Primary Agent - May 2011 - PA Edition

PENNSYLVANIA

ALSO INTHISISSUE:_________________

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Racing ahead in the sluggish market

The soft market has taken its toll. Books of business are battered, staff isworn worn thin, and agency principals are hungry for business. IA&B shares afew creative considerations for getting ahead: new markets, new clients andnew services.

Page 10

The case for out-of-state workers’ comp coverage

It only took a split second for Dean J. Young to fall and injure himself whileframing a building on property near Salisbury, Maryland. But it took nearly sixyears for the courts to resolve the coverage issue that cleared the way for himto receive workers’ compensation benefits.

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ContentsP R I M A R Y A G E N T M A G A Z I N E

Copyright 2011. All rights reserved. No material may be reproduced in whole or in part without written consent of the publisher. The information in this publication is general in nature and is not intended to serve as legal, accounting, financial,insurance, investment advisory or other professional advice as to any reader’s particular situation. Users are encouraged to consult withcompetent legal, financial, insurance, investment advisory and or other professional advisors concerning specific matters before makingany decisions and we disclaim any responsibility for any decisions or actions by readers. Statements of fact and opinion in PrimaryAgent are the responsibility of the authors alone and do not imply an opinion on the part of the officers or the members of the IA&B.Participation in IA&B events, activities and/or publications is available on a non-discriminatory basis and does not reflect IA&Bendorsement of the products and/or services.

Subscriptions: Non-member price: $2.25 per copy or $15 per year.

All communications for publications, including news, features, advertising copy, cuts, etc., must reach the editor by 1st of month two monthsprior to publication. Advertising rates furnished upon request.

Address inquiries to:Primary Agent EditorMechanicsburg, PA 17055-0763Phone (800) 998-9644 or (717) 795-9100 Fax (717) 795-8347

Periodical postage paid at Mechanicsburg, Pa. and additional entry post office.

Postmaster: Send address changes to above address.Primary Agent (ISSN 1543-3110), Permit # 638-620, Issue # 2011-5) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

4 Chair of the Board’s Message5 Member FAQ6 State News8 Coverage Corner9 Glance at Events

17 IA&B Partners22 Technology Update24 Advertisers Index24 Classified Ads24 Last & Least

In every issue

Mission StatementPrimary Agent delivers ideas to help InsuranceAgents & Brokers’ members negotiate their uniqueposition as guardians of trust between insuranceconsumers and companies while facing thechallenges of maintaining a small business. PrimaryAgent also supports IA&B’s mission to preserve andadvocate the American Agency System.

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[ 3 ]


OfficersDavid Rosenkilde, CIC

Chair of the BoardReisterstown, Md.

Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-PVice Chair of the BoardWest Chester, Pa.

Kathleen M. Glattly, ChFC, CLU, CPCUImmediate Past Chair of the BoardFactoryville, Pa.

MembersJoyce M. Bailey, CIC, CRM, CPIW

Newark, Del.

Norman F. Basso, CPCUYork, Pa.

Vincent D. “Chip” Boylan Jr., CPCURockville, Md.

Henry “Butch” Bradley, Jr.Crofton, Md.

Timothy P. BurrisThompsontown, Pa.

John T. “Chip” Colwell Jr., CICCorry, Pa.

N. Lee Dotson, CIC, AAIWilmington, Del.

John L. FrankenfieldTelford, Pa.

G. Greg Gunn, CICLemoyne, Pa.

Diana M. Hornung-Momot, ACSRWilmington, Del.

Jocelyn R. Howard-Sinopoli, CIC, CISRButler, Pa.

Robert S. Klinger, LUTCFGermantown, Md.

Michael F. McGroarty Sr.Pittsburgh, Pa.

Ann Gallen Moll, CICReading, Pa.

Scott C. Rogers, CPIAYork, Pa.

Susan A. Sallada, CIC**Ft. Washington, Pa.

David B. Wasson Sr., CICState College, Pa.

James M. Watkins*Dover, Del.

King W. “Kip” White, LUTCFFallston, Md.

* IIABA National Director** PIA National Director

Board of Directors

Overcoming market obstacles

Times are tough. There’s no denying it.

The economic recovery is slow at best. The soft market is thelongest any of us have seen. And pressure from thestrengthening direct-writer contingency grows.

But there is hope. Independent agents are known for theirresourcefulness, their business savvy and their customerrelationships – strengths that will see them through.

Not to mention their support from IA&B. Your associationcontinues to forge ahead, developing compliance resources;providing training opportunities; monitoring industry, politicaland regulatory developments; and advocating on your behalf… all with your success in mind.

This month’s issue of Primary Agent magazine is noexception. The lead story shares a variety of creative ways –new markets, new clients and new services – that agenciescan get ahead in tough times. Take a read, and then takeheart knowing that IA&B is in your corner.

Until next time,

Dave

[ 4 ]

David B. Rosenkilde Sr., CIC

Chair of the Board’sM E S S A G E


Member FAQ

ANSWER:No, it isn’t. For many years now, the useof a commission multiplier has beencriticized consistently, and even rejected.There are a number of different reasonsfor that, including the fact that using acommission multiplier does not accountfor the agency’s overall profitability. It isa very poor measure of an agency’sperformance. Using it could provedetrimental to either the buyer or thepurchaser, depending on thecircumstances. If you need to rememberone thing, it is that there is no goodaverage commission multiplier.

The consensus in the industry is thateach agency sale transaction should beexamined, and priced, on its ownmerits. If one line of the incomestatement is likely to draw moreattention, it may not be commissions,but rather EBITDA (earnings beforeinterest, taxes, depreciation andamortization), on which a multipliercould, in fact, be applied. IA&B’srecommendation, for years now, hasbeen to hire the services of an agencyvaluation consultant, who will be able toshed some light on the numbers in amore meaningful way.

Depending on what your timeframe is(by the way, 10 years ahead is not toosoon to start preparing), you may wantto look at different options to get readyfor perpetuation. This plan can include:

w Identifying a potential buyerwithin or outside the agency (itcould also be a friendlycompetitor)

w Partnering with the identifiedperson through a buy-sellagreement

w Reviewing whether your businessstructure will be an impedimentto the deal due to the taxtreatment of the transaction, andconverting if necessary

w Making your agency morepalatable to a potential buyer(What this will take depends onyour agency’s strengths andweaknesses … another reason tostart early.)

For some more food for thought, IA&Bhas posted various resources on itswebsite, authored by reputablevaluation consultants, on:

w Merger and acquisition trends

w The concept of EBITDA as amultiplier (as a substitute to theold commission multiplier)

w Agency value

So, log on to www.iabgroup.com, andvisit the Agency Perpetuation page. Forspecific questions, feel free to contactthe Member Service Center by calling800-998-9644, option 0.

DO YOU HAVE A QUESTION? E-mail it to us at [email protected] use “Primary Agent FAQ” in the subject line of your message. You can also fax your question to (717) 795-8347. We look forward toanswering your questions!

QUESTION: Agency value: What is the normalsale price of an agency? Is it still 1.5 times thecommission income for a normal commercial/personal P&C agency?


State NewsPrimary Agent | May 2011

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MAP meetingsdetermine IA&B’sdirectionRest assured, the future of Pennsylvania’sindependent agents is in capable hands –the hands of IA&B members.Approximately 120 member agentscongregated for IA&B’s Member AgentPanel (MAP) meetings, held throughoutthe state last month. Their task? Weighingin on industry issues and providingfeedback on the association’s activitiesand direction.

The April 2011 meetings covered threemain topics:

w Opportunities and threats: Externalforces (positively and negatively)impacting member agencies

w Carrier advocacy: How IA&B canbest advocate on members’ behalfwith carriers

w Branding and marketing:Preferences, questions and concerns for a national/industrybranding campaign

The meetings also allowed associationstaff to recap the most recently launchedIA&B programs and services and to sharelegislative and regulatory updates. And,during an open forum, attendees wereable to air individual agency struggles andbrainstorm solutions.

As always, MAP members’ feedback nowheads to the IA&B Board of Directors,which will digest responses and makenecessary derivations to the association’spriorities and strategic direction.

MAP meetings are held each spring andfall in locations across thecommonwealth. Members serve two-yearterms. The latest round of meetingskicked off the 2011-12 cycle.

Read more:www.iabgroup.com/get_involved

Auto accidentsurcharge thresholdto jumpInstituting an accident-triggered surchargeor rate increase will require a higher claimcost as of July 1. The PennsylvaniaInsurance Department will increase theaccident surcharge dollar threshold from$1,350 to $1,450 for personal auto policies.

An insurer cannot “cancel or refuse torenew a policy or apply any surcharge,rate penalty or driver record pointassignment” unless the policyholder’sclaim cost over a three-year periodexceeds the threshold. The cap applies toany person injured or property damagedand is measured in excess of anydeductible or self-insured retention.

Read more: http://www.pabulletin.com/secure/data/vol41/41-1/24.html


Md. moves to birth-monthlicense conversionIf you hold a non-resident license inMaryland, it soon will renew on the lastday of your birth month. The MarylandInsurance Administration (MIA) recentlyannounced implementation of theNAIC’s State Based Systems (SBS) as a back-office licensing system.Highlights include:

w Expiration date conversion to birth month as required bylegislative amendments adopted in 2008; with more states aligning with the birth-monthrenewal, a producer’s resident and non-resident licenses willrenew at the same time

w Removal of NPI prefix fromindividual license numbers

w Availability of a print-your-licensefeature

More detailed information from the MIA and SBS will be forthcoming.

Access IA&B’s summary:www.iabgroup.com/md_birth_month_chart

Spring often showsup tick in agencyterminations: Know your rights?Members asked to sign a letter agreeing to agency termination should refrain from doing so … at leastnot before checking their rights underAct 143, Pennsylvania’s AgencyTermination statute.

When signing a request or anagreement to mutually terminate,agents automatically relinquish theprotections of the act. Memberscurrently in the process of beingterminated should review IA&B’sresources immediately to preserve their rights (start with the Q&A) andcontact IA&B’s Member Service Center at 800-998-9644, option 0, with any questions.

Review IA&B’s resources:http://www.iabgroup.com/pa/agency_termination

[ 7 ]

New MembersW E L C O M E

H D Compton Insurance Agency IncPhiladelphia, Pa.

Risk Analytics IncFeasterville, Pa.

Humphries Insurance Group IncBlue Bell, Pa.

Michael Pigott AgencyBensalem, Pa.

Read, follow or jointhe discussionThe time to dismiss social networking as a passing fad has come and gone.The fact is, the longer you put offjoining the conversation, the moreyou’re missing. IA&B is facilitatingprofessional and informative exchangeson the social Web.

Discuss trends and network withcolleagues by joining IA&B’s LinkedIn group.

Read timely updates on yourassociation’s activities and breakingindustry news by following IA&B on Twitter.

New to Web 2.0? There’s no better wayto learn how social networking works –and how it can work for your agency –than seeing how it’s done.

Jump onboard:www.iabgroup.com/soc_media


CoverageC O R N E R

[ 8 ]

JERRY MILTON, CIC

Jerry M. Milton teaches

and consults on industry

issues. The legal profession

recognizes him as an

expert on insurance

coverages. He is also the

education consultant for

IA&B, working with CISR,

CIC and continuing

education programs.

Primary Agent | May 2011

None of the following isnews to any of you: We havebeen going through sometough economic times.Companies have beenclosing, terminatingemployees, convertingregular employees totemporary status andoutsourcing work to others.The unemployment rate hasbeen between nine and 10percent for several months.Between 350,000 and400,000 individuals who havelost their jobs file forunemployment benefits eachand every month.

As I said, this is not news toany of you. But what aresome of the consequences ofthese tough times? Pressureat work. Stress from the workenvironment or frompersonal life. Reduction ofincome or loss of income.Some folks can handle thesesituations. Others can’t.Times like these often resultin an increase in domesticviolence, workplace violenceand crime.

Workplace violence,especially those involvingmass shootings, receivesextensive coverage in the

media. It seems like very fewdays pass without us beinginundated by the pressreporting on such an event.According to the NationalInstitute for OccupationalSafety and Health, homicideis now the second-leadingcause of death on the job,behind motor vehiclecrashes.

According to the U.S. Bureauof Labor Statistics, over theyears of 2004-2008, anaverage of 564 work-relatedhomicides occurred in theUnited States each year. Thisaccounted for 10 percent ofall workplace fatalities.Shootings accounted for 80percent of the work-relatedhomicides in 2008. Co-workers and former co-workers were the assailantsin 12 percent of theshootings. Robbers were theassailants in another 40percent in 2008. Theremaining fatalities werecaused by angry customers,relatives and other personalacquaintances.

Of all the workplaceshootings recorded in 2008,24 percent occurred in theretail trade. Workplace

shootings were less commonin manufacturing, accountingfor only 4 percent of the2008 shootings.

About four out of every fiveshooting victims in 2008were male. Robbers made up72 percent of the assailantsfor men and 51 percent ofassailants for women.Relatives and other personalacquaintances accounted foronly 4 percent of assailantsof homicides for men, but 28percent for women. Thoughmen face triple the risk ofbeing victims, homicide hasbecome the leading cause ofworkplace death amongwomen.

If a worker is killed orseverely injured in theworkplace by a robber, a co-worker, or a relative, it’scovered by workers’compensation insurance –right? The answer is not asimple “yes” or “no.” Theanswer is “maybe.” Stateworkers’ compensationstatutes vary.

For example, theCommonwealth ofPennsylvania excludesinjuries intentionally caused

WORKPLACE VIOLENCE


by a third party for personal reasons.Delaware excludes injuries caused bythe willful act of another employee forpersonal reasons only. Maryland doesnot have a similar exclusion in itsstatute.

Even if the death of, or injury to, theemployee is covered under workers’compensation, the company can facesignificant expenses. It has beenestimated that the average workplaceviolence incident costs employers$250,000. These expenses include

additional security, employeecounseling, public relations costs, lossof productivity, loss of income,lawsuits and, possibly, death benefitsnot covered by workers’compensation.

Responding to this increasing risk inthe workplace, some insurers havedeveloped workplace violenceinsurance to address many of theseexpenses that can result from aworkplace-violence incident.Businesses that might consider this

coverage are those that deal with thepublic, retailers, those that are openlate at night and those with littlecontrol over entry by the public.

No doubt, these policies are “niche”policies and will not interest many ofyour insureds. However, don’toverlook the availability of and theneed for this coverage. You may havean insured or two who would beinterested.

Y’all take care!

Date Topic Location

3 Contractual Liability and Certificates of Insurance Mechanicsburg, Pa.

3-5 L&H Licensing Study Course Philadelphia, Pa.

4 CISR: Commercial Property Course Pittsburgh, Pa.

10-12 P&C Licensing Study Course Pittsburgh, Pa.

11-14 CIC: Commercial Property Institute York, Pa.

16-19 CIC: Agency Management Institute Ellicott City, Md.

17 CISR: Agency Operations Course Reading, Pa.

18 CISR: Commercial Property Course Baltimore, Md.

William T. Hold Seminar Newark, Del.

18-20 James K. Ruble Graduate Seminar King of Prussia, Pa.

19 CISR: Commercial Property Course Mechanicsburg, Pa.

23-26 CIC: Agency Management Institute Erie, Pa.

24-26 P&C Licensing Study Course Lehigh Valley, Pa.

25 CISR: Commercial Property Course Lehigh Valley, Pa.

26 E&O Best Practices Seminar Philadelphia, Pa.

Glance at EventsM A Y C A L E N D A R

[ 9 ]


MARKETS AND SALES

Racing Ahead in theSluggish Market

The soft market has taken its toll. Books of businessare battered, staff is worn thin, and agency principalsare hungry for business. On the following pages, IA&Bshares a few creative considerations for getting ahead:new markets, new clients and new services.


[ 11 ]


CONSIDER NEW MARKETS

The green and technological movements of the 21st centuryare revolutionizing industries across the board. In return,insurance opportunities abound. And a bright spot in the softmarket is that more insurers are willing to write theseemerging risks.

Green building and risk sprout up everywhereAs of 2009, over 240 insurance companies in 29 countriesoffered 643 climate-related products and services, accordingto Ceres, a national network of investors and environmentalorganizations addressing sustainability challenges. U.S.companies were responsible for nearly 40 percent of theseinitiatives.

Green-building-related insurance products, in particular, are on the rise. The most recent figures show well over 20companies offering dozens of policies. So it’s no surprise that last year ISO introduced the Increased Cost Of Loss And Related Expenses For Green Upgrades endorsement (CP 04 02) for attachment to the commercial propertycoverage forms.

This endorsement provides coverage for all costs, subject tothe amount shown in the schedule, attributable to greenupgrades following a covered, direct physical loss. Greenupgrades means enhanced energy efficiency or use ofenvironmentally preferable, sustainable materials, productsor methods in design, construction, manufacture oroperation, as recognized by a green standards-setter (LEED,ENERGY STAR or Green Globes).

Beyond commercial green building, specialized personal andcommercial auto policies now replace lost vehicles withhybrid versions. Certain homeowners’ policies allow partiallosses to be repaired with ENERGY STAR products; andpersonal and commercial policies exist for green trendsetterswho generate their own power or install eco-landscaping.

Finally, there is increasing potential for ordinance or lawcoverage. As building codes receive eco-friendlyamendments, endorsements may be necessary to providesufficient replacement costs.

Cyber risks affect virtually everyoneThe risks associated with technology are multifold, and theyare expanding as fast as technologies are advanced.

On the commercial side, many insureds remain exposed inthe event of a hardware loss. While traditional policies coverphysical damages, they exclude business interruption andcosts of restoring function. And for those businesses that

________________________________

One way to retaincustomers is through

cross selling and expandingthe number of policies

they have with the agency.A direct correlation exists between the

number of policies andcustomer loyalty.

________________________________


store their customers’ personalinformation (read: socialsecurity numbers, credit cardnumbers or medical history), thestakes are higher. Beyond thegovernment’s wrath is that ofcustomers, who may sue.

The latest cyber products,coined Network Security andPrivacy Liability policies, addressthe risks of businessinterruption, data restoration,crisis management expenses,etc., and associated liabilityfrom a security breach, includingbreach notification (“Cybercoverage: the new ‘must-have’in the P&C portfolio?,” NationalUnderwriter, March 15, 2010).

Beyond business risks are thoseassociated with an individual’sactions online. Cyber bullying –coined “electronic aggression,”by the U.S. Centers for DiseaseControl – has gained significantnotoriety in recent years. Casesmaking national news headlinesalso have brought to lightinsurance repercussions: liabilityfor resulting bodily or personalinjury or property damage.

A coverage gap remains forinjury or damage resulting fromonline activity. The ISO personalinjury endorsement excludesintentional and malicious posts,and the AAIS homeowners’personal umbrella excludesbodily or personal injury orproperty damage resulting fromcyber bullying. Alerting insuredsto the exclusions is a wise risk-management maneuver.

MARKETS AND SALES

[ 12 ]

Top untapped marketsSearching for a way to round out accounts? Then look no further than these oft-forgotten and emerging markets. As a bonus, offering these coverages could reduce an agency’s E&O exposure and create goodwill (think: retention) with customers.

Cyber liability: Personal and commercial clients alike face escalating risks astechnology expands. What clients don’t know undoubtedly can hurt them.

D&O: When the economy goes south, the risk of bankruptcies and, in turn,“managerial malpractice” lawsuits spikes. And despite our fragile economyand slow recovery, only 25 percent of private companies have D&O policies.

EPLI: In this sluggish job market, the Equal Employment OpportunityCommission received more job-discrimination complaints during the last fiscalyear than any other in the agency’s 45-year history. Which makes EPLI morecritical to an insurance portfolio now than ever before.

Geography: Think outside the box – and, sometimes, under it. Minesubsidence in Pennsylvania, for example, remains a significantly untappedmarket. Over 1 million residences rest on abandoned coal mines, yet only58,000 homes are insured by the state’s Mine Subsidence Insurance Program.

Green building: Environmental friendliness isn’t always economically so. Thecost of building – and rebuilding – green is steep. Endorsements cover thereplacement of pricier green products and materials in the event of a loss.

Home businesses: Of the 11 million U.S. home-based businesses, themajority aren’t properly insured. The scope of their work and their business-ownership status determine if an endorsement or separate policy is necessary.

Flood: While FEMA ranks floods as the No. 1 natural disaster in the UnitedStates, plenty of insureds erroneously believe their homeowners’ orcommercial property policy covers flood damage and unknowingly risk theirproperty and its contents.

Renters: Over 60 percent of renters do not have a renters’ insurance policy,according to a late-2010 comScore study. And searching out and insuringrenters could lead to gaining their auto and umbrella policies as well.


EXPAND YOUR CLIENTBASE

Despite all of the newfangledmarketing efforts available toagencies, one of the mostsuccessful tactics is one of theoldest and most tried and true:referrals. After all, a currentcustomer’s experience speaksvolumes.

While agencies must mind stateand federal regulations, acompliant referral programcertainly is doable. According tostate laws, customers can pointbusiness your way as long asthey don’t sell, solicit ornegotiate the insurance ordiscuss the specific terms of theinsurance contract. And theirpayment cannot fall under theforbidden rebating orinducement category (seesidebar) and must be separatefrom their own policy(ies) withthe agency.

A kosher example would be togive a $10 restaurant gift card toa personal-lines client whorefers his neighbor to youragency. Another approvedreferral program could involvean accountant client who tellsher clients that she likes doingbusiness with you and whoshares your contact informationwith them. When you write aresulting commercial policy, youcould give her a gift card.

In Pennsylvania, for personallines referrals, the fee must be aone-time, nominal, fixed-dollaramount per referral and cannotbe conditioned on the actualsale. And in all states, realtorsare forbidden from receiving

referral fees by the federal Real Estate SettlementProcedures Act.

Regulations vary per state, somembers are encouraged toread more online:

Del.:www.iabgroup.com/de/referral_fees

Md.:www.iabgroup.com/md/referral_fees

Pa.:www.iabgroup.com/pa/referral_fees

ADD NEW OFFERINGS

Of course as soon as an agencysecures new clients, the work ofretaining them begins. In thecurrent economy, customerloyalty is often tested, and thecompetitive, buyer-friendly softmarket doesn’t help.

One way to retain customers isthrough cross selling andexpanding the number ofpolicies they have with theagency. A direct correlationexists between the number ofpolicies and customer loyalty.

Another way agencies aresucceeding with maintainingtheir client base is throughvalue-added services. Offeringloss prevention and safetytraining, risk-managementservices, loss analysis or humanresources assistance, forexample, showcases an agency’simportance to a client andmakes it less tempting to leavefor a small cost savings.

Before launching a value-addedservice, an agency principalmust consider the following

[ 13 ]


Rebate orinducement versusreferral feeIn a rebate/inducement situation, theagency would be making a payment oroffering a gift or special advantage to anexisting or prospective client, and the giftwould apply to the transaction between theclient and the agency. In other words, Agent A pays Client B for transactionbetween A and B.

w Example of inducement: If you writeyour policy with my agency, I willgive you a free toaster.

w Example of rebate: If you renew yourpolicy with my agency, I will give youa free toaster.

In a referral arrangement, the person whoreceives the gift is not part of thetransaction that is being completed. Agent A pays a third-party (Client B) forthe transaction between Agent A andProspect C.

w Example of referral: I will give you $X for every person you refer to myagency (or for every policy I writebased on your referral).


(“Implementing value-addedprograms,” Rough Notes,February 2011):

1. Do I have agency-wide buy in?If the program isn’tunderstood, accepted andimplemented across theboard, it won’t succeed.

2. Is my staff willing to beaggressive in implementation?Clients may see the serviceas a nice offering but neverget around to using it. That’s where agency staffmust step in, get themstarted, keep them investedand demonstrate theprogram’s value.

MARKETS AND SALES

[ 14 ]

Value-added servicesWhen considering new offerings, remember: They cannot fall within a producer’susual and customary services. And, of course, they cannot be specifically prohibited services.

Examples of services and the percentage of agencies that offer them:

Risk analysis 39%

Loss control 36%

Safety programs 35%

Claims management 25%

Employee benefits 20%

Disaster plan assistance 14%

Human resources consulting 12%

OSHA inspections, consulting 12%

Source: The NationalAlliance ResearchAcademy, 2009.

New Ventures accepted Up to 50% work subcontracted Exterior work up to 4 stories Blanket Additional Insureds Expanded list of eligible classes Tool Floaters Business Auto

Kineta Arendall x249 [email protected]

Transportation Underwriter

Tri-State General Insurance Agency 1-800-556-7894

We write more than just “trucking” . . . Visit us at www.tsgia.com

Maryland * Pennsylvania * Delaware * DC * Virginia * New Jersey

Property Casualty Underwriter

Vickie Doane x241 [email protected]

Phone quotes and on-line quoting available !!

Artisan / Trade Contractors


3. Is it financially feasible?Don’t wear your staff toothin. Big clients that bringin big commissions are thelogical fit for value-addedservices. You can’t affordtime-consuming giveawaysfor the little guys.

OR, WAIT IT OUT

It’s been a long six years. But the longest soft market indecades is bound to harden.While reports are contradictory,the first positive, hard-marketprojections are seeing the lightof day.

Most recently, SNL Financialasserted that the personal-linesmarket is hardening and thatcommercial-lines pricingincreases are on their way. The report is based on U.S.property/casualty premiums,which rose quicker in the fourth quarter of 2010 than any other since 2006. SNLcredited “underwriting losses, unfavorable reservedevelopment and an improvingeconomy" ("Soft market isending, really it is, says SNLFinancial," Insurance Journal,March 10, 2011). MarketScoutmade a similar projection inJanuary.

FINAL THOUGHTS

The prolonged soft market mayhave left a dent in books ofbusiness nationwide. But the oldadage remains true: Whatdoesn’t kill you, makes youstronger. Agency principals arerunning tighter ships, staff is

working more effectively, andclient relationships — bynecessity — are prioritized. And implementation of a fewcreative ways to add and retainbusiness now will continue tobenefit agencies long after themarket hardens.

_______________________________

Karen Robison is public relationsdirector for IA&B.

[ 15 ]



Platinum ProfileInsurance Agents & Brokers proudly recognizes Selective Insurance

Company of America as one of its Platinum Partners. IA&B Platinum

Partners dedicate the highest level of sponsorship to our organization.

FEATURED PARTNER:Selective Insurance

Company of America

CHIEF EXECUTIVE OFFICERGregory E. Murphy

Chairman, President and CEO

HOME OFFICE LOCATIONBranchville, New Jersey

A.M. BEST RATING A+ (Superior)

In 1926, Selective was started by asmall business owner committed toproviding prompt, fair settlements

and exceptional personal service.Today, Selective’s outstandingperformance continues, and can becredited to people at every level of theorganization who turn individualcreativity, skill, purpose and hard workinto the collective innovation,strategies and energy that characterizeexcellence. Their expertise atdelivering the distinctive combinationof high-touch through strongrelationships and high-tech throughease of seamless automation hascreated a powerful engine forprofitable growth.

The company’s value-added productsand services are offered throughapproximately 980 independentagents in 22 Eastern and Midwesternstates. Commercial insurance for smalland medium-sized businesses, lightindustry, and public entities representsabout 82% of the company’sinsurance operations.

Selective’s highly regarded field forceis dedicated to servicing andsupporting agents and customers.Living and working in their territoriesprovides Selective’s field-basedemployees with unlimitedopportunities to develop extraordinaryrelationships and to deliver a level ofservice unmatched by competitors.

The 49th largest property and casualtygroup in the U.S., Selective is acustomer-focused, super-regionalcompany providing a broad range ofinsurance and alternative riskmanagement products and services.The company has been rated “A+” (Superior) by A.M. Best for 49 consecutive years.

Selective’s financial stability in themarketplace, coupled with thenimbleness of a regional carrier,provides security for policyholders andthe capacity for profitable growth forthe company and its agents.

“Since our founding 85 yearsago, Selective has remainedcommitted to building strongrelationships with all of ourstakeholders. We value therelationships we have built witha select group of independentagents, and are dedicated tosupporting their successthrough the powerfulcombination of our ‘hightouch’business model and leading-edge technology.”

Gregory E. Murphy, Chairman, President and CEO


WHAT IS IA&BPARTNERS?The IA&B Partners

program gives company

and allied businesses

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demonstrate their

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DO YOU SEEYOUR NAME?To become an IA&B Partner,

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Listed below are those companies that strongly support the independent agencysystem and Insurance Agents & Brokers.

Thank you for your continued sponsorship.

PLATINUM LEVELACUITYBerkley Mid-Atlantic GroupDonegal Insurance GroupErie Insurance GroupHarleysville InsuranceHighmark Casualty Insurance CoInsurance Agents & BrokersService Group IncMMG Insurance CompanyMillers Mutual GroupMillville Mutual Insurance CoMutual Benefit GroupOhio CasualtyPenn National InsuranceSelective Swiss ReThe Main Street America GroupTravelersUtica National Insurance Group

GOLD LEVELAllied InsuranceProgressive

SILVER LEVELAccess Insurance Company American Mining Insurance CoCumberland Insurance GroupFrederick Mutual Insurance CoHarford Mutual Insurance CoJuniata Mutual Insurance CoPSBA Insurance TrustThe Motorists Insurance GroupThe Philadelphia ContributionshipWestfield InsuranceZenith Insurance

BRONZE LEVELAegis Security Insurance Co

Agency Insurance Company

AmWINS Program Underwriters Inc

Auto-Owners Insurance Company

Briar Creek Mutual Insurance Company

Builders Insurance Group

Chubb Group of Insurance Companies

Encompass Insurance

First General Services

Foremost Insurance Group

Goodville Mutual Casualty Company

Grange Insurance Companies

Guard Insurance Group

Hanover Fire & Casualty Insurance Company

Insurance Alliance of Central PA Inc

Insurance Placement Facility of PA

Keystone Insurers Group Inc

Lebanon Mutual Insurance Company

Mercer Insurance Group

Merchants Insurance Group

Mercury Casualty

Penn Millers Insurance Company

Penn PRIME Municipal Insurance

Reamstown Mutual Insurance Company

Rockwood Casualty Insurance

State Auto Mutual Insurance Company

TAPCO Underwriters Inc

The Brethren Mutual Insurance Company

The Mutual Service Office Inc

Tuscarora Wayne Insurance Company

Primary Agent May 2011


COVERAGES

The case for out-of-stateworkers’ comp coverageMaryland court interprets Other States Endorsement

It only took a split secondfor Dean J. Young to fall and injure himself whileframing a building onproperty near Salisbury,Maryland. But it took nearlysix years for the courts toresolve the coverage issuethat cleared the way forhim to receive workers’compensation benefits.


[ 19 ]


In deciding this complicated case, involving two tiers ofsubcontractors and two states, the Maryland Court of SpecialAppeals in February clarified the meaning of a ResidualMarket Limited Other States Insurance Endorsement.

BackgroundIn 2005, a Delaware corporation, A&B Enterprises, Inc.,contracted with Maryland resident, Richard Townsend, to build apole building on Townsend’s Maryland property. A&Bsubcontracted the work to WMT Contracting, a business run byDelaware residents Wayne and Marie Travis. WMT in turnemployed Young, a Delaware resident, to work on the site.

After the May 16, 2005 fall, Young initially filed a workers’compensation claim against WMT in Delaware, but that claimwas later dismissed. Young then filed a claim with the MarylandWorkers’ Compensation Commission. Because WMT wasuninsured, the Maryland Uninsured Employers’ Fund was madea party. The Uninsured Employers’ Fund promptly made bothA&B and its insurance carrier, Zurich American InsuranceCompany, third parties in the case.

The Maryland Workers’ Compensation Commission found WMTwas uninsured, but recognized A&B as a “statutory employer”under Maryland law, and therefore liable for Young’s benefits tobe paid out of the Zurich policy. Zurich petitioned for judicialreview, and the Montgomery County, Maryland Circuit Courtaffirmed the commission’s ruling, resulting in the appeal to theCourt of Special Appeals.

DecisionThe court focused its decision on the insurance policy Zurichissued in Delaware to A&B, which provided workers’compensation coverage. In the policy application, A&B saidDelaware was the only state in which it performed work. So, theworkers’ compensation portion of the coverage applied toDelaware’s workers’ compensation law. But the policy alsocontained a Residual Market Other States InsuranceEndorsement, which promised to promptly pay benefits forworkers’ compensation as required by any other state, if allconditions were met.

It was these conditions that the court examined:

1. The employee claiming benefits was either hired under acontract of employment made in [Delaware] or was, at thetime of injury, principally employed in [Delaware]: and

2. The employee claiming benefits is not claiming benefits ina state where, at the time of injury (i) you have otherworkers’ compensation insurance coverage, or (ii) youwere, by virtue of the nature of your operations in that

Learn moreRead more about workers’

compensation coverage, including issues with out-of-state

employers, online.

Delaware:www.iabgroup.com/de/coverages/wc

Maryland:www.iabgroup.com/md/coverages/wc

Pennsylvania:www.iabgroup.com/pa/coverages/wc

_____________________________

In deciding this case, the Maryland Court of

Special Appeals clarified themeaning of a Residual Market

Limited Other StatesInsurance Endorsement.

_____________________________

I


state, required by thatstate’s law to haveobtained separate workers’compensation insurancecoverage, or (iii) you are anauthorized self-insurer orparticipant in a self-insuredgroup plan; and

3. The duration of the workbeing performed by theemployee claiming benefitsin the state for which thatemployee is claimingbenefits is temporary.

The court noted that each ofthese three requirements were

joined by “and” so theseconditions would all have to besatisfied for the policy holder tobe responsible for the workers’compensation benefits.However, within the secondrequirement there are threeconditions separated by “or.” The court found that because the lead in paragraph is writtenin the negative, satisfaction ofany of the three subpartsprevents coverage.

Young was hired in Delaware,and was, at the time of injury,principally employed inDelaware. In addition, the courtconcluded that Young’s workwas temporary, satisfying thefirst and third requirements. The court spent most of theopinion analyzing the second requirement.

A&B did not have other workers’compensation insurance inMaryland. It was not anauthorized self-insurer in thatstate. The court then turned toMaryland law for the subsectioninvolving a state’s requirementto have obtained separateworkers’ compensation. UnderMaryland law, an employee is a“covered employee” if injured inMaryland unless the employeewas considered a “casualemployee” under Maryland Codeor in Maryland only“intermittently or temporarily.”

In this case, Young was hired asa regular employee, and he andWMT intended “that he wouldcontinue employment for aregular and indefinite term,” theruling found. He was thereforenot a “casual employee.”

COVERAGES

[ 20 ]

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The court interpreted theendorsement to providecoverage where “an employeeemployed in the state ofcoverage [Delaware] is injuredin another state [that] providesfor benefits under its laws[Maryland], but the employerdoes not regularly do businessin that state, and the employeeis performing work in that stateon a temporary basis.”

The court found that Young washired in Delaware, his work inMaryland was temporary andMaryland did not requireseparate workers’ compensationinsurance coverage within themeaning of the endorsement. Asa result, Young will receivecoverage for workers’compensation benefits under the Zurich policy.

_______________________________

James P. Steele contributed thisarticle. He is a board member ofthe mid-Atlantic firm Carr Maloneyand president of the D.C. DefenseLawyers’ Association. He focuseshis practice on insurance coverageand complex litigation.

[ 21 ]

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Primary Agent | May 2011 TechnologyU P D A T E

[ 22 ]

MATTHEW MARKO

Matthew Marko is a marketing

process manager for

Progressive Insurance.

He works to provide local

marketing strategies, tools

and co-branded collateral to

help independent agencies grow

their businesses. E-mail him at

[email protected].

Matt prepared this article for

ACT. For more information

about ACT, contact

Jeff Yates, ACT Executive Director

at [email protected]. This

article reflects the views of the

author and should not be

construed as an official

statement by ACT.

As a marketing processmanager for Progressive, Ispeak with independentagents across the countryabout the importance ofsocial media. For most,finding time in their busyschedule is one of the biggestconcerns.

But you don’t have todedicate hundreds of hours tosee a return from socialmedia. A well-defined strategy(and a few time-saving tools)can help you strike a balancebetween the time you investand the value yourinvestment adds.

When it comes to socialmedia planning, there’s noright or wrong level of

involvement. The mostimportant factor isconsistency. Start by settinggoals for your agency’sparticipation. Whether it’sregular interaction withcustomers on Facebook, atweet every few days or aweekly blog post, you canstrengthen your social mediapresence by having cleargoals in sight.

Here are three levels of socialmedia involvement toconsider based on the timeyou want to commit and thegoals you set:

Listen (1-2 hours a week)This should be the first step ofany social media strategy.

After you’ve set up youragency’s accounts on sites likeFacebook, Twitter andLinkedIn, study what peopleare saying on the platform.Check sites like Google Placesor Yelp! for customer reviewsof your agency. Friend yourcustomers and follow theirupdates, track yourcompetitors’ tweets andwatch how people respond.Note what’s working, recordthe questions and topics thatdominate the conversation,and think through how you’drespond.

By first using social media asa listening tool, you’ll learnbest practices for statusupdates, tweets and blogposts before creating your

SOCIAL MEDIATIME-SAVERS


[ 23 ]

own. Plus, you can apply what you’relearning from online chatter to shapequoting and in-person conversationswith your customers.

Time-savers

w Clearly outline actions andresponsibilities within your agencyto prevent redundancy, maintainfocus and meet your social mediagoals. For example, you couldassign a single person in youragency to review Facebook,Twitter and LinkedIn for one hour,twice a week.

w “Like” competitor Facebook pagesfrom your personal profile tomore easily follow their updateswhen you’re online.

w Search Twitter and third partydirectories like WeFollow andTwellow to identify popularprofiles associated with insurance.Create Twitter lists to organize thepeople you follow by category(customers, competitors, etc.), anduse programs like Hootsuite orTweetdeck to monitor your Twitterlists at a glance.

w Use a reputation managementtool to monitor what people aresaying about your agency.Consider using free services like SocialMention and GoogleAlerts, or more robust paidservices like ChatMeter,LocationMonitor or Trackur.

w Create a Google Reader accountfor one-stop monitoring of keyinsurance blogs and publications.Content hubs can save you hoursa week by better organizingcontent for quick review.

Respond (2-5 hours a week)After taking some time to listen, jointhe conversation by responding toquestions, posts and comments with ahelpful link or thoughtful answer. Note

that while answering questions ordirecting people to another onlineresource builds goodwill and trust,“hijacking” an online conversation toexplicitly promote your agency canundermine your efforts.

Provide helpful advice over time andassociate comments with your agencythrough hyperlinks or a simplesignature with contact information.Remember, showing your valuedoesn’t require you to give “pro bono”advice. Asking the right questions andoutlining relevant points customersshould consider can demonstrate thevalue of an independent agent andlead to a follow-up phone call.

Time-savers

w Focus on a few active onlinecommunities rather than jumpingaround looking for everyopportunity to respond. You’ll getto know the members better, andyour participation will buildcredibility that can lead toreferences across the socialnetwork.

w Develop a FAQ of common topics,your responses and onlineresources you can share. Usingthese responses as a starting pointcan save time when responding tosimilar questions or comments.

Publish (5+ hours a week)The final level of social mediaengagement is proactivelycommunicating to your audience.Although most businesses prefer tojump right into engagement, bylistening and responding first, you’ll bemore comfortable with the mediumand your audience. By starting slow,you’ll also have a better understandingof the time you have for social media,and you’ll be more likely to providethe consistent presence necessary tobuild trust.

Time-savers

w Put a process in place to keepyour involvement consistent andefficient. Assign a producer, CSRor a marketing intern from a localcollege as your social mediamanager to ensure a single pointof contact. Make sure they workalongside everyone in youragency to get questions answeredand develop content withoutbottlenecks. Remember thateffective social media engagementis timely and human. Delayedresponses and overly corporatelanguage limit your effectivenessonline.

w Share any quality information youthink followers may be interestedin – it doesn’t always need to beabout insurance. Not only can thissave you time developing yourown content, it provides value tofans, followers and readers andincreases the chance that otherswill share your content with theircommunities.

w Distribute the work among a fewemployees to keep it manageable.This adds variety to your postsand prevents disruption due tovacation, job changes or illness.

w Mix up your content. A thought-provoking question can be aseffective as a blog post and takes afraction of the time to compose.Discussing community events orcommenting on your favoritesports team can also engage youraudience without the research andwriting time longer posts mayrequire. Plus, consumers willappreciate seeing the personalityof your agency and its employees.

Editor’s note: To learn more on socialmedia, visit www.iabgroup.com, selectTechnology from the left-hand menubar and then click Other Resources.


Atlantic Specialty Lines Inc . . . . . . . . . . . . . . .IBC

Brokers Surplus Agency . . . . . . . . . . . . .IFC, IBC

Commonwealth Ins Co . . . . . . . . . . . . . . . . . . . .1

Frederick Mutual Ins Co . . . . . . . . . . . . . . . . .IBC

Guard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Harford Mutual . . . . . . . . . . . . . . . . . . . . . . . . .21

IA&B Partners Program . . . . . . . . . . . . . . . . . . .17

Interstate Insurance Mngmnt. . . . . . . . . . . . .OBC

Penn National Insurance . . . . . . . . . . . . . . . . .15

PennPRIME . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Philadelphia Contriutionship . . . . . . . . . . . . . . .5

Preferred Property Program . . . . . . . . . . . . . . .21

TAPCO Underwriters . . . . . . . . . . . . . . . . . . . . .20

Tri-State General Ins Agency LTD . . . . . . . . . . .14

Ad Index

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[ 24 ]

While corporations never would take a celebrityendorsement lightly, that’s exactly how some celebrities take their end of the deal. Enter reputationrisk insurance.

New York-based DeWitt Stern rolled out the product inearly 2010, coincidentally at the same time TigerWoods’ scandal broke and his endorsements crumbled.The purpose? To “protect brands, corporate entitiesand advertisers against losses incurred fromreputational crises, … both the cost of crisisremediation and actual loss of revenue following apublic relations crisis.”

A new concept stateside, the coverage is popular forwary companies in Europe.

----------------------------------------------------------------———————-------The Last & Least column is dedicated to the industry’s oddities —from creative claims and kooky coverages, to (tasteful) jokes andstrange stories. Submit yours to [email protected], subject line: Last & Least. The editor will happily protect sources’ anonymityupon request.

Good name, meet bad antics


Frederick Mutual Insurance Company, an AM BESTA- (Excellent), VI property/casualty insurer writing inMaryland and Pennsylvania is currently looking forexperienced property/casualty insurance agents licensedto write personal and commercial lines business inMaryland and Pennsylvania. Frederick Mutual, a nichecompany, specializes in writing Small ArtisanContractors, Mainstreet BOP Business, Homeowners,Dwelling Fire and Personal Umbrella.

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Additional background information regarding FrederickMutual is available on our website at www.fredmut.com.

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3 1/18/11 11:29:18 AM


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Documents

Primary Agent - May 2011 - PA Edition