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Contents FEATURES
4 Senior Life Settlement
26 Agency
Management Mojo
A New Life Insurance Option
BY JERRY RHINEHART, CIC, CLU, ChFC, RHU
Building an outstanding customer service team
12 How to Read
BY JACOB GARCIA
an Insurance Policy
Policy form edition dates and why they are important
BY JOHN EUBANK, CPCU, ARM
COLUMNS
ALLIANCE NEWS
8 On a Personal Note
15
When accidents happen—to someone else’s stuff
Save the dates for 2016!
By Elizabeth Rise, CIC
20
16 Success Story—Igniting a Spark Life & Health Advisor
By Charlie Matejowsky, CIC, LUTCF
The Sun Never Sets
34 Ask Bettie
22 Coverage Corner
Log-in to LinkedIn; programs beyond the pins
Vacancy, Vandalism, and Fire
35 Setting the Pace for Success
By Laura Machado, CIC, MSIM, CPCU
The PaceSetter program celebrates 20 years
By the Numbers
36
Orlando MEGA Seminar
Producer Perspectives By Jim Cuprisin, MBA, CIC, CRM, ARP
More topics, more fun!
The newest edition of Producer Profile is now available! Shop www.TheNationalAlliance.com\ store\publications.
Website: www.TheNationalAlliance.com
25
What’s new—designees, licensees, course topics, and more…
Tax-free retirement made simple
30
Pathways to Success
What will be your next move?
Sabine Pass HS students pioneer new program
18
Free Webinars
37
In the Spotlight
Movin’ on up!
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EMAIL: alliance@scic.com
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Phone: 800-633-2165
BY JERRY RHINEHART, CIC, CLU, ChFC, RHU
I
n the mid-to-late 1980s, the use of a financial arrangement called a “viatical settlement” began to emerge. A good example of this arrangement follows: A terminally ill person would “sell” their in-force life insurance policy to a 3rd party for an amount that was greater than the cash surrender value, but less than the face amount. Medical underwriting would be performed on the insured and the shorter the insured’s life expectancy, the greater the payout. Generally, the insured’s life expectancy was somewhere between a few months to less than two years. In exchange for the payout, the 3rd party organization (or individual) would then become owner, premium payor, and beneficiary of the life insurance contract. These arrangements soon came under intense scrutiny by the various state insurance regulators, and still are today. While viatical settlements (VS) are still in use today, they were the impetus and forerunner of what has become a new and growing market called Senior Life Settlement (SLS). It is also known in the industry as a Life Settlement. While similar in some respects to a
VS, a SLS differs in a couple of important ways. First, the SLS is only for a person who is age 65 or older; and second, only for a person who is not terminally ill. And there are a couple of other details to know—most settlement companies (usually referred to as “providers”) will consider any contract and most arrangements. Contracts: Term, even some group term contracts, whole life, universal life, and variable life. If the contract is a term, it must be convertible to permanent life insurance to be considered. Arrangements: Individually owned, owned by a business or a trust, even those owned by a charity. Additionally, a life insurance contract will only be considered after it has been in force for at least two years.
Consider this Typical SLS Case Paul, age 75, owns an $850,000 Whole Life policy that was purchased in 1975 when he owned his business. The annual premium is $7,200 and it has a current cash surrender value of $266,000. He has paid a total of $216,000 in premiums over the years.
Learn More, Earn More Attend a CIC Life & Health Institute to learn more about life insurance and planning for personal insurance needs. The CISR Life & Health Essentials Course offers a more basic approach to these subjects. Life & Benefits Essentials, available from The National Alliance Research Academy, is another excellent resource for information on life insurance and retirement planning (shop www.TheNationalAlliance.com/store/ publications).
4 Resources | Spring 2016
His wife recently died, and he now feels he no longer needs this life insurance policy. Here is a brief snapshot of his health: he has some mild heart problems and sleep apnea, he is a diabetic, and he has a few other minor ailments. Additionally, he is beginning to have a problem paying the annual premium. He has another small paidup life insurance policy that will easily be enough to take care of his final expenses. The agent who sold the $850,000 contract is no longer in the insurance industry. Paul tells Joan, his personal lines agent, that he is thinking about cashing in the policy and would appreciate her assistance with the paperwork. Joan tells Paul she recently read about the SLS concept and it might be an alternative to consider. Joan contacts a life insurance broker who has access to numerous “settlement companies.” The initial paperwork is completed, followed by some minimal medical underwriting. The underwriting consists mostly of the settlement broker corresponding with Paul’s physicians. After about six weeks, the broker notifies Joan that he has six firm offers. The best offer is a cash settlement of $355,000. Paul accepts the offer and signs the forms to make the settlement company the owner, beneficiary of the policy, and the party responsible for all future premiums. Upon Paul’s death the settlement company would receive the death benefit, free of any taxation. Let’s examine Paul’s potential taxation on his $355,000 settlement check1: • The amount equal to the cumulative premiums he paid ($216,000) would be free of any federal or state income tax; • The next $50,000, the difference between the current cash value ($266,000) and the cumulative premiums ($216,000), would be subject to ordinary income tax; The life insurance policy owner should always check with their tax professional regarding any and all tax ramifications a SLS might have.
1
…it is highly recommended to work through a reputable settlement broker who has an affiliation with several of the leading providers.
• The remaining $89,000 (the amount in excess of the current cash value) would be subject to capital gains taxation.
What are some factors that determine the amount of the potential payout from a SLS? The age and gender of the insured, the type of policy, the current (and future) premiums as a percentage of the death benefit, cash surrender value (if any) of the policy as a percentage of the death benefit, outstanding loans as a percentage of the death benefit, medical condition of the named insured, and the financial rating of the carrier are all factors that can impact
the amount. Keep in mind—and this certainly sounds morbid—the more serious the medical conditions of the insured individual, the shorter the life expectancy, the more valuable the potential payout!
Who are “providers” and where can they be found? Currently, there are thought to be less than 200 settlement providers—also referred to as the “secondary market”—in this industry. Some are institutional providers (Berkshire Hathaway, Citigroup, GE Capital, JP Morgan, etc.) and some are individual investing groups. There is even an association for the industry—Life
Insurance Settlement Association— found on the Internet at: www.lisa.org. Many of the larger providers are members of this association. A quick search will reveal numerous “hits” for settlement companies. Simply type in “life insurance settlement.” Most life insurance periodicals will have several ads for the larger and more aggressive settlement companies.
Should an agent work directly with one of the providers? Certainly, nothing prevents this, but it is highly recommended to work through a reputable settlement broker who has an affiliation with several Continued on page 6. Resources | Spring 2016
5
Senior Life Settlement
…continued from page 5.
of the leading providers. If an agent goes directly to one or two settlement companies, he/she cannot be certain the offers they make are the best for the client. However, a settlement broker will shop the case with numerous organizations, handle all details after the initial paperwork, and should be able to justify a “best offer.”
What are some reasons a person might wish to consider a SLS? • Enjoy a higher quality of life • Enjoy personal independence and dignity • Purchase financial products or investments that are more suited to their present life circumstances • Exercise greater control over their health care options
the time the insured dies. This “failure to lapse” will certainly impact the bottom line of life insurance companies that experience a substantial number of ownership transfers to the SLS market. While the numbers of transacted SLS cases are not substantial in relation to the total number of in-force life policies, the emerging concept is causing some concern in the “traditional” life insurance community.
Is the SLS market here to stay, and should a licensed agent get to know it better? Most definitely! First, let’s consider the money. Total life settlement transactions grew to $2.57 billion (face value) in 2013 (The Deal—annual survey of the life settlement market, June 23, 2014). Conning & Co. (Hartford, CT), a leading insurance and as-
Settlement Association and various other regulatory bodies are pushing for more protection for policyholders from unscrupulous practices. Most states have adopted the NAIC Model Act. Agents need to check with the relevant state department of insurance regarding the specific licensing and CE requirements that might be necessary in a particular state. A knowledgeable settlement broker can also assist in this area. The bottom line: when associations are formed and when regulatory bodies enact licensing and continuing education rules, these are usually good clues that the “concept” is alive and well! Another consideration is the number of professional advisors (accountants, attorneys, financial advisors, etc.) Such advisors are now beginning to
• Take care of any personal debt • Take a dream vacation • Buy a new car or home • Make gifts to loved ones or charities • Compensate for lost income • Take care of financial arrangements • Eliminate the life insurance premium • Have peace of mind
How do the “traditional” life insurance companies feel about the emerging SLS concept? Simply put, they are not too fond of it. The reason? All life insurance contracts are based on actuarial assumptions. One key assumption is the “future lapse rate” of the various types of contracts. Based on this and many other assumptions, the actuary can set a sound, but profitable, pricing and cash value structure. Older contracts, especially term and universal life, have substantial lapse assumptions at the older ages of the insured. It is assumed that many of the cash value building contracts will either be cashed in or they might allow the cash value to keep the death benefit in force for some period of time. Obviously, a contract purchased by a settlement company will be in-force at
6 Resources | Spring 2016
The Life Settlement Association and various other regulatory bodies are pushing for more protection for policyholders from unscrupulous practices. set manager, predicts the future to be extremely robust. Between the years 2014 and 2023, Conning feels there is potential for more than $180 billion in life settlement business. However, they forecast the actual volume in the same 10-year period for settlement transactions in the U.S. to be $3 billion per year. So, while there is huge potential, only a small percentage of actual settlements will be realized, due to a lack of awareness by life insurance contract owners and agents. Next, let’s consider the various regulatory groups. A quick search on lisa.org will reveal the regulations and license requirements by the various states (lisa.org/Industry Resource/State Regulations). The regulations vary greatly by state, even if the contract to be considered for sale is a VS or SLS. The Life
see articles in their trade publications regarding the SLS concept. Some articles even recommend that the professional advise their client of an alternative (the SLS concept) to surrendering an unwanted or expensive life insurance contract. It could be very beneficial for a knowledgeable life agent to work closely, and even counsel, these advisors who might need assistance in placing a SLS. Most agents that are direct writers, and those individuals with a securities license are typically prohibited from becoming involved in these transactions. Thus, the independent agent can be a major resource to these advisors and their clients.
Common Scenarios All agents, life and property/casualty, need to be aware of eight common
scenarios where a SLS may be viable for the owner (and the agent). Here is a brief overview: (1) The sale of a business or other illiquid asset. A policy bought for a buy-sell agreement or estate liquidity may become unnecessary. Compounding the problem is that the business was typically paying for the policy in some manner; either directly, if the policy had been business-owned, or indirectly, through the use of a bonus or splitdollar arrangement. With the business no longer in the picture, both the need for the policy and the ability to pay for it may have vanished. (2) Business owner retiring or exiting from business. Business owners frequently acquire a number of life insurance policies over the course of operating their company which they no longer want upon retirement or termination. These include buy-sell, key person, fringe benefit, creditor protection, and even pension policies. As stated in (1) above, keeping a policy that is no longer needed without a business to pay for it can be problematic. (3) A decline in estate value and/or a decrease in estate tax liability. Both today’s struggling economy, as well as the drastic reduction in estate tax liabilities brought on by the American Taxpayer Relief Act of 2012 (ATRA), make this particular scenario quite common. Keeping the life insurance policy, might still be a good deal for their heirs, but people are typically reluctant to keep more life insurance than is absolutely necessary. There are even ways to consider a SLS should the policy be owned by an Irrevocable Life Insurance Trust. (4) Term policies or riders that are about to expire, lose their conversion privilege, or come to the end of their current premium guarantee. Term policies are among the most likely life settlement prospects to be overlooked. Many advisors and clients don’t realize that a term policy
(including group term), if convertible, can be sold in a life settlement. Since term policies generally do not have any cash surrender value, a life settlement can truly provide “found” money. Furthermore, these situations typically result in a conversion sale for the agent in addition to the settlement. (5) Retirement. When retiring, people usually evaluate their financial resources and expenses. At that time, it is common to find policies, bought to replace income upon death of a wage earner, that are no longer needed. Additionally, the cost of such policies, especially if term insurance, may become unaffordable. These policies can be ideal for a life settlement and the proceeds can really make a difference in retirement. With the aging of baby boomers, there will be an estimated 10,000 Americans reaching retirement age every day for the next 16 years. This represents a massive market for potential life settlements. (6) The policy is no longer affordable due to policy performance. Interest rates have declined steadily and have been at historic lows for an extended period of time. Many policy owners are now being blindsided by premium requirements that dramatically exceed what they expected to pay. This is especially true of older Universal Life contracts. This premium surprise may not only go beyond their budget, but it may also disturb their estate plans by exceeding their annual gift tax exclusion.
(7) Chronic illness. While chronic illness would ordinarily be a time when the death benefit of a life insurance policy would seem most imminent, certain illnesses are longterm in nature and require very costly medical or custodial care. When all else fails, a life settlement can provide critically needed funds to help pay those expenses. (8) Life contracts owned by a charity. Many people have strong positive feelings toward one or more charities. Occasionally a person will “gift” a life policy to their church (or another 501c3). Obviously, the new owner (the charity) is now responsible for the premium. There could be financial problems to the charity should they have numerous policies—some perhaps with very large premiums. Here is where the SLS might come into play. Sell one (or more) of these contracts so the cash it receives from that SLS sale can be used to pay the premiums on the other contracts.
Conclusion The SLS marketplace in the United States is currently very strong and indications point to this continuing for the foreseeable future. The clients serviced by most property/casualty and life agents have little or no knowledge regarding the SLS concept. However, the client generally relies on their agent for advice and counsel regarding insurance updates and recommendations to their coverage. Helping them find additional money with an unneeded or unwanted life insurance contract can be a major “win” for them—and the agent. n
About the Author: Jerry Rhinehart, CIC, CLU, ChFC, RHU Jerry has worked in the insurance industry since 1976. He is a member of The National Alliance’s National Faculty, as well as a past CIC board member. In addition to his involvement in life and health insurance sales, he frequently writes articles for various insurance publications and is a speaker on numerous topics concerning life and health insurance.
Resources | Spring 2016
7
ON A PERSONAL NOTE
|
ELIZABETH RISE, CIC
When Accidents Happen— to Someone Else’s Stuff HO Coverage: When Your Client Damages Personal Property of Others’
C
onsider these loss scenarios:
• Carrie borrows a friend’s camera to take with her on vacation to Yellowstone National Park. While leaning out of her car window to take pictures, she accidentally drops the camera onto the road.
• Bert is driving his friend’s recreational vehicle when he runs it into a tree while taking a sharp turn. • A windstorm damages the outdoor tables and chairs Tim and Deborah rented for the graduation party they’ve planned for their daughter in their backyard.
Learn More, Earn More Attend the CIC Personal Lines Institute to learn more about homeowners exposures and coverages. Learn more about the homeowners and dwelling policies in the CISR Insuring Personal Residential Property Course. The National Alliance Research Academy’s Property & Casualty Insurance Essentials book is also a good source of information about the homeowners and dwelling policies, as well as many other personal lines coverages (shop www.TheNationalAlliance. com/store/publications).
8 Resources | Spring 2016
Are losses such as these covered by the “borrower’s” Homeowners Policy? Let’s take a look. The ISO Homeowners Policy HO 00 03 05 11 will be used in this coverage discussion. Remember, other homeowners policies may treat these exposures differently than discussed in this article.
Section I Coverage C – Personal Property The natural place to seek coverage for damage to personal property not owned by your client is in Coverage C – Personal Property. After all, the policy very clearly states that it covers personal property owned or used by an insured while it is anywhere in the world. While the policy begins by providing coverage for borrowed personal property, there are other sections of the policy that must be analyzed before we can determine the amount of the loss, if any, that is covered. The next stop is in the Special Limits Of Liability and Property Not Covered sections of Coverage C. As long as the personal property is not limited or excluded, the policy continues to provide coverage. The final stop is the Perils Insured Against for Coverage C. As the HO 03 policy provides direct physical loss to property on a named peril basis, the cause of the loss— the peril—must be listed in the policy. If the cause of the loss is a named peril (or not excluded in Section I – Exclusions), coverage is provided, subject to the policy’s deductible. For the losses mentioned previously, Section I – Property coverage is provided only if (1) the type of borrowed property
…an insured is not required to be legally liable (negligent) for [Damage to Property Of Others] coverage to respond; an insured only needs to have caused the loss.
Students take vehicles, which are owned by their parents, with them to college…Will their parents’ PAP provide the coverage they need should they be involved in an auto accident as a driver, a passenger, or a pedestrian?
was not limited or excluded AND (2) the damage was caused by a named peril. And, of course, the Section I deductible applies. If the Section I coverage is inadequate for the loss, we may be able to turn to Section II for coverage.
for this coverage to respond; an insured only needs to have caused the loss. For those of you that have been around a while, this coverage was previously called Voluntary Property Damage.
Section II Coverage E – Personal Liability
There are exclusions that apply, including:
What about Section II Liability? Is there coverage to pay for damage to personal property of 3. “Property damage” to others being used by the client? property rented to, occupied The good news is that if there or used by or in the care of is coverage, a liability loss isn’t an “insured.” This exclusion subject to a deductible. does not apply to “property damage” caused by fire, Unfortunately, unless the loss smoke or explosion; is caused by fire, smoke or explosion, coverage is not provided due to the exclusion for property rented to or used by or in the care of an insured. If this exclusion applies, there is an often-overlooked Section II Additional Coverage Damage to Property Of Others that may provide a limited amount of coverage.
Damage to Property Of Others Damage to Property of Others is an Additional Coverage that provides up to $1,000 on a replacement cost basis for damage caused by an insured to property of others. It should be noted that an insured is not required to be legally liable (negligent)
1. Losses covered under Section I Property (Note, the Section I Deductible is still covered as it is a part of the loss that is not covered under Section I.) 2. Intentional damage caused by a person age 13 or older 3. Damage to property owned by an insured 4. Damage to property owned or rented by a tenant or resident of the household 5. Losses arising out of: • An insured’s business, • A premises that is not an insured location, or • The ownership, use, etc. of aircraft, hovercraft, watercraft, and motor vehicles with an exception for (therefore coverage for) a non-owned motor vehicle that is (1) designed for recreational use off public roads; AND (2) at the time of the occurrence was not required to have been registered for it to be used on public roads or property. Continued on page 10. Resources | Spring 2016
9
When Accidents Happen…continued from page 9. Let’s consider those first three loss scenarios again. The following chart provides an overview of the coverage provided by Section I Property and Section II Liability for the losses to personal property of others introduced earlier.
We have just examined the coverage provided by the Homeowners Policy for personal property of others rented or used by an insured. What kind of coverage is available should your client damage real property rented or used by them? For instance, what if your clients: • rent the ballroom of a hotel for their daughter’s wedding reception • rent a vacation home in Spain for two weeks • rent a hotel room while on vacation in Florida • stay in a friend’s mountain cabin and are legally responsible for damage to the portion they are renting or using? The Section II exclusion for property rented to or used by or in the care of an insured applies to real property as well. So, there is still no coverage for losses other than those caused by fire, smoke, or explosion. Of course, the Section II Additional Coverage Damage To Property Of Others could also apply to these losses. The problem is these losses are much more costly than $1,000. Your clients may be able to
10 Resources | Spring 2016
find additional coverage in their umbrella/excess policy, if they have one. If the property is being used for a wedding, anniversary, party, etc., consider making a recommendation that your client purchase a Special Events policy that may provide the coverage needed for this exposure. n
About the Author: Elizabeth Anne Rise, CIC Elizabeth Rise and her husband, Harlan, owned and managed the Burd and Rise Insurance Agency of Halstad, MN, from 1975 until their retirement at the end of 2008. Elizabeth instructs numerous Dynamics of Service courses, CIC institutes, and CISR courses around the country. She is a CIC National Faculty member, a CISR mentor, and a past CISR Board member.
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Resources | Spring 2016
11
12 Resources | Spring 2016
Policy Form Edition Dates and Why They are Important BY JOHN EUBANK, CPCU, ARM
N
o matter how long you’ve been in the industry, it never hurts to review the more important details of policy analysis. This article focuses on ISO forms and endorsements, discusses how they have evolved, and highlights the critical words and dates that impact coverages and exposures.
The Insurance Services Office, Inc. (ISO) is an insurance advisory organization that provides actuarial, statistical, and policy language services for insurers. Commercial and personal lines forms and endorsements drafted by ISO are considered by many to be the standard forms of the industry. Some insurers elect to use the ISO forms verbatim for at least some of the policies that they issue, and most insurers base their own company forms on the language of ISO forms. There are 23 ISO lines of business and accompanying forms. These range from AG forms (Agricultural Capital Assets – Output Policy) to PR forms (Professional Liability) with the usual CP (Commercial Property), HO (Homeowners), and CG (Commercial General Liability) scattered in between. Just in case you commercial folk want to know, there are 2,115 forms and endorsements for Commercial General Liability! There are probably more right now; that count was a couple of days ago.
Why do we have all these forms? Again, we are going to discuss only the forms issued by the ISO. Insur-
ance is a complex topic, and many organizations have valuable data and interesting points of view. One of these organizations is American Association of Insurance Services (AAIS), a national insurance advisory and statistical organization that develops standardized policy forms and rates primarily for Homeowners, Artisan commercial, Businessowners, Farm, and Inland Marine. The other major insurance advisory organization is the National Council on Compensation Insurance (NCCI). They gather data, analyze industry trends, and prepare objective insurance rate and loss cost recommendations on Workers Compensation.
Reflect a court case interpretation of the court’s analysis of the form This can be done by a “mandatory” endorsement. This is an endorsement that is made mandatory by ISO and, according to the ISO rules, must be used under certain situations. This wording will later be incorporated into a revision of the coverage form. For example, an appeals court decision was made in California that has had a far-reaching impact on the Commercial General Liability Policy (CGL). The case is Montrose Chemical Corporation of California vs. Admiral Insurance Company. ISO developed a mandatory endorsement, CG 00 57 Amendment Of Insuring Agreement—Known Injury Or Damage, to address the issue. This endorsement revised the Insuring Agreements so that commercial liability policies will not respond to any injury or damage known by the insured
Unless you know which edition is being used, it is impossible to know what coverage is available. Why are there so many form changes? Forms are changed by ISO to: Broaden or reduce coverage This is the main reason why the “edition date” is so very important. Unless you know which edition is being
Learn More, Earn More The National Alliance offers a variety of resources to help you learn about the exposures and coverages for personal and commercial lines. The CIC Program includes the CIC Personal Lines and Commercial Lines Institutes, and the CISR Program also offers several courses related to commercial and personal lines (see pages 20–21 for complete topic listings). And be sure to get a copy of P&C Insurance Essentials for handy reference (shop www.TheNationalAlliance.com/store/publications).
used, it is impossible to know what coverage is available. For example, the ISO 2004, 2007, and 2013 editions of the Commercial General Liability forms define “auto” differently from all the prior forms. This can cause a major difference in coverage.
(or an “employee” of the insured who was authorized to give or receive notice of injury, damage, or claim), before the policy inception. The Known Injury or Damage endorsements may be attached to the 1988, 1993, 1996, and 1998 editions of the CGL. When the CGL was revised in 2001, the language was incorporated in the form and the endorsement was no longer needed for subsequent editions. So, some edition dates must have the endorsement, and others do not need it. Clarify previous language Several years ago, ISO revised CG 20 Continued on page 14. Resources | Spring 2016
13
How to Read an Insurance Policy…continued from page 13. 10 11 85, but, even today, some contractors are required to have this exact edition date on their CGL. Reflect changes in society This could come in many forms, but just think of changes we have been experiencing with technology (computer viruses and property damage to electronic data) and gizmos (Segway, Hovercraft, Blackberry, etc.).
What are some other issues? There are state-specific endorsements that may address such things as cancellation. These are called the Category 01 endorsements and are recognizable by the ISO numbering system. Coverage and exclusions may be different in the various edition dates, but that should be clear when you read the forms. There is another concern. Not all ISO forms and endorsements are used verbatim. The insured may change the language if they so desire. How can you tell if the form you are reviewing is an “unedited” edition? Look at the very bottom of a form page and if it says “© ISO Properties, Inc.,” or “Insurance Services Office, Inc.©” or, for some of the older editions, it might say “Copyright, Insurance Services, Inc.” However, if it says “Used With Permission of Insurance Services Office, Inc.,” then something has been changed and you need to look very closely to determine what has been altered.
Are there any “hidden” things to look for? Yes, there are, and they are very subtle. I call these the “seven deadly
words.” When they are found in a policy (insurance contract), you must pay careful attention to how they are used. Once again, without knowing the specific form edition, it can be impossible to know what the form says and—more importantly—what it may mean.
“Everyone knows what an accident is until the word comes up in court. Then it becomes a mysterious phenomenon…” All insurance policies are contracts of adhesion. The hallmark rule for these types of contracts is that any doubt or ambiguity is construed against the party who wrote the contract language.
What are the “seven deadly” words? They are: 1) and 2) an 3) but 4) if 5) however 6) or 7) the It is important to be aware of these words and the problems they may create. These seven words are used 1,502 times in the 16 pages of the 9,826-total-word 2013 Commercial General Liability form (that is 15.8%). The most often used word is “or,” which comprises 676 of the 1,502; “the” is used 476 times, with the other words being used any where from 19 to 184 times.
About the Author: John O. Eubank, CPCU, ARM John Eubank is CEO and President of Professional Insurance Education, Inc. He was previously employed by Insurance Services Offices, Inc., as the Regional Operations Manager for its subsidiary, ISO Commercial Risk Services, Inc. John has served as a National Faculty member for The National Alliance since 1976.
14 Resources | Spring 2016
Here is an example of how these little words are used in insurance forms. The use of a definitive article (adjective) can impact coverage. The following is from the “intentional acts” exclusion from the Homeowners Policy (HO 3 – Special Form, 2000/2011 editions):
Section II Exclusions E. Coverage E – Personal Liability And Coverage F – Medical Payments To Others Coverages E and F do not apply to the following: 1. Expected Or Intended Injury “Bodily injury” or “property damage” which is expected or intended by an “insured” even if the resulting “bodily injury” or “property damage”… However, this Exclusion E.1. does not apply to “bodily injury” resulting from the use of reasonable force by an “insured” to protect persons or property;
The 1991 edition of the Homeowners 3 – Special Form says: 1. Coverage E - Personal Liability and Coverage F - Medical Payments to Others do not apply to “bodily injury” or “property damage”: a. Which is expected or intended by the “insured”…
The 1991 form said “the insured” and several courts have ruled that the exclusion applied only to injury committed by the “Named Insured” on the declarations page. For example, if the Named Insured was John Doe, then the exclusion would not apply to Mr. Doe’s wife, assuming she was a resident of the household. Therefore, the insurer would have to defend the wife in a suit by the daughter claiming the wife had failed to prevent sexual abuse of the daughter.
The 2000 edition of the Homeowners form changed the word “the” to “an,” thus, this edition tries to make it clear the exclusion applies to any insured, whether they are the Named Insured or any other person qualifying as such under the form. It is worth noting, the Intentional Acts Exclusion in the Commercial General Liability form and the Commercial Auto form also says “…from the standpoint of the insured.” In the CG 28 05 Personal Injury Liability endorsement, ISO changed an exclusion for “a criminal act committed by or at the direction of any insured” to read “a criminal act committed by or at the direction of the insured.” In their Explanatory Memorandum, ISO stated this was a broadening in coverage, as there will now be coverage for the vicarious liability of other insureds who have no knowledge of a criminal act. In this memo, ISO acknowledges that the word “any” will encompass “all” insureds under the policy, while “the” is only a specific insured. Thus, the use or changing of one of the seven words can have a major impact on coverage. We could go over many more examples of how changing these words can alter the coverage, but we will leave that for another article. Again, if you don’t know which edition date (in our example the 1991 vs. 2000/2011 Homeowners) is being used, there is a great possibility of misinterpretation of the form language. “Everyone knows what an accident is until the word comes up in court. Then it becomes a mysterious phenomenon and, in order to resolve the enigma, witnesses are summoned, experts testify, lawyers argue, treatises are consulted and, even when a conclave of twelve world-knowledgeable individuals agree as to whether a certain set of facts made out an accident, the question may not yet be settled and it must be reheard in an appellate court.” —Brenneman v. St. Paul F. & M. Ins. Co. (Pa. Sup. Ct. 1963). n
The National Alliance conducts FREE monthly webinars presented by outstanding faculty. Each webinar is conducted live from 12:30 pm–1:30 pm CST. Join us— for FREE—as we explore current topics of interest in insurance and risk management. April 12—The Affordable Care Act: The Impact Upon Fiduciary Liability and Other Liability Coverages Presented by Richard G. Clarke, CIC, CPCU, RPLU May 4—Additional Insured Endorsement in the CGL Policy: Problems of the Named and Additional Insured Presented by Dwight Kealy, J.D., CIC June 21—Construction Defects and the ISO CGL: A Matter of Policy Terms, Law, and Facts Presented by Gerald T. Hargrove, J.D., CIC, CPIA, FCLA, SCLA, PICS, LICS, CBIA July 7—Uncertainty: Underwriting Unmanned Aerial Vehicles Presented by Richard S. Pitts, J.D. August 9 (Spanish)/August 10 (English)—The Risks of Hyperconnectivity—The Internet of Things Presented by Jesus Levy, CRM September 15—Grasping the Impact of Risk Management in Schools Presented by Judith Ann Robinson, CSRM October 11—Cyber Crime—What You Need to Know Presented by Chris Christian, CIC, RPLU November 1—Affordable Care Act Update Presented by Jerry E. Rhinehart, CIC, CLU, ChFC, RHU December 8—Lifestyle Exposures of the High Net Worth Client Presented by Nicole Nouhra Register online at:
www.TheNationalAlliance.com/webinars
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SUCCESS STORY
Igniting a Spark with Innovative Ideas Sabine Pass High School Students Pioneer New Program
I
n the wake of two hurricanes— Rita and Ike—that devastated the Sabine Pass, TX, area, an innovative idea for rebuilding was born. Kathleen Hicks, Chairman of the Certified Insurance Counselors (CIC) Board of Governors, had assisted in rebuilding the community and understood, first-hand, the importance of getting the children back to school as quickly as possible. While most of the affected school districts were struggling daily to keep their children in school, Sabine Pass—with the leadership of Superintendent Kristi Heid (Principal Heid at that time), a steadfast energetic force for quality education—managed to maintain their academic rigor throughout these natural disasters, with students excelling in UIL academic competition and retaining their silver-level rank in the U.S. News’ Best High Schools rankings. In one of Kathleen Hick’s many discussions with Superintendent Heid regarding the state of the schools, Heid mentioned that Texas had recently passed House Bill 5, which made substantial changes to the state’s curriculum and gradua-
Sabine Pass Sharks
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tion requirements. Texas highschool students could now earn credit for specific areas of study, like business and industry, STEM (science, technology, engineering, and math), arts and humanities, etc. Heid asked if Hicks knew of any business/risk management curriculum that was recognized by the industry and would be appropriate for high school students.
The Big Idea The idea occurred to Hicks that the model of the University Associate Program, established by The National Alliance for Insurance Education & Research, might be a good fit—it could be applied at the high school level using the curriculum from their Certified Insurance Service Representative (CISR) Program—with the primary objective to prepare talented, motivated high school students to work in entrylevel insurance and risk management positions after school or during the summer. Upon graduation, the students would have the necessary experience to get goodpaying jobs that would assist them in financing their college and professional educations. Hicks conferred with William T. Hold, Ph.D., CIC, CPCU, CLU, President, and William J. Hold, CRM, CISR, Senior Vice President of The National Alliance, to fleshout the concept. Heid loved the
idea of being able to access curriculum already recognized and respected in the industry, rather than just purchasing some generic, off-the-shelf product. And, she could already identify a willing and able instructor for the program: Ashleigh Deslatte, who had put herself through school working as a Customer Service Representative in her brother-in-law’s insurance agency. The next challenge they faced was funding, since the school district didn’t have the resources to purchase the courses from The National Alliance. Hicks solved that problem by partnering with Bob Rogers, CLU, ChFC, a long-time National Alliance faculty member, to provide scholarships for the initial class. Together, Hicks and Rogers pledged to fund the program until it proved itself and could become eligible for district funding or self-funding through community participation.
The Pilot’s Structure The semester-long pilot program featured an online self-study CISR Insuring Personal Auto Exposures Course. During classroom hours, Deslatte took the online course along with her students, led class discussions about the material, and provided real-life examples from her own agency experience. In addition, the group took three field trips.
L to R: Ashleigh Deslatte, Sabine Pass High School teacher; Sabine Pass students Kayly Barragan, Karli Stelly, Bridget Roberts, Kiara Baker; and Donna Wilson, CIC, Senior VP at Bowen, Miclette & Britt
Visited an Insurance Agency Bob Rogers accompanied the group to Houston on a field trip to Bowen, Miclette & Britt Insurance Agency, LLC, where Senior Vice Presidents, Donna Wilson, CIC, and Michelle Dennis, AIS, API, CIC, CRIS, MLIS, presented the students with several case studies and allowed the group to physically follow the flow of the cases through the various agency departments: marketing, sales, risk management, IT, service, underwriting, operations, accounting, claims, etc. The experience provided valuable lessons about the roles of the departments and how they all worked together to contribute to the account. Toured an Insurance Convention After their agency visit, the group reconvened for the 2015 Houston Insurance Day convention where Rogers led the students around and introduced them to his fellow industry exhibitors. Dr. Wendall
Braniff, Director of the University of Houston–Downtown Insurance and Risk Management Center, and some of her college-level students joined the group for lunch, providing the high school and college students a chance to visit and share their excitement about the vastness, diversity, and opportunity in the industry. Attended a CISR Classroom Course The students’ final field trip was to San Antonio, where they attended the classroom version of a CISR Personal Auto Course. They participated in the class, interacted with the other course participants, and took the final exam.
Lessons Learned The CISR Personal Auto Course proved quite challenging to the students. It was initially chosen as the starting point to provide practical experience for a position in
a personal lines agency, but it became clear that the students needed more background before getting into the details of policy language and insurance codes. As the program continues to develop, it is likely that future participants will start with The National Alliance’s Introductory Series online courses to gain preparatory knowledge, and follow those with a “bigger picture” course like CISR’s Agency Operations or Elements of Risk Management.
A Big Thank You For their zeal in piloting this new educational program, The National Alliance would like to acknowledge the farsighted leadership of Sabine Pass ISD Superintendent, Kristi Heid; the commitment of teacher, Ashleigh Deslatte; the support and guidance of Kathleen Hicks and Bob Rogers; and most importantly, the pioneering, hardworking students of Sabine Pass High School. n Resources | Spring 2016
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L I F E & H E A LT H A D V I S O R
|
CHARLIE MATEJOWSKY, CIC, LUTCF
Tax-Free Retirement Made Simple A Look at the Options for Tax-Free Retirement Income
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iving in a time when our national debt is over 18 trillion dollars is frightening. There are only two ways to get rid of that debt—either cut spending or increase taxes. When was the last time that Congress truly cut spending? (I don’t remember either!) With a high probability that income taxes will rise in the future, it becomes even more frightening to consider retirement planning. When you consider that most of the retirement plans—whether corporate or individual—will require you to pay income tax when you take a distribution, you have every reason to be frightened. Wouldn’t it be nice to have some retirement money on which you did not have to pay taxes? Believe it or not, it can be done. Actually, there are three sources of tax-free retirement income: 1) municipal bonds, 2) Roth IRAs, and 3) cash value life insurance.
Learn More, Earn More Attend a CIC Life & Health Institute to learn more about life insurance and annuities in retirement planning. The CISR Life & Health Essentials Course offers a more basic approach to these subjects. Life & Benefits Essentials, available from The National Alliance Research Academy, is another excellent resource for information on life insurance and retirement planning (shop www.TheNationalAlliance.com/store/publications).
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It is true that municipal bonds gains are received tax-free, but a little-known fact is that they do count as provisional (threshold) income, which can mean that up to 85% of your Social Security benefit could be taxed. These bonds are grouped with other substantial income including wages, interest, dividends, pensions, IRA distributions, CDs, money market funds, U.S. treasuries, mortgage certificates, capital gains, tax-free bonds, and even your Social Security benefits. If you are single, Social Security income is taxed when your threshold income exceeds $25,000. For income of $25,000 to $34,000, up to 50% is taxed. Over $34,000, up to 85% of Social Security income is taxed. If you are married and filing jointly, Social Security income is taxed when your threshold exceeds $32,000. For income of $32,000 to $44,000, up to 50% is taxed. Over $44,000, up to 85% of Social Security income is taxed. (www.socialsecurity. gov is an excellent website for folks wishing to learn about their Social Security benefits.) It is also true that Roth IRAs can be received income taxfree and they do not count as provisional income, hence they do not make one’s Social Security benefit taxable. They do, however, carry some rules and guidelines that make them ineligible for some people. These include: 1. A contributor must earn compensation in the year in which they contribute. 2. Income cannot exceed certain levels (in 2016 single filers can make full Roth IRA contributions if their income is below $132,000 and married couples filing a joint return can make full Roth IRA contributions if their income is below $184,000).
It is true that municipal bonds gains are received tax-free, but a little-known fact is that they do count as provisional (threshold) income… 3. The maximum contribution for 2016 is $5,500 ($6,500 if 50 or older by the end of the year).
Looking at the taxes for qualified plans versus life insurance really puts things in perspective:
4. Contributions are non-deductible and qualified distributions are not included in gross income. To be a tax-free qualified distribution; a) the distribution must occur more than 5 years after the first contribution to the Roth IRA; AND b) the individual most be at least 59½ years old.
Top Income Tax Rates for 2016
(www.irs.gov is also an excellent website for folks wishing to learn about all of the Roth IRA rules and guidelines.)
Interest Income............................................................43.4%
This leaves cash value life insurance as the simplest form of tax-free retirement money.
Qualified Roth Distribution................................................0%
The Internal Revenue Service turns 103 years old in 2016 and, from the beginning, life insurance, because of its intrinsic value to families and business, has been afforded benefits that are not totally available with other retirement income sources. Life Insurance, of course, provides valuable death benefit protection. If one is looking to secure their retirement years, it may be time to consider the tax advantages and growth potential of life insurance.
• 2016: top tax bracket also adds 3.8% surtax to investment income
Taxable IRS & Roth Conversions..................................39.6% Short-Term Capital Gains..............................................43.4% Long-Term Capital Gains..............................................23.8% Qualified Dividend Income...........................................23.8% Life Insurance Loans and Withdrawals (FIFO)..................0%
I ask again: wouldn’t it be nice to have some retirement funds on which you don’t have to pay income tax? Well here they are! Consider a Roth IRA or a life insurance policy to fund your retirement. n
About the Author: Charlie Matejowsky, CIC, LUTCF
A properly designed cash value life insurance policy can provide: • Death benefit protection • No contribution limits—unlike 401(k)s, traditional IRAs, or Roth IRAs • Tax-deferred cash value growth • Supplemental retirement income through tax-advantaged loans and/or withdrawals (actually, you don’t have to wait until retirement to access the cash value) • Cash flow that will not increase your overall tax expense of government programs like Social Security and Medicare Examine the chart below to see how life insurance can fill the gaps of a retirement portfolio. Feature
Life Insurance
Top Rate
Charlie is Vice-President of financial services for Van Dyke, Rankin & Co. in Brenham, TX. His brand is “Retirement Repairman” and he serves both group and individual clients for life and health insurance. Charlie has over 30 years of insurance experience, plus 15 years as a classroom teacher and football coach. He is also a CIC mentor, and Ruble and CIC National Faculty member.
Taxable Investments
401(k)/ IRA
Roth IRA
X
X
Municipal Bonds
Tax-deferred growth
X
Tax-advantaged distributions
X
No contribution limits
X
X
X
No additional tax for early withdrawal
X
X
X
Will not increase Social Security taxation or Medicare premiums
X
X
Income tax-free death benefit
X
X
X
X
• Life insurance death benefit proceeds are generally excluded from income taxes. • Roth IRA death benefit proceeds are generally excluded from income taxes as long as all requirements are met.
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Pathways National Alliance Programs 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 newto-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; and increase customer (and employee) retention with valuable customer service skills. Our programs are known—first and foremost—for their “put-itto-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. The National Alliance now offers five highly-respected and internationallyrecognized professional designations: • Certified Insurance Counselor (CIC) • Certified Risk Manager (CRM) • NEW Certified Personal Risk Manager (CPRM) • Certified Insurance Service Representative (CISR) • Certified School Risk Manager (CSRM)
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Certified Insurance Counselor
Certified Risk Manager
NEW Certified Personal Risk Manager
(CIC) Designation Program 20-Hour Classroom or Online Topics
(CRM) Designation Program 20-Hour Classroom or Online Topics
(CPRM) Designation Program 16-Hour Classroom Topics
• Personal Lines • Commercial Casualty • Commercial Property • Agency Management • Life & Health
• Principles of Risk Mgt. • Control of Risk • Analysis of Risk • Financing of Risk • Practice of Risk Mgt.
University Associate CIC
University Associate CRM
(UACIC) Designation Program (2 parts of CIC)
(UACRM) Designation Program (2 parts of CRM)
• Personal Client Risk Mgt. • Understanding Coverage Differences • Evaluating and Protecting the Lifestyle • Practical Application of Personal Risk Mgt. • Winning the Business
THE NATIONAL RESEARCH AC
RISK AND INSURAN
The National Alliance Research Academy
James K. Ruble Seminars Advanced 16-Hour Classroom Topics for CICs and CRMs • Advanced Risk Management • Agency Management Practices • Contractors • Cyber Risk • Executive Risk • Financial Institutions • Food & Beverage • Graduate
• Healthcare Providers • Large Commercial • Legal Concepts • Managing People • MEGA • Small to Middle Market • Truckers I • Truckers II
Advanced education opportunities: • William T. Hold Seminars (open to all) • James K. Ruble Seminars (exclusively for CICs, CRMs, and CPRMs) World-class sales and producer training: • Dynamics Series Sales Training Programs • P&C School for Producer Development • Employee Benefits Producer Training Programs for university students and those new to the industry: • University Associate CIC (UACIC) • University Associate CRM (UACRM) • Introductory Series
Industry Research and Advancement Shop from a wide selection of books, eBooks, studies, CDs, DVDs at www.TheNationalAlliance.com/ bookstore
Websites, publications, career assistance, and industry advancement: • The National Alliance Research Academy • Knowledge Alliance (http://irmka.scic.com) • My Career Advancement (www.MyCareerAdvancement.com) • Careers for Life (www.CareersForLife.com) Visit www.TheNationalAlliance.com for complete schedules, 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!
to Success
www.TheNationalAlliance.com Call toll-free: 800-633-2165 • Email: alliance@scic.com
Our Licensed-Partner Organizations Certified Insurance Service Representative (CISR) Designation Program Classroom or Online Topics (choose five of nine courses) • Commercial Casualty I— CGL, Additional Insureds • Commercial Casualty II— BAP, WC, Excess Liability • Insuring Commercial Property • Insuring Personal Auto Exposures • Insuring Personal Residential Property • Personal Lines Miscellaneous • Life & Health Essentials • Elements of Risk Mgt. • Agency Operations
CISR Elite
Pass all nine CISR courses
Dynamics of Service 7-Hour Classroom Topic
Insuring Flood Exposures— NFIP Review Online or Classroom; Hours Vary
Ethics Online; Hours Vary
Certified School Risk Manager (CSRM) Designation Program 8-Hour Classroom or Online Topics • Fundamentals of Risk Mgt. • Measuring School Risks • Handling School Risks • Funding School Risks • Administering School Risks
William T. Hold Seminars Advanced Programs 7-Hour Classroom Topics: • Commercial Lines • Personal Lines • Multi Lines • Risk Management 4-Hour Online Classroom Topics: • Understanding School Employment Liability Practices • Effective School Crisis Management • Bullying Prevention: Solutions for Your Schools • Workers Compensation: Claims and Cost Containment 4-Hour Online Topics: • Preparing for CIC—Personal Auto • Preparing for CIC— Homeowners • Life Insurance • Health Insurance • Disability Income & Long-Term Care Insurance • Spoilage, Utilities, and Ordinance or Law • HO Property Endorsements • Insuring “Toys” • Professional Liability Concepts • Workers Compensation • Additional Insureds/Certificates of Insurance • Employment Practices Liability • Commercial General Liability • Business Auto Policy • Liquor Liability
Providing sales education to insurance leaders.
Dynamics Series 20-Hour Classroom Topics • Dynamics of Selling • Dynamics of Sales Mgt. • Dynamics of Company/Agency Relationships • Dynamics of Employee Benefits
P&C School for Producer Development 2-Week Classroom Course
Employee Benefits Producer Training 10-Day Classroom Course
Introductory Series* 3-Hour Online Topics • Introduction to Property & Casualty Insurance • Introduction to Commercial Property Insurance • Introduction to Commercial Casualty Insurance • Introduction to Personal Auto Insurance • Introduction to Commercial Miscellaneous Exposures and Coverages • Introduction to Personal Residential Property • Introduction to Life & Health Insurance • Introduction to Employee Benefits—An Overview • Introduction to Employee Benefit Retirement Plans • Introduction to Employee Benefit Healthcare
In many states, The National Alliance partners with professional state organizations to present certain CE programs in that state. We appreciate these licensee organizations and their spirit of cooperation as we work together to bring the number one insurance and risk management continuing education programs to their areas. Alabama IIA, Inc. IIAB of Arizona, Inc. IIA of Arkansas PIIA of Colorado, Inc. PIA of Connecticut, Inc. Florida AIA PIA of Georgia, Inc. IIA of Illinois IIA of Indiana, Inc. PIA of Indiana, Inc. Kansas AIA IIA of Kentucky, Inc. PIA of Kentucky, Inc. PIA of Louisiana, Inc. Massachusetts AIA Michigan AIA Minnesota IIAB Missouri AIA Montana Insurance Education Foundation IIA of Nebraska PIA of Nebraska & Iowa PIA of New Jersey, Inc. PIA of New York State, Inc. IIA of North Carolina Ohio Insurance Agents, Inc. IIA of Oklahoma PIA Western Alliance Insurance Agents & Brokers of PA, MD, & DE PIA of Puerto Rico and the Caribbean IIAB of South Carolina Insurors of Tennessee TASBO Utah AIIA PIA of Virginia & DC PIA of Wisconsin, Inc. Wisconsin Association of School Business Officials Washington Association of School Business Officials Association of Wyoming Insurance Agents
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COVERAGE CORNER
| LAURA MACHADO, CIC, MSIM, CPCU
Vacancy, Vandalism, and Fire At a Coverage Crossroads
P
roperty vacancy has been a growing problem in recent years. The recession reduced the demand for new buildings leaving many beautiful, well-maintained, new developments empty. New construction came to a virtual standstill. Current property loans were going into default as businesses closed. Tenants downsized into smaller locations with lower overhead, leaving the building owner on the hook for the unused property. The year 2011 witnessed signs of recovery with an increase in new construction. However, even today, many property owners are still struggling to fill the spaces that are complete and ready for immediate occupancy.
footage is occupied. For commercial tenants, the unit or suite rented or leased is considered vacant when it does not contain enough business personal property to “conduct customary operations.”
The problem is further exacerbated as property owners, as well as tenants, are faced with serious coverage limitations when their properties are left vacant. The term “vacancy” is clearly defined in the ISO Building and Personal Property Coverage Form (CP 00 10 10 12). For property owners, a building is considered vacant if less than 31% of the square
In light of this information, a question came up recently regarding a certain ambiguity surrounding the vacancy provision. Consider this scenario: Vandals break into a building left vacant for over 60 days. They spray-paint graffiti throughout the interior, shatter several windows, and destroy whatever property was left behind by owners and former tenants. The vandals also start a fire in the building, causing extensive damage to the structure.
Learn More, Earn More CIC Commercial Property Institutes and CISR Insuring Commercial Property Courses are both excellent options for learning more about various commercial property coverages and exposures. In addition, The Academy’s book, P&C Insurance Essentials, contains several chapters devoted to commercial property insurance (shop www. TheNationalAlliance.com/bookstore).
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The vacancy provision in the Building and Personal Property Coverage Form outlines the coverage restrictions associated with vacancy, which exclude the causes of loss to which vacant buildings are particularly susceptible—including vandalism, glass breakage, and theft. All other covered causes of loss are paid at a 15% reduction of what would otherwise have been paid.
While there is little room for dispute regarding the exclusion of the graffiti, glass breakage, and property damage, the questions surrounding the fire damage are complex. Is the fire considered a separate peril, covered at the 15% reduction, or is it excluded because the damage, including the fire damage to the vacant building, was caused by the peril of vandalism? The Business and Personal Property Coverage Form does not specifically address the situation as clearly as it does in regards to other exclusions such as nuclear hazard, which reads, “but if nuclear reaction…results in fire, we will pay for the loss or damage caused by that fire.”
Fire and vandalism are two distinct causes of loss listed in the policy; however, there is no specific verbiage to support or deny that fire caused by vandals is covered as a separate peril, rather than excluded from coverage with the peril of vandalism. Fire and vandalism are two distinct causes of loss listed in the policy; however, there is no specific verbiage to support or deny that fire caused by vandals is covered as a separate peril, rather than excluded from coverage with the peril of vandalism. It would seem that such ambiguity would, in fact, fall in favor of the insured, as numerous court cases have settled similar ambiguity in that manner. However, the existing case law lends support to either position in this scenario— both covered and excluded. In Nationwide Mut. Fire Ins. Co. v. Nationwide Furniture Co., 932 F. Supp. 655 (E.D. Pa. 1996), a fire was caused by vandals at the insured premises, which had been left unoccupied. Nationwide Mutual denied coverage under the vacancy provision, determining that the building had been left vacant for more than 60 days and the damage was caused by the excluded cause of loss—vandalism. The insured not only denied that the building was vacant, but further argued that even if the building was vacant, the damage was caused by the covered cause of loss—fire—and that the term “vandalism” was ambiguous and must be interpreted in favor of the insured. A legal battle ensued as the insurance company filed a declaratory judgment action and the insured filed a counter-suit seeking payment for the loss, as well as for bad faith. The court subsequently agreed with the ambiguity of the term “vandalism,” charging that the insurer could have defined vandalism to include non-accidental fire in order to clarify the intent of the exclusion. However, in several other cases, courts have ruled that the “common sense,” “usual and ordinary,” and “plain and ordinary” meaning of vandalism includes fire and is, in fact, excluded. In Potomac Ins. Co. of Illinois v. NCUA a/k/a National Credit Union Assoc., 1996
WL 396100 (N.D.Ill.1996) for example, the court considered the dictionary definition of the term vandalism, and concluded that the ordinary meaning of the word does include arson, and therefore, the vandalism exclusion applied. So, what are the available remedies to protect property owners from being caught in this complicated conundrum of vacancy, vandalism, and fire? Although the economy continues to improve, vacancy remains a significant issue among building owners and tenants. In fact, even in the best economies, vacancy will occur and create coverage gaps for insureds. The first step in addressing this potential pitfall is knowledge. Even the most savvy property owner may not understand all aspects of the complex property insurance policy. It is also true that vacancy can catch a property owner off-guard if a major tenant suddenly goes out of business or moves, leaving the space empty, or mostly empty. It could easily take more than 60 days to locate a new tenant and execute the necesContinued on page 24.
About the Author: Laura Machado, CIC, CPCU Laura has over twenty years of experience in the insurance industry. She has been an Underwriter Manager in Personal Auto, Commercial Lines, and Workers Comp, as well as a Content Manager for an online insurance news publication.
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Vacancy, Vandalism, and Fire …continued from page 23. sary contracts. Understanding what constitutes vacancy and the potential ramifications in the event of a loss will empower property owners to take proactive steps with their insurance agents to protect their investment. Agents should take the time to clearly explain the vacancy provisions to their customers, even if the customer insists that it could never be a possibility. Keep the lines of communication open by inviting your customers to stay in touch. Continually reach out to your customers throughout the policy term—not just at renewal time.
Agents should take the time to clearly explain the vacancy provisions to their customers, even if the customer insists that it could never be a possibility. There is a more aggressive approach for protecting insureds from vacancy exposures, especially if vacancy is a more immediate concern for property owners or tenants. Endorsements are available for the Building and Personal Property Coverage Form (CP 00 10) to help treat the coverage shortfalls associated with vacancy. ISO endorsement form Vacancy Permit (CP 04 50) allows coverage to continue at full value when a building is deemed vacant beyond 60 days. ISO endorsement form Vacancy Changes (CP 04 60) allows the 31% occupancy criteria to be reduced to as low as 10%. In using these endorsements to reduce or eliminate the vacancy exclusion, the question of fire vs. vandalism becomes a non-issue. Coverage continues at full value for an additional premium.
CAREERS FOR LIFE Recruitment, training, and hiring of veterans and their spouses for lifetime careers in the risk management and insurance community Approved for funding through Tuition Assistance and the GI Bill.
Careers For Life offers meaningful careers in
risk management and insurance to veterans, military spouses, family members, and others by providing employment opportunities along with industry education and training that will allow them to be successful.
Get on Board!
Six new students are enrolled in Careers For Life and have already started the Spring semester through Florida State University. Five disabled veterans are currently enrolled in the DVIC (Disabled Veterans Insurance Careers) Program and eight more disabled veterans have completed the DVIC training and earned their CISR designations. We have forty-four active employers seeking candidates and twentyeight candidates actively pursuing involvement and seeking jobs.
Keep in mind, however, these forms are optional. Individual carriers may or may not offer these forms to policy holders, or there may be underwriting restrictions for certain accounts. They may offer different endorsements with minor, or even significant, variations from the ISO forms, or they may not offer any vacancy remedy at all. Discussing the acceptability, coverage, and restrictions with your underwriter and/or claims professional will help you gain insight on how these endorsements will be applied. However, it is also imperative that you read the forms carefully in order to discern the details and convey this information accurately to your customer.
The Real Story—Life Transformation
So, back to our original scenario and our original question: Is fire started by vandals covered as a separate peril, at the 15% reduction, or is it excluded because the damage to the vacant building is caused by the peril of vandalism? The answer in this case is… “It depends.” Until the ambiguity of the term “vandalism” is resolved once and for all, the best defense is a good offense. Knowledge and a proactive approach to the prevention and treatment of vacancy can make the difference between coverage, no coverage, or reduced coverage. n
For more information about how you can participate, visit www.CareersForLife.com or email CareersForLife@scic.com.
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“Not only have we received excellent training, we have been given the opportunity to work and put that learning to use. Thanks to Careers For Life, DVIC, and The National Alliance, I get to keep learning and growing on-the-job surrounded by exceptional professionals, experts, and leaders.” —Nelson Diaz, CISR, Webinar Coordinator The National Alliance
“Careers For Life” is a cooperative initiative of Florida State University and The National Alliance—bringing new talent to the insurance and risk management industry.
Updates on new opportunities and hot topics The National Alliance is developing to help you stay competitive, today and tomorrow.
New Sessions Adopted for CRM Course The CRM Principles of Risk Management Course is the first CRM course taken by the majority of participants because it focuses on the most important part of the risk management process—identification. In addition to “Introduction to Risk Management Concepts” and “Risk Identification Methods I through IV, this course’s curriculum now includes three new sessions that will help you acquire an overall knowledge of the risk management process and the skills necessary for developing individual risk identification methods: • NEW Risk Management and the Organization • NEW Introduction to Enterprise Risk Management • NEW Introduction to Risk Identification
CRM courses are offered in your choice of two formats: online or in-class. The online format consists of 10 two-hour sessions over five weeks, whereas the in-class format lasts two-and-a-half days and offers valuable face-to-face interaction with faculty and colleagues. Both formats conclude with an optional examination. And keep in mind, all courses of the CRM Program are approved for CE credit in every state. Become more proactive and valuable to your organization by learning the skills to recognize how risk can interrupt the flow of earnings, and how to protect against it. View full schedules of both online and in-class CRM course offerings at www.TheNationalAlliance.com.
Welcoming CISRs in India As The National Alliance has extended its programs globally, our motto, “The Sun Never Sets on Learning,” is literally true. The CISR Conferments for Willis and Patra employees have increased our ranks of new designees in India by almost 200 individuals! With all CISR courses now available online, there is every reason to believe that number of National Alliance designees in India will continue to grow at an accelerated pace. With a population of over 1.4 billion people, India is attracting more and more professionals to the fields of insurance and risk management. During a recent visit, Dr. William T. Hold, CIC, CPCU, CLU, President and founder of The National Alliance, and William J. Hold, CRM, CISR, Vice President of The National Alliance Research Academy, were welcomed in three of India’s largest cities—Mumbai, Delhi, and Kolkata—where they experienced a rich and welcoming culture. The entire community of The National Alliance can be very proud that our 117,700+ participants and members come from 17 countries around the world.
New CIC/CISR Licensed Association The National Alliance and the Utah Association of Independent Insurance Agents (UAIIA) have announced that the UAIIA became licensed to conduct the CIC and CISR Programs in Utah effective January 1, 2016. UAIIA conducted its first CISR Course (Personal Lines—Miscellaneous) on March 1, 2016, and its first CIC Institute (Agency Management) March 2–4, 2016, both in Salt Lake City. “We are working closely with UAIIA’s volunteer leadership and the association’s Executive Director, Cheryl Lyman, to meet the educational needs of the insurance community in Utah,” said William T. Hold, Ph.D., CIC, CPCU, CLU, President of The National Alliance. “With this new partnership, we are confident that our programs will have a wider reach and accessibility to industry professionals across the state.”
Willis
Patra
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BY JACOB GARCIA
– – : a power that mojo noun [mo . jo] \'mo-,jo\ may seem magical and allows someone to be very effective, successful, etc.
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he National Alliance is currently accepting nominations for the 2016 Outstanding CSR of the Year Award. Every year, hundreds of insurance CSRs and account managers from across the United States compete for this honor. But what exactly does it mean to be an outstanding CSR? What are the traits that make an account manager exceptional? And, just as importantly, how do agency managers find job candidates who possess these qualities? To answer these questions, The National Alliance Research Academy went to the source—the agencies that employ four of last year’s finalists in the Outstanding CSR of the Year competition. The following are excerpts from interviews we conducted with the agency managers (pictured right) who work with these customer service winners. Where do you look to find CSRs and account managers? Jolene: Our company underwriters and marketing reps have been a great resource to contact when we have a position open. Sometimes they know of someone from another agency who is looking to make a move. Another way we have searched out individuals is to ask people in the office if they know of anyone that they would refer to our agency. We have also used a staffing or personnel company, but that can sometimes be difficult, as they don’t always have someone in our area who is looking for an insurance position, so it may take a while to obtain some prospects. Maureen: We just went through a lot of interviews looking for people and LinkedIn seems to be working well for us. We find some candidates through employee referrals, but LinkedIn is probably the best at this point.
What traits do you look for when you’re interviewing? Dan: I think there are probably three main things that I look for when interviewing: demeanor, personal drive, and people skills. Demeanor is basically how a person carries him or herself. I look for someone who is confident, pleasant, and professional—everything from appearance to posture. The second factor is the candidate’s personal drive. What have they accomplished so far in their education or career? What are their goals and objectives in the years ahead? Are they willing to accept new challenges? Are they willing to accept special projects? Are they willing to challenge themselves to earn new designations? The third factor I look for is people skills. Do they
Jolene Schaa, CIC, CISR CSA/Manager Chastain Insurance Agency Omaha, Nebraska
work well in a team environment? Are they willing to share workloads and help others? Alexis: I start communicating with the potential hire via e-mail. I start looking at how they respond to me. How do they communicate? How do they write their e-mails? I ask very specific questions to see if they read through each question and answer it correctly. Since the majority of our communication with our clients is via e-mail, I like to see how they respond and whether they can communicate effectively. So that’s the first thing. And then, when we get to the point of the phone interview, how is their phone presence? Do they listen? Do they sound cheery, like they’re smiling on the other end even though I can’t see them? Are they engaging? That’s a big part of it as well, because once the e-mails aren’t working with your client, then you’re picking up the phone and calling them. Then the third thing: we do a face-toface interview. How are their mannerisms? Are they friendly and responsive? Do they seem like they would get along well with others in the office?
Maureen Arndt, CISR, ACSR VP of Operations The Starr Group Greenfield, Wisconsin
Dan Hale, CIC, CRM, CPCU, ARM, AAI, LIC, AU, AIC, AIS VP/Account Director Marsh & McLennan Agency Livonia, Michigan
What about industry experience and education? Are these important factors in a job interview? Maureen: Having industry experience is helpful. We have hired some people without industry experience and trained them for the position. College education is preferred, but not required. When we go through our interview process, we’re measuring two things. We’re not Continued on page 28.
Alexis Dowling Operations Manager William Gammon Insurance Austin, Texas Resources esources | Spring 201 2016 6
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Agency Management Mojo
…continued from page 27.
just looking at their résumé and their experience or job knowledge; we’re also looking to make sure they’re fit into our culture. We’re looking for someone who shares our same beliefs, practices, and attitudes. Dan: I have had success focusing on the candidate’s education and work experience, without necessarily focusing on their insurance experience. For example, one of our CSRs came to us from a plumbing company and had no
license. From there, staff members proceed through a series of designation exams, starting with AAI, CIC, CRM, and similar designations. This ongoing education gives them a higher level of technical ability when assisting clients and analyzing complex issues. The second category of training is generally described as mentorship and job-shadowing. About two years ago, our office created a formal mentorship program. Everyone in the office is as-
"We're not just looking at their résumé and their experience or job knowledge; we’re also looking to make sure they’re a culture fit." insurance experience at all. I think it is important to find someone who we can invest in and teach the business from the ground up. That way we can build each team member on a personal basis. Of course, experienced candidates are valuable and much easier to bring upto-speed, but they are difficult to find and have a wide variety of backgrounds.
How do you train new hires? Dan: Training usually falls into two main categories: academic and mentoring. No matter where you fall in the organization, I recommend that everyone start with agent licensing, even if you’re not in a producer role. In fact, just about everyone in our office holds an agent’s
About the Author: Jacob Garcia Jacob joined The National Alliance Research Academy in March 2015 as Associate Research Director. He brings with him a background in media and journalism, and produces the weekly podcast, Speaking Insurance, which can be found on the Knowledge Alliance website (http://irmka.scic.com).
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signed a mentee/mentor relationship with someone who is not on his or her regular service team. These mentors offer guidance on operations, strategize about goals, and act as career coaches.
What job aspects do new CSRs most often struggle with? Alexis: That would probably be learning the details of the account. Our customers are used to things being done a certain way, or the producers are used to things being done a certain way. So, a new CSR has to figure out those personalities and figure out what is expected of them, because every client is different. And learning the workflow is another aspect. If you already have insurance experience, all that stuff will come easily to you. But when you’re on a book of business and you’re brand new to it, then you have to learn the personality of the book and the character traits of each producer and how they like things done. So I think that becomes the most difficult part for people. Jolene: When we have had new individuals come to us from other agencies, we find they have done things a little differently, or maybe not to the same degree, so they find it challenging to learn our procedures. One of the biggest hurdles for them is getting to know the coworkers and the agents they work with, and how they want things. Agents in every office can work a little differently—what
they want or what they don’t want, and that can be difficult. And getting to know the new accounts they are working with and developing new customer and company connections can present challenges, as well.
How do you evaluate the amount of work that each CSR is doing? Jolene: Our reviews include auditing procedures and close-day reports that help us evaluate the CSR’s work. Another good way for us to evaluate is when they’re gone for more than a day, I will cover their desks to help them out, and since I’m handling their accounts, that gives me a good picture of how they are doing. Dan: It starts with knowing your CSR. That means knowing what their short and long-term goals are. How do they handle stress? Do they have all the tools they need to efficiently complete their tasks? Have they completed the necessary training? Understanding your CSR is really the first part of knowing how much work they can handle and how much they’re able to process. Some agencies also objectively measure workload by looking at metrics. For example, how much does a CSR handle in terms of commission or number of accounts? I think that a great way to measure workload is by a CSR’s ability to volunteer for special projects. Ideally, a CSR has the ability to keep up with their regular duties and then take on special short-term projects, such as researching issues, writing reports, or acting on committees. When a CSR contributes on special projects, it furthers their growth and experience, which, in turn, makes the company stronger.
How do your CSRs contribute to the sales process? Maureen: We’re servicing the clients’ needs, and we’re also helping the salesperson produce that new sale. We’re always there for the salesperson to take what we can from them. If the salesperson comes to our desk and they have new business, we welcome that new business because we see it as an opportunity for growth. CSRs are rewarded when there’s net profit in the book that they work. CSRs earn a quarterly bonus
because they’re an important part of that new business process. When they’re there to support the producer, they’re rewarded for their effort.
What differentiates a great CSR from an average one? Alexis: It’s someone who is not hesitant to go above and beyond. It’s someone who wants to get the job done and do a good job, and doesn’t worry about, “Well, that’s not my job,” or “It’s 4:30 p.m. It’s time for me to leave.” They’ll stay to get things done, and they have the client and the agency’s best interests at heart. Dan: When people don’t like their jobs, it comes out in everything they do. When you find a CSR who’s friendly, happy, and genuinely likes their work, it shows. This is what separates a good CSR from an average one.
Conclusion All insurance agencies would benefit from having outstanding CSRs. Finding people with potential is key, and providing the right training and guidance is just as important. Good customer service representatives, account managers, and other service personnel help retain accounts and maintain workload efficiency, leading to better profitability. While top sales producers are extremely important, don’t ever forget about the contributions made by key customer service employees. Continuing education can help develop a good CSR into a great one. Dynamics of Service and the CISR and CIC Programs are excellent ways to invest in the education of your service personnel and show that you value them. Understanding the challenges of the job and providing the right training, mentorship, and education can help these important service employees rise to the level of OUTSTANDING. n
Do you know an insurance industry customer service professional who’s at the top of their game? Nominate them for the top honor in the industry! (See back cover for details.)
Through their generous donations, Academy Research Associates help fund and participate in the research and publication activities of The National Alliance Research Academy and also assist in outreach efforts to attract students to the insurance industry through career-oriented programs offered in cooperation with various educational institutions. For more information about the benefits of becoming a Research Associate, contact William J. Hold at wjhold@scic.com, or call 800-633-2165, ext. 3325. Companies: All Risks American Agents Alliance Assurex Global Bancorp South Insurance Services, Inc. BB&T Insurance Services Bowen, Miclette & Britt Brown & Brown, Inc. CRC Insurance Services Calhoun, Thomson, & Matza, LLP Disabled Veterans Insurance Careers HR&R Intergovernmental Pool Administration, Safety & Loss Control HUB International Hylant ISU Insurance Agency Network Insurance Technologies Corporation Jerry Montgomery Memorial Research Fund Keystone Insurers Group Marble Box MarketScout, Inc. McGriff, Seibels & Williams PATRA Corporation Popular Insurance, Inc. Selective Insurance Group, Inc. State Auto Insurance Companies Synergy Comp Insurance Company United Valley Insurance Services
USI Velocify Westwood Trust Zurich North America Associations: Alabama IIA IIAB of Arizona PIIAC PIA of Connecticut IIAB of Delaware Florida AIA PIA of Georgia IIA of Illinois IIA of Indiana PIA of Indiana Kansas AIA IIA of Kentucky PIA of Kentucky IIAB of Maryland Massachusetts AIA Michigan AIA MIIAB Missouri AIA PIA of Nebraska and Iowa PIA of New Jersey PIA of New York State IIA of North Carolina Ohio Insurance Agents, Inc. IIA of Oklahoma IIAB of Pennsylvania IIAB of South Carolina Insurors of Tennessee PIA of Virginia and D.C. PIA of Washington/ Oregon PIA of Wisconsin
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BY THE NUMBERS
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JIM CUPRISIN, MBA, CIC, CRM, ARP
Producer Perspectives Experts Talk About What it Takes
A
s part of their Producer Profile study, The National Alliance Research Academy interviews sales managers, experienced producers, and young producers to gain their unique perspectives. This article provides a few excerpts from the expert interviews contained in the study, and provides tips and suggestions for hiring and training producers, mentoring young producers, and learning the ropes as new producers.
Sales Managers The following three individuals are sales managers who have much to say about hiring and training producers. Tom Barrett, CIC, AAI CEO of SIAA MidAmerica, Inc. • Blowing Rock, NC Tom is a faculty member for Dynamics of Selling and Ruble seminars.
Learn More, Earn More Get your copy of The National Alliance Research Academy’s Producer Profile study at www.TheNational Alliance.com/store/publications. The Producer Profile study is a leading industry resource for learning more about producer compensation, production, and responsibilities, as they compare across agencies of various sizes and locations. The National Alliance also offers the popular and proven, insurance-specific Dynamics Series, with courses designed to enhance selling techniques and strategies, hone sales management skills, and improve company/agency rapport.
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Q: Where do you look to find new producers? A: It is natural to take a person with sales experience from a different industry and put them to work as a niche insurance marketer. That has been very successful for us. We have used various industry sources, such as real estate, mortgage lending, and banking. They simply come to us with sales experience. Q: What is in a job interview that might clue you in as to whether or not they would succeed in the insurance industry? A: There are a number of things to look for: • A high energy level is crucial. • You’ve got to be assertive and aggressive. • You need to be social. • You need to be able to be managed. • You need a level of independence. • A positive attitude is important. • You need to be decisive. Q: How do you train new producers? A: We help them identify mentors in the community. We want them to start building relationships with people who can be supportive of them, and act as references and referrals for them. We work with the producers to identify, with our insurance companies, the areas where they have a unique skill, desire, or passion to work in an industry. We religiously follow The National Alliance Dynamics of Selling Program’s three-step sales process. If it’s somewhat of a pre-qualified prospect, we know that it fits the class. Then we lead off with the diagnostic appointment questionnaire.
“…this is a business where you can be proud of what you’re doing. You’re making positive contributions to your community, to society in general, and to your country.“
Ken Fields, CIC, MSM, CPCU, CLU, ChFC Co-developer of the PaceSetter Sales Development Program for State Auto Insurance Companies • Columbus, OH Ken, an Academy Board member and Research Associate, as well as National CIC and Ruble Faculty member, had a few things to say about choosing prospects, as well as the opportunities for young producers. Q: When producers do NOT have a good chance of writing the account, what should they typically do? A: Walk away. That’s a very difficult thing for new producers to do—to walk away from accounts. They feel like they’re walking away from a sale. They’re not walking away from a sale—they never had anything to begin with, because that business owner was not going to buy from them, ever. But it’s very hard for them to do. They need to spend more time on the prospects with better odds for long-term success. Q: How would you rate the opportunity in this industry for young insurance producers? A: I think there is greater opportunity for insurance sales today than any other time during my career. Where else can a young man or woman come into a business without having to borrow a lot of money, without having to refinance their home, without having to get a Ph.D., and all they have to invest is their time, energy, and creativity, and in a very short period of time, they can be earning an income equivalent to corporate executives? Q: What should young professionals know about the insurance industry? A: This is a business where we’re doing positive things. As a matter of fact, without insurance, our country could not be what it is. So, this is a business where you can be proud of
what you’re doing. You’re making positive contributions to your community, to society in general, and to your country. Joan Sansing, CIC, ARM, AAI Dynamics of Selling Faculty Member • Palm Harbor, FL Joan is an Academy Board member; CIC/CISR Committee member; and a National CIC, Dynamics of Selling, and Specialty Ruble Faculty member. She discusses why new producers fail, mentions the greatest challenges she has experienced as a sales manager, and describes the sales process used in her agency. Q: When new producers fail, is there usually one reason, or are there a variety of factors? A: It’s lack of activity. In order to be successful—whether they like it or not—they need to reach out. They need to make phone calls, knock on doors, and get referrals. They need to make a number of dials, get in touch with a number of contacts, get a number of ex-dates, and schedule diagnostic appointments and first appointments. They are going to make a number of submissions and proposals. And, of course, they need to make a number of sales. There are no shortcuts here; it’s simply a lot of hard work. Q: What are the greatest challenges that you have faced as a sales manager? A: My greatest challenge was not having enough time to do everything I needed to do. How could I actually dedicate enough time to my clientele, to the agency, to the issues with our carriers, to claims, and then also to manage this sales team? However, while the greatest challenge for me personally was for my time, the second biggest challenge was finding qualified people for the sales force. Continued on page 32. Resources | Spring 2016
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Producer Perspectives…continued from page 31. Q: What is your sales process? A: It’s about taking them through the process of the diagnostic appointment questionnaire, protection review, and presentation of solutions. It’s about asking for referrals and evaluating what we call “the four cards.” (1) What is this prospect’s feelings about their current relationship with their current agent? (2) Is the coverage adequate? (3) How has the service been? (4) Is the price competitive?
Experienced Producers The following two producers have decades of sales experience and have some good advice for younger producers. Vince Basciano, CIC Vice President at ADP Statewide Insurance Agency • Florham Park, NJ Vince is an experienced and successful producer. He talks about what makes him successful, and about the challenges and opportunities for young producers. Q: Are there any unique practices or habits that make you successful? A: I would rather be more of a partner with the clients I have and educate them as to what they’re buying. That’s what sets me apart from others. I have had some clients for 25 years— as long as I’ve been in the business—because I’m there for them. I give them advice. I help them as much as I can, and I’ll even tell them when they should take somebody else’s deal because it’s better for them. Q: Is there one thing that younger, inexperienced producers struggle with more than anything else? A: It’s definitely making the cold calls and being willing to fail. They need to get on the phones and make 100 calls. If they don’t make an appointment right away, they will get one soon. It’s the law of large numbers. I try and push that on them. You have to make the calls unless you’re really wellconnected somehow with somebody who is just going to feed you leads. The activity is really what drives your success. You need to have an active prospecting plan. Q: How would you rate the opportunities in this industry? A: The industry is assuredly changing. There’s definitely a need for young producers—those who may have a little more familiarity with technology. We certainly could use a couple of young producers in my agency who are hungry. You have
About the Author: Jim Cuprisin, MBA, CIC, CRM, ARP Jim is the Research Director for The National Alliance Research Academy and the Editorin-Chief of Resources magazine. He has over 30 years experience in the insurance industry, which included working as an underwriter for two companies. Jim has earned his MBA and been with The National Alliance for over 25 years.
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to be hungry. It’s not an easy business by any means. Your success doesn’t happen overnight, but I can tell you that if you put the time in, it is a pretty good career. Ken Estes, CIC, AINS Senior Vice President–Producer at BancorpSouth Insurance Services, Inc. • Little Rock, AR Ken is an experienced producer who worked his way up in the industry. He talks about his early challenges and what may now set him apart from other producers. Q: Which activities did you struggle with most often? A: I definitely struggled quite a bit with cold calling, because I didn’t have to do any of that on the company side, and it’s not really my personality. It was just something I had to force
“Persistence. That’s always been my thing. Persistence leads to timing, and timing is everything. It’s a very relationship-driven business.” myself to do. I had a list and I knew that I needed to make many calls, and I just made myself do it, but I hated every minute of it, at first. That was definitely what I struggled with. Q: How did you get over that reluctance to do the cold calling? A: When I was making those cold calls, I felt that we were actually offering them something that they needed to listen to, that they needed to give us some time because we could really help them. I think that when you’re calling and you feel that you can really help people, then that goes a long way to give you the confidence to do it. Q: When you say the phrase “customer expectations,” what are they and do they want to come back to you year after year? A: They expect you to deliver a policy, be there to answer questions, and try to bring them the lowest price possible. I think that, in general, is what clients expect, but we try to take that a step further, and actually become a risk manager for them. We show them how doing business with us actually helps their bottom line. We can do analytical reviews and other services so that we can become more of a partner, rather than just someone who is just going to deliver a policy.
Young Producers Here are two young producers that are on the fast track. They have worked their way up the learning curve and are doing well early in their careers. David Fishel, MBA Higginbotham • Fort Worth, TX David is a young producer who has gotten off to a fast start. He talks about his early struggles, the most rewarding part of his job, and his current challenges. Q: In the first year and a half, what activities did you most often struggle with, and how did you improve in these areas? A: The technical piece is where I’m constantly working to improve. It’s such a detailed industry and there are so many
balance your current clients and making sure you’re servicing them appropriately while also bringing on new clients—that can be a tough job. Greg Ruggiero, AAI, CLCS Bouchard Insurance • Clearwater, FL Greg is a young producer who is experiencing success early. He has challenges and rewards, but is persistently making great strides. Q: Besides earning a good income, what is most rewarding about insurance sales to you? A: What is most rewarding is being a resource, a trusted business advisor, and the idea that the sales process that my agency has in place is set up for that. We do not want to be going into a bid-and-quote sale when we meet with our clients and prospects. Our style of selling is not aimed for a one-year relationship. If you’re into our process, you’re buying into me, you’re buying into my agency. There’s a strategy that comes along with it, and that strategy could last three to five years, so it’s a relationship that we want to build with our clients. Fighting for my clients and having their best interests in mind is what I definitely find rewarding. Q: What are your biggest challenges as a producer? A: The biggest challenge right now is trying to retain a couple of large accounts that I wrote. I am learning a lot from managing these accounts and getting prepared for the renewal process. This is a great learning experience for me. Unfortunately, this learning curve is taking up a lot of my time from 9 to 5, and I haven’t been able to prospect as much as I’d like to. I’m hoping that after three or four years, the process will be streamlined and a little bit easier. My prospecting time is my strongest priority, but managing existing clients is big, so I struggle with time management.
moving pieces; it can be really easy to make a mistake. Coverages are changing; there are new endorsements and new exclusions. I think the top professionals develop through training, and technical training will always be most important for me going forward. Q: Other than money, what is most rewarding about insurance sales? A: I think getting to really know my clients from both a business perspective and on a personal level. I’ve always been a business geek, if you will. I love learning about new businesses and trying to put myself in the position of the owner: What are their biggest challenges? Getting to sit down and talk to owners or CEOs or CFOs as a 27-year-old; those are my clients. Getting to pick their brain is pretty cool to me, to be honest. I love getting to do that, and then building those personal relationships. Q: What are your biggest challenges as a producer? A: I think it’s time management. As a young producer you’re always looking to grow your book of business, but also being very conscious of taking care of your current clients. I’m very structured; I have my hourly schedule of what I’m doing, but I have to take care of those fires, at times. As much as I would love to go and try to bring on new clients, I’ve got to take care of my current clients first and foremost. So being able to
Q: What has made you successful as a producer? A: Persistence. That’s always been my thing. Persistence leads to timing, and timing is everything. It’s a very relationship-driven business. You build those relationships for when the time is right. A lot of times when we go out on meetings with prospects, and everything is OK with their insurance program and there’s really not much that we can do—it’s a tough sale. But if you can build enough relationships, and be persistent in those relationships, when the time is right, the sales will happen.
Conclusion Read these interviews in their entirety in the new edition of Producer Profile. These individuals’ comments reveal important perspectives and methods that can help you improve your sales production. In addition to the interviews, the study is full of statistical survey results about producer compensation, sales production, responsibilities, hiring and training considerations, etc. Updated on a regular basis, Producer Profile is the leading resource for independent insurance agency producer benchmarks, providing agency owners with goals and data for measurement and comparison. Purchase the newest edition of Producer Profile at www.TheNational Alliance.com/store/publications. n Resources | Spring 2016
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Dear Bettie, I notice that most of the emails I get from The National Alliance include a LinkedIn logo. How do social media and The National Alliance work to complement each other? Could you share for me the benefits of LinkedIn? —Marie Valentine, CIC Dear Marie, The LinkedIn logo in your emails will take you directly to The National Alliance for Insurance Education & Research group, once you are logged in. This group is intended to be a discussion forum for insurance and risk management professionals to network and communicate, benefiting from each other’s knowledge and experience. It is a place where business leaders and new participants may raise questions for the group to consider and point to resources that fellow professionals should know about. The group is moderated by Veronica Winans, CISR, who does a wonderful job of keeping the discussions beneficial, current, and practical for those in the know and those who want to know. You can set your options so you are notified of any new or follow-up posts and comments you may wish to follow. There are currently 26,523 individuals participating in this professional forum and your participation is always welcomed. For more information contact Veronica Winans, Marketing Communications Coordinator, at 800-633-2165. —Bettie Dear Bettie, I am aware that The National Alliance offers many programs beyond the five designations. Could you tell me about the other programs that specifically provide skills and benefits for insurance and risk management employees? —Donnie Rogers, CIC Dear Donnie, The National Alliance endeavors to provide career-building courses for many levels of education—whether individuals are brand new recruits or industry veterans. • For your colleagues newest to the industry, the online Introductory Series provides ten online courses which cover the most basic principles, policies, and terminology of the industry. • The Producer School provides a more intensive and interactive two-week classroom experience for new agents, and also includes materials, instruction, three CISR online courses, and two days of training for the new agent’s sales manager, so they may provide their support and encouragement back at the office. • The Dynamics Series provides a place to learn advanced selling and servicing, sales management, and relationship-building skills, allowing you to practice new solutions in an interactive environment. These classroom programs are appropriate—and beneficial—for new agents, practicing professionals, and experienced industry leaders alike. • William T. Hold Seminars (classroom or online) offer a range of programs covering 21 industry niche topics. Specifically focusing on commercial and personal lines topics related to current knowledge and best practices, they match insurance and risk management needs to practical solutions. Wherever you are in your career, The National Alliance has programs and resources to help you and your colleagues increase your career momentum. We’re proud to be your professional education provider and committed to delivering the most practical programs in the industry with—by far—the best value. For more detailed information, visit www.TheNationalAlliance.com and click on the “Courses” tab, or call 800-633-2165. —Bettie
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Do you have a question to “Ask Bettie?” Bettie Duff, Senior Vice President of Customer Care, has been with us more than 35 years and is the person to contact for information on just about anything related to operations and procedures. Email your burning questions to: bduff@scic.com.
Congratulations on the 20-Year Anniversary of the PaceSetter Program! The PaceSetter Producer Development Program is an intensive sales partnership between agencies, their producers, and State Auto. The program—which incorporates the Dynamics of Selling curriculum—is the brainchild of State Auto’s Sales Development Director, Ken Fields, CIC, CPCU, CLU, ChFC, and PaceSetter Sales Manager, Diane Masterson, CIC, CPCU. Ken is a Research Associate and member of the Board of The National Alliance Research Academy, and a member of both the CIC National Faculty and James K. Ruble Faculty; Diane is a Specialty Ruble Faculty member. Twenty years ago, when Ken and Diane began to develop their unique approach to producer training, they knew they wanted a program that would encompass both sales and technical training. They determined that the Dynamics of Selling curriculum would be a perfect fit for the sales portion. Through a strategic partnership with The National Alliance, Dynamics of Selling—presented in its entirety by National Alliance faculty—became an integral part of the program. In addition, the program includes a two-and-a-half-day Dynamics of Sales Management presentation, targeting the producers’ sponsors, teaching them the skills required to successfully train and coach while monitoring their producers’ prospecting and sales activities. The PaceSetter Program has proven highly successful and has twice been awarded the Eagle/Outstanding Company Achievement Award. In no small part, Ken’s dedication to his in-house training coordinator duties for State Auto has contributed to this success. We asked Ken to discuss with us the value of having an in-house training coordinator in an agency: “As ‘training coordinator’ at State Auto my role is to provide sales and technical training to new property/casualty insurance agents. My primary concern is having the consistent support of both the agency owners and company senior management, and happily, I currently enjoy both. Constantly demonstrating the ROI to both groups is a critical challenge.
President/Publisher William T. Hold, PhD, CIC, CPCU, CLU Editor-in-Chief James R. Cuprisin, CIC, CRM, ARP jcuprisin@scic.com Managing Editor/Senior Art Director Becky Keeling Department Editors Mary I. Husk, CIC, CRM, CPCU mhusk@scic.com Beverly A. Messer, CIC, CRM, CISR bmesser@scic.com Sarah J. Warhaftig, J.D. swarhaftig@scic.com Contributing Editors Mike Bown mbown@scic.com Carol Crysup, CISR Elite ccrysup@scic.com Contributing Designer Chuck Lickert 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: www.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 © 2015, 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.”
We have worked closely with The National Alliance to meet the needs of our personnel—Dynamics of Selling, Dynamics of Sales Management, and Dynamics of Company Agency Relationships courses have been an important part of our curriculum for decades. We conduct each of these courses as in-house programs and benefit tremendously from the fact that this education develops a consistent approach and common language among company associates and agent partners. In addition, because we track the production of the agents we train, we know the ROI derived from their performance.”
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.
Thank you, Ken, and happy 20th anniversary of the founding of the PaceSetter Program!
The National Alliance Standards of Conduct: www.scic.com/about/Standards_of_Conduct
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rlando is the place to be for the best selection of advanced topics and time to enjoy the pleasures of this vacation wonderland. Create your own seminar by choosing from more than 20 four-hour topics to make your schedule fit your individual interest. There are special sessions of property and casualty topics, as well as classes in life and health, risk management—and more. You can even meet the Florida-specific five-hour CE requirement while you are here. Whether you space your classes out during the week, attend all your classes in two days so you can sightsee and relax, or stick around to take extra courses—the price is the same: $430 (which includes your CE filing fee). Always a bonanza of presentations and sessions for many specializations, the MEGA is exclusively for dues-paid CICs, CRMs, and CPRMs. The opportunity to reconnect with colleagues from across the country adds to the enjoyment. MEGA Seminars cover a dazzling variety of topic choices, including: • Niche Specific—Healthcare Providers, Contractors • P&C: Time Element, Cyber, BAP, Additional Insureds • Life & Health: Retirement, Annuities, Senior Care
Disney’s BoardWalk Resort Experience the charm and whimsy of turn-of-the-century Atlantic City at this Orlando-area waterfront resort hotel. Make a splash at Luna Park Pool and delight in a massage at the state-of-the-art fitness center. Discover carnival games, unique dining, and exciting nightlife on the Coney Island-style boardwalk. Strung like saltwater taffy along shimmering Crescent Lake, there are too many attractions to list them all here. See the full menu of things to do by visiting https://disneyworld.disney. go.com/attractions/. Disney’s BoardWalk Resort 2101 North Epcot Resorts Boulevard Lake Buena Vista, FL 32830 Call 407-939-4686 for reservations. Ask for The National Alliance room block to receive the special rate of $199 for single or double accommodations (based on availability— cutoff 5/12/16). Parking is complimentary. The resort provides an airport shuttle through Disney’s Magical Express Service. Shuttle arrangements should be made with your guest-room reservation. Internet access is included in guest-room rate.
• Advanced Risk Management • Personal Lines • Error and Omissions Prevention, Ethics • And Much, Much, More! (A complete agenda can be viewed at www.TheNationalAlliance. com/20160609FLRMG.)
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© Disney
A Collection of Success Stories and Press Clippings from Around the World
IntheSpotlight New National Faculty Members The National Alliance is pleased to recognize fifteen faculty members who have recently achieved “National Faculty” status. They have joined this prestigious group by consistently demonstrating excellence in their instruction, making outstanding contributions to The National Alliance and the insurance and risk management community worldwide. These individuals have distinguished themselves as: • Expert educators who focus on the professional development of insurance and risk management professionals
• Mentors to new faculty members and others in the industry • Members of The National Alliance’s curricula advisory committees • Supporters and contributors to the work of The National Alliance Research Academy • Authors in Resources magazine Congratulations to these newly named National Faculty of The National Alliance!
Brian Bartosh, CIC Top O’ Michigan Insurance Alpena, MI
Lisa Burnside, MBA, CIC, CPCU Burnside Dynamics, LLC Forest Lake, MN
Dwight Kealy, J.D., CIC The Law Office of Dwight M. Kealy Temecula, CA
Scott Treen, CIC Treen Insurance Service Agency, Inc. Jefferson, OH
Jay Williams, CIC, CRM, AAI, ACSR St. Petersburg, FL
Lic. María de San Juan García Diaz, MBA, CRM Consultor Independiente Mexico
Jeffrey Driver, J.D., ARM, DFASHRM, MBA Stanford University Medical Network Risk Authority Stanford, CA
Ing. Alejandro Dorantes González, CRM Ambar Seguros Mexico
Ing. José Eligio Castro Gonzáles, CRM Enterprise Risk Solutions, SC Mexico
Ing. Miguel Ángel Nava González, CRM Consultor Independiente Mexico
Michael Hay, CRM Strategic Risk Consulting Hideaway, TX
Ing. Iván Palomares Hofmann, CRM SIP Asesores en Riesgos SA de CV Mexico
Ing. Jesús Levy Salustiano, CRM Grupo Interesse Mexico
Stanley Smith, CIC, CRM, CSP SGS Consulting, Inc,. Flower Mound, TX
Act. Luis Felipe Barros y Villa, CRM SCI de Mexico, SA de CV Mexico
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A Collection of Success Stories and Press Clippings from Around the World
IntheSpotlight Excellence in Insurance Education Awards Twelve of the twenty-two state associations recently honored at the Big I’s Education Convocation in New Orleans are licensed partners of The National Alliance (licensed to conduct one or more National Alliance programs). The award celebrates and recognizes state associations and staff who have made significant contributions to education for their members and the industry in the key areas of class offerings, continuing education, professionalism, designation offerings, industry collaboration, planning goals, marketing, resources, and more. Congratulations to each of these fine organizations! Diamond: Florida AIA Kansas AIA Massachusetts AIA IIA of Nebraska IIA of North Carolina IIA of Oklahoma IIAB of South Carolina
Gold: IAB of Delaware IIA of Kentucky, Inc. Michigan AIA PIAA of Ohio, Inc. IAB of Pennsylvania
Meincke Elected to Board CISR faculty member and mentor, Don Meincke, CIC, CPIA, LUTCF, is Assistant VP with Southern Insurance Company of Virginia (a member of The Donegal Group of Insurance Companies). Don has been elected to the Board of the Virginia Business Incubation Association—a group comprised of directors of Small Business Development Centers in Virginia, and others, who support the mission of helping people start up new businesses.
Erie Promotes Schad Erie Insurance in—you guessed it—Erie, PA, has promoted Denise H. Schad, CIC, CPCU, AIC, AIS, CLCS, to Litigation Specialist, working through their Roanoke Branch office. Denise has worked for Erie Insurance since 1999, having served as a multi-line adjuster and Commercial Liability Specialist.
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First Designee in Saudi Arabia As The National Alliance continues to expand its reach to serve the global insurance and risk management community, we are particularly pleased to welcome our first double designee from Saudi Arabia. Abdullah Al Maghrabi, CIC, CRM, is the Studies Division Head at CCHI (Council of Cooperative Health Insurance), in Riyadh. We welcome him as an exemplar for educational commitment and continuing professional leadership.
Lee Makes the List Mark Lee, CIC, Managing Director at Higginbotham in Houston, TX, has been recognized as one of the 2015 “Top 40 Under 40 Brokers” in Business Insurance magazine—an acknowledgement of his exceptional work ethic and continuing professional education. In addition, he was chosen for Insurance Business America magazine’s “Hot 100” list. A CIC designee since 2012, who has also participated in Dynamics of Selling and the CRM Program, Mark is the youngest of 47 managing directors and a top producer at Higginbotham.
McFadden Honored Renee McFadden, CIC, CPL, VP and Regional Sales Manager of Distinguished Programs was presented with the PIANY Industry Professional of the Year award at their annual Metropolitan Regional Awareness Program on January 28, 2016. This award recognizes an individual from an insurance company, general agency, managing general agency, or other insurance industry profession, who has demonstrated qualities that foster a strong working relationship with agents and brokers, and who has exemplified a commitment to professionalism and service.
Nominate a Star CSR
for the 2016 Outstanding CSR of the Year Award. See details on back cover.
www.TheNationalAlliance.com
Ewing Scholarship Endowment Lance J. Ewing, CRM, ARM, ERMP, of Cordova, TN, (center) has partnered with the University of Mississippi to establish a scholarship endowment in their School of Business Administration that will provide scholarships to students in the Risk Management and Insurance program. “Mentoring, or teaching, or giving back in some way has always been part of my career trait and I hope this scholarship can provide that for future risk management and insurance students,” Ewing said. Ewing served as RIMS National President in 2003–2004. He is a CRM National Faculty and Specialty Ruble faculty member, as well as a CRM mentor. He is also a past CIC and Academy Board member, and has a CRM scholarship in his name (Lance J. Ewing Educational Scholarship).
Shown left to right: U of M Dean Ken Cyree; Lance Ewing; and Robertson Chair of Insurance Professor Andre Liebenberg.
Illinois Elects Jackman
LassiterWare Cares Recognized
Cynthia K. Jackman, CIC, CISR, insurance consultant with Consolidated Insurance Agency in Carbondale, IL, has been elected President of the IIA of Illinois. Cynthia is a past-Regional Director and past-VP for the IIA of Illinois and will serve as their President through September 2016.
CIC Board member and LassiterWare Board Chairman, Ted Ostrander, CIC, AAI, is proud to share with us the news that LassiterWare’s Foundation—LassiterWare Cares—was honored with the 2015 Humanitarian Award granted by the Leesburg, FL, Chamber of Commerce. The award recognizes outstanding individuals who dedicate their time to improve the well-being and happiness of other people.
Griffith Shows Grit Congratulations to Griff Griffith, CIC, CRM, CPA, of GMGS (Garrett-Mosier-Griffith-Sistrunk) Risk Management and Insurance Services of San Clemente, CA, for his recent triumph at the 2016 Antartic Ice Marathon—he was a convincing winner of the men’s competition, leading from start to finish. Griff is a leading faculty member for the Dynamics of Selling Program. Three cheers for an amazing accomplishment!
Accepting the award were Doug Childers, Jr., LassiterWare CEO; Mandy Funkhouser, LassiterWare Cares Chair; and Stephanie Payne, LassiterWare Marketing Coordinator.
Have you been “IntheSpotlight”? To submit an item for editorial consideration, send article with photo to: The National Alliance/Resources, P.O. Box 27027, Austin, TX 78755-2027, or email mbown@scic.com.
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PRSRT STD U.S. Postage
PAID Austin, TX Permit No. 93
Nominations are now being accepted for the 2016 Outstanding Customer Service Representative of the Year® award. Do you know an industry professional who’s at the top of their game in the customer service arena? Nominate them for the top honor in the industry! The national winner will receive $2,000 cash, a gold and diamond pin, and a framed certificate of recognition. National finalists win $500 and a gold and garnet pin. And if you nominate the national winner, YOU will receive a $1,000 cash award! All it takes to enter is a nomination, a letter of recommendation, a competition entry form, and a 1,000-word essay written by the nominee on the topic, shown here in the gold box. Entries are due no later than May 1, 2016. For more information about the award and to download forms, visit: www.TheNationalAlliance.com/CSR_Award.
“Many in our industry came into insurance by chance, but have built a career by choice. How did you come into the industry, and what are four reasons you stayed and built a career?”