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 Big "I" National News

O N   T H E   H I L L
Big “I” Members Needed to Lobby
Against OFC Bill
National Legislative Conference & Convention
provides golden opportunity.

Now that Senators John Sununu (R-N.H.) and Tim Johnson (D-S.D.) have introduced an optional federal charter (OFC) bill in the U.S. Senate, it is even more important for you to sign up for the Big "I" National Legislative Conference & Convention taking place April 25 through 28 in Washington, D.C.

The Big "I" event is always the best-attended legislative conference and convention in the industry, and it is well known among members of Congress for bringing in hundreds of agents and brokers to lobby elected officials on issues of crucial importance. This year, it will be especially important for you to educate your senators as to why we strongly oppose this OFC legislation.

This bill would drastically change insurance regulation by establishing a federal regulator in Washington. This bill would create a number of problems for independent agents and brokers, as well as your customers. 

The landscape within the industry is sharply divided on OFC. A number of larger companies, as well as the American Insurance Association, American Bankers Association and the American Council of Life Insurers support it. The Big "I" is the leader among the forces that oppose it, which also includes many smaller and mid-sized insurers, the National Association of Mutual Insurance Companies (NCOIL), state regulators and state legislators.

A show of force on Capitol Hill is crucial in shaping the debate on this important issue. You have a real opportunity to present our case to the elected leaders who will make important decisions on regulatory reform, flood insurance, natural disaster legislation, and other topics that affect your businesses, your families, your employees---your way of life. Members of Congress listen when their constituents come to town, so take full advantage of this great opportunity to get their attention.

If you have not already registered, click here. Make a point of being in the nation’s capital to head off a new federal insurance bureaucracy.

Cliston Brown (cliston.brown@iiaba.net) is Big "I" director of public affairs.

C A R R I E R   N E W S
Drive Insurance’s President Resigns

Progressive Corp. announced April 7 that it accepted the resignation of Robert T. Williams, president of its Drive Group of Insurance Companies. He will leave the company May 7. No reason was given for his resignation.

Progressive launched Drive in September 2004 to tout to consumers the benefits of placing insurance through an independent agent. Williams has headed up the unit since its inception.

"It became fairly clear that our brand, as perceived by customers, was overwhelmingly direct oriented and we began to understand that there is an enormous opportunity our there with independent agents," Williams told IN&V in September 2004. "In the auto market, roughly 85% of the auto business is out there in agents. We think those are very different consumers than those who buy direct. And unfortunately, a majority of those customers are buying through local agents are buying through captive agents."

According to AP reports, there is no word on Williams’ replacement.

L & H   T R E N D S
Recruit College Students to Insurance
Get message out to young talent about independent insurance industry’s opportunities.

Serious, career-minded college students generally have a career path in mind, driven in part by interests, perceived future earnings and status.

Some careers have very defined paths. Students who aspire to be lawyers—perhaps for future earning opportunities—have to put in an another three (expensive) years of school followed by years of long hours at a law firm. Other professions, such as pharmacists, public accountants and architects, require at least five years of college and several years’ experience in the field to get full licensing. Despite these required sacrifices, many talented young people opt for these professions.

How many of these students consider joining the independent agency system? Becoming an agency principal offers many career rewards including significant earning potential, workplace flexibility and an opportunity to work in a rural, urban or suburban setting.

What is a logical career path for a college student contemplating a career in insurance? To explore several avenues, students can interview with insurance companies for underwriting, claims adjusting, information technology or sales positions. Similarly, they can join an independent agency and work in several areas. To complement their on-the-job learning curve, new entrants can take coursework like ACSR, AIA, CPCU, ARM, CLU, CFP, etc.

If new entrants make the same commitment to the insurance industry that their peers make to the legal and accounting professions, the earnings potential is similar. In fact, the path to ownership may be faster than in accounting or law.

The issue is getting the message out to young talent about the opportunity that independent agencies offer. It’s also important to spread the message that the industry offers more than just sales positions. More than ever, agencies have marketing, information technology and customer service needs.

College students may be concerned about the independent agency path’s lack of formal training programs. For smaller-sized agencies, it is indeed challenging to provide a formal track for a new hire, but there are new producer schools and online classes that focus on helping new hires. Also, have new hires to network by getting involved with their state Young Agents group and conferences. Insurance carriers, who often help defray a portion of the conferences’ costs, look forward to meeting young agents.

The next time you hear people say that they plan to go to law school or become public accountants, take a moment to educate them about the independent agency opportunity.

Dave Evans (dave.evans@iiaba.net) is a certified financial planner and IA l-h contributing editor.

T E C H N O L O G Y   U P D A T E
Safeguard Client Data from Insider Threats
Recent Progressive incident reminds agents to protect private information.

Sensitive information crosses the computer screens of your agency’s employees every day. Your agency management system houses a host of financial facts and figures, health records and more. Sure, you think your employees are trustworthy and loyal…but are you sure?

Progressive Casualty Insurance Co. found out the answer to that question the hard way. An April 6 ComputerWorld article discusses a recent incident at the company where a now-former employee inappropriately accessed confidential information for her own use. The incident, according to "Data Breach at Progressive Highlights Insider Threat," reinforces the need to protect sensitive client information from inside threats.

"What happened was that the former employee, who purchased foreclosure property, wrongly used the information in a real estate database," Michael O’Connor, Progressive spokesman, tells ComputerWorld. "We investigated the situation, the employee was terminated, and we alerted the people whose data was accessed."

How can you protect your agency’s data from employees who are mal-intended or who mistakenly expose client information? Enter the Agents Council for Technology’s "The Independent Agent’s Guide to Systems Security: What Every Agency Principal Needs to Know."

"Individuals and businesses buy insurance and financial services products from independent agencies and brokerage firms because they are trusted entities in their communities," the report says. "This goodwill is an important component of the overall firm’s value. A preventable security breach exposing the personal information of the agency’s policyholders could result in significant negative publicity for the agency and have a devastating impact on the agency’s reputation."

Agencies should take steps now to prevent possible data breaches. The following is an excerpt from the ACT report that discusses the importance of identity and access management---just two factors that help safeguard private data:

Identity and access management are core security principles because their processes determine who gets on your systems and what access they have once they log on. Agencies should consider establishing clear policies and procedures for each of these areas and then assign specific responsibility to manage them.

Identity Management

Each person requesting access to your system should have a digital ID to identify who he or she is. ACT recommends that digital IDs be unique to an individual and kept secure and private by that individual. Unique IDs give you the capability to track activity and also reduce the exposure to loss by limiting activity related to that ID. There are several methods of authenticating a user. The most popular method is the use of static user IDs and passwords. Static passwords are ones that do not change very often. Static passwords are the easiest to use and deploy and are also the easiest to attack. You can reduce your vulnerability to brute force attacks of password guessing by using a complex password (combination of uppercase, lowercase and numbers) as recommended by the ACT password guidelines. Static passwords are also subject to exposure through spyware and text capture tools.

If you are using static passwords, consider instituting a password aging process where passwords have to be changed on a regular basis. The more often passwords change, the more secure your systems will be, but also the more difficult it will be for your employees to remember their passwords. Consider using complex passwords (those with mixed case and numbers), which provide a much higher degree of security.

It is critical for the agency to promptly revoke the digital IDs of employees who leaves the agency. At a recent security conference, it was estimated that this step is overlooked as much as 30% of the time. It is easy to add to the agency’s standard checklist for exiting employees.

Agency management systems today are increasingly managing multiple passwords for agents, initiating sign-ons to carrier systems without the user having to enter each specific ID and password. In this scenario, the authentication of the designated user is critical to prevent an unauthorized user from gaining access not only to the agency’s systems, but to the carrier systems.

Access Management

Once a digital ID is verified, access management comes into play by controlling what resources that person can use. Access management is the task of permitting or preventing use of specific applications or data sources. Focus initially on controlling the application level, which, by default, may also restrict access to the information needed to perform that function. Grouping users by role is a good method of determining what access rights a person needs to given functions. For example, accountant and managers may need access to the agency’s financial information, but CSRs are not likely to need access to it.

Logging and monitoring of activity, events and exception conditions are necessary for adequate access management. Periodic audits are needed to insure that the controls in place are functioning and that unexpected access points have not been provided or created. Also, routine reviews of activity can detect abnormal actions such as after hour activity or unusually high transaction rates from unexpected sources. Comply with any applicable state laws that require notification to employees that monitoring may be conducted, including accessing their emails, and be sure that appropriate permissions are required to be obtained from senior management before emails of others are reviewed.

And it certainly doesn’t stop there. In Progressive’s case, the employee had clearance to the client information she then inappropriately used. This illustrates the need for agencies to have documented procedures for using third-party data for business purposes, not personal purposes. Make sure employees are aware of this and provide ongoing training.

For more information on guarding against inside and external security threats, click here to read the ACT article in its entirety.

Jennifer Sikorski (jennifer.sikorski@iiaba.net) is IA’s associate editor.

F O R M S   &   S U B S T A N C E
Showdown: Individual Named Insured vs. Drive Other Car

When it comes to business auto policies, when and why do you use the Individual Named Insured endorsement (CA 99 17) as opposed to the Drive Other Car - Broadened Coverage for Named Individuals (CA 99 10) endorsement? And how do these endorsements affect a Personal Umbrella Policy?

You can use either the Drive Other Car or Individual Named Insured endorsements to provide liability, medical payments, uninsured/underinsured motorist and physical damage coverage for the personal use of a non-owned automobile by the individual you wish to protect.

For example, a company officer or business owner who does not personally own or insure any private passenger vehicles is an excellent candidate for this coverage. A company officer may borrow a neighbor’s pickup to move an item, or a business owner may rent an auto while on a family vacation. Neither of these situations fit the BAP’s "in the course of your business" requirement, and even if the BAP does afford coverage, it is afforded to the business entity.

If the individual you wish to cover has a personal auto policy, there is no need to add this endorsement to afford coverage for the personal use of a non-owned automobile because the personal auto policy covers it. If the person doesn’t own a car, an alternative to the BAP endorsements under the PAP is the Named Nonowner Coverage, which may be necessarily to meet the underlying insurance requirements of a personal umbrella.

The key to which one you use depends on how the business is legally organized. The Individual Named Insured (INI) endorsement is used when the business entity is formed as a sole proprietorship. All other entities use the Drive Other Car Coverage - Broadened Coverage for Named Individuals endorsement (DOC).

The INI is a free mandatory endorsement for sole proprietors according to ISO CLM rules, but there is no guarantee that it will be added to the policy. In order for the endorsement to be in effect, the individual must own at least one private passenger vehicle and insure it under his BAP. Vans and pickups are included as private passenger vehicles provided they are not used for business purposes.

There is no additional premium charge for the INI; however the DOC does carry a premium charge based on the coverages you wish to extend with the endorsement. There are also some significant differences in the two endorsements.

The INI cannot be used to cover any commercial type vehicle used for any business use. The DOC can be extended to other types of vehicles.

The pollution exclusion is waived in the INI for the use of a private passenger type vehicle but applies when using the DOC.

Physical damage coverage will also extend to non-owned vehicles under the INI if at least one of the private passenger type vehicles insured under the sole proprietors BAP has physical damage coverage. The DOC extends liability coverage and may provide physical damage if purchased.

The INI automatically covers resident family members. The DOC automatically covers only the resident spouse. Additional resident family members must be named on the DOC at an additional premium for any coverage other than Medical Payments and/or Uninsured Motorist coverage to apply.

The INI removes the fellow employee exclusion, but the DOC does not remove it.

The DOC excludes any vehicle owned by the named individual on the endorsement and both exclude coverage for any vehicle owned by any family members.

For more differences, click here.

Victor D. McCarley, CIC (vmccarley@aiia.org), is the director of education and technical affairs for the Alabama Independent Insurance Agent's Association.

A G E N C Y   M A N A G E M E N T
Customer Service Encounters of the First Kind

What makes a company successful over the long, long term? What characterizes the service relationship between companies and customers who do business together for decades, even generations? How can your company stay close to your customers as times change, technologies evolve and expectations keep steadily rising? What can you do to ensure that your company's future offers are relevant and valuable in the market?

The answer is to explore your customers’ future needs and interests through cultivating "service encounters of the third kind." But to get to there, you first must evaluate the first and second kinds.

In service encounters of the first kind, your agency approaches the customer with the most basic of all customer service questions: "What do you want?"

Your customer replies with equal simplicity, "I want your product X by time and date Y at your listed price Z."

Your agency’s priority and service focus should be clear: "Get the customer’s order right, and get it right the first time!"

In this kind of encounter, breakdowns in the service delivery system are bad news. They are to be ferreted out, analyzed, problem-solved and, most of all, eliminated. The service system must be streamlined and standardized in every possible way.

Companies that consistently succeed in this undertaking (delivering your product X by time and date Y at your listed price Z) earn their reputations in the market as steady and reliable suppliers. This leads, as it should, to customer satisfaction.

In these organizations, training focuses on product knowledge, technical skills, thoroughness, accuracy and adhering to proven procedures.

Marketing consists of powerful efforts to push proven products into the market. In these companies, the customer is "sold to."

The management mindset of such an organization frequently focuses on cutting costs, increasing volume and decreasing cycle time.

This "need for speed" is important. Competitors are often closing in with similar products, shorter delivery schedules and identical or even lower prices. In this competitive situation, profit margins are paper thin and companies can only thrive through consistent increases in volume.

So far, so good. But if you look into the staff mindset of such an organization, you often find a different way of thinking altogether. Frontline service employees, focused on getting it right the first time, trained to carefully follow all procedures and encouraged by management to achieve "more and more results in less and less time" find themselves answering the phone, opening the mail or meeting the next customer in person while thinking to themselves, "I hope this customer is not a pain in the neck!"

After all, customers with questions and unusual requests usually take more time, lead to more errors and can result in a general slowing down of the whole system.

No wonder so many customer requests for anything out of the ordinary are met with the retort: "We don't do it that way" or "It’s not how our procedures work."

To learn more about the next levels—Service Encounters of the Second and Third Kind—click here.

Ron Kaufman (Ron@RonKaufman.com) is author of "UP Your Service!"