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.

Any Time, Any Place, Anywhere

The above is the subtitle of the cover story in this month’s National Underwriter magazine.  It refers to what the author of that article says is how consumers now want to buy products and services.  Anyone who has ever used Amazon or another online retailer to buy something can appreciate the ease of such transactions and how that experience leaves a very favorable impression, so that the next time you need something, you think of them first.

The theme of the National Underwriter magazine article is that independent insurance agencies who want to survive and thrive will have to adapt their business practices to make their products and services available to their customers and potential customers any time, any place, and anywhere.  The first step toward doing so is to make an agency’s website mobile friendly, i.e., able to be accessed and used from a smart phone, tablet, or other handheld electronic device.   More than half the visitors to the website of Paradiso Insurance in Connecticut use its mobile optimized site, which generates a large part of its $6 million in annual personal lines premium.

The Agents Council for Technology has published a white paper on ways to make an agency’s website more dynamic and user-friendly.  It contains references to information on how to make the website mobile friendly.  Steve Anderson, who writes a weekly TechTips blog for insurance agencies, recently wrote about a service that allows an agency to insert interactive content on its website that provides useful information about various types of insurance coverages, which content is also mobile friendly. (Click here to read his post.)  He has also recently published a white paper on how to modernize an agency’s payment methods to better fit what today’s consumer wants and expects.  For those who want to add a personal touch to all this technology, he has found online services that will send handwritten notes for you. (Click here to read about them.)

For those of my readers who are going to this week’s IIAG Fall Conference in Macon, there will be a couple of presentations about the use of technology by agencies to enhance their business activities and protect against the dangers associated with such use.  One of those presentations will be by IIAG’s Agents Go Digital staff.  They can create and support websites and provide social media management services for agencies that don’t have the time or expertise to do those things on their own.  I hope to see some of you at the Conference.

Ways to Cut Your Agency’s Expenses and Increase the Bottom Line

The third quarter of this year will end tomorrow.  For most businesses that means it will soon be time to start the budgeting process for the new year.  An agency’s budgeting process should include a focus on how to cut its expenses, as well as how to increase its revenue in the new year.  Both will lead to an increase in the agency’s bottom line, and if expenses are not properly controlled, they will reduce the bottom line impact of an increase in revenue.

Jim Schubert of Southern States Insurance has recently written a good article that discusses 15 steps an agency, or any business for that matter, can take to cut its expenses.  Those steps range from low tech (find a business credit card that gives you the best deal on interest rate and rewards program, click here for a comparison site) to high tech (go paperless and move your data storage online).   The suggestion I found most interesting was exploring setting up bartering relationships with some of an agency’s vendors.  Although as Mr. Schubert points out, an agency cannot legally give its vendors an insurance policy as part of a bartering exchange, there is no prohibition of which I am aware on providing risk management and similar services not related to obtaining an insurance policy to a vendor in exchange for products or services of the vendor.  Providing a risk management audit to a vendor as part of such an exchange has the added benefit of potentially leading to the sale of insurance products to mitigate the risks identified as the result of such an audit.

At the very least, all agencies should regularly engage in Mr. Schubert’s last suggested cost saving step.  An audit in which possible alternatives to each vendor being used are identified and explored to see if cost savings can be obtained by switching to a new vendor.  Such an audit may even result in the elimination of a product or service that is no longer really needed or can be combined with the products or services already being provided by another vendor.



Georgia’s YAC Wins More Awards

Last week I wrote about the award won by the Independent Insurance Agents of Georgia at this month’s Education Convocation of the Independent Insurance Agents and Brokers of America.  Not to be outdone, IIAG’s Young Agents Committee continued its streak of award-winning at this month’s IIABA Young Agents Leadership Institute.  Georgia’s YAC has won at least one national award every year since I began writing this blog and probably for some time before.

Last year, the YAC was given two awards at the same meeting (click here to read my post about them) and this year it also received two awards, although one was for an individual.  After a one year break, Georgia’s YAC received the Outstanding Young Agents Committee of the Year award again and for the first time that I am aware a member of YAC received the Young Agent of the Year award.   That award went to Kelli Dean, who served as the Chair of YAC during the time period covered by it.  Ms. Dean was recognized for “providing exemplary service to her association community and the industry.”  (Click here to read about the other awards given at the Young Agents Leadership Institute.)

In addition to Ms. Dean, congratulations for the latest Outstanding Young Agents Committee of the Year award go to Jarrett Bridges, the Vice Chair, and Robbie Moore, the Secretary-Treasurer, during the time period covered by it, and the other members of the board of directors and committee chairs during that time period.  After so many awards over the past few years, it now goes without saying that the future of the Big I is in good hands with these outstanding young agents and its strong Young Agents Committee in general.



IIAG Education Program Receives Award

Congratulations are due the Independent Insurance Agents of Georgia.  At last week’s Education Convocation of the Independent Insurance Agents and Brokers of America,  the IIAG’s education program was recognized as one of the best education programs in the nation.  It received a Diamond level Excellence in Insurance Education Award, which is the highest level awarded.  IIAG was one of only 14 state associations to receive this top honor for its education program and one of only five such associations from the Southeast.

The award recognizes “state associations and staff who have made significant contributions to education for their members and the industry in the key area of class offerings, continuing education (CE), professionalism, designation offerings, industry collaboration, planning goals, marketing, resources and more” according to the IIABA press release announcing the award winners.  I am sure that IIAG’s cutting edge use of webinars under the MyCeTube program and its up to date classroom facilities at its offices in Doraville, as well as its use of satellite classroom facilities around the state to provide greater access to its members, all contributed to its earning this important award.  The fact that IIAG’s Executive Director, Aubie Knight, is one of the regular instructors for its education program adds a unique twist to it.

The IIAG won this award two years ago (click here for blog post).  It’s nice to know that its education program has maintained a level of excellence.  The next time you see or otherwise communicate with Andrew McElhannon, who is the Member Services Coordinator for IIAG, please remember to thank him for his great work in overseeing the IIAG’s award-winning education program.

Insurance Certificates – What’s New

The proper issuance of insurance certificates appears to be an issue that just will not go away.  I continue to receive calls and e-mails under the Free Legal Service Program that I run for the IIAG about this issue and in particular, requests made by certificate holders for specific language they want included in the Description of Operations box on the ACORD 25 form.

As many of my readers are probably aware, the Insurance Commissioner’s Office has created a website devoted solely to explaining the requirements of the law on insurance certificates that was passed in 2011.  As pointed out in my blog post in April of this year, that website contained conflicting information about what could be put in the Description of Operations box of the ACORD 25 form.  That conflict has now been resolved.  A revised website recently went live.

After input from representatives of IIAG, the language of the website has been changed to make it clear that the prohibition against including a “summary of a policy provision,” the language of which “varies from the precise and complete language” of that provision applies to the Description of Operations box of the ACORD 25 form.  The list of improper actions with respect to the use and completion of an insurance certificate now includes a specific reference to what can be put in that box.  It is improper to include language that summarizes a policy provision in that box, as well as anywhere else on the certificate.  Instead, references to specific policy provisions or endorsements by “exact title, form number, and edition date” can be included in the Description of Operations box and copies of the documents referred to can be attached to the certificate.

The other major change made to the Insurance Commissioner’s insurance certificate website is the addition of a section that explains to whom the provisions of the insurance certificate law apply.  As readers of my blog already know, that law applies to certificate holders and those who request certificates, as well as to insureds, insurance agents, and insurance companies.  It also applies regardless of where any such persons may be physically located, if the property, operations, or risks to be covered by the insurance policy that is the subject of the certificate are located in Georgia.   Agents now have an authoritative source to which they can direct out-of-state contractors or others requesting insurance certificates for proof that the law applies to them.  Agents should also point out that the website refers to the fact that violations of that law can be punished by fines of up to $5,000.00.

The new website still has an e-mail link that can be used to report suspected violations of the law and an explanation of the information needed to do so.  I urge my readers to make use of the e-mail link, as the Insurance Commissioner can’t take action against those persons who violate the law unless he knows about them.

Are You a Responsible Person?

Most everyone considers themselves to be a responsible person.  Ordinarily, that would be a good thing.  However, there is one context in which being a responsible person can expose a person to unwanted liability. It involves the payment of taxes by a business.

A “responsible person” under the tax laws can be held individually liable for any taxes that are owed by a business, but not paid.  For this purpose, a “responsible person” is anyone who controls the funds of a business and thus, could pay any taxes (e.g., sales, income, excise) owed by that business.  Usually, this would include anyone who has the ability to sign checks on behalf of a business, whether or not it is normally their duty to see that all taxes owed are paid.  Most, if not all, agency owners would fit within this description.

A recent Georgia Court of Appeals decision illustrates just how far the liability of a “responsible person” can extend.  In that case, the majority owner of a corporation first paid sales and use taxes owed by the corporation and then petitioned for a refund of part of the taxes paid.  Richard Moore, who was an officer of the corporation with the ability to sign checks on its behalf, was not notified of the refund action by the majority owner.  The majority owner’s petition for a partial refund of the taxes he had previously paid on behalf of the corporation was granted.

You probably know by now where this is headed.  The Georgia Department of Revenue decided that it had made a mistake in granting the refund petition.  But instead of suing the majority owner to get the money back, it sued Mr. Moore.  Understandably, Mr. Moore wondered how he could be held personally liable for the Department’s mistaken refund of taxes that he knew nothing about.

The Georgia Court of Appeals, acting on the Georgia Supreme Court’s holding that “responsible persons” are jointly and severally liable for the payment of all required taxes, held that Mr. Moore did not have to be involved in the refund action in order to be liable for the improper refund of taxes.  Joint and several liability means that a person can be sued individually for a debt owed by more than one person and required to pay the full amount of the debt.  It’s then up to the person sued to go after the other persons who are liable to pay their share of the debt owed.

Mr. Moore’s story should be a warning to all “responsible persons” to make sure that you know what the other “responsible persons” in your business are doing with respect to all the taxes owed by that business.  More fundamentally, all business owners should carefully consider who they rely on to pay the taxes owed by their business and establish procedures to make sure such taxes are paid as and when due.

Must a Retired Agent Maintain a License to Receive Payments From Former Agency?

The Free Legal Service Program I run for the IIAG has provided me with yet another topic for a blog post.  The above question was recently asked of me by a caller to that program.  You would think that there would be clear answer to this question, as it is a situation that has occurred often in the past and with the average age of agency owners continuing its climb toward 60, this situation will most certainly occur even more often in the future.

Unfortunately, there is no clear answer to that question, although I think I know what the Insurance Commissioner’s Office would say.  The applicable statute is O.C.G.A. Section 33-23-4.  On the one hand, paragraph (e) of that statute states that the “the payment or receipt of renewal or deferred commissions” by “any agency or a person” who has “ceased to be” an agent will not be prevented by the earlier provisions of the statute, which state that commissions generated by the sale of an insurance product can only be paid to a licensed agent, limited subagent, or counselor.  If the payments to be made to a retired agent can be characterized as renewal or deferred commissions, which in many instances will be the case, it appears that the agent does not have to maintain a license to be eligible to receive them.

I say appears because the language of that section of the statute also refers to the payments being made to a “licensee” who has “ceased to be an agent, limited subagent, or counselor.”  The use of the word “licensee” after having referred to “any agency or a person” implies that the person to whom the payment of renewal or deferred commissions is being made must still have a license of some sort issued by the Insurance Commissioner’s Office.  This conclusion is supported by the next paragraph of the statute, which exempts an agent who has been licensed for 10 or more consecutive years from the requirement that they be appointed by a least one insurance company, as long as they are not performing the duties of an insurance agent “other than receipt of deferred or renewal commissions.”

Similar language is also found in the section of the Georgia Insurance Code that governs the continuing education requirements for licensed insurance agents.  Agents who meet the same criteria stated above are not required to satisfy any continuing education requirements.  There would be no reason for the above statutory sections if a person who was no longer performing the duties of an insurance agent could receive renewal or deferred commissions without having to maintain a license of any kind.

One may ask what kind of license must such a person maintain if they are not required to be appointed by an insurance company or to satisfy any continuing education requirements.  The answer is found in a regulation first adopted by the Insurance Commissioner’s Office in 1996 and then readopted in 2003.  It describes the requirements for the issuance of a “nonactive license.”   Such a license must be renewed and “all renewal fees” paid annually.   So it appears a retired agent must continue to pay the Insurance Commissioner’s Office an annual fee for the privilege of receiving “deferred or renewal commissions.”

If such an agent doesn’t want to have to pay a fee for that privilege and run the risk of losing that privilege if their nonactive license is revoked or suspended, which presumably it can be for the same reasons as the license of an active agent, it would be better if whatever payments are to be received from their former agency as a result of their retirement be structured so they cannot be characterized as “deferred or renewal commissions.”

Relationships With Business Groups & Other Potential Sources of Customers – What Can Be Done?

I recently received a call on the IIAG Free Legal Service Program that I operate from an agent who was considering establishing a relationship with a business association, for whose members the agent was interested in writing insurance.  The agent had developed a special expertise regarding the insurance needs of the business association’s members and wanted to gain access to them through their association.

The business association on the other hand was interested in receiving compensation beyond a mere referral fee for assisting the agent in gaining access to its members.   In exchange for that compensation, the association was willing to provide assistance to the agent beyond just giving the agent contact information for its members.  Establishing such a relationship with a business group can be a very effective way for an agent or agency to significantly increase its customer base.

The creation of a relationship with a person or entity that is not licensed by the Georgia Insurance Commissioner’s Office raises two significant issues under the Georgia Insurance Code that must be successfully dealt with.  First, there is the prohibition on the sharing of commissions with a person or entity that does not have the proper license from the Insurance Commissioner’s Office.  Second, there is the prohibition on engaging in activities that constitute the sale, solicitation, or negotiation of an insurance product without the proper license from the Insurance Commissioner’s Office.

The first issue can be resolved by entering into a payment arrangement with the unlicensed business group that is not tied in any way to the amount of commissions received by the agent or agency on insurance business written for the group’s members or even to whether any insurance business is written at all.  The agreed on compensation for the performance of services by the business group should be paid regardless of those two factors.

Some people may think that having an employee of the business group get the proper insurance agent’s license and then paying an agreed on share of the commissions received directly to that employee will resolve the first issue.  That would work if the employee was going to keep all the commissions paid to him or her.  However, that is not likely to the case, and if the agent or agency was or should have been aware that the employee would turn over all or any part of such compensation to their employer, then they may well be in trouble with the Insurance Commissioner’s Office.

However, having an employee of the business group get such a license would resolve the other issue raised by the agent or agency’s relationship with that group.  What duties constitute the sale, solicitation, or negotiation of insurance is a gray area and has been the subject of a couple of my earlier blog posts.  Having a properly licensed insurance producer, who is employed by the business group, handle all the insurance related duties that the business group is to perform in exchange for its compensation would avoid any potential problem with the Insurance Commissioner’s Office over that issue.  In the absence of such a employee, the agent or agency would be exposed to potential liability if the Insurance Commissioner’s Office were to determine that one or more of the duties being performed by the business group could only be performed by a properly licensed insurance agent.