Primary Agent - November 2010 - MD Edition

MARYLAND

ALSO INTHISISSUE:________________

11 ways ISO Homeowners’2011 alters coverage

Member profile

G17133Covers.qxp:Nov2010Primary 10/18/10 3:54 AM Page MDC1

A 1-2 PUNCH!

BUSINESS | HUMAN SERV ICES | INLAND MARINE | AUTO | HOME | L I FE/EMPLOYEE BENEF I TS | F LOOD

When you’ve got Harleysville CustomPak® in yourcorner, it’s easy to go toe-to-toe with the competitionfor quality commercial lines business. With a robustcombination of core enhancements all built intothe base cost of the product, CustomPak deliversthe punch that many carriers offer as extras undertheir BOPs for small business customers. For smallmiddle-market accounts, our CustomPak productconnects just as cleanly with an alternative coveragetier that offers higher base limits with the flexibilityto boost protection even further.

If you’re looking for a knockout sale in the firstround, put on the gloves and start writingCustomPak business with Harleysville today.

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

Harleysville CustomPak®

G17133_C2-C4.qxp:Layout 1 10/19/10 4:07 AM Page C2

Insurance for RestaurantsFamily Style, Pizza Shops, Take-Out, Fast Food, Donut Shops,

Diners, Cafes, Bagel Stores, Franchises

Brokers Surplus Agency wants to quote your restaurants!

We have a terrific BOP program that’s packed with the coverages you need.New Ventures eligible!Liquor liability coverage available!

Contact us by phone or email today!(215) 443-9900

Brokers Surplus AgencyP.O. Box 2849

Warminster, PA 18974

Dennis Marsaglia, Ext. [email protected]

Evelyn Frisch, Ext. [email protected]

G17133_01-11.qxp:November2010 10/19/10 4:18 AM Page 1

Attaching a dollar amount to an agency

One time. One and one half times. Two times. Multiple of commissions.Multiple of revenues. Multiple of earnings.

Do these so-called benchmarks and thumbnail measures have any bearing tothe value of your or any other agency?

Page 12

Member profile: Unexpected loss, unexpected valuation

It was December 2007, and Brenda Antis was mourning the unexpected loss ofher father … and facing an unexpected agency valuation process.

Page 22

12

22

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 # 2010-11) 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 & Omissions10 Coverage Corner18 Glance at Events

21 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.



OfficersDavid Rosenkilde, CIC

Chair of the BoardReisterstown, Md.

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

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

MembersNorman F. Basso, CPCU

York, Pa.

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

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

Timothy P. BurrisThompsontown, Pa.

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

G. Greg Gunn, CICLemoyne, Pa.

Diana M. Hornung-Momot, ACSRWilmington, Del.

Michael F. McGroarty Sr.Pittsburgh, Pa.

Scott C. Rogers, CPIAYork, Pa.

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

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

James M. Watkins*Dover, Del.

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

* IIABA National Director** PIA National Director

Board of Directors

Agency reflections

It’s November: time to reflect on our lives and count our blessings.

On the professional front, it may be hard to find a bright spot in thelingering soft market. But we’re trimming the fat and streamliningoperations. We’re honing our skill sets and nurturing clientrelationships. And all of this, in the long run, makes us stronger.

Amidst today’s challenges, another area in need of reflection isyour agency’s value. For the reasons we anticipate — retirementplanning, transferring stock and securing outside capital — and forthose we don’t (think: dissolution of a partnership or death), avaluation is necessary.

This issue of Primary Agent magazine answers the questions ourmembers so often ask: How far out must I plan for perpetuating myagency? Is there an easy formula I can use to benchmark myagency’s value? When and why should I have my agency valued?

I encourage you to take a few minutes and read the feature article,prepared by valuation expert Al Diamond for IA&B members, andreflect on your agency: what your agency’s earning potential istoday and what it will be in the future.

And, of course, I encourage you to take time away from the office and to enjoy the company of those for whom you are most thankful.

Happy Thanksgiving to you and yours,

Dave

[ 4 ]

David B. Rosenkilde Sr., CIC

Chair of the Board’sM E S S A G E


?QUESTION: Who is responsiblefor filing the affidavit if a risk isfound on the export/exportable list:Is it the Surplus Lines licensee orthe retail producer?

ANSWER: The answer to thisquestion is state-specific. And beforeanswering it, let’s talk briefly about theexport list.

The “export,” or “exportable list,” is a listof risks that are inherently so hard toplace that the state regulator has waivedthe diligent search requirement for thoserisks. As a result, the (generally three)declinations from admitted carriers areno longer needed in order to access theSurplus Lines market.

In every state, the export list is different.And the process to access the SurplusLines market can be different too. So,let’s look at our three states.

Delaware currently does not have anexport list at all. All submissions needthe diligent search to be performed, andthree declinations to be received fromadmitted insurers before placing the riskin the Surplus Lines market.

Maryland has an exportable listavailable. It is part of the Surplus Linesregulation (COMAR 31.03.06.10.) and isavailable for review on IA&B’s website asneeded. Interestingly, while theregulation specifically states that anaffidavit executed by the originatingproducer is required, the MarylandInsurance Administration stated that ithas discontinued filing that affidavit andsimply expects the agency to keep arecord in the agency file. Other affidavitsare still filed, but not this one.

Pennsylvania also has an export list.When a risk is on that list, the “1609-PR”(or three-declination) affidavit no longerneeds to be provided. A different form,

however, must be filled out by theSurplus Lines licensee to indicate thatthe risk is on the export list. The form inquestion is the 1604-E.

Of note to Pennsylvania members:

w The export list is revisited everyyear, and IA&B always providescomments gathered from membersin order to expand the list based onmarket needs. This has been donesuccessfully over the years. Nexttime you are asked for yourfeedback, let us know what risksnever can find a home in theadmitted market.

w The book “Compliance Pitfalls: Howto Avoid Costly Fines and Penalties”contains an entire chapterdedicated to proper Surplus Linessubmissions. The book is based on

IA&B’s Pennsylvania complianceseminars highlighting the top 10producer violations and how toprevent them.

More information on Surplus Linesplacements is available atwww.iabgroup.com (go to AgencyOperations / Surplus Lines).

DO YOU HAVE AQUESTION? E-mail it to us at [email protected] 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

[ 5 ]

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.

G R O U P1844

MI N E R V A

CUM

BER

LAND INSURA

NC

E

Contact Amber J. Ayrerat 800-232-6992, ext. 1237 [email protected]

Commercial and Personal LinesCompetitive CommissionsExceptional Customer ServiceFinancial StrengthExperienced UnderwritersMarketing Support


Primary Agent | November 2010

[ 6 ]

State NewsAs a reminder, Oct. 1 marked the effectivedate of several pieces of legislationresulting from IA&B’s advocacy work inAnnapolis.

WC exemption: The bill included IA&B-amended language allowing for up to fiveofficers of a non-close corporation to electto be exempt from WC coverage.

Premium notice increase: Anindependent agent must be notified by a carrier of increased premiums forcommercial/WC policies. Notifications viaan electronic database/communicationsystem suffice.

Fidelity bonds: Last session’s fidelityinsurance requirement has beenamended to allow for the use of fidelitybonds. This addition should streamlinethe process since bonds are easier and quicker to issue and allow forbroader coverage.

Condo policy cancellations: Cancellationnotices for condo policies are now in linewith the insurance article, providing moreconsistency and clarity.

Recap of producer licensingchangesReminder: Mind Maryland’s producerlicensing changes (enacted in 2008) toavoid last-minute CE scrambling or, worseyet, loss of license. Recently implementedchanges include:

w 24 CE credits are required eachrenewal period;

w 8 hours of “training” are requiredbefore marketing long-term careinsurance;

w 3 ethics credits are required of all producers;

w the grandfathering exemption forrenewal CE was cut off forproducers reaching 25 years afterOct. 1, 2008; and

w CPCU, CIC and other designeesare no longer exempt from licensing exams.

Learn more:www.iabgroup.com/md/2008_licensing_changes

New laws in effect

G17133_06-07MD.qxp:November2010 10/19/10 4:03 AM Page MD6

NFIP floats lowerpremiumsReminder: Policyholders may qualifyfor – and receive notification of –FEMA’s extension of the National FloodInsurance Program’s (NFIP) PreferredRisk Policy (PRP).

To qualify for the lower-cost PRP, thebuilding must have been newlydesignated in a Special Flood HazardArea due to a map revision on or afterOct. 1, 2008. The extension lasts fortwo years following the effective dateof the map change.

Agents’ to-do list:

w Understand the changes inanticipation of clients’ questions;

w Ensure the PRP extension isgranted if it is to a client’sbenefit; and

w Revisit flood insurance quotes foranyone who was affected by amap change and rejectedcoverage.

Learn more: www.iabgroup.com/md/features/NFIP_floats.html

Out-of-state WChurdlesThe list of states that are complicatingcarrying workers’ compensation (WC)coverage across state lines continues togrow. Read up on what your clients(and, in turn, you) need to know.

MassachusettsThe latest state to throw a monkeywrench into WC coverage,Massachusetts now requires businessesthat provide evidence of coverageunder item 3.C to submit the newForm 154 to any licensing and/orpermitting authority before conductingwork that requires a license or permit.

Access Form 154:http://www.mass.gov/Elwd/docs/dia/forms/f154.pdf

Note: As this publication went to print,changes to Form 154 were pending.

New YorkIncidental exposures in New York canno longer be handled by listing thestate in item 3.C of the WC policy.Instead, out-of-state employers arerequired to carry a full, statutory NewYork State WC policy. Translation:When an employee goes to aconference in New York, New Yorkmust be listed in item 3.A (assumingthe carrier is licensed in the state).

Learn more:www.iabgroup.com/MD/WC/NY

[ 7 ]

New MembersW E L C O M E

The Moran Group LLCSeverna Park, Md.

Linda McCannBay Shore Insurance, Inc.

Salisbury, Md.

A note of gratitudeSincere thanks to Linda McCann who recentlycompleted her term on the association’s boardof directors. It is due to the dedication andvision of volunteers like Linda that IA&Bremains relevant and poised for the future.

Neighboring newsPa. surplus lines licenses: birth-month renewal conversion

Renewal changes are in store forMaryland producers who hold non-resident surplus lines (SL) licenses inPennsylvania. New individual SLlicenses now will be issued for aminimum of two years and expire onthe last day of the licensee’s birthmonth, following the process alreadyunder way for producer licenses.Existing Pennsylvania SL licenses alsowill convert from a Feb. 28 to a birth-month expiration date.

Act 14 of 2010, which implementsvarious changes to the SL statute, wentinto effect in late September. Membersholding a SL license are encouraged toread the Pennsylvania InsuranceDepartment’s FAQ.

Visit www.ins.state.pa.us and select“Services for Producers” from the left-hand navigation bar. Click the “Noticesand Information” link.

G17133_06-07MD.qxp:November2010 10/19/10 4:03 AM Page MD7

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 provided

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 your

Errors & Omissions coverage,

contact IA&B at (800) 998-9644

or [email protected].

DON’T TAKE BUSINESS INTERRUPTIONCOVERAGE FOR GRANTED


When meeting with aprospect or current customeron a commercial account, itwill no doubt include adiscussion of Property,Liability, Workers’Compensation, Auto andUmbrella coverages. Theseare probably the mosttraditional coverages uponwhich your customer isfocused. Yet will there bediscussion regarding BusinessInterruption? This is anextremely important coverage.Unfortunately, it alsogenerates its share of E&Oclaims. Starting now, makesure the matter of BusinessInterruption is not taken for granted.

Based on the type ofcustomer with which you areworking, there is potential theaccount will be eligible to bewritten on a Businessowners’package policy. A benefit ofBOP policies is that theyprovide a form of BusinessInterruption coverage.Traditionally, the coverageresponds if an emergencydisrupts or destroys thebusiness – and not onlycompensates for lost incomeand expenses incurred when

a company is forced to vacateits premises due to disaster-related damage, but alsocovers operating expenses,such as payroll, whichcontinue even when businessactivities have ceased. Soundsgood and definitely providessome key coverage, but as wewill discuss later in this article,there are gaps that must beconsidered.

Be alert to any co-insuranceclauses pertaining to Business Interruption as some carriers include them. If a co-insurance clauseapplies, providing an exampledetailing the impact of beingunderinsured is valuable. Italso provides strong E&Oprotection if there is a lossand the insured suffers a co-insurance penalty andalleges the concept of co-insurance was neverexplained. As you will note by the following E&O claim,when moving an accountfrom one carrier to another(even though both werewritten on a BOP), it isextremely important toidentify any coveragedifferences and bring them tothe customer’s attention.

In this case, the agent failed toduplicate coverage for aclient. The client had a BOPpolicy with a $1,400,000 limiton Business Interruption withno co-insurance with CarrierA. On renewal, the agentswitched the coverage toCarrier B. The policy waswritten with the same limits,but with a 100 percent co-insurance clause. Theagent missed the change. A loss occurred, and theclaimed shortfall was morethan $800,000, due to theapplication of co-insurance.There was a suit betweenCarrier B and the client as tothe coverage, and the agentwas brought into the litigation.Carrier B mistakenly put anendorsement on the policywhich in essence removed co-insurance, even though the declarations page showed100 percent co-insurance.Utica was able to convinceCarrier B to contribute asignificant amount, and thecase was settled with Uticapaying $135,000.

Ask and explainAnother common areainvolving this coverage thatseems to generate E&O claims


[ 9 ] [ 9 ]

is that while many clients may haveBusiness Interruption coverage,oftentimes they do not have the rightamount. Whether the account is newbusiness or an existing customer,review each customer’s BusinessInterruption needs annually. To dothis effectively involves asking keyquestions to determine the propercoverage(s) and limit.

Since the current coverage is typicallybased on a projection made theprevious year, with the changes in theeconomy there may be — andprobably are — circumstances wherethe coverage and limit from last yearis no longer adequate. Even thoughthe economy has struggled, not allindustries have been hit the same.You might actually find situationswhere your client projects sales toincrease over the next year. This couldbe due to their introduction of a newprogram or their involvement in anew segment where they project asales increase. Factor in these changeswhen determining the coverage andlimit. Not updating the limit couldleave your customer underinsured.

Many carriers provide a list ofessential questions that will helpdetermine what coverage should be proposed and at what limit.Questions such as:

w Can the business operate at atemporary location rather thansuspend operations?

w Could your client’s business beinterrupted because of a loss atone of its suppliers? There iscoverage under the BOPBusiness Interruption form forthis circumstance.

w If your client is a landlord, could they suffer a BusinessInterruption loss?

w Would the customer suffer a lossif one of their service providers —electrical, fuel, water, heat,refrigeration, communication,etc. — suffered a loss? There iscoverage under the BOPBusiness Interruption form forthis circumstance.

Is there a need for ExtraExpense Insurance?Are there any new state Ordinance orLaw requirements or code upgradesthat could delay the customer fromgetting back in business?

As noted in the claim example, theissue of co-insurance is important. It is also essential to identify andexplain the issues of:

Waiting periods: These can be fairlycommon with different durationperiods. Any losses incurred duringthe period directly following an eventwill not be covered. Try securingcoverage without a waiting period.

Specific clauses that could impactthe settlement of a claim: Thisincludes any exclusions/limitations/war clauses, etc.

A great tool to use to help you, yourstaff and your customers betterunderstand each type of BusinessInterruption coverage is the variousExposure Analysis Checklists. Ifinterested, contact your UticaUnderwriter to secure information on obtaining these tools at significant discounts.

Impress upon your customers theimportance of good recordkeeping.This proper planning and attention todetail will be extremely beneficial andvaluable to them in the event of aloss. It should provide them with aquicker and fairer settlement. A well-thought-out disaster plan shouldalso be recommended.

To determine the appropriate limit forthis coverage, work with the customeror their accountant. Virtually allcarriers will provide a BusinessInterruption worksheet (some providean automated version) if requested.

Does your agency look like it did ayear ago? As your agency haschanged, so have your customers’businesses. Having the necessarydialogue on updating their BusinessInterruption coverage is theprofessional thing to do.

Business Interruption is an extremelyimportant coverage. Make sure it isnot taken for granted. Provide yourcustomers with assistance inunderstanding how the coverageworks and what type best fits them.

GoodvilleMutualNew Holland, Pa.

Contact Fred Macy, [email protected]

Partnering with the finest independent agentsfor over 80 years


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.

HOMEOWNERS’ 2011


The Insurance Services Office(ISO) has filed a revision to theforms and endorsementsunder the Homeowners’ PolicyProgram. All revised forms willhave an edition date of May2011. The revised forms havebeen filed to be applicable toall policies written on or afterMay 1, 2011 in Pennsylvaniaand Delaware and to allpolicies effective on or afterMay 1, 2011 in Maryland.

Many of the revisions havebeen made for editorialpurposes and therefore shouldresult in no change incoverage. However, several ofthe revisions definitely willhave an impact by eitherbroadening coverage orreducing coverage. Thoserevisions that will changecoverage are outlined anddiscussed below.

Personal PropertyLocated in Self-storageFacilitiesCoverage C – PersonalProperty has been revised withthe introduction of a sublimitof 10 percent of the CoverageC limit for personal propertylocated in self-storage facilities.This is a reduction of coverage.

A new endorsement, IncreasedAmount Of Insurance ForPersonal Property Located In A

Self-Storage Facility (HO 0614), has been introduced toprovide for the purchase of anincreased amount.

Electronic EquipmentAnd Business PropertyLimitsA new sublimit of $250 hasbeen introduced underCoverage C – Personal PropertySpecial Limits of Liability forantennas, tapes, wires, records,disks or other media that are inor upon a motor vehicle andare used with electronicequipment that reproduces,receives or transmits audio,visual or data signals. This is areduction of coverage.

The Coverage C – PersonalProperty Special Limits ofLiability $500 sublimit forpersonal property used forbusiness purposes while awayfrom the residence premiseshas been increased to $1,500.This is a broadening ofcoverage.

Damage By AnimalsCurrently, Section I – PerilsInsured Against excludecoverage for loss caused bybirds, vermin, rodents, insectsand animals kept by aninsured. Reference to “vermin”has been deleted, and “nestingor infestation, or discharge orrelease of waste products or

secretions, by any animals”has been added. This is areduction of coverage.

Theft PerilThe Theft peril under Section I— Perils Insured Againstcurrently provides coverage forpersonal property of aninsured who is a student whilethe property is at a residencethe student occupies, as longas the student has been at theresidence at any time duringthe 60 days prior to the loss.This reference to 60 days hasbeen increased to 90 days. Thisis a broadening of coverage.

Motor VehicleExclusionThe motor vehicle provisionunder Section I – Property NotCovered and the Motor VehicleLiability exclusion underSection II – Liability have beenrevised to more explicitlyexpress the coverageapplicable for motor vehiclesused to service a residence.For coverage to apply to amotor vehicle under thecurrent Homeowners’ policy, itmust be “used solely to servicean insured’s residence.” Thenew provision providescoverage if “used solely toservice a residence.” This is abroadening of coverage.


[ 11 ]

Toy Vehicles ProvisionCurrently, the exceptions to the Motor Vehicle Liability exclusion do not address toy vehicles designed to be used by young children. Anexception to the Motor Vehicle Liabilityexclusion has been introduced to coverowned battery-operated, low-speed (upto five miles per hour) toy vehicles usedoff an insured location. This is abroadening of coverage.

Expected Or Intended InjuryExclusionCurrently, the Expected Or IntendedInjury exclusion does not apply tobodily injury resulting from the use ofreasonable force by an insured toprotect persons or property. Thisexception to the exclusion has beenrevised to include property damageresulting from the use of reasonableforce by an insured to protect personsor property. This is a broadening of coverage.

Loss Assessment CoverageEndorsement (HO 04 35)This endorsement has been revised todelete the special limit of $1,000 thatapplies to assessments that result froma deductible in the policy of insurancepurchased by a corporation orassociation of property owners. This isa broadening of coverage.

Replacement Cost LossSettlement For Certain Non-Building Structures On TheResidence PremisesEndorsement (HO 04 43)This endorsement has been revised toprovide replacement cost coverage onswimming pools, therapeutic baths andhot tubs that are inground or semi-inground, with walls and floors made ofreinforced masonry, cement, metal orfiberglass. Currently these typestructures are settled on an ACV basis.This is a broadening of coverage.

Limited Coverage For Theft OfPersonal Property Located InA Dwelling Under

Construction Endorsement(HO 06 07)This is a new endorsement that can be used to provide limited coverage forthe theft of personal property located ina dwelling under construction. If added,this endorsement is a broadening of coverage.

Canine Liability ExclusionEndorsement (HO 24 77)This endorsement has been introducedto exclude liability coverage for anycanine specifically described in the

endorsement that is owned by or in thecare, custody or control of an insured. Ifadded, this endorsement is a reductionof coverage.

The above review of the major changesis based on ISO’s general explanationsof policy intent. However, as stated byISO, it does not necessarily reflect every insurer’s view or control anyinsurer’s determination of coverage for a specific claim.

Y’all take care!


AGENCY MANAGEMENT

One time. One and onehalf times. Two times.

Multiple of commissions.Multiple of revenues.Multiple of earnings.

Do these so-calledbenchmarks andthumbnail measures haveany bearing to the value ofyour or any otherindependent or captive,retail or wholesale, P&C orL&H insurance agency?

Attaching a dollar amountto an agencyThe valuation process


[ 13 ]


The answer is yes … and absolutely not.

Just about every agent facing a merger, acquisition,divestiture or stock or book valuation seeks a simplifiedmeasure of value, one that generalizes the value of his ownagency or others. Most have heard that agencies were beingsold for one time, two times or some other multiple ofcommissions, revenues, earnings or some other gauge ofincome, gross or net.

The problem with multipliersUnfortunately, the only way to use industry averages andbenchmarks to value a business is if most businesses in theindustry are similar enough to validate using generalities.And the insurance agency industry has proven that individualentities can be so dissimilar that their values cannot beinterpolated from simplistic industry averages.

Take this simple (and all too frequent) example:

Two insurance agencies within a few miles of each other areboth at $1 million of revenue. Agency No. 1 is 50 years oldand reached $2 million in revenue about 10 years ago. Forfive years it was relatively stable, but then income beganslipping regularly until it became a $1 million book ofbusiness. The owners are both near 70 years old, and theemployees are either in their late 60s or are new to theagency. The loss of business is a sign of the aging of a clientbase, and most lost business was the result of clientsretiring, selling their businesses or dying.

___________________________________________________________

The base of determining an agency’s current valueis its earnings potential into the future.

___________________________________________________________

Agency No. 2 began five years ago with two young producersgoing off on their own. The staff and owners are in theirthirties and forties, as are most of the businesses and clientsthat they insure. They owners spend a great deal of time andeffort marketing and planning for growth.

Would a benchmark or average sale price of agencies applyto both (or either) of these businesses?

Why insurance agency valuations are uniqueThe valuation of an insurance agency is constructeddifferently from that of a commercial building or of that of aservice business, like a dry cleaner. While conditions could

Long gone are the days when

the value of an agency was

calculated in terms of multiples

of commissions or revenues.


change that would rendercommon value methods forthe building or dry cleanerinvalid under certaincircumstances, most buildingsand businesses like drycleaners exist in a relativelystable environment and enjoycommonalities with otherrelatively similar buildings andbusinesses. Insurance agenciesare so different from oneanother that, while industryaverages exist, they do so onlyas a point of reference, not asa measurement tool.

Take three different agenciesof $1 million in revenue. Oneis a general agency insuringprimarily personal lines with1,000-1,500 small premiumcustomers each renewingannually. Another is a lifeinsurance agency thatcontinuously must sell newbusiness in order to maintainits revenue level becauserenewal commissions aresmall and of limited duration.The third is a specialtycommercial agency writing 50large, high-profile accounts. Ifthe last 100 agency valuesreviewed averaged 1.25 timesrevenue when their valueswere divided by their revenuebases, could you theninterpolate that these threeagencies were also worth 1.25 times their respectiverevenues? Of course not.

An insurance agency valuemust depend on its futureearnings power underwhatever conditions aredemanded by the reason for

the valuation. This implies thatan agency can bear differentvalues under differentcircumstances.

______________________________

Insurance agencies areso different from oneanother that, while

industry averages exist,they do so only as a point

of reference, not as ameasurement tool.

______________________________

For instance, the value of anagency depends on itshistorical and projected futureperformance, based on thecontinued similar performance(or with planned changes) ofits owners and staff. On theother hand, the same agencybeing valued for sale due to itsowner’s retirement will dependon the conditions under whichthe purchasing entity wouldcause the purchased agency togenerate earnings for the newowners. If the owners requiredthe agency location to remainopen and staffed, the revenuepotential is different than if the location could be closedand the staff and customerbase integrated into thepurchasing business.

How a valuation iscalculatedIn the creation of a proformafor valuation, the historicalgrowth, expense andprofitability of the agency as awhole are determined. This

AGENCY MANAGEMENT

When valuationscome into play

Agency valuations are rarely obtainedsimply to satisfy an owner’s curiosityabout the value of his business. Everyvaluation has a purpose.

Buy-sell agreements and estateplanning: A track record of agencyvaluations lends credibility andsupport to the final valuation in theevent of an owner’s demise.

Employee Stock Ownership Trusts,buy-ins and buy-outs: The currentvalue is needed for stock value orstock transfer purposes.

Outside capital: The agency valuationtells the bank, insurance company oroutside investor, on an annual basis,whether the return on investment isjustified by the business performance.

Retirement planning: A valuationdetermines if offers (internal orexternal) are fair and in accordancewith the market value.

Death, partnership dissolution ordivorce: The value satisfies legalentities by determining the fair marketvalue for internal transfer, sale ordissolution. (See the member profileon page 21.)

– A.D.

[ 14 ]

That’s

w

With our “A” Rated Treasury Listed bonds wec Why shopa If we can’t writet We specialize in bonding those “less than p

We’ve beenw N And by the way, we’ll even write thatb Call now and get results not excuses.


“No bond, no job. No job,no commission.”

We know times in the construction business are tough andthat even the best of clientsare having problems. That’swhy when your client needs abond Commonwealth Surety should bethe first call you make. With our “A” Rated Treasury Listed bonds wecan provide the bond you never thought you could get. Why shoparound, get buried with paperwork and hear excuses? If we can’t writethe bond nobody can! We specialize in bonding those “less than perfect” clients, without cash collateral or Letters of Credit, and we’ll getyou that “YES” that you want to hear in 24 hours or less. We’ve beenwriting bonds for small and midsized companies for over 20 years. No bond is too big or too small. And by the way, we’ll even write thatbond for your perfect clients. Call now and get results not excuses.TOLL FREE: 1-800-886-7760FAX TOLL FREE: 1-800-566-7761

The place for the hard-to-place Bonds


includes tracking every revenueline over the past five years andevery expense line over the sameperiod. Agency owners and theirstaff help to determine what, ifany, changes have taken placethat would alter the revenue orexpense track. With thisinformation, revenues andexpenses are projected (by line),and profit projections are madefor at least the next five years.Agencies that perform valuationseach year find subtle changes takeplace in revenue projections orexpense projections dependingupon the agency’s historicalresults.

The profits of the agency in thefuture become the basis for thevaluation (along with the hard networth of the agency). If youquestion whether this method ofvaluation makes sense, askyourself this question: Would youpay more for a business than yourreasonable expectation of theprofits that the business willgenerate to you over a reasonableperiod of time? Well, neitherwould anyone else.

Risk factors that impactvaluationUnless an agency is being valuedfor a very specific purpose(internal perpetuation, bank loans,specific sale), values are projectedas fair market values. Thistypically projects the agency’sperformance into the future withconditions similar to its currentconditions unless otherwisenoted. However, your projectionsare not complete until you add or

AGENCY MANAGEMENT

[ 16 ]

Perpetuation timelineAgents often ask when they should consider perpetuating their agency. Consider this parable:

Two homeowners desire to sell their neighboring houses and retire to a warmer climate. Neither is exactly sure when he wants to move. During summer, while one polishes his golf game, the other landscapeshis property and repaints his house. During winter, while one travels toexotic climates, the other discards the clutter in his house and garage and makes every room more attractive. In spring, while one complainsabout the market, the other begins to contact interested parties about the sale of his home.

Who will sell his home faster? For the most money?

The agent who prepares his agency for sale by “landscaping” and“discarding the clutter” will achieve more value than the agent whodecides to get out on a whim.

For an agency, this preparation means grooming the number and qualityof staff that any perpetuator, internal or external, would be happy to haveworking for him. It means cleaning accounts receivable and discardingclients who don’t pay premiums for long periods of time. And it meanscultivating a track record of business retention and new businessacquisition that proves the agency is strong and vibrant.

Internal agency housekeeping should be done one to two years before thepotential sale. And, for those agencies that have minimal customer growth,another three years should be added to implement and reap the benefitsof new marketing strategies.

– A.D.


subtract from the final valuationin accordance with risk factorsthat would affect the particularagency. While hundreds of 250risk factors add and subtractvalue from an insurance agency,they fall into a few majorcategories that you can useyourself when valuing your ownor other agencies:

Aging

This category involves the agesof the remaining employees orowners and the aging of a bookof business. If you’re valuing anagency whose employees are allnearing retirement or that’s bookof business reflects a generallyolder population, the risk factorsin that agency are higher. Thesale, ownership transition orperpetuation of that agency willbe more difficult: Employeesmust become accustomed to anew method of operation, andcustomers may have loyalty todeparted principals.

Book of business

In this realm of judging risk,determine whether the agency’srevenue base is concentrated ina few large accounts or is spreadover many smaller accounts,personal or commercial lines. A large spread of businessmakes for a safer transition of an agency.

Methods of operation

Is the agency automated ormanual? Does it carry highreceivables, or is it historically astrong collector? Are theprocedures efficient, or is theremuch redundancy in the

[ 17 ]

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.


handling of customers andpaper? Is the decision makingcentralized or delegated?Depending on the answers tothese questions, you either addor subtract risk from the value ofthe insurance operation.

SummaryInsurance agencies are notmysterious or difficult businessesto understand. However, thevariations in the operation ofinsurance agencies requirespecialized knowledge to value without potentially costly missteps.

Be careful of the pundits andpublications that report multiplesof commission, revenue orearnings as the “average” valuecalculation for agencies. It iseasy to work backwards andtake fully matured values anddivide them by commissions,revenues or earnings (raw orproforma). But the only way itmakes sense is workingbackwards.

_______________________________

With 42 years of insuranceexperience, Al Diamond, presidentof Agency Consulting Group, Inc.,has become the industry’s

pre-eminent authority on agencyvaluation. Besides running athriving agency consulting practicefor independent agenciesthroughout the United States andCanada, Al acts as an expertwitness on agencies’ values andpractices and authors “PIPELINE,” amonthly national newsletter foragency principals.

Al and his staff welcome questionsabout agency valuation; internal orexternal perpetuation; strategic,tactical and marketing planning;and any phase of agency operations.Contact them at (800) 779-2430 [email protected], or visit www.agencyconsulting.com.

AGENCY MANAGEMENT

[ 18 ]

Date Topic Location

2-4 P&C Licensing Study Course Mars, Pa.

3 William T. Hold Seminar Hagerstown, Md.

4 CISR—Agency Operations Course Hanover, Md.

8-11 CIC—Commercial Casualty Institute Erie, Pa.

10 CISR—Personal Residential Course Erie, Pa.

10-12 James K. Ruble Graduate Seminar Lancaster, Pa.

11 CISR—Personal Residential Course Coraopolis, Pa.

15-18 CIC—Commercial Property Institute King of Prussia, Pa.

16 Dynamics of Service Seminar Mechanicsburg, Pa.

16-18 P&C Licensing Study Course Malvern, Pa.

17 CISR—Personal Residential Course Lancaster, Pa.

E&O Coverage Standards Seminar Mechanicsburg, Pa.

William T. Hold Seminar Salisbury, Md.

18 E&O Coverage Standards Seminar Linthicum, Md.

19 E&O Coverage Standards Seminar Newark, Del.

Glance at EventsN O V E M B E R C A L E N D A R


Platinum Profile

It’s the rare individual who ismotivated by a genuine desire tohelp others. And it’s the rare

company that puts that principle into practice.

At Erie Insurance, we’ve been helpingpeople make things right since 1925,working side-by-side with the bestindependent agents in the business.Our agents and employees areenergized by a clear sense of purpose,performing to the best of their ability,because they know the work they dobenefits millions of customers’families and businesses. It’s part ofbeing Above all in SERVICE

SMand it’s

why we’re so committed to theindependent Erie agents who live andwork in the communities they serve.

On the strength of these relationships,Erie Insurance has risen to becomeone of the nation’s most respectedproperty/casualty and life insurers.Today, we’re a Fortune 500 company

operating in 11 states and the Districtof Columbia. Erie has more than 4million property/casualty policies inforce, more than $13 billion in assetsand more than $39 billion in lifeinsurance in force. We’re the 19thlargest property/casualty insurer inthe United States, based on total linesnet premiums written, and the 13thlargest auto insurer, based on directpremiums written. A.M. Best rates ErieInsurance A+ Superior.

We are both proud and humbled tohave received recognition by J.D.Power and Associates for “Highest incustomer satisfaction with the autoinsurance shopping experience —three years in a row.” We’re also oneof “Ward’s 50 Top Performers” — theWard Group’s annual ranking of morethan 3,000 insurance companiesbased upon financial performance.

Erie Insurance’s founding principlewas to provide its policyholders with

as near perfect protection, as nearperfect service as is humanly possible, and doing so at the lowestpossible cost. That same principleguides us today.

We still adhere to disciplinedunderwriting, fair pricing and aprudent investment philosophy.

We still practice the Golden Rule — treating others as we want to be treated.

We still thrive on the Erie family spirit, employees and agents workingtogether as a team for the good of our customers and thecommunities we serve.

At our core, we still believe the truthin our founder H.O. Hirt’s words:“Success in business is not a matter oftricks or gimmicks…it is just a matterof simple common sense, mixed withjust plain decency.”

Insurance Agents and Brokers proudly recognizes Erie Insurance as

one of its Platinum Partners. IA&B PlatinumPartners dedicate the

highest level of sponsorship to our organization.

FEATURED PARTNERErie Insurance

CHIEF EXECUTIVE OFFICERTerry Cavanaugh

President and CEO

CORPORATE HEADQUARTERSErie, Pa.

A.M. BEST RATINGA+ Superior

WEBSITEwww.erieinsurance.com


FEATURED PARTNERPenn National Insurance

COMPANY STRENGTHSw Commitment to the independentagency system with strongagency relationships

w Competitive products and pricingw Enhanced ease-of-doing-businessthrough intuitive, powerfulautomation tools

w Superb agency forcew Underwriting consistency in themarketplace

w Financial strengthw Outstanding claims service withhigh customer satisfaction

w Knowledgeable and experiencedemployees

PRODUCT LINESBUSINESSw Businessowners’ Program (BOP)w Propertyw General Liabilityw Inland Marinew Business Automobilew Workers’ Compensation w Umbrellaw Agents’ Umbrella w Surety & Fidelity

PERSONALw Personal Automobilew Homeownersw Boatw Dwelling Firew Rentersw Umbrella Liability

OPERATING TERRITORYWe have more than 750 agenciesacross Pennsylvania, Maryland,Delaware*, New Jersey, Virginia,North Carolina, South Carolina*,Tennessee and Alabama*.*commercial lines only

OFFICERSKenneth R. ShuttsPresident and CEO

Christine Sears, CPCUExecutive Vice President and COO

Gregory R. StineSr. Vice President andCFO/Treasurer

Karen C. YarrishSr. Vice President, Secretaryand General Counsel

Robert B. BrandonSr. Vice President, Underwriting Operations

COMPANY LOCATIONHarrisburg, Pa. (home office)

A.M. BEST FINANCIALSTRENGTH RATINGA- (Excellent)

SUBSIDIARYInservco: a leading regional third-party claims administrationfirm providing integrated riskmanagement services to more than 500 self-insured customers in Pennsylvania, New Jersey, West Virginia and Maryland.

AGENCYAPPOINTMENTSAVAILABLEContact [email protected] or visit online atwww.PennNationalInsurance.com

Platinum ProfileInsurance Agents & Brokers proudly recognizes

Penn National Insurance as one of its Platinum Partners.IA&B Platinum Partners dedicate the highest level of sponsorship to our organization.

“We strive to maintain the same values thatour founders adhered to in 1919: honesty,integrity, dependability, and consistency in ourapproach to the insurance market. We sellonly through independent agents, and wecontinue to seek appointments with agentslooking for a strong, regional carrier. Ourexecutive team spends extensive time in thefield, building relationships with our agents,listening to their needs, and creating corporatestrategies to help them grow, profitably, withus. Won’t you join us and grow with us?”

— Kenneth R. ShuttsPresident & CEO

“We offer our agents stability, consistency,responsiveness, and long-lasting personalrelationships — rare traits in today’s property-casualty insurance environment. Our regionalstructure allows us to respond more effectivelyto local market conditions and to offer ouragents access directly to decision-makers. Andour larger size among regional insurers givesus the financial resources and technologyexpertise to compete with the national carrierswith our easy-to-use, efficient automatedservices. Our automation and competitivepricing in personal insurance has enabledour agents to place more business with usover the last few years, and our broadportfolio of business insurance products andconsistency in the marketplace offers agentscompelling reasons to trust us with theircommercial business.”

— Christine SearsExecutive VP & COO


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.

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 LEVELAccess Insurance Company American 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

Primary Agent November 2010


MEMBER PROFILE

[ 22 ]

It was December 2007,and Brenda Antis wasmourning the unexpectedloss of her father … and

facing an unexpected agencyvaluation process.

Antis’s father intended for thefamily-run business, Walton& Suder Insurance Agency inGreensburg, Pa., to transfer tohis daughter upon hispassing. A buy-sell agreementwas in place: His shareswould go to his wife, whowould sell them to Antis.

“We thought we had our i’sdotted and t’s crossed,”shares Antis.

What they hadn’t known wasthat they would need anagency valuation to settle herfather’s estate — and that thePennsylvania Department ofRevenue would need toapprove it — before theycould move forward.

“I had the right to buy hisshares,” says Antis. “We wereOK there, but we didn’t knowthat we would need anaccountant to value theagency for the state’s seal of approval.”

The surprises continued.Antis first turned to theagency’s regular accountant,only to learn that he wasn’tcertified in valuations. Fromthere she began searching forcertified accountants and

found their services camewith higher price tags thanstandard accounts’. Sheshopped around and settledon someone local.

“She didn’t know our agency,”says Antis of the newaccountant. “We had to give

her everything. It became alot of work for us andrequired a lot of time. I had tofill out a 25-page document.”

The accountant thendetermined two separatevaluations, since the agencyactually consists of twocorporations: The shell,Walton & Suder, holdscompany contracts, while thebranch locations handle theday-to-day operations. Bothvaluations were based on fairmarket value since they weredone for tax purposes tosettle the estate.

In total, including the eight or nine months theCommonwealth took toapprove it, the agencyvaluation process lasted two years.

“We could’ve wrapped it up insix months if we hadprepared ahead of time,”explains Antis.

Today Antis and her husbandare the agency principals.They lived and learned andalready are preparing a newperpetuation plan — completewith an agency valuation —for the day they retire.

Unexpected loss,unexpected valuation

I

G17133_22-28.qxp:Nov2010 10/19/10 4:32 AM Page 22

IF YOU HAVE THE TOOLS,WE HAVE THE INSURANCE.

Residential Contractors with up to 5 employeescan find great deals on liability insurance atBrokers Surplus Agency. We represent Utica First Insurance, one of the largest writers of small contracting firms in the Northeast, and we cangive you a free quote on all your coverage needs!Call or email us today!

Contact: Dennis Marsaglia, Ext. [email protected] Frisch, Ext. [email protected]

Brokers Surplus Agency, P.O. Box 2849,Warminster, PA 18974 � Call (215) 443-9900

EICELIZABETHTOWN INSURANCE COMPANY

56 N Market Street, Elizabethtown, PA 17022www.e-townins.com

SERVICE and STABILITY since 1844

Does your agency need a carrier that provides outstanding service to both you and your clients? We offer products to protect your personal and commercial lines clients. Our service is outstanding, our pricing is competitive and we do not use credit scores as part of our underwriting process. Our

sharing program that includes production incentives. If you would like to learn why a partnership with EIC is a great choice for your agency, please contact Lynn Reynolds at [email protected] or call her at 800-736-8112, extension 404.

Stability Security Sensibility

Leading Insurance Group Insurance Co., Ltd. is a licensed commercial insurance carrier providing competitive rates on property and casualty insurance to business owners in NY, NJ, CA, IL and PA. We spare no effort in providing our utmost products and prompt service for any and all of your insurance needs.

Leading Insurance Services, Inc.US Manager for Leading Insurance Group Insurance Co., Ltd.

Building and Building Owners Business Personal PropertyDry Cleaners Retail StoresPharmacies Pizzerias / Takeout

Apartments Office BuildingConvenience Store Risks DistributorsLiquor Stores Condo / Co-opLRO Buildings

(source by www.ambest.com)

Business OwnersProgram

Commercial Package

LIG offers up to $ 5,000,000 above LIG BOP and Package

NJ [email protected]

www.ligicus.com400 Kelby St., 15th FloorFort Lee, NJ 07024T. (201)720-2100 F. (201)720-2119

505 N. Brand Blvd. Ste 1025Glendale, CA 91203T. (818)254-1040 F. (818)254-1039

LIG Umbrella Policy

Formerly LG Insurance

G17133_22-28.qxp:Nov2010 10/19/10 4:32 AM Page 23

Primary Agent | November 2010 TechnologyU P D A T E

[ 24 ]

DANIEL BURRUS

Daniel Burrus is considered one

of the world’s leading

technology forecasters and

strategists. He is the founder

and CEO of Burrus Research, a

research and consulting firm

that monitors global

advancements in technology

driven trends to help clients

better understand how

technological, social and

business forces are converging

to create enormous, untapped

opportunities. The New York

Times has referred to him as

one of America’s top three

business “gurus” in the highest

demand as a speaker.

For more information on the

services and products offered by

Daniel Burrus, please visit

www.burrus.com.

HOW TO USE TECHNOLOGY TO REDEFINETODAY’S ECONOMY

Today we’re in an era oftechnology-driventransformation. That meansyou can attain higher profitswhen you use technology toredefine your products, yourservices and/or how theindustry in general works.

Unfortunately, mostcompanies are usingtechnology only one way — to

lower costs and become moreefficient. They viewtechnology as a way to “domore with less,” “streamlinethe workflow” and “trimexpenses.” Sound familiar?

While that is certainly one good use of technology, you can also use it to redefine themarketplace as well as yourproducts and services. In this

case, technology becomes atool of creation. You cancreate new products, newservices and entire newmarkets, which then createsnew jobs and careers.

Why is this important?Currently the United States is digging out of the worstrecession since the 1930s, and the global economy is

G17133_22-28.qxp:Nov2010 10/19/10 4:32 AM Page 24

suffering its worst setback in decades.The key to recovering is all about jobsand how to create them. You don’tcreate jobs by increasing productivity;you create jobs by creating newproducts, services and markets. Soeven though we have a statisticalrecovery, we have a human recession.As such, recovery can’t be jobless.

The bottom line is that we can usetechnology to eliminate jobs or create them. It’s time for businesses to focus on redefiningas a tool for job creation. If you’reready to start redefining yourcompany so you can grow yourbusiness and stay profitable as youcreate jobs for years to come,consider the following guidelines.

Know where you’re going Look at your product, service orindustry and see how you can usetechnology to redefine it. The classicexample is Amazon.com. When theyfirst started the business, they usedtechnology to redefine how peoplesell books. But they didn’t stop there.They then expanded to otherproducts and redefined how nearlyeverything is sold. Then theyredefined again.

They developed a large IT, logistics andwarehouse system, and they now rent out their enterprise IT platform andwarehousing space to othercompanies. So they are not onlyredefining an industry; they’re alsoredefining themselves.

Another example is Apple. Back inearly 2000, before they launched theiPod and iPhone, most peoplethought Apple was quickly going outof business. That’s when the companyredefined themselves around music.

Later they redefined again with theiPhone, which is telecommunications.Now they’re doing it again with theiPad, which has launched anotherrevolution as they redefine ebook

readers and media players. LikeAmazon.com, Apple has redefinedthemselves as well as their industry.

So when it comes to your companyand your industry, ask yourself somekey questions, such as:

w What is growing and what isshrinking?

w Where is the direction of thefuture going based on

technology? (For example,getting more energy efficient andgoing green are both long-termtrends. Virtual marketing andsocial networking also representlong-term trends.)

w Based on where your customersand your industry are going, isthere a way to use technology tocreate new opportunities?

continued on page 26

[ 25 ]

800-334-5579www.gotapco.com

Tree Trimmerscoveragein a five-minute phone call.

CGL Coverage Available:

* Available coverages and markets may varydependent upon risk characteristics.

Call. Quote. Bind.

“A”- -a i e carrier

i ive rici g

Fa olic aro

- ci g available i a e

ic c a li g

0 cre i o er o aliz A CO Zc Vi a ebi car wi eac olic

V a a erCa a a e acce e

The TAPCO Service Pledge

1,000 Strong More than 1,000 classes of P&C businesswritten under binding authority.

G17133_22-28.qxp:Nov2010 10/19/10 4:32 AM Page 25

[ 26 ]

Understand how technologyis affecting your customersLook at how technology is affectingyour customers in your industry rightnow. But don’t just look at productivity.Look at the overall customerexperience as well as who is buyingyour offerings. For example, in the late1970s, when ultra light aviation wasborn, the first ultra light aircrafts werebasically hang-gliders with engines. TheFAA decided, due to the size andweight of the plane, people didn’t needa pilot’s license to fly an ultra lightaircraft. As a result, the first ultra lightmanufacturers targeted thatdemographic — people who wanted tofly but who didn’t have the time ormoney to get a pilot’s license. Onecompany, UltraSports, thought theycould attract a better customer, so theyasked, “Why not redefine the product,the customer and the market?”

Rather than target those who wantedto fly but didn’t have a license or theincome to afford buying an aircraft,UltraSports decided to targetcommercial jet pilots and flightinstructors for their ultra light aircrafts.After all, these pilots were the bestpilots, they loved to fly and they hadmoney; however, because of theirjobs, flying had become moreautomated and less fun. ThenUltraSports went one step further andredefined the ultra light aircraft itselfby adding a stick and rudder andinstrument controls. They made theultra light fly like an airplane ratherthan a hang-glider, which betterappealed to their new target market.UltraSports went on to become anational leader in their first year, allbecause they redefined who theircustomer was and then made productchanges accordingly.

So when it comes to your customers,ask yourself some key questions, such as:

w Is there a better customer? For example, maybe you’re sellingto a customer who can only affordlow-margin products and services.

w Who is your ideal customer?

w Is there a customer you don’thave but should have?

w Could you redefine your productand attract that customer?

w Is there a way to use technologyto enhance your product orservice in some way that opens upa market or creates a new marketfor you … and thus new jobs?

Take competition seriouslyLook at the specific ways in which youcompete in the marketplace as well aswhat makes you unique. Then decidehow technology can redefine the wayyou compete. For example, when wasthe last time you bought somethingfrom the Polaroid Company? At onetime, they were the king of instantphotography. But then technology anddigital photography changed theirindustry, and the way they competed(instant photography) changed … butPolaroid didn’t change with it. Instead,they made the mistake manybusinesses do: They used technology toget more efficient and lower their costs.

TECHNOLOGY UPDATE

When it comes toUmbrella or EquipmentBreakdown CoverageWe have fast, competitive quotesfor you, with the service you deserve.• Designed for Condos, Co-ops, Townhouses,

Apartments, HOAs, PUDs, HabitationalAccounts, and Lessor Risk Only Exposures

• Limits from $1 Million to $50 MIllion• Coverage Includes Excess, G.L., D&O, & Auto• Minimum premiums as low as $350

For additional information or quotes call:

888.548.2465And ask for a New Business Underwriter or [email protected]

Visit our website atwww.umbrellaprogram.com

JGSService is our specialty; protecting you is our mission®

®

I N S U R A N C E

A subsidiary of

G17133_22-28.qxp:Nov2010 10/19/10 4:32 AM Page 26

Similarly, the Kodak Company wasfailing for over a decade. Finally, theylooked at how they competed in thepast as well as what it would take tocompete in the future. That’s whenthey embraced digital photography.And while they still have sometraditional film labs across the country,it’s their digital products division that’sprofitable today. The moral: Thelonger you wait to redefine how youcompete, the harder it is to survive.However, when you pinpoint a way touse technology to create new productsand services, you add new revenuestreams and new jobs.

So when it comes to competing in atechnology-driven age, ask yourselfsome key questions, such as:

w Is there a way you can usetechnology to redefine how you compete?

w Is there a way you can usetechnology to change yourproduct or how you servicepeople?

w Is there a way you can usetechnology to redefine yourcustomer’s experience?

A (re)defining momentStaying ahead during a technology-driven transformation is indeedpossible. It’s all about looking atwhere your customers are goingrather than where they have been. It’sabout looking at where technology isevolving and how it is shaping the

market, not where it used to be. Whenyou ask the right questions and take action on what the answersreveal, you can use technology to redefine your company, create new jobs and experience higher profits than ever before.

G17133_22-28.qxp:Nov2010 10/19/10 4:32 AM Page 27

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

Brokers Surplus Agency . . . . . . . . . . . . . . . .1, 23

Commonwealth Ins Co . . . . . . . . . . . . . . . . . . .15

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

Elizabethtown Insurance Co . . . . . . . . . . . . . . .23

Goodville Mutual Cas Co . . . . . . . . . . . . . . . . . .9

Harleysville Insurance . . . . . . . . . . . . . . . . . . .IFC

IA&B Partners Program . . . . . . . . . . . . . . . . . . .21

IA&B Series Ad . . . . . . . . . . . . . . . . . . . . . . . . .IBC

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

LIG Insurance Co . . . . . . . . . . . . . . . . . . . . . . .23

Miller Mutual Group . . . . . . . . . . . . . . . . . . . . .17

Penn National Insurance . . . . . . . . . . . . . . . . . .11

Preferred Property Program . . . . . . . . . . . . . . .26

TAPCO Underwriters . . . . . . . . . . . . . . . . . . . . .25

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

Ad Index

ClassifiedA D V E R T I S E M E N T S

SOUTHEAST PA PRODUCERS & AGENCIES

Professional agency since 1926 locatedin Feasterville, Bucks County, Pa. Call for confidential information and a review of our services. Contact Ray Reinard at (215) 375-8600, Ext. 119.

LOOKING TO BUY!

Agency in Snyder, Union andNorthumberland Counties. All inquiries kept confidential.Call Gary at (570) 524-7670.

If you would like to place a Classified Advertisement, simply fax your ad on company letterheadto (717) 795-8347, and we will take care of the rest.

[ 28 ]

Preventing the marijuanabusiness from goingup in smoke

A handful of the over two dozen states with medicalmarijuana laws allow for marijuana dispensaries andcollectives. While these businesses are only legal under state law, the federal government has nottargeted them.

Never one to miss an opportunity, the insuranceindustry has taken notice of this budding business.

According to aSacramento, California-basedinsurance broker,approximately sixcarriers now writecoverage under anenhanced businessowners’ policy.

Sources: PIA National, A.M. Best

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

G17133_22-28.qxp:Nov2010 10/19/10 4:32 AM Page 28

Restaurants, Bars and Taverns

We can help you place a variety of risks: Fine Dining Delicatessens Nightclubs / Gentlemen’s Clubs Risks with Dance Floors Light entertainment Liquor Liability High property values

Tri-State General Insurance Agency1-800-556-7894

We write more than just “Trucking” - visit us at www.tsgia.com

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

Vicki Doane x 241 [email protected]

Fast, Friendly Service Jen Straw x231 [email protected]

Property / Casualty Underwriter

Property / Casualty Underwriter

Driving members to distinction

UNDERSTANDING THEUNIQUE E&O NEEDS OFINDEPENDENT AGENCIES

Each agency is unique and your E&O coverage shouldbe unique too. At IA&B, our trained professionalagents can provide quality E&O solutions that willprotect your business. Put your E&O coverage with the people that know E&O.

Insurance Agents & Brokers. Driving members to distinction.

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

That’s how we deliver distinction.

Affiliated with

In Delaware &Pennsylvania



Date post:	27-Mar-2016
Category:	Documents
Upload:	insurance-agents-brokers-service-group-inc
View:	224 times
Download:	1 times

Primary Agent - November 2010 - MD Edition

Documents