Insurance Certificates – Another New Issue

Last week I wrote about an insurance certificate issue that was discussed at some length at IIAG’s Commercial Lines Committee meeting.  It concerned the scope of Georgia’s law and the regulation issued by the Insurance Commissioner on insurance certificates.  A related question was also briefly discussed.  Is an insurance agent required to sign an insurance certificate to make it valid?

Like most people, I had assumed that since the approved forms for insurance certificates contained a signature block for the “Authorized Representative”, that someone had to sign the certificate for it to be valid.  Since agents who have signed certificates that became the subject of litigation have been sued, whether an agent is required to sign the certificate to make it valid is an important question.  After reviewing Georgia’s statute and regulation, I am not sure what the answer to that question is under Georgia law.

The instructions to ACORD’s insurance certificate form state that the signature block is for the “authorized representative” of the insurance company whose policy or policies are the subject of the certificate, but they acknowledge that such a signature is not required by the law of every state.  The comment was made at the Commercial Lines Committee meeting that ACORD intended to change its instructions to make clear that no signature was required unless the applicable law said one was necessary.  Georgia’s statute and regulation both define an insurance certificate as a document that “is prepared or issued” by an insurance company or agent.  Nothing is said about whether anyone has to sign that document to make it valid.

In the absence of any specific language in Georgia’s law or regulation, whether an agent must sign a certificate of insurance to make it valid would be governed by the rules of the insurance company whose policy or policies are the subject of the certificate.  Georgia’s regulation requires all insurance companies to “provide to their producers written instructions clearly outlining the insurer’s procedures and each party’s responsibilities for issuing and servicing certificates.”  Those procedures should address whether an agent’s signature on the certificate is required to make it valid.  If not, it becomes an open question whether such a signature is required for an insurance certificate issued for property, operations, or risks located in Georgia.  As noted in last week’s blog, for property, operations, or risks located in another state, the agent would have to look to the law of that state for an answer to this question.

Based on the comments made at the Commercial Lines Committee meeting, it seems there will be an effort made to make some changes to Georgia’s regulation on insurance certificates in 2015.  This subject should be added to the ones discussed at that meeting.

On another note, the Commercial Lines Committee was told that 83 complaints have been made to the Insurance Commissioner’s Office using the e-mail address that is found on its website devoted to insurance certificates.  Of those, five have been referred to the fraud division for investigation.  Not bad numbers for roughly one year of operation. For anyone who may be concerned about the repercussions of making a complaint using that e-mail address, the committee was assured that the identity of all the people who make complaints is kept confidential.

Insurance Certificates – New Issue

As proof that questions about insurance certificates remain and are still a hot topic among insurance agents, the first item discussed at yesterday’s meeting of IIAG’s Commercial Lines committee was insurance certificates.  A new issue that I had not heard before concerned what should a Georgia insurance agency do when one of its insureds is performing work in another state and the person or entity for which the work is being performed asks for a certificate of insurance that contains language which would not be permissible under Georgia law.  The concern was expressed that the issuance of such a certificate by the Georgia agency would subject the agency to the penalties imposed by that law, because it was issued in Georgia.

Although not crystal clear, the Georgia insurance certificate statute does contain language that addresses the above situation.  In pertinent part, it states that its provisions “shall apply to all . . . certificate of insurance forms issued as evidence of insurance coverages on property, operations, or risks located in this state, regardless of where the certificate holder, policyholder, insurer, or insurance producer is located.”  Its that last clause about the location of the persons involved with a certificate that seems to have created some confusion in the minds of Georgia insurance agents.  The first part of the above language tells me that the requirements imposed by Georgia law only apply to certificates of insurance that are issued for things located, or activities taking place, in this state.  If the thing or activity for which the insurance certificate is issued is not in Georgia, Georgia law does not apply to that certificate, even though it is issued by a Georgia insurance agency or agent. Conversely, the last clause of the above language tells me that if that thing or activity is in Georgia, Georgia law applies to the certificate issued for it regardless of the location of the person issuing the certificate, the holder of the insurance policy that is the subject of the certificate, or the person to whom the certificate is issued.

The above application of Georgia’s insurance certificate law is consistent with the constitutional principle that a state government’s laws can only apply to persons, places, or things that are located, or activities that occur, within the borders of that state.  Thus, for agencies that have insureds who engage in business activities in other states, it is important to know what the laws of those states say about the issuance of insurance certificates.  Fortunately, the IIABA has compiled a list of such laws for every state.  That list was last updated in May of this year and can be found by clicking here.

There was some discussion at the Commercial Lines committee meeting about making changes to the regulation that has been issued by the Insurance Commissioner to clarify the scope of Georgia’s insurance certificate law.  Stay tuned for further developments.






What’s New with Obamacare?

It’s been awhile since I wrote anything about the Affordable Care Act, commonly known as Obamacare.  That’s mainly because the rules keep changing, especially for that provision of the law known as “play or pay”, which applies to employers and requires them to either provide “affordable” and  “minimum essential” insurance coverage to their employees or pay a penalty for not doing so.  What constitutes “affordable” and “minimum essential” insurance coverage has not changed, but whether an employer will be subject to a penalty for not offering such coverage in 2015 has changed.

Last year the “play or pay” penalty was delayed for all employers until January 1, 2015. This year the “play or pay” penalty has been delayed until January 1, 2016 for those employers who have 50-99 full-time employees or their equivalents, if they meet certain requirements, and has been watered down for those employers with 100 or more full-time employees or their equivalents.  As I explained in a earlier post, employers with 30 or fewer full-time employees (those who are normally expected to work an average of 30 or more hours a week), do not have to worry about the “play or pay” penalty in 2015 and beyond, because in calculating the amount of the penalty, the first 30 such employees are not counted.  For employers with 100 or more full-time employees or their equivalents, the exemption from the “play or pay” penalty for 2015 has been increased to the first 80 full-time employees.  So, if such an employer has 80 or fewer full-time employees during 2015, it will not pay a penalty if it does not offer insurance coverage at all or even if it offers such coverage that is not “affordable” and “minimum essential.”

For employers with 100 or more full-time employees or their equivalents who offer insurance coverage under non-calendar year plans, there are other ways they can escape the “play or pay penalty” without having to offer “affordable” and “minimum essential” coverage to 95% of their full-time employees, which is what Obamacare initially required. For an explanation of these other ways and the changes made in the “play or pay” penalty for 2015 in general, click here.

In order for employers with 50-99 full-time employees or their equivalents to escape the “play or pay” penalty for 2015, they must continue to do what they have been doing since February 9, 2014.  If they have not offered insurance coverage to their employees since that date, they do not have to offer such coverage during 2015.  If they have offered such coverage on or after that date, they must continue to offer the same coverage to the same employees and contribute the same amount toward the premium for employee only coverage during 2015, but that coverage does not have to be “affordable” or “minimum essential.”

The open enrollment period for 2015 individual insurance coverage runs from November 15, 2014 through February 15, 2015.  Insurance agents and brokers who want to be able to assist individuals in obtaining coverage through the federal insurance exchanges and the Small Business Health Options Program, more commonly known as SHOP, must register or re-register with Centers for Medicare and Medicaid Services (“CMS”).  For a copy of the slides from a recent seminar on that subject that explains the requirements for insurance agents to take part in those programs, click here.

One new benefit for registering with CMS is that an agent’s name and contact information will be accessible from the home page of the website under “Find Local Help.”  For an article about this new benefit and how an agent can change their contact information, click here.

My Thanks to You

There is a time-honored tradition in many households on Thanksgiving for everyone at the dinner table to tell one thing about which they are particularly thankful.  I wanted to take this opportunity to thank my readers for their interest in my blog posts.  I have made over 130 posts since starting this blog in June 2012.  Hopefully, most of them have been of interest and helpful to my readers.

As noted on my Feedback/Suggestions page, this blog is an ongoing process and if you have any suggestions for topics of interest that you would like me to discuss or any constructive criticism that you would like to make about Georgia Agency Resource, please feel free to use the Comment box below to let me know what you think.  So far, I have not received very many such comments.  In the spirit of the season, I have chosen to believe that is because I have discussed topics of interest to Georgia insurance agents in a way that provides value to them in running their agencies.  If that is not so, please let me know what I need to do to make that true.


I Have Decided to Fire An Employee – What Next?

Last week I wrote about the laws that govern the firing of an employee and what steps an employer should take to protect itself from claims by a fired employee under the federal employment discrimination laws.  Please see that post to determine whether your company is subject to those federal laws.  If so, once you have decided to fire an employee, you should meet with him or her in private and have another management level person present to act as a witness.  The meeting should be kept as short as possible and the employer should avoid getting into a discussion with the employee over the validity of the reason for their firing.  After the meeting, what was said and done by the participants should be documented in a memo to the employee’s personnel file.

In deciding what reasons to give, the employer should keep in mind that it may be required to prove them if the employee decides to file a complaint with the Equal Employment Opportunity Commission.  One reason is enough and it should be the most important and easily provable (i.e., best documented) one, but the employer should make it clear that other reasons also exist so as not to be limited to the reason given in its defense of any claim the employee may make.  In order to avoid the possibility of a lawsuit by terminated employees, many employers offer to pay severance benefits in exchange for the employee signing a general release of all claims against the employer.  To be enforceable, the employee must be given something of value that they are not otherwise entitled to receive and for the release of age discrimination claims, certain specific language must be included in the release document.

As noted in last week’s post, even those employers who are not subject to the federal employment discrimination laws would do well to follow the above employment termination procedure.   If possible, before the employee leaves the employer’s premises, all employers should make sure that the terminated employee has returned all property belonging to the employer and the employer should take whatever steps are necessary to make sure that the employee no longer has access to its computer system and the ability to post items on its website or social media platforms.

At the termination meeting or as soon afterwards as possible, the employee should be given a completed and signed Separation Notice on the form required by the Georgia Department of Labor.  That form requires the employer to, among other things, state the reason for the termination of the employee.  That reason should be consistent with what the employee was told.  In order for the employee to be denied the right to receive unemployment compensation, the reason on the form must be the knowing and intentional violation of an employer’s rule, order, or instruction and the employee must have known ahead of time that such a violation could result in the termination of their employment.  This is a very heavy burden to meet and is made all the more difficult by the presumption in favor of granting unemployment benefits wherever possible.

Even if the employer has no objection to the terminated employee receiving unemployment benefits, it should respond to any written requests from the Georgia Department of Labor for information related to the employee’s claim for such benefits.  Under a federal law that became effective in October 2013, if an employer fails to adequately and timely respond to such an information request for three separate unemployment benefit claims during any calendar year, they will be automatically charged for any subsequent benefit claims paid during that year, even if the payment of such claims is later reversed on appeal or an overpayment of benefits occurs.

What All Georgia Employers Should Know About Firing Employees

I have gotten some calls recently on the Free Legal Service Program that I run for the Independent Insurance Agents of Georgia about how an employer should approach the firing of an employee.  Many of my readers are probably aware that Georgia is an “at will” employment state.  What this means is that, absent any agreement to the contrary, an employer is free to fire an employee at any time for any or no reason and an employee is free to quit his or her job at any time for any or no reason.

The above rule applies almost without qualification (there are limited state statutory exceptions to the rule and termination of employment for the assertion of rights under the Fair Labor Standards Act, the National Labor Relations Act, and the Occupational Safety and Health Act is prohibited for all employers subject to those acts) to any employer who has less than 15 employees of any kind (full-time, part-time, temporary, or seasonal) for 33 or more weeks out of the current and immediately preceding calendar years.  If an employer has 15 or more employees for 20 or more calendar weeks in either the current or immediately preceding calendar year, they are  covered by the federal employment discrimination laws.  Those laws prohibit the taking of “adverse employment actions” based on race, color, sex, religion, national origin, pregnancy, and disability.  Employers with 20 or more employees during either of the above time periods are also prohibited from taking such action based on the age of an employee.

For those employers who are subject to the federal employment discrimination laws, it is essential that there be a reason unrelated to the characteristics protected by federal law for their termination of an employee.  Otherwise, the employee will be free to claim that they were fired because of such a characteristic.  In addition to having a reason, the existence of that reason must be documented.  Otherwise, it becomes a swearing contest between the employer and employee over why the termination occurred.  This means that the employer should note in the employee’s personnel file any instances of improper conduct or failure to satisfactorily perform duties and should have and document meetings with the employee to discuss those problems and tell the employee what must be done to correct them.  At these meetings, the employee should be informed of the consequences of their failure to satisfactorily correct the problems discussed, especially if one of those consequences is the termination of their employment.

By creating the above paper trail, an employer will be well-positioned to defend against any claim by the employee that they were fired for an illegal reason under the federal employment discrimination laws.  Even employers who do not have to worry about those laws should follow the above procedure in terminating employees because it demonstrates fairness and a commitment on the part of the employer to do what it can to help its employees succeed in their jobs.  That in turn should lead to increased employee morale and productivity.


Time Off to Vote Rules

It’s that time of year again.  The general election voting day in Georgia is tomorrow, November 4.  I reminded my readers in May that the same rules for giving employees time off to vote for general elections also apply to primary elections.  If the experts are right, after tomorrow’s vote, we will have one or more run-off elections to look forward to in Georgia to which the following rules will also apply.

Georgia law requires an employer to give their employees up to two hours off to exercise their right to vote in any type of election. However, the law only applies if the employee’s normal working hours begin less than two hours before the polls open or end less than two hours before the polls close.  Thus, if the employee’s normal working hours are 9 am to 5 pm, they are not entitled to receive time off to vote, if the polls open at 7 am or earlier and close at 7 pm or later, which is the case in most elections held in Georgia.

For those employers who are required to give their employee’s time off to vote, the employee is required to give the employer “reasonable notice” of their desire to take such time off, and the employer can specify the hours during which the employee can take that time off.  If the employee is nonexempt (i.e., must be paid overtime for any hours worked in excess of 40 during any one work week), the employer does not have to pay the employee for the time taken off to vote.  If the employee is exempt, the employer can not reduce their pay for the time taken off to vote, but may require the employee to use any paid time off available to the employee, if that paid time off is normally accounted for in increments that small.

All the experts are predicting very close races for the governor’s office and the U.S. Senate, which means that in those races, at least, every vote will count.  All employers should encourage their employees to vote and should vote themselves, if they have not already done so.

Fall Conference – What You Missed Too

Last week’s post discussed a presentation that I attended at IIAG’s Fall Conference on how to create an engaged workforce and how to use metrics to identify and resolve problems with an agency’s performance.  The other presentation that I attended at the Fall Conference was about the 2014 Best Practices Study of independent insurance agencies that was recently released.  It was given by Shirley Lukens of Reagan Consulting, which is responsible for putting together the study.  Ms. Lukens referred to herself as the “mother of the study”, which began in 1993.

The Best Practices Study looks at the top performing agencies nationwide in six categories based on annual revenue, from agencies with less than $1,250,000 to agencies with more than $25,000,000 in revenue.  It identifies how the agencies in each revenue group are performing in various areas, including income and expense distribution, revenue and profitability growth, employee production and compensation, and technology expenses.  In doing so, it sets standards for those areas that other agencies can use to determine how they are doing compared to the agencies in the study.  The closer your agency is to meeting those standards, the greater its competitive edge will be.

Like the speaker in the other presentation I attended, Ms. Lukens recommended that the employees of an agency should be involved in determining what could be done to improve the agency’s performance in those areas where it failed to meet the standards set by the Best Practices agencies.  The study offered some surprising information about what those agencies were doing to increase their organic growth rate, which is one of the two main components of agency value (the other being profitability) and according to Ms. Lukens the more important of the two.  In addition to the well-known practice of rounding out accounts by cross selling insurance products to them, the study found that the best practices agencies were using more advertisements and were hiring more new producers.

It was surprising to me to hear that roughly half of all new producers hired by the best practices agencies came from outside the insurance industry and that there was not one particular type of outside experience that stood out.  With respect to the hiring of young producers, the study found that having a regular presence on college campuses and providing internships to prospective employees were very important predictors of a successful hire.  However, having a degree in risk management turned out to be not so important.  One other important factor that makes sense when you think about it was to hire two or more new producers at the same time.  By doing so, a natural competition is created, which can lead to a reduction in training time and costs.

Ms. Lukens mentioned that Regan Consulting would be releasing a Producer Recruiting and Development Study on its website sometime this week that would contain information on the best practices for recruiting and developing producers.   While there, you may want to take a look at the 2013 Best Practices Study, excerpts of which can be found by clicking here.

If you would like a copy of Ms. Lukens presentation, which contained much more information about the results of the 2014 Best Practices Study, please let me know and I will send it to you.

Fall Conference – What You Missed

I attended the first day of IIAG’s Fall Conference in Macon and sat in on two interesting and informative presentations.  However, before I get to them, I want to give you some more information on last week’s blog post about the importance of Millennials to the insurance industry.  In that post, I referred to a panel discussion in a webinar sponsored by Applied Systems.  I recently learned of a report titled “Why Millennials Matter” that was prepared by Applied Systems based on an independent survey and Millennial agent interviews.  That report addresses the consumer side of the Millennials and insurance issue. (Click here for an overview of the report’s findings and a link to download it.)  I also came across another article that offered suggestions on how to recruit and retain Millennials as employees of your agency.

According to Marit Peters, who lead one of the presentations I sat in on at the Fall Conference, one way to get and keep employees of all generations is to provide a workplace that engages them.  To do that, it is necessary for agency owners to practice what is known as servant leadership.  Such leadership focuses on the people of an organization and not its financial and other numbers.  If the employees of an agency think that the management staff actually care about them as people, they are more likely to be willing to do what is asked of them and even more.

Servant leadership begins with an inversion of the traditional pyramid of management hierarchy that puts the agency’s customers at the top followed by those employees who have the most contact with the customers.  In this model, management’s primary duty is to provide those employees with whatever is needed to serve the agency’s customers as they want to be served and to solve any problems and remove any obstacles that may arise.  To do so, there must be two-way communication between management and employees about the nature of the problem or obstacle and how best to solve or remove it.  Above all, management should not “shoot the messenger” in this situation.

Ms. Peters also discussed a process for creating an engaged workforce that starts with a “base camp” of six basic things that should be provided to all employees.     Each employee should know what is expected of them, have what they need to properly perform their duties, have the opportunity to do what they do best every day, regularly receive recognition or praise for doing good work, and feel that someone in management cares about them as a person and encourages them to develop their skills.  Ms. Peters made the point that the level of engagement of employees at work has a direct impact on the bottom line of an agency.  The more engaged employees are, the better customer service they will provide, which will in turn result in more satisfied customers who are more likely to stay as customers and refer others to the agency. (Click here for Ms. Peters’ presentation slides which include a process for problem solving and much more information.)

Next week, I’ll discuss the presentation on Best Practices that I attended.  That presentation provided great information on how to determine if agency and producer performance are what they should be, among other things.

Millennials – Why They Are Important To Your Agency

For starters, the generation commonly called the Millennials (born between 1980 and 2000) is larger than the Baby Boomers, so they will have a larger than normal impact on the insurance marketplace as they create families and start businesses.  Their impact can already be seen in the rapid development and use of social media (the creators of Facebook are Millennials), which has transformed the way that businesses now connect with their customers and potential customers.  The importance of being able to connect with those customers anytime, anyplace, anywhere was discussed in my post last week.

What better way to help your agency develop the systems and procedures necessary to meet the demands of its customers and potential customers than to hire employees who are knowledgeable and comfortable with the technology now used by those customers.  This need of agency owners plays into what is the key to recruiting Millennials as employees according to a panel on a webinar sponsored by Applied Systems this past summer.  The consensus of that panel was that “Millennials don’t want to hear about what your business can do for them—they want to hear about what they can do for your business.”  They want to feel like they have something special to offer and will be making a difference in the way your business is conducted.   They have been in the vanguard of the social media revolution and will be intrigued by the opportunity to make significant changes in the business world.

For agencies looking to recruit Millennials, the Applies System webinar panelists came up with four main motivators for them.  Millennials want to have ties to a community, to make a difference, hands on learning opportunities, and to make use of the latest technology.  In addition to the work environment, providing ties to a community and the opportunity to make a difference can be done by the agency’s involvement in community service and other projects that allow its employees to work collaboratively with others to improve their community.   Hands on learning opportunities can be provided by allowing a new hire to work in various parts of the agency’s business activities.  The agency must be committed to keeping pace with technological advances in the conduct of its business activities to satisfy a Millennial. (Click here for an article that gives examples of how agencies are providing these motivators for Millennials.)

The Millennials will be an important source of both customers and employees for insurance agencies going forward.  Those agencies who are successful in attracting this generation to their products and their industry will be positioned to thrive well into the future.