SC Agent & Broker Magazine, Fall 2011 by A.J. Trevino

FALL 2011

Agent & Broker

E&O Considerations for the Automated Agent A Discussion of Agency Website and Social Media Best Practices Insuring Those that Work From Home It’s Not as Easy as You May Think Event Photo Recaps: Agency Internet Bootcamp Young Agents Conference Junior Golf Don’t Miss the 113th Annual Convention It’s a Oct. 30 - Nov. 1

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FALL 2011

Independent Insurance Agents & Brokers of South Carolina PO Box 210008, Columbia, SC 29221 800 Gracern Road, Columbia, SC 29210 803-731-9460 803-772-6425 (fax) e-mail: information@iiabsc.com

IIABSC Staff

G. Frank Sheppard, AAI, CAE President ext. 23, fsheppard@iiabsc.com Rebecca H. McCormack, CPCU, CIC, AAI, CPIW Vice President ext. 14, bmccormack@iiabsc.com Anita J. Trevino Director of Communications ext. 29, atrevino@iiabsc.com Beth Chastie Director of Administration & Finance ext. 17, bchastie@iiabsc.com Laura Cornell Director of Insurance Programs ext. 22, lcornell@iiabsc.com Megan Huebner Meetings & Membership Coordinator ext. 16, mhuebner@iiabsc.com Mary A. Ellis Professional Development Administrator ext. 12, mellis@iiabsc.com Jeanette Bloss Education Coordinator ext. 11, jbloss@iiabsc.com Pat Fetner Receptionist ext. 10, pfetner@iiabsc.com Lee Ruef Director of State Government Relations lruef@iiabsc.com South Carolina Agent & Broker is the official magazine of the Independent Insurance Agents and Brokers of South Carolina and is published four times annually. IIABSC does not necessarily endorse any of the companies advertising in this publication or the views of its writers. Articles and information published in this magazine may not be reproduced without written consent of the IIABSC. South Carolina Agent & Broker is not responsible for unsolicited manuscripts, art or photography. The publisher cannot assume responsibility for claims made by advertisers and is not responsible for the opinions expressed by contributing authors. For more information on advertising, Contact Jim Aitkins Blue Water Publishers 22727 - 161st Avenue SE Monroe, WA 98272 360-805-6474 fax: 360-805-6475 jima@bluewaterpublishers.com

South Carolina Agent & Broker • Fall 2011

Contents

Message from the Chairman of the Board

Message from the National Director

ACT: A Discussion of Agency Website and Social Media “Best Practices” 10 113th Annual Convention Agenda 16 ACT: E&O Considerations for the Automated Agent 18 2011 Outstanding CSR of the Year Award - Susan Finley 27 Agency Internet Bootcamp 29 2011 Young Agents Conference - “Rockin’ Back to the Future” 30 Insuring Those That Work from Home - It’s Not as Easy as You May Think

Palmetto Partners Program

Young Agents Golf Recap - South Carolina Qualifier 40 IIABSC Education & Events Calendar 44 2011 Board of Directors and Executive Committee 46

Advertiser Index

Assure Alliance 20 Bankers Insurance Group 14 Builders Mutual Insurance 33 Burns & Wilcox 19 Genesee General 36 GUARD Insurance Group 23 Hanover Excess & Surplus 9 InsurBanc 44 JM Wilson 15 Jackson Sumner & Associates 2 Johnson & Johnson 24, 25 M. J. Kelly of South Carolina 43 Military Benefits Association 7 Millennium Insurance Group 28

Montgomery Insurance 12 NetComp 43 Preferred Specialty 47 Prime Rate Premium Finance 21 ProVision Underwriters 46 RPS Rollins 3 Summit Marketing Services 22 Southern Insurance Underwriters 5 TAPCO Underwriters 15 The National Security Group 33 UPC Insurance 48 Universal Insurance Co. / Seibels 36 Universal North America 13 Utica National Insurance Group 17

Cover photo credit: © James Jones, Dreamstime.com - Instead of amber waves of grain, fall in South Carolina means fields of white cotton bolls, ready for picking! Cotton is closely tied to our state’s history, and it continues to be an important industry today.

IIABSC Chairman of the Board Kathy D. McKay, CIC, CPIW

When One Door Closes…

“No duty is more urgent than that of returning thanks.”James Allen, Author

want to express my sincere appreciation to our membership for their support over the past two years. The advancement of our industry begins with you, and I am grateful to have had the opportunity to serve as your Chairman. To my family, your love and support means the world to me. If I had to beg forgiveness for being absent, I would have spent the past two years on my knees. To my co-workers, I don’t know what I would have done without you. I sincerely appreciate your dedication to our operation and the insurance industry as a whole. Jules Anderson, John Braddy and Jon Jensen (better known as the “Three Wise Men”), you are patient mentors, and I am so grateful that you are willing to share your experience and knowledge. It is a privilege to call you colleagues, and an honor to call you friends. To the IIABSC staff, you are first class. With the help of a very talented team, Frank and Becky have established us as one of the industry’s top performers over the past decade, and we have the national accolades to prove it. In addition I would like to recognize the IIABSC Board of Directors for their hard work and dedication to our association. Please accept my heartfelt thanks for sharing your time and talent. Tom, Jay, Scott and Ken, your efforts continuously impress me and the caliber of your work is unparalleled in our industry. Lastly, I would like to extend big congratulations to Ashley. For many years you have worked tirelessly on behalf of IIABSC, and we are fortunate to have you as our incoming Chairman. As the saying goes, “When one door closes, another door opens.” I will always be a proud member of the Trusted Choice® family, but I heard a rumor that the Republican Party is in need of a Presidential Nominee… open door? Thank you, my friends.

South Carolina Agent & Broker • Fall 2011

A ATT CMYK 03-08 4

10/31/09

1:32 AM

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National Director Jon A. Jensen, AAI, AIP

here was a major announcement last month at the Big “I” Fall Leadership Conference in Minneapolis – leaders in the independent insurance agent distribution channel (led by the Insurance Agents & Brokers of America, Inc.) have formed Consumer Agent Portal, LLC (CAP) to deliver digital marketing tools and services that increase the online market presence of independent agencies, brokers and carriers in personal lines insurance. In 2009, more than 70 percent of consumers said they went online to research and/or purchase their personal insurance products. In order to become a viable player in the research and purchase of these insurance products, the Independent Agency system needs to create and sustain an online persona that will allow them to effectively market to consumers the value proposition that Independent Agents can provide by combining the convenience of online shopping with the personal service of a local agent. The CAP project was initiated to build a consumerfacing web portal that will provide the Independent Agency System the ability to reach consumers and provide “best-in-class” technology and information. Initial CAP funding is being provided by IIABA and six insurance company investment partners. As the South Carolina National Director, I am also honored to report that IIABA leaders appointed me as the only national director on the new CAP Board of Managers. There will be two major components of the CAP program – Consumer-Agent Portal and Industry Services. The Industry Services web solution is expected to be online this December to help independent agencies, brokers and carriers build their online brands

South Carolina Agent & Broker • Fall 2011

Introducing CAP

and visibility in order to attract and interact with today’s digital consumer. The Consumer-Agent Portal is expected to launch in 2012 as a marketing resource to complement the industry services website. This portal will be the only online shopping solution to give consumers real-time comparisons from the largest selection of independent insurance carriers, as well as the ability to select local independent agents or brokers for service, customization of policies and advocacy. So what does this mean for independent agents? It means a new way at looking at branding and marketing our inherent strengths to the consumer of today. It means tools that will allow today’s consumer to search out an Independent Insurance Agent in a way that is driven by the consumer. It means gaining back market share in personal lines. It will allow agents to present themselves as strong competitors to existing “online” insurance options. What should independent agents do now? Get ready and watch for more information. In the coming weeks, IIABSC will be publishing information about CAP and hosting meetings and presentations in order to introduce CAP to IIABSC members. The first presentation is an overview of CAP at the 113th IIABSC Annual Convention in Charleston. You can also get more information and program updates at www.projectCAP .info. CAP has the real potential to be a “game changer” for independent agents. But it will only be as successful as agents make it. Watch for more announcements – learn about the opportunities – and then get on board when CAP arrives!

A Discussion of Agency Website and

Social Media

“Best Practices”

South Carolina Agent & Broker • Fall 2011

By Rick Morgan, ACT Workgroup Chairman

A group of 18-20 Internet-savvy agent, carrier and vendor executives gathered at the latest ACT meeting to discuss their experiences and lessons with their websites and uses of social media. What emerged was a consensus on several best-practice tips for using these online tools, which will be helpful to other agencies as they seek to build their online presence and brand.

t the fall ACT meeting, there was a lively break-out session that focused on the latest thinking on websites and social media in the insurance industry and what value agents and carriers were finding through their digital presence. The conversation uncovered behavior and tactics that the group felt were best practices and helpful in achieving a successful social implementation. I served as moderator of the breakout session, which had 18-20 participants. The following is a brief overview of the discussion. Websites and Blogging Considering the increased functionality of Facebook pages, previously called fan pages, some actually questioned the need for a website. Most participants, however, think that a website is still a very important component in a social strategy. Yet, it’s important to note that the website discussed is not the static “brochure-ware” of the 1990s. Rather, it is a twentyfirst century blog or website built on a blog platform. For example, a website created using a product like WordPress or TypePad. New tools make it easy to keep content fresh and relevant. A website is a company’s online home base, where they humanize their brand and build the core of their digital existence. It was suggested that a successful strategy is to become a curator of information on a specific subject. That is, become the resource customers and prospects go to for subject matter expertise.

At our session, discussion took place concerning the quality of blog content, as well as the time-limit between updates for a blog to be considered up-todate and fresh. One agent offered the following, “I was ready to hire someone to do our blog, but one of our employees said she could do it, so I decided to let her try. It helped me realize that a good blog doesn’t require a professional writer. Writing in the first person is okay. In fact, this seems to be the best practice. I did review the posts at first, but now I have full confidence and trust in her and no longer review them.” Another agent mentioned that he typically uses his blog to write testimonials about his clients. Best Practice Tips: • Keep blogs short, two paragraphs or about 300 words. What drives more interest is good concise information. • Build an editorial calendar for your blog posts and share the responsibility for writing them with your colleagues. • Consistency is more important than frequency. • Blogging is very good for search engine optimization (getting found through search engines such as Google). One said, “Every time we blog, page views go up.” • Use Google Analytics to monitor your site. It is a free, easy way to track hits to your web page. • Consider adding a disclaimer. Fall 2011 • South Carolina Agent & Broker

Facebook Fan Page The discussion started with the assumption that every agent and broker should have such a page. All participants agreed that ”you need to be where your prospects and customers are.” The inbound and permission-based marketing model of today will work only if you can be found. With more than 500 million users, Facebook is a place where you must have a presence. Best Practice Tips: • Think of Facebook as a way to keep your network updated on agency activity and/or events. For example, a sports team you sponsor or participation in a cancer walk is news you can share with your community. • Think of your page as an online civic club meeting or cocktail party, a place to introduce yourself and build your online persona. • Use customized tabs to create a “welcome” landing page. • Consider using Facebook Ads to promote your blog and grow your fan base. These ads are very costeffective and can be laser-focused. Facebook provides good metrics and the ads are easy to create and revise as needed. Some of the comments: “If it isn’t working, change it.” “You are not selling a product with a Facebook ad.” “It’s cheap and easy. Play with it.” • Some carriers are using co-op advertising dollars to help agents with Facebook ads. LinkedIn For many in the breakout session, the use of LinkedIn was less threatening and more comfortable than many of the other social media applications. We agreed that LinkedIn has become more than a place to post an online resume. For example, it can be used to do research on potential prospects. Also, engaging in conversation on Linkedin groups can be an effective way to demonstrate subject matter expertise.

news and events in real time. For example, one agent uses Twitter to track local weather, report on tornado sightings and provide location updates. Best Practice Tips: • Use Twitter search. • Use Twitter to monitor local news events or areas of interest . For example, #insurance. Social Networking, Getting Started When asked what steps should be taken by someone just getting started with social networking, the group offered this advice: • Create a connected digital presence by using tools such as Hootsuite, TweetDeck and/or FriendFeed to link and manage all of your social activity. While these tools allow you to replicate posts across all of your social sites, you need to carefully consider whether you actually want to do this. It is important to consider the different audiences and deliver relevant messaging to each of your various social sites. • Make sure you have a good policy or social web guide in place that outlines and defines appropriate behavior for your company and employees when using the social web.

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Best Practice Tips: • Be sure you have a good and complete profile. • Take advantage of its strong search capability when looking for prospects or researching existing customers. • Join groups focused on your firm’s expertise. For example, if you write restaurants or contractors, be sure to join corresponding groups. Twitter The value and business use of Twitter continues to be elusive for many insurance agents. For others, it has become one of their most effective research and communication tools. For some agents, Twitter, like Facebook, is used to humanize and personalize their corporate brand. They use Twitter to broadcast 12

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HOME

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•

• • • •

•

• •

Have a good, comprehensive strategy in place that is part of the firm’s business plan. Be sure to communicate that plan with all employees. Decide what you want to measure and how to measure it. You will want to know what success looks like. Don’t delay. This is not a fad or an experiment. Pick one thing and do it now. Let tools like GetListed.org help you with Local Search. Consider using video and YouTube. Using a Flip video camera or one built-in to your smart phone is a very easy and effective way to create your own video. Use Google Alerts to track mentions of not only your firm but also to track your key customers and competition. Blog, blog and blog some more. Pay attention to the details. Make sure your brand image is consistent across all of your online touch points.

Biggest Mistake When asked what mistakes they made, the group responded with: • Sitting on the sideline waiting for it to mature.

• •

Using these tools as a sales or self-promotion megaphone. Thinking that if you build it they will come and your bottom line will magically grow. It takes work to build relationships and gain trust, online and off.

Other Comments • One agent is discontinuing chat. He felt that most were useless chats. • Some agents have abandoned the Yellow Pages. Instead, they spend the money on improving their website and developing their social sites. One agent also commented that the type of inquiries that came from their social sites were more solid and qualified than the calls they previously had received from the Yellow Pages. • It is important to be in all of these social places, because prospective customers are actively searching for you there. • Under the heading of “What’s Next?” the group universally expected to make more effective use of video. Many were also interested in creating iPhone apps for their agency and saw mobile and locationbased applications as emerging trends for 2011. Editor’s Note: The ACT website contains a wealth of additional information related to effective use of agency websites and social media. For example, you will find prototype website disclaimers in the article Don’t Get Caught in the Web, examples of agency social media policies, ACT’s Creating a Social Web Policy for Your Independent Agency, and several other informative articles and recorded webinars. Go to www.iiaba.net/act and click on “Websites & Social Media” Quick Link in the gray shaded area on the left. Rick Morgan is a consultant with four decades of experience in innovative technology, marketing, and publishing in the independent agency system. He chairs ACT’s Social Web Work Group. Email him at rickjmiv@gmail.com or find his website, www.rickmorganconsulting.com/ blog. Rick produced this article for ACT. It reflects his views and should not be construed as an official statement by ACT.

South Carolina Agent & Broker • Fall 2011

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It’s a

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113th Annual Convention

Keynote: Dr. Ann Kulze, M.D. brilliantly transforms current health science into a program that is simple, fun and completely straightforward. Audience will be entertained, but most importantly will come away with everything needed to “eat right for life,” including copies of her new book.

Networking & exhibit hall: Sunday provides

an entire afternoon and evening of networking with company reps and vendors as well as your fellow agents from around the state in our Halloween themed exhibit hall and kick-off reception.

Local sights & free time: You won’t be stuck in

the hotel the whole time. Activities include reception at the SC Aquarium, late-night ghost tour, cooking demo with local chef, walking history tour and golf at Patriot’s Point, plus there is plenty of free time in which to enjoy Charleston.

Education opportunities: In addition to our

For details & to register, visit

www.iiabsc.com 16

South Carolina Agent & Broker • Fall 2011

keynote, we have continuing education sessions planned on disaster recovery, media training and insurance fraud for ethics credit. Also, be one of the rst members to learn about the Consumer Agent Portal, an initiative by our national association to collectively boost the online presence of member independent agents.

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Fall 2011 • South Carolina Agent & Broker

E&O Considerations for the Automated Agent By Keidel, Weldon & Cunningham, LLP

A noted law firm specializing in agencies’ E&O defense work provides several recommendations as to how agencies can use their technology most effectively to protect against E&O exposure.

echnology is providing agents and brokers today with several tools to increase sales and profitability, as well as to provide better customer service. Automation is also helping many agencies manage their E&O risks more effectively because of its capabilities to retain accurate data, foster consistent processes, document transactions and conversations and to generate reports to monitor adherence to agency procedures. However, if the agency does not implement its technology in a disciplined way, this same technology can be used against the agency in connection with an E&O claim or lawsuit. The following is an overview of considerations agents should keep in mind when using technology, provided by a law firm with expertise in defending agents in E&O lawsuits. Electronic Delivery of Insurance Policies It is crucial in defending many E&O claims and lawsuits that the agency be able to demonstrate that it delivered the insurance policy to the customer. Without this evidence, we are unable to raise one of our most valuable defenses – the “Duty to Read” defense. However, many agencies are now delivering insurance policies and other insurance documents to customers in electronic form rather than in paper form. Providing insurance documents to customers in this way can help save both time and money and also allows the agency to provide a higher level of customer service. However, the agency should make certain that the customer consents to electronic delivery and understands that going forward, until such time as he or she indicates otherwise, he or she will only receive electronic copies of insurance documents and will not receive paper copies. The best practice 18

South Carolina Agent & Broker • Fall 2011

for the agency to follow is to have the customer sign a letter acknowledging his or her acceptance of this practice. If policies are being emailed to customers, the agency should not rely upon automatic receipts, since sometimes they can be falsely generated by the recipient’s antivirus software. Instead, the agency should request that a customer who is sent a policy by email affirmatively respond that he or she has, in fact, received the email and attachment. If the customer does not affirmatively respond, the agency should be sure to call the customer to confirm receipt, and then be sure to make a note of that conversation in the agency management system. If a customer is being provided with an electronic copy of his or her insurance policy contained on a CD, the agency should be sure to send or hand deliver that CD along with a letter stating that the electronic document is the policy and that the customer should be sure to review the policy carefully and advise the agency of any questions he or she may have or changes that need to be made. In addition to email or a copy of the insurance policy on a CD, there is also an electronic system whereby an agency sends an email to the insured with a link to a stand-alone secure server where the client can obtain a copy of his or her policy. If the insured retrieves an electronic copy of his or her policy, the agency management system is documented to show that it was retrieved, by whom and when. However, if the insured does not retrieve the electronic copy of his or her policy, an email is sent to the agent to advise that the policy has not been retrieved. The agency can then either send the customer another email reminding him or her to access the policy through the secure portal or print the policy out and send it the old fashion way, via the mail.

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Notes of Discussions with Insureds and Insurers The rule within every agency should be that all employees must consistently make notes within the agency management system of any discussions with insureds, insurers or anyone else that concern in any way issues related to coverage or claims. The agency management system notes the date and time for any such notes entered. These notes can be very powerful proof if needed to defend the agency against an E&O claim or lawsuit. There are five important aspects to documenting any communications: 1. Note the date, time and duration of the conversation; 2. Note the name and title of the individual that your agency is communicating with; 3. Note how the conference took place, such as office conference, telephone conference and/or cell phone conference; 4. Note the salient points of the conversation; and, 5. If possible, follow-up with the insured in writing to confirm the conversation. While this seems extremely basic, you would be amazed at how many times we open an agency’s file and the notes are missing such details as whom they spoke with, where the conversation took place, or even the issues that were discussed. Without some, or all, of this basic information1 it2/15/11 may be1:06 more MarchHalfpageAssure-Final_Layout PMdifficult Page 1 or even

impossible to defend an agent in an E&O claim properly. Activities Noted in the Agency Management System Activities that are created within the agency management system are a great way for employees to diary matters for follow-up. No matter what agency management system you are utilizing, the first and most important thing to confirm is that any activity performed is reflected by an activity within your system. For example, if your agency creates a certificate of insurance for a customer, your agency management system should create an activity in the log that corresponds to the creation of the certificate of insurance. This action would likewise apply to any other type of task, such as the completion of applications, change endorsements, performing a function on the carrier website, etc. The second most important thing to keep in mind is that the activities that are created should always be closed when the activity has been completed. A very powerful piece of evidence in defending E&O claims and lawsuits is to demonstrate that an activity was opened, handled and then closed when completed. Conversely, it can be very damaging for an agency to have activities within its agency management system that have never been followed up on; or if they have been followed up on, they have not been closed. Accordingly, every agency should make certain that all employees are creating, following up and then closing all activities within the agency management system.

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South Carolina Agent & Broker • Fall 2011

Voice Mail Messages and Disclaimers Voice mail messages are regularly left by customers on the voice mail system of agencies, asking questions on coverage, reporting claims and requesting changes in coverage. For this reason, it is recommended that a voice mail disclaimer be used on both the message for every employee and also on the main message for the agency. This disclaimer should state that coverage cannot be bound or modified, nor can a claim be reported, by use of the voice mail system. In addition, it is a good practice for an agency to consider adopting a procedure whereby voice-mail messages are retained either in the original recorded form or in written form. Some agency management systems are compatible with phone systems to allow a copy of voice-mail messages to be attached to an insuredâ&#x20AC;&#x2122;s electronic file. There are also programs that exist where you can have a written version of your voice mail messages sent to you by email and then retain that written version of the message. Disclaimers for E-mail, Websites and Social Media Sites In addition to a disclaimer on voice mail, it is also important for every agency to have similar disclaimers on their email transmissions, websites and social media sites. Some agencies advise us that they like to use email for their customers to report claims. For those agencies, the disclaimer might state as follows:

Please note that an email will not be effective to report a claim or request a coverage change until such time as you receive a confirmation from us that the claim submitted or change requested has been processed. Additionally, some agencies have interactive websites that allow customers to report claims or request policy changes. A similar type of disclaimer should be used for those interactive websites as well. Where an agency or brokerage is utilizing a social media site like Facebook or Twitter, it should use a disclaimer similar to that mentioned above with the addition of advising that these vehicles should not be used to communicate client-specific information to the agency, any content the customer provides becomes the property of the agency and the agency is at liberty to add, modify or delete any content that is not acceptable. Certificates of Insurance Certificates of insurance are still one of the largest sources of E&O claims and lawsuits. As such, it is important for every agency to have good documentation concerning how certificates were issued. The agency should be sure to retain, either in paper form or electronically, a copy of every certificate of insurance issued. While agency management systems will automatically

Fall 2011 â&#x20AC;˘ South Carolina Agent & Broker

save a copy of the certificates on the system, one problem we have encountered is that many of those systems will only print out the current date as opposed to the date the certificate was issued. Because of the importance of having an exact copy of the actual certificate issued (including the exact date it was issued), agents should make certain that if they are saving the copies of certificates electronically, that their agency management system will either: (a) print out the date that the certificate was actually issued when printed at a later date; or (b) scan a copy of the certificate that is actually issued by the system and maintain an electronic copy of it within the respective insured’s file. ACORD Forms It is equally important that every agency use the most current and up-to-date ACORD forms in connection with its daily operations. Doing so will help protect the agency from potential E&O claims and lawsuits and will often help better serve your customers. For example, the ACORD 80 Homeowners Application was revised in October 2009, but some agencies appear to still be using the earlier versions of the application. The new ACORD Homeowners Application now contains five pages and it is akin

South Carolina Agent Broker •1 10-274 IIA SC Agent & Broker Ad& txtoutl.indd

Fall 2011

to a checklist of coverages and exposures, which is one of the best means to dispute a claim by a customer that coverages were never reviewed. Reviewing the completed application with customers will help protect the agency from claims that the agency did not review a particular type of coverage with the customer or ask about a certain exposure that may exist. Another form that is often not used in its most current version by agencies is the ACORD 25 Certificate of Insurance. The most recent version of the ACORD 25 is the May 2010 edition. As mentioned above, because certificates of insurance are involved in a great many E&O claims and lawsuits, it is of the utmost importance that agencies use the most recent version of the ACORD 25 Certificate of Insurance. Downloads and Uploads Another area to address is the agency’s uploading and downloading documents and information from the carriers with whom they do business. While we understand that uploading and downloading has become a major tool to increase agency efficiency, there are several points to keep in mind: 1. Confirm that your agency management system is not allowing your agency’s downloads to change the applications from insureds unless it creates a new version.

11/12/2010 1:09:32 PM

2. Downloads can greatly enhance the accuracy of the agency’s data, which is essential when counseling insureds, but it is important to audit these downloads regularly to make sure they are accurate and that the agency’s database contains good data overall. Critical to all of these recommendations is that the agency incorporate them into its written procedures, train its employees on them and require that they be followed, as well as audit the agency’s systems regularly to make sure the procedures are being followed. This overview is not meant to be an exhaustive list of potential E&O issues that you may face when you examine the electronic side of your business. Agencies should always keep in mind all of the other E&O risk management principles they have learned and how the technology they are using might impact them.

with many informative articles, can be found in Quick Links, the gray shaded box on the left, of the ACT home page, www.iiaba .net/act. This article was prepared for ACT by Jim Keidel, Chris Weldon and Darren Renner of Keidel, Weldon & Cunningham, LLP, a law firm with offices located in New York, Connecticut, New Jersey and Rhode Island, concentrating its practice in the defense of insurance agent and broker E&O claims and litigation, loss control and education as well as insurance coverage analysis and litigation and insurance regulatory matters for insurance agents and brokers. Contact Jim or Chris at 914-948-7000 or by email at jkeidel@kwcllp.com and cweldon@kwcllp.com. This article reflects the views of the authors and should not be construed as an official statement by ACT.

Editor’s Note: Additional ACT articles on agency E&O and risk management issues are available on the ACT website, of particular interest is Creating a Social Web Policy for Your Independent Agency (comprehensive checklist); and ACT Prototype Agency Information Security Plan (tool to build your agency’s written information security plan). Both tools, along

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South Carolina Agent & Broker â&#x20AC;˘ Fall 2011

2011 Outstanding Customer Service Representative of the Year Award Susan Finley Herlong Bates Burnett Insurance

usan Finley, of Herlong Bates Burnett Insurance in Greenville has been named the SC 2011 Outstanding Customer Service Representative of the Year. This award is the highest honor in our state for insurance Customer Service Reps who have distinguished themselves through contributions to their industry and profession. Once nominated, Susan was required to complete an essay from the following prompt: Many insurance service professionals believe that their personal relationships with clients may be threatened by agenciesâ&#x20AC;&#x2122; and companiesâ&#x20AC;&#x2122; efforts to use more technology such as the internet, instant messaging and automated systems. Discuss four courses of action that a CSR, Account Executive or Account Manager can take to preserve and/or enhance relationships with clients and/or companies while continuing to utilize and benefit from current technologies.

(Winning Essay)

Maintaining Personal Relationships While Embracing Current Technologies By Susan Finley, Herlong Bates Burnett Insurance Technological advances make many things easier. You can text, tweet or surf the Internet while enjoying a beautiful sunset on a white sandy beach. You can do all of your shopping without ever leaving the comfort of your home. And you can monitor your home while a thousand miles away. In a service industry such as insurance, it is important to embrace the ever-changing

advancements of technology; however, it is also our responsibility to ensure that our clients know there is an education and committed person on the other side of the keyboard or telephone. Insurance is a product of trust for consumers. They must be able to trust that the person providing the coverage is well-educated and has their best interest at heart. The only way we can establish this trust is to develop and maintain a personal

Fall 2011 â&#x20AC;˘ South Carolina Agent & Broker

rapport with our clients. A simple telephone call after an email or fax can set you apart from others and let your clients know you care. Hearing your friendly voice and enthusiasm lets your client know you appreciate them and their business. As a Trusted Choice® independent insurance agent, not only are we committed to our clients, but also to our community. Being a part of causes such as Relay for Life allows us to give back to our community and make a difference by helping to save lives from devastating circumstances such as cancer. By inviting our clients and potential clients to partner with us, we are demonstrating our continued support and involvement with our community. It also gives us an opportunity to learn how our clients have been touched by devastation and other opportunities where we can make a difference. It is also very important to make time to visit with our clients at their home or place of business. Instead of simply sending a renewal summary or quote, scheduling a visit to their establishment shows the client you are committed to not only understanding their insurance needs, but also understanding all the many aspects of their business. You may be able to recognize an exposure that your client wasn’t aware of, demonstrating you knowledge and commitment to providing all of their business needs. Knowing your client and their preferences will also help to enhance your relationship. We come in contact with clients from many generations, those that insist on electronic correspondences and those who don’t own a computer or cell phone. If we don’t know their capabilities, how can we maintain a personal relationship? It is important to understand how to communicate with your clients in order to maintain your level of trust. As important as it is to embrace technological advances and opportunities they provide, it is also important to maintain trust with your clients. By taking the extra steps to conserve your personal relationships, you distinguish yourself and your customer service skills as being completely focused on your client’s needs.

South Carolina Agent & Broker • Fall 2011

Agency Internet

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Fall 2011 â&#x20AC;˘ South Carolina Agent & Broker

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July 28 – 31

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South Carolina Agent & Broker • Fall 2011

Sponsors: Access Insurance Company AFCO/ Prime Rate Premium Finance American Strategic Insurance AmTrust North America Auto-Owners Insurance Group Bankers Insurance Group Belfor Property Restoration Berkley Mid-Atlantic Group, LLC Builders Mutual Ins. Company Burns & Wilcox, Ltd. Capitol Preferred Ins. Companion Property & Casualty Frontline Homeowners Insurance Hanover Excess & Surplus, Inc. The Hartford IIABSC Agency Insurance House Jackson, Sumner & Associates Johnson & Johnson, Inc. Main Street America Group Montgomery Insurance/ Safeco Insurance, members of Liberty Mututal Group

Ocean Potion Preferred Specialty, LLC Progressive Insurance QBE RPS Continental Southern Cross Underwriters State Auto Insurance Companies St. Johns Insurance Company TAPCO Underwriters Travelers United Property & Casualty Ins. Co. Universal Ins. Company/ Seibels Bruce Group, Inc. Zurich Small Business/ Foremost/ Farmers

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Fall 2011 â&#x20AC;˘ South Carolina Agent & Broker

INSURING THOSE THAT WORK FROM HOME – By Terry Tadlock, CPCU, CIC, CRIS

was reminded last week about an exposure I have been preaching about for years…The Home-Based Business. Notice the article title; I called it “Those That Work From Home.” This was by design. As I teach this subject I ask students, “Do you have a home-based business?” Very few will admit they do, but when I ask whether there is any work done from home on a full-time or part-time basis or as a hobby that generates any income their answers change dramatically. As was the case with a call I received only a week ago. The client had an HO3 with all the normal bells and whistles with a very reputable carrier. The insured had started a little part-time tax-consulting business in his home about two years earlier. As the business grew it became apparent that the house was too small to accommodate his computer and necessary equipment. Due to the extremely high rental rates in commercial space the insured decided to purchase a small building (20 ft. x 40 ft.) and have it placed in his back yard. Everything was great… that is until the claim! During a violent thunderstorm, lightning hit the building at the point where the electrical service entered. A small fire ensued, damaging the building and property contained inside. When the adjuster showed up, the insured did not attempt to hide the fact that the building was used for his part-time business. A couple of weeks later the insured received a letter denying the claim to the structure as well as all the personal property contained inside that was used primarily for business. The client’s next call was to his agent, which is where I got involved. Unfortunately, there was nothing I could do to help. The adjuster was correct. Now that we have seen the claim, let’s look at the problem areas of the Homeowners policy as well as some solutions that may help. Please keep in mind all homeowner policies are not created equal. This article will use the current ISO 2011 Homeowners program.

South Carolina Agent & Broker • Fall 2011

It’s not as easy as you may think

PROBLEM AREAS: 1. Definition of Business – As you can see from the definition below there is little room in an activity where a fee is charged not to be considered a business. There are a few exceptions, but a careful review will determine these are the things we never really considered a business anyway. The tax consultant would certainly not fall into these. The courts have also looked at these types of claims and their general consensus is if there is a fee charged and there is continuity of activity (some degree of regularity) then it is a business.

3. “Business” means: a. A trade, profession or occupation engaged in on a full-time, part-time or occasional basis; or b. Any other activity engaged in for money or other compensation, except the following: (1) One or more activities, not described in (2) through (4) below, for which no “insured” receives more than $2,000 in total compensation for the 12 months before the beginning of the policy period; (2) Volunteer activities for which no money is received other than payment for expenses incurred to perform the activity; (3) Providing home day care services for which no compensation is received, other than the mutual exchange of such services; or (4) The rendering of home day care services to a relative of an “insured.”

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Fall 2011 • South Carolina Agent & Broker

Other Structures – The policy defines an “Other Structure” as a structure separated from the dwelling by clear space. I wanted to show this distinction because if the business is conducted out of the dwelling there is no limitation for the dwelling coverage. This limitation only applies to “Other Structures.” Notice the giveback for the storage of “Business” property. If the structure was used only for storage and the property was solely owned by the insured (which is a problem for all business entities other than a sole proprietor since another legal entity owns the property) then the structure would be covered. Again, not the case for the tax consultant.

B. Coverage B – Other Structures 2. We do not cover: c. Other structures from which any “business” is conducted; or d. Other structures used to store “business” property. However, we do cover a structure that contains “business” property solely owned by an “insured” or a tenant of the dwelling, provided that “business” property does not include gaseous or liquid fuel, other than fuel in a permanently installed fuel tank of a vehicle or craft parked or stored in the structure.

3. Personal Property – A little good news, but not much. If the personal property is used primarily for business there is a $2,500 limitation if the property is located on the “residence premises” and only $1,500 if away from the “residence premises” (this amount was increased in the 2011 ISO form from $500). I also want to emphasize how this wording is used. Nowhere in this section does it refer to business personal property. It states “personal property used primarily for business, which means it could have been personal property acquired with personal dollars that is now being used primarily for business purposes. This is very broad in terms of the property that is limited. Our tax consultant was paid the $2,500 the policy provided.

3. Special Limits Of Liability h. $2,500 on property, on the “residence premises,” used primarily for “business” purposes. i. $1,500 on property, away from the “residence premises,” used primarily for “business” purposes. However, this limit does not apply to antennas, tapes, wires, records, disks or other media that are: (1) Used with electronic equipment that reproduces, receives or transmits audio, visual or data signals; and (2) In or upon a “motor vehicle.”

4. Liability Coverage – When I teach this section of the Homeowners policy I just say that this is a blanket business exclusion. I am aware that there are a few very minor exceptions, but I would rather students be overly conservative in this area. The good news for our tax consultant is his claim was a property claim and did not involve his liability. But as you can see the exclusion is very comprehensive. There is no coverage if the claim arises on the “insured location” or it occurs off the “insured location” as a result of an activity engaged in by an (this means all of them) “insured.” And to add insult to injury the policy is very clear that it will never become a professional liability policy.

South Carolina Agent & Broker • Fall 2011

E. Coverage E – Personal Liability And Coverage F – Medical Payments To Others Coverages E and F do not apply to the following: 2. “Business” a. “Bodily injury” or “property damage” arising out of or in connection with a “business” conducted from an “insured location” or engaged in by an “insured,” whether or not the “business” is owned or operated by an “insured” or employs an “insured.” This Exclusion E.2. applies but is not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed, or implied to be provided because of the nature of the “business.” 3. Professional Services “Bodily injury” or “property damage” arising out of the rendering of or failure to render professional services;

Now that we have reviewed the policy language as it relates to coverage afforded to “Business,” do you agree with the claims adjusters’ analysis of the claim? They denied coverage on the “Other Structure” and limited the Personal Property claim to $2,500. Since you are probably wondering I will tell you: The total claim was about $18,000 in total damages leaving the insured with an uncovered loss of $15,500.

POSSIBLE SOLUTIONS: There are four ISO endorsements listed below that I think are worthy of mentioning. Three provide decent coverage if the exposure matches the coverage provided by the endorsement. The other (listed first) is an E&O claim waiting to happen, and I would offer caution in using it unless the insured understands the coverage.

ENDORSEMENTS AVAILABLE INCREASED LIMITS ON BUSINESS PROPERTY (HO 04 12) Allows the insured to increase the $2,500 on premises and the $1,500 off premises limitations on property used in business to a maximum of $10,000 on premises and $2,500 off premises.

Caution: This increase does not apply to: “Business” property in storage or held as a sample or for sale or delivery after sale; or “business” property pertaining to a “business” actually conducted on the “residence premises.”

PERMITTED INCIDENTAL OCCUPANCIES (HO 04 42) This one is an excellent endorsement, when the company will let you use it. Its only problem is its name: Permitted (meaning when the company allows) Incidental (meaning not much exposure). Find out the types of risks your company will write. Section I – Other Structures that are used in whole or in part may be scheduled and specifically insured. Personal Property used in the business named on the endorsement will have 100% of the coverage C limit. Section II – Liability and Medical Payments (on premises only) for the business named in the endorsement will be added back.

This endorsement fails to address three exposures still not covered in the Homeowners Policy. 1. $1,500 limitation on personal property off-premises. 2. No data coverage. 3. No offpremises liability coverage. Most underwriters look for two characteristics to eliminate the use of this endorsement: 1. Walk in traffic; and/or 2. Products and completed operations exposure. Most underwriters will allow this endorsement to be used for the small-office-, studio-type risks.

BUSINESS PURSUITS (HO 24 71) This is a Section II – Liability endorsement only. It does nothing to correct any property exposures. Caution: Specifically excluded in this endorsement is: “…”bodily injury” or “property damage” arising out of the “business” pursuits of the “insured” in connection with a ‘business” owned or financially controlled by the “insured” or by a partnership of which the “insured” is a partner or member.”

This endorsement will only work when you are the employee of a company that you do not own or financially control and are allowed to work out of the home. Commonly used for teachers. When used for a teacher, corporal punishment may be added.

HOME BUSINESS COVERAGE (HO 05 90) This is a 15-page endorsement that is added to the Homeowners policy. It reads as though someone went on a cut and paste frenzy and used a combination of BOP, Permitted Incidental Occupancies, CGL and a few other policy forms. My major

concern of this endorsement is that it does not provide offpremises liability coverage unless it is a products claim. This limitation makes it unusable in my opinion.

Fall 2011 • South Carolina Agent & Broker

OTHER SOLUTIONS: When this exposure surfaces don’t forget to review some of the stand-alone products that are available. Two of the more prominent are RLI (offered through the Big “I” to members) and USLI. They both have very good homebusiness policies. I am not going to offer an analysis of them in this article, but it would be worth a call to see what they offer. Both take a BOP approach and USLI even has a Professional Liability sublimit of $25,000. In my opinion these are better suited for the majority of your clients that work from their homes. If these don’t fit the exposures your client faces then I would consider looking to a commercial policy. In conclusion, I would like to be able to tell you this problem is going away, but it is not! There are approximately 2 million homebased types of business started every year, and currently more than 14 million people have some type of home-business exposure. These numbers represent almost 50% of all small businesses in the U.S. My major concern for retail agents is that we just don’t know when the exposure exists. We need to be making sure we ask about this risk and that we word our inquiries in a way that clients will understand. We can fix the problem if we know about it, but I’m just not sure we do. That was the case with the agent who called me. I hope this brief discussion is of some help to your personal-lines staff. Want to learn more about changes from the ISO 2011 Homeowners program? Join us for Terry Tadlock’s Lunch ‘n’ Learn webinar series on Dec. 2 starting at Noon, where he will review the changes and implications for your clients. Each Lunch ‘n’ Learn is approved for 1 hour of P&C CE credit (NO TEST REQUIRED) and only costs $25 for members. Learn more at www.iiabsc.com > Education > Webinars. Terry Tadlock, CPCU, CIC, CRIS currently resides in Hilton Head Island, where he is a principal of Coastal Plains Insurance, part of the Correll Insurance Group. Terry provides a variety of in-person and online education courses and consulting services for SC Agents as well as the rest of the nation. 36

South Carolina Agent & Broker • Fall 2011

Do any of your clients work from home? Are you sure? Most homeowners and renters polices do not cover liability or damage to property from business activities.

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South Carolina Agent & Broker â&#x20AC;˘ Fall 2011

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South Carolina Qualifier June 27 – 28, 2011 Orangeburg Country Club

For final results scores and more photos please visit our web site, www.iiabsc.com/jrgolf

Ford Blanchard, 18, of Orangeburg shot a combined score of 104 and Sydney Legacy, 15, of Lexington shot a 155 combined score to top their respective divisions in the SC qualifier of the Trusted Choice Big “I” National Championship held June 27-28 at the Orangeburg Country Club in Orangeburg, SC. The final round of the Boys Division was interrupted by inclement weather and reduced to 27-hole scores. Second place for the boys division was Will Starke, 17, of Chapin with a two-day score of 105. These three advanced to the Trusted Choice Big “I” National Championship held Aug. 1-4 in Madison, Miss., at the Reunion Golf & Country Club. They were joined by Taylor Zoller, 18, of North Charleston (who qualified by exemption for his finish in last year’s national tournament) and third-place finisher Jon Weiss, 18, of Sumter as an at-large participant (he was actually leading the tournament after 13 holes when lightning halted play). Together, these five gave South Carolina the strongest finish ever in the history of the tournament. Every player made it to the final round (cuts after the second), three of our boys finished in the Top Ten and the fourth boy finished only three players after them. Congratulations to our junior golfers!

South Carolina Agent & Broker • Fall 2011

Clockwise from the top left corner: Ford Blanchard, Boys’ Champion (7th place national); Lee Ellis, Tournament Chairman; Sydney Legacy, Girls’ Champion (16th place national); Will Starke, Boys’ Runner-up (tied for 5th place national); Taylor Zoller, 2010 Boys’ Champion (tied for 11th place national); Jon Weiss, at-large player (tied for 8th place national). continued on page 42

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South Carolina Agent & Broker â&#x20AC;˘ Fall 2011

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Adams, Eaddy & Associates AFCO/Prime Rate Premium Finance Amerisafe AmTrust North America Auto-Owners Insurance Company Berkley Mid-Atlantic Group, LLC Builders Mutual Ins Company Capitol Preferred Ins Company Citizens Ins Agency Correll Insurance Group, Inc. CWS Insurance Agency

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Fall 2011 â&#x20AC;˘ South Carolina Agent & Broker

Calendar For course descriptions and up-to-date calendar, see our Education & Event calendars at www.iiabsc.com

EVENTS/CLASSROOM October 19 20 25 30–31

AIAM 510 & 520, Columbia, 6 hrs. P&C AIAM 310 & 320, Charleston, 6 hrs. P&C CRIS: Commercial Liability for Contractors, Greenville, 6 hrs. P&C IIABSC Annual Convention, Charleston Place Hotel

November 1 3 8 9–11 15 16 16 17 29

IIABSC Annual Convention, Charleston Place Hotel CISR Personal Auto, Greenville, 7 hrs. P&C Insuring Coastal Property, Charleston, 6 hrs. P&C CIC Commercial Property, Hilton Head, 20 hrs. P&C CISR William T. Hold Seminar, Charleston, 4 hrs. Ethics, 4 hrs. P&C CISR Personal Residential, Florence, 7 hrs. P&C E&O Risk Management, Hilton Head, 6 hrs. P&C Ethics: Yesterday, Today & Tomorrow, Greenville, 3 hrs. Ethics CISR Agency Operations, Charleston, 6 hrs P&C or L&H, 1 hr. Ethics

December 1 7 13 14

Surplus Lines Markets & Practices, Columbia, 6 hrs. P&C CISR Commercial Casualty, Columbia, 7 hrs. P&C CISR Agency Operations, Greenville, 6 hrs P&C or L&H, 1 hr. Ethics AIAM 610 & 620, Columbia, 3 hrs. Ethics & 2 hrs. P&C

CE-APPROVED WEBINARS October 26 27

Insuring Personal Autos Used in Business, 1 hr. P&C ABEN Webcast: Ethics in Business, 3 hrs. Ethics

November 2 3 3 15 15 17 29

ABEN Webcast: Business Income, Beyond the Basics, 3 hrs. P&C Setting Business Income Limits, 1 hr. P&C ABEN Webcast: Workers Comp, Beyond the Basics, 3 hrs. P&C Insuring Condos, 2 hrs. P&C ABEN Webcast: Bonds, Shaken not Stirred, 2 hrs. P&C ABEN Webcast: Ethics in Business, 3 hrs. Ethics Rental Cars, 2 hrs. P&C

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Ethics: Yesterday, Today & Tomorrow, 3 hrs. Ethics 2011 HO Changes, 1 hr. P&C Advanced Flood, 2 hrs. P&C How to Complete the Business Income Worksheet, 1 hr. P&C ABEN Webcast: Ethics in Business, 3 hrs. Ethics

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South Carolina Agent & Broker • Fall 2011

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Fall 2011 â&#x20AC;˘ South Carolina Agent & Broker

2011 Board of Directors Executive Committee

Directors

Chairman Kathy D. McKay, CIC, CPIW McKay Insurance Mt. Pleasant, SC kmckay6681@aol.com

National Director Jon A. Jensen, AAI, AIP Correll Insurance Group Spartanburg, SC jjensen@correllinsurance.com

Thomas M. Bates, Jr. (Tom) Herlong Bates Burnett Insurance Greenville, SC tom@herlongbatesburnett.com

R. Scott Moseley Irmo Insurance Agency Irmo, SC scotirmo@bellsouth.net

Chairman Elect/ Treasurer Ashley Brady, CIC First Charter Co., Inc Marion, SC abrady@firstcharterins.com

Immediate Past Chairman Julius J “Jules” Anderson, Jr., AAI Anderson Ins Assoc Charleston, SC janderson@aiasc.com

Angus M. Brabham, IV, CIC (Gus) Frank B. Norris & Co. Columbia, SC gbrabham@franbnorris.com

Edward S. Spivey, CIC, AAI (Spider) Howard B. Smith Agency Mullins, SC espivey@hbsmithagency.com

David A. Cyphers, CIC, AAI Sifford-Stine Insurance Clover, SC dcyphers@sifford-stine.com

James G. Taylor, Jr., CIC (Jay) Kinghorn Insurance Agency of Beaufort Beaufort, SC jtaylor@insurancebeaufort.com

Kimberly J. Gore, CIC (Kim) Associated Insurors Myrtle Beach, SC kgore@firstseinsurance.com

Richard L. Walker, CIC Cormell Street & Patterson Florence, SC rwalker@csp4me.com

Secretary Kenneth A. “Ken” Finch, CPCU, CIC, CRM, AAI Countybanc Insurance Greenwood, SC kfinch@ecountybanc.com

Larry G. Joyner, CIC, AAI CWS Ins Agency Spartanburg, SC larry@cwsinsurance.com

South Carolina Agent & Broker • Fall 2011

Independent Insurance Agents & Brokers of SC 800 Gracern Road Columbia, SC 29210

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