dampening possible complaints. The more knowledge you have, the more efficiently you can solve problems…But don’t be a know-it-all. it can help diffuse tempers. Active listening techniques include summarizing (“So what I heard you say is …?”), asking clarifying questions, and mindfully refraining from interrupting. Know your stuff… Every client appreciates talking to someone who knows his or her stuff. Being a subject matter expert can go a long way in dampening possible complaints. The more knowledge you have, the more efficiently you can solve problems. And let’s face it; clients just want you to solve their problems— plain and simple. …But don’t be a knowit-all. Okay, that seems to contradict the last point, but there’s a difference between being knowledgeable and being a know-it-all. Whenever

possible, use the knowledge you have to help clients. It can be tempting, especially when dealing with a very difficult person, to use knowledge more as a weapon than a tool. Try not to contradict clients, talk down to them, or overwhelm them with facts that don’t pertain to their situations. Work with them to find solutions that meet their individual needs. Be ready to adjust. Sometimes you just need to be flexible. You may already have an idea of the best way to solve the client’s problem from the moment you speak to them. But if moving in that direction won’t satisfy them, be prepared to quickly adjust and find another way to come closer to their expectations. That doesn’t

Learn More, Earn More Do you want to learn more about dealing with difficult customers? With the Dynamics of Service course, you can master the art of diffusing a tense or awkward exchange. You can also gain the skills to transcend client complaints and objections, turning them into opportunities for improved relations, client buy-in, higher customer retention, and increased sales. Go to scic.com and use the search tool to find a Dynamics of Service course near you. Dynamics of Service courses provide seven hours of valuable classroom instruction, and are offered across the country, throughout the year.

mean giving in when it’s against company policy or allowing the person to take advantage. Just be open to exploring other options, and find out where there is some wiggle room.

the client to fight you to get what they want. If you’re empowered to remedy the situation, do so quickly. There’s a time to follow the script and a time to throw it out the window.

Anticipate the client’s needs. What’s better than getting what we ask for? Getting what we want without having to ask at all! Delight your clients by anticipating what they’re likely to request, due to the nature of the conversation—whether that’s a discount, a fee waiver, or some kind of freebie extra. The effort will be appreciated, and any potential situation will be diffused.

Keep the end goal in mind. When someone is being rude to us, it’s only natural to consider returning the favor. However, fighting fire with fire won’t get you where you need to be. As in any conflict, be mindful of not letting the other person push your buttons, and in so doing, lose focus. You have a job to do.

…Is Worth a Pound of Cure (and Sometimes Not)

Sadly, sometimes being proactive and bringing your best service to the table doesn’t work—at least not at first. In those cases, what can you do to quickly settle your difficult client down without sacrificing your chances of a future relationship? Here are some tips: Apologize. If the company is at fault, own it. Let the person know you’re sorry for the error. Be sincere, be specific (“I’m sorry we haven’t credited your account yet. I can see in the system you canceled your coverage on May 12th.”). Be brief and state how you’re going to make it right (“Mr. Smith, I’ll process a refund check immediately. You’ll receive it in 7–10 business days.”). Don’t Encourage a Fight. In other words, don’t force

Don’t take it personally. And along those lines, don’t ever take a difficult client’s irate attitude personally. Take it seriously? Of course—just never personally. Don’t hesitate to call in the cavalry. If the client is insisting (and loudly) that they want to speak with a manager, then by all means make that happen. The manager is paid the big bucks to handle the big headaches. When you’ve done all anyone could ask, but the person is still pitching a fit, it’s time to get help. Go the extra mile. Neutralize the situation and gain some good will by going the extra mile. Take the time to find out whether an unusual client request can be met. Ask someone a question; don’t just say “no” on reflex. When you display enough curiosity about your job to take time to discover what you don’t know, you’re showing respect for the client and your Fall 2018 | RESOURCES

SALES SALESSAVVY SAVVY

Even for sales people, good customer service training can help you and/ or the members of your team pick up tips and tricks for managing difficult clients. employer. Ultimately, clients may not like the answer you find, but they can’t fault you for your efforts toward that end. Of course, take care to deliver the bad news with politeness and tact. You may be tempted to add an “I told you so” tone to your voice, but don’t.

What About Training?

Even for sales people, good customer service training, like that offered in The National Alliance’s Dynamics of Service courses, can help you and/or the members of your team pick up tips and tricks for managing difficult clients. Such training will introduce (or reintroduce) the participants to the concept of active listening, de-escalation, effective communication, problem solving, time management, and more. That said, some personalities will naturally take to these ideas more than others. For instance, not everyone has the same orientation toward helpfulness, the same level of patience, or the same ability to listen well. Discovering which team members have what traits typically happens over time, but you can get a jump start on the discovery by incorporating behavioral assessments into your hiring process and development initiatives. Also, if good customer service is mission and values-aligned (as it certainly 10

RESOURCES | Fall 2018

President William T. Hold, PhD, CIC, CPCU, CLU Publisher/Senior Art Director Becky Keeling bkeeling@scic.com Editor-in-Chief Carol Crysup ccrysup@scic.com Senior Editor Donna Loughran

is for most companies) make sure you’re holding employees accountable for demonstrating those values on a regular basis.

Summary

Whenever you’re dealing with people, there’s bound to be conflict. On the bright side, keeping your cool is entirely possible when you follow our tips. This is key because cool heads prevail and can solve their clients’ problems reasonably, again and again. Finally, don’t neglect to celebrate successes. That “memorable” client finally hung up the phone/left the building, and you can breathe. Things started out a little rough, but you managed to win this individual over in the end. Your company and your career will thank you for it! n

About the Author: Carletta Clyatt Carletta Clyatt, a popular seminar speaker, is the SVP at The Omnia Group. She offers clients advice on how to manage more effectively and gain insight into employee strengths, challenges, and behaviors. For more information about employee behavioral assessments, call Carletta at 813280-3026 or email Carletta@ omniagroup.com.

Department Editors JoAnn M. Clarke, CIC, CRM, CISR, CSRM, CPCU, ARM, ARe, AAI, CPIW jclarke@scic.com Deborah Davis, PhD, MEd, BA ddavis@scic.com Beverly A. Messer, CIC, CRM, CISR bmesser@scic.com Elsa C. Sanchez, CIC, CRM esanchez@scic.com D. Darelle White III, CIC, CPCU dwhite@scic.com 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 © 2018, 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

BECOME A PRODUCING BEAST

The Dynamics Master Sales Class isn’t a one-time pep talk; it’s a permanent solution for training new and experienced producers. You will build confidence, sales skills, and insurance knowledge that will improve your ability to close new accounts and grow your existing ones. After a FULL WEEK of training with the best coaches in the industry, you’ll return to the office ready to ROAR! Seating for Dynamics Master Sales Class is limited. Be part of the next group of elite producers. Register now!

UPCOMING SESSIONS October 22–26, 2018 Mechanicsburg, PA

December 10–14, 2018 Anaheim, CA January 21–25, 2019 Fort Lauderdale, FL

WHERE EXPERTS BECOME EXPERTS

COVERAGE CORNER

aintaining client relationships is critical for insurance brokers and agencies, especially given the fact that developing new commercial clients involves a significant time investment to understand the client’s business and risks and to implement solutions for risk transfer. Once insurance coverage is in place and policies are issued, the focus of the agency switches to servicing the account. The agency is happy. The client is happy. But what happens when your client experiences a significant property loss? In the aftermath of Hurricane Harvey, thousands of businesses on the Gulf Coast of Texas experienced catastrophic damages from the storm. Insurance agencies and brokerages were inundated by policyholders looking for assistance, and agency claims and customer service representatives were mobilized to handle the incredible volume of claims. Sadly, while many agencies did transform this tragedy into an opportunity to stand out through exceptional client service, many clients had a limited understanding of the claims process, and their agencies did little to provide

RESOURCES | Fall 2018

From the Basics to Business Interruption BY SCOTT BUSHNELL, CPA

the customer service assistance that was necessary during this time for successfully maintaining— much less, enhancing—the client relationship. There are several areas where agency personnel can provide services and information for policyholders that will prepare them for the claims process. The first order of business is to help your clients understand the steps involved. Next, you may be able to advise your clients on additional resources they may need to assist with their claim. Finally, as the claim goes into settlement, your agency will have the opportunity to reevaluate the insurance coverages that were

in place prior to the loss, examine how the policies responded, and make recommendations for changes that should be considered during the renewal process. Following these guidelines will go a long way in taking care of your clients.

Understanding the Claims Process

While it is obvious to insurance personnel that the first task in claims is notification to the insurance company, clients often feel better simply knowing that “something” is being done. Notification is often specified in the policy, but it may also depend on regulations specific to each state. Regardless of

the choices, I always suggest that notification be given in writing by email, and this document be retained as part of the claims file. Once notification has taken place, it is important to explain the claims process to your client. A recurring issue with many clients is that they have not been informed about the process. Simply providing clients with information regarding what to expect throughout claims adjustment can alleviate a great deal of stress. This is a critical servicing component that can make a significant difference in how the client views the agency and the services that were provided. While the client cannot be expected to be happy

Simply providing clients with information regarding what to expect throughout claims adjustment can alleviate a great deal of stress. This is a critical servicing component that can make a significant difference in how the client views the agency and the services that were provided.

about the circumstances surrounding their claim, they can be happy about the way that it was handled by the agency. When explaining the process to my clients, I start from the beginning. The policyholder needs to understand that they will be asked to document the damage incurred with photographs, videos, and written narratives of the damage. They need to know that the insurance company will assign an adjuster, who will schedule an initial site visit and meeting to assess the scope of damage. From the perspective of clients, this can be intimidating, and it is reassuring for them to know that someone from the Fall 2018 | RESOURCES

insurance agency will be on location with them during this meeting. As this initial meeting sets the stage for the adjustment process, it is imperative that someone from the agency is there to meet with the adjuster. Additionally, if your client has consultants assisting with the claim, these professionals should attend the meeting as well. Your client also needs to understand it is entirely possible that the adjuster will request additional documentation and information to refine his assessment of the damage, a process that is often frustrating for the policyholder. Document requests for property damage are straightforward since facilities and equipment have been damaged and the policyholder incurs costs to repair or replace the loss. Business interruption (BI) claims, however,

Learn More, Earn More Many CIC, CISR, and advanced programs include materials concerning commercial property insurance. The CIC Commercial Property course features a detailed discussion of Coverage Forms and Endorsements, Causes of Loss, coinsurance, and different valuation methods. The CISR course, Insuring Commercial Property, covers the fundamentals of commercial property insurance. Advanced Claims Management Strategies and Techniques will be a topic presented at the Dallas Ruble MEGA Seminar on October 15, by Mr. Don H. Donaldson, CIC, CRM, RPA, CHS-III. For other advanced study, check the agendas of upcoming James K. Ruble Graduate Seminars. In addition, P&C Insurance Essentials, published by The National Alliance Research Academy, includes a comprehensive overview of this subject and is available at nationalalliancebooks.com. 14

RESOURCES | Fall 2018

Some of the most important information that comes from a catastrophic event is how the insurance policy responded to the loss.

can be much more difficult. Documents and information requested by the adjuster may not always make sense to the policyholders, and it can be difficult for them to provide the information as described by the adjuster. If no one has explained how BI claims are prepared, it is understandable that policyholders will become confused and frustrated. As the damage is adjusted, the process will move toward a final settlement of the claim. During this phase of the process, your client should understand that additional meetings might be scheduled as the final negotiation of the claim is made. Please note that while your clients will appreciate a basic understanding of the claims process, a one-time explanation is rarely sufficient. You will need to be in communication with your clients throughout the claims process to provide the level of service that will result in their satisfaction. This is especially important in cases where the client may not perceive the settlement to be satisfactory, as well as in larger and more complicated claims.

Additional Resources for Policyholders

Understanding the process is valuable information, both for the policyholders and claims representatives. However, in many cases it may be necessary to enlist the aid of professionals external to the agency to adequately document and quantify the loss. This is where clients must trust that you will provide good information and advice, and it is often where the future of account retention may be decided.

For policyholders with manufacturing or more complex operations, the need for consultants may be greater. Take, for example, a manufacturing company that suffers a catastrophic fire to one of its production lines. To determine if the insurance policy is triggered, a causation report may be required by the adjuster, and it may be advantageous for the policyholder to hire a causation expert to assess the damage. These experts may be specialists in equipment or in specific types of causes of damage. It is important for you to work with your client to explain why a causation expert should be hired, help your client to contact reliable experts, and explain how this additional information will be used in the settlement of the claim. For clients who have significant buildings or facilities in their risk portfolio, significant damage to a building may require extensive analysis of the replacement or rebuilding costs. Cost engineers and cost estimators are experts in identifying the scope of damage and reasonable costs necessary to rebuild or to replace a damaged building. Additionally, there are cost estimators that specialize in equipment, and there are those that specialize in types of operations, such as chemical plants or new construction. While you and I may know that these experts are very helpful with proving the loss to the adjuster, your client needs to understand why you believe that they should be retained, what they will do, and what information they will need to provide. In many cases where a significant property loss is followed by a

reduction in business operations, a business interruption (BI) claim will be initiated. BI claims can be very intimidating to policyholders, and few of them are familiar with forensic accountants. They do not know that forensic accountants are specially trained in determining damages related to BI or that they can assist the policyholder with documenting, analyzing, and quantifying their BI claim. They also do not know that once the claims are prepared, forensic accountants will assist in defending the claim with the adjuster. More importantly, they do not know that working with a forensic accountant from the beginning of the claim often reduces the amount of time necessary to settle the claim at a reasonable value.

Learning from a Loss Incident Some of the most important information that comes from a catastrophic event is how the insurance policy responded to the loss. Once the claim is settled, it is the perfect time to review the loss incident. This meeting should include the individual responsible for the policyholder’s insurance, the agent or broker, the agency claims representative, and any outside consultants that worked on the claim. The goal of this team is to review the claims process and determine how it could have been improved. This includes reviewing the insurance policy, any gaps in coverage or insufficient coverage limits, and the process that was used for managing the claim. The agent and claims representative will be able to address the policy and its trigger, while the forensic accountant can address the adequacy of BI coverage and suggest additional limits or coverages to better protect the policyholder’s business. The goal of any insured loss situation should be a fair, reasonable calculation of the losses and prompt payment of the claim.

Accomplishing this goal requires documentation for the adjuster and a policyholder who is informed about the process of claims settlement. An agent, broker, or claims representative should anticipate potential issues and develop relationships with cost estimators and engineers, forensic accountants, and other consultants who can assist a client with a reasonable settlement of the claim. Last, but not least, it is worth reiterating that properly managing the claims process can go a long way toward developing and cementing customer relationships. Policyholders in claims situations are not always the easiest clients to work with. Patience and understanding are important, but are rarely true agency differentiators. If the goal is client retention, providing good information and advice and explaining what will happen throughout the claims process will make the process easier for the client and ultimately be of benefit to the agency. n

About the Author: Scott E. Bushnell, CPA Scott Bushnell is a Forensic Accountant with over 20 years of experience assisting global clients with preparing complex business interruption claims. Scott can be contacted at scott. bushnell@business interruptionconsulting.com or 713-751-9553.

Pete Gunn, III, CIC, CPCU, CRPA, TRS, of Benton, KY, died June 13th at the age of 75. Pete joined the family business, Morgan, Trevathan, & Gunn (MTG Insurance), in 1964, became its President in 1994, serving the company faithfully for 54 years. His associates at MTG said, “Petie was a stalwart in our industry and will be dearly missed.” Pete was a strong supporter of insurance education, and he earned many designations over the years, but none was more important to him than his CIC designation. Pete was an eminent producer in the trucking insurance arena, and in 1985, he became a faculty member for The National Alliance—ultimately teaching Truckers Seminars in almost every state. His long-time teaching partner and friend, Tommy Ruke, CIC, TRS, stated, “Pete was caring. He cared about people, he cared about truckers, he cared about education.” Pete’s faith, dedication, and generosity will be missed by all those who learned from him and were touched by his caring spirit.

Keep on Truckin’ Pete!

Fall 2018 | RESOURCES

SALES SAVVY INNOVATION

Experiential Education The Butler University (Captive) Way BY DR. VICTOR A. PULEO, JR., CIC, CFP®

n less than a decade, the insurance industry is set to experience a major talent gap as baby boomers head to retirement. There are estimates that up to 400,000 job positions in the U.S. insurance industry will need to be filled by as early as 2020. That’s a tall challenge for any industry—particularly one so often misunderstood by consumers. The need for outstanding and experienced graduates in the insurance and risk management field is apparent. Attracting talent to the industry to meet the future staffing needs is being addressed, in part, by colleges and universities nationwide that have undergraduate insurance and risk management and actuarial science programs. The National Alliance Research Academy supports many of these educational institutions’ efforts to attract new people into the risk management and insurance industry through our University Associates Programs. Recruiting undergraduate students into these programs often requires that faculty create innovative curriculum. One area of innovation, critical to insurance and risk management recruiting, is experiential 16

RESOURCES | Fall 2018

education—the opportunity for students to gain handson experience. Students want experiences that expose them to as many career paths as possible. Experiential education often includes internships, study-abroad programs, in-class analysis, and case studies using industry data. The faculty in the Lacy School of Business at Butler

The idea of a studentrun captive was the brain child of Professor Zach Finn, MSM, ARM, AINS, Clinical Professor and Director of the Davey Risk Management and Insurance Program. Before joining the faculty at Butler, Finn was the Risk Manager for the J.M. Smucker Company. His experience as a corporate risk manager for a

The operation of a captive insurance company represents a significant experiential learning opportunity to train Millennials for the insurance industry. https://www.butler.edu/captiveinsurance University in Indianapolis, IN, demonstrated some true innovation in the experiential education arena by creating the first-in-the-nation student-built, student-run, teaching captive insurance company. The operation of a captive insurance company represents a significant experiential learning opportunity to train Millennials for the insurance industry. Captives represent a microcosm of the broader industry and demonstrate the entire product lifecycle for insurance and alternative risk transfer products and services.

Fortune 500 company gave him the proper background to initiate the discussions necessary to create a student-run captive with various administrators at Butler University, including the Lacy School of Business Dean, Chief Legal Counsel, and VP of Finance and Administration, to get the idea off the ground. Through an extensive four-month, semester-long course, a team of students and faculty, working in coordination with a small group of industry advisors, completed a comprehensive feasibility study outlining why the formation of the

The captive insurance company student team from the 2017 Spring semester

captive insurance company made sense for Butler University’s mission. Students were tasked with selecting a place of domicile for the captive and a captive management service organization through a request for proposals (RFP) process. The captive feasibility report included the students’ recommendation to domicile the captive in Bermuda and select Aon as the captive management service organization. MJ Insurance offered to provide funding for the project, and the MJ Insurance Student-Run Captive was launched.

Engaging and Inspiring New Talent

“…the experience these students gained in creating the captive is unparalleled. They are coming out of school prepared to make an immediate impact.”

The captive was granted licensing approval from the Bermuda Monetary Authority (BMA) in April 2017. The students and faculty received news of the approval directly from the BMA during a five-day visit to Bermuda that month. In a press release from the Bermuda Business Development Agency, CEO Ross Webber stated that “the students’ research and application is a wonderful endorsement of Bermuda’s strengths, responsiveness, and robust, agile regulation.” The captive has the backing of Aon, the world’s largest insurance broker.

“Aon fully embraced the opportunity to do more than just manage the student-run captive with Butler University,” said Don Ortegel, Resident Managing Director at Aon Risk Solutions Chicago and Butler’s Strategic Account Manager. “We view this as a great opportunity to demonstrate our commitment to support and educate the Butler students.” KPMG was selected as the auditor of the captive. “I found their story very interesting and compelling,” said Eric Heinrichs, Managing Director of KPMG in

Bermuda and Lead Engagement Partner. The capital necessary to fund Butler’s captive was provided by a gift from MJ Insurance and founder, Michael M. Bill. MJ Insurance is one of the largest independent insurance agencies in America, with offices in Indianapolis and Phoenix. “We’re thrilled to not only be involved from a financial perspective, but also as part of the education process,” said Colin MacNab, Executive VP of Property and Casualty at MJ Insurance. “I served as a mentor in the first captive

insurance class at Butler and can attest that the experience these students gained in creating the captive is unparalleled. They are coming out of school prepared to make an immediate impact.” One of the students, Michaela Neal, who served a key role in preparing and delivering the application to the Bermuda Authority, joined MJ as a full-time employee after she graduated in May, 2018. MacNab said she will be fast-tracked due to the knowledge and experience she brings with her Butler degree. Continued. Fall 2018 | RESOURCES

SALES SAVVY INNOVATION

The MJ Insurance Student-Run Captive officially began work in August 2017. Although the students run the captive, faculty members are also serving as officers, primarily for purposes of business continuity. The CEO and CFO is P. Kevin Thompson, MBA, JD—Former Director of Risk Management of Eli Lilly and Company—and the CRO and COO is Zach Finn. The captive started writing several lines of coverage immediately after it began operations. The following are currently the most notable coverages: • Key (Dawg) Mascot Life Insurance: Animal mortality coverage for Butler’s live bulldog mascot, Trip. • Fine Arts Coverage: Butler’s captive insures scheduled fine art primary to the University’s property coverage, with a maximum policy limit per any one loss. This includes theater set pieces in storage, on display, and pieces currently or soon to be in transit.

In both the undergraduate and graduate programs, insurance and risk management students are gaining a multitude of skills and experiences that will be beneficial to their careers. • Entrepreneurship & Innovation Liability(CGL Deductible Reimbursement Policy): All students in the Lacy School of Business participate in Butler University’s Real Business Experience Program. In a one-year period, students form teams, create a business idea, apply for funding, and start and run their own business. The entrepreneurship liability is coverage that applies specifically to this program. “I wanted to pick coverages where students would not only learn about insurance and risk management, but sothey could learn about other things, too,” Finn said. “So we’ve learned about poets, paintings, planets, and more. I am going to leverage the

Learn More, Earn More To learn more about captive insurance and financial derivatives from a risk manager’s perspective, consider attending the PROFocus Specialty Series seminar, Advanced Risk Management (scic.com/profocusadvanced-risk-management). For more on the subject of captives, check the agendas for upcoming James K. Ruble Graduate Seminars. Risk Management Essentials, published by The National Alliance Research Academy, features different types of captives as an alternative risk financing option and is available at nationalalliancebooks.com. 18

RESOURCES | Fall 2018

great liberal arts education they receive at Butler.” To date, the captive has only provided first-party coverage to Butler. However, students in the Spring 2018 captive course wrote an RFP for a reinsurance broker. They received several proposals and invited a select group to make campus presentations. The students ranked the proposals and presentations and ultimately recommended Arthur J. Gallagher & Co. Having access to reinsurance will allow the captive to begin writing third-party coverage. Future insurance and risk management students at Butler will continue to manage the captive and determine its appetite for both first-party and third-party coverage. The undergraduate insurance and risk management students will soon be joined by the first cohort of graduate students from Butler’s forthcoming Master of Science in Risk and Insurance online degree program and will participate in the management of the MJ Insurance Student-Run Captive. The graduate students will have a semester-

long capstone course that will require an in-residence experience in Bermuda. In both the undergraduate and graduate programs, insurance and risk management students are gaining a multitude of skills and experiences that will be beneficial to their careers. The learning outcomes include skills in underwriting, rate making, loss control, reinsurance, insurance policy language, networking with industry professionals, and project management, to name just a few. This experience has been noted by Crain’s, The New York Times, and Harvard Business Review as a way to excite students and entice them to join the insurance field. “If you think insurance is boring,” the Times wrote, “you haven’t really thought it through. The industry is at least partly about the fascinating science of human behavior—from recklessness to neglect—and our collective efforts to behave responsibly that never end in total success.” n

About the Author: Dr. Victor Puleo, Jr., CIC, CFP®

Dr. Puleo is the Davey Chair of Risk Management and Insurance in the Lacy School of Business at Butler University, Indianapolis, IN. He is also a National Alliance Ed Consultant and National CIC Faculty member, as well as Chair of The National Alliance Research Academy Board of Directors.

Butler Blue, III, (aka “Trip”), the Butler University mascot

Cultivating Talent

for the Future of Our Industry The National Alliance Research Academy designed and initiated its unique University Associate (UA) Program in 2002. The program was created to support educational institutions in their efforts to attract college students into the risk management and insurance industry—to meet future workforce needs and to inspire a new generation of professionals who seek meaningful work. The project has been a great success. Beginning with Florida State University, the program has grown to include 26 colleges and universities across the country.

while pursuing their college education. As a result, these high-achievers are earmarked for success, having gained a significant advantage over their peers upon entering the insurance and risk management workforce.

Butler University (featured in the preceding article, pages 16–18)—with its renowned Lacy School of Business—is one of the most recent institutions of higher learning to join the University Associate Program. Butler, located in Indianapolis, IN, was named by U.S. News & World Report as one of the top schools in the country, citing its enriched educational offerings that lead to student success.

Join us in our efforts to help cultivate bright, motivated talent for the future of our industry. To get involved on an individual level, consider making a donation to the Jerry Montgomery Memorial Research Fund (scic.com/ jerry-montgomery-memorialresearch-fund). Organizations can contribute by becoming Academy Research Associates (scic.com/the-researchacademy) or email academy@ scic.com.

In the UA Program, students can earn credit for completing two parts of their CIC or CRM designation and be awarded a special universitylevel credential—University Associate Certified Insurance Counselor (UACIC) or University Associate Certified Risk Manager (UACRM)—

The UA Program is supported in part by the generous donations of our Academy Research Associates and by donations to the Jerry Montgomery Memorial Research Fund. This fund is dedicated to the memory of Jerry Montgomery, CIC, CRM, LUTCF, and to his commitment to being a positive force in insurance and risk management education.

Appalachian State University Ball State University Baylor University Butler University California State University— Fullerton University of Central Arkansas East Carolina University Eastern Kentucky University Florida State University Heidelberg University Middle Tennessee State University New Mexico State University Olivet College Temple University University of Akron University of Colorado— Denver University of Georgia University of Houston— Downtown University of Louisiana— Lafayette University of Mississippi University of North Carolina— Charlotte University of North Texas University of South Carolina University of Southern Maine University of Texas—Dallas University of Wisconsin— Oshkosh Fall 2018 | RESOURCES

Train Your Team with O National Alliance Programs offer prestigious designations and career development for all insurance and risk management professionals.

As a National Alliance designee, you already understand the value and pride of obtaining a professional insurance or risk management designation. Reaching far beyond mere CE requirements, your commitment to life-long continuing education is a symbol of your dedication to your customers, your employer, and yourself. What will be your next move? Dozens of National Alliance education opportunities await you and your team. • Pursue an additional designation to broaden your repertoire. • Let us help train your producers and bring your new-to-the-industry employees up to speed. • Reduce your E&O risks by training your team. • Fine-tune your sales culture for profitable results. • Stock your reference library with top-notch reference materials and publications. • Increase customer (and employee) retention with valuable customer service skills. Our programs are known—first and foremost—for their “put-it-to-use today” practicality, as well as their affordability and accessibility. Some provide the best networking value when presented in a classroom setting, while many others maximize convenience with a choice of classroom or online formats; and the majority of our programs can be customized for in-house group training. All are taught by practicing industry professionals, using regularly updated curricula. 20 RESOURCES | Fall 2018

Professional Designation Programs CISR

Certified Insurance Service Representative Program

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Certified Insurance Counselor Program

Non-Designation Programs PROFocus Series • Advanced-level niche training • Open to all

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• Specialty topics that expand on the CISR and CSRM Programs • Open to all

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• Dynamics Master Sales Class • Employee Benefits Producer Training

Industry Research and Publications Academy Publications

• The National Alliance Research Academy NationalAllianceBooks.com

ur Programs TheNationalAlliance.com

Call toll-free: 800-633-2165 • Email: alliance@scic.com

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CSRM

Certified School Risk Manager Program

The National Alliance leverages technology and practical instruction to deliver indispensable, transformative learning resources for risk and insurance professionals.

University Programs • University Associate CIC • University Associate CRM

Map your career track and customize your learning experience.

College students, seasoned professionals, and everyone in between can look to The National Alliance for networking, publications, and dozens of career-building resources. Visit TheNationalAlliance.com for complete listings of topic choices, schedules, and details about our programs, and to register for your next update. And remember to recommend National Alliance programs to your team members, friends, and colleagues!

Fall 2018 | RESOURCES

NICHE KNOWLEDGE

New Markets and Legal Uncertainty What Is an Insurance Agent to Do? BY RICHARD S. PITTS, J.D.

e’re hard at work, putting together new National Alliance courses on the trend toward legalizing marijuana, and the biggest question isn’t whether we have enough material for one of our traditional half-day, 4-hour sessions. In fact, the problem at hand is whether we have too much material for a full-day agenda, and genuinely need two full days to cover the issues. “Wait,” you might say, “I’m a big supporter of The National Alliance and I’ve heard about some of the stuff that’s going on in Washington, California, Colorado, and Oregon, but really? Two days? I don’t work in those states, so why would I need to know all of that stuff?” Your question might mean that you are in one of the 20 states that haven’t legalized either recreational (adult use) or medical marijuana

RESOURCES | Fall 2018

(as of this writing). However, medical marijuana is now legal in 30 states, recreational use is legal in nine states, and various polls continue to indicate that there is significant public sentiment for legalization across the country. Who knows? Your state may be next. The trend toward mainstreaming and legitimizing marijuana is here, real, and probably the next big thing in agribusiness—and maybe in retail, too. With that trend comes a huge marketplace, a new web of regulations and licenses, and, of course, a huge number of insurance questions and issues.

Impact of Legalization

First, on the market size: California is the nation’s most populous state, and it moved to full recreational status in November 2016, but medical marijuana had already been legal there for 20 years or so. The Golden State is a forerunner of the kind of market impact that can be anticipated.

While statistics vary, it is reported that 2016 California sales of medicinal cannabis were approximately $2.7 billion, and sales exceeded $3 billion in 2017. If we use the variables of population and the commencement of adult-use cannabis in California, and then add the impact of marijuana tourism, it’s possible that in 2018, California will exceed $5 billion in cannabis sales. For comparison purposes, let’s also look at the sales in another state. Colorado followed a similar trajectory upon the legalization of recreational marijuana. Commercial sales of recreational marijuana began January 1, 2014, and sales for medicinal and adult-use exceeded $1 billion in both 2016 and 2017. Another way to illustrate the growth that has occurred in Colorado is to look at the growth in the revenues that the state has collected from taxes, licenses, and fees since the legalization of recreational marijuana.

Learn More, Earn More

Calendar Year Total Revenue 2014 $67,594,323 2015 $130,411,173 2016 $193,604,810 2017 $247,368,473 2018 (Jan–May) $109,002,969

When you multiply these figures by the number of states that have legalized some form of marijuana usage, you get a very big number. In fact, there are predictions that marijuana sales will be on a par with— or even exceed—sales for alcohol or soda. That about says it all for the impact that legalized marijuana will have on the marketplace.

ing to some state laws, but still prohibited under federal law. That situation creates uncertainty, and this kind of uncertainty is something that our industry doesn’t really like. The Department of Justice has also issued a directive that says that the provisions of the Bank Secrecy Act, the money laundering statutes, and the unlicensed money transmitter statutes are still applicable, too. Not surprisingly, national banks and other major financial institutions are reluctant to provide services no matter how “legal” it is under state law.

Risk Considerations

Finally, with this background, we begin to move into the insurance When it comes to the regulaquestions. With the reluctance of tory environment, nothing here is national banks to get involved, the simple. You may have noticed that marijuana industry remains a cashearlier in this article I used the term oriented business. Without the in“mainstreaming and legitimizing,” volvement of most major banks and rather than saying “legalizing” banking services, and with a heavy marijuana. According to the United concentration in cash business, States Department of Justice, marimarijuana retailers aren’t necessarjuana is still a scheduled substance ily the most attractive of risks to the that is subject to federal sanctions. insurance industry, even in (again) Federal prosecustates that have “letors can still bring galized” sales. cases, even though Simply put, the The trend toward it appears that few, big, national carriif any, have done so. mainstreaming ers aren’t anticipated Just because a state to move quickly to and legitimizing has permitted either insure the marijuana medical or recremarijuana is marketplace, which ational use doesn’t includes the growers here…With mean that there and the dispensaries. can’t be federal law that trend In addition, major enforcement efforts carriers may be afraid comes a huge undertaken. In fact, of losing Mediin January 2018, the marketplace, care and Medicaid Department of Juscontracts. And even a new web of tice rescinded prior those carriers that memos that seemregulations and are willing to enter ingly provided a the market may do so licenses, and, safe harbor for with some remainthe legalization of course, ing reluctance, given movement. the nature of the a huge number So, the short verbusiness. Carrier apsion is that cannabis of insurance plications are replete usage is “permitted with questions about questions or legal” accord-

The Regulatory Quagmire

and issues.

Scan this QR code (simply point your smart-phone camera at it) to listen to a free podcast—“Cannabis Insurance: The Hottest Emerging Trend,” presented by Reed Rhoden, CIC, CRIS, Assistant VP/ Senior Broker for M. J. Hall and Company. The podcast covers the exposures that owners face, the challenges agents are uncovering, and where this segment of the industry is headed in the next few years. And that’s not all! Coming soon, we’ll have a new webinar devoted to educating agents about the exposures created within the cannabis marketplace, including how the insurance industry is meeting this evolving need. Beginning in 2019, The National Alliance will begin offering courses about the burgeoning cannabis market and its insurance and risk management implications.

security and security forces: Are there guards? Are they armed? Are they employees or independent contractors? This underwriting acuity carries over to other areas of risk, as well. There are concerns about the basic premises liability. Does the retailer occupy the entire space? Who are the neighbors? These and other questions have manifested to such a degree that there are reports of carriers non-renewing insureds just because a dispensary moved into a strip mall. And then there are all the questions related to other insurance products. For example: Is there workers’ compensation insurance in place? What class codes are we using for the workers? Agricultural? Retail? Mainly, the challenges that exist in this new field focus on the retailers (the dispensaries) and the growers; however, the considerations for employers are Fall 2018 | RESOURCES

also numerous. In addition to the employment aspects, there may be implications for employment practices liability insurance, as well. In fact, these and other employmentrelated topics have been “smokin’” topics at many recent industry conferences and events, and there is no lack of information (for better or worse) on the internet.

The Legal Schism

While a thorough examination of these considerations is beyond the scope of this article, it is interesting to note that recent litigation …proponents results in the state of Massaof medicinal chusetts underusage say that score the fact that employers marijuana is safe need to be vigiand effective lant about having EPLI policies if appropriately which are in controlled by compliance with the laws in their a physician’s various states authorization, of operation, especially if they while opponents have a “zero still point tolerance” drug policy. to federal Other quesillegality and tions have arisen regarding non-approval by the Americans the FDA. with Disabilities Act (ADA). For example, while the ADA does not require an employer to accommodate an employee’s marijuana use, it does require that the employer accommodate the employee’s participation in a substance abuse program. In addition, there are a host of questions regarding the issue of medical marijuana in the context of workers’ compensation treatments. It is important to note that all of these questions revolve around a central schism: proponents of 24

RESOURCES | Fall 2018

medicinal usage say that marijuana is safe and effective if appropriately controlled by a physician’s authorization, while opponents still point to federal illegality and non-approval by the FDA. However, as these issues move through the courts, there will be less and less uncertainty. Of course, who knows how long that will take? Having said that, there is a growing body of case law on coverage questions. For example, under standard commercial insurance policies, are expensive marijuana plants to be subject to the same treatment as any other “crop”? Under a homeowner’s policy, is a marijuana plant a “shrub” for which there is coverage? The latter case sounds perhaps far-fetched to us, but it actually happened in 2012 (Tracy v. USAA). In this case, the plaintiff’s marijuana plants used for medicinal purposes were stolen. Subsequently, a claim was filed on the homeowner’s policy. USAA argued that the plaintiff lacked an insurable interest in the plants under state and federal law. The court ruled in favor of the defendant (USAA) by noting, “the cultivation of marijuana, even for the state-authorized medical use, violates federal law and the enforcement of an insurance policy under the particular circumstances of this case is contrary to public policy.” It is somewhat obvious that things could change if the court were to focus on state, rather than federal, law. Here again, the specifics of the arguments made by the attorneys representing these clients are beyond the scope of this article, but where marijuana sale and possession is deemed legal, according to state law, one would think this constitutes “any lawful” economic interest and creates an insurable interest— though it leaves the “contraband” issue on the table. So, is destruction or theft of marijuana (or marijuana plants) covered by ISO homeown-

ers and commercial property forms? The answer is the all-too-familiar “maybe; maybe not.” In fact, in a relatively recent Colorado case, Green Earth Wellness Center, LLC v. Atain Specialty Insurance Company, the case involved the CGL policy in which the carrier’s “contraband” defense was rejected.

Start Gearing Up

Where does all of that leave us? The trend toward mainstreaming and legitimizing marijuana will continue to have a significant impact on the national economy, as well as the insurance industry, and as I noted earlier, it is probably coming to your state soon (if it hasn’t already arrived). Join us for one of the courses that we will be conducting in 2019 and find out what you need to know about insuring growers, dispensaries, and other segments of this rapidly growing market! n

About the Author: Richard S. Pitts, J.D.

Richard Pitts is VP and General Counsel to Arlington/Roe & Co., Inc., an insurance brokerage and managing general agent headquartered in Indianapolis, IN. He also serves as General Counsel to the IIA of Indiana, Inc. Rick has served as a panelist and lecturer on a variety of continuing education subjects, coauthored articles appearing in the Indiana Law Review and is a member of the National Alliance’s Ruble faculty. Hear Rick speak about advanced Risk Implications for Commercial Real Estate and other topics in the Instructor-Led Online PROFocus Legal Concepts Seminar, Sept. 25–Oct. 16. Or catch him at the Dallas MEGA Seminar on October 16, and enjoy his presentation of “The Impaired and the Shared Economy.”

MEGA learning is practical, inspired learning—

always relevant and applicable to the needs of your clients and business. The MEGA offers a unique opportunity to participate in lively, in-depth topic discussions while you enjoy the face-to-face exchange of ideas with expert instructors and industry peers.

Choose from this list of topics: • Lessons from CAT Losses • Negotiating Contracts for Risk Transfer • Advanced Claims Management Strategies • • • • • • • • • • • • • • • •

and Techniques Employment Practices and Insurance— Exposures and Solutions The Insurance Industry and the Value of Internships Insuring the E-Commerce Account The Impaired and the Shared Economy and Insurance Implications Understanding the Lloyd’s Market Anatomy of a Construction Injury Claim Insurance Valuation Problems Navigating Insurance Program Development ABC’s of D&O: Exposures and Coverages for Main Street Business Personal Lines and the Need for Special Event Coverage Planning for Retirement Cyber Exposures: Resistance is Futile Managing and Transferring Environmental Exposures The Greatest Insurance Product Ever Invented: Life Insurance D&O and EPL: A Technician’s View Innovative Environmental Strategies Risk Management and Insurance Can’t get away from the office? MEGA Seminars are also offered in our Instructor-Led Online format! The next one: Nov. 8–Dec. 17

With four full days of topic choices, the MEGA is packed with a powerful value that’s unmatched in the industry. Pay only for your required 16 hours and attend as many sessions as you wish. Customize your schedule to take advantage of the many entertainment and cultural activities in the Dallas/ Fort Worth area. You can create a one-of-a-kind getaway for you and your family that pays—with real knowledge that you can put to use immediately.

Open to all dues-paid designees!

Go to scic.com/ruble-mega-seminars for details and register to reserve your spot at this exciting learning and networking event. Renaissance Dallas–Richardson Hotel 900 East Lookout Drive Richardson (Dallas Area), TX 75082  Call 972-367-2000 for reservations. Ask for The National Alliance group rate to receive the special price of $144 for single or double accommodations (based on availability—cut-off date is 10/1/18). Bring your parking ticket inside for validation. Internet access is included in the guest room rate. The hotel is located adjacent to Galatyn Park Plaza, the DART Light Rail, and the Eisemann Performing Arts Center—all in the heart of the Telecom corridor. Fall 2018 | RESOURCES

FROM THE NATIONAL ALLIANCE RESEARCH ACADEMY Get Ready. Get Set. Go! Start Building Your Professional Library Today! These book packages from The National Alliance Research Academy are a great value (save $20 over purchasing separately). The Insurance Library Essentials Package is the must-have, go-to P&C, Life & Health, and Risk reference for your office.

The Insurance Library Essentials Package—$259/$239

The Insurance Professional’s Profile Package is a trio of studies based on solid research protocols that provide benchmarks for comparisons and includes the Academy’s newest publication, The Pulse of Customer Service: A Profile of Insurance Industry Customer Service Personnel—perfect for the Account Exec or Agency Manager. The Agency Value Package and Managing People Package include books by National Alliance National Faculty member, Jon Persky, CPA, CIC, PHR, and come with customizable forms and documents—along with other books vital to the Agency Owner or Manager.

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All of the books shown in these packages are also sold separately and are available in your choice of paperback or digital PDF format. Other books, CDs, DVDs, and webinars are also available at NationalAllianceBooks.com.

The Agency Value Package—$259/$239 A Tedious Brief History of Insurance by Richard Rudolph, Ph.D., CPCU, ARM, AIAF, APA, ARP, AAM—a humorous, yet accurate, tale about the origins of the industry—is the perfect book for holiday gift-giving! Proceeds support the Jerry Montgomery Memorial Research Fund (see page 19).

RESOURCES | Fall 2018

The Managing People Package—$259/$239

Don’t Overlook This Valuable Dues-Paid Benefit: FREE Webinars

CRM and CIC Programs Move to 16-Hour Format

As a benefit of being a dues-paid designee, you have access to a variety of one-hour webinars presented by practicing industry experts, addressing current insurance and risk management topics, such as the 2018 Personal Auto Policy, The Internet of Things, Cyber Liability, Insuring Non-Profits, and one of the most popular—Contractual Risk Transfer and Additional Insured Status: The Inmates are Running the Asylum!

You never stop learning—and neither do we!

Take a look at this synopsis of the Contractual Risk Transfer webinar, presented by Chris Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS: Contractual risk transfer has nothing to do with insurance. Neither does it have anything to do with additional insured status. This may shock you—the endorsed “waiver of subrogation” (an improper term) doesn’t have anything to do with contractual risk transfer or additional insured status either. In reality, these are three separate risk management methods used by one party— generally the upper-tier contractor—to avoid costs associated with the actions of a lower-tier contractor, to garner some level of insurance protection from another party, and to avoid out-ofpocket expenses resulting from their own actions or vicarious liability for the actions of others. Insurance professionals often misconstrue the purpose and effect of each of these risk management mechanisms. Although these three techniques work together to accomplish a specific goal, each has a different effect on insurance. In this webinar, Chris reviews the purpose and effect of these three risk management techniques and the reasons why they don’t—but in some ways do—relate to each other. Participants learn: • How contractual risk transfer fits into or affects additional insured status; • What protection an additional insured actually gets—compared to what they think they get; • Why the “waiver of subrogation” is still needed even when AI status is given; and • Some of the weird additional insured requests you will see (if you haven’t already). Additional webinars are being added regularly. As a dues-paid designee, you can access these one-hour webinars (free) through your individual PROfile page located at scic.com/customer/account/login.

We listened and learned from your requests for streamlined courses. And, as a result, the CRM and CIC programs are both in the process of converting to a 16-hour course format.* CRM Principles of Risk Management and CRM Control of Risk made the change earlier this year, and the response has been overwhelmingly positive! We now have two more CRM courses (both with new material) in the 16-hour format: CRM Practice of Risk Management— All sections have been revised, and a new section on International & Multinational Risks has been added! CRM Financing of Risk— Students now move through a continuum of risk financing options that starts with a Guaranteed Cost Program and ends with Alternative Risk Transfer options. The focus is on equipping participants with the skills and information they need to be able to meet the risk financing needs of a growing organization. Beginning in October, we’ll have a new 16-hour option for our Spanish speaking participants: CRMI Principles of Risk Management— • Online instructor-led in Spanish (both instruction and exam are in Spanish) • Course is open to all participants who prefer instruction in Spanish, including those in the United States and territories, such as Puerto Rico and the Virgin Islands, or in Latin American countries CIC is Also On the Move! The CIC Program has also begun implementing the new 16-hour format, for both classroom and online instructorled courses. The online instructor-led CIC Insurance Company Operations was the first course to convert to the 16-hour format, in July 2018, and additional CIC courses will make the change in January 2019. *Both the online instructor-led and the classroom courses are converting to the 16-hour format. Fall Fall 2018 2018 || RESOURCES RESOURCES

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SALES SAVVY INDUSTRY INSIGHTS

Interested in Internships? All You Want to Know, and More, About the Value of Internships

nternships represent a growing avenue for employers to attract and evaluate potential employees, an important fact in an industry facing widespread employee shortages in the very near future. This article summarizes some of the major benefits of internship programs for the intern, as well as for the company or agency employer. Also outlined are strategies that can help companies identify and recruit interns and factors that should be considered when designing an internship program.

The Benefits of Internships

Internships are experiential learning opportunities that allow students to apply what they learned in a

classroom in the hands-on environment of a business setting. Immersion in a professional setting helps students develop skills relevant to a specific position, as well as enhances the communication, critical thinking, and networking skills that will be required in the workplace. Additionally, this workplace exposure allows them to determine where they “fit” best, builds their confidence, and improves their marketability, all of which can lead to better job opportunities, higher starting salaries, and greater job satisfaction. For these reasons, risk management and insurance majors at Florida State University (FSU) can complete approved internships and earn academic credit toward their degree programs.

Learn More, Earn More To learn more about the benefits of an internship program for your agency or company, attend the James K. Ruble MEGA Seminar in Dallas, TX, Oct. 15–18, where Dr. Kathleen McCullough of Florida State University will present a four-hour session, called “The Insurance Industry and the Value of Internships.” Included in this session will be a panel discussion where past interns will share some of their experiences. This session, along with your choice of three additional four-hour sessions, earns CE and National Alliance designation update credit. Attend extra sessions for the same registration fee and learn even more! 28

RESOURCES | Fall 2018

Internship programs can also be valuable to the agency/company employer from a workforce planning perspective. Internships can be viewed as a long interview process that can

help a company decide if and where a potential future employee may fit within the organization. This is increasingly important today as company culture is a strong consider-

When contemplating interns in your organization, consider how you want to leverage the value of these positions by asking core questions.

FSU College of Business

Internships give students the opportunity to experience the company culture prior to permanent employment, which in turn has the potential to reduce turnover in full-time hires. Together, these advantages can lead to lower employment costs. ation for Millennials (now in the workforce) and Gen Z (soon to be entering the workforce) when making employment decisions. Internships give students the opportunity to experi-

ence the company culture prior to permanent employment, which in turn has the potential to reduce turnover in full-time hires. Together, these advantages can lead to lower employment costs.

Finding and Recruiting Interns

What’s in a name? If your company is interested in attracting young talent, the answer to that question is “quite a lot.” Millennials gravitate to companies they have heard of before, just as we all do. Major insurers spend considerable money building a brand image, and it can pay off during campus visits because students may initially be interested in associating with wellknown entities. After all, they are trying to build a resume, and they know that experience with a national company may be a ticket to greater opportunities. That doesn’t mean that a smaller entity or agency is at a serious disadvantage. There are ways to stand out before, during, and after career fairs and to compete successfully with organizations whose advertising budgets are a thing of envy. An investment in a visual display expressly for career fairs can be helpful. To draw students in, most companies have a colorful backdrop, intriguing display board, and table runner emblazoned with the company logo. Recruiters standing by sparsely outfitted tables do not get as much traffic. An

attractive visual display is a relatively small investment that can really pay off. Don’t wait for a career fair to start building a campus presence. Get involved in department activities. Sponsoring an event brings executives on-site and creates opportunities for them to interact with students. You can also find volunteers from your company to get involved in other campus activities. FSU has enjoyed strong relationships with agents, brokers, owners, recruiters, and many other professionals and has sought their active participation in everything from curriculum design to judging student competitions. Students are extremely appreciative of professionals who help them in their studies, and they don’t forget the individuals who step up.

Internships as Part of Workforce Planning

When contemplating interns in your organization, consider how you want to leverage the value of these positions by asking core questions. 1. Will interns complement existing staff? Interns can contribute value by completing critical, Fall 2018 | RESOURCES

SALESINSIGHTS SAVVY INDUSTRY

short-term projects that existing staff may not have time to perform, but are nonetheless important. This will ensure the organization completes a necessary activity while exposing the intern to a real-world project that returns value to the organization.

2. Are interns a part of your future applicant pipeline? Organizations that hire interns have reported higher levels of retention and productivity in large part due to their familiarity with the company and the job. 3. What is the commitment of the organization to

About the Authors: Information presented in this article is drawn from a presentation made at the James K. Ruble MEGA Seminar conducted in Orlando, FL, on June 6, 2018. The four authors—all representatives of the College of Business at Florida State University— (C. Darren Brooks, Ph.D., Management Faculty and Executive Director of the Center for Human Resource Management; Cassandra R. Cole, Ph.D., Department Chair and William T. Hold Professor in Risk Management and Insurance—Dr. William T. Hold/The National Alliance Program in Risk Management and Insurance; Alexandra Massey, M.A., Corporate Relations Coordinator; and Lynne McChristian, Teaching Faculty and Director of the Center for Insurance Education & Research—Dr. William T. Hold/The National Alliance Program in Risk Management and Insurance) have expressed their appreciation to The National Alliance for giving them the opportunity to participate in the seminar, as well as to Kathleen McCullough, Ph.D. (Associate Dean of Graduate Programs and Research and State Farm Insurance Professor in the Dr. William T. Hold/The National Alliance Program in Risk Management and Insurance) for moderating during the session, and their fellow industry professionals (Kelly Doran, Associate Broker for AmWINS Brokerage of Florida; Laura Sherman, CPRM, CAPI, Founding Partner of Baldwin Krystyn Sherman Partners and Baldwin Risk Partners; Blake Starbuck, Producer Development Manager at Bouchard Insurance; and Nathan Upton, Commercial Property Broker at All Risks, Ltd.) who shared their personal experiences. 30 RESOURCES | Fall 2018

develop novice professionals? Taking on and managing interns is not for the faint-of-heart. Managing interns takes time and effort that organizations must be willing to invest to ensure a successful experience for all parties.

Designing an Internship Program

Once you have decided to hire interns, you need to determine the structure of your internship program. There is no right or wrong approach to this, but you should consider the organization’s size, number of interns needed, purpose of the internship, and the available support. Next, the structure of the internship will fall into one of three categories—fixed, rotational, or hybrid (incorporating elements of fixed and rotational). For organizations that hire for specific positions, a fixed job-based internship will provide the necessary job-related training and experience to prepare them for the role. More flexible internship structures are rotational and project-based positions. These structures provide the opportunity for broad exposure to the organization through rotational and/or project assignments that engage the intern with multiple work units. Internships that offer some type of departmental rotation can be especially valuable to students because they may not know what area of the industry is their best fit or what specialization may

suit them. Having a chance to “test drive” some options provides them with some much-needed direction when making those initial employment decisions. One of the most important considerations in designing an internship is support. An internship is a learning experience, and as an employer, you are also a teacher. Students are looking to their employers for guidance—not just for the task at hand, but also for the soft skills necessary for success. Communication about what is working well, and what is not, will make them a better employee and a more well-rounded insurance professional. The key is to clearly establish expectations, review progress regularly, and provide frequent feedback throughout the internship.

Should I Pay Interns?

The Department of Labor has published guidelines instructing for-profit employers on the seven-factor pay criteria used to evaluate intern positions to determine if they fall under Fair Labor Standards Act regulations. It is recommended that employers pay interns. Based on 2017 NACE (National Association of Colleges and Employers) and FSU intern salary data, interns earn approximately $10 to $15 per hour, on average. Salaries are impacted by numerous factors, including job responsibilities, geographic location, and size of the firm. Another expense your organization needs to

One of the most important considerations in designing an internship is support… The key is to clearly establish expectations, review progress regularly, and provide frequent feedback… consider is housing allowance. For many students, the availability of a housing stipend will determine if they accept an offer from a firm. Approximately half of the employers recruiting interns from FSU offer a housing allowance. The average stipend ranges from $1,500 to $3,000, depending on the duration of the internship and the location’s cost of living.

Employer and Intern Expectations

When employing an intern, there are several expectations that employers and interns should be mindful of to ensure a successful experience for both parties. For employers, it is important to recognize that this may be the first professional experience for many students. Consequently, it is reasonable to anticipate that the intern will have some anxiety. As such, make sure you do the following:

measures to monitor the intern’s progress. • Encourage students to obtain a professional mentor who can share their expert knowledge. • Verify with the intern that expectations are challenging, but reasonable.

Conclusion

A well-structured internship program generates positive benefits for employers and students. It can provide employers with an opportunity to evaluate a potential employee without first making a long-term commitment. It can also generate excitement for the industry among students

• Meet regularly with the intern to review progress, answer questions, and offer feedback.

Gamma Iota Sigma Campus Career Fairs

In addition, interns need to be oriented to the expectations your firm has of them. Interns want to contribute during their experience. Clarify the following expectations with your intern:

Gamma Iota Sigma The Insurance Industry’s Premier Collegiate Talent Pipeline (GIS)—a college campus fraternity that promotes, encourages, and sustains student interest in insurance, risk management, and actuarial science—has begun a series of Fall Campus Career Fairs.

• What types of projects will the intern work on? • What are the day-to-day responsibilities?

• Discuss with the intern what they should get out of the experience.

• What is the significance of the assigned tasks/ projects, how will the outcome/results/project benefit the organization, and how will this work develop professional competencies?

• Orient the intern to their role, supervisor, and other employees.

• What is the company’s management style and culture?

• Develop written expectations and establish goals/

• What are some important facts interns should know

for their chosen profession and better prepare them for the transition into the workplace. Students who have great experiences return to campus eager to learn. They “brag” about their summer employer. They talk about that special project they completed or the lunch with the president of the company, and the excitement about these activities builds a positive reputation among students. Remember, there is no better brand ambassador for your company than an intern with a rewarding experience! n

about the organization and what are some of the important rules of employment (e.g., professionalism at all times: dress, communication, and behavior)?

GAMMA IOTA SIGMA

Employers—this is a great opportunity for you to be visible on campus and find your next-gen industry leaders! Connect with, recruit, and hire qualified students as interns or employees. Create brand awareness and a positive profile for your agency or company on college campuses while meeting large groups of students in a single setting. The National Alliance is a Sustaining Partner of GIS. GIS CEO Noelle Codispoti, CPCU, ARM, says, “GIS provides a full complement of meaningful and innovative programs for insurance, risk management, and financial organizations to engage directly with students who exemplify excellence. Campus Career Fairs are an optimal way to connect with students and showcase the many opportunities available within the industry.” More information about GIS and a listing of upcoming 2018 GIS Campus Career Fairs can be found at gammaiotasigma.org. The universities conducting these fairs are also participants in The National Alliance Research Academy’s University Associate Program (see page 19). Fall 2018 | RESOURCES

SPECIALTY RISK MANAGEMENT

Crisis Prevention and Response Bullying and Liability New Curriculum for School Risks “Big things are happening at The National Alliance in Specialty Risk Management,” says Sara Naus, CSRM, CSRM Academic Director for The National Alliance. “We are building a comprehensive three-pronged curriculum that addresses and helps remedy threats that are prevalent in the current school environment. Crisis Prevention and Response and Bullying and Liability are the first two parts of the curriculum, with Crisis Prevention being the first installment. The curriculum delineates the insurance coverage implications for each type of risk. Reputational and Legal Risks, Workers’ Compensation, General Liability Insurance, Property Insurance, School Board/Educator’s Legal Liability, and Violent Event/Response Active Shooter Insurance are all examined.” School Risk Managers must take a closer look at their school’s current insurance versus what they may need in the event of a claim. It is possible that insured entities may only have the minimum and/or mandatory coverages necessary to operate. 32

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Personal and mental stressors are just some of the triggers for schoolrelated crises. Recognizing the warning signs early can be the difference between life and death for students and school personnel and the key to avoiding the interruption of educational responsibilities, property damage, reputational damage, and other losses. Prevention and education are essential elements to mitigating this growing risk.

Training for Worse-Case Scenarios

“For many reasons, active-shooter training is vital to preparing school staff—beginning by simply raising their awareness,” explains Naus. “Training forces staff members to mentally prepare for the unexpected and the shock that can paralyze in an active-shooter or other life-threatening situation. Training makes them more observant and helps them respond to early warning behaviors signaled by colleagues, parents, or students. The training should reinforce the organization’s violence prevention reporting proce-

Sara Naus, CSRM Academic Director The National Alliance

dures and underscore the preventative nature of being alert.” Like an athlete who develops muscle memory from regular training to prepare for a major competition— staff and students will similarly draw upon their training when it comes to the unthinkable in the school environment. Insurers who offer coverage for workplace violence, active-shooter, EPLI, D&O, and other exposures often include questions on their application forms asking if the insured has a violence prevention policy, safetytraining plan, employee assistance program (EAP), or mental health program for students. These initiatives could help de-escalate and even prevent violence and accompanying losses. The main sections of the Crisis Prevention and Response course are:

• Threat Assessment in Schools: types and levels of threats and procedures; school climate strategies and mental health support; arming teachers and school staff • School Safety and Security: access control; visitor management procedures; crime prevention through environmental design; school resource officers • Mental Health Assessment for Schools • Youth Mental Health First-Aid

• Planning for School Emergencies: developing a plan; functional shelters during a crisis: reunification and protocols; crisis communication; human resources responsibilities • Responding to a School Crisis: intruder response; continuity plans; a variety of emergency situations; developing and conducting drills and exercises • Insurance Coverage Implications The Crisis Prevention and Response course will be available at the end of November 2018 and Bullying and Liability in the first quarter of 2019. Crisis Prevention and Response is being developed in collaboration with Wisconsin Association of School Business Officials (WASBO) in Madison, WI (a licensed CSRM Program partner). The Academic Advisory Committee includes Faculty Member, Jodi Traas, CSRM, and Safety Consultant, Allysa Hrubes, CSRM. An Active-Shooter Training video will be offered as a resource for this course. Available in a 7-hour classroom setting, the course will also be offered in an instructor-led online format. Bullying and Liability and Crisis Prevention and Response will both be new update options for the CSRM designation. P/C credit is offered, as well. n

Do you have a question to “Ask Bettie?” Bettie Duff, Senior VP of Customer Care, has been with us almost 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,

I’ve been a CISR for about a year now, and it’s time for me to complete my first update. I’d like to try an online course. What are my choices? Do I have to take the exam? —Clarissa Peterson, CISR Dear Clarissa, You have a number of different options for completing your annual CISR update requirement online—some are self-paced and others are instructor-led. Self-Paced Online One option is to take any one of the nine self-paced online CISR courses. You always have the choice of updating with a course you have taken before to reinforce knowledge you gained previously. On the other hand, if you choose to update with one of the CISR courses you have not already taken, you will be on your way toward becoming a CISR Elite—a distinction reserved for ambitious CISRs who have taken and passed all nine CISR courses. Alternatively, if you have an interest in learning about risk management as it relates to schools, updating with a self-paced online CSRM (Certified School Risk Manager) course is a choice available to you. Another option is to select two 4-hour self-paced online course offerings from the following: William T. Hold seminars, Legal & Ethical Requirements of Insurance Professionals (Ethics), or Insuring Flood Exposures—NFIP Review. With each of the options listed above, you will need to complete all of the selfquizzes and the short review quiz at the end of the course(s) to earn one year of update credit. Keep in mind that there is a proctored final exam attached to each of these self-paced online courses. The exam is optional for your annual update, but may be required for earning state continuing education credits. “CE” credits vary by state, so be sure to check your state’s requirements at scic.com/ce-by-state. Instructor-Led Online Another possibility for your update is to attend an instructor-led online CIC or CRM course, online Ruble MEGA Seminar, or online PROFocus Series Seminar. Full attendance of any of these programs earns two years of update credit for CISRs. The self-quizzes and final exam are optional for update credit, and because CE credit for instructor-led online courses is based on webinar attendance only, no final exam is required. As you can see, you have many choices for updating online. We know that designees’ interests, job duties, and career goals vary a great deal, and we strive to be responsive to your needs. Taking all nine of the CISR courses to become a CISR Elite is a great way to round-out your knowledge and demonstrate your professionalism. William T. Hold Seminars provide rich exposure to industry niches. Sampling an instructor-led online course may be the ideal way for you to test your skills in one of the more advanced programs to determine if you feel ready to move into the next phase of your learning career. Whichever option you choose for your update, happy learning! —Bettie Fall 2018 | RESOURCES

EXPERT PERSPECTIVE

ver the last 30 years, I have been retained in the evaluation of over 200 insurance agencies in matters such as bankruptcy, tax consequences, sales of books of business, internal perpetuation mergers and acquisitions, and other non-disputed events that occur eventually in the life of every insurance agency. However, many of those assignments involved disputes between agencies and former employees who took confidential information with them to solicit business with the former employersâ&#x20AC;&#x2122; insurance clients. This article will not focus on the distinctions between, or importance of non-piracy, non-compete, or other confidentiality and non-disclosure agreements. In my experience, most agency owners and managers understand the importance of these 34

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BY ROY L. PHILLIPS, CIC, CISR, AAI, CPIA agreements, although implementation is another matter. The area where I find more limited understanding is in defining what information could be considered a trade secret or confidential information that is the property of the agency. I am an insurance agent, rather than an attorney, and the information in this article is not a substitute for the advice of an attorney. However, I can certainly read court decisions, learn from my experiences with clients over the years, and imagine scenarios involving trade secrets that have not yet been litigated. So let us begin with this: Insurance agencies have books of business, customer lists, and expiration lists, all of which have been deemed to constitute a firmâ&#x20AC;&#x2122;s trade secrets. The Fifth Circuit Court of Appeals has affirmed the contention that expirations are the PROPERTY and major asset of

an independent insurance agency (Texas Truck Insurance Agency, Inc. Appellant vs. Harry Cure, Chapter 7 Trustee for Vance G. Dunham, Debtor, Appellee) No.96-10565 United States Court of Appeals, Fifth Circuit. April 17, 1997). In my work in placing a value on insurance agencies, it is that property that carries the value of the agency with it.

What Is, and Is Not, a Trade Secret?

As a practical working definition, trade secrets comprise the body of information that is contained in the files of each individual insurance account, as well as other knowledge of accounts that would benefit a competitor. While the definition of trade secrets is broad and varies by state, there are some commonalities which can be described as falling under three major headings: the information or knowledge is

not generally known to the public, it is of economic benefit to the agency, and its secrecy is guarded by the agency. Obviously, these guidelines demonstrate that there is great latitude in determining exactly what knowledge and information could be considered a trade secret, as well as how vehemently it is guarded and its economic value to the agency. This should make it clear that it is far better for the agency to err on the side of caution in making determinations regarding employee access to confidential information, as well as ensuring that the proper employee agreements are in place. However, to properly implement these measures, it is critical for an agency to understand what could be considered a trade secret in the first place. The problem is that although agencies have spent significant time and resources in developing this knowledge, and this knowledge is of tremendous value as a major asset of the agency, many agency owners and managers do not understand just how extensive that information may be. As a result, they do not take the necessary steps to identify their agency’s trade secrets or to properly guard that information.

Examples of Trade Secrets

Let us look at some of the knowledge and information that could give the agency an advantage over a prospecting agency, an exercise that will help to illustrate the breadth and depth of an agency’s trade secrets.

…there is great latitude in determining exactly what knowledge and information could be considered a trade secret, as well as how vehemently it is guarded and its economic value to the agency. First, let us examine the relationship that the agency has with their largest client, and the knowledge and information the agency possesses that could be of significant benefit to a competitor. Would it be helpful for a competitor to know who controls and makes decisions regarding the client’s insurance program, or if that person may be replaced by someone else in the near future? What about the financial condition of the firm, or their major services, products, and customers, or which customers are the most significant sources of income? That is just the beginning of the list of sensitive information to consider, especially if the agency has a long-standing relationship with the client. At this point in the examination, a related topic for general consideration is the information and knowledge that the agency possesses regarding the status of lawsuits against the client. For example, a competitor could benefit from knowing if the insured has had lawsuits filed against them—and for what reasons, the settlements that

were made, and information regarding any current lawsuits. Similarly, information regarding adverse tax consequences within the prior five years could be used as a competitive advantage. The next major area for consideration is the insurance program. While information regarding the current coverages would certainly be advantageous to a competitor, as would information regarding claims, there is an almost inexhaustible amount of knowledge and information that could be considered a trade secret held by the agency. For example, do any of the account’s major customers require special coverages or special certificates of insurance? Do these customers require coverage for contracts that they have with the insured? While these may not be the first things that come to mind when it comes to trade secrets, they are important nonetheless. The questions that an agency must ask to properly understand and protect its trade secrets is extremely extensive. While it is not possible to present a complete listing of these questions in this article, I would like to give you a few more things to think about. With any client, one of the largest areas for consideration is liability exposures, and this is particularly important if the client manufactures products or assembles or modifies the products of others. While it is obvious that knowing which services and products are major exposures is of value to a competitor, there is a great deal of information Fall Fall2018 2018|| RESOURCES

that is less obvious, but could be of equal or greater value. Without question, if the insured has contracts with third parties related to product manufacturing, it could be beneficial for a competitor to know the nature of these agreements. Additionally, it would be helpful to know if the insured has coverage in admitted markets, or why they don’t. The claims history regarding products and services would also be valuable, as would information regarding claims filed by employees for employee practices, workplace hazards, or workers’ compensation. Similarly, the history of the workers’ compensation modifier would be of interest, as would be the history of claims reserves.

Some Useful Determiners

As a further example of how extensive the questioning can get in regard to trade secrets, let us examine a more exhaustive list of questions

Learn More, Earn More To learn more about infringements, consider taking the CIC Commercial Multiline course. For an in-depth study of such issues as intellectual property and exposures, how liability coverages apply, and legal liability and litigation trends, the James K. Ruble Graduate Seminars are an excellent resource. Check the specific seminar agendas for topics presented by experts like David W. Henry and Chris Christian, CIC, RPLU. For help in identifying vulnerable assets, turn to Starting, Buying, Selling, and Perpetuating Insurance Agencies, by Jon Persky, CPA, CIC, PHR, available at nationalalliancebooks.com.

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that come to mind when thinking about the CGL policy: • Is the CGL written on an occurrence or a claims-made basis? • What has been the history of audits? • What codes comprise the ratemaking? Have there been any changes in those codes? • Have there been any major changes in the revenue stream that would impact the audit? • How does the policy treat mobile equipment liability? • Has the insured developed new products or services? • Has the insured discontinued any product line? Is there coverage for this? Does it come under umbrella coverage? The last point brings up a host of questions regarding the umbrella coverage: • Is it a true umbrella or a following-form policy? • Does it provide coverage for the products sold, modified, or assembled by the insured? Does it cover products sold in other countries? Are there any special conditions or limitations? • Does it cover owned and nonowned auto exposures? What about coverage for rental or leased vehicles and the use of personal autos? • Oh, and by the way, what is the claims history?

Additional Considerations

Let’s look at one more thing. Is the insured a degreed professional, such as an engineer or a product designer? Do they have professional liability coverage? You can see where I am going here, but I will leave this question open for your further perusal, along with others that you should be asking about the products addressed in

this article, as well as questions about additional products that you may offer. The point is that I have only touched the tip of the iceberg when it comes to the “confidential information” that YOU have about your accounts. Last, but not least, is the relationship that you have with your client and their employees. That intangible asset is priceless, and having a former employee attempting to solicit this business can cause concern on the client’s part that perhaps all is not well in your shop. There is no question in my mind that an employment agreement that meets the test in your jurisdiction is your best defense in safeguarding your trade secrets. However, understanding what trade secrets your agency may possess is key to developing the proper policies and procedures regarding employee access, file storage and retrieval protocols, and other internal safeguards to protect confidential information. When it comes to something as valuable as trade secrets, the truth is you can’t afford to take any chances. n

About the Author: Roy L. Phillips, CIC, CISR, AAI, CPIA Roy Phillips is a 32-year member of the American Association of Insurance Management Consultants and coauthor of Standards for Evaluation of Agencies. He is VP of King-Phillips Insurance Agency in Houston, TX. He was an adjunct Professor of Insurance at the University of Houston and served on The National Alliance Faculty for eleven years, teaching CIC courses all over the country.

A Collection of Success Stories and Press Clippings from Around the World

IntheSpotlight Huling Has Spoken

Emily Huling, CIC, CMC, CSP, President of Selling Strategies, Inc., and twenty-year National Alliance National Faculty member, has been awarded the Certified Speaking Professional (CSP) designation from the National Speakers Association. The CSP is the speaking profession’s international measure of speaking experience and skill. About 12 percent of speakers worldwide hold this professional designation. To achieve this designation, the professional speaker must show documented proficiency of 250 presentations over a minimum of five years, receive positive evaluations from 20 clients, and be evaluated and affirmed through a stringent peer-review process. Huling is the author of four books on the subject of sales skills and one of fewer than 20 professionals to hold both the CSP and CMC (Certified Management Consultant) designations.

Up and Cummings

Having performed strategic risk consulting and employee benefits advising for Lockton Companies since 2011, Kevin Cummings, CIC, ARM, has been named President of their Phoenix location. In addition to his work at Lockton, Cummings previously served as an Executive VP and Partner at Willis Towers Watson and is currently active in the Phoenix community, serving on a number of business and non-profit boards. (businessinsurance.com)

Sanders Makes His Mark(el)

Markel Corporation has promoted Virginia-based Bryan Sanders, CIC, from President of the Markel Assurance Division, to President—US Insurance. Sanders joined Markel in 2013, having previously served as CEO of Alterra Specialty and as President of Dominion Specialty Group. (businessinsurance.com)

Texas Two-fer

The IIA of Texas has elected two National Alliance designees to lead its Board for the 2018–2019 term. Jeff Brady, CIC, CRM, President and CEO of Brady, Chapman, Holland & Associates, has been elected to serve as Chairman, and Robert Nitsche, CIC, President and CEO of The Nitsche Group has been elected to the Vice-Chair position.

Brady

Nitsche

Brady has served on various committees with the IIA of Houston and the IIA of Texas. He was also a Board member and served as President of the IIA of Houston. Jeff is a past recipient of many awards, is currently active on a number of insurance company advisory panels—on a local, regional, and national basis—and is involved with several charities. Nitsche completed Harvard Business School’s Owner/President Management Program and worked in multiple departments at The Nitsche Group throughout the course of his career, eventually becoming CEO. During his tenure, the firm has received many accolades and awards, including the “Top 100 P&C Agency Award” and “Best & Brightest Companies to Work For in the Nation.” (Insurance Record)

Integrity Calls on Collies

Integrity Insurance of Appleton, WI, has appointed Bobbie Collies, CIC, AIS, VP of Sales and Marketing. Integrity President, Jill Wagner Kelly stated, “Bobbie is an insurance industry expert and highly respected by many of our agency partners. Her deep understanding of the independent agency channel and proven ability to produce actionable results makes her an asset to the Integrity team.” (news release)

Fall 2018 | RESOURCES

A Collection of Success Stories and Press Clippings from Around the World

IntheSpotlight Rising to the Top in Wisconsin

When the PIA of Wisconsin held its Annual Convention this year, National Alliance designees were well represented. Matthew Cranney, CIC, CRM, VP of Operations with M3 Insurance Solutions, was elected President of the PIAW’s Cranney Board and named Professional Agent of the Year. (If Matt looks familiar, we spotlighted him in the last issue of Resources when he was named 2018 Young Insurance Professional of Paterson Butzke the Year by PIA National.) Sean Paterson, CIC, VP with Robertson Ryan & Associates, was elected PIAW’s VP and also chosen to serve a threeyear term on their Board Hardrath Herriges of Directors, along with Ryan Butzke, CIC, CISR, P&C Producer with Northbook Insurance Associates, and Sandra Hardrath, CIC, CPIA, AAI, Branch Manager and Senior Account Manager with Ansay & Associates. In addition, LouAnn Herriges, CIC, CISR, Commercial Lines Account Manager with American Advantage, was honored with the Stony Steinbach Achievement Award. (PIA of WI News Release)

The Big “I” Says “Aye” to Jackson

Todd Jackson, CIC, CWCA, President of Jackson-McCormick Insurance in Lebanon, IN, was recently elected to the Executive Committee of the IIA & Brokers of America. Throughout his career, Todd has served on numerous committees and advisory councils at both a local and national level. He was a member of the Board of Directors for the IIA of Indiana, then appointed to their Executive Committee, and ultimately served as President. He was also named the State Director for the Indiana Big I, and served as a member of their Finance Committee and on the Trusted Choice Board. Todd was awarded the Harry P. Cooper Industry Public Image Award by the Indiana Big I in 2016. In addition, he served on the CIC Board of Governors and a number of years as Chairman of the CIC Indiana Education Committee.

RESOURCES | Fall 2018

Kepperling Steps Up

Robert Kepperling, CIC, CPIA, AIC, AIS, has stepped into the role of Illinois Branch Manager for Pennsylvania-based Erie Insurance. He began his career with Erie in 2004, in the Claims division. Later, he moved into a sales role, and then into an integral position helping Erie open for business in Kentucky. (insurancejournal.com)

Grey Makes the Grade

Kenneth Grey, CIC, CRM, of Marshall & Sterling Insurance, has been promoted to Senior VP. In the course of his career, Ken has worked as a property/inland underwriter, production underwriter, and marketing manager. (hudsonvalley360.com)

Selective Selects Mazzarella

Selective Insurance Company has promoted Michael Mazzarella, CIC, CPCU, to VP, Commercial Lines Underwriting. Mike has been with Selective since 1988 and served most recently as VP, Underwriting for Selective’s Northeast Region. (prnewswire.com)

Have YOU been “IntheSpotlight”? If you, or a fellow designee, has landed a promotion, won an award, or been honored in some fashion—don’t be shy! Let us help celebrate! (Can you say, “FREE publicity”?) To submit an item for editorial consideration, send biographical data and a color headshot photo to Becky at bkeeling@scic.com.

TheNationalAlliance.com

It’s No Coincidence!

Each year, Insurance Business America magazine accepts hundreds of nominations for their prestigious annual Elite Women in Insurance list—representing 2018 insurance professionals who are shaping a new future for insurance. Of the 95 women selected for this honor in 2018, 37% have participated in National Alliance programs and 18% hold National Alliance designations. We’re proud to present the National Alliance designees who made Insurance Business America’s list of 2018 Elite Women in Insurance: IBAMAG.COM ISSUE 6.06 | $12.95

These 95 women are raising the bar on gender equality in the industry

CHANGE COMES TO THE NFIP

Will FEMA’s latest moves put the flood insurance market on solid ground?

TAPPING INTO THE ENERGY MARKET

Despite the uncertainty around oil prices, opportunity awaits brokers in the energy sector

PRODUCERS ON TECHNOLOGY

Producers tell IBA which tech tools they can’t live without

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Kitty Ambers, CIC, CISR, CPIA CEO of NetVU and retired National Alliance Faculty member Kelley Ayuso, CIC Assistant P&C Department Manager with Superior Underwriters–GSU Insurance Services Sharon Emek, Ph.D., CIC Chairman and CEO Work At Home Vintage Experts (wahve) Lori Freedman, CRM Managing Director with Marsh Wortham—a division of Marsh USA Denise Johnson, CIC, CISR President and CEO of IIA of Oklahoma Holly Jordan, CIC, CISR Commercial Lines Account Manager Gillis, Ellis & Baker Regan Katz, CRM, RLU, RM Managing Director with Marsh Wortham—a division of Marsh USA Janett Kearbey, CIC, CISR, CWCP, CPIW VP–Marketing and Sales with Service Lloyds Insurance Company

8/06/2018 1:31:47 AM

Maryann McGivney, CIC, ARe Producer–Healthcare with Willis Towers Watson Missy McGlone, CIC Account Executive with The Buckner Company Cindy Paulin, CIC, CPCU, CPIW Associate with Eagan Insurance Agency Laura Pettit, CIC President of RSS Insurance Kacy Campion Renna, CIC CEO of Connelly-CampionWright Insurance Agency Laura Sherman, CPRM, CAPI Founding Partner of Baldwin Krystyn Sherman Partners and CPRM Faculty member Tara Trout, CIC, AFIS Assistant VP and Director– Farm and Equine, Private Client Specialist with AHT Insurance Stephanie Waldron, CIC, CPCU SVP–Events and Attractions with K&K Insurance Debbie Williams, CIC First VP and Regional Manager with USG Insurance Services

EPIC Chooses Nordbrock and Chu

EPIC Insurance Brokers and Consultants recently announced that it has chosen Rose Nordbrock, CIC, AAI, AFIS, to join the firm’s operations in Southern California as Principal and Practice Group Leader, and Brian Chu, CIC, CLCS, a VP. (workcompcentral.com)

Nordbrock

Chu

Baker Joins Brokerage

Mike Baker, CIC, has joined Texas-based independent insurance brokerage firm, RHSB (Roach, Howard, Smith & Barton), as an Assistant VP. He brings over a decade of experience assisting commercial clients with their risk management needs. (insurancejournal.com)

Designees Represent in NJ

CIC Faculty member and past CIC Board member, Paul Monacelli, CIC, CPIA, CEO of ADP/Statewide Insurance Agencies, Inc., has been named PIANJ’s newest National Director. In addition, three National Alliance designees were recently elected (or re-elected) to the PIA of NJ’s Board. Roger Butler, CIC, VP of the Barclay Group, and Andrew Harris, Jr., CIC, AAI, President of Liberty Insurance Associates, were both re-elected for three-year terms, and Aaron Levine, CIC, Owner of LG Insurance Agency, was newly elected. Harris was also voted PIANJ’s Director of the Year and serves on the Board of the NJ Young Insurance Professionals; Levine is a past-President of the NJ Young Insurance Professionals. Kacy Campion Renna, CIC (not pictured), CEO of ConnellyCampion-Wright and a 2018 Elite Woman in Insurance, is serving as PIANJ’s immediate past-President. (PIANJ News Release)

Monacelli

Butler

Harris

Levine

Fall 2018 | RESOURCES

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