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Congress Looking at Terrorism Backstop Options |  Liberty Mutual Combines RAM, Wausau, Surety into New Unit |  Tailor Your Financial Planning Game Plan |  Box It Up: Insuring Property in Storage |  Should You Document Service Standards? |  Big "I" National News

O N   T H E   H I L L
Congress Looking at Terrorism Backstop Options
In wake of Treasury report on TRIA,
committees schedule hearings

In the wake of a Treasury Department report released last week, the chairmen of two important House and Senate committees are looking at possible ways to develop a new federal backstop for terrorism insurance.

Last week’s Treasury report recommended against extending the existing Terrorism Risk Insurance Act (TRIA), but it did lay out parameters for considering some sort of federal backstop.

In response to that report, House Financial Services Committee Chairman Mike Oxley (R-Ohio) agreed with the administration that TRIA extension was not the best solution to the issue of terrorism coverage, but indicated a willingness to work toward a revamped program.

"I am committed to working with the (Bush) Administration, my House and Senate colleagues, and all interested parties on a bipartisan basis to address these issues," Oxley said. "Any revamped terrorism insurance program must encourage greater private-sector involvement and must improve the insurance marketplace. Any successful package must include full payback of claims, narrowed taxpayer exposure to insurance risk, narrowed federal involvement in order to allow development of the private market and private-sector layers of coverage."

Senate Banking Committee Chairman Richard Shelby (R-Ala.) issued a similar reaction to the Treasury report. He expressed the possibilities that Congress may need to create a temporary extension of the program to ease its sunset and that any extension should be "narrow, targeted and minimize interference" with the markets.

"Prior to the August recess, the Banking Committee will hold a hearing to consider the Treasury report and proposals for reforming TRIA," Shelby said. "It is my intention for the committee to work in a bipartisan fashion, in cooperation with the House Financial Services Committee and the administration, as the Congress considers the future of the TRIA program."

The Senate committee hearing is scheduled for July 14, the day after the House committee’s hearing.

"While we are disappointed with some of the conclusions reached in the Treasury report, we are encouraged by the comments of Chairman Shelby and Chairman Oxley," says Charles E. Symington Jr., Big "I" senior vice president of government affairs and federal relations. "Both chairmen have shown a sincere interest in working toward a practical solution to continue to bolster the nation’s terrorism insurance marketplace. We are very hopeful that they, in cooperation with their colleagues and the administration, will find a viable program that will preserve a much-needed federal role in insuring against unpredictable acts of terrorism and their potential economic consequences."

Oxley expressed optimism that Congress will formulate a viable plan before TRIA expires on Dec. 31. "I am confident that we an achieve a comprehensive, fiscally responsible solution to deal with terrorism insurance by the end of this year," he said.

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

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P & C   T R E N D S
Liberty Mutual Combines RAM, Wausau, Surety into New Unit
Gary Gregg, unit’s new president, speaks to IN&V

Liberty Mutual Group’s recently formed strategic business unit, consisting of the company’s Regional Agency Markets (RAM), Wausau Insurance and Liberty Mutual Surety, launched Tuesday, July 5. What’s behind Liberty Mutual’s reorganization, and what can independent agents and brokers expect from the new unit?

When Roger Jean, RAM’s president, decided to retire in 2006, the company looked at its areas of growth, according to Gary Gregg, president of the new Liberty Mutual Agency Markets business unit. Independent agents were a large factor in the equation.

"Increasingly, as we looked at the distribution we’d built and where the focus has been at Wausau, it was in the independent agent and broker channel where our growth was occurring and where we have been building relationships," he says.

Surety is another piece of the new unit. "As those two have been growing and expanding in the independent agent and broker marketplace, it became increasingly clear that a combination with the regional agency companies of RAM organization made a lot of sense, with the focus being on the independent agent."

The regional companies that compose RAM—America First Insurance, Colorado Casualty, Golden Eagle Insurance, Hawkeye-Security Insurance, Indiana Insurance, Liberty Northwest, Montgomery Insurance, Peerless Insurance and Summit Holding Southeast, Inc.—meet the needs of local and regional agents in their markets through their own distributions. Wausau, on the other hand, deals with larger-premium companies and distributes its products through intermediaries.

"Strategically, we’re going to look very hard over the next few months to see how we can leverage the capabilities that Wausau has without doing anything to hurt or harm the great relationships we have," Gregg says. "We think of it as providing more capability and more product to the independent agents.

"I think that we’ll be bringing that strong Wausau brand and, to a certain extent, some surety product in some way to that market, even though those companies have their own relationships already," he continues. "So it’ll be an opportunity for us to leverage and take advantage all the way around."

Gregg stresses that independent agents and brokers won’t notice a change in daily interactions with their regional companies.

The company ultimately would like to "be one of the absolute premier companies in the independent agency and broker channel," and hopes the new unit will be "mutually profitable" for the company and for agents. In 2004, RAM brought in $4 billion in revenues, nearly 20% of Liberty Mutual Group’s $20 billion in revenues.

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

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L & H   T R E N D S
Tailor Your Financial Planning Game Plan

Our culture is obsessed with sports. The fascination goes beyond idol-worshiping the athletes to obsessing over luminary coaches such as Casey Stengel, Vince Lombardi and John Wooden. The days of a coach toiling in relative obscurity are long gone. Case in point: Phil Jackson is returning to coach the Los Angeles Lakers for a reported $10 million a year. What characteristics set apart these revered coaches? They posses superior technical knowledge, such as strategies and plays, to enable the team to operate at its highest level, and they can select and motivate the right team members.

Independent agents who offer financial services should take a page out of successful coaches’ playbooks. First, agents need to listen to customers’ needs to assess their goals and objectives. Then, determine their priorities and gather data based on what their financial resources allow.

Next, determine their tolerance for risk and devise recommendations. Just as great coaches individualize their game plans based on the skills of their players, agents should tailor their recommendations to customers’ needs. For example, some customers will want financial products that allow for significant investment returns by utilizing aggressive growth stocks, international stocks and real estate. Other customers may seek financial guarantees such as preservation of capital. Develop a financial game plan that reflects a customer’s desires to set your agency apart from the large cookie-cutter financial institutions.

Just as a good coach explains the elements of a play to his or her players, agents need to educate customers. A primary example is long term care. Many consumers mistakenly believe that Medicare will help cover nursing home expenses. Or they may not want to think the possibility of a nursing home. A good financial coach will assist customers with these difficult issues and remind them that no decision is a decision.

It is critical for agents to devise a financial plan and execute its action items And, just like good coaches have to deal with game situations such as injuries or fouls, an agent has to deal with unexpected situations like underwriting declinations, divorce, job layoffs and other events that result in financial plan adjustments. That long-term assistance is what separates good financial coaches from the short-term agents, looking for a quick sale.

Lastly, just as great coaches network with other coaches to gain exposure to new ideas, great agents continue their education by interacting with their peers and keeping abreast of developments in financial services. That dedication will pay off for your customers, your agency and you.

Dave Evans (dave.evans@iiaba.net) is a certified financial planner and life-health contributing editor for IA magazine. 

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F O R M S   &   S U B S T A N C E
Box It Up: Insuring Property in Storage

Your insured has to place items in a self-storage facility for approximately six to seven months while building a new home. Does the homeowners policy cover these items, or do you need to obtain more specific coverage?

As long as there is a homeowners policy in place on the current residence, or a tenant’s policy if they are renting, the insured should be OK. Although you should review the form, most homeowners policies cover personal property anywhere in the world. There is typically a limitation on property usually located at another residence, but that doesn’t apply to a storage facility.

Subject to certain restrictions, personal property owned or used by an insured is covered worldwide. While often misinterpreted as limiting all off-premises personal property coverage to 10% of the Coverage C limit, the HO policy only applies the 10% limit to personal property that is "usually located at an insured’s residence, other than the residence premises." That is, for the restriction to apply, the insured must have more than one residence. In addition, the personal property must be "usually located" there. For example, if the insured has a second home, the Coverage C on the homeowners policy covering his or her main residence only extends 10% of the Coverage C limit to personal property usually kept at the second home. For personal property the insured takes back and forth, the 10% limit would not apply.

The 10% limit also would not apply to personal property that is usually kept at a residence that is not an insured’s residence. Personal property in storage at a friend or family member’s house would not be subject to the 10% limit.

Personal property of college students is subject to the 10% limit, according to most insurance experts. In most cases, the 10% limit under the parents’ homeowners policy is usually sufficient, but coverage can be increased using the HO 04 50 - Increased Limit on Personal Property in Other Residences endorsement. Or, the student can purchase an HO-4 policy.

Personal property stored in a mini-warehouse is not subject to the 10% limit under the insured’s Coverage C. Again, the 10% limit only applies to "property usually located at an insured’s residence, other than the residence premises." A mini-warehouse is clearly not a residence, thus the 10% limit does not apply to property stored there; full Coverage C applies, subject to other restrictions discussed in the full article from which this is excerpted.

While Coverage C basically applies to personal property worldwide, there are certain restrictions of coverage, in addition to the 10% limit discussed above. Under Special Limits of Liability," Coverage C is limited for business property. The HO 04 12 - Increased Limits on Business Property endorsement usually can increase the policy special limits, but it does not provide any additional coverage for business property in storage. Under the endorsement, the increase in limits on business property does not apply to ""business property in storage..."

The Coverage C named peril for theft contains several limitations relevant to certain types of personal property in storage (or otherwise off-premises). For example, insureds who use a mini-warehouse to store watercraft and equipment, or trailers and campers, have no theft coverage for such property. Another limitation exists in valuation if the HO 04 90 - Personal Property Replacement Cost endorsement is added. There is no coverage for "outdated or obsolete" articles that "are stored and not being used."

There are also a number of liability and contractual exposures to consider, so while the homeowners policy provides broad coverage for insureds in most storage-related situations, there are certain specific exposures that are not covered. Agency staff should be aware of potential gaps in coverage and make appropriate recommendations to insureds when handling new and renewal personal lines business.

For more information, click here.

Mike Edwards (mike_edwards65@earthlink.net) is a Virtual University faculty member and head of Edwards & Associates, an insurance training company.

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A G E N C Y   M A N A G E M E N T
Should You Document Service Standards?

Customer standards tell your employees and your customers what you expect of your staff and what your customers should expect from their interaction with your agency. The focus and clarification of standards can be a strong, positive statement that differentiates you from the average insurance agency. All agencies say that they provide excellent service, but few are committed enough to actually write it down and provide it to their clients.

Should you establish and publish customer standards for your agency? The simple answer is "of course," but it’s really not as simple as that. There are dangers associated with establishing customer standards—and even more in publishing them.

The obvious problem is the agency’s legal liability if its standards are not met. Could customers sue you if you didn’t meet your own standards?

The second problem involves establishing customers’ expectations that your employees must achieve. Many agents adopt excellent standards of conduct for sales and service functions. However, the standards often reflect what the agent would like his agency to reach, not what it currently achieves. Setting standards before developing the systems and procedures to accomplish those standards lowers employee morale and results in dissatisfied customers who, until the standards were published, did not expect greater service than they received from the agency.

With these issues in mind, should you establish and publish customer standards for your agency? The answer is still, "of course." Customer standards ensure that you meet customers’ expectations.

Here is a sampling of what your standards can cover:

1. Every prospect is treated as a valued client when they call or visit the agency or when an agency representative visits them.

2. The producer or sales representative will establish a relationship with the prospect that is built on respect and attention to his or her individual needs.

3. Representatives will make it easy for the client to finalize the policy and payment terms.

4. Deliver new policies, when promised, as promised, without errors.

5. An agency representative will call every client after the sale to confirm that the client is completely satisfied.

6. The agency will be responsive to questions and concerns identified by the client.

For more information, click here.

Al Diamond (al@agencyconsulting.com) is a Virtual University faculty member and president of Agency Consulting Group, Inc.

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