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.