INTHIS ISSUE________________Privacy audit

Top 5 privacy provisions

How one agency met newHIPAA mandates

DELAWARE

G15646Covers.qxp:August10Primary 7/19/10 1:44 AM Page 1

© Copyright Employers Mutual Casualty Company 2009 All rights reserved

www.emcinsurance.com

MAKE EMC YOUR CHOICE FOR MAIN STREET BUSINESSWhen you think main street business, start thinking about the EMC Choice® Businessowners Program. Small and midsize businesses will enjoy the flexible coverage options designed to meet their specific insurance needs, the added value of free loss control services, plus the responsive service from an EMC branch office nearby. So if you still think EMC is just for niche programs, think again. Count on EMC ® for your main street commercial lines marketing, too. For more details, contact your local EMC branch office.

I used to think EMC was ju st for niche commercial programs. Then again, I used to think babies came from storks.

Valley Forge Service Office: 800.362.3620 | Home Office: Des Moines, IA

G15646_IFC-IBC-OBC.qxp:Layout 1 7/19/10 2:03 AM Page 1

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G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 1

How to be well schooled in privacy complianceFor insurance producers – and agencies as a whole – privacy compliance hasbecome an ever-expanding web of standards and rules, mandates andregulations. Goodbye, days of simply shredding MVRs and calling it a day.Today you need programs in place and policies under constant review. Misstep(even by ignorance), and you’ll pay.

Page 14

Privacy auditThese questions provide teachable moments: locating where your agencymakes the grade … and where you ought to hit the books.

Page 15

Member profileMuch like Mother Nature did with snow, new federal regulations buried Healthproducers in privacy responsibilities last February. Tom Thorne, of IA&B-member John Yurconic Agency, explains how the agency responded.

Page 19

14

15

19

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

Copyright 2010. 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 # 2010-8) 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 Preventing Errors & Omissions11 Glance at Events12 Coverage Corner

23 IA&B Partners24 Technology Update28 Advertisers Index28 Classified Ads28 Last & Least

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.

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 2

For All That Matters

www.acuity.com

A.M. Best A+

Get Ready Pennsylvania.Here Comes ACUITY !

For All That Matters

Interested in an agency appointment?Please contact Territory Director

Steve Harris at 717.756.9983

www.acuity.com

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 3

OfficersKathleen M. Glattly, ChFC, CLU, CPCU

Chair of the BoardFactoryville, Pa.

David Rosenkilde, CICVice Chair of the BoardReisterstown, Md.

Robert J. “Buc” Cawley, AAIImmediate Past Chair of the BoardWexford, Pa.

MembersNorman F. Basso, CPCU

York, Pa.

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

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

Timothy P. BurrisThompsontown, Pa.

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

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

G. Greg Gunn, CICLemoyne, Pa.

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

Diana M. Hornung-Momot, ACSRWilmington, Del.

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

What can we do for you?

Over the past 12 months, you have read my articles that sharedinformation about your association. In this, my last article aschairwoman of your association, I wanted to describe those keybenefits in greater detail.

w The weekly e-mail providing timely information, Agent Headlines;

w Member discounts on your Errors & Omissions and otherinsurance products;

w The Member Service Center which is readily available to reviewyour concerns, issues or questions;

w Review and counsel of agency/company contracts and agencytermination procedures;

w Top notch professional training and education brought to you byindustry experts such as Jerry Milton and Rita Hollada;

w Grassroots advocacy on your behalf to companies, legislaturesand regulatory bodies via our online Political Action Center, whichprovides you legislative information and the ability tocommunicate directly to your legislators;

w Our Company Satisfaction Index, due out later this year andcompleted every other year (since 2004), which provides a unifiedvoice to the companies we represent;

w Industry resources and tools to assist you and your agency inareas such as human resources, privacy compliance (read more inthis issue), producer licensing, law changes and legislative orregulatory issues;

w www.iabgroup.com, a resource library available 24/7/365;

w And last but certainly not least, Member Agent Panels (MAPs) —regional bi-annual meetings that allow members to voice theirissues and needs to IA&B leadership and staff. (This is where youcan get involved, and you will be glad you did! Seewww.iabgroup.com/maps.asp to learn more.)

It has been my honor and privilege to serve as your chairwoman overthis past association year. Your association’s board of directors,incoming chairman David Rosenklide, and the talented staff are amongthe very best, and I thank them for their support.

All the best to you and yours,Kathleen

[ 4 ]

Kathleen GlattlyCPCU, CLU, ChFC, AIM

Chair of the Board’sM E S S A G E

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 4

?QUESTION: Do you have anyrecommendation on whether or not

we should do or continue to do

business with a specific carrier?

ANSWER: IA&B does not, andtechnically cannot, provide any advice orrecommendation in that area, for acouple of different reasons. We can,however, provide you with some “foodfor thought” in assessing yourrelationship with various carriers. So,read on!

Why IA&B can’t provide adviceAntitrust laws place strict limitations onanything that could be deemed an“agreement” to act in concert, includingwhether to do business or not to dobusiness with a particular company(a.k.a. a boycott).

Producers are all considered competitorsunder law. If you have attended an IA&Bseminar or meeting, you may havenoticed a statement at the beginning ofevery class reiterating the requirement tocomply with antitrust laws: in substance,the statement reminds participants thatthey must refrain from exchanginginformation regarding price, refusals todeal or agreements to proceed in certainanti-competitive respects. This is not tosay that you cannot name a company orsay anything about it, but the nature ofwhat can be said is restricted. For IA&B— as an association — to recommendthat you refrain from doing businesswith a particular carrier could bedeemed an “agreement” amongcompetitors to take concerted action.

What to doMembers must individually assess thefinancial strength and the integrity of thecarriers with which they do business.Some criteria will likely be similar from

one agency to the next (obviously, thecompany’s financial rating comes tomind), others may differ: products,claims handling, underwriting,technology, ease of doing business…and sometimes, quite simply, trust.

One tool that can be, and is increasingly,used in assessing companies is IA&B’s“CSI” (stands for Company SatisfactionIndex). The CSI is a biennial report carddeveloped from a membership-widesurvey. Interestingly enough, the tool isalso increasingly used by carriersthemselves to see how they are viewedby producers as a group. The CSI doesnot address any specific products, butrates the companies on four categories:

w Products, Pricing & Underwriting,

w Policy Service & Claims,

w Agency/Company Relationship, and

w Technology;

The information is found atwww.iabgroup.com (go to CarrierRelationships, then Company Satisfaction Index).

DO YOU HAVE AQUESTION? E-mail it to us at iab@iabgroup.com.Please use “Primary Agent FAQ” in thesubject line of your message. You canalso fax your question to (717) 795-8347.We look forward to answering yourquestions!

Member FAQ

STRONG RELATIONSHIPSPRODUCE RESULTS

Celebrating 166 years of service � 1844 - 2010

There is no better time tobecome part of The CumberlandInsurance Group Team. We arenow appointing agents in CentralPennsylvania.

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Commercial and Personal LinesCompetitive CommissionsExceptional Customer ServiceFinancial StrengthExperienced UnderwritersMarketing Support

[ 5 ]

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 5

Primary Agent | August 2010

State News

Nearly 250 independent agents, CSRsand company personnel gathered inRehoboth Beach, Del., June 8-10 for theDelaware Association of InsuranceAgents & Brokers’ 53rd annualconvention. The event includededucational seminars, social outings anda trade show and culminated with abanquet and awards ceremony.

“The convention was a success,” saidJohn Yasik, chairman of the DAIAB. “Ithas become a staple gathering for who’swho in the Delaware insurance worldand draws a loyal crowd.”

Attendees mix business withpleasureThe event kicked off on Wednesday withsocial outings. DAIAB members andcompany representatives mingled on thegreens at the Kings Creek Country Club,over fishing on a chartered boat andthroughout local vineyard and brewerytours. That evening they took part in a reception.

On Thursday, DAIAB members attendeda CSR-appreciation luncheon and earnedcontinuing-education credits at fourseminars. Renowned industry expertsBettye Buffington and Jerry Milton taughtsessions on Business Auto, insuringcondos and Workers’ Comp. MelanieGraham of the National Flood InsuranceProgram led a workshop on Flood.

Keynote speaker providesperception, goal-setting tipsScott Addis, president and CEO of The Addis Group and Addis IntellectualCapital, provided an executive leadershipsession on Thursday. He sharedstrategies to avoid commoditization and customers’ price-based purchasing decisions.

The convention culminated that eveningwith a banquet dinner, where Addisprovided the convention’s keynoteaddress. Titled “2010 Organic Growth‘Purple Cow’ Findings,” his presentationhighlighted the key characteristics ofindependent agencies experiencing thegreatest organic growth.

Association recognizes localindustry leaders, youthThe banquet also included an awardsceremony, where several attendees were lauded for their contributions to the association and the Delawareinsurance community.

Association leadership presented DAIAB-member Mary Rowland, of Willis ofDelaware in Wilmington, Del., with theWharton-Ranalli Leadership Award. MattKilroy, of The Main Street AmericaGroup in Bear, Del., received the WilliamH. Lenhart, Jr. Award for forging strongcompany-agency relationships. Inaddition, DAIAB awarded two recenthigh school graduates – Sierra Spicerand Robert Yerkes – with $1,500 JoannScott Memorial Scholarships.

Delaware agents converge in Rehoboth for annual convention

[ 6 ]

SAVE THE DATEDAIAB’s 54th

Annual Convention

June 8-9, 2011

Atlantic Sands Hotel,Rehoboth Beach, Del.

G15646_06-07DE.qxp:August2010 7/19/10 1:49 AM Page 2

Successfuldefense marksend of legislativesession in DoverState lawmakers packed up and leftDover earlier this summer, markingthe end of a legislative session whereDAIAB had to play defense on anumber of potentially harmful bills.

The following potentially harmful billswere stopped thanks to DAIAB’sadvocacy efforts:

w HB 255 — a Trial Bar initiativewhich would have negativelyaltered how a victim couldaccess his or her own UM/UIMbenefits and lead to increasedpremiums; and

w SB 237 – which would haverequired insurance carriers tohave proof of delivery frompolicyholders for cancellationor non-renewal of insurancepolicies.

Additional bills of note to agentsinclude the passage of a ban on theuse of handheld cell phones andother electronic devices while drivingand the passage of a resolutionrequiring a report to the legislatureon the impact of the Workers’Compensation reforms in the state.

Before leaving town, the GeneralAssembly also passed a $3.3 billionbudget for the 2010-2011 fiscal year.The budget represents a spendingincrease of almost 7 percent from lastyear, prompting several Republicanmembers to oppose the plan.

Moving into the fall, look foradditional advocacy updates fromDAIAB on the 2010 general electionand on preparations for the 2011 startof the next legislative session.

DAIAB convention attendees paidtribute to CSRs at a recognitionluncheon.

Winners of the golf scramble (from left to right): Derek Shaffer,of Southern Cross Underwriters;Robin VanVruggen and SteveHarvey, of Williams InsuranceAgency; and David Bond, of Selective.

DAIAB Chairman John Yasik andVice Chairwoman DianaHornung-Momot presented MattKilroy (center), of The Main StreetAmerica Group, with the WilliamH. Lenhart, Jr. Award.

DAIAB Chairman John Yasik (left)and Vice Chairwoman DianaHornung-Momot (right) presentJoann Scott MemorialScholarships to Robert Yerkes and Sierra Spicer.

[ 7 ]

New MembersW E L C O M E

Fred S. Smalls Insurance AgencyWilmington, Del.

A to Z Insurance Inc.Dover, Del.

Scott Addis presentedthe keynote addresson organic growth.

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

[ 8 ]

CURTIS M. PEARSALLCPCU, AIAF, CPIA

Curtis M. Pearsall contributed

this article on behalf of Utica

Mutual Insurance Company in

Utica, N.Y.

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 iab@iabgroup.com.

WHEN PLACING WORKERS’ COMPENSATION,WHAT COULD POSSIBLY GO WRONG?

Primary Agent | August 2010

It’s somewhat of a surprisethat when looking at E&Oclaim statistics, E&O claimsarising out of the placementof Workers’ Compensationeach year account forapproximately 10 percent ofall claims. Moreover, many ofthose WC claims are well inexcess of $100,000. Whatcould go wrong? Let’s take a look.

Ensure you areproviding coverage forall of the client’sstates When meeting with theaccount to secure thenecessary information toprovide a proposal or issue apolicy, bring along thenecessary WC application sospecific risk questions can beasked and documented.Obviously, answers to thesequestions could determine theacceptability of the risk andwhat endorsements areprovided.

One of the key questionsinvolves the states in whichthe client is doing business.

There are a number of issueshere. If there is a chance theclient will have an employeetemporarily working inanother state, while the policymay provide coverage, thereis the chance that the benefitsof that other state will begreater than the home statewith the employer forced topay the difference. If the clientis looking to set up apermanent new location,absent the policy reflectingthat additional state, therewould be no coverage.

A highly recommendedapproach is to add OtherStates coverage to the policyto ensure injuries toemployees in the other stateswill be fully covered. Oneexception to this involves themonopolistic states; privateinsurers are not allowed toprovide coverage in thosestates. Explain and documentthis discussion with yourclients. The preferredlanguage for Other Statescoverage would be to use “Allstates, U.S. Territories andPossessions except

monopolistic states and statesdesignated in item 3.A of thisInformation page.” If forsome reason, the underwriteris not agreeable to thatlanguage, at the very least,neighboring states and stateswhere the employees maytravel to attend seminars,meetings or conventions,should be listed in 3.C.. Asdiscussed below, make surethis is reviewed every year.

With respect to monopolisticstates, please note that in late2008, Ohio amended itsWorkers’ Compensationstatute to remove anexemption for out-of-stateemployers for temporarywork (up to 90 days). Thelaw was rewritten to providean exemption only if theemployer’s state statute helda reciprocal provisionexempting Ohio employersfor incidental work performedin that other state. If there isno reciprocity, the out-of-stateemployer must secure anOhio policy even forincidental operations.

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[ 9 ]

Don’t just renew “as is”It is highly recommended that yousecure an update each year with yourclient as to what their work plans arefor the next policy term.

If your client only has “partial” other states coverage (did not get “all states except monopolistic states”listed in item 3.C), you want to beextra cautious in assessing yourclient’s situation.

There have been many E&O claimswhere the client apparently did notunderstand the “rules” and openedup a permanent location in anotherstate only to have an employeeinjured – and then discover there wasno WC coverage in effect. As you willnote by the following claim, whenmoving the account to anothercarrier, be certain the coverage is atleast equal.

In this claim, the agency failed toproperly replace WC coverage for atrucking firm that had “other states”coverage on a previous policy. Thenew policy only covered losses in thestate in which the client wasdomiciled. The client had anemployee injured in another state,only to find they had no coverage forlosses occurring in that state. The casesettled for $317,000.

Even if your client had the preferredwording, keep in mind that thepolicyholder must notify the company“at once” if they begin any work inany state listed in item 3.C. If theinsured is working in a state not listedin item 3.A on the effective date orrenewal date of the policy, there isonly 30 days coverage, unless thecarrier received notice, for benefitspaid under that state’s statute.Relying on item 3.C to provide

automatic coverage can be adangerous practice.

State requirementsIn New York, it is mandatory to haveNew York listed if the insured has any New York exposure – even if it is incidental. In fact, sources confirm that New York has started to levy fines against employers ifthere is an exposure in New York butthe state is not listed. Thus, keep upwith and comply with the variousstate regulations! And as indicatedabove, Ohio also changed its law in away that can adversely impact out-of-state employers with incidentaloperations if they do not fullyunderstand the requirement.

Insuring contractors?This class of business has its fair shareof E&O claims arising from improperhandling of the WC exposure.Sometimes, the terms of the contractwith a sub-contractor call for thegeneral contractor to supply theWorkers’ Compensation coverage. If you are insuring the GC, work with your client to understand thisstipulation and take the necessaryaction. Don’t wait for an employee of the subcontractor to be injured tofind out that no WC coverage was in place.

Be alert to communicationfrom your carriers regardingcoverage statusThis is a claim where the agencyprocured Workers’ Compensation fora small contractor. After the policyhad been in force for a month, thecarrier cancelled the policy forunderwriting reasons. Both the clientand agent denied seeing acancellation notice and thus noreplacement policy was procured. Itwas not until a worker was injured

several months after the cancellationthat it was discovered the WC policyhad been cancelled. The client wasforced to pay the benefits and suedthe agent. A review of the agency’srecords revealed a fax the agent hadreceived from the carrier one monthprior to the cancellation date clearlyindicating the policy was to becancelled. Because the agency failedto act on the fax, the case was settledfor $11,000.

U.S. Longshoreman andHarbor coverageDo you have a client that is subject tothe Longshore and Harbor Workers’Compensation Act? This act,administered by the U.S. Departmentof Labor, provides medical benefits,compensation for lost wages andrehabilitation services tolongshoremen, harbor workers andother maritime workers injuredduring the course of employment orwho suffer from diseases caused orworsened by conditions ofemployment. Placing this coveragemay not be easy and extra cautionshould be exercised. As you will noteby the following example, the dollarsat stake can be high.

The client requested U.S.Longshoreman and Harbor coveragebe provided for their employees. Theagency went through a broker toplace the coverage. An employee ofthe client was injured and the carrierdisclaimed, saying there was nopolicy in place. The employee lostwages and incurred medical bills andattorney fees. The client was facedwith the cost of an attorney and hadto pay fines for not having coveragein place. Although the carrier felt thebroker was at fault – there wasdocumentation on file supporting theposition that the broker had agreed to

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 9

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

procure the coverage – following abench trial the Court found the agentequally liable with the broker. Withthe total damages claimed in excessof $700,000, the agent’s share was$315,000.

WC Trusts/alternativeprogramsIf you are looking to use a trust toplace one or more of your WCcustomers, it is important to fullyunderstand these trusts, how theyoperate and, quite certainly, theirfinancial condition. In New York, anumber of these have declaredinsolvency in the past few years.

Without a Guaranty Fund to provideprotection, a high degree of duediligence should be exercised. Thislack of a Guaranty Fund should alsobe clearly communicated in writing toyour customers.

Placing WC is not thatdifficult – doing it right isthe hard partWhen placing this coverage, there is adefinite need for attention to detail.Work with the application anddocument the responses from theprospect, and your job should be alot easier.

Brush up on thelatest in

Workers’ Comp

Members have access to thecoverages guru himself – Jerry Milton – for a series of state-specific Workers’ Comp seminars,produced in conjunction with IA&B.

The course covers classification and rating, experience-rating plan,and federal compensation andliability laws.

Catch Jerry in a nearby town:

Erie, Pa. Aug. 24

Pittsburgh, Pa. Aug. 25

Hagerstown, Md. Aug. 31

Mechanicsburg, Pa. Sept. 1

Dover, Del. Sept. 2

Allentown, Pa. Sept. 28

King of Prussia, Pa. Sept. 29

Hanover, Md. Sept. 30

Learn more and register byvisiting www.iabgroup.com/

education/sp_work_comp.html

[ 10 ]

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 10

[ 11 ]

Date Topic Location

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

4 Dynamics of Service Trevose, Pa.

CISR—Commercial Casualty Course Wilkes-Barre, Pa.

5 CISR—Agency Operations Course Lancaster, Pa.

CISR—William T. Hold Seminar Macungie, Pa.

10 Insuring Success Seminar (CPIA Module 1) Coraopolis, Pa.

E&O Coverage Standards Seminar Allentown, Pa.

Pennsylvania Compliance Pitfalls Seminar Lancaster, Pa.

11 Insuring Success Seminar (CPIA Module 2) Coraopolis, Pa.

E&O Coverage Standards Seminar Hagerstown, Md.

Pennsylvania Compliance Pitfalls Seminar Scranton, Pa.

11-13 James K. Ruble Graduate Seminar Hershey, Pa.

12 Insuring Success Seminar (CPIA Module 3) Coraopolis, Pa.

17 CISR—Agency Operations Course Trevose, Pa.

18 CISR—William T. Hold Seminar Dover, Del.

18-21 CIC—Commercial Property Institute Timonium, Md.

24 CISR—Commercial Casualty Course Timonium, Md.

Workers’ Compensation Seminar Erie, Pa.

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

25 CISR—Commercial Casualty Course Lancaster, Pa.

Workers’ Compensation Seminar Pittsburgh, Pa.

31 CISR—Commercial Casualty Course Salisbury, Md.

31 Workers’ Compensation Seminar Hagerstown, Md.

Glance at EventsA U G U S T C A L E N D A R

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 11

CoverageC O R N E R

[ 12 ]

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.

CONTRACTORS, SUBCONTRACTORS ANDINSURANCE REQUIREMENTS

Primary Agent | August 2010

Larger, well-managedcontractors usually requiretheir subcontractors to sign acontract prior to beginningany work. These contracts willinclude an indemnificationprovision, as well as requirethe subcontractor to procureand maintain certain policiesof insurance.

A typical indemnificationprovision may read asfollows:

“The subcontractor shallindemnify and holdharmless the contractor andits employees from andagainst claims, damages,losses and expenses arisingout of work performedunder this contract,provided that such claim,damage, loss or expense isattributable to bodily injury,sickness, disease or deathto any person, or to injuryto or destruction of tangibleproperty including loss ofuse resulting therefrom.”

The policies of insurance thatthe subcontractor is requiredto procure include

Commercial General Liability,Automobile and Workers’Compensation. Somecontracts also require thesubcontractor to purchasePollution Liability insurance.Few, not many, include arequirement for ProfessionalLiability insurance.

This requirement is enforcedby some insurers who attachendorsements to theirCommercial General Liabilitypolicies that exclude coveragefor the contractor arising outof the actions of anyuninsured subcontractor. Anexample of this type ofexclusion is:

“If you are a contractor,builder or developer, thereis no coverage under thispolicy for ‘bodily injury,’‘property damage’ or‘personal and advertisinginjury’ caused by the acts ofindependent contractors/subcontractors contractedby you or on your behalfunless the independentcontractor/subcontractorcontracted by you or onyour behalf maintains

insurance coverage andlimits of insurance equal to or greater than theinsurance coverage andlimits of insurance providedby this policy and namingyou as an AdditionalInsured.”

In addition, the contractbetween the contractor andthe subcontractor normallystipulates that all policies ofinsurance provided by thesubcontractor shall contain awaiver of subrogation in favorof the contractor. Some statesprohibit insureds fromwaiving an insurer’s rights torecover workerscompensation benefits paid toan injured worker. However,Pennsylvania, Maryland andDelaware do not; waivers ofsubrogation are permitted.

Sam Subcontractor was hired by Carl Contractor topaint the interior and exteriorof a new building underconstruction. Sam signed acontract with the sameindemnification provisionsand insurance requirementsas discussed above.

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 12

One of Sam’s employees was injuredwhen he fell from defectivescaffolding. The injured employee willbe paid the Workers’ Compensationmedical and indemnity benefitsrequired by the state under Sam’sWorkers’ Compensation policy.However, the employee was advisedthat he could also sue Carl Contractorfor his negligence in failing to provideproper supervision of the job.

In Pennsylvania and Delaware anemployee can collect Workers’Compensation and also sue a thirdparty. In Maryland the employee caneither collect Workers’ Compensationor sue a third party, but not both.Incidentally, Maryland is one of sevenstates that have this provision.

If Sam’s employee does sue Carl, thenSam’s Commercial General Liabilityinsurer will have to defend and, ifnecessary, indemnify Carl as per the

indemnification provisions of thecontract. Sam’s CGL policy excludesbodily injury to an employee duringthe course of employment. However,the exclusion does not apply to anyliability assumed under an insuredcontract. The definition of insuredcontract includes this constructioncontract between Carl and Sam.

If the injured employee does not sue Carl:

w In Pennsylvania the employer is subrogated to the rights of the employee;

w In Maryland the Workers’Compensation insurer may bringan action against Carl; and

w In Delaware the employer or theWorkers’ Compensation insurercan file an action on behalf ofthe employee.

However, in either case, whether theemployee sues Carl or not, Sam andhis insurer are blocked from anyrecovery from Sam. Why? The waiversof subrogation, that’s why. Why canthe employee sue Carl? The employeeis not bound by the waiver — just Samand his insurer.

Now you know why insurers wantcontractors to require theirsubcontractors hold them harmlessand also procure certain policies ofinsurance.

Y’all take care!

HELPING AGENCIES AVOIDCOSTLY E&O CLAIMS

IA&B HAS OVER 50 YEARS OFEXPERIENCE TRAINING AGENCY STAFF

By attending IA&B training programs, your staff willhave the skills to provide proper coverage and avoidcostly E&O claims. No one knows E&O like IA&B. Don’t trust your employee training to anyone else.

FOR MORE INFORMATION, VISIT IABGROUP.COM OR CALL THE IA&B MEMBER SERVICE CENTER AT (800) 998-9644.

That’s how we deliver distinction.

Driving members to distinction

G15646_01-13.qxp:August2010 7/19/10 1:04 AM Page 13

AGENCY MANAGEMENT

Privacy is all the rage these days. Customersexpect it, and thegovernment regulates it.For insurance producers —and agencies as a whole —privacy compliance hasbecome an ever-expandingweb of standards and rules,mandates and regulations.

______________________________

“Sometimes we’re so focusedon retaining business that we can be broadsided byregulatory issues,” said Mike Papa, senior vicepresident at Diversified

Insurance Industries, Inc., in Baltimore, Md., whoutilized IA&B’s privacy

resources. “We really count on IA&B to identify problems

and create solutions.”

______________________________

Privacy 101How to be well schooled in compliance

G15646_14-21.qxp:August010 7/19/10 1:26 AM Page 14

[ 15 ]

Primary Agent | August 2010

Goodbye, days ofsimply shreddingMVRs and calling it aday. Today you need

privacy programs in place andpolicies under constant review.Misstep (even by ignorance),and you’ll pay.

IA&B recognizes that what youdon’t know can hurt you.That’s why the association hasdeveloped privacy complianceresources (which are awardwinning, we might add) thatcover your state and federalobligations and walk you, stepby step, through the necessaryprovisions. No otherorganization offers thisthorough of a product withinmembership dues.

The privacy audit is located onthe right of this page. Answerthe questions to find out whereyou and your agency stand.Then make a commitment tocompliance.

ANNUAL PRIVACY NOTICEAgencies gained theclassification of financialinstitutions in 1999, when thefeds enacted the Gramm-Leach-Bliley Act (GLBA). Theysubsequently became subjectto new privacy requirements.

Individual states were grantedoversight of the rules andstandards. Pennsylvania,Maryland and Delaware(among others) regulated thatagencies disseminate anannual privacy notice.

Q. In plain English, whatdoes the directive mean?

A. Tell customers (andpotential customers) whatyou do with the health and

G Privacy auditDo you sell personal lines, Workers’ Compensation and/or group-benefit policies? How about Health insurance?nn Yes nn NoYes? Read up on the privacy notice you’re required to provide to clients and prospects.See page 15.

Is your privacy notice provided initially and annually? And is it posted on your Web site?nn Yes nn NoNo? You best learn more about the privacy notice you’re required to share. See page 15.

Do you share client information with any affiliates (applies if you hold at least aquarter ownership or control) or with any non-affiliated third parties?nn Yes nn NoYes? Then your privacy policy must allow customers to opt out. See page 15.

Do you have an information-security provision with the service providers (think: ITproviders, envelope stuffers, telemarketers, data-backup providers) who access yourfacility or files? How about with fellow agencies in your cluster? nn Yes nn NoNo? You need a security addendum for your contract that restricts others’ use of your clientinformation. See page 15.

Do you have a written information security program in place that addresses howyou protect the information collected by your agency?nn Yes nn NoNo? Find out what an information security program is all about and how IA&B can help.See page 16.No and you write Health or group benefits? More stringent guidelines apply. See page 18.

Do you have a plan to identify and respond to data breaches in your agency?nn Yes nn NoNo? You’re required to have procedures and systems in place. See page 17.

Do you simply delete electronic files with customers’ credit or insurance scores?nn Yes nn NoYes? Better read up on the FTC’s approved methods of trashing customer files. See page 21.

G15646_14-21.qxp:August010 7/19/10 1:26 AM Page 15

financial information youcollect. Share it at thebeginning of yourrelationship with thecustomer and then againannually. And if you havea Web site, post the noticeonline – and documentany customer informationyou gather or store via theWeb.

Q. Exactly what informationdoes the regulationinclude?

A. Health information is self-explanatory. The financialinformation in questionincludes any informationgiven by or obtained aboutthe consumer relating tothe transaction. If theinsurance product is usedfor personal, family orhousehold purposes, theregulation applies.

Q. What should my privacynotice say?

A. So glad you asked. IA&Bmembers have access toWeb-based audits thatdetermine if your noticecan say that you don’tshare information “otherthan as permitted by law”or if you must give moreinformation based on youragency’s practices. Anddepending on thosepractices, the audits mayprompt you to include anopt-out provision forclients to request that theirinformation isn’t shared.

No matter your audit results, inthe end you’ll learn which ofIA&B’s four sample notices fitsyour agency.

Create your notice:

Pennsylvania –www.iabgroup.com/pa/privacy_requirements

Maryland –www.iabgroup.com/md/privacy_requirements

Delaware –www.iabgroup.com/de/privacy_requirements

Note: You also must have aprivacy agreement in placewith every service provider(i.e. IT provider, marketingfirm) and fellow cluster agencythat come in contact with yourcustomers’ information. Anaddendum to your contractscan clarify their use of thatinformation.

Read up on informationsecurity addenda:

Pennsylvania –www.iabgroup.com/pa/privacy/service_provider

Maryland –www.iabgroup.com/md/privacy/service_provider

Delaware –www.iabgroup.com/de/privacy/service_provider

WRITTEN INFORMATIONSECURITY PROGRAMAs mentioned in the previoussection, the GLBA labeledagencies as financialinstitutions – a lofty title thatstipulates privacy obligations.

Individual states oversee theprivacy rules and standards.Pennsylvania and Delawarerequire agencies to create awritten information securityprogram. And while Maryland

AGENCY MANAGEMENT

[ 16 ] [ 17 ]

Common questions aboutprivacy notices

w My carrier told me I didn’t need a privacynotice. True or false?

w What can I tell car dealers who call and ask for information on customers who arebuying a car?

w What about lenders asking for information on customers who are buying or refinancing a house?

w What if I share information with an MGA or broker?

w I received a subpoena asking me for a copy of a client file. Can I share that?

w I belong to a cluster. What’s permissible to share?

w I own two separate agencies but operatethem with the same staff. How can I shareinformation between the agencies?

w I’m in the process of selling my agency, and the prospective buyer wants a look-see.How should I handle this?

Turn to IA&B’s online Q&A forthe answers:

Pennsylvania –www.iabgroup.com/pa/privacy/qa

Maryland –www.iabgroup.com/md/privacy/qa

Delaware –www.iabgroup.com/de/privacy/qa

G15646_14-21.qxp:August010 7/19/10 1:26 AM Page 16

never regulated it, producers inthe state are still required byfederal law to develop one.

Q. What should be included?

A. A written informationsecurity program details themeasures your agencytakes to protect customers’information, including:

w Identifying anddetermining thelikelihood of threats,

w Defining administrativeprocedures, officesecurity and computersystems security and

w Assessing the sufficiencyof those safeguards.

Q. How do I get started?

A. IA&B has you covered.Complete a Web-based risk-assessment survey, andyou’ll earn a customizedprogram to keep on file.The only things left to do?Training your staff toimplement the program,and monitoring your agencyoperations to adjust theprogram as necessary.

Create your informationsecurity program:

Pennsylvania –www.iabgroup.com/pa/privacy_requirements

Maryland –www.iabgroup.com/md/privacy_requirements

Delaware –www.iabgroup.com/de/privacy_requirements

Note: If you sell Healthinsurance (even just onepolicy), you’ll need a more

stringent information securityprogram to comply with HIPAA’snew HITECH Security Rule.Read more in the securitystandards section on page 18.

DATA-BREACH NOTIFICATIONIt’s common knowledge that theHealth Insurance Portability andAccountability Act (HIPAA)guards personally identifiablehealth information. (UnderHIPAA, it’s called protectedhealth information, or PHI.)What’s not so well known isthat HIPAA requirementsrecently expanded to furtheraffect producers.

The bottom line: As ofSeptember 2009, affectedproducers must comply withdetailed notification proceduresif PHI – whether it’s electronic,written or spoken – is breached.

Specifically, producers are onthe HIPAA hook if they areconsidered a business associateof a covered entity (defined as ahealthcare provider, healthinsurance plan or healthinsurance clearinghouse). Ofcourse, HIPAA obligations alsocan be triggered if the producer

is considered a covered entity,i.e. is an employer with a fullyinsured or self-insured healthinsurance plan for his or herown employees.

Q. How do I know if I’m abusiness associate?

A. Chances are, if you sellhealth insurance or groupbenefits, you’re a businessassociate. While a businessassociate isn’t a member ofthe covered entity’sworkforce, he “performsfunctions or activities onbehalf of covered entitiesthat involve the creation orreceipt of protected healthinformation.”

Q. What’s this business-associate agreement I’veheard about?

A. Put simply, the agreementestablishes safeguards toprotect health information.It also stipulates thatbusiness associates andtheir vendors (and theirvendors’ vendors, etc.)enter into contracts whensharing protectedinformation. And since the

[ 16 ]

Primary Agent | August 2010

[ 17 ]

Digital copiers: the weak linkAn unexpected source of data breach is that seemingly innocuous office copier.Digital copiers store a copy of every document that is copied, scanned or e-mailed.And that could mean trouble when the copier leaves your office.

CBS News last spring ran a story about digital copiers that were purchased or leasedand then replaced or discarded without wiping the hard drive. Personally identifiableinformation, including social security numbers and protected health information,were available within hours of purchase on the second-hand market.

The lesson:Make sure the hard drive is wiped before leased digital copiers leave the premises.And before replacing owned copiers, contact the manufacturer to secure or removethe hard drive before you dispose of the equipment.

Last but not least, make these processes part of your information security program.

G15646_14-21.qxp:August010 7/19/10 1:26 AM Page 17

data-breach rule went intoeffect, the agreement alsogives a timeframe for thebusiness associate to notifya covered entity of abreach.

Your carrier, the covered entity,likely asked you to sign abusiness-associate agreement.And carriers on top of theirgame already sent outamended agreements to reflectthe recent data-breach andSecurity Rule changes.

Your client also is considered acovered entity and should havesent you an amended business-associate agreement,too. If not, give them a gentlereminder. (The law includes awhistle-blower provision thatrequires you to reportviolations … such as failure toprovide a business-associateagreement.)

Q. How do I handle a breach?

A. This is serious stuff. HIPAAmandates notification bythe covered entity within60 days of discovering abreach of unsecured PHIthat compromises theinformation’s security. Allthose affected must benotified. So mustprominent media outlets ifover 500 people in thesame state or jurisdictionare impacted.

If covered entities have 60 daysfor notification, guess what?Business associates have lesstime (anywhere between oneand 59 days) to notify theircovered entity. So if you

discover a breach in youragency, check your agreementASAP for a timeline.

IA&B’s Web site details thescenarios that don’t triggernotification and, worst casescenario, the specific steps totake if a breach occurs.

Read up on HIPAA’s data-breach provisions:

Pennsylvania –www.iabgroup.com/pa/hipaa/breach_rule

Maryland –www.iabgroup.com/md/hipaa/breach_rule

Delaware –www.iabgroup.com/de/hipaa/breach_rule

Note: Independently fromHIPAA, all agencies areaffected by state data-breachlaws, which addressidentification and clientnotification of breaches.

Learn more about state laws:

Pennsylvania –www.iabgroup.com/pa/privacy/breach

Maryland –www.iabgroup.com/md/privacy/breach

Delaware –www.iabgroup.com/de/privacy/breach

SECURITY STANDARDSInsurers and employersconsidered covered entitiesunder HIPAA have always hadto comply with strict securitystandards. As of February 2010,

AGENCY MANAGEMENT

[ 18 ] [ 19 ]

Securing the e-mail trailE-mail contents and attachments are free gameas they travel the Internet. Think of an openpostcard sent through the mail, where anyonecan read it en route.

If an unsecured e-mail is intercepted and itcontains sensitive client information, the agencywould be on the hook for a security breach. Notto mention a damaged reputation.

Transport layer security (TLS) is an industrystandard protocol to protect e-mails sent via theInternet. It’s built into most e-mail gateways(Microsoft Exchange, IBM Lotus Notes) and isactivated with a click of the mouse. The senderand receiver will notice nothing.

TLS operates independently. When an e-mail issent from one domain (an agent, for example)to another (a carrier), the servers that controltransmission negotiate to determine if TLS isenabled. If it is, the servers transmit the e-mailwithin an impermeable tunnel. Message contentand attachments are protected.

Source: Agents Council for Technology

Note: TLS is particularly well suited for e-mailsbetween agencies and carriers. What aboutclients? When it comes to those that are coveredentities under HIPAA, e-mail security must beaddressed by discipline (absolutely no PHI sentvia e-mail) or by encryption. TLS may or maynot be an option, depending on your client andyour operations.

Learn more:

Pennsylvania –www.iabgroup.com/pa/technology/TLS

Maryland –www.iabgroup.com/md/technology/TLS

Delaware –www.iabgroup.com/de/technology/TLS

G15646_14-21.qxp:August010 7/19/10 1:26 AM Page 18

[ 18 ]

Primary Agent | August 2010

[ 19 ]

Member profile: The John YurconicAgency tackles new HIPAA mandates

Much like Mother Nature did withsnow, new federal regulations buriedHealth producers in privacyresponsibilities last February.Obligations once reserved for coveredentities (typically, insurance carriers)under HIPAA were expanded toencompass business associates(typically, agents), thanks to theSecurity Rule.

Tom Thorne, of the Allentown, Pa.-based John Yurconic Agency, knew a bitabout HIPAA thanks to his backgroundworking for a health insurance carrier.So when he heard about the SecurityRule, he jumped at the chance to helpthe agency prepare.

“We were always very focused onprotecting members’ privacy,” he says,“but this brought it up to a whole newlevel. We became directly accountablefor the protection of information.”

The mid-sized agency, which handlesLife and Health as well as Property andCasualty, geared up for the changemonths in advance. They mademodifications to their agencymanagement software, restricted accessto information and began utilizinglimited data sets.

“While some IT requirements may beexpensive,” says Thorne of the agency’sadjustments, “as far as nuts and boltsand the cautious and properprocedures on releasing and managingdata, it’s not expensive. It’s justcommon sense.”

Ready by February 2010, the JohnYurconic Agency was no doubt aheadof the game. And now, with the SecurityRule firmly in place, agencies that haveyet to comply must follow suit.

“I know some agencies haven’t taken it seriously, but I urge them to becautious with that,” he warns.“Enforcement is probably notsomething that will come up too often, but when it does, it could be catastrophic for a small agency.”

Read more about security standards on page 18.

John Yurconic, left, and Tom Thorne are upto speed on privacy compliance.

business associates – a termthat includes most agencieswith Health policies – must playby the same rules, specificallythe Security Rule.

Curious if your agency isconsidered a businessassociate (or perhaps a coveredentity)? Read the criteria in theprevious section on data-breach notification.

Q. What does the SecurityRule entail?

A. Business associates mustcomply with the following:

w Limit “the amount ofprotected healthinformation they access,receive or process,”

w Review security controlsand add encryptionwhere possible,

w Develop an incident-response plan and

w Train employees on howto handle healthinformation and how tocarry out the incident-response plan.

What’s more, businessassociates are bound by awhistle-blower rule. If acovered entity isn’t compliant,they must terminate thecontract or report the breach.(The rule goes both ways:Covered entities must addressbusiness associates’ securityslip-ups.)

The Security Rule is no joke.Business associates are nowsubject to the same civil andcriminal penalties as coveredentities.

G15646_14-21.qxp:August010 7/19/10 1:26 AM Page 19

Learn more about data security atIA&B’s Executive Management Conference on Oct. 26-27 in Lancaster, Pa.

The technology-themed event will bring together industry experts tocover:w Agency management systemsw Data securityw Electronic document

managementw Social networkingw Top technology tips

Data security 101

Look for more information in Agent Headlines and at iabgroup.com

Q. How do I comply?

A. Have no fear. IA&B walksmembers through thedaunting project with aseries of onlineassessments –administrative, physical and technical safeguards.

Each assessment labelsindividual standards as required or addressable. As thetitle suggests, covered entitiesand business associates mustcomply with required standards. Addressablestandards require compliance ifit is reasonable and appropriate based upon youragency. For the addressablestandards that you choose notto implement, you’ll need todocument why and implementan alternative measure.

Once the assessments arecomplete, formalize andimplement the policies andprocedures, and then set areminder to review the policies.

Access the Security Rule assessments:

Pennsylvania –www.iabgroup.com/pa/hipaa/security_rule

Maryland –www.iabgroup.com/md/hipaa/security_rule

Delaware –www.iabgroup.com/de/hipaa/security_rule Note: The Security Ruleapplies only to electronicinformation. The HIPAA data-breach notification mandates,on the other hand, apply toelectronic, written and spokeninformation.

AGENCY MANAGEMENT

[ 20 ] [ 21 ]

Snapshot of 2009 data breaches Who is behind data breaches?74% resulted from external sources

20% were caused by insiders

32% implicated business partners

How do breaches occur? 67% were aided by significant errors

64% resulted from hacking

What do they have in common?83% of attacks were not highly difficult

87% were considered avoidable throughsimple or intermediate controls

99.9% of records were compromisedfrom servers and applications

Where should mitigation effortsbe focused?3 Ensure essential controls are met.

3 Find, track and assess data.

3 Collect and monitor event logs.

3 Audit user accounts and credentials.

3 Test and review Web applications.

Source: Verizon Business InvestigativeResponse Team

G15646_14-21.qxp:August010 7/19/10 1:26 AM Page 20

DISPOSAL OFCUSTOMER FILESTrashing consumer reports — in the insurance world, think:credit or insurance scores,MVRs and C.L.U.E. reports — is governed by the Fair andAccurate Credit TransactionsAct (FACTA) and enforced bythe FTC. Agencies must destroythe documents using“reasonable and appropriate”measures.

Q. What are “reasonable andappropriate” ways todestroy consumer reports?

A. There are a few methodsthat meet the FTC’sdemands:

w Shredding, burning orpulverizing papers,

w Destroying or erasingelectronic files (watchout: simply deleting filesis not sufficient) and

w Conducting due diligenceand hiring a document-destruction contractor.

Beyond consumer reports,remember that any sensitiveinformation, such as socialsecurity numbers, must beprotected. Detail it all in youragency’s written informationsecurity policy. (See page 16 formore on creating aninformation security policy.)

[ 20 ]

Primary Agent | August 2010

[ 21 ]

Private eyes are watching you

Think no one will notice a privacy transgression? So didRobert Warren Spruill when he dumped over 1,000 insurancerecords and documents into an unlocked dumpster.

A bystander saw the activity, became suspicious and alertedthe media. In the end, Spruill was down $11,000 thanks to anOregon Department of Consumer and Business Services fine.

G15646_14-21.qxp:August010 7/19/10 1:26 AM Page 21

Platinum ProfileInsurance Agents & Brokers proudly recognizes ACUITY as oneof its Platinum Partners. IA&B Platinum Partners dedicate thehighest level of sponsorship to our organization.

FEATURED PARTNERACUITY

PRESIDENT & CHIEF EXECUTIVE OFFICER

Ben Salzmann

COMPANY LOCATION\SSheboygan, WI

A.M. BEST RATING “A+” (Superior)

ACUITY believes insuranceshould be fun. Despite theapparent insanity as seen

through its crazy promotionalmaterials, ACUITY takes a veryserious approach to the business of insurance — and does it solelythrough professional independentagents.

“ACUITY is focused on being the ‘go-to’ company for agents,” explainsWally Waldhart, Vice President -Sales and Communications. Thatfocus has led to ACUITY’scommitment to developing andinvesting in ease-of-businesstechnology aimed squarely at itsagent partners. ACUITY providesreal-time, online policy quotationand application and automaticallyissues and delivers policies to agentswithin seconds. ACUITY’s ongoingleadership has helped the company

earn more technology awards fromACORD than any other carrier in thenation over the past 10 years and aspot on the InformationWeek 500 for the past six.

ACUITY also offers a wide range ofproducts in personal andcommercial lines, a broad appetite,and expert value-added services inkey areas such as loss control andmanaged care. The companybalances competitive rates andpricing flexibility with underwritingdiscipline and considers accounts ofvirtually any size.

The carrier — rated A+ by both A.M.Best and Standard & Poor’s — hasconsistently outperformed theindustry in terms of profitability andsurplus growth over the past decadeand has been named by WardFinancial Group for 10 straight years

as one of the top 50 best-runinsurers nationwide. ACUITY writes$750 million in premium throughover 900 independent agencies andmanages over $2 billion in assets.

Perhaps combining fun andpragmatism to the business ofinsurance is the reason ACUITY isthe only company across allindustries to be named one of thetop five Best Places to Work in eachof the last six years. According toBen Salzmann – President and CEO,“Our voluntary employee turnoverrate of less than 1 percent clearlycontributes to consistentlyoutperforming the industry over thepast decade. We are incrediblyexcited about what we bring to thetable, as well as the tremendouspotential in Pennsylvania.”

Acuity President & CEO, Ben Salzmann

G15646_22-28.qxp:August2010 7/19/10 1:30 AM Page 22

WHAT IS IA&BPARTNERS?The IA&B Partners

program gives company

and allied businesses

the opportunity to

demonstrate their

commitment of support

to independent agents

and receive maximum

market exposure. As an

IA&B Partner, you will

also realize the benefits

of IA&B membership to

help you succeed in

the insurance industry.

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

choose the sponsorship

package that matches your

commitment of support.

Contact the Member Sales

Center at (800) 998-9644,

(717) 795-9100 or visit us

online at www.iabgroup.com

to get started.

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

Thank you for your continued sponsorship.

Primary Agent August 2010

PLATINUM LEVELACUITYBerkley Mid-Atlantic GroupErie Insurance GroupHarleysville InsuranceInsurance Agents & BrokersService Group IncMillers Mutual GroupMillville Mutual Insurance CoMutual Benefit GroupOhio CasualtyPenn National InsuranceSelective Swiss ReThe Main Street America GroupTravelersUtica National Insurance Group

GOLD LEVELAllied InsuranceMMG InsuranceProgressive

SILVER LEVELAmerican Mining Insurance CoCumberland Insurance GroupDonegal Insurance GroupFrederick Mutual Insurance CoHarford Mutual Insurance CoJuniata Mutual Insurance CoPSBA Insurance TrustThe Motorists Insurance GroupWestfield InsuranceZenith Insurance

BRONZE LEVELAegis Security Insurance Co

Agency Insurance Company

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

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

G15646_22-28.qxp:August2010 7/19/10 1:30 AM Page 23

Primary Agent | August 2010 TechnologyU P D A T E

[ 24 ]

ComScore’s latest assessmentof the online auto insurancelandscape reflects continuedgrowth in quoting andpurchasing auto insuranceonline (2010 comScore OnlineAuto Insurance Report). Mostconsumers still buy off line,however, and want to dealwith a person. Independentagents can continue tosucceed in this newenvironment if they buildtheir own online presencewith an engaging Web site,use social media to develop“fans,” incorporate online

consumer quoting coupledwith rapid follow-up anddemonstrate they add valueto the process.

It is important forindependent agents to befully aware of the trendsrevealed in comScore’s latestresearch as they develop theironline strategies, and thisarticle seeks to present thosehighlights.

The 58-page report coverstrends regarding onlinequoting and purchasing,

information about customerpreferences, agent versusdirect-channel purchasing, aswell as aspects of customerself-servicing and loyalty. Forthis survey, comScore reliedupon input from 1 millionU.S.-based consumers, as wellas insights from a panel ofover 2,000 U.S. onlineconsumers.

Online quotingOnline quoting continues tobe the first stop forconsumers researching autoinsurance. Online quoting

RON BERG

Ron Berg is senior technology

research specialist within the

Agency Services & Technology

unit of MetLife Auto & Home

(www.metlife.com), based in

Warwick, R.I. Ron can be

reached at rberg1@metlife.com.

He produced this article for ACT;

for information about ACT,

please visit www.iiaba.net/act.

This article reflects the views of

the author and should not be

construed as an official

statement by ACT, nor of

MetLife Auto & Home, nor

should it be interpreted as

MetLife Auto & Home’s

endorsement of comScore or

the report.

CONSUMER SHOPPING FOR AUTOINSURANCE GROWS ONLINEHow independent agents can benefit from active Web presence

G15646_22-28.qxp:August2010 7/19/10 1:31 AM Page 24

increased 21 percent from theprevious year’s survey to a total of38.8 million quotes submitted online. In 2009, 54 percent of allconsumers went online to get autoinsurance quotes, and 72 percenthave gone online to find autoinsurance information at some pointin their lives.

—————————————

Savvy agents can start to divert a lot of this

online business by usingInternet tools to duplicate

the speed and conveniencethe direct carriers

are providing.

—————————————

The economy continues to be adriver in shopping around forinsurance. Twenty-one percent ofconsumers reported they are “morelikely” to shop around for insurancedue to the economic conditions.

We see this play out online with themajority (83 percent) going directlyto insurer Web sites, versus only 17percent going to aggregators andonline agencies (Insurance.com,NetQuote, etc.). Of the quotes doneon carrier sites, the usual “direct”suspects lead the pack: GEICO (28.8percent of all quotes), ProgressiveDirect (28 percent) and Esurance(13.8 percent).

Independent agents have a say in allthis, as a full 22 percent ofconsumers went to a multiple-carrieragent. This is a decrease of 3 percentfrom the previous year, so the focuson improving agent Web sitefunctionality becomes critical – withthe inclusion of Web site comparativerating tools, as well as direct-to-carrier quoting links offered bycarriers as agency Web site add-ons.

[ 25 ]

805 N. Front St., Harrisburg, PA 17108

Success

YourUnderwriting

SM

GIVING PROPERTY OWNERS CONFIDENCE TO BUILD UPON.

Years ago, Mike Serluco had a national company insuring his growing property development business. “But they go the way the wind blows,” he says. Then Independent Agent Don Kingsbury, of Christian Baker Insurance Agency, Lemoyne, suggested a local insurer with a stronger commitment to building owners – Millers. “It’s very, very important for an investor to have an insurance partner, and that’s what I call Millers,” Mike says. With the few insurance claims he’s had, “Bing, bam, boom – it’s done and taken care of.” Adds Kingsbury, “With Millers, they actually listen to what you have to say. And not only do they know this industry, they offer package policies at a good price, and they back it up with excellent claims service.” Smart business people, independent agents and Millers...truly partners in protection.

G15646_22-28.qxp:August2010 7/19/10 1:31 AM Page 25

TECHNOLOGY UPDATE

When it comes to consumer attitudeson purchasing, independent agentsstill have an edge.

Online purchasingA record 2.8 million policies werepurchased online in 2009 – anincrease of 22 percent from theprevious year. For some perspective,only 700,000 policies were purchasedonline in 2004.

The opportunity for independentagents lies with assisting theconsumer in understanding his/herinsurance needs. Seventy-eightpercent of consumers are stillpurchasing offline, and by far thelargest reason is that they want tospeak with someone who can guidethem. Seventy-one percent listed thisas their primary reason forpurchasing offline. The key is makingit easy for the consumer to findagents on the Web, as well asconnecting the consumer to theagency via technology tools likeonline quoting on the agency Website, live chat, online forms requestingagent call-back and using socialmedia. Additionally, more consumersare able to sign all needed policydocuments online. A full 82 percentreported using online tools such aselectronic signature in 2009. Overall,consumers are expecting easy-to-usefunctionality and rapid service.

Agency carriers are producing betterlong-term retention. Thirty-ninepercent of all shoppers switched theirauto insurance in 2009. However,State Farm and Nationwide had thehighest retention of those consumersstaying with their insurer five years ormore. GEICO and Progressive had thelowest five-year retention. While pricewas the biggest driver for switchinginsurers (49 percent), having a realperson with whom the insured can

visit with was third at 13 percent,after “protecting myassets/possessions.”

Self-servicingRetaining customers is crucial forboth agents and insurers. One of themost important aspects is payments.Fifty-five percent of customers pay fortheir bills on a monthly basis. While alittle over one-quarter of allcustomers pay their premiums in fullup front to obtain discounts, there isa large opportunity to provide ease ofuse functionality to the customer whomakes monthly payments, byproviding this functionality throughthe agent’s Web site (as well as at thecarrier’s site) – to keep the agent’s Web site in the forefront of thecustomer’s mind.

Many carriers provide eService links that can be placed on their agency’sWeb site, allowing clients to go theagency Web site first and then link tothe carrier’s sign-in and make apayment function. In total, 34 percentof customers pay their bills online –either at the insurance carrier’seService Web site or by onlinebanking.

Online activity varies with ageFor those shopping online for Autoinsurance, the biggest increases werebetween ages 18-24 and 25-34. Allage ranges over 35 decreased.

Twenty-three percent of 18-24 yearolds purchased their policies online in 2009, compared to only 9 percentfor 55+.

Percentages purchasing onlinedecreased for each range:

18-24: 23 percent

25-34: 21 percent

35-44: 18 percent

45-54: 15 percent

55+: 9 percent

Conversely, the percentage of thosepurchasing through an agent risesfrom 60 to 70 percent as age ranges increase.

Buying with or without an agentThe top four reasons consumers giveto have bought through an agentinclude: wanted a real person to visitwith or call (38 percent); have alwaysused an agent (34 percent); wantedlocal agent from one company whocould help with all insurance needs(26 percent); agent quoted best price(25 percent).

The top four reasons consumerschose not to go through an agent inmaking their purchase were: moreconvenient to use Web site or 24-hour toll-free number (27percent); faster to purchase online orthrough toll-free number (23percent); got a quote with a toll-freenumber and decided to purchase (23percent); prefer Web site or toll-freenumber (16 percent). Agents canemploy available technology tools tooffer the same convenience andspeed as the direct carriers, but addon top of that the personal adviceand local presence they offer.

Seventeen percent of respondentsindicate they purchased a policythrough an affiliation with anassociation or a group. Thirty-onepercent indicated they woulddefinitely purchase “pay-as-you-drive” insurance – more evidencethat consumers are looking fordiscounts wherever possible.

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Where are theopportunities?The majority of consumers are goingonline to research auto insurancepremiums. Agent Web sites canattract a larger portion of those byimproving site functionality withquoting and making their site easy tofind with social networking and SEO(search engine optimization). Twenty-two percent of those in the comScoresurvey went to local agents to getquotes. Twenty-six percent ofconsumers looked online for a localagent, either on a search site or on acarrier’s Web site.

Seventy-eight percent are stillpurchasing offline. Agents cancontinue to provide a crucial link inhelping consumers find a great pricematched with the coverage they need.While the direct giants like GEICO andProgressive Direct still get the most quotes online, agent-based

insurers have the lead in totalpremiums written. Consumers still putmore faith in agent-based insurers,and agent-based insurers have thebest retention versus direct writers.

Twenty-five percent of therespondents have individual Auto and Homeowners’ or Rentersinsurance with different carriers.There is a significant opportunity hereif the agent can attract moreconsumers to educate them on theprice and flexibility advantages ofwriting all of their insurance needswith one carrier. And 54 percent saidthey have additional insurancepolicies outside of Auto andHomeowners, primarily Life.

Thirty-four percent pay their billsonline. Links to carriers’ eService sitesplaced on agency Web sites are oneway to keep the clients in touch withagency Web sites. In addition, 82percent of online purchasers were

able to sign all policy documentsonline at the time of purchase, whichis up from 76 percent in 2009.Carriers and agents should work

together to offer this same eSignaturecapability for online forms.

While the clear trend is toward moreonline activity without theinvolvement of an agent, savvy agentscan start to divert a lot of this onlinebusiness by using Internet tools toduplicate the speed and conveniencethe direct carriers are providing.Agents can now optimize their Websites with online quoting andeServicing capabilities and links, aswell as attract more traffic using socialnetworking. Including customer self-service functions on agency Web sitesnot only provides more customerpreference options, but it keeps theagency Web site in the customer’sfield of view.

GoodvilleMutualNew Holland, Pa.

Contact Fred Macy, CPCUfred.macy@goodville.com800-448-4622goodville.com

Partnering with the finest independent agentsfor over 80 years

G15646_22-28.qxp:August2010 7/19/10 1:31 AM Page 27

ACUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Absolute Risk Placement . . . . . . . . . . . . . . . . . .1

Cumberland Insurance Group . . . . . . . . . . . . . .5

EMC Insurance Co . . . . . . . . . . . . . . . . . . . . . .IFC

Goodville Mutual Cas Co . . . . . . . . . . . . . . . . .27

IA&B Partners Program . . . . . . . . . . . . . . . . . . .23

IA&B Series Ads . . . . . . . . . . . . . . . . . . . . .13, IBC

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

Miller Mutual Group . . . . . . . . . . . . . . . . . . . . .25

Mutual Benefit Group . . . . . . . . . . . . . . . . . . . .27

Penn National Insurance . . . . . . . . . . . . . . . . .21

Preferred Property Program . . . . . . . . . . . . . . . .9

Tri-State General Ins Ag . . . . . . . . . . . . . . . . .IBC

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[ 28 ]

Travel woes

End-of-summer blues? Then get a chuckle from these nightmarish travel insurance claims— both of which were paid.

Monkey madness A couple vacationing in Malaysialeft their chalet window openwhen they went for a stroll. Theyreturned to find that monkeyshad stolen their clothes ... andstrewn them throughout theadjacent jungle.

Sick of the seaA gentleman suffering from seasickness bent over acruise ship balcony to get sick. Unfortunately, a boutwith nausea wasn’t the only thing he lost. His false teethfell out and splashed into a watery grave.

Source: http://ezinearticles.com/?expert=Josh_I_Harrison

----------------------------------------------------------------———————-------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 iab@iabgroup.com, subject line: Last & Least. The editor will happily protect sources’ anonymityupon request.

G15646_22-28.qxp:August2010 7/19/10 1:31 AM Page 28

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