Can an Agent Require a Customer to Buy More Than One Policy?

A recent caller to the Free Legal Service Program that I offer for members of the Independent Insurance Agents of Georgia asked the above question in the context of a potential commercial lines customer who wanted a policy on which the agent would not have made much, if any, commission.  The agent wanted to know if they could require the customer to buy another policy on which the agent would make some commission as a condition to selling the customer the policy requested.

My review of the Georgia Insurance Code did not reveal any statute that specifically addressed the subject of the agent’s question, but the regulations issued by the Insurance Commissioner’s Office did contain prohibitions on requiring a potential purchaser of one insurance policy to buy another policy in two situations.  Those situations involve a customer who is a natural person and wants to buy either a “private passenger automobile policy” or a policy covering “residential property at a specifically described location.”  In both instances, the regulations state that an agent who refuses to sell such a policy because the potential insured is not willing or able to buy another type of policy or one with limits above those required by law engages in the grouping of risks.  If requiring the insured to buy another type of policy is (i) “not actuarially supported”, (ii) “not relevant to risk”, (iii) “not based on a reasonable consideration allowed” for the creation of rates by insurance companies, or (iv) “is based in whole or in part, directly or indirectly, upon race, creed or ethnic extraction”, such a requirement is unlawful as a fictitious grouping of risks that constitutes unfair discrimination.  It is unlikely that a requirement that a potential personal lines customer be required to buy a policy they had not requested to obtain a policy they want will meet any of the above requirements.

Whether the Insurance Commissioner would apply the same rationale to the sale of commercial lines policies is unknown.  If not or if any of the above requirements could be satisfied with respect to the commercial lines policies in question, the general rule is that an agent is free to do business or not do business with whomever they want on whatever terms they want, subject of course to the federal and state anti-discrimination laws.  If an agent decides to institute a requirement that a commercial lines customer who wants a certain type of policy must also buy another type of policy, I suggest that this requirement be applied consistently to every such customer.  Otherwise, the agent would run the risk of violating the anti-discrimination laws.     

If any of my readers have implemented such a requirement, please let me know, as I would like to find out how it has worked out.  

What Georgia’s YAC Can Teach Georgia Agencies

I mentioned in my post right before Thanksgiving that the Independent Insurance Agents of Georgia’s Young Agents Committee (“YAC”) had won the 2015 Outstanding Communications Award given by the Independent Insurance Agents and Brokers of America (“IIABA”) “for achievement in establishing and maintaining an excellent communication vehicle for the young agents in their state.”  In that post, I failed to name the chair of YAC’s Communication Committee, who played a big part in overseeing the activities that led to YAC’s winning the award.  Her name was Emily Earp, which I learned when I listened to a webinar presented by IIABA a couple of weeks ago in which the Immediate Past Chair of YAC, Jarrett Bridges, explained what YAC did to win the award. (The webinar is supposed to be posted on IIABA’s website for Young Agents, but it hasn’t yet made it to that website.  When it does, it can be found here.)

As I listened to the webinar, which also included Jonathan Tease, who is the IIAG liaison for YAC as well as IIAG’s Digital Marketing Administrator, the thought struck me that what YAC was doing was marketing itself to young insurance agents in Georgia and giving them reasons why they should join the committee and take part in its events.  This is not much different from what an insurance agency wants to do in marketing itself to potential customers.  YAC’s coördinated use of newsletters, social media, e-mails, testimonial videos, direct mail, and even text messaging could be a marketing plan for any insurance agency.  In the case of YAC, it led to a 50% increase in attendance at its 2015 Sales and Leadership Conference and the largest attendance yet at that event.

This multi-channel approach to contacting and then staying in touch with its target market, young agents, was the same sort of approach that most commentators have recommended for some time for insurance agencies.  Georgia’s YAC has also taken the next step of segmenting its target market, so that it can send e-mails and other marketing materials that are customized for the interests of their recipients.  For example, it posts its newsletters and other publications online at its website and then sends e-mails with links to specific sections of those publications to the different segments of its target market.  Doing so, encourages those who may be interested in one subject to click through to the website to read about that subject, when they may not have taken the time to read through a complete newsletter that had been e-mailed to them.  It also gets those people to the website where they may find other things of interest.

The last piece is YAC’s ability to track the responses to their e-mails and other communications.  They know how many people open those communications and how many of those actually click on any links in them.  This information lets them know what topics are of greatest interest to the different segments of their target market and allows them to tweak their communication/marketing strategy to achieve greater effectiveness with those segments.

If Georgia’s YAC can do all the above with a volunteer run organization, there is no reason an insurance agency cannot do the same.   For help in getting started, those agencies who are members of IIAG may want to contact Jonathan Tease.

Cyber Security in 2016 – The Opportunity

Last week, I wrote about the challenges facing independent insurance agencies to protect their confidential data from hackers.  The reality of agencies’ exposure to cyber attacks was made clear at a cyber security event hosted by Travelers last Fall.  At that event, the head of Travelers’ cyber insurance unit stated that 60% of all cyber attacks in 2014 were against small to medium sized businesses and that half of all small businesses contacted reported being the target of a such an attack.

While the above facts should concern all agency owners, they also provide an opportunity for agencies to sell cyber insurance to their business customers, who are subject to at least the same and depending on the industry, even greater risk of cyber attack.  As might be expected health care, financial services, and retail businesses are the top three targets of such attacks.  According to the head of Travelers’ cyber insurance unit, less than 20% of all businesses have cyber insurance.    That leaves a lot of room for growth in the sale of what will become, if it is not already, as much-needed an insurance coverage for every business as the BOP policy.

Because it is a relatively new risk exposure, many business owners do not fully understand the extent of that risk.  According to the 2015 NetDiligence Cyber Claims Study, the average cyber-related insurance claim was almost $675,000 ($4.8 million for a large company and $1.3 million per claim in the healthcare sector).  The study also reported the average cost to a business for every record taken by hackers was about $964.   Such costs can be enough to cripple, if not destroy, a small or medium-sized business and should be a wake up call to your business customers.

A recent article in the Property Casualty 360 discussed six best practices to follow when approaching a business customer about the purchase of cyber insurance.  The first and probably most important practice is to make the purchase of cyber insurance the main reason for the meeting, instead of the last item discussed at the end of a normal customer review.  As with any type of insurance, before the meeting, the agent should do their homework on the possible cyber exposures that exist for the customer, so at that meeting, the agent can use real world examples involving similar businesses to show the customer they are vulnerable and the potential cost to them of a cyber attack.

The agent should also take this opportunity to correct common misconceptions about cyber attacks, the main one being that all that is required to protect against such attacks is better security for their computer network.  In fact, many cyber attacks that result in data breaches are due to human error by the employees of the business (e.g., employee responding to phishing e-mails), or a third-party vendor (in one case now in litigation, a vendor hired by a health care company to store its data did not take even the basic steps of changing the default password on some of its software or regularly updating that software as security patches became available).  Your business customers also need to know that they remain responsible for a data breach due to the mistakes of a vendor they may have hired to store or protect their data.  Any indemnities in an agreement with such a vendor are only as good as the vendor’s insurance coverage or financial condition.

The premiums for cyber insurance coverage in 2015 were over $2 billion and some commentators expect that number to rise to $20 billion by 2025.  In such a relatively new and wide open market, there is money to be made by those agents who seize the opportunity presented.

Cyber Security in 2016

I hope all my readers had a safe and enjoyable Holiday Season.  I thought it would be a good idea to start the New Year by writing about a topic that was the subject of a lot of commentary last year and promises to be even more of a hot topic this year.  The massive data breach at Anthem Insurance (over 78 million consumers affected) at the beginning of 2015 was followed by many other breaches, large and small.  Given the potential for large damage awards to consumers whose identities may be stolen by using such information and financial institutions that incur significant losses due to having to write off bogus credit card charges that were enabled by the data breach, not to mention the cost of complying with the various federal and state notification laws, there was a great demand for insurance coverage in 2015.  (Click here for an article that reviews the developments in 2015 in this area.)

The need for such coverage will only increase now that the ability of the Federal Trade Commission (“FTC”) to impose sanctions on businesses that do not have appropriate cyber security policies and practices in place has been confirmed by a federal appeals court.  In a case involving Wyndam Hotels, the Third Circuit Court of Appeals held that the FTC had the ability to regulate the cyber security practices of any business engaged in interstate commerce under its authority to prohibit “unfair or deceptive acts or practices in or affecting commerce.”  The regulatory concerns of those businesses who handle personally identifiable health information are now the concerns of any business that collects personal information and engages in interstate commerce, which in the age of the internet is almost every business.

Although the FTC has not proposed a regulation that sets a standard for what cyber security measures a business must take to avoid regulatory action, it has issued guidance for businesses on what they should do about cyber security.  This guidance discusses 10 lessons to be learned from its earlier enforcement actions.  Those lessons range from the obvious (require strong passwords for access to your computer system) to the common sense (only collect the personal information you need and then dispose of it properly after it is no longer needed) to the more technical (segment your computer system so that sensitive information is not accessible from every computer on your network).  The lessons are illustrated by real world examples of what businesses did wrong, so they are easier to apply to your own situation.

Agency owners should review their cyber security practices in light of the above lessons from the FTC.  There is also a brochure developed by the FTC that goes into more detail on the steps that businesses should take to protect the personal information they collect.  Up to 100 of these brochures can be ordered free of charge.  They would make a nice New Year’s gift for your agency’s business customers.  One more way to show you care and add value to your services.

My Gifts To You This Holiday Season

As the end of the year draws near, I thought it would be a good idea to update some of my earlier posts with new information that may bring joy, or at least some measure of happiness to my readers.

First, for those employers who are concerned about the new overtime rule proposed by the U.S. Department of Labor this past summer (click here for my blog post), which would mandate a minimum salary of $921 a week or $47,892 a year for an employee to qualify as exempt from overtime pay, it looks like that rule will not take effect, if at all, until sometime in the summer of 2016, instead of January as originally predicted.  As you might expect, there were a lot of comments filed about that new rule, over 300,000.  The Department of Labor is required to consider all of them before it can finalize its proposed rule.  Also, as you might expect, many of those comments were critical of the substantial increase in the required minimum salary for exempt status, to the point that some commentators are predicting that the minimum salary in the final rule will be lower than what was originally proposed.   For now, employers can take a break over the Holiday Season from worrying about how they will be able to afford to pay a higher minimum salary to their exempt employees.

Although the next item on my gift list may not bring joy or happiness to any employers, it will put them on notice of a little known change made by the 2015 Georgia General Assembly to the statute that prohibits texting while driving a motor vehicle.  In a post over three years ago, I explained the parameters of that prohibition, which did not include the use of a mobile telephone to have a conversation while driving.  In a change to that statute that became effective on May 12, 2015, holding a “wireless telecommunications device” by the driver of a “commercial motor vehicle” to conduct a voice communication was prohibited.  With some exceptions, a “commercial motor vehicle” is any motor vehicle used to transport persons or property that (i) has a gross vehicle weight rating of 26,001 or more pounds, (ii) is designed to transport 16 or more passengers, including the driver, or (iii)  is transporting hazardous materials and is required to be placarded by federal law.  As noted in an article I wrote that is referenced in my earlier blog post, the U.S. Department of Transportation issued a regulation in January 2012 banning the use of “hand held mobile telephones” by drivers of commercial motor vehicles engaged in interstate commerce or transporting hazardous materials.

O.C.G.A. 40-6-241.2(b)(2) extends that prohibition to the drivers of commercial motor vehicles within the State of Georgia who are not otherwise engaged in interstate commerce.  For those drivers who have a hands free way to use their wireless telecommunication device, that statute goes on to prohibit the use of more than one button to initiate or terminate a voice communication.  The new statute also prohibits a driver from reaching for such a device in a manner that results in the driver no longer being “in a seated driving position properly restrained by a safety belt.”

Violation of the above statute is a misdemeanor, but the penalty is only a $150 fine.  However, in the same bill that made the above changes to that statute, a new section was added to O.C.G.A. 40-5-159 that imposes a civil fine of up to $2,750.00 on any driver convicted of violating the prohibition on the use of a mobile telephone.  More importantly for employers, that new code section imposes a civil penalty of up to $11,000 on them if they knowingly allow, require, or authorize a driver to violate that prohibition.

Finally, for those employers, or anyone else for that matter, who are looking for technology to make their life easier that doesn’t cost a lot of money, click here for an article on 25 free ways to use Google services.  It’s hard to beat free, especially when the provider is as well known and respected as Google.


Ride Sharing Coverage Gaps

Last Spring, I wrote a couple of articles that dealt with the insurance requirements imposed by the Georgia legislature for all Transportation Network Companies (think Uber and Lyft) and their drivers and the new endorsements issued by the Insurance Services Office for personal auto policies that addressed the use of personal autos to provide ridesharing services.  The effective date for the new insurance requirements is January 1, 2016.  Reminding your personal auto insurance customers of those requirements and their options to satisfy them would be a good way to give added value to your customers and could be a nice Christmas present for them (and you) if your markets have developed products that offer the required coverages.

However, a recent article in the IA Newsletter pointed out that, even if your customers who participate in ride share services get the insurance coverage required by Georgia law, either on their own or through the ride share service they work with, there will still be a significant gap in coverage.  This gap arises from the fact that the law’s required insurance coverages are all liability coverages.  Providing coverage for comprehensive and collision risks, as well as medical payments and uninsured/underinsured motorists, is left up to the discretion of the driver or his or her ride share company.

The new endorsement issued by ISO for its basic personal auto policy specifically exempts the time period during which the insured is logged into a Transportation Network’s Company’s system from medical payments and comprehensive and collision damage coverage, as well as liability coverage.  While two other endorsements permit such coverages to be added to the policy while the insured is logged into a Transportation Network Company’s system, neither of those endorsements covers the time period that a passenger is actually in the insured’s motor vehicle.   Thus, while a passenger is in the insured’s motor vehicle, there is no medical payments, comprehensive or collision damage, or uninsured/underinsured motorist coverage.  This is a significant gap in coverage that could be very costly to the insured if he or she were to be involved in an accident during that time period.

Now would be a good time to let your personal auto insurance customers know about the upcoming insurance requirements imposed on them if they are working with a Transportation Network Company and the gaps in coverage that will result if they do only what the law requires.

Tips for Overcoming a Sales Slump

After a break for Thanksgiving week, I am back to highlighting information I have come across that I think may help insurance agents become better and more efficient at what they do.  Last week, there was an article on Property Casualty 360 that discussed what to do if an agent finds themselves in a sales slump.  As the author noted, even otherwise successful agents can go through a slowdown in their sales for reasons over which they have no control.  When that happens, the sales slump can become self-perpetuating if the agent does not take action to avoid the loss of confidence that can  result from a lack of sales success.

Not surprisingly, the author’s first suggestion is to remain confident, focus on the process that lead to previous sales success, and have faith that it will result in future sales success.   However, it is a good idea to evaluate your current work routine to make sure that you have not gotten into bad habits (e.g., focusing more on service than sales) and that you are actually doing those things that lead to past sales success in the same way you had done them.  Along these lines, the author suggests that you review the prospects that you have been pursuing to decide if further pursuit is warranted.  If you have done everything you can to interest a prospect in your products without success, it’s time to move on to other prospects who may be more likely to be interested in them.  Not doing so will result in the wasting of valuable time on prospects who are not going to become customers and the further loss of confidence that can bring.

One way to find more prospects is networking.  There was an article last week in Employee Benefit Adviser that discussed 12 things done by all highly effective networkers.  All 12 are basic things that every person who uses networking to find prospects should know, but it is good to be reminded of the basics, especially when things are not going well.  That article focused on in person networking.  An article at the beginning of this month in Property Casualty 360 discussed why you should never ask for a referral on LinkedIn.  The author’s main point is that referrals should only be requested after you have actually talked to the referral source and done the kind of things with the source that you would do when networking in person.  As the author notes, the rules for relationship building online are no different from doing so in person.

The above three articles offer helpful insights into how best to break out of a sales slump and continue to fill your prospect pipeline.  Please feel free to offer any thoughts you may have on what to do in this situation.

Thanksgiving Thoughts & Georgia’s YAC

Last year at this time, I wrote a post that expressed my thanks to my readers for their interest in my blog posts and encouraged you to post comments about what I have written or suggest topics of interest for future posts.  It’s that time of year again and I want to say thanks to my readers for their continued interest in my posts.   My invitation to suggest topics of interest for future posts still stands.  I am close to 200 posts on this blog and finding new things to write about that would be of interest to my readers is always a challenge.

In addition to being thankful for my readers, I would also like to acknowledge yet another award for the Young Agents Committee of the Independent Insurance Agents of Georgia.  At the IIABA Fall Conference in New Orleans last month, Georgia’s YAC was given the Outstanding Communications Award “for achievement in establishing and maintaining an excellent communication vehicle for the young agents in their state.”  After winning the award two out of the past three years, the Outstanding Young Agents Committee of the Year went to the Young Agents Council of the Florida Association of Insurance Agents this year.  I see a pattern developing, as the one year out of the past three that award was not given to Georgia’s YAC, it won the Outstanding Communications Award.  If the pattern holds, Georgia’s YAC is on course to be named the Outstanding Young Agents Committee in 2016.

Regardless of what may happen in the future, congratulations are due to YAC’s chair, Jarrett Bridges, the Vice Chair, Robbie Moore, and the Secretary-Treasurer, Jimbo Floyd, during the time period covered by the Outstanding Communications Award, as well as the Communications Chair on YAC’s Board of Directors.  As noted in my post about last year’s Outstanding Committee award given to Georgia’s YAC, the future of the Big I is in good hands with these outstanding young agents and its strong Young Agents Committee in general.

Finally, although the upcoming holiday is mainly about giving thanks for our many blessings, it is also a time to acknowledge those who are not as fortunate and to think about what we can do to make their lives better.  There was a post last week on the LifeHealthPro blog that discussed seven things independent insurance agencies can do with respect to charitable causes that will create a beneficial impact on their agencies, as well as on their communities.  Building a sense of teamwork within an agency, as well as with its referral sources, while providing needed items, services, or money for charitable causes in the local community, can be a great “win-win” for any agency.  Read the post for ideas on how to make that happen.



Using Technology to Make Agencies More Productive

In my last blog post, I discussed the need for insurance agents to focus on doing things that educate their customers and potential customers about the benefits of having a particular insurance coverage.  By doing so, an agent can come to be seen as a resource for them, instead of someone who is just trying to sell them something.  However, such an approach takes time and thus, requires an agent and by extension his or her agency to be as efficient as possible in performing their other tasks, so they will have the time it takes to successfully implement this approach.

The natural inclination for agents and agencies who are looking to become more efficient in their work is to look to technology.  I wrote a blog post over two years ago about some apps and other technology solutions that can improve efficiency for agents and agencies.  But the IIABA’s 2014 Future One Agency Universe Study found that 66% of the agents surveyed were disappointed in the increases in efficiency obtained by the use of technology.

A recent article in the IA newsletter explains how to approach the implementation of technology in an agency so that it is likely to get the greatest benefit from the technology.  The author advises agencies to “start simple” by defining the problem to be solved (the “pain point”) and then researching the technologies available to address that problem.  If the problem is lack of productivity, Applied has created an e-book that provides productivity standards for each agency function and suggests ways to meet those standards using technology.  If an agency is looking for a way to better organize its customer prospecting efforts, interactive prospecting management systems offer a solution (click here for a post about them).

Before making the decision to buy one of those technologies, agency owners need to make sure they are committed to taking the time that it will require to fully implement the chosen technology and then be willing to do what it takes to get buy-in from their employees on the use of the new technology.  Without such buy-in, it is unlikely that the new technology will be used for the greatest benefit, if it is used at all.  Such buy-in can only be obtained if the employees are shown and understand how the proper use of that technology will make their jobs easier.  Consulting with employees about the problems they face and what would help them do their jobs more efficiently before a decision is made on what technology to implement is one sure way to help achieve the needed buy-in, as they will better understand why the new technology is being obtained.

When carefully thought through and then fully implemented, technology has the ability to make an agency’s employees much more efficient in the performance of their duties, thereby giving them more time to become a resource for the agency’s customers and potential customers.

Are You a Problem Solver?

There is an article in this week’s IA Newsletter that makes the argument, to be  successful in today’s information overloaded world, an insurance agent must first be a teacher, not a salesperson.  Instead of asking yourself how can I sell this policy to customer X, an agent should be asking how can I show customer X why having the policy will benefit them, their family, or their business.  What problem in the customer’s life will having the policy solve or at least, make more manageable?   By helping your customers and those who you would like to have as customers understand how having a particular insurance product will make their lives easier, you can become a resource for them, not just a salesperson.

The article suggests asking yourself three questions as a way to begin the transformation from salesperson to resource.  First, what questions or concerns do my customers and target customers have about the insurance products I am trying to sell?  Second, how can I best answer those questions or address those concerns, and third, what is the best way to reach my customers and target customers with the answers to their questions?  The idea, which is not a new one, is for the agent to be seen by their customers and target customers as some one who can make their life easier by solving insurance related problems.  (Click here for the website of a Georgia insurance agency that has branded itself as the “problem solvers.”)

In becoming a resource for your customers and target customers, it is important not to include sales messages in your communications that are intended to explain how a particular insurance policy will solve a problem they have or otherwise make their lives easier.  Including such a message will only lead your customers and potential customers to conclude that you are just trying to sell them something, so why should they believe anything else you have to say.  Once they understand why they need such a policy, they will look to the person who helped them understand that need to satisfy it.

A recent article on Property Casualty 360 discussed 14 things that an agent should not do when trying to sell an insurance policy.  Many of those don’ts also apply to an agent’s efforts to become a resource for their customers and target customers.  Failing to listen to the customers’ questions or to follow-up on the questions asked, avoiding accountability for your answers to their questions, and choosing the wrong medium to communicate with them are all things that will undermine your attempts to be seen as a teacher/problem solver.

As noted above, the idea of becoming a teacher/problem solver as the best way to market an agent’s (or attorney’s) services is not a new one, but it is one that many agents (and attorneys) have not yet embraced.  The IA Newsletter article is a good reminder of why every agent should incorporate one or more elements of that approach in their marketing efforts.