from the independent insurance agents and brokers of arizona,...

© Copyright Independent Insurance Agents and Brokers of Arizona, Inc.’s News & Views March/April 2017 Edition

Page

Continued on top of page 15

From the Independent Insurance Agents and Brokers of Arizona, Inc. © Copyright

Your Source for Arizona Insurance Industry News

March/April 2017

INSIDE THIS ISSUE

Cheap E&O Coverage—

You Get What You Pay For

Page 31

TV Insurance Ads—

Do They Mislead?

Page 4

Cyber Risk Protection

For High Net-Worth

Page 8-9

333 East Flower Street—Phoenix, Arizona 85012—Phone 602.956.1851—Fax 602.468.1392—Web www.iiabaz.com

Chapter Events & News

March 21-23, 2017 CISR Personal Lines Mini-Marathon Week ITEC Classroom—Phoenix April 7, 2017 The Risk Mgmt Process for 21st Century Chase Field—Phoenix (Indians Game) April 12-14, 2017 CIC Commercial Casualty Institute Embassy Suites by Hilton—Tempe April 21, 2017 IIABAZ Board Meeting ITEC Classroom—Phoenix April 26, 2017 2nd East Valley CISR seminar—Casualty I Farm Bureau Classroom—Gilbert

Life isn‘t always fair, and

you can still lose lawsuits

alleging you were negligent

when you haven‘t done

anything wrong. In a

lawsuit, there will be two

sides of what happened,

and if you don‘t have the

proper documentation the

odds are against you.

Documentation is king

and great documentation

is everything.

As insurance agents, we struggle to convince our customers of needed insurance coverage. When we think someone is making

a bad choice for insurance coverage, many times we think of writing up a rejection form. Rejection forms are sometimes

mandated by law, such as with UM/UIM coverage. ACORD has a rejection form for Flood Insurance which sets out the

consumers‘ choice to not get flood coverage. Other times, we may put together a rejection form of our own that the

consumer/insured can sign that acknowledges their desire to forgo the protection that we believe is needed.

Do rejection forms work? Not always. Even with state approved UM/UIM forms, the allegation can come up that the agent

shoved a form in front of the applicant and asked them to initial here, initial here and sign and date here. Too many times, that

argument or allegation sticks. In 2016, the IIABAZ was instrumental in getting legislation to help agents specifically with UM/UIM

rejection forms, but there is still work that must be done to NOT sell UM/UIM coverage and other needed coverage.

TWO WORDS TO REMEMBER

Any time you are talking about or sending an e-mail about any coverage that you feel is needed, please remember these

words……… STRONGLY RECOMMEND. When you write about it – capitalize the words, bold print, underline – making the

point that this is not JUST a suggestion but a strong recommendation (like – ―don‘t be stupid‖, but more professional).

If the applicant/insured still wishes to decline coverage, so be it; they still have the final decision making responsibility.

These two words need to be a part of your vocabulary when talking about critical coverage.

FIVE WORDS TO REMEMBER

Now……… The applicant or insured has made the decision, ―nope – not gonna do it – not gonna take the coverage‖. Fine, it is

their decision, but it is great to get that acknowledgement in writing. When you ask them to acknowledge that they are not

going to buy the coverage that you believe is necessary, remember these five words that YOU WANT THE INSURED/APPLICANT

TO WRITE TO YOU……… REJECTING AGAINST ADVICE OF AGENT.


No One Said Life Is Fair Do the Insurance Commercials on Television Tell the Whole Truth? How To Avoid a Swearing Match in E&O Claims Cyber Risk Tips for Your High Net-Worth Clients Successful Agencies and their E&O Loss Control Practices Serving the Luxury Life: High Net-Worth Market Update IIABAZ Fraud Training Center Flood Insurance Bill Reintroduced In the Senate and the House Ask An Expert: How Important Is Employers Liability Coverage? Tech Talk: Saving Time by Recording Client Phone Calls THE ITEC Commitment—Risk Management Seminar & Dbacks Game News From Capitol Hill Upcoming ITEC, CISR, CRIS and CIC programs How Much Can a Personal Lines CSR Handle? Using Data to Sell Life Insurance—Know the Event Triggers What I Learned from Working for a High Producing Brokerage Do You Have a Wo rthy Spare Tire? Ray’s Fun with Song Lyrics

Cover Page 4 Page 5 Page 8 Page 11 Page 12 Page 14 Page 15 Page 16 Page 18 Page 19 Page 20 Page 23 Page 24 Page 29 Page 30 Page 31 Page 32

ACUITY AmShield Insurance Company AssurWerx Berkshire Hathaway Guard Insurance Companies Burns & Wilcox, Ltd. E&O Happens The E&O Department EMC Insurance Company Markel Special Commercial Insurance Pekin Insurance Company Preferred Property Program SECURA Insurance Selective Flood Insurance Virtual Risk Consultants

Page 28 Page 19 Page 7 Page 25 Page 17 Page 27 Page 3 Page 6 Page 22 Page 21 Page 10 Page 26 Page 10 Page 10

March 24

The first "hail insurance company" was incorporated in

Connecticut and was known as Tobacco Growers‘ Mutual

Insurance Company—1880

In Rome, The Gestapo rounded up innocent Italians and over

300 were shot to death in response to a bomb attack that

killed 32 German policemen—1944

March 27

About 55,000 people staged a protest against Adolf

Hitler in New York City—1933

The U.S. announced a plan to explore space near the

Moon—1958

Construction began on Alice Cooper's new

Coopers'town Restaurant in Phoenix—1998

March 29

The British Parliament passed the North America

Act to create the Dominion of Canada—1867

Monty Python Actor and Comedian Eric Idle born

in South Shields, County Dunham, England—1943

The last U.S. Troops left South Vietnam—1973

April 3

George Washington received an honorary Doctor of

Laws degree from Harvard College—1776

Pepsi dismissed Madonna as a spokesperson after her "Like A

Prayer" video was called "blasphemous" by the Vatican—1989

The Dow Jones industrial average climbed above 9,000 for the

first time—1998

April 5

American Indian Pocahontas married English colonist John

Rolfe in Virginia—1614

Nirvana singer/guitarist Kurt Cobain killed himself with a

shotgun, and his body was found three days later—1994

April 7

The first steel columns were set for the Empire

State Building—1930

Prohibition ended in the United States—1933

Actor and martial artist Chan Kong-sang, known

better as Jackie Chan, was born in Victoria Peak,

British Hong Kong—1954

April 10

Warner Bros. released "House of Wax," which was

the first 3-D movie to be released by a major

Hollywood studio—1953

Isaac Hayes won an Oscar for the Best Music,

Original Song award for the song "Shaft‖—1972

Outside Needles, CA, comedian Sam Kinison was

killed in a roadside car accident—1992

March 20

The 6th recorded perihelion passage of

Halley's Comet took place—141

In Paris, the Legislative Assembly approved

the use of the guillotine—1792

March 22

The U.S. Congress outlawed polygamy—

1882

Niagara Falls ran out of water due to a

drought—1903

Swedish actress Lena Olin born in

Stockholm—1955

NOTE: This feature below is merely for information, trivial

entertainment, or to spotlight various historical factoids for

random dates throughout the months of March and April. It is

not our intent to deliberately ignore any particular national or

religious holiday, or historical day of remembrance.


After years of ―Nothing Matters But Price‖ TV commercials

from GEICO and Progressive Direct, it‘s refreshing to see some

insurers focusing on coverage, not price. In a way, it‘s like a

public service announcement that, no, insurance is NOT a

commodity where the only difference is price. Kudos to

carriers like Farmers, Liberty Mutual and Allstate for providing

coverage-based claim scenarios that make this point.

HOWEVER…

One suggestion I have for many of these commercials is for

the advertising agencies and PR firms to clear their commercial

ideas with each carrier‘s claims department before investing

a lot of money in producing a commercial that might be

factually (from a coverage standpoint) inaccurate.

Take, for example, the Farmers gopher thief commercial (see

#1 at end of page for link). In this commercial, an amorous

gopher ―steals‖ a diamond ring to give to his burrow-mate.

According to the commercial, this was a real claim that was

paid on April 26, 2014. I have a copy of several Farmer‘s HO

policies. On a named perils basis, there is coverage for theft;

however, most courts have found that animals are incapable

of ―stealing‖ or vandalizing property…this usually involves

some sort of criminal mindset. On an open perils basis, the

policies I have exclude loss caused by ―rodents.‖

So, could the ring have been scheduled by endorsement?

Possibly, though the commercial doesn‘t say so, perhaps

implying that the unendorsed policy provides coverage. I

don‘t have a copy of whatever endorsement Farmers uses to

schedule jewelry, but if it‘s like ISO‘s HO 04 61 form, it likely

covers this since the only relevant exclusion for this type of

loss would be if the gopher is considered a ―vermin‖ and courts

have generally found that ―vermin‖ is an ambiguous term.

Two other Farmers commercials involve dogs, one where the

dog causes a fire (#2) and another where dogs flood the house

(#3) by turning on a sink faucet. The Farmers HO policies I

have exclude damage to the dwelling caused directly OR

INDIRECTLY by ―domestic animals‖ like dogs. In the fire

commercial, Standard Fire Policy states or those that follow the

proximate cause doctrine might statutorily impose coverage,

but it‘s possible that the exclusion could be enforceable in

other states. In the water damage commercial, the policy

excludes loss caused by ―domestic animals‖ but covers

accidental discharge for water from a plumbing system.

Covered? Probably but, even more to the point of this post,

almost certainly given that Farmers is on record that this type

of loss is covered.

One of the Allstate Mayhem commercials (#4) is based on a

sports referee trying to escape an angry mob by deliberately

driving through fences, shrubs, etc. Auto policies usually cover

accidents. Does this constitute an accident? Not from my

viewpoint, but the implication of the commercial is that

deliberately damaging property in your auto, perhaps

depending on the circumstances, is covered. On the other hand,

many of these commercials are based on scenarios that imply

that many policies wouldn‘t cover the damage but the reality is

that most would.

So, maybe carriers advertising coverage advantages should very

carefully vet the accuracy of their commercials. That being said,

I still say hats off to these carriers for making consumers aware

that there is more to their insurance purchasing decision than

just price.

Author: Bill Wilson, CPCU, ARM, AIM, AAM—Founder at

InsuranceCommentary.com. One of the premier insurance

educators in America on form, coverage, and technical issues;

Founder and director of the Big ―I‖ Virtual University; Retired

Assoc. VP of Education and Research from Independent

Insurance Agents & Brokers of America.

Commercial links:

#1—https://www.youtube.com/watch?v=FDzWJgyO0wM

#2—https://www.youtube.com/watch?v=BsdHsZpiWg8

#3—https://www.youtube.com/watch?v=AIy_ujPBRP8

#4—https://www.youtube.com/watch?v=HkLAL5vulS8

VIEWPOINT

http://www.InsuranceCommentary.com

https://www.youtube.com/watch?v=FDzWJgyO0wM

https://www.youtube.com/watch?v=BsdHsZpiWg8

https://www.youtube.com/watch?v=AIy_ujPBRP8

https://www.youtube.com/watch?v=HkLAL5vulS8


Author Foster Meharry Russell said, ―Every story has three sides

to it—yours, mine and the facts.‖

An errors & omissions claim against an agent can often devolve

into the agent‘s word against the client‘s. When a lawsuit

involves this type of ―swearing match,‖ getting the case

dismissed on a motion is usually not an option– and if it goes

to trial, it‘s up to a jury to decide who is telling the ―truth.‖

Unfortunately, many jurors don‘t like insurance companies—

or, by extension, insurance agents—and are more likely to side

with the claimant, who is just another person like them from

their hometown.

Your best weapon against this type of case: documentation of

the facts. Better still, if your agency has a Swiss Re Corporate

Solutions policy, proper documentation may serve as the basis

for up to a 100% reduction in the deductible under the new

policy.

The current Swiss Re policy includes a ―deductible reduction

provision‖ that gives the agency a 50% reduction of their

deductible up to a maximum of $12,500, in the event that the

agency ―generates and maintains contemporaneous written

documentation in the agency file of the refusal of any customer

to accept any type of coverage or limits recommendation

made‖ by the agency, and a subsequent claim alleges failure

to secure the recommended type of coverage or limit.

Under the new Swiss Re policies that will phase in this year,

the deductible reduction provision now gives agencies in

most states a 100% reduction in the deductible, up to a

maximum of $25,000. The same requirements apply.

As a Swiss Re policyholder, how can you secure this benefit?

The first best practice is to always send your clients something

in writing that outlines the quote and/or policy and clearly

states your recommendation that they consider ―the following

optional coverages and limits‖ along with the cost of those

coverages. Require your client to initial and sign any coverages

they reject.

Logistically, it is not always possible to get a signed rejection

of the coverages back from your client. For the purposes of

the deductible reduction provision, it is enough to have

documentation that you sent your client something in writing

that included your offer, and documentation that they rejected

the coverage. Note that this documentation must be

―contemporaneous,‖ meaning it either existed or occurred

during the same time period as the claim involving the

coverage or limit.

It‘s much easier to defend an E&O claim when you're armed

with undeniable facts, not just a memory of what took place.

Author: Caryn Mahoney—Assistant Vice President,

Claims Specialist with Swiss Re Corporate Solutions.

ISSUES AND INSIGHTS

How to avoid a ‘swearing match’ in E&O claims

ERRORS AND OMISSIONS


Cyber risk is increasing rapidly for everyone—and not just your

commercial lines clients (See #1 at conclusion of this article).

Although the insurance industry has been slow to respond

to cyber exposures in personal lines (#2), companies are

beginning to recognize the threat, particularly when it comes

to high net-worth insureds (#3) who make appealing targets for

hackers and other cybercriminals.

―Watch the space—I think you‘re going to start seeing some

responses in that area,‖ predicts Eric Cernak, vice president

for reinsurer Munich Re America. ―Traditional identity theft

insurance is already pretty commonplace for high net-worth

people, but what you‘re going to start seeing is more carriers

looking at a commercial lines cyber policy and saying, ‗What

might be transportable to personal lines?‘‖

Cernak expects coverage for extortion, data and systems

restoration and the like, with an initial emphasis on first-party

coverage. ―It‘s easier for people to grasp that exposure to

themselves than the third-party exposure,‖ he explains. ―And

there could be some confusion around the liability section of

homeowners or umbrella cover. Might some of this be already

picked up there? The industry still needs to work through that

part of it.‖

But until it does, individuals don‘t have to sit around waiting to

become victims—they can take matters into their own hands.

Right now, they probably just don‘t know they can. As smart

home technology (#4) continues to open up new doorways for

inviting cyber attacks, your personal lines clients may not even

be aware of their risk.

―People aren‘t thinking that their refrigerator is a computer,‖

Cernak points out. ―That‘s what it‘ll come down to—people

will have to start thinking about these things that they haven‘t

thought about in the same light as their traditional computing

devices.‖

―It actually takes a lot of doing,‖ says Jessica Groopman,

independent industry analyst and IoT adviser. ―The umbrella

step is to care. A lot of people don‘t, but it‘s because they

don‘t know to care.‖

That‘s where you come in. Encourage your high net-worth

clients to take these five steps right now to mitigate their

personal lines cyber risk.

1) Freeze your credit. If you won‘t be using your credit any

time in the near future, there‘s a process you can use to freeze

it temporarily (#5) so that no one can open up a new account

in your name.

―You have to actually write a letter to each credit bureau

individually, but all of them have forms on their websites,‖

explains Julie Conroy, research director at Aite Group. ―And

it‘s a pretty easy process to unfreeze it—it takes about 10 days,

and then once you‘re done buying a car or whatever you need

to do, you can just freeze it back up again. Especially for high

net-worth individuals, that‘s a really good practice because

they make such attractive targets.‖

Considering how many different companies, devices and

services we entrust with our personal financial data, ―the credit

freeze seals up one major exposure point,‖ Conroy adds.

2) Set the bar high. Cernak encourages consumers to be

selective about the smart home devices they purchase.

―You‘re probably better off with recognized brands that have

institutional power behind them,‖ he says. ―Start with a

company that‘s serious in this game and has the wherewithal

to stand by their product. If you‘re buying from a retailer, make

sure you‘re not buying from the discount rack.‖

And encourage your clients to demand more from product

and service providers. ―Put that security system provider

through their hoops to explain how they are protecting data,‖

Conroy suggests. ―Your layman person is probably not going

to understand whether or not that‘s adequate, but those

providers better at least have an answer. If they don‘t, that‘s

a red flag right there.‖

Continued on next page


―There‘s a lot to be said for the demand coming from

consumers to drive this,‖ Groopman agrees. ―A lot of the

manufacturers I talk to about this subject know it‘s important,

but frankly, consumers aren‘t asking for this. From a business

model standpoint, it‘s not a fire under them. Think about this

in your purchasing decisions, prioritize the vendors that are

talking about this and delivering this—the ones that are

proactive in how they communicate with you about it.‖

3) Don’t make it easy. Once they‘ve installed their smart

home devices, encourage clients to maintain them properly.

―Just like you would patch your operating system on your

desktop, a lot of these things are going to get firmware

patches sent to them,‖ Cernak points out. ―You need to keep

on top of that and make sure you‘re deploying safe firmware.‖

―Turning off unwanted features is a big thing, upgrading your

devices—very often, these kinds of upgrades have embedded

security augmentations into what will then be downloaded or

uploaded onto your device,‖ Groopman agrees.

When using public Wi-Fi, Cernak recommends using a virtual

private network (VPN), which ―helps protect you from the

bad guy who might be ‗surfing over your shoulder‘ in the

unsecured Wi-Fi area,‖ he says.

For example, ―if you‘re at Midway Airport and you connect

to freemidway.com, is that really the Midway Wi-Fi? Or is that

a bad guy putting out a signal, wanting you to connect so

they can see your traffic? That‘s unsecured and unencrypted,‖

Cernak explains. ―But if you were to log on and activate your

VPN before you do anything, you‘re creating a secure tunnel.‖

And as cyber attacks continue to increase in mobile

environments, ―make sure your smartphones and tablets at

a baseline have antivirus and malware software,‖ Conroy says.

―It‘s not 100% perfect, but it‘s better than nothing.‖

4) Practice good password hygiene. ―The first and easiest

way to protect yourself is to change your passwords,‖ says

Christie Alderman, vice president, client product and service

manager at Chubb. ―When you get a new device, if it allows

you to change the password, change it to something complex

using letters, numbers and special characters.‖

Keeping passwords sophisticated and updated shouldn‘t be

a one-time practice, either—―changing passwords regularly

is huge—changing passwords on multiple devices, and

having different passwords on multiple devices,‖ Groopman

adds.

And double up when possible: For all devices, ―If you can turn

on two-factor authentication—fingerprint and password or ID

and pin number or something else—turn it on,‖ Cernak advises.

―It‘s a little bit more cumbersome, it probably takes a minute

more to do something, but it‘s a lot more secure.‖

5) Don’t go overboard. As technology becomes more and

more integrated in every corner of life, ―it‘s probably a good

practice to step back and weigh the question: Does this device

bring enough convenience to my life that I‘m willing to give up

my privacy? That‘s a question all of us have to face,‖ Alderman

says.

Consider devices that let you know your plants need watering.

―Agents can be talking to their clients about whether that‘s

really relevant,‖ Alderman says. ―It‘s probably not something

customers have thought a lot about, and that certainly brings

value to that relationship from a risk management standpoint.‖

Remember: None of these measures are foolproof. ―If it‘s built

by a human, it can be hacked by a human,‖ Cernak says. ―None

of these things are going to keep you absolutely secure. But it‘s

all about raising the level effort that the bad guy has to take to

get to you.‖

Author: Jacquelyn Connelly—Senior

Editor for Independent Agents

magazine.

NOTE: Here are the numbered links

mentioned on the previous page.

#1:

http://www.iamagazine.com/strategies/read/2016/10/27/5-

misconceptions-small-businesses-have-about-cyber-risk

#2:

http://www.iamagazine.com/markets/read/2017/02/06/

vulnerable-and-oblivious-cyber-risk-in-high-net-worth-

personal-lines

#3:

http://www.iamagazine.com/magazine/read/2017/02/01/

serving-the-luxury-life-high-net-worth-market-update

#4:

http://www.iamagazine.com/markets/read/2017/02/13/works-

of-smarts-how-hackable-are-in-home-iot-systems

#5:

https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs

http://www.iamagazine.com/strategies/read/2016/10/27/5-misconceptions-small-businesses-have-about-cyber-risk

http://www.iamagazine.com/strategies/read/2016/10/27/5-misconceptions-small-businesses-have-about-cyber-risk

http://www.iamagazine.com/markets/read/2017/02/06/vulnerable-and-oblivious-cyber-risk-in-high-net-worth-personal-lines



http://www.iamagazine.com/magazine/read/2017/02/01/serving-the-luxury-life-high-net-worth-market-update

http://www.iamagazine.com/magazine/read/2017/02/01/serving-the-luxury-life-high-net-worth-market-update

http://www.iamagazine.com/markets/read/2017/02/13/works-of-smarts-how-hackable-are-in-home-iot-systems

http://www.iamagazine.com/markets/read/2017/02/13/works-of-smarts-how-hackable-are-in-home-iot-systems

https://www.consumer.ftc.gov/articles/0497-credit-freeze-faqs


Stephen Covey‘s popular book, ―The 7 Habits of Highly

Effective People,‖ has been a business and self-help go-to

for nearly three decades.

In a similar vein, I contacted several agency risk managers,

agency principals and Westport‘s panel defense counsel and

asked, ―What practices and procedures best serve an insurance

agency with respect to reducing or eliminating their errors &

omissions exposures?‖

Here are the five behaviors and habits I encountered most

frequently:

Culture. Agency principals and management shape every

corporate behavior by the type of culture they create and

nourish. The agency principals I spoke with emphasized

the importance of immediate and formalized training for

new employees, highlighting behaviors that are particularly

important to the agency. Continued employee training is

also crucial in order to keep staff abreast of new

developments and underscore appropriate risk

management practices.

One agency I spoke with holds weekly 30-minute seminars

on a variety of topics and involves employees and managers

in conducting them. Other successful agencies hold quarterly

meetings with employees to review work plans and discuss

various areas of concern and progress.

Documentation. Any professional liability claims handler

will affirm the importance of frequent and meaningful

documentation when it comes to defending an E&O claim.

The agencies I spoke with devote special attention to

documenting important conversations with their clients via

file notes, emails and letters. The application process is

particularly important—a careful review of all initial and

renewal applications for accurate information and necessary

signatures significantly reduces E&O exposure.

It‘s equally important for agency personnel to check and

double-check all correspondence—email, letters, file notes—

before sending and recording them. A good test: Think

about how the email or file note would look to an

independent party, several years down the road. In the

event of legal proceedings, most jurisdictions require

agencies to produce this file information.

Consider attaching a cover letter to any important documents

your agency sends to a client, and make sure to support all

offers to obtain higher limits or additional coverage with

thorough documentation. Similarly, document any customer

rejection of such an offer and communicate it to the customer.

Diary. The successful agencies I spoke with use effective and

efficient diary systems that enable monitoring and follow-up

on key documents, meetings, renewals, quotes applications

and more. This also includes diaries for management to

periodically review employee work and confirm adequate

coverage for employees while they are sick or on vacation.

Checklists and workflow. It is important to ensure consistency

in the way employees perform their jobs. A good checklist helps

provide direction.

Audits. A variety of parties can complete an audit, including

internal/quality managers, outside consultants and defense

counsel. Most of the agencies I spoke with combine periodic

internal audit procedures with independent external audit

procedures. The key is to make sure additional people review

processes and workflow, and to have at least one independent

set of eyes review agency practices and procedures.

The most successful agencies take risk management very

seriously. That means creating and nurturing a highly effective

company culture that expects buy-in from everyone, top to

bottom.

Author: Brian Butcher—Vice President and Claim

Expert at Swiss Re Corporate Solutions.


A $30-million wine collection. A $100-million jewelry

collection. A $1-billion art collection. A privately owned

rocket launch. A mansion that needs to be moved 600 yards

in the wake of a hurricane.

These outside-the-box exposures are just a few real-life

examples of the unique risks that abound in the high

net-worth insurance market.

Since the 2008 economic recession, ―high net-worth clients

and the segment in general have rebounded well,‖ says Jerry

Hourihan, president of AIG‘s Private Client Group. ―If you look

at the composite annual growth rate of ultra-high net-worth

individuals globally and in the U.S., it‘s grown by almost

double digits since 2008. It‘s a $30- to $40-billion premium

segment, and it‘s growing every year.‖

―We had one agency tell us that while high net-worth only

represented 10% of their volume, it represented 20% of their

margin,‖ agrees Will Van Den Heuvel, senior vice president of

personal lines at Cincinnati Insurance. ―The eye opener for a

lot of agents is as they look at their books of business and

segment their margins, they realize in a soft commercial market,

high net-worth personal lines can be a growing space—and the

margins can be significantly better than commercial lines.‖

Whether your agency already has a high net-worth book of

business and wants to expand its footprint, or you‘re eyeing

this segment as a potential growth opportunity, here‘s what

you need to know about the space in order to succeed there

in 2017.

The Consequences of Consolidation

The elephant in the high net-worth room is ACE‘s acquisition

of Allianz/Fireman‘s Fund‘s personal lines book in 2015 and

Chubb in 2016. And while Hourihan points out that

consolidation has created challenges for agents, whom he

says have been ―put at the back of the bus‖ in some respects

as carriers become more internally focused, consolidation

has also opened up a whole new world of possibilities.

Although some agents were concerned that the three-way

consolidation would lead to too many eggs in one basket,

the acquisitions have ultimately resulted in more options for

consumers as companies that previously had no interest in the

segment—Ironshore, Berkley, QBE, National General and even

Travelers, to name a few—are now eyeing it as an opportunity

for growth.

―With three leading high net-worth companies coming

together, we‘ve seen a number of competitors or soon-to-be

competitors announce that they‘re entering the high net-worth

space,‖ points out Scott Gunter, COO of Chubb Personal Risk

Services North America. ―And from a competition standpoint,

we welcome that, because it really helps keep us focused on

the customer and the agent and driving innovation. The more

carriers come into the space, the more opportunity everyone

has to innovate.‖

―From a carrier perspective, there‘s been a lot of innovative

products and services in order for them to stay relevant and

competitive,‖ agrees Lisa Lindsay, executive director, trustee

and founding member of the Private Risk Management

Association, an independent association committed to the

promotion and advancement of the high net-worth insurance

industry. ―With the consolidation, everyone wants to be assured

that this type of innovation will continue—that no carrier‘s

going to say, ‗We don‘t have to do that, because there aren‘t

too many choices.‘‖

That‘s a given for the new Chubb, which Gunter says now has

a ―tremendous opportunity‖ to deliver better, more tailored

solutions for high net-worth clients. ―Each company has

unique strengths,‖ he says. ―How do we extract those

strengths, keeping the best of each, so that the agents and

clients are getting the best of the three? That‘s been our

mission right from day one.‖

The same perspective applies to every new competitor. ―With

consolidation comes different value propositions for different

companies,‖ Van Den Heuvel points out. ―Some focus on

different price points, some focus on capacity, some focus on

agency strategies, coverage differences, client experiences—I

think it‘s good for the marketplace. Customers in this space

need choice and flexibility, they want it at a competitive price

and they want great service.‖

Passion Plays

If that‘s what you‘re aiming to provide, remember that the

recession hit many wealthy insureds hard—and transformed

their approach to financial security in the process. ―People

were not really happy with the performance of their bond


portfolios or their stock market investments,‖ Gunter says.

―So what they were able to do is turn around and say, ‗I‘ve

got a passion for collecting, and I‘m able to use that as an

investment tool.‘‖

In the post-recession world, ―there‘s definitely been a flight

to passion investments,‖ Hourihan agrees. ―As the other

investment options flattened out, people are absolutely

spending more of their investment dollars on art, jewelry,

antique cars, and we saw that in our collections portfolio.

That segment of our business is growing faster than any

other part.‖

In the past, most carriers would consider these hobbies.

But now, ―what we‘re seeing is that people are investing

in art and wine and those types of things, and they‘re looking

at it as an asset class,‖ Lindsay says. ―They‘re saying, ‗I have

this wine collection, and I want to understand how my wine

can depreciate.‘‖

And that‘s another post-recession trend sweeping high

net-worth insureds: They want to get their arms around

their risk. ―In the old days, everyone said, ‗Just place my

policy—I‘m not going to worry about it,‘‖ Gunter says.

―Now, everybody says, ‗I need to understand—how do I

prevent losses? Give me advice on that.‘ That‘s the dynamic

shift we‘re seeing from a service standpoint, and it‘s very

dramatic.‖

―They‘re moving away from that laissez-fare attitude of, ‗I‘ve

got my agent looking after me—I don‘t have to think about

my insurance,‘‖ Gunter adds. ―They want to be more involved

in the insurance conversation. It‘s not just about buying a

policy—it‘s about understanding the whole universe of my life,

and then what do I need from a risk mitigation standpoint?‖

Lindsay agrees that the silver lining of the recession was that

it made high net-worth clients smarter. ―The recession made

them step back a little bit,‖ she says. ―Now, we have smart

consumers who really want to understand value and make

sure they‘re covered.‖

Pricing Trends

You should also expect that they‘ll want to understand what

they‘ll be paying for it. Like agent commissions [see sidebar],

pricing in the high net-worth segment is currently ―all over

the map,‖ Hourihan says.

―Most new entrants are really burning into the market—

they‘re anywhere from 20–50% below AIG in pricing. That

might be good for one year, but what I‘ve seen happen over

my time in the business is that‘s just not sustainable,‖

Hourihan points out. ―They either end up getting out of the

business or pushing through significant rate increases that

are very difficult for agents and brokers.‖

Across the market, heading into 2017, ―I think the reality is

pricing probably goes up a little bit, maybe 0–5%, somewhere

in that range,‖ predicts Ross Buchmueller, CEO of the PURE

Group. ―It will maybe be higher in some cases—parts of the

central part of the country where hail has been a considerable

source of claims over the last couple of years, or the cold

weather in the Northeast.‖

―The same trends you‘ve been reading about for the overall

industry affect the high net-worth industry,‖ Van Den Heuvel

adds. ―People are driving more, fatalities are up, severity is

way up in a lot of cases, so I do expect rates overall for high

net-worth to be accelerating to keep up with trends.‖

Author: Jacquelyn Connelly—Senior Editor for

Independent Agents magazine.

The Compensation Question One consequence of consolidation is high net-worth carriers treating their distribution force extra nice—perhaps, some are concerned, at the expense of the end consumer. Agent commission rates are public data, and they’re currently incredibly inconsistent in the high net-worth space, running as low as 10% and as high as 27%. “If you make a conscious decision to serve wealthy people and say they are the most discriminating, service-demanding, sophisticated consumer out there, for companies to go in and tell agents, ‘I want your independent advocacy, but I’m going to pay you 27% so you will steer it to me regardless of what my virtues are’—that’s a collective action to ignore the consumer and to try to influence the brokerage community,” suggests Ross Buchmueller, CEO of the PURE Group. “The balance is important,” says Jerry Hourihan, president of AIG’s Private Client Group. “We want to maintain competitive pricing, and we also want to reward agents who are investing in this business. This is not the kind of business where you’re going to be in the black overnight. If agents are hiring producers and spending time on educating their existing staff, that takes a few years’ time, so they do need to get a fair amount of commission to be able to support that kind of activity.” The situation puts some agents in between a rock and a hard place, because “no broker created this problem,” Buchmueller points out. “No broker said, ‘Please create a conflict for me by forcing me to make a decision to do this.’ If somebody says they’re going to pay you more money, you don’t say, ‘No, please, don’t pay me more money.’ What ends up happening then is if you have somebody paying 14% and somebody paying 18% and somebody paying 20% and somebody paying 30%, when the industry average is 12% and the brokerage community already has huge margins on this business—you want to talk about an industry ripe for disruption?” Over time, “the lasting success of this category will be determined by how well we serve consumers,” Buchmueller says. “If we are absolutely obsessing over delivering great service, I think we become more valuable to the independent broker who, given a choice between a carrier that serves their clients better than anybody else vs. one that serves the agent better than anybody else, will elect the person who delivers the best experience to their clients.” —J.C.


Eva Christian refuses to give up, having tried every legal

avenue including the state Supreme Court to reduce her

nine-year sentence for torching her

Dayton, Ohio, restaurant and

faking a home burglary for

insurance. Now Christian is back

in a state appeals court for another

go. Christian burned up her Cena

Brazilian Steakhouse and staged a home burglary for insurance

payouts. Her eatery was failing and she had piled up $2.7

million in debt. Three family members removed TVs, computers,

jewelry, purses, rare coins, and cash from her home. Christian

filed a claim and Cincinnati Insurance paid nearly $52,000.

Family members stored the items for several weeks then

returned the goods to Christian. She has already served four

years, and could be deported to her native Germany after

finishing her jail term.

Lasandra Laverne Edwards’ bankruptcy and claim figures

did not add up, spelling an insurance-fraud conviction for

inflating a fire-damage claim. The Monroe, Louisiana, woman‘s

bankruptcy filing valued her furniture and clothing at $1,000.

She then bought a renter policy valuing her assets at more

than $100,000. Edwards‘ house later burned down. Edwards

reaffirmed her $1,000 furniture and clothing value at a

creditors‘ hearing yet the next day she claimed ruined

possessions worth $116,063 with State Farm. Edwards faces

up to 20 years in federal prison when sentenced June 1.

Agent Todd Jeremy Fendler stole client bank account info

and used the data to write checks in their names, feds allege in

Illinois. The Rockford man ran several agencies in Northern

Illinois. He took the banking info of businesses and consumers

who applied for coverage. One check was for $1,447 from the

bank account of the Hollywood Wax Museum, and $5,205 was

drawn upon the account of the Beer Haus. Fendler also

electronically debited funds from client accounts — even when

premiums were paid up or the policy cancelled. He overcharged

clients and did not send premium payments to insurers as well.

The Illinois and Missouri insurance departments earlier yanked

Fender‘s licenses so he falsely applied for a non-resident license

for Surplus Market Solutions. He used the name and license

number of a former agent. Fender must contend with several

federal felonies, each with a 20-year max jail sentence.

A spine-jarring moment for Scott Young, it seemed. Two

people entered his Rooster Wines and Liquors in the Hartford,

Connecticut area. One person brandished a gun and took a

large sum of cash, Young said.

They set the place on fire and

fled out the back. Young crashed through a front window to

escape the flames, he claimed. Police found a racial slur and

two swastikas painted on the rear door. The hate crime and

robbery were cover-ups, investigators say. Young allegedly set

his store on fire for an insurance score, inventing the invasion

to distract investigators. He is charged with insurance fraud,

arson, and other crimes.

A fire fighter suffered burns to his shoulder and hand while

battling a flaming home. Jamat Manzoor set the home afire for

an insurance score near Harrisburg, Pennsylvania. Now he will

serve up to 11 years in state prison. He sloshed gasoline around

the house to start the fire and it was discovered on his pants.

Manzoor‘s home door key was found in the wreckage. The

blaze spread much faster than he expected so he fled the

burning building without his key. That was, well, key evidence

against him. In addition to jail, Manzoor must repay $117,670.

His Corvette and rental properties in two counties also were

seized.

Cutting up patients with botched spinal surgeries earned

a neuro doctor nearly 20 years in federal prison to correct his

technique. Dr. Aria Sabit launched a $2.8-million insurance

scam. The Detroit-area doctor promised to insert implants to

help stabilize patient spines, reduce their pain, and allow them

to live happier lives. Many trusting patients generally did not

need the invasive life-altering implants. Sometimes he sliced

open patients and sewed them up making zero repairs. Sabit

created a fantasy world of counterfeit surgical records to back

up his fraudulent insurance billings. Tonocca Scott languished

with painful bulging discs from working at a car wash. Sabit

cut him open and claimed he performed a spinal fusion. Scott

remained in pain so Sabit prescribed painkillers, yet his

recovery stalled. In fact Sabit never did the fusion, opening

Scott up twice just for insurance money. Scott suffered from

chronic discomfort, could sit for only a few minutes, wears a

back brace with a DVD case taped inside to keep his spine

straight, and is worried he will need yet more surgery.

To learn more about insurance fraud and simultaneously earn CE credits, visit the Big ”I” VU Fraud Training Center for on-line courses, resources and daily news. Go to: http://bigivu.learn.com/learncenter.asp?id=178517&sessionid=3-C4545B89-01C7-4250-924D-0997061E2CAE&page=6.

http://bigivu.learn.com/learncenter.asp?id=178517&sessionid=3-C4545B89-01C7-4250-924D-0997061E2CAE&page=6




Continued from front page

The Independent Insurance Agents & Brokers of America

(IIABA or the Big ―I‖) applauded Senators Dean Heller

(Republican-Nevada) and Jon Tester (Democrat-Montana)

and Representatives Dennis Ross (Republican-Florida) and

Kathy Castor (Democrat-Florida) for introducing the ―Flood

Insurance Market Parity and Modernization Act.‖ This

legislation allows for private flood insurance to satisfy

National Flood Insurance Program (NFIP) continuous

coverage requirements; meaning that policyholders can

obtain NFIP coverage without losing their grandfathered

status if they leave the program, obtain coverage in the

private market, and later find that this new coverage no

longer meets their needs.

‖The Big ‗I‘ thanks Senators Heller and Tester and

Representatives Ross and Castor for introducing this

important legislation that clarifies that having an active

flood insurance policy, whether through the NFIP or through

the private market, should be considered continuous

coverage for purposes of NFIP rating requirements,‖ says

Charles Symington, Big ―I‖ senior vice president of external

and government affairs. ―The Big ‗I‘ supports the gradual

development of a private market as a complement to the NFIP,

and this legislation is of vital importance to that goal.‖

The bill also clarifies that a private flood policy can satisfy the

mandatory purchase requirement for flood insurance and gives

state insurance regulators the authority to determine what is

―acceptable‖ private market flood insurance.

―The Big ‗I‘ supports a reformed NFIP and slowly increasing

private market involvement; however, absent a viable private

market alternative for policyholders, the association will

continue to advocate for a timely reauthorization of the NFIP

ahead of its expiration on Sept. 30, 2017,‖ continues Symington.

―The Big ‗I‘ is also working to ensure that any changes to the

NFIP recognize the important role of agents in helping

consumers make informed decisions about the purchase of

NFIP policies for their homes and businesses.‖

Article provided by: Margarita Tapia—IIABA

Director of Public Affairs

Legislation would ensure private policies satisfy NFIP continuous coverage requirements

These five words take away the argument that a form was shoved in front of them and they just signed it.

In the case of the UM/UIM, you must still use the company filed, approved UM/UIM rejection form. The difference is that when

they sign it, in the margin below the signature YOU will ask the applicant/insured to write these 5 words – REJECTING AGAINST

ADVICE OF AGENT. If you are using an electronic signature service, ask that a text box be added in the margin and the insured/

applicant will type in the 5 words and then initial.

Will this solve all of your problems? Probably not, but it will build a defendable file for you so that if an E&O issue comes

up, we will have a solid defense due to the procedures that you have in place for ALL staff to follow.

Author: Joni Fairbrother, CIC, RPLU—IIABAZ Assistant Vice President and E&O Department Manager

Barbara Neumann: 1954—2017

Barbara passed away on February 3, 2017 at her home in Phoenix, after a long fight with

Multiple System Atrophy at the age of 62. Barbara was born September 4, 1954 and grew

up in Phoenix. She spent her working career in the insurance industry, where she retired as

an executive of CBIC. During her career, Barbara taught commercial lines based ITEC and

CISR classes for IIABAZ for many years. She led a wonderful life, traveling the world, SCUBA

diving, fly fishing, hiking, skiing and flying. She will definitely be missed. Rest In Peace.


―Is employers liability coverage important? Our

state allow corporate officers to opt out of workers

Compensation and employers liability separately.

What do they give up if they opt out of employers

liability in addition to workers comp?‖

―Employers liability coverage fills the gap between

the workers comp policy and the commercial

general liability policy.

Liability for employee injuries is essentially totally excluded

under the CGL policy, with few exceptions, including third-

party-over claims resulting from contractual risk transfer.

Workers comp covers medical, indemnity and other expenses

to and for the benefit of the injured employee only—provided

the injury arose out of and occurred during the course and

scope of employment. No one other than the employee

receives payment or the benefit of payment under workers

comp, except when the death benefit goes to the family.

Employers liability coverage fills the gap between workers

comp and CGL coverages, providing a source of funds for a

person or entity injured– financially or literally– due to an

injury to an employee. Employers liability also covers a

workers when they sustain injuries as a consumer rather

than just an employee.

Employers liability covers four types of loss costs:

1) Third-party-over actions: Not to be confused with the

third-party-over action covered by the CGL policy, third-party-

over coverage in employers liability protects the employer

against the legal liability assigned to it as a result of an outside

party suffering financial injury arising out of injury to the

employee. In simpler terms, an employee sues someone as

a result of an injury; during and after the suit, it comes to light

that the employer was somehow negligent and not the third

party; the claim is turned over to the employer under employers

liability.

2) Loss of consortium: Also know as loss of family services,

this refers to when an employee is injured and the family still

suffers financial injury even though workers comp pays medical

and indemnity costs. They still have to mow the lawn, clean the

house, drive the kids around, and may need to hire these

services out. Employers liability covers these increased costs.

3) Consequential bodily injury: For example, one spouse

brings a work-related disease home, and someone in the family

contracts the disease.

4) Dual capacity actions: If an employee is injured by a

product their employer manufactured, the employee may have

a cause of action outside that granted them as an employee—

they have rights as a consumer. The classic example is a tire

manufacturer delivery driver who is injured by a tire exploding

while they are filling it with air. The tire was manufactured by

the employer, and the employee has coverage under workers

comp as a compensable injury. But the employee has also

suffered an injury to which a consumer would be exposed, and

therefore holds two positions in the claim. Employers liability

covers their position as a consumer.

One caveat to employers liability: The employer must be legally

liable for causing the injury to the outside party, or employee in

a dual capacity situation. While workers comp does not require

fault, employers liability is more like CGL, requiring that the

employer be proven negligent in causing the injury to the

employee that led to financial loss for an outside party.

That‘s what an insured surrenders when they reject employers

liability coverage—it‘s not a loss of protection for the

employee, but rather the employer.‖

Author: Chris Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA,

CWCA, CRIS, AINS—Director Big ―I‖ Virtual University.

Author: Chris Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS

TO SUBMIT A QUESTION TO THE ASK

AN EXPERT SERVICE, PLEASE VISIT: http://www.independentagent.com/

Education/VU/AskanExpert/default.aspx

Questions fr

om

the Big “I”

Virtual University

’s

Ask an Expert Service

http://www.independentagent.com/Education/VU/AskanExpert/default.aspx

http://www.independentagent.com/Education/VU/AskanExpert/default.aspx


From the IIABA staff


by Steve Anderson http://techtips.steveanderson.com/

Telephone technology is developing new capabilities as

rapidly as other kinds of technology today. I find that many

organizations do not consider their telephone system as

important as other technology platforms used in their

organizations.

This could be a mistake.

Even with all the digital communication options available,

many people still rely on a personal phone call to get things

done. Modern telephone systems can provide tremendous

advantages to an agency that will help them streamline their

internal workflows.

This TechTip was prompted because of an increase in the

number of questions I am receiving about the advisability

of recording all inbound and outbound phone calls within

an agency. Recording all phone calls could be a very good

idea that would save a tremendous amount of time by

reducing the amount of typing necessary to document

phone calls into the client file.

I recently received an email from Ed Higgins at Thousand

Islands Agency stating,

“We also just implemented blueC integrated call recording

software and have discovered a lot more wasted time.

“The system is expensive, but we expect it to pay for itself

solely in providing guidance/counseling for better customer

service on a daily basis; identifying the clearly wasted time

on personal calls is an ancillary benefit. The unfortunate

reality is that the larger an agency becomes, the more

standardized procedures and systems, and general

personnel policies have to become.”

Ed is correct. Standardizing policies and procedures within

your organization is one of the biggest issues managers face to

make sure clients consistently receive a great experience.

You can watch a blueC blueButler demo video here:

https://youtu.be/d8EjEBeqwJ8.

I have not done a deep dive review for the blueButler platform,

nor have I done a comprehensive review of other options that

are available. I will take a deeper look in the future.

My purpose is simply to highlight this as an area for you to put

on your ―we should look at this‖ list.

I have been a bit concerned about whether E&O underwriters

would consider phone call recordings as appropriate client

documentation. Recently, I asked both an E&O consultant as

well as an E&O attorney about this concern. They both

indicated they did not see an inherent problem with using

phone call recordings as the primary documentation.

If your phone system supports recording all inbound and

outbound phone calls, or you are considering replacing your

old system with a new telephone system, here are a few

suggestions for transitioning to phone call recordings as

client documentation:

How To Save Time By Recording

Client Phone Calls


http://techtips.steveanderson.com/

https://youtu.be/d8EjEBeqwJ8


THE ITEC COMMITMENT

It‘s Spring Time! You know what that means! Baseball season

is just around the corner. Cactus League games are underway

all over the valley. When I was a kid, games were also played

in Yuma and Tucson, but those days appear to be over. All

games are in the greater Phoenix Metro area these days.

You know what isn‘t over? ITEC‘s Commitment to bringing

you big league insurance education, and mixing in some fun

and entertainment while we‘re at it. 2017 is our third year in

presenting home run topics prior to an exciting major league

game at Chase Field. The first opportunity is a brilliant two

hour seminar titled, ―The Risk Management Process for the

21st Century.―

You are invited to the Diamondbacks‘ Executive Board Room

inside the ballpark on Friday, April 7th from 4:00—6:00 PM.

First pitch against the AL Champion Cleveland Indians is set

for 6:40 PM. Fireworks follow the ballgame. Tickets are $30.

Two hours of CE credit is also included. This deal is a steal!

To access a fillable PDF, please go to:

http://www.iiabaz.com/Education/SiteAssets/Pages/FindClass/

default/Risk%20Management%20Process%20at%

20CHASE.pdf. Completed forms go to [email protected]. All

staff can get tickets at the $30 member price. Additional seats

for the game can be purchased at the same price for friends

and family who don‘t attend the seminar. May 12th will be

our next event at Chase. I‘ll see you at the ballpark!

Make sure you fully understand the capabilities of your

phone system. How does the recording process work?

Where are the audio files physically stored? Are they

attached to the agency management system client file?

If not, how are those files backed up?

Provide additional training for your staff. The potential

downside of recording all phone calls is that what your

employees might say something to the client you don't

want recorded. There may be some situations where you

do not want what the CSR said as part of your

documentation! Providing additional training for all staff

on proper telephone etiquette could go a long way to

help prevent any embarrassing moments.

Check with your E&O underwriter. It would be prudent

to check with your E&O carrier for their input on how you

propose to change how you document client phone calls.

Include customer service phone call reviews. As Higgins

indicated above, one of the benefits of recording all phone

calls is the training that can take place to either streamline

the conversation or enhance the client experience.

The technology to record phone calls has become

commonplace. Adding phone call recording capability could

be a great enhancement to your organization that would

improve customer service and, at the same time, provide

productivity improvements.

Are you currently recording all inbound and outbound phone

calls? If so, how well does the process work? Any pushback

from clients or staff? Let me know by visiting

https://steveanderson.com/2017/02/23/how-to-save-time-

recording-client-phone-calls.

Article reprinted with kind permission by the author.

Author: Steve Anderson, CIC—Executive Editor of

The Anderson Report, and a National CIC Faculty member.

Continued from previous page

Author: Ray A. Garcia, CIC, CISR—Education Coordinator

http://www.iiabaz.com/Education/SiteAssets/Pages/FindClass/default/Risk%20Management%20Process%20at%20CHASE.pdf



mailto:[email protected]

https://steveanderson.com/2017/02/23/how-to-save-time-recording-client-phone-calls

https://steveanderson.com/2017/02/23/how-to-save-time-recording-client-phone-calls


Draft legislative language that would repeal the Affordable

Care Act (ACA) was leaked in late February. House Republicans

wrote the language, which is the first glimpse of efforts to

repeal and replace the ACA.

This legislation, expected to begin moving through the

committee process as early as March 6th, would dispose of

most of the ACA, including its subsidies and its Medicaid

expansion. In place of the ACA subsidies, the draft legislation

would provide tax credits based on age. The legislation would

also repeal the individual mandate as well as all of the ACA‘s

tax provisions, including the ―Cadillac‖ tax.

In order to pay for parts of this new health care plan,

Republicans would replace the ―Cadillac‖ tax by capping the

employee tax exemption for employer-sponsored health

insurance at the 90th

percentile of current premiums. That

means benefits above the capped level would be taxed.

Capping this exemption is a direct tax increase on employees

and their health care. The Big ―I‖ believes that doing so will

increase health care costs for millions of Americans and

increase the number of uninsured people.

The employer-sponsored health care system is stable, efficient

and effective in covering more than 177 million Americans—

leading to better health outcomes, lower costs and more

satisfied employees. Employers are the foundation of a health

care system that provides quality health coverage, and this

coverage should be the basis of any health care reform

solution.

As Congress seeks to stabilize the individual market, the Big ―I‖

believes it should avoid destabilizing the employer-sponsored

system which covers 10 times more Americans.

Author: Wyatt Stewart—IIABA Senior Director of

Federal Government Affairs

NEWS FROM CAPITOL HILL

The U.S. Department of Labor (DOL) released a

proposal to delay (link #1 is at the end of this article)

implementation of the fiduciary rule for 60 days. The rule

was scheduled to start taking effect on April 10; under the

proposal, it would not take effect until June 9.

The fiduciary rule is a federal regulation that tightens conflict

of interest rules under the Employee Retirement Income

Security Act (ERISA), and requires insurance agents and brokers

who give guidance about certain retirement investments to

adhere to a fiduciary standard of care.

The proposal to delay the rule is a response to a memorandum

President Trump issued in early February, directing the DOL to

review the rule to ―determine whether it may adversely affect

the ability of Americans to gain access to retirement

information and financial advice.‖ The proposed delay is

intended to give the DOL more time to perform this review.

If the DOL determines that the rule will adversely impact

retirement savers, it will likely publish a notice to rescind,

amend or further delay the rule.

The Big ―I‖ supports delaying and reviewing the fiduciary rule

and will submit comments to the DOL during the 15-day notice

and comment period for the delay. Once the comment period

closes, the DOL will likely issue a final rule to make the delay

official.

In addition to the proposed delay, the DOL is also seeking

comments regarding questions raised in the President‘s

February memorandum, and questions of law and policy

concerning the fiduciary rule. These comments are due in April.

Previously, the Big ―I‖ submitted comments (#2) to the DOL on

a proposal to give insurance marketing organizations (IMOs)

more flexibility under the fiduciary rule. In the proposal, the Big

―I‖ urged the DOL to delay the fiduciary rule as well as the IMO

proposal.

#1:

https://s3.amazonaws.com/public-

inspection.federalregister.gov/2017-04096.pdf

#2:

http://www.iamagazine.com/docs/default-source/Legislative-

Activity/iiaba-imo-exception-comment-letter-feb-2017.pdf?

sfvrsn=0

Author: Jennifer Webb—IIABA Federal Government

Affairs Counsel

https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-04096.pdf

https://s3.amazonaws.com/public-inspection.federalregister.gov/2017-04096.pdf

http://www.iamagazine.com/docs/default-source/Legislative-Activity/iiaba-imo-exception-comment-letter-feb-2017.pdf?sfvrsn=0




Copyright © IIABAZ

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CIC James K. Ruble Graduate Seminars—$430.00

March 21 Surplus Lines: A Market for Challenging Risks—FREE Tucson

March 21 CISR Insuring Personal Residential Seminar Phoenix

March 22 CISR Insuring Personal Lines Miscellaneous Seminar Phoenix

March 23 CISR Insuring Personal Automobile Seminar Phoenix

March 30 CISR Insuring Personal Automobile Seminar Flagstaff

April 5 CISR Insuring Commercial Casualty I Seminar Phoenix

April 7 ITEC Seminar #1—Risk Mgmt Seminar (Indians) Chase Field

April 12-14 CIC Commercial Casualty Institute Tempe

April 19 CISR William T. Hold Commercial Lines Seminar Phoenix

April 20 CISR Insuring Commercial Casualty II Seminar Tucson

April 20 ITEC Ethical Terms/The Dumb Things We Do—FREE Phoenix

April 25 CRIS Contractual Risk Transfer in Construction Phoenix

April 26 CISR Insuring Commercial Casualty I Seminar Gilbert

May 3 CISR Agency Operations Seminar Phoenix

May 9 ITEC E&O: Roadmap to Policy Analysis—FREE Phoenix

May 10 ITEC E&O: Roadmap to Policy Analysis—FREE Tucson

May 12 ITEC Ethical Terms/The Dumb Things We Do—FREE Gilbert

May 12 ITEC Seminar #2—Topic to be Determined (Pirates) Chase Field

May 16 CISR Elements of Risk Management Seminar Phoenix

May 17 CISR Agency Operations Seminar Lake Havasu

June 6 CISR William T. Hold Personal Lines Seminar Phoenix

June 8 CISR Life & Health Essentials Seminar Phoenix

June 14-16 CIC Life & Health Institute Tempe

July 11 CISR Insuring Commercial Property Seminar Phoenix

[email protected] (602) 956-1851


Q: ―How many clients and policies should a personal lines CSR

handle?‖

Response 1: ―Unfortunately, there is no easy answer to this

question. It depends on the types of clients and policies

the CSR is handling. If they are largely direct-bill, automatic

renewal policies, then the CSR could probably handle a

substantial number and commission amount. But if they‘re

working with a lot of complex, agency-bill policies, then the

number should probably be much smaller—and even lower

if a lot of renewal remarketing is involved.

I recommend checking out the latest Big ―I‖ Best Practices

Study (See link #1 at end of this article) as a starting point.

The study provides averages by agency size, so it's a good way

to open the discussion before getting down to the specifics.‖

Response 2: ―Because fewer agencies are participating in

surveys, such specific metrics are no longer readily

available. One helpful survey might be the Growth and

Performance Standards Study (see #2) by The National

Alliance for Insurance Education & Research. However, keep

in mind that no survey shows what a CSR should be able to

handle. All such surveys are simply averages—the answer

isn‘t black and white.‖

Response 3: ―Personal lines productivity depends on the level

of automation in an agency. We have CSRs in fully automated

agencies with no files that handle 1,500 customers with an

average of 1.3 policies per account. We also have manually

driven agencies in which personal lines CSRs can handle only

800 clients.

Another issue is whether the CSR handles quotes or claims, or

if another department or person handles these tasks, which

would further enhance productivity.

The best measure is not industry averages, but information

about the historical performance of an agency, with goals of

5% annual productivity increases through more effective

procedures and processes.‖

Response 4: ―There‘s no magic number. It‘s undeniably easier

to benchmark personal lines CSRs than commercial ones, since

personal lines accounts are typically more similar in size and

amount of service required.

One source of information is publications from the National

Alliance for Insurance Education & Research (#3). Two books

may be helpful: ‗CSR Profile and Growth‘ and ‗Performance

Standards.‘ The authors break down this question by

geography and agency size. Another source is independent

consultants, such as MarshBerry or others that work on

benchmarking. A free benchmarking tool (#4) is available

through Agency Consulting Group.

That said, here is my personal opinion: What CSRs do can

varies dramatically from one agency to the next. Most

benchmarking tools do not weigh all the variables, including:

Are the CSRs required to do all new business sales? Or are

there separate personal lines producers?

Are CSRs required to cross sell and meet account rounding

goals?

Is any of the book serviced by a carrier service center?

Are CSRs involved in taking, reporting or following up on

claims? Or are customers encouraged to report claims

directly to the carrier?

Does the agency use a dependable comparative rating

system?

Does the department still maintain customer files?

Does the department maximize downloading and real-time

capabilities?

Are the accounts rounded with three or more policies per

account?

Is the book of business somewhat standard? Or does the

agency specialize, such as in high net-worth clients?

When I consult with agency clients, I apply some

benchmarking—and some common sense. Many years ago

when I was a personal lines manager, my selling CSRs were

required to sell, handle claims, keep paper files up to date, keep

the agency management system up to date and keep the

carrier's system up to date. In other words, they‘d do the work

three times because there were no downloading or real time

capabilities. Each CSR handled approximately 1,000

accounts. That makes most current benchmarking standards

look pretty conservative.


There's no easy answer. Start by comparing your agency's workflow to others of the same size.

How Much Should a Personal Lines CSR Handle?


Remember: You might be looking for an average number,

but do you really want your staff to be just average? My rule

of thumb: A personal lines CSR should be able to handle 1,000

average accounts or more, depending on the aforementioned

variables.‖

Author: The Big ―I‖ Virtual University Faculty

This question was originally submitted by an agent through

the Big ―I‖ Virtual University‘s Ask an Expert Service. You can

access the Virtual University website page here:

http://www.independentagent.com/Education/VU/AskanExpert/

Ask-Question/home.aspx

Answers to other coverage questions are available on the VU

website. If you need help accessing the website, email

[email protected] to request login information.

#1:

http://www.independentagent.com/Resources/

AgencyManagement/BestPractices/Pages/default.aspx

#2:

http://www.scic.com/store/publications/growth-and-

performance-standards.html

#3:

http://www.scic.com/store/publications.html

#4:

http://www.agencyconsulting.com/benchmarking.asp?linkID=9

http://www.independentagent.com/Education/VU/AskanExpert/Ask-Question/home.aspx

http://www.independentagent.com/Education/VU/AskanExpert/Ask-Question/home.aspx

mailto:[email protected]

http://www.independentagent.com/Resources/AgencyManagement/BestPractices/Pages/default.aspx

http://www.independentagent.com/Resources/AgencyManagement/BestPractices/Pages/default.aspx

http://www.scic.com/store/publications/growth-and-performance-standards.html

http://www.scic.com/store/publications/growth-and-performance-standards.html

http://www.scic.com/store/publications.html

http://www.agencyconsulting.com/benchmarking.asp?linkID=9


When it comes to marketing life insurance and other financial

services and products, you‘d probably say it‘s not an easy sale

for two primary reasons.

The first is low financial literacy. Most people incorrectly

assume that Social Security always provides a surviving spouse

with monthly income regardless of their age, and that Medicare

provides long-term care (LTC).

The second is procrastination. People know they need to

address the risk of a premature death or disability, but they

don‘t feel the urgency to take action.

But there‘s also a third reason you might not be selling more

life and disability insurance: Your Property & Casualty clients

don‘t know you offer those products, because they perceive

your agency‘s focus to be personal and commercial lines, not

Life & Health.

These common misconceptions make it critical to leverage

technology and data to remind your clients not only of their

financial exposure to life‘s many perils, but also that as an

agent, you can provide peace of mind by addressing them.

Urgency is often a key ingredient when making any sale. Take

advantage of your agency management system and customer

relationship management database to systematically capture

key times and events that constitute ―life triggers‖ [see sidebar].

Any event is an opportunity if it could involve a component of

urgency that prompts a client to move forward with purchasing

a life or disability insurance policy for themselves, their spouse,

children or parents.

How do you go about capturing this information? Consider

milestones based on age—22, 30, 55, 60—depending on the

product. For example, if your client is starting a business and

needs commercial insurance, that‘s also a great opportunity

to discuss replacing their former employer-sponsored life

and disability coverage.

Whatever the life trigger represents, the key is populating a

database that will routinely send you alerts reminding you to

send the client prepared communication congratulating them

on the event, and specifically offering to sit down and discuss

how their insurance needs may have changed as a result.

Depending on the technology your agency has at your disposal,

you may even be able to automate this process. If you don‘t

receive a response, follow up with a phone call.

Bonus tip: Use social media to create awareness around June—

the most popular month for weddings and graduations—

regarding the importance of various types of insurance.

Author: Dave Evans—Certified Financial Planner

and contributor to Independents Agents magazine

EVENTS TO WATCH

Marriage

Having or adopting a child

High school graduation

College graduation

New job

Major promotion

Purchasing a house

New business launch

Divorce

Using data to sell life insurance


Early on in my sales career I was lucky enough to be in the

top-producing office of a financial services firm. In that office

we had the top two producers in the country, out of 1800.

We also had 3 more in the top 20. Here are the elements of

that office that made it number one for the entire three years

I was there.

Element #1: Our only job was to sell.

With rare exception, companies go out of business because

they don‘t sell enough and they stay in business because they

do sell enough. That premise was understood in our office and

as producers our job was to produce sales. Almost all of our

business was done over the phone and we were expected to

make in the neighborhood of 200 phone calls a day because

that‘s what it took to make the necessary sales. During

prime-calling hours, and most other hours for that matter,

all we were doing was making calls in order to get the

necessary number of prospects, presentations, and sales.

Heaven forbid you got caught doing paperwork, or anything

that could be done off-hours, during prime-calling hours.

Everyone knew their annual, monthly, and weekly goals,

along with their daily activity and you were under pressure to

hit those numbers. You did whatever it took including working

crazy hours during the week and on Saturday and Sunday if

necessary.

Anything that interfered with sales from an employee with an

attitude problem to a logistical or other problem was dealt with

immediately and completely. If it interfered with selling, it was

removed right away. We had great support people and systems

in place to handle all the non-selling activities and sales was the

top of the food chain, everything else was secondary.

Element #2: All key sales metrics were tracked and counted

and the most important were displayed.

Phone calls were listened to and tracked and everyone‘s call

numbers were announced in the morning meeting. New

prospects, presentations, and sales were recorded. The board

with the sales numbers and new accounts, which was listed in

order of who had the highest sales numbers, was updated

every evening and displayed prominently where everyone

including all support people and even the cleaning people

could see it. There was complete visibility and transparency

when it came to numbers and performance. We even had a

horse‘s a… um, butt trophy for the person with the combined

lowest numbers for the previous day. Maybe this was

old-school but it motivated people not to get it and/or get

rid of it quickly when they did.

Element #3: A push for excellence and continually raising

the bar.

There was no such thing as good enough, you could always

improve and do better and you were expected to. It was

impossible to rest on your laurels because it was too

competitive. If you stopped for a second, someone was going

to pass you. There was always someone willing to outwork

you and do whatever they had to do to be at the top.

Element #4: A Team Atmosphere.

Everyone supported and drove everyone else, pushing them

to higher levels. A win for one was a win for all and a challenge

for everyone else to up their game. The top five producers in

the office were willing to share their presentations, answers to

objections, and any other techniques or tricks they had to make

sales. No one kept success secrets from the others and there

were no prima donnas. Everyone helped one another and

cheered one another on knowing that the more successful each

of us was, the more successful we‘d all be. We were one solid

unit, one solid team all helping one another win. It was a

powerful and positive environment and it created a lot of

energy.

Element # 5: Positive Peer Pressure

Our office was committed to being super-positive. Though

negative people usually didn‘t make it through the interview

process, on the few occasions they did, they either got positive

or left quickly. I remember one guy leaving at lunch and not

coming back because a producer told him to ―go to lunch and

change your negative attitude or don‘t come back.‖ This was

an environment in which you either focused on solutions or

kept your mouth shut. There was zero tolerance for negativity,

negatives, and other similar BS.

Working at the Highest—Producing Brokerage Office In the Country

by John Chapin



Another aspect of the positive peer pressure was that it pushed

people to work hard and do the right things. Because everyone

else was working hard, you felt pressure to do the same.

Because everyone ran their business the right way, you felt

pressure to run your business the right way too. In short, the

positive peer pressure weeded out negativity and poor work

ethic, ensured all were committed, and also helped hold people

accountable.

Element #6: Self-governing and Self-correcting

Related to the above point, one of the most interesting

elements of our office was that, for the most part, it managed

itself. Attitude issues and other problems were usually handled

at a peer level and rarely got to the point where upper-level

management had to get involved. I remember a situation in

which one of the producers was being particularly negative one

day. Actually, it only lasted about two minutes because one

of the other producers turned to him and said, ―Dude, you‘re

being negative! Knock it off or go home! Understand!‖

Situation resolved. Also, if a producer saw another producer

doing something wrong or making a mistake, they would

immediately say something. It was like an internal check-and-

balance system.

The bottom line

is our office was

a positive,

supportive

environment

conducive to

doing lots of

business.

It wasn‘t

Pollyanna, we

had problems

and differences of opinion, but they were dealt with swiftly,

directly, and with respect and professionalism. Everyone was

expected to put in more than they took out and everyone was

held accountable to do the best job possible and help everyone

else in the process.

Author: John Chapin—Award winning speaker, sales trainer,

coach and co-author of the gold-medal winning ―Sales

Encyclopedia‖, a comprehensive how-to-guide on selling.

You could drive around a very long time and never have

a flat tire. You could be super careful in maintaining

your car and driving cautiously but still get a flat tire.

No problem, right? You have a spare tire. Problem is

that when you go to get your spare tire out it is actually

a spare tire for a bicycle. Or maybe the spare tire has

no air in it. In one case you had a spare that would

NEVER be of use to you on your car and in the other case;

you have a spare that just isn‘t usable when you need it.

I often hear the story that an agent has found an E&O market

that has really cheap rates. My response is to let me read their

policy form and endorsements so that I can do a comparison.

Too many times I find things like punitive damage exclusions,

definition of professional services that are very restrictive in

what you can sell, defense within the limits (so you really don‘t

know what your limit of coverage for a loss payment will be),

restrictive exclusions on Bodily Injury (another article where this

is really bad for an agent), absolute intentional acts exclusions

(even for innocent parties), absolute exclusion for insolvency,

very limited options to purchase Extended Reporting Period

aka: ―Tail‖ coverage (which could make your agency difficult or

impossible to sell), absolute exclusion for contractual, territorial

limitations, retro-active dates that don‘t match your expiring

policy and much more (watch for more articles on difficulties

with inferior coverage.) But the rates/premiums are cheap!

If you have an insurance agent E&O policy that isn‘t usable, it

doesn‘t matter what it cost; if it doesn‘t work when you need it,

you wasted your money. How is your spare tire?

Author: Joni Fairbrother, CIC, RPLU—IIABAZ Assistant

Vice President and E&O Department Manager

DO YOU HAVE A WORTHY

SPARE TIRE?


Independent Agents and Brokers of Arizona

2828 North 36th Street

Phoenix, Arizona 85008

Affix Mailing label here

333 East Flower Street

Phoenix, Arizona 85012

Phone: 602-956-1851

Toll: 800-627-3356

Fax: 602-468-1392

Email: [email protected]

INDEPENDENT

INSURANCE

AGENTS AND

BROKERS OF

ARIZONA, INC.

The Premier Property and Casualty Trade Association

IIABAZ staff

Lanny L. Hair, CIC, AAI, ARM, RPLU

Executive Vice President

Joni R. Fairbrother, CIC, RPLU

IAS Assistant Vice President

E&O Department Manager

Terri S. Edwards, CIC, CISR

IIABAZ Assistant Vice President

Ray A. Garcia, CIC, CISR

Education Coordinator

News & Views Editor

Hunter A. Rackham

Education Coordinator Assistant

Michael E. Radcliffe, CISR

E&O Department Administrator

Mona L. Enriquez

E&O Department Administrative

Assistant

“It is safe to say,

„Like most of us, Carly

Simon does NOT

like her coffee with

grounds in it.‟”

Carly Simon—You’re So Vain (1972)

“I had some dreams, they were grounds in my coffee, grounds in my coffee” are not

the actual song lyrics. Replace grounds with clouds. I‘m guessing Carly doesn‘t

drink take hers black either.

The Cars—Bye Bye Love (1978)

“Substitution asked Confucius, „What‟s inside your head?‟” Close, but no.

Substitution, masked confusion clouds inside my head.‖ Confucius once

eloquently philosophized, ―Man who drops watch in toilet have _________

time.‖ Oh Confucius, what will you say next?

Kraftwerk—The Robots (1978)

“Yaktaz noble yaktaz noborte.” Ralf Hütter is saying is, ―Ya Tvoi Sluga, Ya Tvoi

Rabotnik.‖ NOTE: The correct lyric is Russian for "I'm your slave, I'm your

Robot..." This is coincidentally printed in Russian/Cyrillic letters on the back

of the parent album ―THE MAN MACHINE.‖ And you thought it was Klingon….

John Cougar Mellencamp—Jack & Diane (1982)

“Diane's doin time in the backseat with Jackie's mom.” The line goes, ―Diane

Debutante backseat of Jackie‘s car.‖ And what the heck are Bobby Brooks? Anyone?

Coldplay—Paradise (2011)

“Parrots, parrots, parrots die.” That is so sad. Actually, many parrots live

longer than a lot of us humans. You would think the song title would

make the chorus a no-brainer! Come on Coldplay fans!! Really?

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