Avoid, Deny, Defend – What is it?

Avoid, Deny, Defend is a program developed by the ALERRT Center at Texas State University for training people about what to do if they are involved in an active shooter incident (an individual is actively engaged in trying to kill other people).  According to an FBI study of such incidents, there were 160 from 2000 through 2013 and the rate at which they occurred steadily increased during that time period.  Recent events indicate that rise in the rate is still occurring.  The fact that slightly less than half of all such incidents took place in a commercial setting should be of concern to all business owners, including agency owners.  The “it can’t happen here” belief is refuted by the fact that such incidents occurred in 40 states and the District of Columbia during the study period.

That belief leaves most people unprepared when an active shooting occurs and leads to an increase in the death toll.  The Avoid, Deny, Defend program seeks to inform people what they should do in such situations to protect themselves.  As with many such programs, it seems to be mostly common sense when you think about it.  First, you should AVOID the shooter by seeking to get away from his or her location.  This requires a person to be aware of their surroundings and in particular, where the exits are.  If you can’t get away from the shooter’s location, DENY him or her an opportunity to shoot you by putting as many barriers (e.g., closed and preferably locked and barricaded doors) between you and the shooter as possible, turning off the lights, hiding from sight behind whatever large object (e.g., desk) you can find, and turning off your smart phone.  Only if you can’t avoid the shooter or deny him or her an opportunity to shoot you should you DEFEND.  In doing so, be aggressive and don’t fight fair.  This is about survival, so there are no rules.

The ALERRT Center website has a video that demonstrates the principles of the Avoid, Deny, Defend program.  The FBI website also has a video on this subject that can be downloaded.  It’s title is more direct, “Run, Hide, Fight.”  The Department of Homeland Security has an extensive resource page on this subject, that includes links to an online course for managers and employees and a 90 minute webinar on how to prepare for and respond to an active shooter situation.

Like life insurance or in my profession, Wills, this is a subject most people don’t want to think about, much less discuss.  While those two things are important, the failure to take action with respect to them is not life threatening.  Not knowing what to do if confronted with an active shooter situation can be fatal.  Offering information on this subject to your commercial lines customers can be another way to distinguish yourself from other agents and agencies.  It can be part of your discussion with such customers about their business risks and how best to insure and otherwise protect against them.  If done in partnership with your local police department or even on your own, a presentation on this subject can put you in front of potential new customers, for both commercial and personal lines policies.

Stated Value Policy Changes & New Trap for the Unwary

Last week, Governor Nathan Deal signed into law an important change to Georgia’s Stated Value policy law.  A Stated Value, or Valued Policy, is one which provides coverage for buildings in a specified amount, which amount will be paid upon the complete destruction of the building without any proof by the insured that the building was actually worth the policy amount.  What is such a policy and when it will pay off are governed by statute.  In Georgia, that statute is O.C.G.A. Section 33-32-5.

In an earlier post, I explained the requirements that must be met for such a policy and pointed out a trap for the unwary insurance agent who advises the insured on what value to assign to the building covered by the policy.  One of the requirements for such a policy was that it must be “issued to a natural person or persons.”  This presented a problem for people who own residential rental property and follow their attorney’s advice to transfer ownership of such property to a limited liability company or other legal entity to protect their personal assets from any claims that may arise out of the rental of the property.  Since a policy covering a building can only be issued to its owner, residential rental property that was owned by a limited liability company or other legal entity could not be covered by a Stated Value policy.  

The bill recently signed into law by Governor Deal expanded the entities to which a Stated Value policy could be issued to include ” any legal entity wholly owned by a natural person or persons.”  Effective on July 1, 2016, one or two residential family buildings or other structures in Georgia that are owned by a legal entity that is in turn wholly owned by one or more individuals can be covered by a Stated Value policy.

I am sure most insurance agents realize that where residential real property is being rented, a commercial general liability policy must be obtained instead of a homeowner’s policy to provide liability protection for the property owner.  However, what many agents may not realize is that even a commercial general liability policy will not provide complete protection for the owner.  This point is illustrated by a decision the Georgia Supreme Court rendered in March of this year.  In that decision, the court held that the absolute pollution exclusion in the CGL policy in question in that case meant the policy did not cover a claim by the tenant that her child was injured due to exposure to paint chips containing lead.  In its opinion, the court cited an earlier decision that had applied such an exclusion to a claim of injury by a tenant due to carbon monoxide poisoning as the result of a faulty furnace.  

Lead paint chips and carbon monoxide exposure are two conditions that could easily occur in situations involving the rental of residential real property.  A recent webinar presented by the IIABA explores the scope of the absolute pollution exclusion in this context and points out that it covers much more than what would ordinarily be thought of as hazardous substances, fungus, mold, and bacteria being the most common.

As with any other policy, an agent should be aware of any gaps in coverage provided by a CGL policy in each context in which it will be used and decide how best to fill those gaps.  Otherwise, the agent runs a substantial risk of being the subject of an E&O claim.         

Georgia Does Well at IIABA Legislative Conference

The state of Georgia was well represented in the awards handed out at the recently completed Independent Insurance Agents and Brokers Association’s annual Legislative Conference.  The old reliable when it comes to awards, Georgia’s Young Agents Committee, walked away with the first ever InsurPac Catalyst Award.   This is a new award that recognizes a state Young Agents Committee that shows great progress in InsurPac innovation and participation.  

Georgia’s YAC won the award due to its efforts that resulted in increased contributions from prior donors, a significant increase in new donors, and most notably, its introduction of the concept of making a monthly recurring contribution to InsurPac, instead of a one time donation.  My local public radio station, which just completed its Spring fund drive, introduced this concept a few years ago and it has allowed the station to significantly shorten the length of its fund drives.  This approach allows for the splitting up of a contribution amount that may be too large to make at one time into smaller monthly increments, which will continue to be paid using the donor’s credit card until the donor takes action to stop them.  Thus, there is no need to expend time and resources on soliciting contributions from such a donor year after year.  That time and those resources can be devoted to finding new donors.  I don’t know who came up with the idea of applying this concept to donations to InsurPac, but the co-chairs of Georgia YAC’s InsurPac committee, Sean Stewart and Will Argo, are to be congratulated on a job well done.

A Georgia insurance agency walked off with the prestigious Dan Fulwider Award for Community Involvement.  This award is sponsored by Trusted Choice and annually recognizes an independent insurance agency for outstanding community involvement. This year’s award went to Snellings Walters Insurance Agency in Dunwoody, Georgia for its work with the Cystic Fibrosis Foundation’s Great Strides fundraiser event.  It is a 5K walk held each year in which teams raise money for their participants.  Snellings Walters has been the corporate sponsor for the Great Strides event in the Atlanta area for several years and through its efforts has made that event the largest such event in the nation, raising over $1.8 million last year.  This year’s goal is over $2 million.  The $2,500 that comes with the Dan Fulwider Award will go toward achieving that goal.  

Within the larger event, Snellings Walters has created an insurance industry focused group, known as Insure the Cure, which since 2011 has raised over $800,000 for the Cystic Fibrosis Foundation.  In accepting the award for Snellings Walters, Michael Iverson noted that all insurance agencies have people with passions who are looking for permission to release them.   In this case, it happened to be one of the agency’s owners whose daughter has cystic fibrosis.  He asked those in the audience to “Help your people release their passions. We have a great industry. We can make a big difference in so many ways, and I encourage you to do so.”        


Can An Agent Collect a Fee For Assisting With the Purchase of Health Insurance?

In the past couple of months, the above question has been asked by more than one caller to the Free Legal Service program that I run for the Independent Insurance Agents of Georgia.  Some insurance companies have stopped paying commissions on health insurance policies, while others have drastically reduced the amount of commissions paid. These changes have been made, at least in part, in response to the provision in the Affordable Care Act that requires an insurance company to spend at least 80% (for individual and small groups) or 85% (for large groups) of the premiums they collect on claims payments and “health care quality improvement.”  If they don’t meet those targets, the company has to issue rebates to its insureds.

The problem for insurance agents is that commissions have been deemed to be included in the 20% and 15% of premiums collected that can be spent on administrative expenses. This problem was the subject of a breakfast briefing at last week’s IIABA Legislative Conference given by South Carolina Senator Tim Scott.  Senator Scott urged those in attendance to speak to their elected representatives about two bipartisan bills currently pending in Congress that would specifically exempt commissions paid to agents from the above limitations on administrative expenses.  Unfortunately, those bills like many other bipartisan efforts have been caught up in the general gridlock that now exists.

In the meantime, Georgia agents have called me to find out if they can charge a fee to the insured for assisting them with obtaining a health insurance policy.  The short answer is Yes, if certain conditions are met, but there is a large exception to that answer.  With respect to personal lines health insurance, an agent must have a life, accident, and sickness counselor’s license and cannot also receive a commission from the insurance company.  Thus, the policy in question must be one that either can only be issued without the payment of a commission or the issuance of which without the payment of a commission has been approved by the Insurance Commissioner in a rate filing, rating plan, or rating system.  If certain disclosure and consent requirements are met, an agent can receive both a fee from the insured and a commission from the insurance company for the placement of a group health insurance policy. (Click here for an article I have written on this subject.)

The Georgia Insurance Commissioner’s Office is trying to make it easier for agents to get the necessary counselor’s license.  It has proposed a regulation that will create a new type of counselor’s license to be known as a Limited Health Counselor License, because it covers only accident and sickness insurance.  This license will take the place of the Limited Group Health Counselor license and will cover counseling services provided in connection with the purchase of both individual and group health insurance policies.  Any agent who has held an accident and sickness license for five or more years or who has any of the following designations will not have to take an examination to get this new counselor license: CIC, CLU, FLMI, REBC or RHU.

The large exception to my above Yes answer concerns individual health insurance policies obtained through the insurance marketplace exchanges created under the Affordable Care Act.  Although they are not crystal clear, the regulations that govern the operation of those exchanges prohibit charging the potential insured for assisting them in obtaining a policy on the exchange. Those regulations specifically prohibit Navigators from charging a fee to the potential insured for providing help with the marketplace exchange and state that any “non-navigators” who give such assistance are subject to the same prohibition.  The regulations contemplate that any compensation received by agents and brokers for such services will be paid in the form of a commission by the insurance company that issues the policy obtained through the marketplace exchange.

Apparently, the people who wrote the above regulations were not the same as those who decided that commissions paid to agents are administrative expenses.  Not the first time that one government hand did not know or consider what the other was doing.

Is Your Agency a Top Workplace?

Last week’s post asked if your agency met the benchmarks established by the Best Practices Study for financial well-being.  This week I will discuss what it takes to be a top workplace in the eyes of your employees, at least according to the Atlanta Journal Constitution.  It recently published its annual list of the best places to work in the metro Atlanta region.   Congratulations are again in order for J. Smith Lanier & Co.  They have continued their string of being in the top 50 mid-sized workplaces and this year moved up seven places to number 6.  Unfortunately, as has been the case since I began following this subject in my blog, no other insurance agencies or companies made the top 150 workplaces or this year, even the 15 workplaces that received honorable mention.

So what did the top workplaces as designated by the AJC have in common?  Two of the top three qualities from last year were again cited the most by employees in the top workplaces, only this year the most often cited quality was a belief that the company was going in the right direction followed closely by last year’s top quality of feeling genuinely appreciated by their employer.  The next two most cited qualities were confidence in the leader of their employer and a feeling that the employee is part of something meaningful.  The two lowest rated qualities were again the feeling that the employee’s pay was fair for the work they did (cited by only 46% down from 51% last year) and the feeling that their benefits package was good compared to similar companies (cited by only 34% down from 37% last year).

I thought it interesting that a week or so later, there was an article in the IA Newsletter titled. “How to Make Your Employees Love Where They Work.”  It discusses five things that the author’s clients have consistently mentioned to her as being important for creating a place that employees want to come to work.  The first one, supporting the good health and well-being of employees and their families, correlates well with the AJC quality of feeling genuinely appreciated by the employer.  Examples of this are flexible work schedules, complimentary healthy food in the break room, and company picnics, holiday parties, and other activities that involve the employee’s family members, as well as the employee.

Providing an employee a sense of commitment to a cause also correlates well with the AJC quality of being part of something that is meaningful.  This sense of meaning can be created by the work itself (e.g., insurance agencies help families and businesses protect against risks that could destroy them financially) or by having the employer sponsor or allow employees to engage in community involvement activities on and off company time, or preferably both.

The employer providing opportunities for learning job skills and advancing the employee’s career was also one of the qualities cited by over half of the employees in the AJC’s top workplaces.   Finally, the IA article author suggested something that was not in the AJC’s list of qualities.  Providing opportunities for employees to have fun while at work.  Some examples cited are posting a giant crossword puzzle on the wall or having a jigsaw puzzle on a table that can be worked on by employees during their break times.  The author suggests asking your employees for ideas, as allowing them a voice in what is done both here and in other areas will help create a sense that you genuinely care about them.

Does Your Agency Measure Up?

Last week, I listened to a very informative webinar on the “Best Practices” study done by Reagan Consulting.  It was the first in a series of five 15 minute webinars that will be put on by IIABA and Reagan Consulting throughout the rest of this year (click here to view a list of all the webinars).  Each webinar focuses on a topic that should be of interest to all agency owners.  The first webinar discussed the key metrics that Reagan Consulting has identified as being most important for an agency to measure, if it wants to be successful in the long-term (click here for a recording of the webinar and to download the presentation slides).  Later webinars will discuss mergers and acquisitions, perpetuation planning, and producer recruitment and development, among other topics.

Reagan Consulting’s research on successful agencies over the past 20 plus years has led it to conclude that the two most important drivers of an agency’s value are its organic growth rate and its profitability, as measured by its EBITDA margin.  Based on that research, it has created the Rule of 20 to determine if an agency is doing well.  If the sum of the organic growth rate and one-half the EBITDA margin for an agency is 20 or greater, the agency is in good shape from a growth and profitability perspective.

To determine the productivity of an agency, Reagan Consulting has found the best measure to be its revenue per employee.  For this and all the other metrics, the “Best Practices” study breaks down the results by agency size, as measured by annual net commission and related revenue.   There are six categories of agencies, ranging from those with less than $1.25 million to those with more than $25 million in net annual revenues.  The average revenue per employee for the agencies studied in 2015 ranges from $131,714 for the smallest category to $207,660 for the largest category of agency.

To determine how ready an agency is for perpetuation, Reagan Consulting looks at the Weighted Average Shareholder Age (“WASA”) and the Weighted Average Producer Age (“WAPA”).  An explanation of these concepts is beyond the scope of this post, but you can click here to see the 2015 study, which contains such an explanation.  The important points about these concepts are the higher the WASA, the greater the need for a perpetuation plan, and the closer the ages for WASA and WAPA, the more likely there will be problems in creating and implementing a successful perpetuation plan.

The key metric developed by Reagan Consulting for determining if an agency is making an effective investment in its new producers is Net Unvalidated Producer Payroll (“NUPP”).  This metric is a percentage of the annual revenues of an agency that are spent on payments to producers over and above what their books of business would entitle them to receive.  The average  agency’s NUPP is between 1% and 1.5% and the more successful agencies have a NUPP of greater than 1.5%.

Reviewing the 2015 Best Practices study for the category of agency that fits your agency is a good way to determine how it compares to the agencies that were studied, which on average have doubled their pro forma profitability and revenue per employee in the 20 plus years that the study has been conducted.

Copyright Issues for Bloggers

Last week’s post was about the important role that blogs can play in an agency’s marketing plan.  If you decide to give blogging a try, there are some things you need to know about what can be done with content that was not created by you, both visual and text.  These things all have to do with the law of copyright, which essentially protects everything that a person creates from use by others without the creator’s permission, with some exceptions.

In a post I wrote over two years ago, I explained how the copyright law applied to the use of photographs on an agency’s website . The same rules apply to the use of photographs or any other visual object created by someone else in a blog post or other writing.  Just because something is on the internet does not mean that anyone is free to use it.  This is one of the top ten misconceptions about copyright law recently published by the Copyright Clearance Center, which acts as an agent for the holders of the copyrights for various publications.

Another related common misconception about copyright law is that the existence of buttons or other tools that permit the sharing of a blog post or other article found on the internet means anyone can use the content of the post or article for whatever purpose they want.  Not true, if those buttons or other tools were included in the post or article by the author.  Their inclusion by the author is a way to publicize the work and does not signify permission to use the content of the work for other purposes.

In addition, merely citing the source of content created by another does not give a blogger or anyone else the right to copy that content and include it in their work, except to the extent that doing so can be considered “fair use” of the content.  What qualifies as “fair use” is a complicated and fact specific question, but to be safe you should not use anything more that brief quotations from such content without obtaining the permission of its creator.  If you try to get such permission and receive no response, that does not mean you are free to use the content.  Under the U.S. copyright law, permission must be affirmatively granted, it cannot be presumed.

Having a paid subscription to a print or online journal or other publication does not necessarily mean that you are free to distribute the content provided to your customers or other third parties.  Your right to do so will be governed by the terms of the subscription contract, which should be carefully reviewed before redistributing the content provided to others.  Posting the content on your agency’s intranet to which only the agency’s employees have access is not necessarily a permitted use in this situation and would not be a permitted use for any other content for which a subscription was not paid.

My earlier post on the use of photographs goes into some detail on the financial penalties that can be levied for a violation of the copyright law.  They can be significant, so activity that may violate that law should be avoided.

Is Blogging For You?

According to most of the commentary I see on what agents and agencies should be doing to better market themselves and the services they offer, creating and maintaining a blog for your website is almost mandatory.  That was the advice I received from the consultant I hired a few years ago to help me with the marketing of my law practice.  Like many people, I lacked confidence in my technical ability to create a blog and I wondered how I would be able to continually come up with topics of interest for those persons who I wanted to reach with my blog.

Almost four years later, this will be the 190th blog post I have written.  The creation of my blog proved to be the easy part.  There are many good programs available that make that step doable for anyone who can follow directions.  Believe me, if I could do it, most anyone can.

Continually coming up with topics to write about has proven to be far more difficult.  But, as noted in a recent article on Property Casualty 360, one way to do that is to focus on topics that will be of interest to the people you are trying to reach.  The author of that article discusses this and nine other tips for writing a successful insurance agency blog.

One of those other tips is not to focus your blog posts on the sale of insurance.  Instead, as suggested in an article in IA Magazine at the end of last year, your posts should aim to explain potential risks or other problems likely to be faced by your target audience and how insurance can be used to help mitigate those risks or solve those problems.  Such posts can then be followed by what this author and others refer to as “a call to action”, which asks your reader to do something that can give you their contact information for later marketing efforts. Click here for another article that provides more technical ideas on how to get such contract information by the use of blog posts.  That article was written for attorneys, but the suggestions made apply to any blog.

I have enjoyed writing posts for this blog and have received some compliments, as well as some business opportunities, as a result of things I have written.  The same thing can be true for any insurance agent or agency who is willing to devote the time and attention necessary to create and maintain a blog.  If the commentators are correct, having a blog will soon be an essential part of every agent and agency’s marketing plan, so now is as good a time as any to get started.





Can an Agent Be Paid a Fee for a Personal Lines Health Insurance Policy?

In the past couple of weeks, I have received telephone calls through the IIAG Free Legal Service Program that I run in which I have been asked the above question.  My general answer is Yes, if certain conditions are met, but there is one large exception that I will discuss below.  Those conditions are (i) the agent must have a counselor’s license for life, accident, and sickness insurance and (2) ) the insurance being placed can only be issued without the payment of a commission or the issuance of such insurance without the payment of a commission has been approved by the Insurance Commissioner in a rate filing, rating plan, or rating system.

The above questions were prompted by the decision of many health insurance companies to stop paying any commissions on individual and family health insurance polices.  A fact that has gotten the attention of at least six Georgia legislators.  Representatives Shaw Blackmon, John Meadows, Bubber Epps, Trey Rhodes, Richard Smith, and Chuck Efstration have co-sponsored a bill in the House of Representatives, HB 838, that will mandate the payment of at least a 5% commission for the sale of a group health plan by an agent and at least a 4% commission for the sale of an individual health plan.  These minimum commissions would be required for each renewal of such a plan as long as the agent “reviews coverage and provides ongoing customer service for such plan.”

HB 838 was passed by the House of Representatives on February 24, 2016, but has sat in a Senate committee since then.  The bill has two exceptions to the requirement to pay a minimum commission on the sale of health plans.  No commission would be owed for the sale of an individual health plan during a special enrollment period or for the sale or renewal of a group health plan to an employer who has “more than 50 bona fide employees on at least half of its working days.”

The above exceptions may have something to do with the regulations that govern Obamacare, which leads me to the large exception to my general Yes answer to the question posed in the title of this post.  Although not crystal clear on this point, those regulations seem to prohibit agents from charging a potential insured for services related to assisting the insured in obtaining a health insurance plan through a marketplace exchange that is run by the federal government, which is the case in Georgia.  Those regulations contemplate that any compensation received by agents for such services will be paid in the form of a commission by the insurance company that issues the policy obtained through the federal marketplace exchange.  The regulations specifically prohibit Navigators from charging a fee to the potential insured for providing help with the federal marketplace exchange and state that any “non-navigators” who give such assistance are subject to the same prohibition.

Even if HB 838 is passed by the Senate and signed by the Governor, the above federal regulations will take precedence over any contrary state law.  It appears the best hope for agents who want to help their customers with obtaining health insurance plans through the federal marketplace exchange will be to amend the provision of Obamacare that lumps in the commissions paid to agents with other administrative costs of the health insurance companies.  There are bills pending in Congress that do this, but unfortunately they do not seem to be getting anywhere.



Cyber Security Revisited

I began the year by writing two posts about the challenges and opportunities presented to insurance agents and agencies by cyber security issues.  During the last week of February, I attended a webinar that focused on what agents and agencies should be doing to protect themselves. (Click here for a link to that presentation.)  Next week, on March 16 at 2 p.m., Steve Anderson will be giving another webinar devoted to that topic. (Click here for a link to register for that webinar.)  Those who have been following my blog this year will recognize his name, as he is a nationally recognized expert in the use of technology by the insurance industry.  I wrote a couple of posts last month about a presentation that he made at a conference I attended on the use of social media in an agency’s marketing efforts.

It seems that cyber security will be the hot topic of 2016.  It is something that cannot be ignored by agents and agencies any longer.  If the practical reasons for paying attention to it that I explored in by blog posts earlier this year are not enough to motivate agents and agencies, the National Association of Insurance Commissioners (“NAIC”) is doing what it can to make sure that you have no choice.  It has proposed 12 principles for consideration by state insurance commissioners in enacting regulations that will govern what insurance agents and agencies, as well as others in the industry, must do to protect the data they collect.   Among these principles is a mandate that they have systems in place to alert consumers in a timely manner if there is a cyber security breach and that a minimum set of cyber security standards be enacted for all who are physically connected to the Internet and/or other public data networks, regardless of the size and scope of their operations.

The NAIC has also adopted a Consumer Bill of Rights related to cyber security that will be incorporated into its model laws and regulations and thus, will likely find its way into state regulations.  One such right is that every agency have a privacy policy posted on its website and available in hard copy for anyone who asks. This privacy policy should explain what personal information is collected, what choices consumers have about this information, how they can see and change or correct that information if needed, how that information is stored and protected, and what they can do if the agency does not follow its privacy policy.  The NAIC also thinks that consumers should get at least one year of identity theft protection paid for by the company or agent involved in a data breach.

The regulations are coming, so it makes sense for agents and agencies to get ahead of the curve and be ready for them.  One way to begin the process is by reviewing the webinar I attended and signing up for Mr. Anderson’s webinar next week.  Both of those will give agents and agencies the knowledge needed to create and implement appropriate cyber security policies and practices.