Fall 2013

Professional Insurance Agents/Fall 2013 1

Agents/CompAniesnavigate a critical relationship

Tennessee Edition/Fall 2013

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2 Professional Insurance Agents/Fall 2013

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Professional Insurance Agents/Fall 2013 3Fall 2013

Dedicated to the advancement of knowledge and informed opinion for the professional enlightenment and growth of the men and women of the insurance industry.

Cover design: Roberta Lawrence

Departments

4 Update

7 Tech talk

9 National focus

11 Your best defense

19 Tech bit

22 Readers’ service & advertising index

23 Officers and directors directory

Statements of fact and opinion in PIA magazine are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the Professional Insurance Agents. Participation in PIA events, activities, and/or publications is available on a nondiscriminatory basis and does not reflect PIA endorsement of the products and/or services.

CEO of PIA Management Services Inc. Kenneth Bessette, President Mark LaLonde, CPIA, CIC, AAI, Communciation Director Mary E. Christiano, Senior Magazine Designer Sue Jacobsen, Member Information Manager Jaye Czupryna, Advertising Sales Executive Susan Newkirk.

Postmaster: Send address changes to: Professional Insurance Agents of Tennessee, 504 Autum Springs Court, Suite A-2, Franklin, TN 37067.

“Professional Insurance Agents” is published quarterly by PIA Management Services Inc. PIA Management Services, 25 Chamberlain St., P.O. Box 997, Glenmont, NY 12077-0997; toll-free (800) 424-4244; email [email protected].

© 2013 Professional Insurance Agents. All rights reserved. No material within this publication may be reproduced—in whole or in part—without the express written consent of the publisher.

13We’re on the same side, really

Reduce the frustration in the agency-company relationship

17Agency + Company = Business

development discussion The secret to successful agency planning

Feature

Cover story


Association news Tina Hutsenpiller, CPIA, owner of Hutsenpiller Insurance Services in Mt. Juliet, is the new president of PIA of Tennessee. PIA National President-elect Johnny Lee installed her during the 2013 convention.

Serving as officers on the 2013-14 board of directors are:

• President-elect—John Keisling, CPIA, CISR, principal of Keisling Insurance Agency, Byrdstown;

• Vice president—Joe Kerr, CIC, CPIA, owner of Kerr Insurance Service, Brentwood;

• Secretary—Herbert Montgomery, producer, Clay and Land Insurance, Memphis;

• Treasurer—Donnie Hogan, CIC, owner of Fred M. Smith & Son, Springfield; and

• Immediate past president—Steve Peay, senior vice president, Boyle Insurance, Memphis.

Three new directors were elected to the board to serve a three-year term:

• Greg Augustine, owner of The Augustine Insurance Group, Clarksville;

• Llew Boyd, principal of Southern Insurance Associates, Chattanooga; and

• Bill Richards, CPIA, LUTCF, owner of Community Insurance, Greeneville.

Continuing service as directors are:• National Director—June Taylor, CIC, CPIA,

CPIW, DAE, principal, Wilkinson Insurance Agency, White House;

• Carl Butcher, CIC, CPA, principal, C.L. Butcher Insurance Agency, Knoxville;

• Andrea Bond Johnson, CPIA, owner, Golden Circle Insurance Agency, Brownsville; and

• Britt Linder, CIC, executive vice president, Peterson-Linder Insurance Services, Bartlett.

Three board members concluded their service on the board:

• Elaine Morton, CPIA, vice president, Morton Insurance Agency, Bartlett;

• Bill Oglesby, CIC, president, Brown Insurance Group, Crossville; and

• Barry Wilson, CIC, principal, Mid-South Insurance Office, Memphis.

Tina Hutsenpiller is 2013-14 president

Board of directors (front row, left to right): Chris Mills, Bill Richards, Herbert Montgomery, John Keisling, June Taylor, Greg Augustine and Andrea Bond Johnson. (Back row left to right): Donnie Hogan, Steve Peay, Llew Boyd, Carl Butcher and Britt Linder.

Congratulations to Daniel Schilling, PIA’s 2013 Company Representative of the Year award. He is sales manager for Allied Insurance.

Congratulations to Elaine Morton, CPIA, PIA’s 2013 Professional Agent of the

Year. Elaine is vice president of Morton Insurance Agency

in Bartlett.


Platinum partner profileAFCO/Prime Rate Insurance Premium Finance Pittsburg, Pennsylvania www.myAFCO.com www.afco.com www.primeratepfc.com

Providing insurance premium financing solutions to clients across the U.S., including PIA of Tennessee agents.

Senior executivesDaryl Zupan, president and CEOAFCO Credit Corp./Prime Rate Premium Finance Corp.Rick Fowler, executive vice president, North American salesAFCO/Prime Rate Insurance Premium Finance

Tennessee staffAlan Malone, vice president & regional sales managerSheila D. Geary, vice president & senior business development officer

History AFCO was established in the early 1950s as part of what was known then as Continental Insurance Corp.’s America Fore Group of companies. In 2007, AFCO combined with Prime Rate PFC, which was founded in Florence, S.C. in 1984, with a focus on

financing personal lines and smaller commercial accounts, serving customers with an efficient, highly automated quoting system and workflow process. Together, AFCO/Prime Rate combine to offer premium financing solutions across the spectrum of client needs—from smaller and simpler turnkey deals to larger, more complex and highly customized transactions.

Philosophy AFCO/Prime Rate philosophy is: “At AFCO/Prime Rate, we put the premium on performance. By providing premium finance solutions across the spectrum of client needs, AFCO/Prime Rate is uniquely positioned to help PIA of Tennessee agents use premium financing to grow their business, generate new revenue streams and cultivate closer relationships with insured customers. “Offering the premium finance industry’s strongest mix of experience, expertise and resources—from significant funding capacity and in-house legal and underwriting expertise for large, complex accounts to high-tech efficiency for personal lines and smaller accounts—AFCO and Prime Rate Premium Finance Cos. deliver premium finance solutions across the spectrum of client needs.”

Appetite Whether the client is a multinational enterprise or a smaller business, AFCO/Prime Rate makes it easy for PIA of Tennessee agents to offer their insured clients all the advantages of premium financing for property/casualty insurance. From high-touch guidance through large, complex transactions to high-tech servicing of personal-lines and small-business accounts, AFCO/Prime Rate Insurance Premium Finance delivers unparalleled experience, expertise and capabilities in premium finance.

“We are focused on providing the highest quality, competitive solutions through transparency, simplicity and exceptional customer service. AFCO is thrilled to be able to prove ourselves to the PIA of Tennessee membership. —Rick Fowler, executive vice president, North American sales

PIA of Tennessee and AFCO/Prime Rateproud partners

for independent agents

Prime RatePremium Finance Corporation


Platinum partner profileXpressCapital LLC Kalamazoo, Michigan http://xpresscapital.com

EPI, Employer Pipeline LLC Kalamazoo, MichiganConducting business nationwide.

Senior executives Robert Poloskey, president and CEO

History For more than a decade, XpressCapital has provided insurance billing and servicing solutions for the insurance industry and those companies involved in the distribution of insurance products. EPI was started to provide the insurance industry with a national payroll company that insurance carriers, MGAs and agents can utilize to compete with large payroll-service providers. Large payroll companies compete with agents by cross-selling to their payroll customer. The EPI model is used and distributed by thousands of agents who offer payroll services to their customers. They have the confidence of knowing that EPI has a national footprint, excellent service and is competitively priced. Most importantly, EPI is agent-friendly and does not compete by selling insurance. By offering EPI’s easy payroll and pay-as-you-go solutions, carriers and agents become more competitive in today’s marketplace.

Philosophy XpressCapital’s philosophy is: “XpressCapital delivers insurance premium billing solutions to insurance carriers and their distribution partners, which are designed to increase insurance policy sales and decrease the cost associated with payment processing, account servicing and audit processing. Though our Insurance Management Group, XpressCapital offers: • workers’ compensation integrated billing programs u pay-as-you-go u payroll reporting; • premium financing programs; and • various billing options including: direct bill, agency bill, binder bill, variable and volume billing services. “EPI is a national payroll solution that can be offered as a stand-alone, value-added service or can be bundled with other insurance products. Reverse engineered to support the insurance industry, EPI offers complete payroll and tax reporting services that are marketed solely through insurance agency referrals. Services include: • pre-integration for pay-as-you-go; • easy online payroll processing; • automated payroll payments; • tax deposits and filing services; • HR support center; • employee online services; and • knowledgeable and friendly customer support.”

Appetite XpressCapital consults with insurance carriers, MGAs, agencies and insureds to provide the best premium billing programs available.

PIA of Tennessee and XpressCapital LLCproud partners

for independent insurance agents

“Our intent is to provide our clients with excellent choices with the goal of making sure there is a good fit between

what they value and what we do best.” —Robert Poloskey, CEO and president

“Achieve success by focusing on the success of others first.” —Robert Poloskey, CEO and president


Pittzis PIANY, PIANJ, PIACT and PIANH’s business issues director.

Tech Talk

Underwriting: A collaboration toward profitability By Jim Pittz, CIC, CPIA

What does a carrier expect of an agent? Why does a carrier have certain expectations of its agent? What can an agent do to advance toward greater profitability for all parties? These are important questions regarding the agent-carrier relationship. How does underwriting factor into the equation? The importance of underwriting cannot be stressed enough. (Disclaimer: In a previous life, I was an underwriting manager for a national carrier.) Both sides would agree that the focus on underwriting is to obtain the right price for the risk. However, the tools used to obtain the price are when the similarities end. The importance of underwriting is more than eligibility vs. desirability (although this still is

important). When I was an underwriting manager, I probably interviewed 100 candidates over the years and I would start with one question: “What is the role of an underwriter?” The response varied from an advocate for the insured to someone who determined what insurance policies were written and what ones were denied. My response was, the protector of the loss ratio. The role of underwriting is not just to decide who or what was written, but to price what was written correctly. If a risk is priced properly, chances are it will be a profitable piece of business. With more carriers moving toward multivariant rating, one has to ask how long it will be before the practice of one risk, one price becomes the norm. Today’s technology has


gotten to the point when the actuaries can identify a rate solely dependent upon individual characterizes of the risk. An insured and his or her neighbor could be the same age, have the same vehicle and the same driving history, and because of the use telematics, have vastly different premiums. Technology certainly has added a new dimension to the underwriting process. With the recent explosion of database sizes and affordability, carriers now have the availability to create their own analytics. Also at their disposal are hosts of industry-data aggregators that allow them to enhance their own collected information further. Previously, they would rely on the bureaus for data collection, analysis and wait for the publication of any modifiers, deviations or trending analysis. The downside with this process—when the information was disseminated it was a year or two old. If a carrier looks at this year’s products/rates/renewals (2013) it has to base its quote on data from 2008-11—not quite the speed to market information carriers need. Now carriers can utilize their own data. They can look at their own experience and not necessarily the industry’s experience to give them the direction they need. They can create their own predictive models. For example, industry data could show that a given product line or class is experiencing increasing loss ratios—so the industry or rating bureaus are increasing their rates or modifiers accordingly. However, an individual carrier can look at its own data and see that, because of its own internal processes, it is experiencing the opposite of the industry. Now the carrier is poised to take action. In addition, the carrier’s data would reflect current market trends and not be based on data that is a year or two old (i.e., information compiled by the reporting bureaus data).

The agent’s role Where does the agent fit into this procedure? A professional, independent insurance agency that maintains an open dialogue with its carrier can forge ahead. Just as a carrier uses the knowledge that a specific market is moving in one direction to position itself accordingly, the agency

that maintains the proper dialogue with its carrier also will be aware of the change and can partner with the carrier and take advantage of the market changes. While agents don’t use predictive analytics tools, they can benefit from a business information tool. Many technology companies have bolt-on products (that attach and integrate with an agency’s agency management system), which give agents information. The question is, “How would an agent utilize the business information?” Answer: An agent would have information on sales-to-quotes ratio; geographic concentration of the agency (e.g., by product; geographic location of claims—by product or account vs. monoline business) for cross-selling purposes, to name a few. These are just an indication of the business information that may be available to agents. If it’s in your management system, it can be extracted in a dashboard approach for easy recognition and business planning. This information can provide an agent with price per policy (or per account) information; help with the customer service account load; determine how much time goes into landing a piece of business; or the break even or profit point per line or product. Agencies also can take advantage of the technology availability. There are tools to assist in front-lining underwriting, including many websites with mapping capabilities that allow the agent to see the risk from the sky. Don’t forget social media. This resource has proved to be a valuable asset during the investigation process—looking at individual risks or checking a company’s website or Facebook page can give an agent an abundance of information. With advancing technology, a professional, independent insurance agent has more control, more information at their fingertips than they ever had. The big question is: What are you going to do about it?

Utica National

Business Risk Partners

PIAPRO

Navigators

Rockwood

E&S markets

Agency E&O

Contact

Sandy Clive, CPIA,

800-875-7428

Has a market for

your agency


Besesparis is senior vice president of PIA National. He can be reached at (703) 518-1352.

A report by the Government Accountability Office has found that the state insurance regulatory system worked to help mitigate the negative effects of the 2007-09 financial crisis on the insurance industry. In addition, the GAO found that since the financial crisis, state insurance regulators have continued efforts to strengthen the insurance regulatory system. The report noted that state regulators were critical in maintaining general stability in the market during the crisis. “The effects of the financial crisis on insurers and policyholders were generally limited, with a few exceptions,” stated the report. A GAO study on the benefits of state insurance regulation is important, in that it serves as an objective counter-balance to one likely not to be objective: a study of insurance regulatory

modernization by the Federal Insurance Office. Mandated by Congress, the FIO study is in the section of the Dodd-Frank act that created the FIO. However, the questions the FIO published as it solicited input belied a clear bias toward federalization of insurance regulation, raising concern that the forthcoming report has a preordained conclusion. FIO solicited comments on such things as “the costs and benefits of federal regulation of insurance across various lines of insurance” and “the feasibility of regulating only certain lines of insurance at the federal level, while leaving other lines of insurance to be regulated at the state level.” But, there were no balancing questions asking about the proven successes and efficiencies of state regulation. FIO Director Michael McRaith inadvertently

PIA proposes GAO study as counterweight to FIO report

By Ted Besesparis

National Focus


admitted the questions were one-sided. During congressional testimony, he was asked if he could assure that the FIO study will not be biased in a way that leads it to recommend greater federal regulation of insurance. McRaith did not answer directly. Instead, he pointed to the provision of Dodd-Frank that mandated the study and said, “The bias is framed by the statute.” So, rather than waiting for the FIO to issue a partisan report with a preordained conclusion, PIA National took the initiative, urging some of our allies in Congress to request a balanced report from the GAO on the benefits of our state-based system of insurance regulation. PIA supports our national, state-based system of insurance regulation. PIA opposes efforts to substitute any system of federal insurance regulation, be it mandatory or voluntary. Dual or “optional” federal regulation (when carriers choose their regulators and a new federal bureaucracy is created) is the Trojan horse that rolls up the steps of the Capitol in Washington, D.C., every year. It disgorges squads of bank and securities lobbyists, who try to devour the insurance sector, while the federal government gazes at every state’s insurance premium tax receipts. Fortunately, this annual assault continues to fail.

Beyond writing a report, the FIO also was mandated to issue recommendations to Congress on regulatory modernization. That poses a potential conflict, because a recommendation for a greater federal role in regulating the business of insurance would benefit the FIO by proposing an expansion the power of the FIO itself, which Congress is on record opposing.

The state system worked The GAO report was prepared for the House Financial Services subcommittee on Housing and Insurance Chair Rep. Randy Neugebauer, R-Texas, as well as subcommittee member Rep. Steve Stivers, R-Ohio. GAO found that the financial crisis “generally had a limited effect on the insurance industry and policyholders,” with the exception of certain annuity products in the life insurance industry and the financial and mortgage guaranty lines of insurance in the property/casualty industry. In addition, the report notes, “industry business practices and existing regulatory restrictions on insurers’ investment and underwriting activities helped to limit the effects of the crisis on the insurance industry.” “The GAO report is positive, in that it essentially says the state regulatory system worked well during the financial crisis,” said Mike Becker, vice president

of federal affairs at PIA National. “It also says that state regulators and the NAIC have taken steps since the financial crisis to further strengthen the state insurance regulatory system.” PIA maintains that a modernized insurance regulatory system must remain state-based and that insurance consumers, the insurance industry and the American economy would be poorly served by the expansion of federal insurance regulation. Contrary to the assertions of supporters of federalization, the state-based system of insurance regulation is not broken, as evidenced by the GAO report. “Multiple regulatory actions and other factors helped mitigate the negative effects of the financial crisis on the insurance industry,” stated the GAO report. It said state insurance regulators and the NAIC took various actions to identify potential risks and help provide capital relief for insurers.

Insurance sector fared well “The conclusion is obvious from the assessments made in this report—as compared to the other GAO reports that assess the performance of banking, investment and capital markets during the same time period—that the insurance sector did well,” said PIA National Senior Vice President Patricia A. Borowski. “The GAO report and its resulting message would have benefited further by including one key point,” Borowski said. “It should have included a comparison of how the insurance industry and state insurance regulators (with NAIC) performed during the financial crisis, versus the performance of the other sectors of financial services, banking and securities.” PIA maintains that it makes sense that as additional protections are considered in the effort to avert another crisis, regulators should take their cue from the state-based oversight already in place in the insurance sector and its overall success in protecting the financial stability of the insurance industry and policyholders. In contrast, using federal regulatory systems that failed so spectacularly as a template for the insurance industry would make no sense at all.

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Your Best Defense

Pearsall is president of the Pearsall Associates Inc. and a special consultant to the Utica National E&O Program. His blog is agentseotips.com.

Insurance producersand E&O exposures By Curtis M. Pearsall, CPCU, CPIA, AU, ARM, AIAF

Virtually every year, producers rank first as the most prominent agency staff member who is the alleged “wrongdoer” in an errors-and-omissions claim. Upward of half of E&O claims are the result of supposed errors or omissions made by producers. When considering the other levels within an agency—customer service, claims, reception, accounting, etc.—it’s really not a surprise that producers have this inglorious distinction. After all, they are the face of the agency for most new business opportunities and for a significant number of renewals, especially commercial lines. Producers have distinct duties and responsibilities, most of which must be handled carefully to avoid potential E&O litigation. While the degree to which these men and women perform this job professionally and ethically can determine the agency’s success, they also can affect—positively or negatively—the agency’s E&O risk greatly.

Technical knowledge a must It is imperative for producers to possess strong technical knowledge for interactions with prospects and customers. After all, to a large degree, the public relies on them for how best to protect their assets. This includes knowing the various classes and lines of business to ensure the public is educated and informed properly. Due to changes in the insurance industry, including the periodic introduction of new products, the commitment to learning should be ongoing, regardless of the years a producer has performed his or her job. Many would contend it is difficult to know everything about every class and line of business. This is true, to a large degree. An exposure analysis checklist can help. (Producer Plus through Vertafore and Producer Online through Rough Notes are two of the more prominent checklists.) A checklist provides solid, in-depth detail on more than 650 classes of business and the applicable lines of business. Before going out on a sales call, it would be beneficial for a producer to review this detail as it will enable him or her to converse more intelligently about the exposures and issues facing that specific account.

Sales training Yet, it takes more than technical knowledge to be successful and to minimize the potential of an E&O matter developing. Knowledge with no sales skills—or sales skills without knowledge—is a “glass-half-full” scenario, which can be dangerous for an agency from an E&O perspective. Learning the sales structure/process is critical because how a producer conducts himself or herself during the complete sales process likely will determine the success level achieved and to what degree he or she is an E&O risk. Sales training does not have to be expensive. Affordable, quality sales and marketing training is available. The Certified Professional Insurance Agent program through AIMS provides valuable training focusing on pre-sale, sale and post-sale issues.

Know the client Quality exposure analysis checklists provide the ability to build a questionnaire that will enable the producer to know the exposures faced by that specific risk. These also should help to identify potential sales opportunities. A recent industry article noted only 30 percent of the small businesses affected by Storm Sandy had business interruption coverage. Did the producers on these accounts ever discuss the coverage with their respective clients? This question will no doubt be addressed during any potential E&O litigation.

Listen When interacting with a client, it is crucial for producers to realize that in many, if not all, states, an insurance producer (agent/broker) has a common-law duty to obtain the coverage the client specifically requests within a reasonable time or inform the client of the inability to do so. Accordingly, producers must do a fair share of listening to what the customer/prospect asks. “Memorializing” these client discussions helps ensure there is no misunderstanding between the parties.


Watch your words Due to the tremendous pressure to sell, producers may be inclined to position themselves and their agency in the best favorable light. While various marketing “puff” may enhance the ability to be successful, producers must be careful and deliberate in the words and phrases used for promotion. For example,

advising customers and prospects one is an “expert” or “specialist” could be problematic because it has the potential to raise the legal liability bar to the level of “special relationship.” What’s more, phrases such as “we make sure you are covered properly” should be avoided. That might sound impressive, but also can lead to a potential “special-relationship” standard.

Document, document, document Inherent in all of the interactions, whether with the prospect or the carriers/markets being used, is the need for prompt and professional documentation. This could be a key issue if a problem develops. The quality, promptness and professionalism of the documentation will heavily determine the direction of the E&O claim. As a result, documentation is not an option—it is mandatory. While it might be nice that the customer always buys all of the coverages noted in the proposal, it is likely not the norm. Because of this, producers should get the customers’ sign-off on the coverages/limits they will not be securing.

Check the policies You got the order—congratulations. Now it’s time to issue a binder and order the policies. Upon receipt of the policies, producers need to spend the time to review them to ensure they reflect what was ordered. Once this review has been performed and the policies have been verified for accuracy, producers should promptly deliver the policies. In all but a few states, the client has a duty to read the policy, so producers should strongly encourage the customer to do so. If the customer has questions, the agency should be contacted as soon as possible. Being a producer requires tremendous knowledge, professionalism and attention to detail. This will go a long way to ensuring success. Without these attributes, there’s an E&O nightmare waiting to happen. The right choice should be easy to make.

Experienced AgentsPIA agents have been providingagents’ umbrella coveragelonger than anyone else.We can craft a policy — or a combination of policies — tocover you, while leaving yourwallet in one piece.

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We’ve got you covered

Sometimes, it’s what’s underneath that counts

®


Behind closed doors and in quiet places, insurance companies and professional, independent

insurance agencies frequently grouse about each other. Ironically, both insurance companies and agencies usually subscribe to similar objectives. However, in the course of conducting business, conflicts arise that damage the relationship and create barriers, which prevent both sides from delivering the most value to the business community. The current firming marketplace seems to escalate the level of frustration for all stakeholders.

Not just a spreadsheet What factors contribute to the frustration? We begin with a paradox. Agents despise the practice of being “spreadsheeted” by their prospects and clients, but they in turn “spreadsheet” their insurance companies. The “cycle of commoditization” starts when an insurance buyer perceives insurance as a commodity with price as the primary differentiator. Agents, especially those with an inadequate pipeline of prospects, follow the buyer’s lead and ask their company partners for the lowest price—so they can make the sale. In this all too common scenario, insurance companies do not get the opportunity to compete on their capabilities to reduce risks and improve outcomes for employers. Instead, all of their resources are reduced to one number on a spreadsheet. Naturally, insurance

companies that have invested significant resources to develop enhanced products and services bristle at agencies that fall into the price-only trap. They disdain competing with other insurers that have fewer capabilities and resources when price dominates the discussion. Nor do most agents want to compete on price; they typically believe they bring more to the table, as well. To add to the absurdity, the price-only model not only damages the relationship between agencies and their companies, but the insurance buyer also suffers. Insurance buyers may say that all they want is the lowest price, but they really want much more.

Changing distribution channels To further stress the relationship, national consulting firms are advising insurance companies to assess and consider changing their distribution channels. These firms are building and deploying data analysis models to examine insurance agency relationships and conducting focus groups with insurance buyers to evaluate their insurance purchasing preferences. An increasing number of insurance buyers feel they can address their business insurance needs through online and call-center solutions directly from the insurance company. Now, it is unlikely the larger, more complex accounts will

We’re on the same side, reallyReduce the frustration in the agency-company relationship

By Frank Pennachio



seek this alternative anytime soon, but smaller, less complex accounts already are going direct. Some insurance companies already offer the choice: work with us through an agent or contact us directly. This appears to be reminiscent of the travel agency industry when online travel sites hit the market and many traditional travel agencies disappeared. However, those that remained re-created themselves with a specialized focus and are thriving today. Employers’ dissatisfaction with their brokers is another area of concern, according to the Zywave 2013 Broker Services Survey of more than 5,500 respondents nationwide. The survey found that employees are less satisfied with their current broker on the same services that they cited as more important than ever. Dissatisfied employers may not simply seek another agent to address their concerns, but instead may seek a direct alternative. This may be true especially for the Generation X and millennial buyers whose buying preferences are much different from their predecessors. While these challenges threaten

independent agencies, to paraphrase Mark Twain, the death of the independent agency system is exaggerated greatly. In fact, insurance companies and insurance agencies have an opportunity to take on these and other challenges and to develop more powerful and effective relationships with improved outcomes for all stakeholders, including business owners. However, this won’t happen unless both parties take new steps forward together.

Value propositions Agents often complain that they don’t know what the insurance company wants or values. Insurance companies are frustrated when treated as a commodity or are not receiving accurate and critical information about risks submitted by the agency. There is a better way. If insurance agencies have not already done so, they should develop a value proposition for their insurance companies. Many agencies have developed value propositions for their prospects and clients, but few have engaged in a similar process with their insurance companies.

This value proposition should include, but is not limited to: geographic footprint; specialized expertise in niche industries; sales process and differentiation in the marketplace; processes for risk selection; processes to improve a client’s risk profile; client attraction and growth strategies; technology and efficiency capabilities; and succession plans. Agencies must articulate that it would be too costly or inefficient for the insurance company to try to replicate the value the agency delivers. The primary purpose of an intermediary is to deliver more for less than the direct source can accomplish on its own. If an agency cannot demonstrate greater efficiencies and profitability for the insurance company, then the partnership will begin to show signs of stress and perhaps ultimately break.

Better, not more relationships Agencies also need to reassess the number of insurance company relationships they try to maintain and serve. Agencies often tout on their

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websites and marketing literature that they represent a significant number of insurance companies. The thinking has been that the more insurance companies an agency represents, the greater its clout with clients and prospects. However, in this changing marketplace, having a larger number of insurance company relationships actually may reduce the agency’s effectiveness. Insurance companies realize they cannot all be rewarded with the best business and attention. Insurers are asking, “How do we fit, and why should we have a relationship with you?” Often, you will hear agency principals say, “We need to feed our carriers.” This is true, but fewer mouths to feed create opportunities for deeper, more powerful relationships. Agencies must keep in mind that insurance companies are now collecting and analyzing data to determine if the agency is a good fit for them and if the relationship should continue.

Reduce frustrations Insurance companies need to step up to the plate and convey in which market

segments they find the most value in their interactions with agents. Frequently, insurance companies are either not transparent with their agencies or not completely clear themselves as to what they value and want, or they prefer to remain “flexible.” It is frustrating for agencies to hear, “Just send the account to us, and we will take a look.” Greater clarity from insurance companies will reduce frustrations and inefficiencies in their relationships with agencies. In addition, insurance companies can foster stronger relationships with agencies by helping them transition in the tumultuous and rapidly changing marketplace. They can assist them with the development of their people, processes and technology. Insurance companies will create greater reciprocity and loyalty from agencies who have realized their growth and profits were influenced by an insurance company that provided more than just an insurance market and policy. Economic pressures, changing buying preferences and technological changes are creating stress with the

agency model. However, agencies and insurance companies have the opportunity to create stronger and better aligned relationships that will create greater sway for their mutual clients. It all starts with a conversation and an exploration of how both parties will best fit together moving forward. The relationship is in transition and changing. Both agencies and companies have a responsibility to reassess and adapt, so both parties and the insurance buying public realize greater benefits.

Pennachio is a partner in Oceanus Partners, a consulting and training firm that works with insurance professionals to improve their sales and new business development. Pennachio brings nearly 20 years of agency ownership/ management, sales training and workers’ compensation expertise to his topics. His keen industry understanding, empathetic and humorous style and depth of technical knowledge make him a popular speaker at insurance and workers’ compensation conferences. Contact him at [email protected].

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National Security strives to provide competitive, affordable insurance for policyholders, but we also reward our agents with some of the highest commissions in the industry, a partnership profit sharing program and an award-winning web site that provides fast online quotes, policies, and endorsements. Find out more by calling 1-800-239-2358 x213 or visit us on the web at www.nationalsecuritygroup.com. Elba, Alabama • 800-239-2358



“Whether you choose Arlington/Roe for our breadth of knowledge, product line diversity, market access or industry know-how, you may be assured we are in business primarily to serve you. We will do our best to earn and keep your trust. You have our word on it.”

– James A. Roe, CPCU, ASLI, President

IT’S THE RIGHT THING TO DO.

800.878.9891 • ArlingtonRoe.com

Arlington/Roe. You have our word on it.

Managing General Agents andWholesale Insurance Brokers

Aviation | Bonds | Brokerage | Commercial Lines | Farm | Medical Professional | Personal Lines | Professional Liability | Transportation | Workers’ Compensation


Agency + Company = Business development discussionThe secret to successful agency planning

By Dick Lavey

Faced with economic pressure and a surge of catastrophic events, it is important for professional,

independent insurance agents to have a clear strategy and plan to guide them and their carrier partners to achieve shared business goals. The keys to enabling success: make informed decisions and then pull the right levers. With this in mind, the best agents approach agency planning as an opportunity to conduct a “discovery” session with their carrier partners to help align their strengths and create a business development plan that ensures mutual success. Despite the critical importance of this process, when many agents hear carriers talk about “planning,” they are more likely to react with grimaces and groans, than with enthusiasm. So, what gives “planning” such a bad rap? While many in the industry use the word “planning,” there is a wide range of interpretation to what that involves. Across the industry, many agents and carriers approach planning as something to “get through it.” In these cases, the outcome usually provides little tangible value for either party. The biggest problem with agency planning begins early on, with planning processes that focus on short-term tactics rather than long-term strategies. For example, an agency’s main goal is the numbers for next year. In many cases, the agency feels like it is participating in a one-way dialogue in which the carrier simply states a financial goal and then

asks the agency to commit to it. There is nothing wrong with financial goals, which are an important part of planning. However, there is much more to doing planning well and making it mutually beneficial.

The secret to success Successful agencies, whether large or small, understand the importance of collaborative, discovery-based planning. They choose their strategic partners and shape their strategies together to create value and win-win plans. Many use planning as an opportunity to take their businesses to the next level, working with carriers to help them to differentiate themselves in the marketplace; to be more specialized; and enhance their

operating economics. The most dynamic and successful planning processes share a few important components—beginning with the obvious: Planning done well, takes work, which is a challenge. Planning is an end-to-end process, starting with preparation, then productive discussion(s), ongoing execution and measuring of progress. To do this well, we have learned that limiting the number of agents with whom we build plans helps keep our efforts from being too diluted. By focusing on a few committed agents, we achieve deeper levels of discussion and greater resource allocation to those agents. For agents, focusing their planning on a few key carriers can provide similar, positive results.



While planning processes should evolve based on the needs of the agency, here are five key elements to a successful agency planning process. Preparation. Take the time to define your agency’s strategic goals and operating priorities, including areas that can be developed or grown. This may range from products, industry expertise, staff investments or financials (e.g., lower operating costs). Assess what is working or not working with the

carrier(s) with which you intend to plan. Ask them to do the same—in advance. Start the discussion with your agency priorities. Often, the planning conversation starts and ends with a carrier asking for financial commitments. To make this work for you, that paradigm has to be reversed. Start with what you want to achieve to ensure that planning will help to meet your needs. Building from your goals, you can then move into talking about how the carrier’s strengths,

capabilities and product portfolio may align with the goals you have for your agency. Conduct a mutual discovery that results in business alignment and strategic action. The most powerful part of the planning session involves exploration and discovery. Brainstorm business strengths and weaknesses and expect partners to do the same. Then, explore what your agency and your carrier partner identify as areas for alignment, and where you can leverage strengths to each other’s advantage. Pick a handful of key levers and actions that will maximize desired outcomes. Focus on what matters most to you and how to get there. Set financial milestones and benchmarks for success. These benchmarks can help keep everyone focused on pulling the levers previously agreed upon to help drive priorities. Try to avoid the tendency to “load up” or to do everything in the first quarter. Instead, work to set a realistic timeline for staging your actions. Execute and manage your plan. Sadly, too often plans are put on the shelf and rarely used again after they are written. Plans should be a “living roadmap” to guide the agency and their carrier partner toward their shared goals and desired outcomes. Ideally, the plan should be revisited several times a year to assess progress, make adjustments and ensure that everyone is aligned on the same priorities. Smart carriers set themselves apart by thinking about planning as a collaborative strategic business development process and not just a numbers game. Smart agents won’t grimace when the topics of business development and strategic planning are broached. Instead, agents should get excited about having productive discussions and creating actionable plans. Hopefully, these suggestions will help agents, and their carrier partners, to get more out of their planning process, leading to greater success in 2014 and beyond.

Lavey is president of field operations and chief marketing officer at The Hanover Insurance Group, Worcester, Mass.

M. J. Kelly of Tennessee www.mjkelly.com 1-800-873-8374



Marshallis a speaker, author and con-sultant. He can be reached by email at [email protected]. or visit www.vendor-tech.com.

Tech Bit

Are you looking for an Ultrabook? By Gregg Marshall, CPMR, CSP, CMC

My travel notebook is a bit over two years old, ancient in computer years. It was one of the early dual core “thin-and-light” models, a bit more horsepower than an Intel Atom powered netbook I had been using, but much more portable than a traditional notebook. A year ago, I bought a high-powered notebook, with similar specifications as my desktop: quad core I7 processor, 8 GB of RAM, and a 750 GB hard drive, but at more than seven pounds it wasn’t perfect for traveling. So, I use it when I’m on-site at a client’s for a period of time and want the same performance I have at home. But, I’ve been doing a lot more traveling this year and wanted something much more powerful, yet just as portable. One of the recent group of Ultrabooks was an obvious candidate. The term Ultrabook was created by Intel and has a minimum set of standards, which translate into thin, light, relatively fast and good battery life. The Macbook Air was the original Ultrabook, predating the term itself by a year or two. In my mind if you are a MacOS user, that is the obvious choice despite the cost differential. The first Ultrabooks introduced two years ago were OK, but they weren’t impressive and were as expensive, or in some cases, more expensive than the Macbook Air. That’s one of the reasons I decided to delay the purchase of my first Ultrabook. Oddly, the expected drop in price on Ultrabooks hasn’t occurred. When first introduced, Intel predicted the price would fall to close to traditional notebook prices. Instead, the manufacturers have largely kept them as a premium product, adding features instead of allowing the price to fall. There are some reasonably priced (approximately $600) Ultrabooks that are generally the previous generation, with a traditional 1368 x 768 screen and hybrid SSD/hard-drive storage. They are decent alternatives if you aren’t willing to purchase premium options. The past year has seen laptop screen resolutions increase dramatically. For years, 1368 x 768 screens have been more/less the only option, now 1920 x 1080 is becoming an available option. I originally thought I wanted to go with a 13-inch Ultrabook with a 1920 x 1080 resolution screen, but I actually find that combination a little hard to read with my eyesight.

My original list of options included two Asus models, two Samsung models, a Toshiba, a Lenovo and an Acer. The other Ultrabooks I had seen didn’t seem as thin or light. I ended up taking the Acer S7 off the list based on reviews I had read that indicated it didn’t really have the battery life of the other machines. The Toshiba and the Lenovo were removed from the list because I couldn’t find a local place to try one out. I have found that there are ergonometric subtleties that make trying a notebook important. My short list was narrowed to the Asus UX31 and UX32 and two models of the Samsung Series 9—one 13 inch the other a large 15 inch. I had ruled out almost all the other Ultrabooks larger than 13 inch based on thickness, but the Samsung is effectively the same thickness at 15 inch as the other three Ultrabooks on my list. Sadly, I have to say I am frustrated with both Asus and Samsung on their product naming/numbering. Both have several models of each of these computers and there is no obvious correlation in the model number, which generation it is, or the specifications. That makes it too easy for a dealer to sell models with the previous generation Intel processors, which are making significant improvements every year, as if they were the latest model. I ended up ruling out the UX32 because almost every model I could find had the 1368 x 768 resolution screens and the more I read about the hybrid storage, the less excited I was with the actual implementation. That could change in the next year and I’d love to readdress that option. I had thought about upgrading the hard drive to a faster 7200 RPM drive until I realized the UX32 used a thin drive that had few options, not all 2.5 inch hard drives will fit every computer; you have to worry about drive thickness in thin computers. I also ruled out the Samsung Series 9 13-inch model. It didn’t have the specifications I wanted, at least from any local dealer. However, I still love its look and feel. In the end, the final decision was made on price, largely because I stumbled into an open-box computer at a Best Buy and the required amount of RAM. I ended up with a Samsung Series 9 15-inch model with 8 GB of RAM. Oddly, most of the Ultrabooks max out at 4 GB of RAM; my experience is that this amount


of RAM generally results in a slower computer if you have many applications running at once, which I frequently do. I liked the Series 9 with a 1600 x 900 resolution screen display. That extra vertical resolution means a bit less scrolling on most applications. While a full 1920 x 1080 would be fantastic on that sized screen, I have been happy so far. I also immediately added a custom Gelaskin to the laptop since I believe in taking every opportunity to advertise my website URL.

After three months with the computer, I feel it might be too big to be a great travel computer. I don’t try to do much on airplanes in a standard coach seat, even a 10-inch computer would barely fit. But, despite being amazingly thin, it still feels big. I did have an issue with the open-box unit. I had purchased a unit with the model number ending in A07, which should have included a 256GB SSD. I was about half way through reformatting the drive to install Windows 7 (I’m not

willing to run Windows 8 on a nontouch screen laptop) when I realized my SSD was only 128GB. The model number was barely readable it was so small and it turned out my unit was an A01 model. I kept the unit when a price adjustment made it an offer I couldn’t refuse, especially after having spent several hours preparing it. The small SSD had me worried. Windows 7, Office 2010 and a few other applications took up half the drive. That didn’t leave much space for my files. I reorganized my files into active files and my archive files (files older than two years) and I put the active files on the SSD. I also did what I had done on my desktop, teamed my SSD with a hard disk, in this case an external hard drive. I went with a USB 3.0 portable hard drive thinking it would be almost as fast as an internal drive, since USB 3.0 can approximate SATA speeds. Sadly, it is about three times slower than the SSD. I figured the drives in commercial external drives are the less expensive 5400 RPM drives, so I actually built an external drive using a Maxtor 7200 RPM hybrid drive, which was about 20 percent faster, but still not the speed I was expecting. I also thought I could use the built in SD card as some expansion storage. While I have a fast 64GB Kingston SD card, it would appear the internal SD connection is via the USB 2.0 interface so it is about 10 times slower than the SSD. I did get a 64GB Kingston 3.0 flash drive that tests out better than the faster external hard drive and just a little slower than the internal SSD. I’ll probably get another one or two of those for intermediate storage. I have also made a couple of interesting observations about the computer. With the fast internal SSD, I think 4 GB of RAM would work fine since disk swapping is so fast. And, ironically, the computer actually boots up faster than it can resume from hibernation. There is a faster hibernation mode, but it requires the space on the SSD to be partitioned off permanently, which would remove almost 10 percent of the total storage space. The upgrade to an Ultrabook has been interesting and totally worthwhile. I’d do it again in a heartbeat, but probably would pick the 13-inch HD screen version, even with less RAM. External storage can be used to supplement the smallish SSDs that are built in to the technology.

Don’t lose grounD in a tough economyThe fact is, this is the time to invest in advertising. Now, more than ever, you need to retain existing clients and attract new ones. And, while you may lack the bottomless pockets of direct writers, well-crafted, well-placed, affordable marketing can punch through the noise and get your message out. Whether you’re looking for brand new marketing materials, our customized consumer materials or Spanish-language pieces, Think PIA first for the marketing advantage you still need to succeed.

logon to www.pia.org or call (800) 424-4244.

s • e • r • v • i • c • e • s


PLATINUM

SILVER

BRONZE

2013 PARTNERS2013 PARTNERS2013 PARTNERS

Arlington / Roe & Co. Burns & Wilcox Consumers Insurance Haulers Insurance Summit Utica National Insurance Group

Bailey Special Risks Bolton & Co. Hanover Insurance Group NAI National Security Fire & Casualty

Penn National Insurance RPS of Lexington Sharp & Robbins Construction Tennessee Underwriters Thomco Travelers

Access Insurance Co. Accident Fund Ins. Co. of America Appalachian Claims Service Applied Underwriters Associated Insurance Administrators Bituminous Insurance Co. Builders Mutual Ins. Co. CRC/Crump Ins. Of Memphis Deep South of Tennessee Direct Insurance Donegal Insurance Group

EMC Insurance Cos. Erie Insurance Farmers Mutual of Tenn. Genesee General GMAC Guard Insurance Group J.M. Wilson Lemic Insurance Co. Main Street American Grp. Mapfre Insurance Mid South Mutual Ins. Co. Mountain Empire Agency Alliance NetComp Insurance

Oak Street Funding Risk Innovations Safeway Insurance Co. South & Western Southern Cross Underwriters Southern Pioneer P&C Southern Trace Underwriters Southern Trust Insurance Co. Stonewood Insurance Co. Tapco Underwriters Tenn. Agents Alliance Group The General United Fire Group


Readers’ service & advertising index

Check advertisers of interest, complete form and fax or mail to: PIATN magazine, 504 Autumn Springs Court, Suite A-2, Franklin, TN 37067.

Name ___________________________________________________________

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Address _________________________________________________________

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❏ 20 PIA Creative Services❏ BC Midsouth Mutual Insurance Company❏ 14 PIA Trust Insurance Plans❏ 8 PIATN Agency E&O❏ 22 PIATN/Utica National Insurance❏ 22 PIATN True Color Advertising ❏ 7 Summit

❏ 20 Amerisafe❏ 16 Arlington/Roe & Co.❏ 9 EMC Insurance❏ 18 LEMIC Insurance Company❏ 18 M.J. Kelly of Tennessee❏ 10 NAI❏ 15 National Security Fire & Casualty Company❏ 12 Penn National Insurance

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PIATN officers and directorsDirectoryOFFICERSPresidentTina Hutsenpiller, CPIAHutsenpiller Insurance Services LLCMt. Juliet, TN(615) [email protected]

President-electJohn Keisling, CPIA, CISRKeisling Insurance Agency Inc.Byrdstown, TN(931) [email protected]

Vice PresidentJoe Kerr, CIC, CPIAKerr Insurance ServicesBrentwood, TN(615) [email protected]

SecretaryHerbert MontgomeryClay and Land Insurance Agency Inc.Memphis, TN(901) 767-3600, ext. [email protected]

TreasurerDonnie Hogan, CICFred M. Smith & Son Inc.Springfield, TN(615) [email protected]

Immediate Past PresidentSteve PeayBoyle Insurance Agency Inc.Memphis, TN(901) [email protected]

NATIONAL DIRECTORJune Taylor, CIC, CPIA, CPIW, DAEWilkinson Insurance AgencyWhite House, TN(615) [email protected]

DIRECTORSGreg AugustineThe Augustine Insurance GroupClarksville, TN(931) [email protected]

Llew BoydSouthern Insurance AssociatesChattanooga, TN(423) [email protected]

Carl Butcher, CIC, CPAC.L. Butcher Insurance AgencyKnoxville, TN(865) [email protected]

Andrea Bond Johnson, CPIAGolden Circle Insurance AgencyBrownsville, TN(731) [email protected]

Britt Linder, CICPeterson-Linder Insurance ServicesBartlett, TN(901) [email protected]

Chris Mills, CPCU, CICMills Insurance AgencyNashville, TN(615) [email protected]

Bill Richards, CPIA, LUTCFCommunity InsuranceGreeneville, TN(423) [email protected]

STAFFPam Cass, CPIAConvention, Education, Membership(615) [email protected]

Sandy Clive, CPIAE&O, Member Services(615) [email protected]

Lochiel GainesCommunications, Trade Show(615) [email protected]


MidSouth Mutual provides a measure of workers’ compensationto the home builders industry others simply cannot match.

•Owned and managed by home builders

•In-depth construction industry experience

•Strong insurance and risk management expertise

•Stability through the ups and downs of the market

•New name, same company, same high standards and focus on our clients (formerly known since 1995 as Home Builders Association of Tennessee Self-Insurance Trust)

• Examples of clients we serve include:

Bricklayers Painters Carpenters

Electricians Insulation Framers

Plumbers Flooring Cabinetry

Siding Installers Dry Wallers Masonry

Contact your local agent or Tom Perez at BSA 615.712.2398 or [email protected]

Proudly serving the members of the Home Builders Association of Tennessee since 1995.

Stability & Strength

www.midsouthmutual.com

Documents

Fall 2013