Primary Agent - September 2009 - MD Edition

MARYLAND

ALSO INTHISISSUE________________Coverages for swine flu claims

G10805 Covers.qxp:September09Primary 8/13/09 9:42 AM Page 2

THESE AGENTS HAVE MADE THEIR MARKCongratulations to Progressive’s Signature Agents

Congratulations to the 43 Pennsylvania independent agents who’ve achieved Signature AgentSM status in our new Progressive Preferred program.

The program recognizes and rewards agents for selling an average of at least one preferred Progressive personal auto policy per week. This elite group now earns higher commission and a variety of additional benefits, including the opportunity to leverage more of Progressive’s marketing firepower.

©2009 Progressive Casualty Insurance Company and its affiliates, Mayfield Village, Ohio.

P R O G R E S S I V E

To find out what you need to do to make your mark as a Signature Agent, contact your Progressive account sales representative.

The Progressive Preferred program is currently only available in Pennsylvania and Colorado.

James WadeWade Insurance

Philadelphia

David SciollaSciolla Agency

Ivyland

John SciollaSciolla AgencyKing Of Prussia

Steven GoldbergContemporary

Insurance AgencyMonroeville

Jeffrey PompeiPompei Insurance Agency

King Of Prussia

Michael PadgeonJuniata Insurance Agency

Philadelphia

Tom FloreyFlorey Insurance Agency

Clarks Summit

Mike McCorristonMcCorriston Agency

Newtown

Jim IddingsIddings Insurance Agency

Wyalusing

Brian MillerMiller Insurance Agency

Jonestown

Zheng NiuMetro Insurance Services

Philadelphia

Bill RiemenschneiderRiemenschneider Agency

Lansdale

Lee HinkleHinkle Agency Inc

Richboro

Brian TirpakTirpak Insurance

Tamaqua

Richard HirschSterling Insurance Agency

Levittown

Michael FulginitiFulginiti Insurance

Aston

Cliff HutchensCliff Hutchens Agency

Philadelphia

Tom WolfWolf Insurance Agency

Nazareth

Ron MaerzThe Insurance Man

Roslyn

Gary OrvietoImperial Agency

Bala Cynwyd

Doug ErwinAdvanced Insurance Solutions

Hershey

Anita AllegrezzaFreedom Insurance Group

Philadelphia

Carl Karschner William R. Karschner & Son

Coudersport

Kathleen Johnston-ParoneHenderson Agency

Aliquippa

Paul BarzdB & W AgencyWashington

Mike GuerriniGuerrini Insurance

York

Roy ThompsonThompson NE Insurance

Scranton

Jim HoffmanJ E Hoffman Agency

Hawley

John CoolbaughCoolbaugh Insurance Agency

Stroudsburg

Brian FitzsimmonsFitzsimmons Insurance Agency

Forest City

In Memory of Mark Coleman*

Coleman Insurance IncPittsburgh

Felicia KatzShirley Katz Inc

Stroudsburg/E Stroudsburg

Mike BastendorfAAA Insurance AgencyHarrisburg/Lancaster

Teri MillerMiller & Miller Agency

Slatington

Mark JohnsonRunkles Insurance Agency

York

Robert ColemanColeman Insurance Agency

Gilbert

James Ford and Stephen BrownJames Ford and

Stephen Brown AgencyPhiladelphia

James MorrellFirst National Insurance Agency

Meadville

Dan MortonD J M Insurance Agency

Mechanicsburg

Brian CorbettCorbett Insurance

Shavertown

Andrew BommentreFry & Bommentre Incorporated

Warminster

Gary DijosieDijosie Insurance Services

Philadelphia

Robert Moran Moran Insurance

Harleysville

09A00214.AP (07/09)

*We'd like to offer our condolences to the family, friends and associates of Mark Coleman of Coleman Insurance in Pittsburgh. Mark passed away suddenly on July 19, 2009.

G10805 IFC-IBC-OBC.qxp:September09Primary 8/13/09 10:04 AM Page 1

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Hope for the best, prepare for the worst

From frozen pipes to fires, hazmat incidents to hurricanes, common accidentsand natural disasters cause thousands of businesses to close each year. And atleast 25 percent never reopen. IA&B members have a new resource to helpthem prepare for the unthinkable and reduce their likelihood of becoming astatistic. Introducing the Emergency and Business Continuity PlanningManual….

Page 12

Insurance coverage for swine flu claims

Diana Shafter, Marshall Gilinsky and Rhonda D. Orin of Anderson Kill & Olickdiscuss insurance coverage for liability related to swine flu, including coverageunder CGL, D&O and workers’ compensation policies.

Page 18

12

18

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

Copyright 2009. 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 EditorPO Box 2023Mechanicsburg, 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 # 2009-9) is published monthly by IA&B Service Group Inc., a subsidiary of IA&B.

4 Chairwoman of the Board’s Message5 Glance at Events6 State News7 New Members8 Preventing Errors & Omissions10 Coverage Corner

11 Member FAQ17 IA&B Partners24 Technology Update27 Advertisers Index27 Classified Ads

In every issue

Mission StatementPrimary Agent delivers ideas to helpInsurance Agents & Brokers’ membersnegotiate their unique position asguardians of trust between insuranceconsumers and companies whilefacing the challenges of maintaining a small business. Primary Agent also supports IA&B’s mission topreserve and advocate the AmericanAgency System.


FLEXIBILITY.Gumby’s not the only one who can bend over backward.

B U S I N E S S | A U T O | H O M E | L I F E / E M P L O Y E E B E N E F I T S | F L O O D | W W W. H A R L E Y S V I L L E G R O U P. C O M

Ever seen an insurance company stretch? At Harleysville, our professionalsgive new meaning to the word, “flexible.” And they’re anything but green.Instead, you’ll find seasoned underwriters who arrive in your office with theauthority to craft solutions to meet your challenges. A loss control staffthat’s OSHA-certified to lead safety training wherever you need them togo. And a claims team as accommodating to your clients as that of any other carrier—large, mid-sized or small. In fact, the only way we’re rigid is in our commitment to the independent agent. Don’t expect us to bend when it comes to that.

For more information, call 800.523.6344, ext 5016, visit www.harleysvillegroup.com, or contact your local Harleysville office.

Gumby ©2008 Perma Toy Co.,Inc. All Rights Reserved


OfficersKathleen M. Glattly, ChFC, CLU, CPCU

ChairwomanFactoryville, Pa.

David Rosenkilde, CICVice ChairmanReisterstown, Md.

Robert J. “Buc” Cawley, AAIImmediate Past ChairmanWexford, Pa.

MembersNorman F. Basso, CPCU

York, Pa.

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

Timothy P. BurrisThompsontown, Pa.

M. Scott Clemens, CIC, CPCU, CLU, ChFC Souderton, Pa.

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

Robert B. Hall, CPCU, CLU, ChFC, ARM, ARM-PWest Chester, Pa.

Linda A. McCann, AAI, CPCU, CPIWSalisbury, Md.

Michael F. McGroarty Sr.Pittsburgh, Pa.

Scott C. Rogers, CPIAYork, Pa.

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

William D. Schneider, CPCU, ARM*Pittsburgh, Pa.

Robert A. Walbeck, CICHomer City, Pa.

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

James M. Watkins*Dover, Del.

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

John S. Yasik, CICNewark, Del.

* IIABA National Director** PIA National Director

Board of Directors

Be Prepared

Fall is often associated with change — even from our childhood,when the season marked a new school year. At IA&B itcoincides with a change in leadership, as this month marks myfirst in the role of chairwoman of the board. I am excited andenergized to be given this opportunity to serve our membership.

Physician, heal thyself. We preach the value of insurance, ofpreparing for the unexpected. But beyond insurance, when itcomes to our own agencies and livelihood, many of us ignorethe potential for disasters, accidents and emergencies.

September is National Preparedness Month, which makes it theperfect time to focus on your agency’s readiness for an eventthat disrupts your day-to-day business operations. If you haven’talready, I encourage you to take advantage of IA&B’s Emergencyand Business Continuity Planning Manual, a simple-to-use, Web-based resource that walks you through preparation and providesa guide for managing crises. (You’ll find an article about this newmember benefit on page 12.)

I would also like to take this time to remind you that it is ourresponsibility to prepare and secure our future by:

w educating our clients about our industry to attract anddevelop individuals to a business that everyone needs andis a major part of our economy;

w continuing to defend the role of agents in the sale of healthinsurance and be recognized as purchasers of healthinsurance for our employees; and

w being a united voice!

As the new leadership of the IA&B Board of Directors begins itsterm, I pledge to you that we will do our best to prepare for thechanges, known and unforeseen, that threaten our associationand its members.

Until next month,Kathleen

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Kathleen GlattlyCPCU, CLU, ChFC, AIM

ChairwomanO F T H E B O A R D ’ S M E S S A G E


Glance at EventsDate Topic Location

1-3 P&C Licensing Study course Philadelphia, Pa.

2 CISR Commercial Casualty course Reading, Pa.

3 CISR Commercial Casualty course Baltimore, Md.

Dynamics of Service seminar Pittsburgh, Pa.

9 Company Auto vs. Personal Auto seminar Baltimore, Md.

10 Company Auto vs. Personal Auto seminar Mechanicsburg, Pa.

14-17 CIC Agency Management institute Harrisburg, Pa.

14-16 James K. Ruble Graduate seminar Ocean City, Md.

14 *CISR Personal Residential course Mechanicsburg, Pa.

15 *CISR Personal Auto course Mechanicsburg, Pa.

16 *CISR Agency Operations course Mechanicsburg, Pa.

E&O-10 Ways to Get Sued seminar Newark, Del.

17 *CISR Commercial Property course Mechanicsburg, Pa.

E&O-Mistakes That Lead to E&O Claims seminar Baltimore, Md.

18 *CISR Commercial Casualty course Mechanicsburg, Pa.

22 Company Auto vs. Personal Auto seminar Allentown, Pa.

23-26 CIC Life & Health institute Pittsburgh, Pa.

23 Company Auto vs. Personal Auto seminar Newark, Del.

24 Company Auto vs. Personal Auto seminar York, Pa.

*CISR Marathon Week

Don’t wait for a CISR course to come to you — access it from your desktop! CISR OnLine is an excellent way to complete a course you need that may not be scheduled in your area in thetimeframe you need it. You can also mix and match the CISR OnLine course with classroom courses so you can stillmaximize the benefit of networking and face time with the instructor.Register for courses online at iabgroup.com.

S E P T E M B E R C A L E N D A R

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State NewsPrimary Agent | September 2009

LicensingSeveral producer licensing changes willbecome effective Oct. 1, 2009.

w General CE: Licensees renewingon or after Oct. 1, 2009 will need24 hours of CE credits, unless theyare grandfathered (continuallylicensed for over 25 years as ofOct. 1, 2008), in which case theywill need only 8 credits.

w Ethics CE: Licensees renewing onor after Oct. 1, 2009 will need tohave completed 3 ethics credits.

IA&B’s ethics course has been approvedfor credit by the Maryland InsuranceAdministration. Members can findadditional information on the course byvisiting iabgroup.com or by contactingIA&B’s Member Service Center toll freeat (800) 998-9644, option 0.

Title insuranceThe recently adopted SB 86 amendsSection 10-121 of the Insurance Article byadding language that requires:

(A)(1) In this subsection, “TrustMoney” means a deposit, payment,or other money that a personentrusts to a licensed title insuranceproducer in connection with theprovision of escrow, closing, or realestate settlement services.

(2) Except as provided in paragraph (3) of this subsection, only a licensedtitle insurance producer may exercisecontrol over trust money.

(3) This subsection does not apply totrust money that is entrusted to:

(I) A law firm as defined in Section10-125 of this subtitle;

(II) A title insurer.

Persons who “may exercise control overtrust money” include those withsignature authority on a trust or escrowaccount, those who can approve and/orrelease wire transfers from a trust orescrow account and those who haveday-to-day control of disbursementsfrom a trust or escrow account. Theamendments went into effect June 1,except for Section 2, which will becomeeffective Oct. 1, 2009.

The bill also increased the amount of themandated fidelity bond, surety bond orletter of credit from $100,000 to $150,000each. A bond in the increased amountwill be required for any producer whoapplies for a new license or holds anexisting license due to renew on or afterOct. 1, 2009.

The countdown is on: Oct. 1 marksregulatory, legislative changes

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G10805 MD 6-7.qxp:SeptPrimaryAgnt009 8/13/09 10:01 AM Page 2

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Fidelity bondsThe General Assembly this year passedHB 687 (SB 541) requiring governingbodies of cooperative housingcorporations, condominium andhomeowners’ associations to purchasefidelity insurance protecting againstfraud, dishonesty or criminal acts by itsdirectors, officers, agents or employees.The new requirement takes effect Oct. 1, 2009.

The amount of coverage needed is thelesser of $3 million or:

w for cooperative housing: threemonths’ worth of gross commoncharges and the total amount heldin all investment accounts at thetime the fidelity is issued;

w for condo associations: threemonths’ worth of gross annualassessments and the total amountheld in all investment accountswhen the fidelity is issued; and

w for homeowners’ associations:three months’ worth of grossannual association fees and thetotal amount held in allinvestment accounts when thefidelity is issued.

Workplace fraudSenate Bill 909 goes into effect Oct. 1, 2009. The pending law, whichapplies to the construction andlandscaping industries, establishespenalties for employers who knowinglyfail to properly classify employees andfurther establishes broad investigativeprocedures for the state to utilize incases of noncompliance.

This month marks the secondMember Agent Panel – betterknown as a MAP – of the year. It’san opportunity for IA&B to hearmembers’ feedback on programsand services and for members todrive the association’s priorities.

Who: IA&B members

What: Member Agent Panel

Where/When:

Gaithersburg, Sept. 9

Towson, Sept. 10

Bowie, Sept. 10

MAP participants (most of whomare agency principals) volunteer fora two-year term and attendmeetings each April and Septemberin a nearby town. In total, IA&Bhosts 13 MAPs throughoutDelaware, Maryland andPennsylvania.

Spaces remain for participants inthe 2009/10 cycle. Interestedmembers should visitiabgroup.com/about_us/maps.aspor contact IA&B’s Member ServiceCenter toll free at (800) 998-9644,option 0.

Get out the

MAP

MAP participants drive the association’s priorities.

G10805 MD 6-7.qxp:SeptPrimaryAgnt009 8/13/09 10:02 AM Page 3

PreventingE R R O R S A N D O M I S S I O N S

[ 8 ]

ROBERT J. BURNS

Robert Burns is an E&O

underwriting manager for

Utica Mutual Insurance

Group in Utica, NY.

Insurance Agents & Brokers

Service Group Inc. is the

exclusive agent for the Utica

E&O program in Delaware,

Maryland and Pennsylvania.

For questions regarding this

article or your Errors &

Omissions coverage, contact

IA&B at (800) 998-9644 or by

e-mail at [email protected].

WHAT DOES MY E&O REALLY COST?

Primary Agent | September 2009

Ralph Waldo Emerson said;“Can anybody rememberwhen times were not hard andmoney not scarce?” Everyoneis watching their costs andexpenses these days.

It is a serious responsibility forany business manager orowner to ensure that everydollar spent is a worthwhileinvestment in their business. Itis a duty they owethemselves, their stockholdersand employees.

It is right and appropriate tolook at serious competitivebids for every business cost.Your agency E&O insurancepremium is one of thosecosts. Most agencies do look,and there are many ways togo about it.

Most go through a process ofanalysis. Commoncomparisons are limits,deductible and majorcoverage terms. With thisarticle I would like to addressthose and add someadditional points ofcomparison.

The normal routine is tolook at the limits anddeductible first. Then themajor terms such asinsolvency are compared. But

does this address costdifferences in their entirety?From my experience, the pricevariances in a single year areusually around 7 to 15percent. In heatedcompetition it can become alot more. And some real one-year savings can be had.

If you step back and look,you’ll see there’s more to thispicture when you considerwhether your agency is reallysaving anything over, say, afive-year period … or even atwo-year period.

What if you save $5,000 andthen find out that the newdeductible applies tocompany expenses other thanattorney fees, and they hityou for $7,500 on a “noindemnity” claim that wouldnot have applied on your oldpolicy? Your $5,000 savingsjust turned into a $2,500 loss.

There is a whole range ofother variables that canhave a huge impact on thecost of your E&O that youshould consider. The firstgoal is managing the overall,long-term cost of protectingyour agency. The one-yearpremium is only one part ofthat cost.

Agents’ E&O insurance is aspecialized line of business.Many standard insurancecompany claims andunderwriting practices don’tapply in E&O. You only gainthat insight with experience.

Take management of losshistory from an underwritingperspective. If the loss ratiobecomes too high, non-renewal is an industrypractice. It is not desirablewith E&O because of thenature of the tail coverage. Ifa carrier gives you asignificantly better deal on thefirst year but non-renews youfor claims in an unfavorablepart of the market cycle, yourcosts can go up 100 percent.

Because we offer very broad,extended reporting periodoptions, it is in our bestinterest to work with anagency as opposed to usingnon-renewal. When looking atother carriers, you may wantto see how long they havebeen in the E&O line as a testof stability.

Another soft cost is claimsexpertise. Better claimshandling results in moreefficient claims handling. Thiscan have major impact on


[ 9 ]

your office operation because knowledgeable E&O claims peopleare going to take up less of your time and mitigate the lostrevenue, lost time and lost productivity your agency will spenddealing with a loss.

While it is difficult to quantify, look at it this way: An agency with$2 million in revenue over 250 days of operation makes $8,000 aday. Or look at the revenue generated per person for a sense ofwhat may be lost due to depositions and staff time pullingtogether information. You want to make sure that your E&Ocarrier is not taking a second more than is needed in addressingyour claim. That can only be done by highly experienced claimsprofessionals with a superb panel of attorneys.

So it’s worth asking a prospective E&O carrier directly, “What is the experience of your claims staff, and what attorneys do they use?”

Service can also be a major unseen cost factor. Do you havedirect access to decision makers? If you have an immediatequestion such as a merger acquisition question, can you get ananswer that day? If you can’t, what is the potential cost in lostrevenue while the details are put through channels?

This leads to the question of future needs. We will occasionallyhear an insured say that they don’t need broad coverage. What istrue today may not be true in the future, particularly as youragency grows. An example is coverage for temporary workers andinterns. If an agency has an opportunity to purchase anotheragency, might the sudden increase in business make it necessaryto hire temps? You would, of course, want coverage!

Limits are important. Most agencies scale their limits with theirworst-case loss exposures. Consider your future needs. If you nowhave coverage for one million dollars and you sign to represent anew carrier in your office that demands five million in limits, canyour E&O carrier meet the request? If not, what is the potentiallost revenue opportunity?

It is important to remember that the premium for your E&Ois just one part of the cost. More than any other line that I canthink of, the overall service is a package deal. If you focus only onthe premium amount, you may shortchange yourself in the end.

Make Our Experience,Your Advantage.

The Harford Mutual Insurance Companies165 years experience in Commercial Lines

Join our team today. Contact us to learn more:

www.harfordmutual.com 800-638-3669

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To become a Merchants Agent, contact:

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Tina SchaedlerRegional Manager

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ext. 2200sguarnieri@

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The main things that I think you should look at are:

w Coverage: How broad are the coverages?

w Experience: Does the company have a successful track record? Does it have the ability and motivation to hang on through tough times?

w Service: Do you have access to decision makers inclaims and underwriting?

w Cost: Is the pricing aimed at being a long-term overall value?


CoverageC O R N E R

[ 10 ]

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.

MEDICARE SECONDARY PAYER REPORTING


Medicare is a federal programthat pays for certain coveredhealth care provided toenrolled individuals age 65and older, certain disabledindividuals and individualswith permanent kidneyfailure. Every one of youknows that!

The Centers for Medicare andMedical Services (CMS) is anagency of the federalgovernment and is part of theDepartment of Health andHuman Services. The CMS isresponsible for the oversightof the Medicare program,including implementingSection 111 of the Medicare,Medicaid and SCHIPExtension Act of 2007Medicare Secondary Payerreporting provisions. NowI’ll bet most of you didn’tknow that!

Medicare has been asecondary payer to workers’compensation benefitpayments since the inceptionof Medicare in 1965. Additionsto the Medicare law andregulations, which arereferred to as Medicaresecondary payer provisions,were enacted in the 1980s

and have been modifiedseveral times since then.These provisions wereamended again by Section111 of the Extension Act of2007, which establishedmandatory reportingrequirements.

Congress enacted theMedicare Secondary Payer Actin 1980 to curb the risingcosts of Medicare. Thesechanges expanded the statuteto make Medicare thesecondary payer to anymedical benefits receivedunder a group health plan,workers’ compensation,liability insurance (includingself-insurance) and no-faultinsurance. Prior to this,expansion the MedicareSecondary Payer Act hadbeen limited to workers’compensation claims.

When individuals enrolled inMedicare receive medicalbenefits from other sources —group health plan, workers’compensation or liabilitysettlement – Medicare is thesecondary payer. BeginningJuly 1, 2009, Section 111requires certain entities,referred to as Responsible

Reporting Entities, to:

1. Determine the Medicarestatus or all claimants;and

2. Report all claimsinvolving a Medicarebeneficiary to the CMS when those claimsare paid.

If the reporting for anyclaimant is not done in atimely manner by theResponsible Reporting Entity, the Extension Act of2007 authorizes CMS toenforce a penalty of $1,000per day. Who is a ResponsibleReporting Entity? Simply put, it’s the entity making the claim payment orsettlement. That could be the insurance company, athird party administrator or aself-insured entity.

Many settlements includefuture medical costs. In thesearrangements Medicare set-aside arrangements must beused to allocate settlementmoney for future medicalexpenses that wouldotherwise be covered byMedicare. Medicare set-aside arrangements


[ 11 ]

funding and administrative requirements are:

1. The claimants cannot use any ofthe set-aside money until theclaimant becomes a Medicarebeneficiary;

2. The set-aside money is held in aninterest-bearing account;

3. The set-aside money can only beused for expenses covered byMedicare;

4. Set-aside accounting must bereported to the CMS RegionalOffice annually until the funds areexhausted; and

5. Legal fees and administrative costscannot be charged to the set-asideaccount.

Unless you are a business entity which qualifies as a ResponsibleReporting Entity (insurance company,third party administrator or self-insurer),Section 111 will have very little impacton you. However, any individual whoreceives reimbursement for medicalcare under a group health care plan,workers’ compensation or liabilitysettlement will be asked to furnish his orher Medicare Health Insurance ClaimNumber. If that number is not available,the individual’s Social Security Numberwill likely be requested.

Individuals who receive ongoing medicalcare reimbursement, make a settlementwhich includes future medical costs, orreceive a judgment for future medicalcosts will be asked for their MedicareHealth Insurance Claim Number orSocial Security Number, even if they arenot currently enrolled in Medicare.

If you get a call from one of yourinsureds asking why all this informationis needed, now you know.

Y’all take care!

?QUESTION: I have an employee who is currently in a clerical position. I would like to gethim licensed, but he mentioned a prior felony conviction. Will he be able to get licensed?

ANSWER:Well, it depends. But most importantly, depending on the type of felony conviction, youremployee could be in trouble for working in your agency, even in a clericalfunction, and so could you!

The Violent Crimes Control and Law Enforcement Act (VCCLEA) is a federal law whichprohibits anyone who was convicted of a felony for dishonesty or breach of trust fromworking in insurance without securing prior written consent from the state’s insuranceregulatory authority. It also prohibits anyone from willfully employing such an individualin insurance without ensuring that such consent was granted.

The bad news? Both of you already could be in violation of the law. The penalties are verysevere, both criminal and civil, for the employee and for the employer, including heftyfines and imprisonment. By the way, no time limit applies either.

The good news? It’s never too late to do the right thing.

At this time, the first thing you need to do is talk to the individual and explain the legalrequirements. If the felony conviction is one that could fall within the scope of “dishonestyor breach of trust,” the Insurance Department should be contacted immediately and anapplication for written consent secured. The consent form is sometimes referred to as a“1033 waiver,” after the applicable section of the US Code (18 USC 1033). Until consenthas been secured, the person should not work for the agency. If it’s your lucky day andthe felony has no chance of being categorized as indicated above, read that as a sign …that you need to read more.

IA&B has a comprehensive, turn-key and — let’s brag — award-winning resource availableat iabgroup.com. Members who are not familiar with the VCCLEA are encouraged to logon and learn more about what the requirements entail and practical ways to comply.

A word of caution: Employers who plan on relying on the word “willfully” to exoneratethemselves should be aware that this may just not cut it. Agency principals are expectedto exercise due diligence. It is the nature and the extent of the due diligence that will comeunder scrutiny if a violation is found. If you choose not to ask questions so as not to hearthe answers, trouble may still come your way.

The VCCLEA is the reason behind all the background checks conducted by carriers ontheir appointed agents. Agencies should do the same with their staff, licensed or not. Itwill demonstrate due diligence, and you can also look at it as a good business practice.

For complete resources and assistance with the requirements and the process, go toiabgroup.com, Agency Operations, Employee Management, Employment BackgroundChecks.

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

Member FAQ


ASSOCIATION AT WORK

From frozen pipes to fires,hazmat incidents tohurricanes, commonaccidents and naturaldisasters cause thousandsof businesses to close each year. And at least 25percent never reopen.* An insurance agency, inparticular, cannot afford to be out of commission.The pun is intendedbecause insureds — and an agency’s viability —depend on accessibility.

Hope for the best, preparefor the worstIA&B unveils Emergency and Business Continuity Planning Manual


[ 13 ]


IA&B members have a new resource to help themprepare for the unthinkable and reduce their likelihoodof becoming a statistic. Introducing the Emergency andBusiness Continuity Planning Manual….

How one member agency coped with disasterIt was Friday, Sept. 17, 2004, and Hurricane Ivan had dumpedinches upon inches of rain in downtown Pittsburgh. TodAronson’s agency, E.R. Munro and Company, was housed onthe ninth and tenth floors of an office building located alongthe Monongahela River. Eight feet of water flooded thebasement, where Aronson rented storage space and wherecontrols for the building’s phone lines, electrical circuits andelevators were kept.

The office building was closed for 10 days, six of themworkdays. During that time, Aronson funneled phone calls ande-mails into his home, where he operated an exhaustingtemporary operation. It was a spur-of-the-moment plan ofaction – one that kept him afloat but required him to scramble.

Aronson vowed to be better prepared for a future disruptionof his agency’s operations. He secured alternate office space,hired a recovery-management firm and, most recently, utilizedIA&B’s planning manual to formulate a strategy.

How the planning manual worksIA&B’s Emergency and Business Continuity Planning Manualcontains two sections: an input, where members cataloguetheir business relationships, inventory their equipment andidentify back-up locations, and an output, which incorporatesmembers’ information from the input and serves as a finalizedplan of action.

The personalized output outlines the various scenarios thatcan disrupt an agency’s operation and then delves into theimplementation of the plan, which is broken down intotimeframes – the first 12-24 hours, day one through end of theemergency, and termination of the plan and restoration ofnormal operations.

What makes the planning manual uniqueThe new planning manual available to IA&B members is Web-based. The input process is completed online, and the output(a.k.a. finalized plan) is available online or as a MicrosoftWord document.

Besides ease of personalizing the plan, the benefit of housingit online is availability. Members are encouraged to store theirplan in multiple locations (onsite and offsite) and in variousformats (in print and on an electronic storage device), butthanks to the Web-based structure of IA&B’s planning

IThe input section walks membersthrough cataloguing the following:

w Staff

w Key contacts

w Agency management system

w Computer software

w Computer hardware

w Office equipment

w Vital records

w Go Kit (emergency supplies)

w Alternate site prospects

The output section (a.k.a. finalizedplan) addresses three scenarios:

w Single event isolated to the agency,such as a minor fire, severe weatheror loss of utilities

w Catastrophic event (may or may notbe isolated to the agency), such as amajor fire, natural disaster ormalicious attack

w Pandemic

*Business & Home Safety, a non-profitinitiative of the insurance industry


manual, members’ plan isavailable anywhere at anytime via the Internet.

____________________________

“This is another exampleof IA&B bringing value

to its membership.”

____________________________

How IA&B’s plan ratesSince Aronson saw hisagency through the 2004flood, IA&B asked him —along with several othermembers who recoveredtheir agencies from variousdisasters and emergencies —

to test drive the planningmanual. It passed with flying colors.

“It’s well organized and wellthought out,” said Aronson,who tackled the inputprocess by dividing theworkload among hisemployees. “This is anotherexample of IA&B bringingvalue to its membership.”

All IA&B member agencieshave access to the planningmanual as a benefit ofmembership. To learn more,visit iabgroup.com or contactIA&B’s Member ServiceCenter toll free at (800) 998-9644 or locally at (717) 795-9100, option 0.

ASSOCIATION AT WORK

Accessing theplanning manual:Easy as 1, 2, 3IA&B members with administratorrights to iabgroup.com have accessto the Emergency and BusinessContinuity Planning Manual.

1. Visit iabgroup.com.

2. Choose Agency Operations fromthe left-hand navigation bar.

3. Click the Emergency Planning link.

[ 14 ]


generalcasualty.com

General Casualty is a registered service mark of General Casualty Company of Wisconsin.QBE and the links logo are registered service marks of QBE Insurance Group Limited.All coverages underwritten by member companies of QBE. © 2009 QBE Holdings, Inc.

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Platinum Profile

Harleysville Insurance is aleading regional provider ofinsurance products and services

for small and mid-sized businesses, aswell as for individuals — rankingamong the top 60 U.S. property/casualty insurance groups with $1.1billion in annual net writtenpremiums. Harleysville also is rankednationally as one of the 20 largestcommercial multi-peril insurers and asone of the top 15 “Write Your Own”flood insurance carriers.

Commercial lines generate 82 percentof the company’s property andcasualty risk portfolio, while personallines sales account for the remaining18 percent. In addition, Harleysville’sagents have the unique capability ofrounding out customer accountsthrough a full line of life and floodinsurance products.

At the heart of Harleysville’s successare the lasting partnerships the

company has developed with its 1,350independent agencies. Harleysvilledistributes its products exclusivelythrough independent insuranceagencies and reflects that commitmentto its agency force by being a TrustedChoice® company partner. Toperpetuate its long-standing agencyrelationships, Harleysville providesdecision-makers close to the point ofsale — field underwriters dedicated tospecific business segments andcustomer service representativeslicensed to assist agents with theiraccount management responsibilities.

Having “good people to know” at all levels of the organization serves to define Harleysville in themarketplace by delivering on its brand promise every day — making it easy for agents and policyholders todo business with the companythrough advanced technology andcustomer-friendly services.

Insurance Agents & Brokers proudly recognizes

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IA&B Platinum Partners dedicate the highest level of

sponsorship to our organization.

FEATURED PARTNERHarleysville Insurance

CHIEF EXECUTIVE OFFICERMichael L. BrownePresident and CEO

COMPANY LOCATIONSHome office in Harleysville, Pa.,

with four regional and16 branch offices

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“Our independent insurance

agents are trusted advisors

who offer their customers

freedom of choice through

the companies they represent.

As a Platinum-level supporter

of the IA&B Partners Program,

Harleysville is investing in the

futures of both our company

and our sole distribution

outlet — the independent

agency system.”

—Michael L. Browne,President and CEO

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WHAT IS IA&BPARTNERS?The IA&B Partners

program gives company

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the opportunity to

demonstrate their

commitment of support

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help you succeed in

the insurance industry.

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

choose the sponsorship

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Contact the Member Sales

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Listed below are those companies that strongly support the independent agency

system and Insurance Agents & Brokers.Thank you for your continued sponsorship.

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GOLD LEVELOhio CasualtyProgressive

SILVER LEVELAegis Security Insurance CoAmerican Mining Insurance CoCumberland Insurance GroupDonegal Insurance GroupFrederick Mutual Insurance CoHarford Mutual Insurance CoJuniata Mutual Insurance CoMMG Insurance CompanyPrivate Client GroupPSBA Insurance TrustThe Motorists Insurance GroupWestfield InsuranceZenith Insurance

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Countryway Insurance Company

Encompass Insurance

Foremost Insurance Group

Friends Cove Mutual Ins Company

Goodville Mutual Casualty Company

Grange Insurance Companies

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

PMSLIC Insurance Company

Reamstown Mutual Insurance Company

Rhoads & Sinon LLP

Rockwood Casualty Insurance

State Auto Mutual Insurance Company

TAPCO Underwriters Inc

The Brethren Mutual Insurance Company

The Mutual Service Office Inc

The Philadelphia Insurance Companies

Tuscarora Wayne Mutual Insurance Company

UPAC Insurance Finance

Primary Agent September 2009


COVERAGES

Diana Shafter, MarshallGilinsky and Rhonda D.Orin of Anderson Kill &Olick discuss insurancecoverage for liability relatedto swine flu, includingcoverage under CGL,D&O and workers’compensation policies.

Insurance coverage forswine flu claims


Businesses subject to “invitee

liability,” such as restaurants and

hotels, cruise operators,

conference organizers and others

that draw people together, may

face claims from anyone who

becomes ill shortly after visits to

their premises.

For a business to be fullyprotected, it is essential for its risk manager or other personresponsible for its insurance to maintain a complete set of

all insurance policies in a secure location outside the

business premises.

[ 19 ]


As the world braces for a swine flu pandemic, the first concern of every business is the safety of its workers and customers, if it is in thehospitality industry or another business thatdraws people into physical proximity to oneanother.

Step one is to access and implement the “business pandemicinfluenza planning” checklist jointly produced by the Centers forDisease Control and Prevention and the Department of Healthand Human Services, available at http://www.pandemicflu.gov.

Step two is to consider the health and welfare of the businessitself and the various protections provided by the businessinsurance policies. To use a health metaphor, such policies arethe business equivalent of a flu vaccine.

Insurance may provide relief in a number of ways. Propertyinsurance policies, for example, may become relevant if a flupandemic disrupts a business’s daily operations. A companymay be able to file a business interruption claim in variouscircumstances, such as if its office buildings or warehouses areshut down or access is otherwise impaired for reasons relatedto the pandemic.

Liability insurance policies would come into play for any businesswith exposure to claims by individuals. For many businesses thatliability, if any, would be limited mainly to workers’ compensationclaims. Depending on the facts, it is conceivable for employeeswho become ill to claim that they were exposed to the disease inthe course of their employment.

For other businesses, the risks are higher. For example,businesses subject to “invitee liability,” such as restaurants and hotels, cruise operators, conference organizers and othersthat draw people together, may face claims from anyone whobecomes ill shortly after visits to their premises. Thesebusinesses should be alert to this risk and be prepared to give notice to their liability insurers as soon as they becomeaware of actual, even potential, claims.

The same is true for businesses that conceivably could be heldaccountable for exposing people to the disease through theirproducts or services. Although this category seems small,potential candidates are businesses that provide transportationservices, such as airlines, as well as businesses in the foodservice industry, such as caterers and supermarkets.

Similarly, should shareholders in companies adversely affectedby the flu outbreak make claims against executives based onallegations of wrongful acts by management that caused harmto the claimants, directors-and-officers insurance shouldprovide coverage for such claims.

AG10805 Pgs 18-23.qxp:September09Primary 8/13/09 9:53 AM Page 19

As a practical matter, the risk of such claims may be small. It may be unlikely, if notimpossible, for people whobecome ill to prove the exactmoment and location of theexposure that caused theillness. For planning purposes,though, that practicalconsideration is not the point.

It makes good sense for allbusinesses to take stock now,before the pandemic spreads, of the ways in which it mightaffect operations and the types of insurance that mayprotect them.

Several key issues are likely toarise from claims under thesetypes of insurance policies.

Is business interruptioncoverage available for aswine flu pandemic? Depending on the facts, it maybe possible for a swine flupandemic to give rise tobusiness interruption coverage.Such coverage typically ispurchased by businesses as partof their property insurancepolicies in the form of a rider,endorsement or an optionaladditional coverage. Businessinterruption coverage isdesigned to protect companiesfrom losses they may sufferunexpectedly because ofunavoidable interruptions intheir daily operations.

Business interruption coveragemay apply in a variety ofcircumstances, such as a forcedshutdown or a substantialimpairment in access to abusiness’s physical plant orwarehouses. Recent, infamous

examples of events giving riseto such business interruptionsare the events of Sept. 11 andHurricane Katrina.

In most property policiesbusiness interruption coverageis triggered only when the sitesuffers property damage.Physical damage, however, caninclude contamination ofequipment. Moreover, somepolicies, particularly thosewritten for policyholders in thehospitality industry, do providecoverage for losses stemmingfrom infectious disease withoutrequiring physical damage topremises. Further, civil authoritycoverage, triggered whenauthorities shut off access to anarea in which a business islocated, can be triggeredwithout physical damage to thepolicyholder’s premises.

The unfortunate events of Sept.11 and Hurricane Katrinaillustrated clearly that for abusiness to be fully protected, itis essential for its risk manageror other person responsible forits insurance to maintain acomplete set of all insurancepolicies in a secure locationoutside the business premises.

Otherwise, if a business isunexpectedly deprived of accessto its premises, it will find itselfdeprived as well of access tothe very policies it needs to filea business interruption claim.

At this point, any business thathas not already secured a set of its insurance policies and key non-insurance documentsin a secure, off-site locationshould do so immediately. It

may be a small inconvenienceto make these arrangements,but that inconvenience is more than offset by the benefitsthe business would garner on the day it needs those off-site copies.

Is there CGL or D&Ocoverage for claims relatedto swine flu? Commercial general liabilitycoverage is designed to coverpolicyholders against claimsbrought against them by othersalleging the policyholder’sconduct caused bodily injury tothe claimant, such as sicknessand disease resulting fromexposure to harmful conditions.Since most claims by sickenednon-employees would fit thisdescription, CGL coverage willbe a key source of protectionagainst such claims.

Any policyholder that receiveseven one such claim faces therisk, because of the way inwhich swine flu is contractedand spread, of being the targetof many more claims. Thus, it isimportant that notice is given assoon as possible to the CGLinsurance company.

Early notice will ensure that theinsurer cannot try to denycoverage based on thecontention that it could havehelped stem the policyholder’sexposure to additional claims ifonly it were given notice soonerand therefore was prejudiced bysome delay in notice.

It is possible that people otherthan those personally sickenedby the flu outbreak (e.g.,shareholders in companies

[ 20 ]

COVERAGES


adversely affected by the fluoutbreak) may make claimsagainst companies or theirexecutives based onallegations that management’sacts or omissions caused such claimants to sufferfinancial losses.

Although most D&O policescontain exclusions for claimsalleging bodily injury, suchclaims for financial damagesare covered under D&Oinsurance. As with CGLcoverage, it is important forpolicyholders that becomeaware of such claims againstthem to give notice to theirinsurers as soon as possibleand certainly before the

policy period or reportingperiod for their current D&Ocoverage expires.

Will afflicted workers be covered under state workers’compensation laws? Assuming one or more of acompany’s employees becomeill, will they be entitled toworkers’ compensationbenefits? That depends on how they became ill and thenature of the illness.

Virtually every state workers’compensation statute providesthat an employee will beentitled to benefits for what isknown as an “occupational

disease.” To constitute anoccupational disease, twoconditions must be met: Thedisease must be proven to stemfrom causes and conditionsthat are characteristic of andpeculiar to a particular trade,occupation or employment, and the disease cannot be an ordinary disease of life to which the general public is equally exposed outsideemployment.

The distinction between anoccupational and infectiousdisease, however, is not alwayseasy to make. Whileoccupational diseases arecovered, and ordinary diseasesgenerally are not, the latter

[ 21 ]


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may be covered in somecircumstances if a direct,causal connection to theworkplace can be established.

Is a flu outbreak an“occupational disease”? If a business faces one or more workers’ compensationclaims arising from an allegedillness, it will have todetermine whether tochallenge the claim. Whether agiven illness would constitutean occupational disease andthus be covered under stateworkers’ compensation law isan issue of fact.

There is limited case lawdealing with the spread ofcontagions in the workplace to provide insight into thefactors a court may examine in determining whether a given outbreak is sufficientlyconnected to the workplace to constitute an occupational disease.

In California a breakout of acontagious eye disorder calledkeratoconjunctivitis, amongemployees at a steel companywas found to be “proximatelycaused by and to have arisenout of the employment” and“constituted a special exposurein excess of that of thecommonality.”

In Bethlehem Steel Co. v.Industrial AccidentCommission, 21 Cal. 2d 742(Cal. Mar. 19, 1943), theCalifornia Supreme Court heldthat conjunctivitis apparentlywas “epidemic” in thedefendant’s shipyards and that

“although there were manycases of the disease among thepublic, there [was] nothing inthe record to show that thesame proportion as in theshipyards was affected.”

Washington, too, requires adirect link between theoccupational injury or diseaseand the employee’s scope ofemployment. In affirming aworkers’ compensation awardto an employee who developedasthma from exposure toworkplace dust, smoke andfumes, the court found acorrelative link between theaffliction and the nature of the employment.

In Simpson Logging Co. v.Department of Labor andIndustries, 202 P.2d. 448 (Wash.1949), the court held:

Under the present act, nodisease can be held not tobe an occupational diseaseas a matter of law where ithas been proved that theconditions of the extra-hazardous employment inwhich the claimant wasemployed naturally andproximately produced thedisease, and that but for theexposure to such conditions,the disease would not havebeen contracted.

It is clear that an employeeseeking workers’compensation coverage forillness would need todemonstrate that there wasa proximate link betweenthe disease and heremployment or that she was subjected to some

special exposure in excessof that of the commonality.

How many self-insuredretentions will apply in theevent of an outbreak? If workers can demonstratethat they have contracted an illness through theiremployment and are therefore entitled to workers’compensation benefits, oneissue likely to arise is thenumber of self-insuredretentions that will apply for a given outbreak.

Many workers’ compensationinsurance policies, particularlythose providing excesscoverage, provide coveragebeyond an initial self-insuredretention (essentially, adeductible) for each accidentand/or employee for disease,after which unlimited coverageis provided for workers’compensation coverage untilthe applicable statutory caps.

Thus, if an illness is deemed toconstitute a “disease,” mostpolicies would apply a separateretention for each individualemployee asserting a “diseaseclaim.” This is the likelyoutcome if workers contract adisease such as the swine flu(pandemic outbreaks typicallyconstitute “diseases,” not“accidents,” for purposes ofdetermining the number ofapplicable retentions underworkers’ compensationpolicies). Employers facingmultiple claims thus could faceextremely high exposures.

COVERAGES

[ 22 ]


If, however, an illness outbreakis triggered by a causal eventat the workplace and directlyflows from the work beingperformed, it may be arguedthat the resulting disease wasproduced by an accident, thusreducing the number ofapplicable self-insuredretentions. One commentatornoted that:

[I]f the cause of aninfectious disease istraceable to a specificincident(s) at or related towork, then contracting thedisease meets the definitionof accident and qualifies asa covered injury. Forexample, if contractingtyphoid fever could be

traced to polluted water in afactory, then the illness is acovered injury.

Whether a given outbreakinfecting multiple workerswould be regarded as an“accidental event” or an“occupational disease”depends on the specificcircumstances leading to theinitial exposure. If a specificevent led to the spread ofthe contagion, an outbreakcould be considered an“accident,” causing bodilyinjury, as opposed to a“disease.”

Thus, a business only would berequired to pay one self-insured retention, no matterhow many employees were

exposed to a contagion orcontaminant.

_____________________________

Diana Shafter Gliedman, Esq.,Marshall Gilinsky, Esq., andRhonda D. Orin, Esq.

Diana Shafter Gliedman is anattorney, and Marshall Gilinsky isa shareholder in Anderson Kill &Olick’s New York office. RhondaD. Orin is the managing partnerof the firm’s Washington office.They specialize in insurancerecovery litigation on behalf ofpolicyholders.

Andrews Insurance CoverageLitigation Reporter, May 22, 2009

Copyright © 2009 ThomsonReuters


Contact PA Home Office:at ext. 139 [email protected] ext. 128 [email protected]

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Etty HerzigJanet Barton

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JEFF YATES, ACTEXECUTIVE DIRECTOR

Jeff Yates is executive director of

the Agents Council for

Technology (ACT) which is part

of the Independent Insurance

Agents & Brokers of America.

Jeff can be reached at

[email protected]. ACT

has posted further information

on many of the subjects

discussed above at

www.independentagent.com/act.

This article reflects the views of

the author and should not be

construed as an official

statement by ACT.

Primary Agent | September 2009 TechnologyU P D A T E

[ 24 ]

For much of its history, agencyautomation was a source ofagency frustration because of itscost and unfulfilled promises.Remember “Paper-free in 83”or the promises to achieveSEMCI (Single Entry, MultipleCompany Interface) in the 80sand 90s?

Fortunately, there has been asea change over the last decadein the quality and functionalityagency automation now offers,coupled with agent-carrierinterfaces that really deliver.Agencies taking advantage ofthese advances are cuttingredundant and time-consumingprocessing and replacing it withrevenue-generating sales andpro-active service.

Many agencies are virtuallypaper-free in personal linestoday, and increasing numbersare working on smallcommercial business now thatcarriers and vendors haveimproved their commercial linesdownload. The great progressbeing made with Real Time isputting independent agencieswithin striking distance ofachieving the agents’ vision ofSEMCI — and it is only going toget better.

The history of agencyautomation is also the story ofhow independent agents andcarrier and vendor leaders can

make a real difference in theevolution of the technology andworkflows available to ourdistribution system bybecoming involved at theindustry level in user groupsand organizations like ACT(Agents Council for Technology)and AUGIE (ACORD UserGroups Information Exchange).

Agents’ vision forcarrier interface

The agents’ overall vision to beable to work in a consistentmanner with multiple carriershas been remarkably constantover time. In 1906, an agentpetitioned the NationalAssociation of Insurance Agents(NAIA, now IIABA) to take thelead in developing standardapplications and procedures fordealing with the carriers. Thisagent was ahead of his time, butas a result of the foundationwork of several California agentsand western based carriersstarting in 1968, NAIA and 12carriers formed the ACORDCommittee within the agents’association in 1970 to begin thedevelopment of standardizedapplications and forms.

In 1975, ACORD became aseparate corporation and hassince grown into theinternational standards body forthe insurance industry. In theearly years it was extremely

difficult to get the carriers toagree on common forms,especially applications. Butthrough agent persistence overseveral years and the leadershipof several companies, thelogjam eventually broke, andtoday there are thousands ofstandardized ACORD formswithout which the agencymanagement systems of todaywould not have had thestandards necessary to designthe data fields in their systemsand generate commonapplications.

In addition to havingstandardized forms, however,the prescient agents in 1975wanted to develop an agencyuniversal terminal that theycould use to access multiplecarriers electronically. To furtherthis goal, NAIA formed the EPICCommittee which had a meetingwith several carriers in PointClear, AL, that lead to theformation of the InsuranceInstitute for Research (IIR) in1977 to study agent-companyoperations automation. IIRstudied the concept of theagents’ universal terminal andalso began the development ofbatch electronic standards whicheventually became the basis forthe downloads that saveagencies so much time today.

Out of IIR emerged the need tocreate IVANS in order to provide

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[ 26 ]

the industry with a shared data-communications network to save cost.IVANS today is still the entity that mostcarriers and agencies use to aggregateand transmit carrier downloads toagencies each evening. While IIR wassuccessful in creating the first electronicstandards for the industry along with thecreation of IVANS, there was not sufficientsupport to move forward with theuniversal terminal concept that manyagencies wanted to see. In 1982, ACORD &IIR merged bringing together the entitythat developed both the paper andelectronic standards for the industry thatwe know today.

During the 1980s and 1990s, the agentsmade great progress with standardizedforms and personal lines download butstill had to contend with the inefficientuploading of data to the carriers. First, thecarriers placed their proprietary terminalsin agent offices, and then some carriersand vendors tried to achieve SEMCI byimplementing batch uploads using thestandards, but this approach only metwith limited success.

The Internet creates majorchange

With the advent of the Internet in the late90s, carriers saw an opportunity to buildtheir own carrier Web sites to increase theinformation and functionality available totheir agents as well as to reduce their ownprocessing costs. As these Web sitesproliferated, agents again were faced withhaving separate and inefficient workflowsfor each carrier, including the need to logon to each carrier’s site, remember thecarrier’s password, learn how to navigatethe site, enter the same data again andagain to compare quotes (even thoughthe data was already sitting in the agencymanagement system) and train eachemployee on multiple carrier workflows.

Fortunately, the Internet and the Webservices used by carriers for theirproprietary Web sites also sowed theseeds that enabled enterprising agency

management system vendors to create aworkflow that allows agencies finally torealize their long-held vision of a SEMCIworkflow. It is called Real Time.

Real Time – a majorbreakthrough

Real Time enables agents to work withmultiple carriers in a consistent waythrough their own systems: It handleslogons and passwords to carrier systemsand Web sites automatically, and iteliminates having to re-enter data that isalready in the agency managementsystem. Real Time includes inquiries(billing, policy view, claims, etc.),endorsements and quoting through theiragency management systems andcomparative raters.

In the 2008 IIABA Future One AgencyUniverse Survey, agencies ranked RealTime billing, claims and policy inquiry asthe technology having the greatest impacton their productivity. And it is no wonder.In the January 2009 Real Time CampaignAgency Survey, the agents using Real Time(inquiries, endorsements and/or quoting)reported saving 10 hours a month peremployee on average. One agentcalculated that this time savings translatedto the equivalent of $3,000 annually perpersonal lines employee.

Real Time is fast becoming thepredominant workflow used by agents toperform transactions with carriers,supplanting carrier-proprietary Web sites.That same 2009 Real Time CampaignSurvey indicated that 54 percent of theagencies with agency managementsystems are doing Real Time inquiries andendorsements. Forty-three percent ofagents are using personal lines real-timerating through the agency managementsystem or comparative rater, and 18percent are performing commercial linesreal-time rating. The amount of real-timequoting in both personal and commerciallines is growing significantly in 2009because of the tremendous time savingsagent users of this functionality are

deriving. Another very positive sign is that180 carriers and carrier groups are nowoffering at least some real-timefunctionality. That’s a 58 percent increasein two years.

The evolution of download

In 1988, a group of savvy agents andcarrier representatives under the auspicesof the associations and ACORD steppedforward to spell out the actual functionseffective interfaces must possess from theagents’ perspective. They formed theInterface Systems Requirements (ISR)panel which made the crucialrecommendation in 1990 that downloadshould be the starting point for currentinterface development. This gave a cleardirection to interface development forcarriers and vendors that broke a log jamand resulted in a proliferation ofdownload implementations. Personal linesdownload is one of the greatest successstories to date in the advance of agencyautomation in terms of the productivityenhancements that have resulted from it.Even today, agents encourage carriers toimplement download first, then Real Time.

Agent-carrier pairs implementing personallines download continue to grow. Todaythere are 170,531 such agent-carrier pairs.Agencies can save significant additionalprocessing time by implementing directbill commission download that automatesthe entry of commission statementinformation into their systems. Agents arealso taking advantage of claims downloadwhere available to get back into the claimsloop and to automate the entry of claimsdata into their systems.

Commercial lines download is the nextbig opportunity area now that significantsteps have been taken in recent years byindividual carriers, vendors and industrygroups to improve the quality of thesedownloads and to reduce the overwritingof agency data. Today there are 42,067agent-carrier pairs that have implementedcommercial lines download representingan 18 percent increase over the prior year.

TECHNOLOGY UPDATE


[ 27 ]

Commercial lines download is providingmany agents with significant productivitybenefits, and I encourage agents to test itagain with their carriers now that thesequality improvements have been made.

Agency management systemsbecome the hub of theelectronic agent

It all started back in the 1950s whenvendors emerged to do agencyaccounting on a batch basis. From theseroots, the first agency managementsystems emerged still focused onautomating the accounting function. Withthe approval of ACORD standardapplications, these management systemswere then in a position to create a policyand client database so that agencies couldservice clients from the system and use itas a marketing tool to cross sell. Agencymanagement systems also were sensitiveto the E&O risks agents faced anddeveloped activity logs that track everytransaction performed by the system aswell as permit the capture of clientconversations and events. Most recently,the focus of agency management systemshas broadened importantly beyondinternal agency operations to agent-carrier connectivity using tools such asReal Time and download.

During this evolution in the functionalityof the systems, we also saw theintroduction of the PC, windows, color, e-mail and the laptop which made thesesystems much more attractive for agencyprincipals and producers to use. Nowagency managers can generate invaluablemanagement reports from these systemsto oversee their agency operations.

Today the truly electronic agency isemerging, eliminating paper wherever itcan. The agency management systemprovides the hub for the agency’sinformation, and the agency’s othersystems, if needed, integrate with themanagement system as much aspossible. Thanks to the Internet, agencies

no longer need to have their agencymanagement system on site. It can nowbe housed at the vendor allowing thevendor to be responsible for updates,maintenance and proper back ups. Inaddition, agents can access their systemsand work from anywhere that theInternet is available.

Agents once again have played a key rolein the evolution of the automationavailable to them by working with theiragency management system vendorsthrough their user groups to providecontinuous improvements in functionality.These user groups also provideinvaluable education and online servicesto their agent users to help them getmaximum benefit out of their systems.

Agent advocacy at the industrylevel

We have seen how small groups ofagents have made big impacts in theevolution of agency automation for thebetter over time. That critical agentinvolvement – coupled with carrier andvendor leaders having similar foresight –continues today.

In 1999, the Independent InsuranceAgents & Brokers of America (IIABA)created the Agents Council forTechnology (ACT) to put a moreconsistent and permanent focus onindustry automation issues from theagents’ perspective. The immediatecatalyst was the impact the Internet wasstarting to have on the industry. At thefirst ACT meeting, the carriers made anurgent plea for the development of newstandards based on XML for transportingdata across the Internet. ACORDresponded promptly and its XMLstandards today provide the basis for theindustry’s Real Time transactions.

The agents, carriers, vendors,associations and user groups involved inACT are working on:

w improving agent-carrier connectivity

Commonwealth Insurance Co . . . . . . . . . . . . .25

General Casualty . . . . . . . . . . . . . . . . . . . . . . . .15

Guard Insurance Group . . . . . . . . . . . . . . . . . . .1

Harford Mutual Insurance Co . . . . . . . . . . . . . .9

Harleysville Insurance . . . . . . . . . . . . . . . . . . . . .3

IA&B Series Ads . . . . . . . . . . . . . . . . . . . . .14, IBC

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

Insurance Innovators . . . . . . . . . . . . . . . . . . . .23

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

KnightBrook Insurance Co . . . . . . . . . . . . . . . .21

Merchants Insurance Group . . . . . . . . . . . . . . . .9

Penn Millers Insurance Company . . . . . . . . . .23

Preferred Property Program . . . . . . . . . . . . . . .28

Progressive . . . . . . . . . . . . . . . . . . . . . . . . . . . .IFC

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and workflows in the standard aswell as E&S markets,

w promoting best practices agencyworkflows,

w addressing agency and agent-carrierinterface security issues,

w helping agents with their onlinemarketing using Web sites, searchengine positioning, and socialnetworking,

w extending quoting and servicingfunctionality to clients throughagency Web sites and

w assessing major technology andsocietal trends that will impact ourdistribution system and identifyingthe industry’s “must-do” issuesarising out of these trends.

ACT has created a number of resourcesto assist agencies and the industry inthese areas which are available atwww.independentagent.com/act.

Also in 1999, ACORD established AUGIE(ACORD Users Group InformationExchange) to bring together all of theagency management system user groupleaders. ACT and AUGIE closelycoordinate their activities and often meetback to back, so that they avoidduplication and communicate aconsistent message. AUGIE has createdseveral reports and tools to assistagencies in adopting the latestworkflows. (Visit www.acord.org, click on “Advocacy” and then AUGIE).AUGIE’s top priority in 2009 is toincrease the implementation ofcommercial lines download.

A key to ACT and AUGIE’s success has been the unprecedented level of involvement and insight beingprovided by carrier, vendor, user group,and agent and industry associationleaders. The interest by the carriers andvendors in working together to furtherthe agents’ ease of doing business isgreater than I have ever seen it in my 34 years in the business.

The coming together of the industry tocreate the Real Time/DownloadCampaign in 2007 is a great example ofthe high level of industry partnership thatis currently occurring on agent-carrierworkflow issues. The campaign has beenhugely successful in driving increasedagent and carrier implementation of RealTime and now hopes to accomplish thesame result with commercial linesdownload. The campaign has alsodeveloped excellent materials to assistagents with their Real Time anddownload implementations(www.getrealtime.org). Another greatresource on what Real Time anddownload functionality particular carriersand vendors offer is found atwww.ACTtech.org.

Agency automation tools are meeting theneeds of agencies better than everbefore and are critical to the functioning

of the successful agency today. But theevolution of agency automation is ajourney, and our work will never bedone as we continue to react to andincorporate the technologyenhancements that become available. It is reassuring that the industry has ACT and AUGIE in place keeping aconstant focus on these issues withunprecedented support by the differentstakeholders. But we need more agents,carriers, and vendors to get involved atthe industry level. As this brief historyhas shown, a few committed people can make a real difference in theevolution of agency automation, creatinglasting benefits that improve the dailywork of virtually every independentagency employee.

TECHNOLOGY UPDATE




Documents

Primary Agent - September 2009 - MD Edition