October 2015 by Independent Insurance Agents of NM

Drive New Business to

COMMISSION

INCREASE ON NEW BUSINESS*

Policy Effective Dates October 1, 2015 to December 31, 2016

Thank you for placing your business with a New Mexico company. We look forward to providing your clients with a wide range of local services to enhance their insurance experience.

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

*Excludes accounts that were insured with New Mexico Mutual in the previous 6 months, canceled policies, rewritten policies, and renewal policies. 2

*Applicable to new policies bound with effective dates of October 1 to December 31, 2016.

a L

“La Voz” is the official monthly e-publication of the

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 Chief Operations Officer Consuelo Trujillo Insurance Programs Administrator Renee Trujillo Communications Director Rachel Sheffield Social Media Director Jacob Grant Member Services Associate Eric Crisostomos

2015-2016 Officers

"The Voice" of Independent Agents since 1934

IIANM Events

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Save the Date - IIANM’s Holiday Party

Features Principal - Why Great Loss Ratios are NOT the Goal of All Insurance Companies

Producer - 82% of Young Insurance Proffesionals Believe This

CSR - Puttin on the Ritz - Building a Customer Service Culture

Principal - Confessions of a CSR Who Could Sell

Disruption: The New Normal Creates Launch Pad for Disruptors

Should Agents Follow Up on Pending Cancellations for Nonpayment?

Convention Highlights 20 Introducing our new Board of Directors

Producer - What Do You Know About ISO’s PAP Ridesharing Endorsements

In Every Issue IIANM 2015 Company Partners! 04 Tech Talk 12 Odds n Ends 27

La Voz Advertisers

Chair Mike Parisi

Acuity 17

Vice-Chair Dick Minick

Integrion 08

Secretary/Treasurer Heather Fortner

MHI General Agency 05

Burns & Wilcox Back Cover Market Finders, Inc. 19

National Director Katherine Yeager

Mountain States Insurance Group

Immediate Past Chair Gabe Portillo

Trustco/HCIT 13

New Mexico Mutual 02 Union Standard 26 3

These carriers have partnered with our association to support the vitality of the independent agent system in New Mexico. Take a moment to visit their new page on our site and take advantage of their varied products and services. Independent agents have the freedom to choose!

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Why Great Loss Ratios Are Not the Goal of All Insurance Companies by Chris Burand Many agency owners take great pride in generating low loss ratios year after year. Maybe without even knowing it, this group has created a unique business model because my experience has been their growth is painfully slow, often their agencies are not managed closely otherwise, and they are often small. However, they are often very, very profitable. They are often the perfect cash cow in business school parlance.

hese agency owners are not happy with many carriers who have de-emphasized loss ratios. They cannot fathom why any carrier would not love their good loss ratios. The result has become stressed and fractured agency/company relationships. These agency owners do not understand that loss ratios that are too low (and each company will define “too low” differently) are not in some companies’ best interests. How can too high of a profit margin be bad? 1. When loss ratios are too good, it may mean rates are too high resulting in too little growth. Companies, particularly stock companies, need to show growth especially after the softest market in industry history. 2. Similarly, if growth is too slow, they may lose market share. Or their market share may be too low and they need to grow faster and capture more market share. Company management often has considerable pressure to attain specific market share. 3. Loss ratios too low may also mean that profit is not being maximized. Maximizing profit is obviously important.

PRINCIPAL

Maximizing profit is not the same thing as achieving a high profit margin. The former is in dollars, and the latter is in percentages. This is a crucial difference between running a company and an agency. Agency owners are well served to understand the difference. If a company wants to maximize profit, it must balance revenue generated by lower rates with higher loss ratios. For example, if a company has a 35 percent loss ratio and $100,000,000 premiums, its gross profit (excluding expenses) might be $65,000,000. However, if it decreased its rates and subsequently increased premiums to $125,000,000 at a 45 percent loss ratio, it makes $68,750,000 in gross profit. Many agency owners would like to increase their books 25 percent and go from a 35 percent loss ratio to a 45 percent loss ratio too, but for agency owners focused on slow growth and low loss ratios, they probably will not get their share of that 25 percent growth, but their loss ratios will still increase resulting in much lower contingency income. Frustration greatly increases when companies price to a 55 percent, or higher, loss ratio. This is because profit sharing declines precipitously at these inflection points. The company still makes plenty of profit at a 55 percent loss ratio (and 6

if it does not, then the company has very serious expense issues that go far beyond the points of this article), especially if profit sharing expense declines. However, this group of owners makes most of their money in contingencies so their profit is eliminated. Their lifestyle is curtailed. The value of their agencies is impaired. Their business model goes to shambles. If a company is truly pricing to a loss ratio in the mid-50s or even higher, this group of agency owners might consider doing business with different carriers which have philosophies more closely matching their own. Easier said than done, obviously, so maybe a better solution is updating their business model. Growth is more important today to many carriers. Sitting on a cash cow annuity for a decade or more is not as feasible as it once was, and wishing otherwise will not help. Not all companies want to grow faster for market share or profit. They desire fast growth because: 1. Some key executive(s) bonus is tied to fast growth. 2. The company is being set up to sell. 3. The company has reserving issues, and it needs the extra premium to dilute the effect of a reserve increase. It is only a temporary solution, but companies have done this forever. These companies are often the ones pushing growth most vigorously. Not only does fast growth temporarily hide their problem, it also makes the executive look heroic. The fast growth is almost always created by low, unsustainable rates eventually resulting in higher loss ratios. The smartest executives are gone by then leaving their successors with their mess to repair. Nonetheless, growth is initially far more important than profit. Agents doing business with these companies may want to evaluate whether these situations create risks to the agency and its clients. If so, creating a plan to offset these risks can create excellent opportunities. Agents can fight these realities, and fighting will feel good for masochists. An agency owner might have the luxury of only doing business with profit-minded carriers, but very few won’t be forced to do business with at least a few growth-focused carriers. Don’t keep telling carriers how short-sighted they are. Capitalize instead by understanding their perspective and using your resources to with the carriers you choose. www.iianm.org

Workers’ Compensation. You Asked. We Listened.

Mountain States continues to evolve! We are committed to offering greater options and flexibility for our clients. Mountain States Commercial Insurance Company has been established and now offers Workers’ Compensation coverage for small businesses throughout New Mexico. For more information about our newly available Workers’ Compensation options, contact James Lyons at 505.764.1494 or jlyons@msig-nm.com.

www.msig-nm.com Albuquerque, New Mexico 505.764.1400

Sandia Mountain Range Central New Mexico

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82% of young insurance professionals believe this about the industry The insurance industry may be facing an impending talent gap, but young professionals working for insurance firms today couldn’t be happier. According to the results of a new survey conducted by Vertafore, 82% of millennials employed with independent agencies are “optimistic” or “very optimistic” the industry will evolve to attract new talent, and 77% consider insurance to be a “life-long career.”

Another area where agencies can improve is extending to millennials the opportunity to engage in decision making. Three out of four respondents say they find it “important” or “very important” to influence change in the organization, but a full 49% say they have little or no influence in agency decisions – particularly when it comes to technology investment. Addressing these issues and engaging millennials is critical for agencies who wish to move forward, says Guy Weismantel, vice president of marketing for Vertafore. With so many planning to stay in the industry for the long haul – and 15% even planning to carry on family-owned agencies – continuing to cultivate a positive culture and incorporate new technology into the workplace is vital.

PRODUCER

Favorable work/life balance was cited as the top reason for staying in the insurance industry (98%), followed by compensation (98%) and enjoyment of work (96%). Additionally, nine out of ten survey respondents said their organization’s use of technology was critical to their job satisfaction. A full 82% said they were able to increase personal productivity as a result of tech adoption.

Unfortunately, independent agencies are falling behind in this regard. According to the Vertafore survey just 9% of agencies use social media to recruit new employees.

Social media and mobile availability in particular are paramount for millennial employees – 71% of survey respondents say they use their smartphone for work, including 34% for lead generation and 27% for customer support.

“Millennials are playing a significant role in the digital disruption we are beginning to see in the insurance industry and their optimism is contagious,” Weismantel said. “This age group was born and raised in the era of technology, and they are bringing this mindset to an industry on the cusp of transformation.

Critically, 20% of millennials say they use social media to hunt for new jobs. In fact, that age group is twice as likely to be recruited through LinkedIn or other social media contacts.

“Millennials’ ideas, opinions and attitudes toward technology are being incorporated into all facets of agency operations, and we share their optimism in the future of the industry.”

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Building a Customer Service Culture by Bill Wilson If you've ever stayed at a Ritz-Carlton hotel, I'm betting that the experience was outstanding. How can they do it so much better than most hotel chains? Yes, you do pay a premium for their services, but largely The Ritz does it by creating a corporate culture almost solely devoted to serving the customer....

irst, let me say that I don't make a habit out of staying at Ritz-Carlton hotels. But I have had occasion perhaps a dozen or more times to stay at a Ritz while attending a conference. I'll have to say that, not only did I never experience a problem, but without exception, each stay was an exercise in indulgence. I've also experienced several outstanding displays of excellence in customer service. On one occasion, I was preparing for a workshop and realized that I had forgotten my overhead markers. Stepping into the hallway outside the meeting room, I asked a housekeeper who was dusting ashtrays (really) if she knew how I could get in touch with the A/V people. In many other hotels, I've been lucky to get a shrug or Freddie Prinze-ish, "That's not my job, man." Not at the Ritz. The lady insisted on tracking down the markers herself (my program was scheduled to begin in minutes) and, remarkably (no pun intended), she returned with a new, unopened pack of markers within five minutes. She had been taught that SHE "owns" any request by a hotel guest.

CSR

On another occasion, I was convinced there was a shortcut to a meeting room on the second floor (where my sleeping room was located), without having to go down and through the lobby, then back up some stairs to the second floor again. I stopped and asked a guy who was painting some trimwork if he knew how to get to the room. It would have been easy for him to say he didn't know, but this guy laid down his brushes and escorted me through a maze of corridors to the meeting room. What this gentleman did is the rule, not the exception, at a Ritz-Carlton hotel.

If you've ever stayed at a Ritz-Carlton hotel, I'm betting that your experience was outstanding too. (In an independent survey, 99% of Ritz-Carlton guests said they were satisfied with their experience, with more than 80% "extremely satisfied.") How can they do it so much better than most hotel chains? Yes, you do pay a premium for their services, so we can attribute some of this to a larger budget. But, for the most part, the Ritz does it by creating a corporate culture almost solely devoted to serving the customer. If you spend the night at a Ritz, chances are the person making your bed received more training than you did getting licensed! EVERY Ritz-Carlton employee receives a minimum of 120 hours of customer service training...that's THREE WEEKS or more of training devoted to one discipline. Most first-year employees receive 250-300 hours of total training. How many of your CSR's have received 120-300 hours of any kind of training? This type of commitment to service and training pays off by allowing the Ritz to charge significantly higher than average rates for rooms and facilities while developing a clientele that is fiercely loyal. Many people WILL pay more for greater quality and service...the kind of people most businesses would want as long-term customers. The Ritz-Carlton, at the time this article was originally drafted, is the only hotel chain to receive the coveted Malcolm Baldrige National Quality Award and the only two-time winner (1992 and 1999) in the service category. In a study by Cornell and McGill Universities, the Ritz was selected "Overall Best Practices Champion" from a field of 3,528 nominees.

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Let's take a look at some of the foundational principles of the Ritz:

8. Any employee who receives a customer complaint “owns” the complaint.

The Ritz-Carlton Motto:

9. Instant guest pacification will be ensured by all. React quickly to correct the problem immediately. Follow-up with a telephone call within twenty minutes to verify the problem has been resolved to the customer's satisfaction. Do every thing you possibly can to never lose a guest.

“We Are Ladies and Gentlemen Serving Ladies and Gentlemen.”

The Ritz-Carlton Three Steps of Service: 1. A warm and sincere greeting. Use the guest's name, if and when possible. 2. Anticipation and compliance with guest needs. 3. Fond farewell. Give them a warm good-bye and use their names, if and when possible.

The Ritz-Carlton Credo:

10. Guest incident action forms are used to record and communicate every incident of guest dissatisfaction. Every employee is empowered to resolve the problem and to prevent a repeat occurrence. 11. Uncompromising levels of cleanliness are the responsibility of every employee.

The Ritz-Carlton Hotel is a place where the genuine care and comfort of our guests is our highest mission.

12. “Smile - We are on stage.” Always maintain positive eye contact. Use the proper vocabulary with our guests (Use words like - “Good morning,” “Certainly,” “I'll be happy to” and “My pleasure”).

We pledge to provide the finest personal service and facilities for our guests who will always enjoy a warm, relaxed yet refined ambience.

13. Be an ambassador of your Hotel in and outside of the work place. Always talk positively. No negative comments.

The Ritz-Carlton experience enlivens the senses, instills well-being, and fulfills even the unexpressed wishes and needs of our guests.

14. Escort guests rather than pointing out directions to another area of the Hotel.

The Ritz-Carlton Basics: 1. The Credo will be known, owned and energized by all employees. 2. Our motto is: “We are Ladies and Gentlemen serving Ladies and Gentlemen.” Practice teamwork and “lateral service” to create a positive work environment. 3. The three steps of service shall be practiced by all employees. 4. All employees will successfully complete Training Certification to ensure they understand how to perform to The Ritz-Carlton standards in their position.

15. Be knowledgeable of Hotel information (hours of operation, etc.) to answer guest inquiries. Always recommend the Hotel's retail and food and beverage outlets prior to outside facilities. 16. Use proper telephone etiquette. Answer within three rings and with a “smile.” When necessary, ask the caller, “May I place you on hold.” Do not screen calls. Eliminate all transfers when possible. 17. Uniforms are to be immaculate. Wear proper and safe footwear (clean and polished), and your correct name tag. Take pride and care in your personal appearance (adhering to all grooming standards).

5. Each employee will understand their work area and Hotel goals as established in each strategic plan.

18. Ensure all employees know their roles during emergency situations and are aware of fire and life safety response processes.

6. All employees will know the needs of their internal and external customers (guests and employees) so that we may deliver the products and services they expect. Use guest preference pads to record specific needs.

19. Notify your supervisor immediately of hazards, injuries, equipment or assistance that you need. Practice energy conservation and proper maintenance and repair of Hotel property and equipment.

7. Each employee will continuously identify defects throughout the Hotel.

20. Protecting the assets of a Ritz-Carlton Hotel is the responsibility of every employee.

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Steve

ANDERSON.com by, Steve Anderson (Always feel free to email me with comments, new ideas or products that have worked for you. I will check them out and spread the word!)

Getting Your Articles Featured on

As you might know already, I believe LinkedIn is the most underused commercial insurance prospecting tool available to agencies. Using the LinkedIn publishing platform and getting featured on LinkedIn Pulse is another tool that will increase your visibility. I first wrote about LinkedIn Pulse in July 2015. It is simply another way to use the LinkedIn platform to connect with prospects and clients. Fortunately, anyone in the U.S. can now use the LinkedIn Pulse platform to publish long form articles. This platform is LinkedIn’s main source for professional news from favorite websites and other industry professionals. Getting one of your articles featured on the Pulse platform will provide you with higher visibility and have a positive impact on your “authority.” Being featured could be the difference between a few hundred views of your article and getting thousands of views and many comments. In addition to highlighting content in your LinkedIn newsfeed, Pulse also sends out an email with content that was “Published by your network.” Another reason to begin publishing articles on LinkedIn. How LinkedIn Pulse selects articles to be featured in an individual’s newsfeed is part of their secret sauce. While no one, except the team at LinkedIn, knows the exact formula, there are some guidelines you can follow to increase the chances that your article could be featured.

Follow these guidelines to increase your article’s chance of being featured: > Proper Topic Selection Select a topic relevant to the people you want to influence. The more organic likes, comments, and shares you get on that article significantly increase your chances of getting featured. Your article should also line up with one of the Pulse channels. > Use a Compelling Headline Another way to gain readers is by using a captivating headline. An effective article contains both an appealing headline and engaging content. Improve the article’s title for SEO. But remember to not make it too long. A good length for the title is 5 to 10 words. Once you publish your article, you can get the attention of the LinkedIn editors by tweeting a link to the article that includes the term Tip@ LinkedInPulse. This is a unique Twitter feed format solely for the LinkedIn editors. This is not a guarantee you will

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be highlighted. But, it increases your chances of an editor seeing your post. > Additional Guidelines Following are some guidelines on how to create a compelling article for the LinkedIn Platform: • Remember, if you want to increase your visibility, you need to create a compelling article. So, whatever you’re writing, make it your best effort. • Don’t write an article with just statistics and figures. Put some of your own personality into your article. • Use a concise, neat, and vibrant photograph for the Cover Photo. This will help get the attention of the viewer.

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• Know the Pulse Channels and where your article could fit. • Engage with your readers by responding to any comments as much as you can. Hit Like on their comments, so your viewers know that you read their content as well. • Include links to related earlier posts. • Incorporate a bio (About the Author) at the end of your article. Be sure to include any links to your LinkedIn profile and your websites. • Share your post in Facebook, Pinterest, Twitter, LinkedIn groups, etc. • Try to publish new articles on a regular schedule. The LinkedIn publishing platform and the new Pulse network will provide you with another way to attract and engage with your perfect prospect. Being featured on the Pulse news platform will increase your authority and visibility.

by Tracy Cotton

Five Secrets to Help Your CSRs Succeed Twenty years ago, I started in insurance as a personal lines customer service representative because I knew I didn’t want to sell. I’m not a salesperson. I like customer service, however, because I like people. So I was really happy to just be an agent who serviced personal insurance clients. And then one day, the personal lines producer I worked with was out on vacation and a new prospect called in. Instead of taking a message as I normally did, I started talking to the person, and after some quoting and then more talking, I had suddenly sold an account. I’d like to say that I instantly became a salesperson by handling that one prospect. But after all these years later, I still am not a salesperson. However, I am a CSR who can sell.

Can Your CSRs Succeed in Sales? I’m not alone. I am not a unicorn. The problem is that most CSRs are afraid to sell because they think that means they have to be a salesperson. They also are probably unaware that if they want to give the best service to their clients or potential clients, it requires selling some coverage.

PRINCIPAL

To get CSRs to sell, there are barriers that have to be removed and ways to help them that differ from what you do to manage producers. From my own experiences and what I observed in the 35+ agencies I visited when I traveled the country as a consultant, there are five basic needs that must be met to help a CSR succeed with sales.

1) They need time to build relationships. CSRs are great with people, but they prefer a slower pace and aren’t comfortable rushing the prospect or client through a barrage of questions. To a CSR, that equates to high pressure sales. However, CSRs are busy servicing, and to create that extra time, it is very important to provide them with the most efficient technology for their servicing duties. If a CSR is overwhelmed with processing paperwork or outdated technology, they are much less likely to feel they have time to sell. I am still amazed at the number of agencies not utilizing dual monitors, agency management system upgrades like single entry and download, or the worst CSR time culprit of all–paper files. Give them the

time they need to build trust and rapport, which will lead to sales.

2) They need more knowledge. A basic understanding of the sales process is great, but that’s not the key. They need more knowledge of coverage and more knowledge of your markets. Often, CSRs get left out of meetings when company market reps come in the office to discuss their company’s offerings. Instead, you can include the CSRs. Some agencies only send producers to advanced continuing education, like designation programs. Instead, send everyone you can. Start the CSRs out with CISR or ACSR, then encourage them along to CIC and CPCU. The more they know, the better they can sell because for CSRs, it’s all about offering choices and educating clients/prospects. “Helping a customer understand their choices and make an informed decision” sounds better than “selling something.” Fundamentally, it’s the same thing, right? Yes, but to a CSR with the knowledge to advise a client on what is available and how it can benefit them is more like customer service, which they already enjoy doing.

3) They need more guidance. It’s a big jump to go from order taker to adviser. Order takers are never wrong as long as they take in the correct information. Advisers? They can flub stuff. Maybe say the wrong thing. CSRs don’t like being wrong – it goes against all that conscientiousness you hired them to exhibit. Coaching a CSR on how to talk to their clients so that it results in more sales can make a huge difference. Please don’t call it a script if you can help it, because the connotation there is that this is an act. CSRs want to be genuine, so instead call it optimal wording or something that helps them understand they are going to be serving their client better. www.iianm.org

In addition to coaching and scripts (that aren’t called scripts), they also can use extra direction. If you set up a schedule where each week they should focus on discussing a different coverage, then they don’t have to think it up themselves. Or, if they are supposed to be doing renewal reviews that hopefully generate cross-selling or up-selling, make sure to give them a worksheet to follow. CSRs will be more effective at selling if they don’t have to decide what to sell when, but can follow a flow chart or procedure.

4) They need to get used to the word NO. This one is probably the toughest. Once you get a CSR to start selling, they will eventually and repeatedly be turned down just like a regular salesperson. Except a producer isn’t daunted by the word NO, and either figures a way around it or moves on without a second thought. A CSR takes rejection a lot harder. The word NO is a wall they will avoid hitting at almost all costs. Training a CSR to keep asking questions even after a NO is helpful. It’s important to the sale process for the CSR to understand when price is really the issue or when value is the issue. Obviously, if it is value, then they still have an opening to provide more detail on the coverage. It’s easy to accept “I can’t afford it” as a NO and more challenging to ask additional questions to determine if NO means NO. The more they hear NO, the better they will become at questioning why.

5) They need incentive to sell, and it may not be commission. The good news is a CSR may not be motivated by money, because they are already getting paid to be a warm body taking car changes and answering billing questions. Why is that good news? You probably already have a producer getting commission for sales who most certainly is motivated by that money. Your budget may not be ready to start paying out commission to CSRs for smaller policies or up-selling additional endorsements. How do you offer an incentive then, for a CSR that sells? Instead, create a point system where once they meet a goal or achieve a certain number of additions to policies, they can “cash” their points in for a day off or maybe a gift certificate. You may be able to negotiate gift certificates from one of your commercial clients at a reduced rate – especially from restaurants or beauty/barber shops who normally offer discounts in their regular marketing. Another idea is to mark off a prime parking spot near the entrance for “CSR of the Month” and use your social media to spotlight the winner of that month’s award.

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Competition amongst CSRs can be motivating and keeping a dry erase board in an area of high visibility for employees where tallies or points are recorded can keep everyone engaged. Small prizes like coffee mugs, tote bags, and recognition pins are just a few things that could also serve as incentives. When in doubt, ask the CSRs what they’d like to see as incentives, and be prepared to offer more than one option depending on the number of employees involved. Today, I am a commercial account executive. Those are fancy words to indicate I’m a CSR who sells. Consider changing titles and job descriptions if you are expecting your CSRs to sell, as it may help them to readily embrace their role. Taking Your Agency to the Next Level The reality in insurance agencies today is that everyone in the agency, from receptionist to CSR to producer, should be selling customers and prospects on why to stay with or buy from them. Not everyone is a salesperson, however CSRs already have the jump on selling by virtue of wanting to help people. Insurance is meant to help people and businesses through the unfortunate circumstances in life. Once they understand how they can help people by selling them what they need, the seeds are planted. You can grow your CSRs into selling roles by helping them with their needs, which differ greatly from that of a producer. If you can meet those five needs, you’ll have CSRs who start selling successfully.

Big “ ”dea As an IIANM member, you have access to ABEN’s member discounted web seminars for further training. Check out this CSR Training and Professional Development Series: CSR Essentials - Relationship Management CSR Essentials - Verbal Communication Skills: Phone Etiquette & Client Interaction CSR Essentials - Personal Time Management

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Disruption: The New Normal Creates

by Marty Agather

for Disruptors One of the common themes in the insurance press over the past year has been the arrival of insurance ‘Disruptors’. Although many believe disruption is all about technology, a broader view is that disruption can come from a number of different sources. While the terminology is new, the concept is as old as the economy. A new idea overtakes the champ. Essentially, a disruptor changes the marketplace and definition of the product so thoroughly that you can’t think of how the marketplace and products were before. Life without untethered phones is almost unthinkable.

affects a market in one of a number of dimensions including: • • • • •

Existing Competitors Potential Competitors Suppliers Business Process Change Customers

And while there is ample evidence that there are changes taking place in all of these dimensions in our industry, the rapid morphing in the customer dimension lead to the conclusion that we are on the cusp of that strategic inflection point, or more ominously, may have already entered it. One key item of which to be aware: These processes don’t happen in an instant. They can roll out over the course of years.

Disruption Defined Grove describes a strategic inflection point as the following, but I’m going to replace his term with disruption: {A disruption is} “that which causes you to make a fundamental change in business strategy. Nothing less is sufficient.”¹

Insurance Buyer as Enabler of Disruption Over the past decade, a number of changes have taken place with consumers that have changed their behavior. Most of these are so well entrenched that here at Agency Nation we call it the New Normal for customer behavior.

One disruptor that most have heard in day to day conversation is “The best thing since sliced bread.” But what does that mean? And why was sliced bread better than unsliced bread?

• Do-it-yourself shopping First, pump your own gas; now check yourself out at the grocery

The first effective bread slicing machine was used by a small bakery in Missouri in 1928. It was so popular that the local newspaper wrote a front page article article on in 1930. The public’s fascination with mechanization led to the invention spreading world wide, and it spawned other inventions that needed that level of standardization such as toasters.

• De facto commodification of personal lines insurance Although experts know insurance isn’t a commodity, the public believes it is

Insurance is a very attractive market for outsiders. They see the vast amounts of money and want to get in. In most instances, new entrants fail, but that doesn’t mean we can smugly sit back and expect their failure to continue indefinitely. Innovation is coming to the industry at an ever increasing pace. When does innovation become disruption?

Disruption by Another Name. Andrew Grove, the former CEO of computer microprocessor maker Intel, wrote a book 20 years ago called “Only the Paranoid Survive“. In it he describes the process of disruption from the marketplace perspective, calling these events Strategic Inflection Points. He goes on to describe how Intel successfully navigated the disruption in their marketplace while some competitors didn’t.

• Comparing options before you buy Most purchase decisions are well researched

• Customer frugality Customers take pride in spending less; conspicuous consumption is down • Distrust of institutions and marketing Consumers value the experiences of peers and use recommendations in purchasing decisions • Rise of the internet and mobile We are online all the time, and expect to be able to get anything we want 24 hours a day Any one of these changes by itself has (and have had) only a minor impact on the industry. But taken together, these changes have the potential to create a foundation for disruption. A launch pad. Click the button below to finish the story!

Grove describes a strategic inflection point as the changes that occur in a market when what he calls a “10X force” 16

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Virtual University’s Ask an Expert

ulty

VU Fac

Should Agents Follow Up on Pending Cancellations for NonPayment?

“Are you aware of any case in any jurisdiction where an agent was found negligent for failure to advise or contact a customer of a cancellation? This relates to the practice of some agents who selectively contact some customers but not others related to direct bill cancellation notices. I understand the best practice, but do you know of any case law?? "For the last 20 years or so, our agency has routinely refrained from contacting an insured whenever we became aware of a pending cancellation for nonpayment or a pending expiration notice due to nonpayment of the renewal premium. The thought process was three-fold: 1.The clients are already receiving written reminders directly from the carrier. 2.We didn’t have the manpower to provide such a service to such a large customer book. 3.There was an E&O concern that if we provided this service to ONE customer, we must provide this service to ALL customers. Furthermore, we must provide the service EVERY YEAR henceforth. "Now we are finally getting to the point where our staffing is large enough that we might be able to contemplate providing this service. I think that it would help boost our retention rates. However, item #3 still concerns me greatly. Admittedly, every time I hear about this being an E&O concern, no one is able to provide any evidence or documentation that it is fact rather than just anecdotal fear. "Can you provide some insight as to whether this is a recommended practice for agents and, if so, what are the potential E&O implications? I cannot guarantee to any client that we will call them every year to remind them about their renewal invoice. Furthermore, there will almost certainly be some clients who 'fall through the cracks.' "We do currently contact clients when we receive a pending cancellation for Underwriting Reasons. I don’t know what, if any, impact this has on this discussion." One of the issues here is invariable practice. Whatever procedure you elect to implement, you should strive to follow it “One Way, All the Time, By Everyone.” With that thought in mind, we ran this by the VU faculty and got the following observations. Faculty Response I have personally seen agencies win or lose E&O cases based on whether they could show they called no one, ever. The agents that could show they never called anyone have won every time that I’ve seen. The agents that could not provide this proof have lost. Whatever an agency decides to do, they need to do it invariably. A huge mistake is made by some E&O experts, including attorneys, as to what constitutes invariable practice. These people make the mistake of assuming or saying that if you miss just one item, ever, the agency is toast. This is not true. I have again personally seen several “notification of late pay” cases won by both carriers and agencies who could not prove they did send notice (carrier) or do not call everyone (agency). What they could prove without doubt was that the statistical test used showed they had a 99%+ (or whatever the bar set by the court was) compliance rate with their procedures.

Many and in my experience, most, courts understand that nothing is 100% perfect so if the agency can show a good faith effort and prove they are compliant at an extremely high, though maybe not perfect, level they will likely win. Another point is the plaintiff’s attorney has to find that one single miss. With new software, finding that miss is getting ever easier but most plaintiff attorneys still are not going to search an entire agency’s database and a good defense attorney will not allow the plaintiff’s bar to search the entire database. They’ll get the court to agree to a sample search. The problem I see with agencies regarding notifying on late pays is that when they start calling, they inevitably begin missing more than just one. Sooner or later they fail to call a dozen, and then three dozen, and then 100 different clients.

Click here to view more Faculty Responses and further information. You will have to log-in with your iianm username & password. If you need help locating yours, contact Rachel here at the association office. 18

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IIANMs 81st Annual Convention

IIANM’s Past Chairs

Superintendent, John Franchini Chair, Mike Parisi IIANM’s New Board

NMSU Check Presentation IIANM’s CEO, Thom Turbett & Immediate Past Chair, Gabe Portillo

Company of the Year Winner, Acuity

TradeShow Booth Winner, Acuity

Innovative LeadershipNM Graduation

TradeShow

Click here to view a complete slideshow of 2015’s Convention. TradeShow

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Introducing our

2016

Board of Directors Executive Committee: At Large Directors: Randy Hobbs Mike Parisi Chair of the Board

Leavell Insurance, Inc. randy.hobbs@leavellinsurance.com

Atlas Insurance Services mikep@aisnm.com

Kendra Zacharias Rio Grande Ins Services of Santa Fe kendra@riograndeins.com Jakki Swicegood

Dick Minick Vice-Chair of the Board

Western States Insurance Group jswicegood@swcp.com

Minick & Company, Inc. dminick@minickandcompany.com

Cara Cress Cress Insurance Consultants, Inc. ccress@cressinsurance.com Greg Geer Western Assurance Corp. ggeer@westernassurance.com

Heather Fortner Secretary / Treasurer AVI Risk Management - Insurance Brokers hfortner@aviagency.com

Dax Kastrin Elemental Risk Management dax@erm-ins.com

Gabe Portillo Immediate Past-Chair Berger Briggs Real Estate & Insurance, Inc. gportillo@bergerbriggs.com

Katherine Yeager National Director High Country Agency, Inc. kathy@hicountryagency.com

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What Do You Know About ISO’s

PAP Ridesharing Endorsements? by Bill Wilson Ridesharing is once again making headlines in the wake of a California labor commission ruling that Uber drivers are employees of the company not independent contractors. Did you know that ISO has already made two nation-wide filings in response to the rise of ridesharing through transportation network companies such as Uber and Lyft? Pertaining to personal auto and umbrella insureds who drive for these organizations, the filings include: PAP Forms Filing PP-2015-OTNFR “Introduction of a Reinforced Public or Livery Conveyance Exclusion and Related Optional Coverage Endorsements”: • PP 23 40 10 15 – Public Or Livery Conveyance Exclusion Endorsement • PP 23 41 10 15 – Transportation Network Driver Coverage (No Passenger) • PP 23 45 10 15 – Limited Transportation Network Driver Coverage (No Passenger) PUP Forms Filing DL-2015-OTNFR “Introduction of a Reinforced Public or Livery Conveyance Exclusion”: DL 99 12 10 15 – Personal Umbrella Liability Policy Public or Livery Conveyance Exclusion Endorsement Each filing goes hand in hand with a companion rules filing. The proposed nationwide effective date for these changes is Oct. 1, 2015, though the actual implementation date could vary in specific states. The PUP endorsement follows the reinforced PAP “public or livery conveyance” exclusion ISO introduced with the PP 23 40 PAP endorsement. At this time, no options are available to extend even limited coverage under ISO’s PUP to ridesharing drivers. 24

What do you need to know about the three PAP endorsements for ridesharing? PP 23 40 10 15 – Public or Livery Conveyance Exclusion Endorsement This endorsement revises the existing ISO PAP exclusion for the use of a vehicle as a public or livery conveyance. According to the filing explanation, the endorsement clarifies that the exclusion applies to any period of time that an insured is logged into a “transportation network platform” as a driver, whether or not a passenger is occupying the vehicle. The endorsement defines a “transportation network platform” as “an online-enabled application or digital network used to connect passengers with drivers using vehicles for the purpose of providing pre-arranged transportation services for compensation.” The new part A – Liability Coverage “public or livery conveyance” exclusion reads as follows (new language italicized): “5. We do not provide Liability Coverage for any ‘insured’: For that insured’s’ liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance. This includes but is not limited to any period of time that ‘insured’ is logged into a ‘transportation network platform’ as a driver, whether or not a passenger is ‘occupying’ the vehicle. This exclusion (A.5.) does not apply to a share-the-expense car pool. The implication of the language “but is not limited to” is not yet known. ISO is also making the same revision to the “public or livery conveyance” exclusion that appears in similar form under Part B – Medical Payments Coverage and

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Part D – Coverage For Damage To Your Auto in the PAP. Since state-specific endorsements in most states provide statutory uninsured and underinsured motorist coverages, ISO is filing a similar change, to the extent permitted by law, to each state’s UM/UIM endorsements. PP 23 41 10 15 – Transportation Network Driver Coverage (No Passenger) This optional premium-bearing endorsement would replace the PP 23 40. According to the filing explanation, it extends PAP Coverage to an insured ridesharing driver for the period of time from when the driver logs into a “transportation network platform” up until a passenger has entered the vehicle. The Endorsement modifies the “public or livery conveyance” exclusions in Parts A, B, C, and D of the PAP and includes a schedule of the following information: • Identity of the “transportation network platform(s)” for which the insured drives • A description of the vehicle in question • A list of provided coverages, triggered by premium entry for each desired coverage PP 23 45 10 15 – Limited Transportation Network Driver Coverage (No Passenger) This optional premium-bearing endorsement would replace the PP 23 40. According to the filing explanation, it extends PAP coverage to an insured ridesharing driver for the period of time from when the driver logs into a “transportation network platform” up until the driver accepts a request through the “transportation network platform” to transport a passenger. The endorsement differs from the PP 23 41 in that it does not cover the time period between accepting a ridesharing request and the passenger’s entry into the vehicle. It modifies the “public or livery conveyance” exclusion in Parts A, B, C and D of the PAP and includes the same schedule as above for the PP 23 41. Neither optional endorsement extends PAP coverage while a passenger is in the vehicle, meaning a driver with only an ISO PAP must rely on whatever coverage is provided by their transportation network company. That may or may not include medical payments, UM/UIM coverage for the driver or passenger(s) and physical damage coverage. Agents should take great care when providing advice to insureds about these endorsements. Even under the PP 23 41, the full driver exposure does not enjoy full coverage and the insured may not elect to extend limited coverage to all PAP coverage parts. If drivers are independent contractors, they are basically operating a business. Legal counsel might advise them to do so as a corporation or LLC and purchase a BAP rather than relying solely on a PAP.

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Some situations could involve claims or suits filed against drivers that a CGL, BOP or other commercial policies would more appropriately address than a BAP. For example, a claim for slander, invasion of privacy or wrongful eviction might be unrelated to the use of an auto and unlikely constitute BI or PD. Since the driver is engaged in a business activity, a home-owners policy would likely not respond. Bill Wilson is director of the Big “I” Virtual University. Reprinted from IIABA’s Virtual University

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Odds Ends Three quick tactics for career enhancement

More power to them:

Career development doesn’t always require getting another degree or going to a series of training workshops. Enhance your knowledge with these quick development tips:

Energy is a hot topic around the world these days, and some U.S. organizations are starting to do something about it. According to a study by Deloitte, 55 percent of large U.S. businesses (those with over 250 employees) now generate some portion of their own electricity on site.

Network with colleagues. Ask someone from another department to explain his or her job to you. This will increase your overall knowledge of how your organization works.

Go to lunch with your boss. Don’t talk about yourself—ask questions about how he or she sets priorities, solves problems, and handles the pressures of the job.

Build a portfolio. Highlight your successful projects and key accomplishments. Use this as a tool for showing what you can do on the job.

Take one step to lose weight

Thirteen percent produce electricity with wind or solar power; 9 percent get power from on-site generators using fuel cells, and another 9 percent generate it from a process known as combined heat and power (CHP). The rest use fossil fuel generators. They’re not just doing it to feel good, either—79 percent view creating their own energy as essential to maintaining a competitive advantage.

There is more to life than making a living. Do not work more than you live. ~Mokokoma Mokhonoana

Spiders on the move:

Want to lose weight? Step onto a scale every day. That may seem like obvious advice, but it’s supported by the results of a study reported on the Live Science website.

If you’re afraid of spiders, this may not be good news: Scientists have discovered that some spiders can actually walk or sail across water, allowing them to travel great distances and colonize new areas of the world.

In the study, researchers challenged 162 people to reduce their weight by 10 percent over the course of the year. They weren’t given any specific advice, but about half the participants were given scales and told to check and record their weight every morning.

Spiders have long been known to travel by “ballooning”— climbing to the top of a plant or tree and shooting out a strand of web that catches the breeze, pulling them through the air. But what happens when they land on water? Some species of spiders have water-resistant legs that prevent them from sinking beneath the surface. With specialized “dance” routines, the spiders are able to make their way across the water. In addition, they’re able to lift their legs to catch the wind, sliding on the surface as if sailing. Some spiders are also able to lift their abdomens like sails and take advantage of air currents to transport themselves.

Although few of the participants in either group achieved their goal of losing 10 percent of their body weight, 29 percent of those given scales succeeded in losing at least 5 percent, but only 11 percent in the scale-free group lost as much. In addition, participants given scales managed to maintain their weight loss for a second year. The researchers have theorized that checking weight once a day may help people pay more attention to what they eat (and how much), and reinforce positive weight-loss behaviors like skipping dessert.

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All this helps spiders move about, allowing them to take their place as predators keeping insect populations in check. How far they can actually travel is still unclear, as is the question of whether salt water affects their mobility. Scientists are continuing to study the spiders to find out if they can literally sail across the ocean. 27

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