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June 30, 2010
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| In this Issue
• How We See It: Independence is More than Just a Word
• Breaking News: ACORD Says It's 'Imperative' New Version of Liability Certificate be Used
• IIABNY Submits Written Testimony to NY Insurance Dept. on Filing, Licensing, CE Reform
• Insurance Dept. Opinions: Producer Compensation Disclosure, HMO Commissions
• Terrorism Insurance Take-Up Rates Rise Most Notably in Northeast, According to Study
• Trusted Choice® Has Summer Safety Tips IIABNY Members Agents Can Pass on to Insureds
• Free Webinar: 'Revolution and Routine: Social Media and the Independent Agent'
• Participate in the Agency Universe Study
• The E&O Report
"A Follow-Up to Questions Asked During Annual E&O Seminar" (Member login required)
• Office Closing
IIABNY's office will close at 3:30 p.m. July 2 and remain closed through July 5 in observance of
the Independence Day holiday. The office will reopen at 8:30 a.m. July 6.
| Hot Links Local Events | Education Calendar | E&O Reports | Capitol Reports | The Situation Room | Technology
Word on the Street Podcast | Ask Tim Podcast
| How We See It Independence is More than Just a Word
by Richard A. Poppa, CAE, AAI As we prepare to celebrate our nation’s 234th birthday this weekend, we should never lose sight of what makes the United States of America and the Independent Agency System so enduring. It’s summed up in just one word — Independence. Without it, the USA would still be a British colony and insurance purchasers would be left without all the buying choices they enjoy today. Independence gave the risk-takers, the Founding Fathers and the entrepreneurs who created the agencies and brokerages that form the backbone of our association, the freedom to pursue their dreams. Today, hundreds of thousands of New York homeowners, motorists and business owners depend on IIABNY members to protect them. Thousands of workers are employed at our member agencies and brokers, earning a paycheck to support themselves and their families. Yes, we are proud to be Americans because of our independence. For the same reason, we should be swollen with pride to be part of the greatest system ever devised to protect the livelihoods of so many of our fellow citizens. And, we should not be afraid to promote our independence to consumers. 
Richard A. Poppa, IIABNY Pres. & CEO Let us know how you see it. E-mail IIABNY Insider with your thoughts, opinions or reactions to "How We See It." If you would like your response to be considered for publication in "How You See It," please provide your name and phone number where you can be reached. | | | Top of page | | | Breaking News: ACORD Says It's 'Imperative' New Version of Liability Certificate be Used
The newest edition of the ACORD 25 Certificate of Liability Insurance is the only one that users should be issuing, ACORD announced this week. In a notice posted on its Web site, the organization said, "It is imperative that all ACORD forms users use the most current versions of our forms." ACORD published the Sept. 2009 edition of the ACORD 25 last October. One of the most significant changes is that the new edition no longer states that the insurers listed on the certificate will "endeavor to" mail a specified number of days’ written notice to the certificate holder that a listed policy has been cancelled. Rather, the new edition refers the certificate holder to the policy provisions. While IIABNY (member login is required to access this link) and others have applauded the change as reducing agents’ exposure to errors and omissions claims, several IIABNY members have reported that certificate holders are rejecting the new edition. ACORD said that it issued the notice in response to numerous inquiries it has received with regard to the need to use only the latest edition. The organization explained that it removed the word "endeavor" from the form because policy cancellation provisions generally do not use that word. "The new language is compliant with state insurance regulatory requirements in all states, and specifically responsive to bulletins issued last year by the South Dakota Insurance Department," ACORD said. "Since the form is national, not state-specific and is filed where required, only the version of the form containing the new language should be used in all states." The notice reminded users that the additional remarks section of the form and form ACORD 101, Additional Remarks, are available for copying verbatim information in a policy, such as the specific number of days of written notice. For more information on this topic, visit the Certificates of Insurance page in the Research section of the IIABNY Web site and the Certificates of Insurance Resource Section of the Big "I" Virtual University Web site. | | | Top of page | | | IIABNY Submits Written Testimony to NY Insurance Dept. on Filing, Licensing, CE Reform
The state Insurance Department recently asked the industry how it could enhance its procedures. So, IIABNY is answering. Today, the association is submitting written testimony with recommendations on how the department can improve its rate and form filing, producer licensing application and licensee access to continuing education information on the NYSID Web site. In its testimony, IIABNY cites the lengthy delays that still hamper insurers in the rate and forms filing process. The association is calling on state regulators to renew their focus on this problem area by quickly resolving issues related to simple technical errors and presenting examiner filing questions at one time rather than piecemeal. While the introduction of an online licensing application system has improved the licensing process, IIABNY asserts that much more could be done to streamline the process. The online system, IIABNY points out, is limited to an original license application or renewal for individual licenses. If an additional license is sought, the online application is held pending until the department receives paper documentation. By including the current license number on the online submission for an additional license, IIABNY contends the paper documentation could be eliminated, expediting the process. IIABNY is also recommending several changes to the Insurance Department's administration of continuing education. Among the suggestions is development of a database that will provide licensed producers with information about their license status, renewal date and continuing education credits earned during the licensing period, as well as elimination of the requirement for a monitor when taking online exams. | | | Top of page | | | Insurance Dept. Opinions: Producer Compensation Disclosure, HMO Commissions
The New York Insurance Department’s Office of General Counsel posted four new advisory legal opinions, all issued in June, on the department’s Web site last week. Proposed language that describes the role of an insurance producer in the sale of insurance, discloses the source of the producer’s compensation, discloses that the producer’s compensation may vary based on different factors, and informs the purchaser that additional information is available satisfies the requirements of the regulation on producer compensation transparency.
(Editor's Note: IIABNY has been steadfast in its opposition to requiring producers to disclose their compensation to insureds. To learn more about the association's position on this critical issue and the status of IIABNY's legal challenge, go to the "Producer Comp Updates" page on our Web site.) An HMO may use a sliding scale arrangement in paying broker commissions provided that it is nondiscriminatory, does not exceed four percent, and does not otherwise violate Insurance Law restrictions on overall expense limitation. A licensed life insurance agent who is a member of the board of directors of a not-for-profit charity may solicit individual members of the charity to purchase a life insurance policy naming the charity as the beneficiary, because New York Insurance Law creates an insurable interest in a charitable organization with respect to its donors. The agent may donate a portion or all of his commissions earned on the sale to the charity, so long as the advertising of a charitable contribution as an incentive for new insurance business does not constitute an improper inducement in violation of Insurance Law.
All opinions issued since 2000 are available on the department’s Web site. | | | Top of page | | | Terrorism Insurance Take-Up Rates Rise Most Notably in Northeast, According to Study
Despite a changing and uncertain marketplace, U.S. terrorism insurance take-up rates continued to climb in 2009 as companies of all sizes and across all industries continued to purchase terrorism coverage, according to a report released recently by Marsh. Sixty-one percent of the firms surveyed by Marsh purchased property terrorism insurance in 2009, an increase from 57 percent in 2008 and representing a steady climb from 27 percent in 2003, according to The Marsh Report: Terrorism Risk Insurance 2010. Median premium rates declined from $37 per million of total insured value in 2008 to $25 per million in 2009, according to the report, which indicated several differences by industry, region, and company size: Take-up rates rose most significantly in the Northeast, increased slightly in the South and the West, and remained flat in the Midwest. Utility, real estate, health care, transportation, financial institutions and media companies purchased property terrorism insurance at the highest rates of the 15 industry segments reviewed, with take-up rates in each sector exceeding 70 percent. Construction, hospitality, utility and real estate companies experienced the highest median premium rates, exceeding $50 per million of TIV. As a percentage of total property premiums, financial institutions (24 percent) and transportation companies (17 percent) paid the largest share; hospitality firms saw the greatest decrease in this area (from 13 percent to 4 percent). Smaller companies—with TIV below $100 million—spent 22 percent of total property premiums on terrorism coverage in 2009. By contrast, relative spending was significantly lower for companies between $100 million and $500 million in TIV (5 percent), $500 million to $1 billion (7 percent), and $1 billion or more (11 percent).
Capacity in the standalone terrorism insurance market, which has served as an important alternative or supplement to coverage made available through the Terrorism Risk Insurance Act, has grown considerably in recent years, to a theoretical maximum of $3.76 billion. Primary purchasers in 2009 included hospitality companies, large real estate firms, and financial institutions. Exposure to Terrorism Risk Persists: Commercial insurers continue to avoid accumulating high-profile urban exposures due to the residual risk for terror events retained by insurers below the triggers and retention levels set by TRIA, coupled with the relatively high cost of reinsurance in key exposure zones. In 2009, the percentage of businesses that purchased general liability coverage through TRIA appears to have dipped to just above 50 percent. Rates, charged as a percentage of premium for overall coverage, held steady at about 1 percent. Several U.S.-based multinational companies have re-examined the adequacy of their property and terrorism insurance in countries with uncertain political environments; political violence coverage for such events as war and civil war in developing countries is of key concern. Using a U.S.-domiciled captive to access TRIA coverage to insure an organization's exposures against acts of terrorism can be a viable, cost-efficient insurance alternative to traditional property programs.
TRIA was originally enacted in December 2002 as a response to the attacks of Sept. 11, 2001; the program has been extended twice and is now set to expire Dec. 31, 2014. According to Marsh, should the federal backstop lapse, a market dislocation could occur due to the obligatory nature of terrorism coverage for certain lines, such as workers' compensation. | | | Top of page | | | Trusted Choice® Has Summer Safety Tips IIABNY Members Agents Can Pass on to Insureds
IIABA is advising consumers to meet with a Trusted Choice® agent in assessing the risks associated with summer social events and making sure they are adequately insured. Equally important, the Big "I" is offering summer safety tips from Trusted Choice that IIABNY members and other producers can share with their insureds on their agency Web sites, in newsletters and other communications. "Summer has arrived and for the next few months, many people will take advantage of the weather by hosting summer parties, testing the waters with sports and recreational watercraft, firing up outdoor grills and uncovering backyard swimming pools," says Madelyn Flannagan, Big "I" vice president of agent development, education and research. "Summer can be lots of fun, but it’s important to take a few precautionary steps to limit seasonal risks." According to new research by Trusted Choice and IIABA, an estimated 32 million people across the U.S. plan to host parties or gatherings near water this summer, yet they may not be aware of all the risks or prepared in case of an accident. In the national survey, more than 43 percent of respondents, representing 98.6 million households, said they plan to host a party or any kind of social gathering this summer. Of those, more than 32 percent, representing more than 32.1 million households, indicated that their event will be held in or around water (such as a pool, beach, boat, lake, etc.). The survey was conducted for Trusted Choice via telephone by International Communications Research, an independent research company in Media, Pa. Interviews of a nationally representative sample of 1,006 households were conducted in May 2010. The survey has an overall margin of error of +/- 3.1 percent. | | | Top of page | | | Free Webinar: 'Revolution and Routine: Social Media and the Independent Agent'
Independent agents are faced with a unique opportunity to lead the way as the use of social networking transitions from an activity seen as a way for college students to waste time with friends to an acceptable medium for conducting business, sharing news and ideas and building relationships. To take advantage of the opportunity, here are two important points to remember. Access to the vast number of consumers populating these social networks is free in almost every case. And, the skills of an independent agent — the ability to build relationships, willingness to be proactive and intuitive to consumer needs and responsiveness to their problems — lend themselves perfectly to the medium. Join Paul Banuski, IIABNY’s Marketing & Communications Coordinator, for a free introduction to a three-part series on this subject,"e-Revolution: Essentials for Agency Social Media Use" at 11 a.m. July 8. Part II will follow July 22 as Banuski is joined by social media expert Rick Morgan, who will explore the tools of social media and how an agency can utilize them. Part III, scheduled Aug. 5, will feature errors and omissions attorneys Jim Keidel and Chris Weldon for a discussion on managing the risks associated with social networking. Parts II and III can be purchased for $45 each. The purchase of one link allows for viewing of that Webinar for the entire agency. Members can stay connected with IIABNY by joining the association’s LinkedIn group, connecting to us on Facebook or following IIABNY on Twitter. | | | Top of page | | | Participate in the Agency Universe Study
The 2010 Agency Universe Study is here and provides critical information for the independent agency system, IIABA and insurance carriers. Please take part in this valuable research. IIABNY and Big "I" members in other states outside New York should have received an e-mail message from IIABA inviting them to participate in the study. The e-mail message includes a link to the Web site, where the study can be completed online. The survey takes less than 30 minutes to complete, and responses are completely confidential. The 2010 Agency Universe Study will take a look at the role of social networking in agency operations, as well as a variety of other innovations and challenges affecting today’s business. For information or questions, e-mail Madelyn Flannagan, IIABA vice president of agent development, research and education. Contact Flanagan if you received the e-mail message previously mentioned but no longer have the link to the survey's Web site. | | | Top of page | | |
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