Ten days or so ago, 22 members of the IIAG spent time in Washington, D.C. speaking to our Representatives and Senators about issues that are of importance to Georgia insurance agents. They were part of the annual IIABA National Legislative Conference. Led by the IIAG’s President Bob Monk and Executive Director Aubie Knight these 22 agents listened to speeches and other presentations by important members of Congress and spent time with almost all of Georgia’s Congressmen. Their conversations with Georgia’s Congressmen focused on four main topics: the National Association of Registered Agents and Brokers Reform Act of 2013 (“NARAB II”), the Terrorism Risk Insurance Act (“TRIA”), crop insurance, and tax reform.
NARAB II was refiled in March of this year in both the United States House of Representatives and Senate. It had been filed in 2012 (click here for my post about its filing), but because final passage of the Act did not occur before the end of that Congressional session, it had to be refiled this year. Georgia’s David Scott was again a co-sponsor of this legislation in the U.S. House. It seeks to streamline the process of obtaining licenses by non-resident agents and has passed the U.S. House on two prior occasions, only to fail in the Senate. Mr. Knight reports that there are positive signs for its passage by both the House and Senate this time around. For more information on NARAB II, click here.
TRIA was originally passed in 2002 in response to the effect of the events of 9/11 on the insurance markets and was extended in 2006 and again in 2007. It is now set to expire on December 31, 2014. Under TRIA, the federal government acts as the insurer of last resort for losses caused by acts of terrorism. There are significant monetary thresholds that have to be met before the federal government would be responsible for any such losses and if those coverage triggers are met, the federal government can impose surcharges on all commercial insurance policies to help recoup any payments it may have to make. Mr. Knight reports some opposition to the extension of this Act by those who are philosophically opposed to government intervention in support of private businesses. The extension of this Act is a legislative priority for the IIABA and it has created a Terrorism Resource Page where both historical and the most recent information about TRIA can be found. Mr. Knight is not hopeful that anything will be done by Congress until sometime next year and is concerned about possible disruptions in the marketplace as a result.
As far as crop insurance was concerned, Mr. Knight reports that President Bob Monk carried the ball, as he was the only member of the group who had ever written such insurance policies. The focus of the discussion about crop insurance was on the role that the federal government plays in that program, which is similar to but not as significant as the role it plays under TRIA. All the members of Georgia’s Congressional delegation were receptive to the points made by the group’s members about the need for tax reform that benefits small business owners like the members of IIAG.
Mr. Knight encourages all IIAG members to participate in this annual lobbying effort, at least once. Making your voice heard is an important part of the legislative process and the more voices that our Senators and Representatives hear the more likely they are to pay attention to issues that are important to insurance agents.
The Trade Adjustment Assistance Extension Act of 2011 contains a little known provision that can have a significant impact on insurance agencies and all other employers who are subject to the unemployment compensation tax. Beginning on October 21, 2013, a state must prohibit an employer whose failure to make a timely or adequate response to a claim for unemployment benefits results in the payment of such benefits to an employee who was not entitled to receive them from being relieved of liability for the payment of such benefits, if the state agency responsible for the payment of such benefits determines that the employer has “established a pattern of failing to respond timely or adequately to such requests.” The law gives a state agency the ability to adopt stricter standards, including the denial of relief from liability for such benefit payments in the first instance.
As most employers over the past few years are keenly aware, the amount of unemployment compensation benefits paid to former employees is one factor used to determine the rate of unemployment compensation tax that will be payable by that employer in the future. At this time, the Georgia unemployment compensation law only states that an employer’s account “may be charged” for the payment of such benefits “due to the employer’s failure to respond in a timely manner to the notice of claim filing.” That will become mandatory on and after October 21, 2013, if the employer has engaged in a pattern of such conduct.
Such a pattern will exist if an employer makes a habit of not responding to such claims when they are justified and then fails to respond to one that turns out not to be justified. This coming change should be communicated to all the customers of an agency for whom it writes unemployment compensation insurance. They should be advised to respond timely and adequately to all claims for unemployment compensation, whether justified or not. One more way that an agency can provide value added service to its customers.
Worker’s compensation insurance was involved in another trap for the unwary that was illustrated by a call I recently received on the Free Legal Service Program that I operate on behalf of IIAG (click here for more information on this program). The agent who called me had issued an insurance certificate for a worker’s compensation policy that her agency had written for a contractor. Unfortunately, unbeknownst to the agent, the insurance company had canceled the policy on a date before the date the insurance certificate was issued. The agent had assumed that the policy was still in force because she had not received notice of its cancellation from the insurance company and her customer had said nothing even though it had received the cancellation notice over two months prior to the date the insurance certificate was issued. Now the agent was looking at an E&O claim from the contractor to which the certificate was issued, which had to pay more premium to its worker’s compensation insurance carrier since the agency’s customer did not actually have such insurance.
The moral of the above story is always check to make sure an insurance policy is in force before issuing an insurance certificate for it. Do not assume that the insured will tell you a policy has been canceled or that you will always receive a mailed notice of cancellation from the insurance company. Performing this check can be made easier if the agency has real time and download communication capabilities with its insurance companies. Click here for a recent post on this subject.
This month’s cover story for the IA Magazine focuses on the various ways in which successful agencies are paying their producers. According to a recent study by Reagan Consulting, for the most part, there was little or no correlation between agency growth and the use of many standard producer compensation models (e.g., paying less for renewals than existing business, stair stepping of rates for new business produced). Instead, the agencies that were experiencing above average growth set high performance standards for their producers and rewarded those producers who met them and penalized those who did not.
One of the agencies discussed in the article was Pritchard and Jerden, which is based in Atlanta. Its producer compensation model involves establishing annual goals for both retaining business and writing new business. Those producers who meet their goals are paid at the top commission rates and earn an annual bonus based on the amount of growth they produced. As an incentive to meet their new business goals, at the beginning of each year, five percentage points is withheld from renewal commissions for all the producers. Once a producer meets his or her minimum requirements for new business, the amount withheld is paid in a lump sum. Producers who fail to meet minimum growth requirements two years in a row have to meet those requirements for the next two years consecutively to regain their original renewal rates. For more examples of successful producer compensation models, click here to read the full article.
How producers are compensated has been identified as an important factor in attracting young people to the insurance industry. In a recent post, Jim Schubert of Southern States Insurance in Douglasville discusses six ways to increase the recruitment of young people and to retain them once they are recruited. One way is to provide appropriate compensation incentives for the conduct you want from them. His agency pays the same commission rates for new and renewal business as a way to encourage its producers to establish strong relationships with their existing customers and thereby, make it easier to fend off attempts by other producers to take their business. He also creates competitions among the producers with both large and small rewards for the winners. His final piece of advice is perhaps the best and can be applied to both young and established producers, “Above all find out what really motivates your young agents. Sometimes, its just good ole fashioned recognition.” (Click here to read the rest of the ways to increase the recruitment and retention of young producers.)
I am interested to hear from my readers about your experiences in determining what works best in compensating producers. The IA Magazine article makes it clear that no one size fits all in this area. Let us know what works best for you.
Last week, I posted an article about the second annual Real Time Day, which is tomorrow, April 9, and offers various web-based resources for agencies to learn about the benefits of having real time and download communication capabilities with their insurance markets. Adding these capabilities will add value to an insurance agency by enabling it to process applications and claims faster and more efficiently. (Click here to read the full article.) A week from tomorrow, on April 16, will be the sixth annual National Healthcare Decisions Day, which at first blush would not seem to be very relevant to a property and casualty insurance agency or agent.
However, for personal lines agencies and agents, National Healthcare Decisions Day offers a way to provide a value added service to your customers and to show them that your are concerned about more than just selling them an insurance policy. Its purpose is to raise awareness in the general population of the need to plan in advance for health care decisions that may have to be made in the future. The coalition of national, state, and community organizations behind this event seeks to ensure that “all adults with decision-making capacity in the United States have the information and opportunity to communicate and document their healthcare decisions.”
Even after the prolonged agony of the Terri Schiavo case, which demonstrated the need for advance care planning (click here if you need a refresher), fewer than half of adult Americans have executed an advance care planning document in which they express their wishes about the health care treatment they are to receive in the event they are diagnosed with a terminal condition or find themselves in a coma from which there is no reasonable hope of recovery and thereby, become unable to communicate their wishes to their treating physicians. The website for this event has an extensive list of resources that can be used to educate your customers about this issue and provide them with various types of advance care planning documents, generically referred to as Advance Directives. As it turns out, the name for this type of document that has been adopted by the Georgia General Assembly is the Georgia Advance Directive for Health Care. A copy of it and an explanation of its provisions can be found here.
If you are looking for a reason to contact your personal lines clients or even your commercial lines clients to remind them of you and the services you can provide, National Healthcare Decisions Day provides a good reason and one that will indicate to your customers that you have their best interests at heart, not just the sale of insurance to them. Of course, if your agency also sells life and health insurance, this would be a good time to remind its personal and even commercial lines clients of that fact.
The past two weeks, I have posted articles about how an insurance agency and agent can use technology to streamline their business operations and better connect with today’s insurance consumer. (Click here and here for the two articles.) Another aspect of the use of technology by insurance agencies and agents involves communications with their insurance company markets. The Real Time/Download Campaign, an industry group composed of agencies, brokers, companies, vendors, and agent associations, is sponsoring its second annual Real Time Day on April 9, 2013. It’s goal is to expose agencies who do not already have real time and download communication capabilities with their insurance markets to the benefits of those capabilities. Those benefits include the use of a single consistent system to communicate with multiple insurance companies and the ability to process policy transactions and manage claims from the customer’s file.
On Real Time Day, among other things, there will be web broadcasts featuring discussions with real time and download users and technology consultants, webinars and education events sponsored by agency management system user groups, and presentations by insurance companies and vendors on using real time tools. Participants will be able to see how these capabilities can save them time and money in the conduct of their everyday business activities. Click here to go to the Campaign’s Real Time Day website for more information on the events that will be taking place on April 9. For those of you who would like to get some information now on how real time and download capabilities can save time and money, click here to go to the guide that has been created by the Campaign to explain the benefits of those capabilities and the actions that need to be taken to acquire and implement them.
Those readers who have already implemented one or both of these capabilities, please leave a comment to tell us your experience with them and any advice you may have for agencies thinking about implementing them.