July 2011 La Voz by Independent Insurance Agents of NM

CEL E

TIN G A BR

YEARS MAKING NEW MEXICO AN AFFORDABLE PLACE TO DO BUSINESS FOR TWENTY YEARS.

New Mexico’s Experts in Workers’ Compensation Insurance 3900 Singer Blvd. NE • Albuquerque, NM 87109 • 505.345.7260 or 800.788.8851 •

www.NewMexicoMutual.com

â&#x20AC;&#x153;La Vozâ&#x20AC;? is the official monthly publication of the

"The Voice" of Independent Agents since 1934

Independent Insurance Agents of NM 1511 University Blvd. NE Albuquerque, NM 87102. (505) 843-7231. Fax (505) 243-3367. Web site www.iianm.org. This publication is intended to provide accurate and authoritative information on the subject matter covered, but is distributed with the understanding that neither IIANM, nor any contributing author, publisher, contributor or advertiser is rendering legal, accounting or any other professional service and assume no liability whatsoever in connection with its use. Further, the electronic links to our advertisers and/or contributors found in this publication are provided as a courtesy to our readers and do not necessarily indicate an endorsement by IIANM. News items from members of Independent Insurance Agents of New Mexico and the general insurance industry are encouraged. The advertising deadline is the fifteenth day of the month, preceding publication. Advertising rates are available upon request. Please contact Rachel Sheffield at rachel@iianm.org for details

IIANM Staff President/CEO Thom Turbett VP Of Membership Services Lorri Gaffney

Features

VoZ

Why You Work More, & Enjoy It Less

Insurance Implications of Western Wild Fires

The Future for Independent Insurance Agencies

The Latest on Health Care Reform

Building LIFE Into a P&C Agency

Southern Seminar Registration (Las Cruces, NM)

How NOT to Fumble Your Phone Leads

Combat Cyber Crime & Protect Your Agency w/ Simple Security Steps 22 Lessons from Hulk Hogan - "Watch Your E&O exposure, brother!"

2011 Convention at the Hard Rock

5 Tips for Building Strong Customer Relationships

In Every Issue Tech Talk

Tired of Throwing Your Money Down the CIC Money Pit?

Director Of Communications Rachel Sheffield

Education Edge

Insurance Programs Administrator Julie A. Franchini

July's Clickable Calendar

Odds n Ends

IIANM's Partners Program

Member Services Associate Renee Rivera

2010-2011 Officers

Advertiser Index Acuity

Chair Kathy Yeager

American Mining Insurance Company

Burns & Wilcox

Vice-Chair Scott Jones

FUSA Insurance Agency

Secretary/Treasurer PJ Wolff

Litchfield Special Risks, Inc.

Market Finders, Inc.

New Mexico Mutual

Risk Placement Service

Trustco / HCIT

National Director Sam Conlee Immediate Past Chair Alma Franzoy-Capron

www.RPSins.com/scottsdale

Why You Work More, & Enjoy It Less

ver since his boss, chef Jen Jasinski, discovered that Mr. Dale is handy, she's had him doing double duty as the maintenance man. He has spent hours repainting the oven, fixing the plumbing and installing a garbage disposal. And that's just the start. He used to manage the dessert operation at one of Ms. Jasinski's restaurants; now he's up to three. All told, Mr. Dale says, his hours have expanded to more than 60 a week. SmartMoney's Anne Kadet explains why tough economic times are vastly expanding the role of some jobs, without the benefit of additional pay. In this new era, everyone does windows, and anyone who gripes about working too hard will hear an even hairier tale from the exec on the next bar stool. Emboldened by an unemployment crisis that's only now easing up, businesses of all sizes have asked employees to take on extra tasks that have little to do with their primary roles and expertise -- with engineers going on sales calls, accountants pitching in on customer service and chief financial officers running a division on the side. And some believe this shift is permanent, as the quickening pace of change demands more flexibility from everyone at the office. Management consultant Rich Moran, whose clients have included Apple and AT&T, says employees will do whatever it takes to help their company compete: "Job descriptions are written in sand, and the wind is blowing." Some workplace experts say this is the logical next step in management's quest to make the workplace more cost efficient. The latest shift started when businesses redistributed the workload during the recession; last year's nascent recovery intensified the process. In a recent survey by Spherion Staffing, 53% of workers surveyed said they've taken on new roles, most of them without extra pay (just 7% got a raise or a bonus). Now that sales are picking up, there's even more work to do, but companies are reluctant to hire, say human-resources experts. Some are anxious about what the economic future holds, while others are seeing their profits increase now that their work forces are leaner. CEO pay rose last year by about 11%, according to the Wall Street Journal's annual CEO pay survey. Kelsey Hubbard talks with WSJ's Erin White about the results. As hard as it can be to keep up, employees can benefit from the trend. Research shows that many successful leaders grew the most through "stretch experiences," says Seymour Adler, a senior vice president at Aon Hewitt's talent-and-rewards practice. Still, even the most hard-nosed bosses know workers can be stretched only so far. Indeed, a recent survey from the Conference Board found that just 43% of Americans are satisfied with their job -- a record low.

by Anne Kadet Source: The Wall Street Journal Assigning new roles to existing employees can be a smart move, says Debbie Zmorenski, a productivity consultant at LSA Partners in Orlando. But during the recession, instead of thoughtfully reassigning tasks based on a careful assessment of employees' skills, many companies redistributed the workload willy-nilly and provided little training. When you send a talented but shy IT specialist out to do sales, says Ms. Zmorenski, "you're setting him up to fail." If you're wondering why it's hard to juggle new roles, ask a neuroscientist. Recent research suggests that multitasking can reduce productivity, because it takes a ton of mental energy to switch from one task to the next. The sheer number of hours demanded also can impair your performance as your brain gets fatigued, says Susan Koen, an organizational psychologist and consultant whose clients include Pfizer, Alcoa and Procter & Gamble. To their credit, some employers are doing more to help their superstars. And companies are helping executives with time management and delegation. Another popular tactic: recognition programs that reward employees for taking on extra work. Major companies are turning to software "wizards" that dole out laurels on preset, automated schedules, says Adrian Gostick, a co-author of "The Carrot Principle" and a former vice president at employee-recognition consultancy O.C. Tanner. Of course, the ultimate responsibility for workload management falls to the employee. Experts say that in many cases, employers have no idea how many tasks they've loaded on one person, so workers have to "manage up."

VIDEO: Anne Kadet explains why tough economic times are vastly expanding the role of some jobs, without the benefit of additional pay.

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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Insurance Implications of Western Wild Fires A lot has been said in the press lately about the raging wild fires that have plagued much of the western U.S. This problem has raised insurance concerns as well, based on at least three "Ask an Expert" questions we've received in the past month. In this article, we'll explore the implications of insurance coverage, particularly the HO civil authority coverage when evacuations are ordered.

ere are a couple of recent questions involving this issue, the first from an agent and the second from an insurer's claims department. "Need some help with a forest fire question. AZ risk -- HO3 1991 edition. Several small AZ communities have been evacuated by civil authorities due to forest fires approaching the towns. Question: Coverage D provides 2 weeks of coverage for civil authority evacuations if the 'neighboring premises' have been damaged by a covered peril... Can you interpret that section?? Keep in mind that no homes have been damaged yet. I think the paragraph is pretty vague. A 'neighborhood' is a very big area, so can a 'neighboring premises' be a large area too, like an entire town? Does there have to be structural damage to the neighboring premises or is ground/tree damage good enough to trigger coverage?"

Faculty Response This would qualify for coverage if there is a governmentally mandated evacuation due to the peril of fire. The terms used in the policy are broad enough to encompass this situation and I suspect that no carrier would be bold enough to deny such claims. The adverse publicity and potentially heavy hammer of the DOI would probably make them think twice. This is a significant exposure...check out these statistics from the U.S. Fire Administration. Faculty Response I feel that civil authority does apply. The key is that people have to leave because they are ordered to not because they want to and it has to arise out of a covered cause of loss.

Faculty Response This came up in the summer of 1998 in Florida when we had bad fires here. Flagler County (Daytona Beach area) was ablaze. Almost every resident could look out the window and see smoke. The local authorities issued a mandatory evacuation order for the entire county due to the threat "We have had a handful of claims evolving out of of the fires. Fire embers were literally falling all over the the fires in Colorado, New Mexico and Arizona. We county. While there was no litigation to my knowledge, all have decided that we will interpret the policy lanthe companies that I know of paid the HO Additional Living guage as broadly as it will allow and afford coverage Expenses under Coverage D for the 2-3 days that folks under the neighboring premises clause for the Loss of Use were out. coverage. The claims that we have seen at this point deal entirely with Additional Living Expenses and so far we have Interestingly, our then Commissioner and now Senator Bill Nelson made a plea to the companies, at a big press not seen any damage by fire. Just curious to know if you conference, to waive the deductible. In a nice manner the have heard how any other carriers are approaching these types of losses. My research indicates that the 'neighboring companies (a "neighborly" carrier being the main one) said, "Stick it Mr. Commissioner, the deductible applies." premises' term is elastic and hinges upon the nature of the catastrophe. Any thoughts?" So while I can't tell you what "neighboring premises" means (the policy sure doesn't), here in Florida companies pretty We ran this by our HO faculty and got the responses much paid it. Then again, we were talking about 4 days below. Following those responses, we'll take a look max. here, so that less deductible wasn't much money. at some related issues in the HO policies beyond just Faculty Response civil authority coverage. Here's the referenced HO proviThe "neighboring premises" wording is intrinsically broad sion: and, in addition to the political/regulatory/media pressures, 3. Civil Authority Prohibits Use If a civil authority prohibits you from use of the "residence carriers would have a hard time denying claims when areas are evacuated due to wild fires that could still be several premises" as a result of direct damage to neighboring miles away. In the absence of a definition of "neighborpremises by a Peril Insured Against, we cover the loss as ing premises," I think that carriers would have to pay such provided in 1. Additional Living Expense and 2. Fair Rental claims. Value above for no more than two weeks.

In addition to the Additional Living Expense civil authority issue are the following HO-3 policy provisions: C. Coverage C â&#x20AC;&#x201C; Personal Property 1. Covered Property We cover personal property owned or used by an "insured" while it is anywhere in the world. 2. Limit For Property At Other Residences Our limit of liability for personal property usually located at an "insured's" residence, other than the "residence premises", is 10% of the limit of liability for Coverage C, or $1,000, whichever is greater. If you evacuate your premises, all of your personal property is covered anywhere in the world for Coverage C perils, including a mini-storage warehouse. Even if you move property to another residence, it is covered for the full Coverage C limit since it is not "usually located" at that residence. E. Additional Coverages 1. Debris Removal b. We will also pay your reasonable expense, up to $1,000, for the removal from the "residence premises" of: (2) A neighbor's tree(s) felled by a Peril Insured Against under Coverage C; provided the tree(s): (3) Damage(s) a covered structure; The $1,000 limit is the most we will pay in any one loss regardless of the number of fallen trees. No more than $500 of this limit will be paid for the removal of any one tree. This coverage is additional insurance.

3. Trees, Shrubs And Other Plants We cover trees, shrubs, plants or lawns, on the "residence premises", for loss caused by the following Perils Insured Against: a. Fire or Lightning; We will pay up to 5% of the limit of liability that applies to the dwelling for all trees, shrubs, plants or lawns. No more than $500 of this limit will be paid for any one tree, shrub or plant. We do not cover property grown for "business" purposes. This coverage is additional insurance. While damage to landscaping is covered only for a few perils, one of those perils, as shown in the excerpt above, is fire. 5. Property Removed We insure covered property against direct loss from any cause while being removed from a premises endangered by a Peril Insured Against and for no more than 30 days while removed. This coverage does not change the limit of liability that applies to the property being removed. Although personal property is covered anywhere in the world, this coverage expands the normally named perils coverage to "all risks" for up to 30 days if the premises is "endangered" by a covered peril. Note that this provision doesn't say anything about "neighboring premises," just that the property be "endangered" by a covered peril, however remote. continued...

Up to $1,000 of additional insurance (over and above the policy limits) is available for debris removal if, for example, fire causes a "neighbor's" tree to fall on a covered structure. 2. Reasonable Repairs a. We will pay the reasonable cost incurred by you for the necessary measures taken solely to protect covered property that is damaged by a Peril Insured Against from further damage. Note that this coverage only applies to protect your property from FURTHER damage. In other words, there must first be direct damage before reasonable protective repairs are covered. Expenses you incur to PREVENT a loss are not covered unless damage is first incurred. The "further damage" requirement has often been cited to exclude the costs, for example, of boarding up a home prior to a hurricane evacuation, despite the fact that such expense could have saved the insurer thousands of dollars in claims expenses. Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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TRUST.

For All That Matters

SECTION I – PERILS INSURED AGAINST A. Coverage A – Dwelling And Coverage B – Other Structures 2. We do not insure, however, for loss: c. Caused by: (6) Any of the following: (e) Discharge, dispersal, seepage,migration, release or escape of pollutants unless the discharge, dispersal, seepage, migration, release or escape is itself caused by a Peril Insured Against named under Coverage C. Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed. Since fire suppression activities in wild fires often involve the air dropping of fire retardants, it's possible that this exclusion might be cited to deny coverage for any damage or cleanup required. However, the exclusion, unlike that found in many commercial lines policies, doesn't apply if the pollution is "caused by" a Coverage C peril. If one argues that the retardant was "caused by" fire, then the exclusion would not apply. The same would apply for "smoke" damage...since smoke is included in the list of "pollutants," there would still be coverage due to the fire

(Coverage C peril) exception. SECTION I – EXCLUSIONS A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area. 9. Governmental Action Governmental Action means the destruction, confiscation or seizure of property described in Coverage A, B or C by order of any governmental or public authority. This exclusion does not apply to such acts ordered by any governmental or public authority that are taken at the time of a fire to prevent its spread, if the loss caused by fire would be covered under this policy. Establishing fire breaks is a common fire fighting practice in conflagration fires and sometimes requires the deliberate destruction of property in order to prevent the spread of fire. This clarifies that such governmental action is covered by the policy.

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For more information, contact Bryant Brown, V.P. Marketing • 1.800.448.5621, x 249. 3490 Independence Drive • Birmingham, Alabama 35209 WWW.AMERICANMINING.COM Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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Maintaining Policies Locally in Today’s Agency Helpful tips can point your agency in the right direction when making a decision about how to store policies

4. Does the carrier provide links on the dec page to all of the actual policy forms and endorsements applicable to that risk—not just the latest editions of these forms— so that they are easy to access?

s agencies go paperless and carriers stop providing paper policies, agencies have to decide whether to continue to retain policies locally or rely on electronic policy view to access the policies on the carrier’s website. Agencies are also considering whether to begin to e-mail policies to clients, rather than sending them paper copies. Many agencies have decided to retain commercial lines policies locally, even if they have a good download of policy data and electronic policy view in place, because they find they need to refer to these policies and endorsements frequently when coverage and claims issues arise. In contrast, many agencies with a good download in place have decided not to retain personal lines policies locally, because they are able to handle the typical client inquiries without referring to the policies. Often these questions relate to billing and making a payment, and the agents are able to handle these inquiries efficiently by using real-time billing inquiry and make a payment functionality. Each agency is different, but here is a list of questions to consider: 1. How frequently does the staff need to refer to the actual policies for the line of business and for what purposes? Does the amount of usage justify the amount of time it will take to attach them to the client file? 2. Is there a good download in place for the line of business and is my database accurate? If there is not a good download for the business then the agency will probably want to retain at least the dec page locally. 3. Does the agency use the dec page for policy checking and like to retain it as part of the documentation of the policy checking process?

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5. Has the carrier provided a contractual guarantee that the agency will continue to have access to its policy information in the event the carrier or the agency terminates the relationship? This commitment should be for the statutory period in which the agency must retain this information (usually seven years). 6. Do the applicable state laws require the agency to retain the policy documents locally or is access to them at the carrier website sufficient? Agencies should go through the same analysis with regard to their E&S policies. Since many agencies have made the decision to retain commercial lines policies locally, it is incumbent on carriers and agency management system providers to make it as simple as possible for agencies to attach these policies to their client files. One approach would be to give the agency the option to have the carrier download PDFs of policies (new, renewal and endorsements) each evening using realtime Activity Notifications and Alerts. An option could even be given to receive the dec pages with links to the actual policy forms or the complete policies. Agency management systems should have the capability to route these notifications to the appropriate person in the agency for checking and attachment to the client file. Using this real-time workflow would be an improvement over the e-mailing of these policies because of the added security and transmission directly into the agency management system. Since some agencies use the personal lines dec pages to check policies for accuracy and then retain them, the same workflow should be made available to agencies for personal lines.

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

following up with the insured if he/she does not acknowledge receipt. Policies without the Paper Implement a secure electronic storage and e-mail policy. Agents are generally supportive of personal lines carriers that give clients discounts in order to go paperless and access their policies electronically. In the commercial lines and E&S markets, however, many agents are concerned about the inefficiency and cost shifting that takes place when carriers stop sending the paper policies to the agent for delivery to the client, because many insureds still want the paper. Electronic policies represent the future and are more efficient in many ways (no mail time, do not need to be scanned into agency system, potentially save printing costs). Agents should encourage their clients to make the transition to electronic policies, in the same way that other financial services companies are inviting their clients to move to electronic delivery. Carriers, in turn, should help their agents with this transition by providing them with electronic policies and the option to receive paper copies for clients who are not ready to accept the electronic model. Many agencies like to deliver commercial lines policies to their insureds personally and are now delivering these policies on a CD as a “value add,” where clients agree to this method. Several larger agencies provide a secured area on their website where clients can access their policies. Hopefully, technology providers will increasingly provide turn-key solutions for the broader agency population so that they can provide their clients a secured portal for accessing their policies, as well as linking to their carriers to make payments and perform other self-service functions. This is an area in which ACT’s Consumer Functionality Work Group is trying to spur more industry action. E-mailing Policies to Clients In this emerging “paperless” environment, many agencies are considering e-mailing policies to their insureds. There are several issues for agencies to assess and then incorporate into their procedures when considering such a change in delivery: 1.Confirm that the particular state’s laws and regulations permit the e-mailing of policies and do not require that the insured be provided a physical copy. 2.Secure the advance agreement of the client to receive policies electronically by e-mail. 3.Provide in the e-mail a request that the client acknowledge receipt of the policy by return e-mail and have a procedure—that is consistently followed—of

4.Include in the e-mail a disclaimer that the insured should read the policy to ascertain that its limits and coverages are appropriate for its needs and that it should contact the agency if it would like to add any coverages or make any changes. The notice should also give the insured the option to elect to receive paper policies. (This disclaimer should be provided in the cover letter that accompanies the personal delivery of a paper policy or CD as well.) 5.Check the policy for accuracy before sending as provided in the agency’s procedures. 6.Send the e-mail securely if the policy contains any private personal information under the applicable state and federal privacy and data breach notification laws. Such private information might include the federal employer identification number, driver license numbers, etc. ACT encourages the use of TLS e-mail encryption for secure e-mail, and TLS works very well in agentcarrier communications when both parties have it. A proprietary secure e-mail solution, however, will be necessary for many client communications when the client does not have TLS. 7.Deliver the policy to the client promptly after being received—whether e-mailed or delivered personally— and avoid any agency backlog in policy deliveries. 8.Document in the agency management system that the policy has been sent, the steps taken to follow up if necessary and attach the transmittal e-mail in unalterable form. The emergence of a paperless environment is precipitating changes in agency workflows and is creating opportunities for carriers and technology providers to provide new tools to help agencies function more efficiently in this new environment. These new tools include the use of activity notifications and alerts to send electronic policies to agencies and the availability of easy-to-use and cost-effective “plug ins” to enable agencies to provide secure portals for their clients to access documents and to perform other services online.

Jeff Yates (jeff.yates@iiaba.net) is executive director of the Agents Council for Technology (ACT), which is part of the Independent Insurance Agents & Brokers of America. This article reflects the views of the author and should not be construed as an official statement by ACT. The author would like to thank the following agency consultants for their insights on these issues: Pat Alexander, Steve Anderson and Laura Nettles; and the following agency E&O risk management experts: Dave Hulcher, IIABA; Jim Keidel, Keidel, Weldon & Cunningham; and Sabrena Sally, Westport Insurance Corporation. Thanks also to the ACT Agent Feedback Group for its input.

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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T he

by Chris Burand

for Independent

I believe the future of independent insurance agencies is at a tipping point. A number of forces are pushing agencies toward the precipice of major change. A few of those forces include: legislation, case law, the Web, generational differences, the economy, the soft market, and the vast fortune carriers have made the last five years. With so many forces driving the industry, isn’t it better to pro-actively manage your future rather than letting the winds of destiny set you down somewhere you don’t want to be?

Loss Rations and the Hard Market Carriers have never made as much money as they have made the last five years, especially if the mortgage guaranty insurers’ dismal results are excluded. And what happens when people have too much of anything? They take it for granted. That’s just human nature. So with the carriers making so much money, they are on the verge of taking loss ratios for granted. In fact, more than one company has explicitly stated (albeit privately) they no longer care about loss ratios. Many others have implicitly stated the same through their actions. These factors mean change, but agents can be prepared. What are you doing to prepare for your competitors’ carriers that don’t care about loss ratios? What are you doing to prepare your agency for the eventual hard market? Having too much business spread too thin is not going to help. Doing business with weak carriers is not going to help. Selling price rather than your agency is not going to help.

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Agencies

exposures for this market and the hard market when it arrives. That market may not arrive for a year or more, but they will be prepared. Being prepared gets more difficult with each passing day of the record setting soft market. When the market tips, will you be ready? Will your clients be ready?

ome of the forces are clearly beyond an agent’s control, but agents can take action to mitigate their effects.

Professional agencies are helping their clients understand, expect, and manage their risk expenses and

Insurance

Disintermediation and Web Sales I see many agents worry about being driven out of business if they don’t appeal to consumers buying insurance over the Internet. If a customer is going to buy over the Internet, do they need an agency? Does the carrier need a middle man? This very well may be a situation of being careful what you wish for. Carriers also understand that as the agency becomes more expendable the more the sale becomes commoditized, the more agents depend on company service centers, and the more agents don’t use coverage checklists. Carriers completely understand that the more agents are peddlers rather than professionals, the more agents are expendable. But Internet-based writers have a completely different business model than independent insurance agents. They don’t have agents, so they have to advertise. There’s no doubt the annual expenditure of tens of billions on advertising insurance, mostly by direct writers, has changed the insurance market forever. Many

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

agents and agent associations feel pressured to compete with this advertising, but independent agents and brokers are, by definition, supposed to get out and sell. This seems to be an often forgotten characteristic. We employ live people, not cartoons. We employ people that actually know coverage, not stand up comedians with red hair. We employ people, not cavemen. The advantage agents and brokers should have is they employ real people that can go out and find clients, provide professional advice, and develop long term relationships in person. It appears too many agents and brokers want to build marketing models based on clients calling them. Agents become the order takers. This model tries to compete using a much larger competitor’s rules, which is always a recipe for failure. Another failure of this strategy - investing heavily in advertising and continuing to pay producers as if they were producing accounts from scratch. These agencies will go broke. I am already seeing this. Agencies cannot afford to advertise heavily and pay producers standard commissions. Additionally, getting people to call is only part of the issue. The remaining part is knowing what to do when prospects do call. Consider Yellow Page ads. In the past, some yellow page ads generated so many calls that agencies continually spent more than they made just answering the phone and offering quotes. Generating call volume is not the solution. In fact, the advantage of selling rather than marketing is you get to choose your customers.

Court after court is ruling agencies must offer applicable coverages if the the agency holds themselves out to be a professional. A map recently published by Westport in their E&O magazine shows the vast majority of states are moving to this direction and a large proportion of the case law in those states has made it fairly easy for courts to rule that agents have this responsibility. Moreover, I suggest the goal should not be to have policies and procedures that will eventually be upheld in a lawsuit. The better goal is to have policies that procedures that prevent you from being sued in the first place. An E&O suit, even one an agency wins, will likely last at least a year, costing a tremendous amount of money and time. With the changes in health care, I firmly believe the sophisticated benefits agencies will prosper because they stopped selling only health insurance a long time ago. When every benefits agency has access to the same four carriers and exactly the same rates and coverages, the winner has to bring something to the table other than a commoditized health insurance policy. It does not really matter if the government provides insurance because the services these firms offer will still be necessary. The P&C industry is approaching the same tipping point. Agents have sat on the fence of whether they are a professional or a peddler for long enough. If you continue to sit on that fence, the odds of being sued and the odds of losing the suit increase every day. You will be tipped off the fence whether you’re ready or not.

I am not suggesting marketing is not important, because marketing is critical. But marketing for marketing’s sake is a waste of time, money, effort and hope. Agents who remember that someone has to always ask for the sale and the money will always come out ahead. No amount of marketing can ever substitute for that.

The professional agent will always have a place in this industry. Within the independent agent system, I’m not sure that peddlers have a future. I encourage you to be proactive and become a true professional in practice, and the first step toward being a professional is th use coverage checklists religiously.

Professional vs. Peddler

I firmly believe many forces are independently pushing the industry towards a major tipping point. The only question is: Which direction will you tip?

As an approved errors and omissions (E&O) auditor for two of the three major agency E&O carriers, I’ve had agents all over the country tell me that attorneys and other experts have advised them they did not have to offer the right coverages to clients. The idea that a professional agent does not have to offer clients the right coverages just seems totally ridiculous to me. What do you expect from other professionals? Do you want your doctor to offer all the treatments available or only the one he or she thinks you’ll buy? A professional advises.

NOTE: The information provided in this newsletter is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

The Latest on Health Care Reform

U.S. Appeals Court to Hear States' Challenge Against Healthcare Reform Source: USA Today

A U.S. appeals court in Atlanta heard a lawsuit last week challenging the constitutionality of the health care reforms signed into law by President Barack Obama a year ago. Of the many legal challenges to the health care overhaul, this case brought by 26 states stands out. In a lawsuit targeting the rule that all Americans buy health insurance, the states have banded together to claim that Congress exceeded its power and tread on states' domain. Other lawsuits, such as those recently argued in appeals courts in Richmond and Cincinnati, were filed by individual entities, for example, a Christian university, the single state of Virginia and a cluster of people who do not want to purchase coverage. Further, the case to be aired in Atlanta marks the only one in which a lower-court judge, U.S. District Judge Roger Vinson of Florida, voided the entire health care law after declaring the individual insurance mandate unconstitutional. (His ruling is on hold while appeals are pending.) The law, signed by President Obama in March 2010, increases the availability of insurance, expands Medicaid, creates insurance exchanges and prohibits insurers from denying coverage to people because of their medical history. At the core of the national litigation is the requirement that most Americans obtain insurance by 2014 or pay a tax penalty. Click here to view full article...

Report Shows 30% of Employers Likely to Opt Out of Offering Health Coverage After Reforms in 2014 Source: WSJ - Janet Adamy

A new report finds that 30% of employers are likely to stop offering workers health insurance once most of President Obama's health overhaul takes effect in 2014. The findings from the McKinsey & Co. report come as a growing number of employers are seeking waivers from an early provision in the overhaul that requires them to enrich their benefits this year. At the end of April, the administration had granted 1,372 employers, unions and insurance companies one-year waivers to the law's requirement that they not cap annual benefit payouts below $750,000 a year. The law doesn't allow for such exemptions starting in 2014, leaving all those entitiesâ&#x20AC;&#x201D;and other employers whose plans don't meet the requirementâ&#x20AC;&#x201D;to change their offerings or drop coverage. Previous research has suggested that the number of employers who opt to drop coverage altogether in 2014 would be minimal. But the McKinsey study predicts a more dramatic shift away from employer-sponsored health plans once the new marketplace takes effect. Starting in 2014, all but the smallest employers will be required to provide insurance or pay a fine, while most Americans will have to carry coverage or pay a different fine. Lower earners will get subsidies to help them pay for plans. In surveying 1,300 employers earlier this year, McKinsey found that 30% said they would "definitely or probably" stop offering employer coverage in the years after 2014. That figure increased to more than 50% among employers with a high awareness of the overhaul law. Click here to view full article...

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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Building By Kenneth A. Shapiro

L I F E

t goes without saying that property and casualty and life insurance agents work in two separate and, most frequently, nonintersecting worlds. They both sell insurance, but that’s about where the similarity ends. It’s as if they’ve lived next door to each other for years, but have never spoken, watched a ballgame or grilled a burger together. In a significant way, they think, act and work differently and neither understands the other’s language.

into a P&C Agency

ray’s view, Richard Hillberg, a 30-year P&C veteran and senior Vice President of the Provider Insurance Group, an agency with 38 employees in Needham, Mass., has had a different experience.

Most efforts to break down the seemingly impenetrable wall or overcome the gulf that keeps them apart have been notably unsuccessful. Many seem convinced this will never change.

“The word ‘insurance’ in our name is all inclusive,” he says. “We view ourselves as an agency that has the capabilities to meet all of a client’s insurance needs, everything from property and casualty to life, disability income, long-term care and group medical,” says Richard. “Although we have separate groups within our agency, our producers view their clients’ insurance needs in a unified way.”

“There’s only one thing that life insurance and property and casualty people have in common––and that’s the word insurance,” says Tim Murray, president of Crossroads Insurance Answers, a New Hampshire-based consulting firm. In his 30 years in the industry, Tim has been not only on both sides of the table but at the head of the table, as well.

When scratching a little deeper, it’s clear why the Provider Group takes an integrated approach. It was a life insurance agent who was the founder and he recognized the value of taking what Hillberg describes as a “holistic approach” to serving clients. “My experience is that clients understand why it makes sense to do business with one advisor when it comes to their insurance,” says Hillberg.

Besides the word “insurance,” life and P&C producers have something else in common, even though they may have a difficult time recognizing it: they both serve the same customers.

Although he is a property and casualty agent, the close interaction with the agency’s Life & Benefits group makes it seamless to bring that resource into the picture. “That’s simply the way we work,” he notes. “The Life people operate the same way.”

Coming from his perspective, Murray makes it clear that what divides them creates a barrier that runs so deep that it can keep them from working cooperatively, even when serving the same client. He describes the gulf –– or dramatically different cultures –– in these terms: • P&C is based on long-term sales, while a life sale is relatively quick, from a few days to several months. • P&C sales require long-term relationships, while the life sale, by comparison, can be more transactional. • Life commissions are large, one-time payments, while P&C commissions are much lower but serve as a continuing revenue stream. • While the life agent begins each year with minimal revenue, the P&C agent starts out every year with something akin to a “base salary.” • P&C producers have a “book of business,” which they tend as if they were traditional “farmers,” while life producers work more like classic “hunters.” “Since they work so differently,” notes Murray, “it’s no accident that the two never meet, even for lunch. They have very little in common, other than the word insurance.” While there’s plenty of evidence to support Tim Mur-

Even so, countless attempts to find a way to bridge the gulf between life and P&C have been something less than highly successful.

At one time or another, some P&C agencies have established a relationship with either a life agency or an independent life producer with the idea of handing off leads to each other. Although there are exceptions, such arrangements may start out with enthusiasm, which usually fades rather quickly. One business owner recalls the time a well-known P&C agency attempted to foster life insurance sales by hiring a retired insurance carrier marketing representative. “He seemed to be competent, but he seemed like a fish out of water,” reports the executive. “Although this occurred at least 15 years ago, my picture of this man remains clear. He knew the products, but had difficulty engaging a customer. It just didn’t work for me.” The president of another large P&C agency described its inside life agent in a less than complimentary way. “He’s been with us for over a decade and our producers don’t know him and most haven’t spoken more than a few words to him,” he said. “He’s successful when working his own leads, but there’s no referrals, either way. We’ve made an effort to work more closely but nothing has clicked so we just leave each other alone.” Others have had similar experiences, not unlike those of salespeople in many other industries, who are extremely possessive of anyone else getting involved with their customers. In insurance, these feelings can be exacerbated by the fact that P&C and life insurance agents have such different approaches to working with clients. Such a view can help to throw light on a difficult situation, while, at the same time, in helping to avoid embracing simplistic and naïve solutions. It also can suggest useful ways to transcend the chasm that currently exists: 1. The need to “protect client assets.” If the viewpoint at the top of a P&C agency sees its insurance mission in terms of a “protecting client assets,” then the “holistic” approach, as Hillbert suggests, offers possibilities for integrating life with P&C. Since insurance is a relation-

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ship business, having one person managing an account seems to make good sense. 2. The need for the “relationship manager.” More and more, the salesperson’s role seems to be morphing into that of “relationship manager,” particularly as products and services become more technical and product lines expand. No one salesperson can be an expert in everything today, which is particularly true in the insurance business. Technical advice is coming from outside sources, whether insurance companies or wholesalers, a view that positions the salesperson as an “orchestrator of accounts.” This is the person who brings together the right resources at the right time to deliver the right product or service to achieve the desired result. 3. The need to strengthen the P&C agency’s reach and revenues. Needless to say, the pressure on revenue, demands from insurance carriers for increased volume, lower commissions, intense competition and the difficulty getting in to see prospects have all taken their toll. At the same time, personal lines sales via the Internet and commercial lines’ client downsizing have had a significant impact on the P&C agencies. And there’s little indication that this will change for the better in the near future. Given this situation, having a life insurance component would seem to make sense as a way to increase and diversify revenue, while opening the door to broadening the customer base. While there are no “sure-fire” solutions, we have seen P&C agencies benefit from inviting business owners to quarterly luncheon sessions that include a discussion of various insurance issues, everything from buy-sell agreements, defined benefit plans to retirement planning for those in their 40s and 50s to estate planning for wealthy clients. In each case, the presenters have been someone from a life agency. It conveys to clients a P&C agency’s commitment to a “holistic” approach to their clients. It also lets the agency get better acquainted with life producers who may eventually find a place in the P&C organization. Every P&C agent has heard someone say, “If you have a customer’s auto insurance, you have a 25% chance of retaining the customer. Add the homeowners and that goes up to 50%. Add life insurance and it jumps up to 90%.” That’s a good reason to put life in a P&C agency. The fact that P&C agencies have established relationships with their clients, moving into life insurance is the logical next step and the most effective way of saying, “We’re pleased to be your insurance agent.” Kenneth A. Shapiro is the president of First American Insurance Underwriters, Inc., a Needham, MA-based national life brokerage firm specializing in serving high-end producers and working on complex cases. He can be contacted at 800-444-8715.

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

gencies work hard to get the phone to ring. However, so often, people have no idea how to respond to that call. Some people look at a ringing phone as an interruption or as an inconvenience while trying to do their job, and typically try to avoid taking the call altogether. When that person picked up their phone and called your office it was the most important thing in their life at that moment in time—you cannot afford to miss this opportunity to win their business. I heard a story the other day about how not to handle a phone lead. Prospect calls asking for a quote on car insurance. The person that answered the phone says “oh, it's 4:55, could you call back tomorrow?” At our office, we try to route that call to someone that can provide the caller with the information they want to know right now—because let’s face it, if you don’t, someone else will. You need to make sure that the exact opposite happens. The caller wanted to be called back because she realized it was 4:59 and she didn’t think we would help her. Our teammate told her we had someone available to help her now. When all was said and done, we picked up not only a raving fan but an auto policy, homeowners and six rental units, just because someone was willing to treat that caller like the valued client that they are.

Homeowners Catastrophe Insurance Trust

If they want a quote and we don’t have a producer available, we collect all the necessary information so they can be called back with a quote and not just a list of questions.

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The first thing we want is their name, then their phone number in case we get disconnected and then we ask them for their e-mail address so we can get our presentation of solutions to them right away. We also use some small talk to put the prospect at ease (how did you find us, what has you shopping for insurance, can you tell me about you and your family) as these are rapport building questions to show that they are important and not just another lead. Now as quickly as possible collect the under writing information and deliver your quote by phone and e-mail. Then last but not least follow up until they make a decision. Follow up is an ongoing activity not just one attempt—it’s all about going that extra mile and providing the personalized service that sets you apart from your competitors.

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Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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Combat Cybercrime & Protect Your Agency With Simple Security Steps By Danielle Johnson

What is Cybercrime? Like traditional crime, cybercrime covers a broad scope of criminal activity and can occur anytime and anyplace. What makes it different is that the crime is committed using a computer and the Internet. You may recognize some of its most common forms such as identity theft, computer viruses and phishing, and at a corporate level, computer hacking of customer databases. Most people are aware of these and protect themselves and their PCs with anti-spyware and anti-virus software such as Norton or McAfee programs. As an agency owner, you should be alert to the fact that cybercrime is becoming more and more sophisticated and not only targets consumers and large corporations, but small to medium sized businesses as well. Single programs against these intrusions are not enough. An alarming cybercrime now affecting small to medium sized businesses is “corporate account take over.” This involves cyber criminals penetrating the computer network of a business and spreading malicious software, such as a “keylogger” which records the words typed, Web browsing history, passwords and other private information. This in turn allows them access to programs using your log-in credentials. If they steal your password and breach your online banking system, the cyber criminal can begin an online session to initiate funds transfers, by ACH or wire transfer, to their accomplices. The accomplices withdraw the money almost immediately. Take the first steps to prevent fraud at your agency – become aware of the latest cybercrimes and how they can access a business’s computer network. An agency should also employ the most up-to-date online security practices on a pro-active basis. Agencies can also take the opportunity to present these online security practices to their clients, as many are

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The most potent tools to fight this threat are to keep a wary eye and practice proactive online security techniques and policies. Danielle Johnson, Vice President of InsurBanc, suggests several steps to protect personal privacy, banking information, and agency data, including adoption of recent advancements in banking security.

also instituting internet-based online programs at their businesses. Online Security Practices While no tools or automated software is 100% effective, the best solutions to protect your agency are to be well informed and use common sense. Using a multiple vendor, multi-layer approach to system design can significantly reduce your chances of being a victim of cybercrime. To assess the risks associated with a cyber intrusion of your agency’s online systems and critical client data, ask yourself the following questions: 1. Does your agency have a hardware based firewall at the network level? 2. Does the network firewall include anti-virus, antispyware and anti-spam services along with content filtering and intrusion prevention, detection and realtime reporting? 3. At the individual PC level, does each computer have centrally updated and monitored anti-virus, antispyware and anti-spam software loaded? 4. Are your computers set up to automatically update your operating system and applications for the latest available security and critical updates? 5. Do you consider your browser security setting to determine how much or how little information the browser can accept from, or transmit to, a website? 6. Does your agency have a security policy in place that includes such policies as disaster recovery, use/

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

storage of passwords, use of social media on work computers, etc.? 7. Does your agency back-up critical files in case of an issue that disables your systems? 8. Has your agency identified an individual to review security policies and practices on an ongoing basis? 9. Are you aware of the laws governing the protection of personal information in your state? 10. Do you have cybercrime insurance to protect your data and liability exposure in the event of an intrusion? 11. Does your agency have a training program to educate employees on best practices to avoid becoming a victim? 12. Does your online banking system provide multiple layers of security tools to prevent intrusions into the system such as token-based authentication? Agency principals should consider the types of transactions they conduct within online banking and check with their banking institution for available security enhancements. These are just some of the basic steps an agency can implement to assess and protect itself from cybercrime. Your agency should have a network security assessment and review conducted by a certified information technology firm that specializes in network security. This evaluation will help you to identify the “next steps” in securing your network and data from unauthorized access and distribution. If Your Agency Becomes a Victim If you discover, or even suspect, your agency has fallen victim to corporate identity theft, you should proceed as follows: • Immediately cease all online activity and contact your IT administrator. • Remove the affected computer from the network and any other computer stations involved. • Contact your financial institution to disable online access to the accounts and close affected accounts. You can then open new accounts and reset passwords. • Consult your counsel and your state’s data breach notification law and regulations to ascertain the process you need to follow. • Notify other business partners that may have been affected, such as your insurance carriers. • File a report with the police department.

Common Online Fraud Definitions • Malware refers to software programs designed to damage or do other unwanted actions on a computer system. Common examples of malware include spyware, keyloggers, and viruses. • Spyware is a type of malware installed on your computer without your knowledge. It collects small to large pieces of personal information including Internet surfing habits. It can redirect web browser activity and change computer settings. Spyware is typically hidden from the user, and can be difficult to detect once installed without proper antispyware tools. • Keyloggers, as with spyware, are installed on your computer without your knowledge. It is the action of tracking (or logging) the keys struck on a keyboard, typically in a hidden manner so that the person using the keyboard is unaware that their actions are being monitored. Keystroke logging can record the words typed, Web browsing history, passwords and other private information. This is extremely dangerous in all aspects of computer usage. • Viruses are an ever changing and constant threat to all systems. Based on their digital makeup they can deliver malicious content to your data and systems in an effort to either collect data, destroy data, or turn your systems into a machine that spreads the virus or other malware. • “Phishing” is the act of obtaining personal information or spreading malware using emails, calls, text messages or pop-up messages from what appear to be friends or legitimate banks, retailers, government agencies or other organizations. All of the security tips presented here are simply guidelines to aid agencies in not becoming a target for cybercriminals. However, none can be guaranteed 100% effective.

Editor’s Note: Please also refer to ACT’s “Security & Privacy” page for a prototype agency information security plan and recorded webinar which will help agencies fashion their written security plan and implement their security program. Go to www.iiaba.net/act and click on “Security & Privacy” in the gray shaded area on the left side of the page. Danielle Johnson is the VP, Director of Information Technology at InsurBanc, which IIABA and the W.R. Berkley Corporation established to assist independent agencies, businesses and consumers with their specific banking needs. Danielle prepared this article for ACT and she can be reached at technology@insurbanc.com. This article reflects the views of the author and should not be construed as an official statement by ACT.

Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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Who has the ability to handle all your specialty insurance needs?

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Lessons from

Hulk Hogan Agents professional liability makes headline news; “Watch your E&O exposure, brother!”

Source: The E&O Claims Advisor, Copyright Big I Advantage, Inc. and Swiss Re Americas

ecently, Terry Bollea, aka professional wrestler Hulk Hogan, sued his insurance agent because there was no umbrella liability policy in place to protect his assets from liability arising out of his son’s car crash. The story has been widely reported, from local news in Tampa Bay, Fla. to ABC, E! and other national outlets. Previously, Bollea had sued his attorney for failing to sufficiently protect his personal interests, but that was dismissed. Failing that, Bollea turned to suing his insurance agent for failure to offer the coverage. Damages alleged are unspecified in media accounts but reports point to exposure of his estimated $30 million in net worth and what Bollea was “unnecessarily required to pay to settle a lawsuit for injuries caused by his son,” according to his attorney, Wil Florin. For agents, there are three critically important lessons from this situation. First, “failure to procure” and “failure to recommend” drive nearly one-third of by Paul Buse all E&O claims and agents and CSRs need to be aware of this, especially with respect to offering personal umbrella policies. Second, depending on where the agency is located, agents need to be aware of duties to recommend. Third, the Big “I” can be huge asset to your agency for E&O risk management. The Big I Professional Liability Program is widely recognized as the largest one in the United States. That size gives the professional liability committee (PLC) great insight into the causes of agency E&O claims. With the program’s long-time partner, Westport Insurance and Swiss Re, the PLC has carefully tracked E&O claim causes. For example, since 2003, more than 24% of claims are a result of “failure to procure coverage” and 5% are due to a “failure to recommend” a coverage. E&O education offerings and risk management tools have been adjusted to reflect this. Just as important as knowing that not procuring or recommending coverage can result in an E&O claim, exposure for getting sued varies by state. Recently, the E&O Claims Advisor reported on states with the highest levels for “duty to advise.” As reported by the article’s author the Hassett Law Firm, agents in Alabama, Arizona, Idaho, Pennsylvania and New Jersey have the greatest duty to advise or recommend on insurance needs with Florida, Louisiana, Maryland, Minnesota, New Hampshire, Ohio, New Mexico, South Carolina, Tennessee, Texas and Washington close behind. To read the entire article, go to www.iiaba.net/eohappens. Given that Florida is in a “duty to advise” state, one would assume the trial attorney will look to establish a special relationship existed between the agent and “The Hulkster.” Perhaps the most important take-away from the pending claim is that your Big “I” membership provides unique tools to deal with the challenges of running your agency. For example, if agents use a checklist and follow-up process provided as part of the Big I Virtual Risk Consultant when facing a similar situation, the claim might not have occurred. It is very likely Bollea would have been made aware of a high severity loss exposure from automobile accidents and a clear process would have been in place to document his refusal to purchase such coverage. No doubt in the adjudication of this claim, the issue of documentation will be critically important—especially if, as has been reported, the agent did in fact recommend excess or umbrella coverage and Bollea refused. If a member faces trouble finding coverage for a stand-alone umbrella, a call to your state association would have directed the agent to the Big I’s stand-alone personal umbrella program with RLI Insurance Company. If the umbrella was a truly special needs situation, as might have been the case with a celebrity like Hulk Hogan, the agent would have been directed to alternatives available on Big "I" Markets. Independent Insurance Agents of New Mexico - www.iianm.org - * July 2011

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When: September 21 & 22, 2011 Where: Hard Rock Casino

Your registration form is coming soon! Visit our web site for a look at the event schedule, exhibitor packet and more information.

IIANM’s Tradeshow is the best way to stay connected to the insurance industry. This year, our Tradeshow will be held on the afternoon of September 22nd. Cocktails and hors d’oeuvres will also be served.

II ANM Co ck

Come join the fun, visit the exhibit booths and register to win prizes.

Greg Claassen

Ventriloquist "Never, Never Sit On This Man's Knee!" Greg Claassen – everyone’s talking about him! It's an evening of hilarity and good-natured fun – as audiences across the country have discovered. He is a ventriloquist of uncommon range and skill.

t ai l s