Resources Magazine Spring 2018 by resourcesmagazine

NICHE KNOWLEDGE

Cyber and Executive Liability Domestic Staff and EPL Long-Term Care Funding

LEADERSHIP

Women Entrepreneurs Producer Success Team Rockport

THERE ARE MORE DRONES IN THE SKY THAN PASSENGER PLANES. The world never stops advancing. And the insurance industry has to keep pace. Since 1969, The National Alliance has been the educational force in the industry. Thatâ&#x20AC;&#x2122;s because we offer training by industry experts. Our job is to make sure you and your people are better informed than anyone else in insurance and risk management. Find out how we can customize an education program just for your organization. Call 1-800-633-2165 for details.

Visit us at www.scic.com/contact-us

WHERE EXPERTS BECOME EXPERTS.

Contents FEATURES 8 The Top Three Reasons Your New Salesperson is Struggling

Carletta Clyatt—VP with Omnia Group Setting up new Producers for success

18 Rockport-Fulton Revisited

Chris Christian, CIC, RPLU More than ever, executive liability, as it relates to cyber exposures, is a critical focus for you and your clients.

Shirley Gordon, CRM A Personal Risk Manager’s perspectives on the employment practices liability exposures associated with domestic staff.

28 Innovations in Long-Term Care Funding

Jerry Rhinehart, CIC, CLU, ChFC, RHU Examples, options, triggers, and recent innovations.

32 How Blockchain is Changing the Industry

CRM programs now 16 hours; the Resources Risk & Insurance Webinar Series

22 Train Your Team

Map career tracks for your entire team

37 In the Spotlight Industry accolades and achievements

12 Domestic Staff and the EPL Exposure

Laura Sherman, CPRM, CAPI, and Kate Norris, CPRM, CAPI, discuss their paths to success in the high net worth insurance and risk management arena

4 Cyber Exposures and Executive Liability Peril

7 Ask Bettie

36 Learning Horizons

COLUMNS

NEWS

How teamwork helped heal a community hard-hit by Hurricane Harvey

24 Women Entrepreneurs

TheNationalAlliance.com

FSU Risk and Insurance Undergrads An academic perspective on blockchain’s impact.

On the cover (left to right): Paul Chapple, Director of Reconstruction Operations for NorthStar Recovery Services; Kathleen Hicks, CIC, Director of Administration and Risk Management for Risk Pool Alliance; and Travis McDavid, CIC, VP of GSM Insurors.

Getting out (of the office) and standing out (top colleges)

Inspiration

1,000th CISR Elite, Michelle McGee

Please join us as we congratulate Michelle McGee for becoming the 1000th National Alliance participant to have earned the distinction of CISR Elite! Michelle began working in the insurance industry in 2005 as an office assistant at a small agency, and with the support and encouragement of her employer and coworkers, she was trained and licensed within a year. Since then, Michelle has worked exclusively in personal lines—first as a personal lines assistant and then as a producer/consultant. Once she discovered how the training she received through the CISR program allowed her to increase her knowledge and become more of an asset to her agency, coworkers, and clients, she decided to take all nine CISR course offeringsand become distinguished as a CISR Elite. Michelle stated, “The best moments in my career have always been when I’ve been able to use the education I’ve received to educate and help others.” Congratulations, Michelle! For more information about the CISR Elite distinction, go to scic.com/cisr-elite.

alliance@scic.com • 800-633-2165

NICHE KNOWLEDGE This timely article is the final in a series of seven written by Chris Christian, CIC, RPLU, for Resources magazine which look at diverse aspects of executive liability risk from a variety of perspectives. Starting with the 2016 Summer issue, Chris’s article, “The Wide, Wide World of Executive Liability,” provided a brief introduction to the exposures addressed by executive and management liability coverages, along with some history and background about the various specialty lines. Her 2016 Fall article covered directors and officers liability, while her Winter article offered insights into human resources malpractice insurance. In her 2017 Spring article, she shared a valuable synopsis of fiduciary liability coverage as it relates to benefits malpractice, and followed that in the Summer issue with an article about crime coverage. Kidnap, ransom, and extortion coverage was the subject of her article published in the 2017 Winter issue, and now, in this last installment, she takes a look at how and why cyber exposures intersect with executive liability perils and coverages.

BY CHRIS CHRISTIAN, CIC, RPLU

irectors and officers, and the corporation as a caretaker of its customer relationships, are coming under fire for their alleged lack of diligence and concern regarding security of their customers’ data. Both the prevention of a breach and the company’s post-breach response can be subjected to regulatory and civil scrutiny and may give rise to claims. Most claims by the parties whose data was compromised would hypothetically be properly covered by a cyber policy. However, if the insured does not have a cyber policy in place, or if its limits are insufficient, it’s possible that a D&O policy could respond to allega-

RESOURCES | Spring 2018

suits after a breach becomes public. tions of negligence regarding data The suits can be brought by the security or breach response. D&O shareholders for their direct loss of carriers generally don’t want to get diminution of share dragged into claims value, or they can be as a de facto cyber brought derivatively, policy, so we are startBoth the with the shareholding to see the addition prevention of ers standing in the of breach exclusions shoes of the corpoon many forms. As a breach and ration, alleging the tends to happen with the company’s Ds & Os harmed the exclusions these days, entity through their the wording may be post-breach negligence. overbroad and could response can Either of these be excluding coverage approaches could for claims that would be subjected be fruitful for the be appropriate for a to regulatory plaintiffs, although D&O policy. courts to date have For example, and civil tended to dismiss the we find that many scrutiny and suits. Many of those publicly-traded firms dismissals have incur shareholder may give rise

to claims.

occurred due to technicalities in how the claims were brought, so it is likely only a matter of time before a similar suit makes it past the “Motion to Dismiss” phase and goes on to bigger, better negotiations with subsequent settlement, or an actual trial and judgment. There is also the question of claims being brought against Ds & Os for not having proper cyber coverage in place and therefore incurring excessive financial harm in mitigating a breach or responding to breach claims. The specter of this type of claim, as well as many others, should serve as a reminder to us to reject a “failure to maintain insurance” exclusion in our D&O policies. Any claim against the Ds & Os for damage to the corporation,

share value, relationships, etc., due to a breach would be considered “knock-on D&O” claims, and we would want to see coverage for them in a properly written D&O policy. For this reason, we need to keep an eye on any breach exclusions in D&O policies to ensure they don’t spread beyond acceptable boundaries and especially that they not apply to claims against the insured persons. Employment practices liability intersects with cyber when it comes to breaches of employee data. Such breaches certainly occur, and an EPL policy with a privacy endorsement or coverage provision may be useful in addressing them. However, we tend to find that such provisions in an EPL policy

carry relatively small sublimits and limited coverage. If an insured is concerned about employee data, or has several hundred or more employees, a real cyber policy is going to be a more effective tool in addressing any employee data breaches. Fiduciary liability policies do include some coverage for violations of HIPAA, but that coverage can be sublimited or may apply only to fines and penalties. HIPAA violations can take many forms, from insufficient documentation of disclosure of privacy rights, to an employee peeking in a patient’s file without a business purpose for doing so, to a breach of numerous records by a third party. Whether any or all of these breaches would Spring 2018 | RESOURCES

Learn More, Earn More be covered by a fiduciary liability policy depends on the circumstances of the specific case and applicable policy wording. As with EPL, if the insured is concerned about HIPAA exposures, the more effective tool to address them would be a robust cyber policy. Crime policies and cyber exposures have some cross-pollination, specifically in the area of social engineering fraud. Some carriers are adamant that social engineering fraud coverage belongs on a management liability/crime policy, and others prefer to see that coverage on a cyber policy and do not want to add it to their crime forms. Some carriers will offer the coverage on either type of policy. Coverage for social engineering fraud is very much in flux at the time of this writing. Carriers are changing underwriting parameters, …many policies available limits, and require that requirements ransom/ regarding controls extortion losses exercised on be a “targeted the part of the insured. attack” against Exclusions the insured. or coverage requirements A ransomware pertaining attack is rarely to call-backs and confirtargeted and is mation of the more typically validity of the requested the result of a transfer are widely-cast net also proliferating. We of malware. will need to revisit this topic in the future for a more extensive and clearer look at it. Kidnap, ransom, and extortion coverage may address some cyber exposures. Most KRE policies cover extortion threats against the 6

RESOURCES | Spring 2018

The topic of cyber risk is addressed in a number of National Alliance course offerings. You’ll find segments in both the CIC Commercial Casualty and Commercial Multiline courses, as well as certain Ruble Graduate seminars (check the seminar’s specific agenda). For a concentrated dose of cyber risk education, attend a PROFocus Cyber Risk course, which offers 16 hours of advanced training on this important area of coverage. The classroom PROFocus Cyber Risk course is available in Atlanta, GA, October 4–5. (As a duespaid designee, you’re eligible to receive a savings of $200 on the registration fee of one PROFocus course in 2018.) Visit scic.com/profocus for details.

insured’s data or property, including their computer systems. If an insured receives an extortion demand threatening to release data or harm the insured’s systems, the policy will respond to mitigate the threat and/or pay the extortion monies. It may also be possible for a KRE policy to cover a ransomware attack, and I have heard of a couple of situations where insureds have turned in such a claim to their KRE carrier. I have not yet seen the outcome of turning in such claims and am eagerly awaiting updates when they are available. However, I would not suggest relying upon KRE policies to address this exposure. There are two major shortcomings that could interfere with hoped-for coverage. First, many policies require that ransom/extortion losses be a “targeted attack” against the insured. A ransomware attack is rarely targeted and is more typically the result of a widely-cast net of malware. Second, the ransom provisions in a policy often apply solely to the kidnapping of a person and do not address the “kidnapping” of data or systems. It could be that a ransomware attack against a computer system and its data could contain elements of extortion (“pay us or else we’ll start deleting the data”) and that might trigger coverage if the insured gets over the targeted attack hump. However, if the attack is purely a ransom demand, coverage would be challenging to come by. In summary, it’s important to note that an insured’s cyber exposures intersect with all portions of

their executive liability concerns. Coverage and exposures are evolving very quickly, and it’s prudent to keep a close eye on the developments. n

About the Author: Chris Christian, CIC, RPLU Chris Christian is a Ruble Faculty member and VP/ Senior Broker for U.S. Risk. She stumbled into insurance in 1985 as a temporary worker in a bank-owned agency and got hooked on the delightful mix of legal concepts, contracts, sales, and services that comprise the industry. She has specialized in professional liability since 1991, working on the carrier and wholesaler sides. In addition to her daily practice of the art and science of wholesale brokering, Chris is a frequent contributor to industry publications, speaker at events and educational seminars, and is the author of Cyber Insurance Basics, available on Amazon.

President William T. Hold, PhD, CIC, CPCU, CLU Publisher/Senior Art Director Becky Keeling bkeeling@scic.com Editor-in-Chief Carol Crysup ccrysup@scic.com Senior Editor Donna Loughran Department Editors JoAnn M. Clarke, CIC, CRM, CISR, CSRM, CPCU, ARM, ARe, AAI, CPIW jclarke@scic.com Deborah Davis, PhD, MEd, BA ddavis@scic.com Beverly A. Messer, CIC, CRM, CISR bmesser@scic.com Elsa C. Sanchez, CIC, CRM esanchez@scic.com D. Darelle White III, CIC, CPCU dwhite@scic.com Resources is published by The National Alliance for Insurance Education & Research, P.O. Box 27027, Austin, TX 78755-2027, 800-633-2165, Fax: 512-349-6194, Internet: TheNationalAlliance.com, email: alliance@ scic.com. At present, Resources is available to dues-paid Certified Insurance Counselors (CICs), Certified Insurance Service Representatives (CISRs), Certified Risk Managers (CRMs), Certified School Risk Managers (CSRMs), Certified Personal Risk Managers (CPRMs), and affiliates of The National Alliance Research Academy. Entire contents Copyright © 2018, The National Alliance for Insurance Education & Research. All rights reserved. Material in this publication may not be reproduced in any form without permission. Authorization to photocopy items for internal or personal use, or the internal or personal use of specific clients, is granted by The National Alliance, provided that the following words are included on any copy: “Reproduced from Resources with permission of The National Alliance for Insurance Education & Research.”

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

Do you have a question to “Ask Bettie?” Bettie Duff, Senior VP 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 questions to bduff@scic.com. Dear Bettie, I am in the process of earning my CRM designation and have heard that the courses will now be 16 hours instead of 20 hours—is this true? —George Simpson, CIC Hello George, Thank you for inquiring because we are delighted to announce this change, endeavoring to meet your needs and reduce your time out of the office. Please keep in mind that this change will be implemented in phases. Starting January 1, 2018, Principles and Control of Risk became available in the new 16-hour format, both classroom and online. The 16-hour classroom courses start at 8:00 a.m. on Wednesday, with the exam Friday morning, and the online courses are four weeks long, rather than five. Practice of Risk Management will transition to the 16-hour format in third quarter 2018, followed by Finance of Risk in fourth quarter 2018, and Analysis in first quarter 2019. It will be extremely important that you read your registration confirmation letter to confirm your start dates and times throughout this transition period. George, we look forward to your earning the prestigious CRM designation! —Bettie Dear Bettie, I recently became a dues-paid member of the Society and read that one of the many benefits includes access to some exclusive webinars. What kind of topics are covered and how do I access them? —Sandra Lankford, CPRM Hello Sandra, We’re excited about this online content because it represents a powerful and effective channel for bringing value to our designees. The Resources Risk & Insurance Webinar Series provides in-depth information and unique perspectives delivered by a variety of subject-matter experts in easy-to-digest, one-hour presentations. Focused on pertinent, current topics, these webinars are designed to help you strengthen your approach to clients and discuss current events within the context of proper insurance coverage. As a dues-paid designee, you may access the series by logging into your PROfile (upper right corner of scic.com) and selecting “Dues Paid Webinars” in the left-hand column. So far, topics have included The Internet of Things, Cyber Liability, Insuring Non-Profits, and most recently—Contractual Risk Transfer and Additional Insured Status. Additional webinars are in development and will be released periodically throughout the year, so check back often to see what is new. —Bettie Spring 2018 | RESOURCES

SALES SAVVY

hether talented salespeople are born or made remains a topic of debate, with the answer undoubtedly lying somewhere between nature and nurture. Still, it’s a good question, and certainly worth exploring during the hiring process. But darn-it, you’ve already made your hiring decision! In fact, your new salesperson has been on the job a few months, and with each passing day you become less confident he or she will meet the goals you’ve outlined. Let’s just admit it—your new hire is…struggling. But there’s hope! Here are the top 3 reasons why this might be happening and (more importantly) what you can do about it.

RESOURCES | Spring 2018

Reason #1. Your Onboarding Process is Flawed.

No matter how gifted your new salesperson is, an effective onboarding process is a must. In addition to learning about your agency and products and services, the new hire has to acclimate to a brand new environment that includes new policies, new procedures, and new people. All of this takes time and training—or to put it another way, good onboarding. Neglect this stage and you may be setting new hires up to fail. Before your new superstar salesperson starts his or her first day, make sure you: • Create a training plan. Who will be responsible for teaching the new salesperson and what is he expected to learn? What portion of the new hire’s education will be self-study? Are your train-

ing materials in order? Have you set clear expectations with current staff who will be working with the new hire? Nothing is more demoralizing than being “trained” by a grumpy coworker with her own workload and far too little interest in seeing a newbie succeed. Consider investing in some formal training, like The National Alliance’s Dynamics Master Sales Class, that will motivate, energize, and help the new hire ramp up quickly. • Take care of the “little” things. Has your new employee been assigned an email address? Does she have the equipment needed for the job, such as a laptop, tablet, or cell phone? Is her desk adequately equipped with office supplies? What about an organizational chart or company phone list? These may seem like minor details you can worry about later, but such preparations will make new hires feel welcome and lay the foundation for a smooth transition into the new position. • Touch base with HR. Even if your hiring process is highly decentralized, at some point, your human resources department has to be brought into the loop. While you’re planning an orientation to the job tasks, HR can be planning an orientation to the agency at large, including an introduction to

by Carletta Clyatt, The Omnia Group, Inc.

It might be tempting to think that your superstar new hire can be thrown into the mix and figure it all out, but even superstars need support or they may struggle. all that pesky, but necessary, paperwork, like W-4s and I-9s. It might be tempting to think that your superstar new hire can be thrown into the mix and figure it all out, but even superstars need support or they may struggle. A solid onboarding process is a firm foundation for employee success.

Reason #2. No Mentor.

Whether formal or informal, a mentoring program is a valuable addition to your new salesperson’s education as well as her acclimation into your company. A good mentor can introduce your new employee to all kinds of information about what you do and how you do it—and that’s in addition to industry knowledge and sales technique. With a mentor, your new employee always has someone to tap into for advice, or to ask that “stupid” question he is too embarrassed to ask the boss. A mentor isn’t a substitute for formal education or managerial coaching, but an enthusiastic one may be just the thing that could help your new employee transition from “struggling” to stepping “firmly into the learning curve.”

Reason #3. The New Employee Isn’t a Good Fit for the Job.

Because it’s so important, yet often so elusive, the idea of “hiring for fit” has been written about extensively. Typically, when we think

Spring 2018 | RESOURCES

SALES SAVVY

of hiring for fit, we think of employing someone with traits compatible with the job tasks and the organization’s culture. So, what are the traits of every good salesperson? Well, that’s a trick question! The traits depend on the sales job. The smooth talking, confidence oozing, persuasive salesperson is one type, but there are other types who arguably are just as successful, if not more successful, than the “traditional” sales personality. In his book, Give and Take, Adam Grant writes at length about the “giving” personality and how these naturally unselfish individuals can make excellent salespeople because they listen more than they talk, offer sincere efforts to solve customer problems, and are good at building rapport, especially with customers inclined to be turned off by a more aggressive approach. The same can be true of the customer service folks with deep product knowledge. These individuals may shy away from “selling,” but

they’re only too happy to share their know-how with customers in distress—leading to both happy customers and a fatter corporate wallet. Having said all that, sometimes your new hire really isn’t a good fit. Whether it’s the pace, the product line, the pay, or the personality of the hiring manager, something might be “off.” In these cases, it may be better to cut your losses and move on. But before sealing the deal with a new hire, consider beefing up your hiring practices by reviewing your interview questions to ensure they focus on preferences and past behavior, and/or by adding a behavioral assessment to draw out your potential new employee’s behavioral traits. Here’s the bottom line: If you find that your new salesperson is struggling, you have options that don’t automatically include letting him go. For example, even if the onboarding process was flawed, it may still not be too late to begin

Learn More, Earn More Hiring, Managing, and Compensating Insurance Agency Personnel, coauthored by National Alliance faculty member Jon Persky, CPA, CIC, PHR, and Jenny Foster, CIC, offers a wealth of valuable information on the subject of recruiting, hiring, and firing, as well as agency best practices and sample job descriptions. Purchase your copy—digital or paperback—at NationalAllianceBooks.com. 10

RESOURCES | Spring 2018

Learn More, Earn More The National Alliance also offers sales training programs—the Dynamics Series—with courses geared toward sales techniques as well as sales management. And the popular National Alliance Producer School now has a streamlined format and new name—the Dynamics Master Sales Class. Ideal for helping new Producers get up-to-speed, this powerful week-long training event features the best active professionals and mentors in the insurance and risk management industry. Not only do the instructors’ individualized coaching impart a clear sense of direction, participants are empowered to customize their training by choosing either a commercial lines or personal lines track, delivering the most bang for your training buck.

doing now what could have been done then. Set time aside to educate the employee—both formally, to develop robust selling skills, and informally, to help them adapt to your corporate culture—and gather up the tools he or she needs to get the job done. If your company doesn’t have a structured mentoring program, who’s to say you can’t create your own by judiciously pairing a senior salesperson with your newer employee? Intervene wherever you can to get the results you want. That’s a win-win for both you and your soon-to-benon-struggling employee! n

About the Author: Carletta Clyatt Carletta Clyatt, a popular seminar speaker, is the Senior VP at The Omnia Group. She offers clients advice on how to manage more effectively and gain insight into employee strengths, weaknesses, and behaviors. For more information about employee behavioral assessments, call Carletta at 813-280-3026 or email: Carletta@omniagroup.com.

Point your smart-phone camera at this QR code to link to a podcast where you can hear Mitch Dunford, Chief Innovation Officer and Academic Development Officer for The National Alliance, talk with Diane Masterson, CIC, CPCU, Ruble Faculty and Regional Sales Manager with State Auto, and Griff Griffith, CPA, CIC, CRM, Dynamics of Selling Faculty, CIC Board member, and Principal with GMGS Risk Management & Insurance Services, about how they have enjoyed success developing the skills and productivity of producers both inside and outside their organizations.

Become a Better Insurance Producer in Only 5 Days!

— Sign up for The Master Class —

• Discover new techniques that get you in the door • One-on-one sales coaching and interactive role-plays • Build a realistic sales plan tied to specific business goals • Develop a niche market and leave with a marketing plan

“This is by far the best sales course I have ever taken. I am sending all of my producers.” John G. Heist, Sales Manager, Thomas Heist Insurance Agency

• Increase your HIT RATIO from 25% to 75%

Learn From the TOP Sales Pros in the Insurance Industry. Enroll in a Dynamics Master Sales Class Today. Aug. 13–17 | Indianapolis, IN • Oct. 22–26 | Harrisburg, PA • Dec. 10–14 | Anaheim, CA Learn More & Register Now: scic.com/producer • 800-633-2165

PERSONAL RISK MANAGEMENT

BY SHIRLEY GORDON, CRM

ersonal Risk Managers must adapt to the role of trusted advisors by bringing valuable advice and resources to our clients. As new technology changes the world of insurance, it becomes more important that we differentiate ourselves from “order takers” and show that we understand the complex needs of our Affluent and High Net Worth clients. Risk management then becomes an invaluable tool for Personal Risk Managers to positively affect the success of their clients’ insurance program, from reducing losses to

RESOURCES | Spring 2018

improving insurance market options, long-term insurability, and favorable pricing. An area of frequent and often controllable losses is Employment Practices Liability (EPL). EPL covers certain employment exposures a business or individual employer might encounter with their hired staff. Businesses commonly use insurance to finance this exposure to loss, but many individuals who employ domestic workers do not; some simply don’t believe their long-time housekeeper or nanny would ever make such a claim against them. Whether a client

hires an employee directly or through an employment service, they remain exposed to employment practice-related liability claims. Affluent and High Net Worth clients are quite likely to have at least one domestic employee (for example, a housekeeper or gardener) working in their household. On the other end of the spectrum are clients with a sizable staff, consisting of household, personal, and travel staff. These clients might also employ a “Majordomo,” a title describing the head of household staff. Fellow Downton Abbey fans

Learn More, Earn More Attend the Certified Personal Risk Manager (CPRM) Evaluating and Protecting the Lifestyle course to learn more about how domestic staff increases clients’ exposure to loss and the importance of incorporating risk management control techniques when structuring their insurance protection. Discover when relying on coverage provided by a homeowners or personal excess policy designed for High Net Worth clients may meet their needs and the alternative ways to provide coverage. Plan to attend the next Evaluating and Protecting the Lifestyle course in Boston, MA, September 25–27. For information on the CPRM program and the other CPRM courses, visit our website at TheNationalAlliance.com.

would recognize Carson as a Majordomo. Clients with domestic staff are employers with responsibilities and exposures to loss, like those of a

Majordomo definition: a head steward of a large household (such as a palace); butler, steward. Source: merriam-webster.com/ dictionary/majordomo

business, but often without human resources, legal resources, or risk management departments. In the curriculum of the Certified Personal Risk Manager (CPRM) “Evaluating and Protecting the Lifestyle” course, three hours are dedicated to managing clients’ risk associated with domestic employees. As a faculty member, I present the material in story-form by sharing news articles involving celebrity lawsuits, many of which involve former employees alleging their famous employers harassed or discriminated against them. Other common allegations include inva-

sion of privacy, wrongful termination, and wage and hour violations. As Personal Risk Managers, our role is to help our clients reduce the potential for employment-related claims. To achieve this objective, it is important to understand the questions we must ask our clients to help identify and analyze their EPL exposures. While we strive to ensure that losses are paid by applying the most appropriate method of risk finance, clients should also apply risk management techniques to reduce the likelihood of these claims, both from a frequency and severity standpoint. (Continued on next page.) Spring 2018 | RESOURCES

Benjamin Franklin said, “An ounce of prevention is worth a pound of cure.” We help our clients understand the importance of risk control, which, if implemented at each stage of the employment process, can mitigate their potential for loss. Let’s look at a few helpful methods your clients can use to reduce the potential for EPL claims at various stages of employment. Pre-employment: When possible, clients should outsource the selection and management of domestic staff to a reputable firm. Some High Net Worth insurance companies may be able to provide referrals or services. • Understand local, state, and federal laws applicable to the interviewing and hiring process • Use current and complete job descriptions (reviewed by an employment law attorney) • Have a current and complete employment manual and contracts (also reviewed by an employment law attorney) that include information such as: – Job expectations and requirements – Work location(s), schedule, and hours per week – Compensation: including overtime, benefits, paid-time-off, and holidays – Social media policy, confidentiality expectations, personal visits permission – Expectations of behavior in the household and with others during the course of employment – Consent to order reports (motor vehicle, background, licenses/ certifications) – Performance review process – Termination process

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• Apply a fair and consistent interview and selection process • Run compliance and uniform background checks

Even with the best planning and mitigation controls in place, our clients can still be sued for alleged acts tied to employment practices.

During Employment: • Host a meeting with family members to outline the types of behaviors and discussions that are appropriate to have (and not have) around domestic employees

• Train employees—both new hires and longer term—at regular intervals (every 12 months is recommended) – Discrimination and harassment: zero tolerance and escalation policy – Emergency procedures: situations response, decisionmaking – Injury prevention and notification

• Complete and document regular employee assessments and annual reviews • Secure all human resource-related information for employee protection • Review and update employment agreements, job descriptions, and background consents

• Address and correct problems early, fairly, and consistently • Request regular feedback to ensure employees feel valued and secure • Update insurance broker of changes to number and duties of employees • Comply with their state’s Domestic Workers’ “Bill of Rights” – A “Bill of Rights” provides protection for domestic workers in areas such as minimum wage,

overtime pay, periods of rest, paid personal time, protection against harassment, required benefits, not reducing pay for breakage of property, etc. There are seven states with a “Bill of Rights” (CA, CT, HI, IL, MA, NY, and OR). – Clients are responsible for compliance and can face disciplinary action by a state’s Department of Labor, Human Rights Commission, etc., if determined not compliant. Post-employment: • Resignation—The client should request from the resigning employee a written letter describing the reason for leaving and keep it on file. If the employee will provide no written document, the client should attempt to discuss the reason for leaving, record the response, and place the documented statement in the employee file.

• Termination—The client should first ensure that he/she has a legal basis and the termination is compliant with local, state, and federal laws. • Conduct a post-employment assessment for potential improvements to their employee environment • Notify their insurance broker of changes to the number and duties of their employees

Whew! Insurance to the Rescue

Even with the best planning and mitigation controls in place, our clients can still be sued for alleged acts tied to employment practices. Using insurance as the method of risk finance provides our clients with defense coverage as well as coverage to pay claims and settlements. It is important to understand the solutions you can provide and stay up-to-date with the changing markets, coverage terms, conditions, and exclusions.

Coverage Provided by the Personal Excess Liability Policy Some insurance companies specializing in coverage for Affluent and High Net Worth clients offer the ability to purchase this coverage as part of their personal excess liability policies. This may be a sufficient solution to your client’s needs, and relatively easy to implement, but it is important to note that this coverage does not protect the client against all employment act allegations— it must be a covered

wrongful act alleged by an individual that falls within the policy’s definition of residential/private staff. Covered Wrongful Employment Act What is a covered wrongful act? This defined term is used to describe only very specific offenses. Typically, these acts are limited to wrongful termination, harassment, or discrimination. When an allegation falls outside of the named offenses, a client is left financially responsible for a claim. Protection Against Allegations by Domestic Staff Coverage for a covered wrongful act is provided to compensate only those domestic employees who meet the policy’s definition of residential staff, private staff, or similar. If the allegation is made by a person not included in this definition, there is no coverage. No coverage = No defense No coverage = No payment to compensate the client

The endorsement or coverage language must be reviewed to ensure Outsourcing that the employee’s specific duties and the selection number of hours and worked meet the definition of residential/ management private staff. If they of domestic do not, the coverage does not apply. staff to a As mentioned reputable firm above, there is no coverage for an alspecializing legation made by a in High person who is not included in the definiNet Worth tion of residential/prifamilies is an vate staff. What if the harassment is done additional by the residential/primethod to vate staff to someone

prevent/ reduce losses.

Spring 2018 | RESOURCES

else? Third-party liability coverage is NOT provided. While these types of losses are not commonly made against Affluent and High Net Worth clients, it should be understood how these losses could occur. An example: A client’s housekeeper regularly “compliments” the delivery driver on his physical attractiveness when he comes to the home. Over time, the housekeeper becomes more explicit with her comments. The delivery driver sues the client for harassment, as he or she is vicariously responsible for the conduct of employees. The client would have no coverage for this loss. Staff Size Limitation Care must also be taken to make sure the client’s staff size does not exceed the policy’s limitation Care must for the maximum number of emalso be taken ployees allowed. to make sure Policies limit the maximum number the client’s of staff for the staff size does coverage to apply, anywhere from not exceed as few as five or the policy’s as many as 12. Should a client’s limitation staff size exceed for the the maximum number during maximum the policy period, number of coverage could be affected. Make employees sure you and your allowed. client know what that number is. Coverage is typically $500 or more for $250,000 per occurrence/$500,000 aggregate with higher limits available. Defense costs are outside of policy limits. A deductible applies.

RESOURCES | Spring 2018

Domestic Staff Can Include: Estate Manager

Butler

Household Manager

Majordomo

Valet

Domestic Couple

Estate Security

Private Chef

Maid or Housekeeper

Groundskeeper

Executive Housekeeper

Farm Manager

Personal Assistant

Houseman

Caregiver

Au Pair or Nanny

Governess

Laundress

Body Guard

Elderly Companion

Chauffeur

Yacht Crew

Jet Crew

Aviation Crew

Final Thoughts

The past year has set the stage for explosive sexual harassment claims. The Harvey Weinstein scandal and the #MeToo social media movement will likely embolden victims to speak out—and sooner. The effects will probably cause an increase in the frequency and severity of claims. Eventually, insurers may increase rates and/or amend policy wording. Be sure you and your clients are aware of the coverage provided, or not provided, by the Personal Excess Liability Policy. A standalone Employment Practices Liability policy may be more appropriate for your client if they have a larger staff size, desire broader coverage, and/or higher limits. These policies can be purchased through some Affluent or High Net Worth insurance companies or through managing general agents. These types of policies are not standard, so it is important to understand the cover-

age differences. Today’s Personal Risk Manager must identify and understand EPL coverage options, compare policies, and present the best risk management solutions to the client. n

About the Author: Shirley A. Gordon, CRM Shirley Gordon is a CPRM Faculty member and Family Office and Client Service Leader with Lockton Private Risk Solutions. Her experience spans more than 20 years in the insurance industry, having held previous positions with Marsh Private Client Services and Wells Fargo Private Risk Management. Shirley brings tremendous passion to ensuring that clients receive timely and valuable risk management advice and solutions.

Scan this QR code to access “HomeEconomics: The Invisible and Unregulated World of Domestic Work,” a report by the National Domestic Workers Alliance, Center for Urban Economic Development, University of Illinois at Chicago DataCenter.

hen the average person thinks about insuring assets—cars, homes, health, and businesses are what typically come to mind. But, as we know, the world of insurance and risk management is vast, with many fascinating and unusual facets. Consider, for instance, the concept of insuring a museum. The restoration and preservation of delicate artifacts, risk management issues surrounding staff and visitors to the museum, and emergency preparedness to mitigate the impact of a catastrophic event are just a few of the aspects of insurance and risk management associated with this unique market niche. As part of our efforts to bring you new perspectives on insurance and risk management, our National Alliance Media Team visited the National Museum of the Pacific War, located in Fredericksburg, Texas, and interviewed Museum Director, Joe Cavanaugh, who talked about the challenges of protecting rare WWII era artifacts. Our team also recorded one of the museum’s reenactment events—the Living History Program at the Pacific Combat Zone—which involved staff and volunteers, complete with tanks, flamethrowers, and period guns, revealing a myriad This QR code will link you to a glimpse into the fascinating world of insurance and risk management as it relates to museums.

of risk management considerations. This exploration of the unique risks associated with museums (and museum events and activities, such as reenactments) brings to mind the question: What did your insureds do last weekend that you don’t know about? Do you know where your high net Joe Cavanaugh, Museum Director for the National Museum of the Pacific War, with one of the many worth clients’ fine WWII tanks that are in the museum staff’s care. art or antiquities might be on loan? The risk involved in caring for one-of-a-kind items and the management of complex public events require specialty insurance policies and an understanding of high-level risk management. What questions should you be asking your clients? The National Alliance’s CRM and CPRM programs can equip you with expert knowledge and resources to profile and meet the needs of the specialty client.

r. John Bratton, CIC, CPCU, ASLI, ARM, Professor of Insurance & Risk Management at the University of Central Arkansas (UCA), has announced that he is retiring from his professorship at the end of the Spring 2018 semester. Dr. Bratton has been a National Alliance Educational Consultant for 25 years and has served as a faculty mentor, and will continue his work in those capacities. In addition to being instrumental in the development of an insurance and risk management course that is currently taught in many Arkansas high schools, he made the proposal that led to the creation of the Arkansas Insurance Hall of Fame. Dr. Bratton encourages

his students to participate in UCA’s University Associate Certified Insurance Counselor (UACIC) Program. Since 2011, more than 75 UCA students have earned the UACIC designation—13 have gone on to complete their CIC designations. In honor of his outstanding dedication to education, the John Bratton Professorship Fund has been established to provide financial support for students and faculty in UCA’s Insurance and Risk Management program. The goal of the foundation is to honor Dr. Bratton by obtaining commitments for this fund to reach the endowment level. If you would like to support this effort to cultivate and bring bright, new talent into the industry by contributing to the John Bratton Professorship Fund, please contact: UCA Foundation, Inc. UCA Box 4986 Conway, AR 72035 501-450-5859 foundation@uca.edu Spring 2018 | RESOURCES

SUCCESS STORY

Rockport-Fulton In our 2017 Winter issue of Resources magazine, we described some of the devastation on the Texas coast resulting from Hurricane Harvey (see “Hurricanes and Heartache,” pg. 37). Here, we follow up on some of the key participants in the recovery process and how heart and professionalism went hand-in-hand in rebuilding the communities.

ransas County Judge C. H. “Burt” Mills, Jr., has an important role in emergency preparedness and response for the large county that he serves. Looking back on the devas-

tation caused by Hurricane Harvey in August 2017, and how far the county has come since then, he has plenty of good things to say about the team involved in the pre-planning, recovery, and rebuilding efforts. When asked what was

Revisited

the best pre-planning initiative in dealing with the after effects of Harvey, Judge Mills smiled and nodded at Travis McDavid, CIC, Vice President of GSM Insurors, and Kathleen Hicks, CIC, and said, “We have really good insurance!” Kathleen is Director of Administration and Risk Management for the Regional Pool Alliance, a consortium of governmental entities located on the Texas coast. The state of Texas grants governmental entities, school districts, and other tax-supported organizations

“We work closely with GSM Insurors—the local insurance agency that has been in Rockport since 1923,” says Hicks. We became familiar with them back in 2005 when property coverage on the coast became a real problem. Collaborating with GSM and with some coastal clients, we formed the Regional Pool Alliance.” Judge Mills praises not only the insurance coverage, but the swift and dedicated efforts of this special group of people and organizations who came together to get the Aransas County schools and its courthouse back up and running. Hicks

When asked what was the best pre-planning initiative in dealing with the after effects of Harvey, Judge Mills smiled…and said, “We have really good insurance.”

Left to right: Kathleen Hicks, CIC, Director of Administration and Risk Management for the Regional Pool Alliance; Judge C. H. “Burt” Mills, Jr.; and Travis McDavid, CIC, Vice President of GSM Insurors.

RESOURCES | Spring 2018

the right to band together in a special group to cover risk. Not considered insurance because it’s a self-insurance pool, a risk pool can be backed with insurance, specifically with property, liability, and workers’ comp coverage.

and McDavid are just two of many dedicated people who are working together post-Harvey to complete the rebuilding process, and they were part of the group that was involved in planning efforts long before Hurricane Harvey hit. As Judge Mills says, “You go into the emergency management mode when you hear a hurricane is approaching. We have a group of emergency prepared-

Teamwork Helps Heal a Community “Things can get quite chaotic when you are faced with an event like Harvey. That’s when realworld knowledge, like the CIC program teaches, kicks in.” —Travis McDavid, CIC be innovative to secure it for your clients. After the storm, to get internet service, members of our team were creating Dr. William T. Hold, CIC, CPCU, CLU, President of The National Alliance, and Travis makeshift techMcDavid, CIC, Vice President of GSM Insurors, met in January at The National Alliance nology, using headquarters in Austin, TX, to discuss the recovery efforts in Rockport-Fulton. imagination and innovawas as large as it was until ness people for the City of tion. They were pulling it was upon us. Things can Rockport and the town of bent antennas out of trees, become quite chaotic when Fulton. Normally, we ask putting them together and you are faced with an event for voluntary evacuation getting us back online. Harlike Harvey. That’s when 40 hours out, and then vey taught us that we have real-world knowledge, like we watch the storm very to practice our plan in a the CIC program teaches, closely. If it intensifies, I variety of possible scenarios kicks in.” order a mandatory evacuato test how applicable it is. After visiting The tion. Harvey was completeIt also showed us the imNational Alliance offices ly different. It didn’t give us portance of having talented in January, McDavid much warning. It built from people in place who can commented on how the a Category 1 to a Category think on their feet.” organization’s core values 4 almost overnight. We Norm Spears, Director apply to what he and the ordered a mandatory evacuof Information Systems at GSM team experienced ation at 20 hours out.” Aransas ISD, shares about in Rockport, “When the Travis McDavid of GSM the schools’ preparations, unexpected happens, you Insurors, adds, “Quite a bit “We have a meeting once need integrity, innovation, goes into pre-planning and

We come to a consensus about releasing school early or canceling school. Once a decision is made, we compose what we are going to communicate, and then we push that info out using an automated call system. Information can go out to the parents within 15 minutes. We also use social media and have a special group that can text for us. As a storm approaches— but while it is still at a good distance—we off-site our website and move our servers to a cloud-based unit in Austin.” The hurricane devastated Aransas County schools, governmental buildings like the old courthouse, and other historic landmarks. The fierce winds downed power lines and cut off vital communication services. The initial damage assessments were high because the level of destruction was

and imagination, or you’re going to be in trouble. You must have integrity for people to trust that you have their best interests at heart, and you need innovation and imagination to carry you through a disaster like this, because there is no script. Living in a zone that’s prone to storms, where no one wants to write insurance, you must

staggering. Spears was in the disaster zone the day after the storm and wrote a summary blog about what was happening inside ground zero. He also took pictures and shot video of the damage every day to

emergency strategies, but the key is having an innovative and flexible team. We didn’t know Harvey was a storm of “this magnitude” until the waning hours of Friday, August 25, just before it made landfall. Obviously, your preparation is different for a small storm compared to that of a large storm. Unfortunately, we didn’t know the hurricane

“We have a meeting once a month, and preparedness is the number one item on our agenda.” —Norm Spears a month, and emergency preparedness is the number one item on our agenda. When the real thing happens, we meet, listen to the National Weather Service, and have a conference call with all decision makers.

Spring 2018 | RESOURCES

SUCCESS STORY “When I returned to Rockport…and saw the damage in person, it was even worse than I thought.…It looked like a bomb had gone off.” —Joey Patek

Norm Spears (left), Director of Information Systems for the Aransas County ISD, and Joseph “Joey” Patek (right), Superintendant of the Aransas County ISD.

keep those outside the area informed. The biggest challenge was the loss of electricity. Spears explains, “We did have a generator that powered our local network— our technology wing. That’s where we made a makeshift office; we had air conditioners, we had lights, we had everything, except we didn’t have water or food unless we brought it in. I

don’t care if you had a million dollars; there was nothing left to buy in Rockport.” Superintendent of Aransas ISD, Joey Patek, says, “When I returned to Rockport two days after the hurricane devastated the area and saw the damage in person, it was even worse than I thought. I knew it was bad because I had seen the photos and video sent by Mr. Spears. But seeing it

Even though much of the rebuilding of schools and governmental structures in Rockport has been completed, a great deal of reconstruction is ongoing, with an estimated completion date of September 2018 and with a total price tag estimated currently at between 75 and 80 million dollars.

20 RESOURCES | Spring 2018

Photo: Gayle Hicks, NorthStar Recovery

in person—somehow it hits you harder. It looked like a bomb had gone off.” Regional Pool Alliance had already contacted NorthStar Recovery Services, which began setting up pre-positioned personnel and resources. As NorthStar’s Business Continuity team already had County access credentials as emergency First Responders, they had no trouble getting past DPS roadblocks and checkpoints the day after Harvey passed. Fortunately, pre-loss assessments had been conducted by NorthStar and the Regional Pool Alliance prior to the storm, and annual meetings with the ISD and the County had focused on disaster prepara-

tions, protocols, and insurance coverages. Because of these efforts, detailed information was available to assist with damage assessments, the coordination of materials and workers, and recovery plans. The question everyone kept asking was how long the schools would be closed. Superintendent Patek comments, “We didn’t have an answer for the parents until the NorthStar engineers could assess the damage. Until we had a viable timeline to get the kids back in school, we advised parents to enroll their children in surrounding school districts.” Neighboring school districts that escaped significant storm damage offered immediate assistance, and soon after, Gregory-Portland ISD and Sinton ISD welcomed 1,600 temporary students. Judge Mills says proudly, “The schools got back online by October 11, with the help of Kathleen Hicks

Scan this QR code (simply point your smart-phone camera at it) to access a poignant and inspiring video featuring drone footage of the Rockport area and comments from the recovery team.

Teamwork Helps Heal a Community and NorthStar, and with the support of the ISD, the County, and GSM; it’s unbelievable how far our community has come in the last eight months.” Paul Chapple, Director of Reconstruction Operations for NorthStar Recovery Services, says, “We have worked very hard to get the most important aspects of community life back together. Getting the kids back in school has been the most urgent matter, and the gratitude of the community and the kids has been exceptional. We’ve felt a lot of positive feedback from the community. It is hard-earned. We have a lot of good guys, and they have worked extremely hard in difficult conditions. It’s a great community, and it’s a pleasure to serve them. We’re going

“It’s a very emotional thing, but at the same time, you know what you are doing is making a difference. I credit my CIC training. We’re not in this just to provide property coverage, but to deliver a benefit to our clients.” —Kathleen Hicks, CIC to be here a while; we have work to do. We are not in a hurry to leave; it’s a wonderful place, and we are going to do our best to restore it to where it was before the storm.” Kathleen Hicks is not going anywhere either. She says, “My firm will remain on-site. We were here on August 28, just a few days after the storm hit, and we are still here. From the beginning, we were coordinating with the disaster recovery group—NorthStar, GSM Insurors, the school districts and the County.

“We told our clients,” Hicks says, “‘We know what the coverage is; we’ll work with the adjusters. We take the whole process and try to make it as painless as possible so that you can go forward with the recovery and meet the educational and governmental needs of your citizens.’” Hicks summed up the damage by saying, “Harvey was probably the worst storm I’ve ever seen, and I’ve been through Katrina, Rita, and Ike. Those hurricanes had a lot of flood damage. With Harvey, I’ve never seen

“We’ve felt a lot of positive feedback from the community. It is hard-earned. We have a lot of good guys, and they have worked extremely hard in difficult conditions.” —Paul Chapple

Fulton schoolchildren wrote letters of thanks to the NorthStar team for their work rebuilding the schools. Inset photo: Paul Chapple, Director of Reconstruction Operations for NorthStar Recovery Services.

as much wind damage as this one had or as many tornadoes wrapped up in a storm.” She continues, “It’s a very emotional thing, but at the same time you know that what you are doing is making a difference. I credit my CIC training. We’re not in this just to provide property coverage, but to deliver a benefit to our clients. The priority for all the team members was to get the students back in school, because their parents and the community can’t get back on track until that happens. And even though the school might not be finished completely, as one kindergartner said, ‘the school might still be a little “broke,” but not as broke as he thought it would be!’” Judge Mills says of the community, “We are very resilient and strong, and we rally around one another and help each other. We always have, and we always will. This area is a piece of paradise. People come here and realize how friendly we are—we don’t see any strangers. The amazing team that has come together to rebuild our community is made up of longtime residents and temporary transplants. But they have all become friends and are now a part of RockportFulton’s story.” n Spring 2018 | RESOURCES

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

As a National Alliance designee, you already understand the value and pride of obtaining a professional insurance or risk management designation. Reaching far beyond mere CE requirements, your commitment to life-long continuing education is a symbol of your dedication to your customers, your employer, and yourself. What will be your next move? Dozens of National Alliance education opportunities await you and your team. • Pursue an additional designation to broaden your repertoire. • Let us help train your producers and bring your new-to-the-industry employees up to speed. • Reduce your E&O risks by training your team. • Fine-tune your sales culture for profitable results. • Stock your reference library with top-notch reference materials and publications. • Increase customer (and employee) retention with valuable customer service skills. Our programs are known—first and foremost—for their “put-it-to-use today” practicality, as well as their affordability and accessibility. Some provide the best networking value when presented in a classroom setting, while many others maximize convenience with a choice of classroom or online formats; and the majority of our programs can be customized for in-house group training. All are taught by practicing industry professionals, using regularly updated curricula. 22

RESOURCES | Spring 2018

Professional Designation Programs CISR

Certified Insurance Service Representative Program

CIC

Certified Insurance Counselor Program

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

William T. Hold Seminars

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

James K. Ruble Seminars • Graduate Seminars • MEGA Seminars

Producer Schools

• Dynamics Master Sales Class • Employee Benefits Producer Training

Industry Research and Publications Academy Publications

The National Alliance Research Academy NationalAllianceBooks.com

ur Programs TheNationalAlliance.com

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

CRM

CPRM

ACES

Dynamics Series

Certified Risk Manager Program

• Advanced Continuing Education Series • For corporate clients

Introductory Series • For those new to the industry • Open to all

Certified Personal Risk Manager Program

• Dynamics of Selling • Dynamics of Sales Mgmt. • Dynamics of Company/ Agency Relationships • Dynamics Master Sales Class

CSRM

Certified School Risk Manager Program

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

University Programs • University Associate CIC • University Associate CRM

Map your career track and customize your learning experience.

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

Spring 2018 | RESOURCES

LEADERSHIP

Women Entrepreneurs in Insurance and Risk Management—

Breaking the Mold

orget everything you think you know about the insurance business and insurance professionals. And set aside the old joke—“There are worse things in life than death. Have you ever spent an evening with an insurance agent?”—it certainly does not apply here.

In fact, Kate Norris, CPRM, CAPI, and Laura Sherman, CPRM, CAPI, are refreshingly different from the stereotypes that still haunt popular culture, and they are breaking the mold when it comes to how they approach their insurance and risk management careers. They see their work as

a vocation and a privilege and approach each client’s world as unique. Laura Sherman cofounded Baldwin Krystyn Sherman Partners (BKSPartners) in 2006 and Baldwin Risk Partners (BRP) in 2012. Specializing in providing risk management solutions for successful individuals, families and busi-

nesses, Laura was named a Risk & Insurance Power Broker® for Private Client and one of Insurance Business America magazine’s Elite Women in Insurance. Kate Norris, Vice President–Family Office Practice Leader of Chubb Personal Risk Services, works with successful and multi-generational families and family

For Laura Sherman and Kate Norris, there’s no such thing as “business as usual.” 24

RESOURCES | Spring 2018

Laura Sherman, CPRM, CAPI, founding partner of Baldwin Krystyn Sherman (BKS) Partners, and Kate Norris, CPRM, CAPI, VP, Family Office Practice Leader at Chubb Personal Risk Services, attended the Private Asset Management (PAM) Awards gala in New York City in February. Both Chubb and BKS were short-listed for best high net worth insurer (Chubb) and best high net worth insurance advisors (BKS).

Laura Sherman, CPRM, CAPI, and Kate Norris, CPRM, CAPI offices. She says not only does meeting the needs of successful clients demand a hands-on approach, “it requires absolute service and excellence of execution across the entire spectrum.” Kate and Laura met while working on an Advisory Committee for

conflict, so she had me swing into action. But then, it turned out that Laura could present after all, so Beverly suggested that we team-teach. I did a look back at where the insurance business has been—how the concept of insurance got started, when women

Kate seconds that, “I don’t think it matters how you come into the business; it’s if you stay in the business. It’s the people who stay in the industry who have a true passion for it. I think Laura and I both have a true passion for personal risk. There is so much room

“There is so much room to grow in this business for both young people and women. You can go down many a path in insurance.” —Kate Norris The National Alliance. This group of academicians and top industry leaders had a demanding task—to design a curriculum for a program that would equip professionals to interact with, profile the needs of, and specify coverages for financially successful clients. In concert with the Council for Insuring Private Clients (CIPC) and with the support of several top carriers, the Certified Personal Risk Manager (CPRM) designation program was born. In each other Laura and Kate recognized a kindred spirit who provided a back-and-forth repartee that sparked ideas and prompted a sense of fun. Laura explains, “Insurance is a very important, weighty business to both Kate and me, but a kind of creative playfulness can lighten the atmosphere and make room for big ideas to emerge.” Kate Norris confides, “Beverly Messer, a Senior VP of The National Alliance, originally approached Laura with the idea of giving a presentation at the popular Orlando MEGA. Laura had a scheduling

entered the industry, how many women were in the business back in the sixties and seventies, and how many women are in the business today. Then Laura took over with a look forward, picking up with millennials and the future— specifically, millennial buying power. We all know that recruiting and training millennials and learning their purchasing styles and interests are important points to zero-in on in this evolving industry and market.” Kate continues thoughtfully, “I was just saying this, in fact, to a broker friend recently. If I could, I’d go out and hire a ton of millennials because I think that even though they can take a lot of nurturing, they are exceptional.” Laura adds with a twinkle, “We don’t care how you come to the insurance and risk management field. We are just thrilled you are in the industry. I believe we all have an obligation to the industry to recruit the best and brightest, regardless of their path, so they can take care of us in our retirement!”

to grow in this business for both young people and women. You can go down many a path in insurance. Some people say, ‘Yes! I’m going to get a job with this company because it has good benefits or has great press!’ It’s not about insurance for that person. It’s more about the company profile. I think that if you

with creative vision. And, I have always thought it was my mission in life to help others. In my work, I help clients understand the risks that emanate from their lifestyles—their career and employees, their assets and interests, their families and relationships. We educate them to reduce their risk profile, which in turn lowers their insurance expenditures over time. I love giving my clients peace of mind so they can pursue their life’s passions.” Kate Norris took a slightly different path. She says, “I came out of the family office world. I knew how families were using risk management, and I knew the questions they were asking. I felt families at the highest end of the market were being underserved. I kept getting

“…I have always thought it was my mission in life to help others. In my work, I help clients understand the risks that emanate from their lifestyles…” —Laura Sherman have a passion for what you do, you’ll be successful in this industry.” While in college, Laura Sherman took internships that influenced her trajectory. She says, “I interned for Chubb, Price Waterhouse, Deloitte, and an Ohio-based oil company. I learned so much from all my experiences, but during my time at Chubb, it just clicked. I loved the fact that insurance requires both the left and right brain—analytical skills working in tandem

so many questions that I thought were rudimentary from lots of different families—some of the most successful families in America—and I concluded that there needed to be more people out there educating this community of clients. A little over eight years ago, I called up a friend of mine who was running Personal Risk at HUB and said, ‘Hey, I’m thinking about making a career change; I want to talk about working with you and for you.’ A couple Spring 2018 | RESOURCES

LEADERSHIP

of months later, I was hired on at the local office. I was a broker for three or four years and now have been on the company side for the last four years. I work at Chubb, but I primarily work with family offices and help engage our agency partners in the family office segment of clients. I work with agencies of all stripes, shapes, and sizes.” Kate continues, “I now work with many women consultants who advise families of wealth. Early in my career, I might have been the only woman in the boardroom. When I was an insurance broker, there were two women who were producers out of an office of forty-eight. Being at Chubb is a pleasure because it’s a very balanced environment. The stumbling block in the beginning was having the confidence to know my discipline and know where I sat in that space. I don’t think it had anything to do with gender, but rather making sure I always had the right set of knowledge when I was in the room. In our seminar presentation, we talk about executive presence and emotional intelligence and how you cultivate both of those to empower a career and take it to the next level. Having excellent mentors who can give you solid feedback on your personal affect and possible career choices is an important aspect of growing a healthy work life in this business.” Laura Sherman shares, “I have been very blessed to work with the industry’s best and brightest through26

RESOURCES | Spring 2018

out my career and have had many incredible mentors. But I think the most challenging aspect of navigating my professional life has been balancing my career objectives with my personal life. While on the insurer side, many of the opportunities included a move, which was fine while I was single and unattached. As I progressed through my career and met my husband, it became more difficult to find the perfect fit. When we had the opportunity to move to Tampa Bay to

in HNW insurance for over two decades, it was exciting to sharpen the saw and stay on the vanguard of client needs, emerging trends, and further my expertise in this arena. Ongoing education in this amazing market segment is vital.” Kate Norris agrees, “I’m very proud of the work that the team of Beverly Messer, JoAnn Clarke, Laura Sherman, and I—along with others on the advisory committee*—did in developing curriculum for CPRM—The National Alliance designa-

”Ongoing education in this amazing market segment is vital…Never stop learning.” —Laura Sherman start our firm, I was thrilled when my husband led the charge in our impetus to move from Atlanta to Tampa Bay. He was so incredibly supportive of the long hours, various charitable events, and talking shop over dinner. I wouldn’t be where I am without him or my wonderful children!” Laura adds, “I also value highly the friendships I have made along the way. I have several incredible women mentors across the country, and it is such a blessing to be able to call them to run an idea past them, vent about an issue, or brainstorm a new approach. Laura says she is extremely proud of earning two designations in the high net worth insurance space, both in their inaugural year: CPRM with The National Alliance and CAPI through Chubb and Wharton. She says, “Being

tion that serves the high net worth marketplace. Raising the level of knowledge and expertise that’s in the market is going to make a positive impact on the successful clientele.” Laura Sherman offers this advice for women and millennials looking to enter the industry. “If you are looking for a fast-paced environment with a welldefined career path and enjoy solving problems and helping others, we would love to have you. As I tell friends, insurance is recession proof, transferable no matter where you live, and

you can always learn more! I have recruited numerous people over the years, and the overwhelming majority of them are still here and loving their decision. When we began the firm 11 years ago, we hired several folks early in their careers. Watching them grow and flourish has been a true gift! I am so incredibly proud of the team and firm we have built over the last decade.” She continues, “Finding the right organization is critical. Align yourself with a team that challenges you, that can grow with you, and has the right mindset. After you find your home, volunteer for projects, seek speaking engagements, serve your community, find a mentor both inside and outside of your firm, be a mentor, grow and become an expert in your field. I believe a multi-pronged approach is what helped me grow and helped define our firm’s culture. Laura also thinks great leadership in a potential employer is something a newcomer to the industry should look for. “A great leader has vision for the team, is focused on the big issues that will move the needle, is selfless and puts his/her stakeholders first, while giving them great safety and counsel.”

* Beverly Messer, CIC, CRM, CISR, Senior VP with The National Alliance, is a CPRM Faculty member, Educational Consultant, and past CIC and CISR Board member. JoAnn Clarke, CIC, CRM, CISR, CSRM, CPCU, ARM, AAI, CPIW, ARe, Personal Lines Senior Academic Director for The National Alliance, is a National Faculty member, Educational Consultant, Mentor, and past CISR Board member. The National Alliance, under the direction of JoAnn Clarke and Beverly Messer, formed the Advisory Committee with CIPC, and this team, along with Laura Sherman, Kate Norris, and others, provided valuable insights and significant contributions to the development of the CPRM curriculum.

Laura Sherman, CPRM, CAPI, and Kate Norris, CPRM, CAPI For women who are aiming at leadership roles, there is never a substitute for hard work. Laura advises, “Create a personal business plan that outlines where you want to go and the steps to get there. Engage your mentor to get advice on how to advance your plan.” She says, “Never stop learning. Once I finished the designations, I started listening to podcasts during my commute. It’s a combination of meditation and personal growth. This time in the car two to three times a week has helped me reshape my priorities, ground me into focusing on

“Mastery of our industry knowledge and specialty is certainly a key part of success for women. We also need to tell those around us, tell our bosses, tell our colleagues, where we want to go in our career.” —Kate Norris what’s really important and helped me balance being a great wife, mom, business partner, and insurance advisor. You never hear anyone in this business saying, ‘I’ve learned all there is to know about insurance.’ I learn something new every day!” Kate Norris says, “Mastery of our industry knowledge and specialty is certainly a key part of success for women. We also need to tell those around

Building Your Personal Brand In their June, 2017, Orlando MEGA Seminar presentation, Laura Sherman and Kate Norris discussed building a personal brand. They stressed authenticity and becoming a student of the industry to build expertise. Part of this personal branding includes creating a business niche, authoring white papers, taking speaking engagements, giving interviews, and building an online presence. Emphasizing the importance of hosting charitable events and participating in community affairs, Kate and Laura believe that adding value to clients outside of insurance is a responsibility. They also suggest reinventing yourself (while keeping your core values) with the help of mentors. Part of this self-reflective process involves developing a confident presence that includes mastery of your business and a strong people sense. What is “Executive Presence”? The ability to project gravitas: confidence, poise under pressure, and decisiveness. What is an “Emotional IQ”? The ability to pick up the vibe of a room—breathe and meditate and develop deeper connections by focusing on others without being distracted. A focused connection is critical when communicating with clients and colleagues. In today’s digital age, it is even more important. It can break down barriers. Communicate with passion and master conversation and presentation skills. Leverage your strengths and review your performance with the help of mentors.

us—tell our bosses, tell our colleagues—where we want to go in our career. ‘Here’s where I’d like to see my career in the next two years, the next five years, the next ten years.’” Finding informed mentors is paramount. Kate says, “I have three people I call on regularly for career advice. Two are men and one is a woman. Any time I faced a change or I thought maybe I needed a changeover in my career, I would go to them and say, ‘Here’s what I’m thinking. Here’s why. What challenges am I not considering that might affect my decision?’” Kate laughs, “In fact, I saw two of my mentors in the last three days. They are colleagues in my broader professional life. You need to learn from people who have walked down the road ahead of you. You need their advice because sometimes you don’t see the big picture—especially as a young or inexperienced person in the industry.” What are these two powerhouses like outside of insurance? “Well,” says Kate, “as a true risk manager, I never take my risk manager hat off—I do read about risk management for fun. I love Tom Clancy novels; I like the complexity of what he writes about. I read a lot of books about the family office space because that’s the space

that I am focused on; that’s my discipline. I travel about forty weeks a year, so when I’m home, I tend to be a human vegetable—a vegetable that doesn’t do a whole lot except go for a run and out to dinner with my hubby!” Laura laughs, “Yes, I subscribe to multiple insurance periodicals and read them daily. I have gotten better about bombarding the BKS team with articles, and folks have stopped avoiding me in the hallways!” Both Laura Sherman and Kate Norris see their work as a privilege and celebrate it with passion. They want interested professionals to know that the insurance and risk management industry is open to newcomers. Kate says, “People still come into insurance through a family business, but I’ve seen young folks entering the business and getting an opportunity to grow. I’ve met stay-athome moms trying to get back into the workforce and looking for a career path. I’ve seen just about every reason for coming into insurance and risk management, and I think our industry is primed for smart individuals who like a challenge. Insurance is a dynamic business. I think it’s great, no matter how people wind up in this fun little sandbox!” n Spring 2018 | RESOURCES

LIFE & HEALTH ADVISOR

BY JERRY RHINEHART, CIC, CLU, ChFC, RHU

s most of us are aware, a prolonged nursing home stay can easily deplete a person’s savings, force them to liquidate their assets, and possibly erode their retirement money. And modern medicine—which is keeping us alive ever longer—is only making this possibility a bit more likely. Should they need long-term care (LTC), most people would like to remain in their own home, rather than residing in a skilled nursing facility (SNF). They probably think the cost will be substantially less at their home than the expense at 28

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ance’s 2016 Cost of Care study, the a SNF. And they might be right if national average cost for care is that individual has a friend or relastaggering, as indicated in the comtive who can provide the hands-on parison chart, shown below. care they need. But what if no such person is available? Consider Funding Options this: A certified, in-home caregiver So, should the need arise, what are runs a minimum of $20 per hour the LTC funding options? There are in most parts of the country. When you do the math, The average monthly/annual cost (nationally): three 8-hour shifts will approach $500 Assisted living facility: $3,628 / $43,536 per day! That may Skilled nursing facility (semi-private): $6,844 / $82,128 be twice the cost of Skilled nursing facility (private): $7,698 / $92,376 a SNF in the same Site: genworth.com/about-us/industry-expertise/cost-ofgeneral area. care.html* According to *With this site, it is very easy to search for your state’s averGenworth Insurages, as well as those for most major cities in your state.

Learn More, Earn More National Alliance programs offer you several avenues for learning more about long-term care insurance. Consider attending a CISR Life & Health Essentials course, a CIC Life & Health course, and/or a Ruble Graduate Seminar that includes a long-term care section (check the seminar’s specific agenda). In addition, The Academy publication, Life & Benefits Essentials, contains a detailed discussion of longterm care insurance (shop NationalAlliancebooks.com)

to a mandated amount—generally $2,000, and 2) their income can’t exceed a certain level ($2,204 per month in Florida in 2017, as an example). The third option—be insured—usually meets with resistance due to, 1) the perceived high cost of the premium of Long Term Care Insurance (LTCI), and, 2) many people simply thinking this issue will not affect them. There is no question about it—a traditional LTCI policy is pricey! And, there is rarely any benefit payable should the person die before using the coverage.

Claim Triggers

Basically, there are two defined “triggers” for a covered claim with a LTCI policy. The If the need for first trigger relates to a situation long-term care where the insured arises, there can’t perform any two of six Activiare really only ties of Daily Living (ADLs). ADLs really only three three options: are defined as options: 1) be rich, be rich, be eating, dressing, 2) be poor, or 3) be bathing, toileting, insured. The first poor, or be transferring, or option—be rich— continence. The eliminates the vast insured. other “claims trigmajority of people. ger” requires the The second opinsured to have a medical diagnosis tion—be poor, meaning Medicaid— of Severe Cognitive Impairment. A typically means the person needing person with a dementia impairment care must use their money and (Alzheimer’s disease, for instance) assets FIRST—ultimately becoming might be able to perform all six destitute—and then they will be ADLs, but obviously should not be able to qualify for Medicaid. Every left without someone to look after state has specific rules regarding them. So, how is a claim approved? Medicaid qualification: 1) the appliThe insured individual meets cant must spend down their assets

either of the two defined claims triggers: any two of six ADLs OR Severe Cognitive Impairment. Once an individual’s claim qualification is met, benefits are payable until they recover from the medical issue, or the “insurance bucket of money” is empty. What is meant by the phrase, “until they recover?” Most of us think of this coverage as being for older people with severe (and irreversible) medical situations. But what about a person—of any age— who has a serious medical event (heart, cancer, accident, etc.) and is in need of care for several months, and then recovers? The benefit would be payable for that period of time, if the claims trigger and the elimination period are met.

Funding Innovations

We have discussed the dilemma, the various options, and the traditional LTCI approaches. What about recent innovations and trends for this issue? A few years ago, we started seeing some life insurance carriers include a novel approach regarding the LTC benefit. Many refer to it as a Living Benefit (LB); some call it an Accelerated Benefit. Keep in mind, not all carriers include this coverage. For those that do, some make it a rider (with a published additional cost), while most make it a policy provision or contract feature (thus, no published Spring 2018 | RESOURCES

additional cost). Additionally, the LB contract language and pay-out provisions vary greatly among the companies that offer this benefit. There are even some annuity contracts that make this type of coverage available in varying degrees. How does the LB provision generally work? First, the life insurance contract obviously includes a death benefit, but as part of the death benefit, the contract will generally provide three “buckets” of money that can be accessed by the owner Note that if the insured just because has a qualifying event or meets a company’s a claims-trigger provision. Note life policy is that just because approved in a company’s life policy is a particular approved in a particular state, state, this rider this rider may may not meet not meet with approval. Always with approval. check with your company. Always check The first covwith your erage “bucket” is generally referred company. to as “Critical Illness.” Here, the claimant can file for up to some maximum amount against the contract—the life insurance death benefit amount—should they have a defined medical procedure. A physician’s certification will be required. One company’s language defines it as: “open heart surgery, angioplasty or myocardial infarction, life threatening cancer, stroke, major transplant or end-stage renal failure.” The limit may be a flat maximum amount (such as $25,000) or some maximum percent of the death benefit (such as 25%), but not to exceed some 30 RESOURCES | Spring 2018

specified dollar amount (one company’s maximum is $125,000). An example: John (who is self-employed) has a $500,000 life insurance policy that contains the LB provision. He becomes ill and ultimately receives a kidney transplant. He is responsible for a sizable medical insurance deductible and can’t work for four months, so he sustains a significant loss of income. He decides to take an advance of $100,000 against his policy. He still has $400,000 of death benefit coverage, since this is considered a lien against the contract. Most companies will charge an administrative fee when such a claim is made—a one-time fee of $150 is common.

The second “bucket” is generally defined as “Chronic Illness.” In this case, the claimant will be required to provide a physician’s certification showing that the individual is unable to perform any two of the six ADLs (eating, dressing, bathing, toileting, transferring or continence) OR has been diagnosed as having Severe Cognitive Impairment. You will note this is the exact language we discussed with a traditional LTCI contract. Carriers may require the coverage trigger to be for a minimum and continuous timeframe—perhaps 90 days. As with Critical Illness, there will be some maximum limit. With many life insurance companies, it will generally be up to 50% of the death benefit, with some overall maximum total. One company’s maximum benefit payout is $1,000,000, with language that states: “The sum of all accelerated benefits may not exceed either 50% of the specified amount (the death benefit) at the time of the first acceleration, or $1,000,000.” Additionally, the

company may limit how benefits are paid under this provision. Some may pay annual installments, but not to exceed the maximum LTC benefit as defined under HIPAA. Some may pay a maximum monthly benefit (such as 2% installments over 50 months). An example: Sharon is 45 years old and has a $400,000 life policy that contains the LB provision. She has developed a degenerative muscle disorder and is no longer able to care for herself. She and her husband take an advance of $200,000 from her policy to modify their home and help pay for a home health aide. She will still have $200,000 death benefit protection.

The final “bucket” is defined as “Terminal Illness.” The LB language for most contracts state that the owner can access this benefit if the insured individual’s life expectancy is 12 months or less. Generally, the maximum benefit will be 50% to 75% of the death benefit, not to exceed some specified amount— perhaps $1,000,000. An example: Patrick has a $300,000 life policy that contains the LB provision. He has an inoperable tumor and his physician has given him five months to live. He requests a $50,000 advance against his contract, so he, his wife, and adult kids can take a cruise they have discussed for years. Upon Patrick’s death, his wife receives the remaining $250,000 death benefit.

Note that a number of life insurance carriers have the LB provision as part of their Whole Life, Universal Life, and even Variable Life contracts. A few carriers

even include this as part of select Term Life contracts. An important point: when the LB is received, it is considered a lien against the life insurance policy. As mentioned before, the company will typically have some fee associated with each transaction ($150 was given as an example), plus, they will charge interest against the lien, as specified in the contract. The company will always state the maximum interest—such as 8%. With a lien, the interest is charged against the ultimate remaining death benefit payout. By doing this, the amount received from the LB, should be free of taxation. Always advise your clients to check with their tax specialist for their advice and interpretation.

Other Options

As mentioned, variation of this benefit is available with some annuity carriers. One such enhancement with many carriers is the Waiver of Surrender Charge Provisions. This provision has been around with most carriers for a number of years. How does this work? Should the annuitant have a terminal illness, or be confined to a nursing home (many define confinement as 12 months or longer), the individual can access the annuity account value without a surrender charge. Another variation is the ADL trigger provision (or rider). How does this work? Should the annuitant meet the LTC “claims trigger” (two of six ADLs, or Severe Cognitive Impairment), they can access a greater percentage of their annuity account value on an annual basis without a surrender charge. A 10% annual withdrawal with no surrender charge is common without this provision. This LB provision will increase this percentage to a higher amount—perhaps 20% annually—without a surrender charge.

Currently, very few annuity carriers have this last provision available. Either of these annuity variations are a benefit to a person or family that has the long-term care funding need. But neither will be as attractive as the life insurance with LB, unless the annuity is very sizable.

Advantages

What are the major advantages of an insured LTC funding program? With either a good quality LTC insurance contract or a somewhat sizable life insurance policy that includes the LB, the unpleasant thought of 1) running out of money, 2) having to liquidate their assets, or 3) trying to qualify for Medicaid can be eliminated or greatly postponed. Most of us will work 30 or 40 years to amass a sizable amount of money in our qualified plans (401-k, IRA, SEP, ROTH, etc.) so our retirement years can be financially low-stress. As stated previously, to qualify for Medicaid, you must spend down your assets to a certain threshold. Are you aware that Medicaid rules require you to spend down your qualified money (401-k, IRA, SEP, ROTH, etc.) in addition to all your other assets? Think of a quality, insured, LTC funding program as a FIRE-WALL around all your qualified money!

Be Prepared

Numerous questions might arise concerning this innovative LB provision. Others may come up about LTC funding options with an annuity. The questions may include: What are the tax rules, limitations on the use of the funds, coverage territory issues, and waiver of premium concerns, just to list a few. Since coverage language and benefit options vary greatly with life and annuity contracts that offer one or more of these funding choices, it

Think of a quality, insured, LTC funding program as a FIRE-WALL around all your qualified money! is highly recommended that agents thoroughly research what is available with their carriers. Another alternative is to discuss these contracts and options with a knowledgeable life insurance brokerage agency that works in this area and that has a good relationship with numerous quality life insurance companies. n

About the Author: Jerry Rhinehart, CIC, CLU, ChFC, RHU Jerry is the Owner of Rhinehart & Associates and has worked in the insurance industry since 1976. He is a CIC National, CISR, and Ruble Faculty member, as well as an Educational Consultant and 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. Scan this QR code (point your smartphone camera at it) to link to an extremely useful comparison table Jerry Rhinehart created that addresses most of the issues and questions that might come up for agents and their prospects.

Spring 2018 | RESOURCES

ACADEMIC PERSPECTIVE

BY JOYCE BLANCHARD, AMBER CARTIER, SPENSER O’HAIR, AND KENNETH THOMAS—

a team of undergrad students enrolled in Florida State University’s Dr. William T. Hold/The National Alliance Program in Risk Management and Insurance

s new technologies continue to impact the insurance industry, there has been significant discussion regarding the use of blockchain (defined as a continuously growing list of recorded transactions which are linked and secured using cryptography). However, blockchain and the ways that it may impact the industry are not well understood by many of the insurance professionals who will be affected by the changes brought about by this technology. Suffice it to say that blockchain may not only transform the way that simple informational transactions are completed, it may also revolutionize how business is conducted in the twenty-first century. Let’s take a closer look at what blockchain is, how it works, and how it may affect our industry in the future. 32

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The technology underlying blockchain was initially developed during the invention of bitcoin—a cryptocurrency and worldwide payment system—and it was later realized that this technology could be used for other purposes. Technology futurist Ian Khan highlighted what he considers to be the most promising aspect of blockchain technology: the ability to “guarantee the validity of a transaction by recording it not only on a main register but a connected distributed system of registers, all of which are connected through a secure validation mechanism.” Dispersing the registers decentralizes the system, which helps to prevent hacking and fraud because transactions are verified constantly through updating and checking information against other nodes’ copies every ten minutes (Rosic, 2016). With these facts in mind, it becomes easier

to visualize how blockchain may impact the industry.

An Industry Disruptor

While the security of blockchain has made financial institutions one of the leading innovators in the business environment, a major development for insurance considerations was the introduction of “smart contracts.” This provided a prime opportunity for insurance companies to begin experimenting with blockchain to gain a competitive advantage—and they are doing so with significant investments in further developing applications that will have widespread impact on the industry. According to Kevin Wang and Ali Savafi of Plug and Play Insurance, “Blockchain allows for cheaper, more consumer-oriented products to be developed that could chip away at the premi-

ums collected by large insurance companies. In essence, the use of blockchain may lower premiums, simplify the claims process, benefit those in areas with high exposure to catastrophes, and help insurance companies create special or niche coverages” (Wang 2016). Although a discussion of all of these factors is beyond the scope of this article, reviewing two of the new forms of insurance that benefit from the use of blockchain technology will be helpful. Keeping in mind that there are differing models for each type of insurance, and that further innovations can be anticipated, the following provides a brief summarization: • According to the National Asso-

ciation of Insurance Commissioners: “Peer-to-peer (P2P) insurance is a new innovation that allows insureds to pool their capital, self-organize, and self-administer their own insurance. The core idea of P2P is that a set of likeminded people with mutual interests group their insurance policies together, introducing a sense of control, trust, and transparency, while at the same time, reducing costs.” Obviously, the implications here are widespread—from families to almost any type of affinity group that can be imagined. • Parametric Insurance: insurers would pay a percentage based on certain triggers contained in the smart contract. “For example, if

Insurtech: Learn More While it is probably anecdotal, a quote attributed to Charles H. Duell, the Commissioner of the US patent office in 1899, is also instructive: “everything that can be invented has been invented.” As laughable as it may seem in 2018, isn’t it true that we often resist change, stick our heads in the sand, and refuse to acknowledge that the world around us is changing every day—that business as usual today will never be business as usual tomorrow?

Think back on the last century. Horseless carriages and flying machines. Television, telephones, and personal computing machines that led the way into the world we know today. Care to take a guess what those industries that disrupted life as it was known at that time are worth today? And one of the greatest disruptors thus far in the 21st

century is insurtech, a word that has increasingly become a common term in our shared industry vocabulary. Following closely upon the heels of the massive investment made in fintech— new technologies used for banking and financial services—billions have been invested in insurtech every year for the last several years. There is little doubt that these figures will continue to increase in the future or that new technologies will impact everything from customer acquisition to claims. Look for continual disruption as more start-ups come on board, new technologies are tested and launched, and innovations occur across the industry. When you think of things like big data, the Internet of Things, the sharing economy, blockchain technologies, telematics, artificial intelligence, autonomous vehicles, unmanned aerial

an earthquake were to occur in a given region above a magnitude of five, the smart contract would automatically pay 20 percent of the insurance claim to policy holders” (Wang, 2016). This author also notes that this new form of insurance could greatly affect the auto insurance industry by using smart technologies. For example, when a vehicle with a chip and sensors provided by the manufacturer was involved in an accident, compensation would be triggered based on the sensor data and the smart contract that the consumer had purchased.

Changes and Eliminations

Blockchain will reduce the need for on-site claims inspections. To

vehicles (and the list goes on, and on, and on), you are beginning to get the picture. But it is no longer the vision that you are accustomed to. The picture is different, the delivery is different, the experience is different, and the financial implications are immense. Oh, and by the way—it’s changing at an unprecedented pace. Learn more about two powerful insurtech drivers by logging into your PROfile account. As a dues-paid designee, one of the membership benefits you receive is access to webinars— and you can currently view webinars about The Internet of Things and Underwriting Unmanned Aerial Vehicles. A variety of webinars on other topics are also available, and new ones are being added regularly, so check back from time to time to take advantage of this informative and valuable benefit.

Spring 2018 | RESOURCES

continue the auto example from Conclusion above: perhaps the fender-bender Multiple prospective implicaoccurred because the vehicle’s tions that will positively impact brakes became unresponsive. Alinsurance agents and the insurmost instantaneously, the incident ance industry may outweigh the could be cross-referenced with costs of implementing blockchain. recalls or defects, and there would Firstly, some claim and underwritbe no lengthy inspection or coling functions could be completed lection of data. Because all the without human interaction. Smart client’s information as well as the contracts will enable actions to evidence of the collision is stored activate when certain conditions on the blockchain, payout would be are met, decreasing human error almost immediate, making certifiand increasing the speed of service cates of insurance a thing of the to consumers. Additionally, claims past. could be processed Audits, which are much faster and with currently used to anaWhile little or no assistance lyze records such as from agents. Secondly, blockchain revenue, sales, debt, blockchain could and payroll, will no does not make the insurance longer be necessary industry more transeliminate with the implementaparent, ultimately tion of blockchain. the need for increasing the perAll records pertainceived trust consumbrokers and ing to audits will be ers have in insurance housed and linked producers, companies. Thirdly, through the technolblockchain could current ogy. Additionally, reduce costs, includthere will be no need systems may ing underwriting, for loss runs; claims claims, and intermebe replaced or will be enclosed in diaries. And finally, the blockchain of the streamlined. blockchain can detect stakeholders (Lamand prevent fraud parelli, 2017). and multiple claim While blockchain does not submissions or payments. eliminate the need for brokers Some claim and underwriting and producers, current systems functions will soon be performed may be replaced or streamlined. electronically. As blockchain would Julian Martin, General Manager of improve efficiency and reduce erInformation Technology at Galrors, it could potentially reduce the lagher Bassett says, “It creates an need for some jobs. However, the opportunity for tech-savvy brokers general consensus seems to be that to get on board early and develop agencies (and agents!) that develop new products with smart contracts good relationships and a solid basis that take advantage of blockchain of trust with their customers will functionality” (NIBA, 2017). Using be well-poised for future growth. blockchain, these brokers could Information remains a primary create products that expedite claims factor in this relationship, and it is payment, incur fewer processing knowledgeable insurance profesexpenses, reduce fraud and moral sionals who will continue to be hazard, increase profits and volessential in providing good product umes of sales, and provide a better information to their clients. n value for the consumer. 34

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References Lamparelli, Nick (2017). “5 Ways Blockchain Will Revolutionize the Insurance Ecosystem” Retrieved from: https:// insnerds.com/5-ways-blockchain-willrevolutionize-insurance-ecosystem/. National Association of Insurance Commissioners (2018). “Peer-to Peer (P2P) Insurance)“ Retrieved from: http://www.naic.org/cipr_topics/topic_ p2p_insurance.htm. National Insurance Brokers Association (NIBA) (2017). “What Does Blockchain Mean for Brokers?” Retrieved from: https://www.insuranceandrisk. com.au/what-does-blockchain-meanfor-brokers/. Rosic, Ameer. (2016). “What is Blockchain Technology? A Step-by-Step Guide For Beginners” Retrieved from: https://blockgeeks.com/guides/whatis-blockchain-technology/. Wang, Kevin, Safavi, Ali (2016). “Blockchain is empowering the future of insurance” Retrieved from: https:// techcrunch.com/2016/10/29/blockchain-is-empowering-the-future-ofinsurance/.

About the Authors: Joyce Blanchard, Amber Cartier, Spenser O’Hair, and Kenneth Thomas

These four students are all undergrads majoring in risk management Blanchard and insurance at Florida State University. When presented with the opportunity Cartier to research and write an article for Resources magazine on the subject of blockchain and its O’Hair influence on the insurance industry, they teamed together and rose to the challenge. Thomas We look forward to more contributions from upand-coming talent like these motivated individuals.

MEGA Seminars are about giving you MORE—more topics, expert instructors, and now more ways to attend! Online MEGAs now come to YOU— All of you!

• Attend Online MEGAs from a phone, tablet, or computer • Choose from eight webinar topics and create your own seminar. • Each instructor-led topic is conducted in two 2-hour webinars (held on the same day). • All National Alliance dues-paid designees can now attend MEGA Seminars.* Register today to attend any of our 2018 Online MEGA Seminars! July 9–Aug. 27 Aug. 28–Oct. 18 Nov. 8–Dec. 17

Or reserve your spot at a classroom MEGA Seminar: Lake Buena Vista (Orlando), FL...........June 4–7 Richardson (Dallas area), TX...............Oct. 15–18

Enrich Your Niche. PROFocus Courses offer unique insights, new approaches, and innovative strategies. All dues-paid designees receive a savings of $200 on PROFocus Courses as a membership benefit.* Formerly James K. Ruble Seminars, PROFocus Courses deliver high-level insurance and risk management education on specialty topics to seasoned professionals and those interested in a new business line. (PROFocus Courses are open to all professionals—no designation is required.) Register today for a PROFocus Course! Online: Contractors..............................................................................July 9–31 Advanced Risk Management..................... July 9–Aug. 17 Cyber Risk....................................................................July 10–Aug. 1 Legal Concepts.................................................. Sept. 25–Oct. 16 Large Commercial..........................................................Oct. 9–29 Food & Beverage...............................................Nov. 20–Dec. 12 Classroom: Executive Risk....................... Burr Ridge, IL...........June 11–12 Truckers..........................................Houston, TX..........June 12–13 Large Commercial................Houston, TX.............. Aug. 7–8 Legal Concepts.............. Burlingame, CA..........Aug. 21–22 Cyber Risk......................................Atlanta, GA............... Oct. 4–5 Contractors..................................Phoenix, AZ.............. Nov. 8–9

Register at scic.com/profocus *Dues-paid designees may earn update credit and are eligible for a one-time savings of $200 in 2018. Spring 2018 | RESOURCES

Tradeshows—See and be Seen!

Tradeshows and conventions are a good reason to get out of the office, a great way to network, and also learn about new business opportunities and products available in our industry. The National Alliance will be in attendance at several events throughout the rest of the year—so stop by and say “Howdy!” (Dates and locations shown below.)

National Alliance employees “round up” some fun with the Houston ISD Medicaid Finance & Consulting Services group at the 2018 TASBO Annual Conference in Ft. Worth, TX.

June 7–9 • IAIP 77th Annual Convention St. Louis Union Station in St. Louis, MO June 13–16 • FAIA 114th Anniversary Convention & Education Symposium Rosen Shingle Creek Resort in Orlando, FL June 24–26 • 2018 SITE Annual Conference Davenport Grand Hotel in Spokane, WA Aug. 1–4 • Latin American AIA 48th Annual Convention Diplomat Beach Resort in Hollywood, FL Sept. 5–6 • Entrepreneurial Insurance Symposium* Hilton Anatole in Dallas, TX *Attendance of the full Symposium qualifies as update credit for dues-paid CICs, CRMs, and CPRMs Sept. 20–23 • American Agents Alliance Convention & Expo JW Marriott Desert Springs Resort in Palm Desert, CA Sept. 21–24 • ASBO 2018 Annual Meeting & Expo Gaylord Palms Resort & Convention Center in Kissimmee, FL Sept. 29–Oct. 3 • URMIA 49th Annual Conference Grand America Hotel in Salt Lake City, UT Oct. 15–18 • Applied Net 2018 Gaylord Opryland Resort & Convention Center in Nashville, TN 36

RESOURCES | Spring 2018

UA Universities Make Best’s Review List

Fostering the development of new talent for our industry is a primary goal of The National Alliance Research Academy. To that end, The Academy has partnered with 24 universities across the U.S. to offer the University Associate CIC (UACIC) and University Associate CRM (UACRM) programs, providing college students with the opportunity to use approved university insurance and risk management coursework to achieve credit toward the CIC and CRM designations. In 2017, 503 students across the country were enrolled in UA programs. We are proud to announce that ten UA universities have received honorable mentions in Best’s Review magazine’s 2018 list of “College Standouts,” defined as those with “risk management and insurance programs that are doing the best job of preparing young people for careers in insurance.” Florida State University, University of Georgia, and Temple University all made the “Top Performers” grade; Appalachian State University and Olivet College rated highly in the “Strong Performers” category; Ball State University, University of Central Arkansas, Eastern Kentucky University, and University of Mississippi were honored as “Popular Performers”; and California State University—Fullerton was named a proud “Contender.” Congratulations to all of these fine institutions! For a complete listing of participating UA schools, go to scic.com/ university-program.

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

IntheSpotlight National Alliance Elects New Board Officers

The National Alliance welcomes its new officers for the Society of CIC and Society of CISR Boards of Governors and The National Alliance Research Academy Board of Directors. CIC Board of Governors Chairman: Dino C. Gavanes, CIC, from Itasca, IL Vice Chairman: Gregory J. Massey, CIC, CRM, CPCU, ARM, CLCS, PMP, of Zurich Insurance, in Jersey City, NJ Member-at-Large: Jenny L. Bolt, CIC, of HUB International Mountain States, Ltd., in Missoula, MT Member-at-Large: Jill M. Lowder, CIC, CRM, of Marsh & McLennan Agency, LLC, in Minneapolis, MN Immediate Past-Chairman: Steven C. Pearson, CIC, CRM, of ISU Insurance Agency Network in San Francisco, CA CISR Board of Governors Chairman: Linda H. Luka, CISR, CPCU, CIIP, AINS, DAE, AAI, CPIA, of West Bend Mutual Insurance Company in West Bend, WI Vice Chairman: Marilyn D. Williams, CIC, of BB&T Insurance Services in St. Petersburg, FL Secretary: Nicole Lyn Keck, CIC, CISR, of Iowa City, IA Treasurer: Jack H. Elliott Jr., CIC, CISR, of CRC Insurance Services in Birmingham, AL Immediate Past-Chairman: Melvin A. Russell, CIC, of Russell Insurance Consulting in St. Petersburg, FL National Alliance Research Academy Board of Directors Chairman: Victor A. Puleo, Ph.D., CIC, CFP, of Butler University, in Indianapolis, IN Vice Chairman: Cristina Pedraza-Martinez, J.D., CPA, CIC, of Popular Insurance in Guaynabo, PR Member-at-Large: Brenda G. Goodwin, CPCU, CPIW, from Smithville, TN Member-at-Large: Kevin Ray, CIC, CPCU, AU AINS, AIS, API, of Erie Insurance Group in Erie, PA Immediate Past-Chairman: Kenneth L. Fields, MSM, CIC, CPCU, CLU, ChFC, of State Auto Insurance Company in Columbus, OH

Dual Designees Take Top Honors

Carla Jean Marks, CIC, CISR, President of Marks-Tiller Insurance Agency in Roanoke, VA, has been named the 2018 Professional Agent of the Year by PIA National and Matthew J. Cranney, CIC, CRM, VP of Operations at M3 Insurance Solutions, Inc., in Madison, WI, has been named 2018 Young Insurance Professional of the Year. Both awards recognize outstanding achievement and leadership in the industry, as well as contributions to their communities. (PIAnet.com) Marks (right) with PIA National President Tim Russell, CPCU

Cranney (right) with PIA National VP/ Treasurer Dennis Kuhnke, CIC, CPIA

Douglas Steps Up

W.R. Berkley Corporation has named Brian P. Douglas, CIC, the new President of BerkleyNet Underwriters, LLC. Brian has over 20 years’ experience in the workers’ comp market and previously served as BerkleyNet’s AVP of Marketing and Business Development, having joined the firm as a founding team member. (WVNews)

Arthur Hall Promotes CICs

Two CIC designees have recently assumed new leadership roles at Arthur Hall Insurance in Pennsylvania and Isler Blake Delaware. Joshua J. Isler, CIC, has been named Vice President and a Principal Shareholder for the firm, and Edward R. (Ted) Blake, CIC, CPCU, has been named Senior Account Manager. (delawarebusinessnow.com)

Spring 2018 | RESOURCES

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

IntheSpotlight The Van Dyke, Rankin “Wall of Fame”

Van Dyke, Rankin & Company, with offices in Texas, proudly displays the diplomas of thirteen current employees who have all earned National Alliance designations. Accounting Manager Pamela Chudej has earned both the CIC and CISR designation; six employees have their CICs— President (and past CIC board member) Lewis (Eddie) Van Dyke, VP Charles (Charlie) Matejowsky (Ruble Faculty and CIC National Faculty member, and CIC mentor), VP Jarvis Van Dyke, VP Jeannie Seamons, Producer Randy D. Weidemann, and CSR Kay Przyborski; in addition, Grace Gillson, in Marketing, and six additional CSRs have all earned their CISR designations—Lisa Callahan, Grace Gillson, Katherine Kennedy, April Roemer, Karen Roemer, and Robin Stephens. And this list doesn’t even include a number of National Alliance designees who have retired! Charlie Matejowsky, CIC, LUTCF, summed up the pride Van Dyke, Rankin & Company takes in this wall display when he stated, “Forty-five years ago Eddie Van Dyke attended a CIC class in Austin, TX, and brought several employees of his agency with him. That began a long and prosperous relationship between our agency and the National Alliance. The National Alliance and its Matejowsky many offerings have been our number one source for insurance education, modern insurance trends, and timely updates ever since. Our employees have not only attained CIC and CISR designations, but have profited by attending Dynamics of Selling programs, Ruble Seminars on a wide variety of subjects, and Certified Risk Manager (CRM) courses. We know that to be a successful multiline agency we must embrace change, but not at the expense of the values upon which we were founded. The National Alliance, its people, and programs have helped us to do just that.”

Thalmann Honored

Coryn Thalmann, CIC, CIW, CEO of Jimcor Agency, Inc., in Montvale, NJ, was presented with the Executive of the Year award at the PIANY’s 43rd annual Long Island Regional Awareness Program for her dedication to the independent agency system. (PIANY news release)

RESOURCES | Spring 2018

Reid Revered

James Russell (Rusty) Reid, CIC, Chairman, President, and CEO of Higginbotham, an insurance and financial services broker, was recently honored with the Burns & Wilcox Award for Agency CEO of the Year. The award is given to an individual who has demonstrated vision and leadership over the years, which has led to his or her organization’s growth and achievement. In addition, corporate performance, social responsibility, business achievements, and use of technology are considered. (Insurance Record)

Acuity Promotes Bell

John Bell, CIC, CPCU, has been promoted to Territory Director at Acuity, in Louisville, KY. He began his career at Acuity in June 2013 as a Commercial Underwriter. (Acuity Press Release)

Thomas Appointed

Insgroup recently appointed Timothy Thomas, CIC, CLU, to Vice President of its Employee Benefits practice in Houston, TX. Thomas has over 30 years’ experience in the insurance industry in both employee benefits and property/casualty. (Insurance Journal)

TheNationalAlliance.com

Big Anniversary for Small Company

Jerry’s Legacy Lives On

By any standard, 125 years in business is a remarkable accomplishment. Join us as we congratulate Madison Mutual Insurance Company of Chittenango, NY, on their momentous 125th anniversary. Madison Mutual is proud to point out that it has four National Alliance designees among its ranks.

Robert (Bob) Rogers, CLU, ChFC, presents a Jerry Montgomery scholarship certificate to Priscilla H. Oehlert, CIC, CRM, ARM, Director of the Insurance and Risk Management Center of the University of Houston–Downtown (UHD). Bob is a Distinguished, CIC National, and Ruble Faculty member, Academy Board member, CIC Mentor, and President of Cedar Lake Consulting, Inc. Priscilla is a CRM, CISR, and CSRM Faculty member, and Educational Consultant, in addition to her professorship at UHD. Six UHD students were awarded Jerry Montgomery scholarships in January 2018 to help fund their participation in the University Associate CRM (UACRM) program.

Pictured, left to right—Back row: Sr. VP Heidi Barron, CPCU; Candice Brummer; Sue Wilcox, CISR; Anne Wallace, CISR, AU; and President John Owens, CIC, CPCU, ARe. Front row: Laureen Tackman; Nick Eshbaugh; Chris Morehouse; and VP Ben Thompson, CIC, CPCU.

Give a Hand to Houston Designees The Independent Insurance Agents of Houston elected several CICs to its board to serve the Sept. 1, 2017– Aug. 31, 2018 term. Scott Margraves, CIC, of TDECU Margraves Kurtz (Texas Dow Employees Credit Union), was elected President and Wesley Kurtz, CIC, of Pathfinder, LL&D Insurance Group, was named President-Elect. Chris Goff, CIC, LUTCF, (not pictured) with HARCO Herrington Clark Insurance Services became Treasurer, while Daphne B. Clark, CIC, ACSR, of Hotchkiss Insurance Agency assumed the roll of Immediate Past-President, and Brett Herrington, CIC, of Marsh was named a Director. (The Insurance Record)

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 bkeeling@scic.com.

In memory of Jerry Montgomery, CIC, CRM, LUTCF, and his contributions as an educator and friend, Bob Rogers and The National Alliance Research Academy established the Jerry Montgomery Memorial Research Fund. The fund provides scholarships for deserving university students enrolled in UACRM and UACIC programs. These programs provide the opportunity for university students to gain credit for two parts of their CRM or CIC designations while pursuing their degree plans—thereby affording them a considerable edge in the job market upon graduation. A tax deductible $100 contribution to the Jerry Montgomery Memorial Research Fund fully pays for a student’s cost to participate in either the UACRM or UACIC program. For additional information please go to scic.com/jerrymontgomery-memorial-research-fund.

Spring 2018 | RESOURCES

PRSRT STD U.S. Postage

PAID Austin, TX Permit No. 93

For 30 years, the Growth and Performance Standards (GPS) study has been the leading resource for independent agency benchmarks—information that empowers YOU to make strategic comparisons of your agency’s financial and productivity results to those of peer group agencies. The National Alliance Research Academy is now conducting the survey for the 11th edition of the GPS study, and this is your chance to step up and participate in critical industry research that can help you grow your agency! • Use GPS benchmarks to identify positive and negative variances that will inform your decisions about how to improve the performance of your agency. • Specifically compare income and expense averages, productivity standards, balance sheet ratios, and agency profile measures. • The Academy will complete the financial portion of the questionnaire for you, if you wish. • All data from agency financial statements is maintained by The Academy in a totally confidential manner. WIN a Scholarship! Participate in the GPS survey to be entered into a drawing to WIN one of 20 scholarships, each good for one online CIC or CRM course! (Scholarships are valued at $430 each.) 50% off! Participants are also entitled to purchase one copy of the new GPS study at 50% off the regular price.

GO TO surveymonkey.com/ r/ T2BL5HP