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                                                      Big “I” National News

P-C Trends
Consumers Indicate Homeowners Woes
Survey from Consumer Reports shows room for improvement, points consumers toward independent agents.

Dropped coverage, late claims payments and lack of coverage options plague many consumers when it comes to homeowners insurance, according to a recent survey by Consumer Reports. Agents are in a unique position to address these issues with clients and often find a lack of understanding about the content of the policy at the heart of customers’ concerns.

While 73% of the 10,500 survey respondents were satisfied with their homeowners policies and rates remain low overall, many customers also indicated room for improvement in key areas. The survey showed that excellent coverage can be too expensive or difficult to obtain because the carriers rated most highly for claims satisfaction (Amica, Chubb and USAA) largely offer high-end policies or cater to exclusive groups. Many respondents also reported claims problems with some major carriers such as Allstate and Travelers, and 21% of those surveyed said they had faced delayed claims payments. According to Tobie Stanger, senior editor at Consumer Reports, customer dissatisfaction can stem from a lack of understanding about what’s actually in the policy.

“It’s not really clear how many people totally understand what’s covered and not covered,” says Stanger. “That’s true of windstorm deductibles, when people get notices in the mail, don’t read them, and may be surprised at the coverage. But, a lot is also covered that people may not be aware of, and it’s useful for the agent to be able to communicate that.”

Jon Love, an agent at A to Z Insurance Solutions in Tampa, Fla., says a major challenge for agents right now is finding ways for insureds to keep essential coverages, such as wind, even as customers look to save as much money as possible. 

“People are desperate, and insurance is something people look at to cut costs,” says Love. “We try to find other ways to get their premium down, such as higher deductibles and windstorm mitigation discounts.”

Love also counsels insureds on coverages they need but hesitate to accept because of the cost. Sinkholes are a major issue in his area, and the coverage terms have become complex since the state of Florida divided the coverage into separate categories for “catastrophic ground collapse” and “sinkholes.” Love says he always spells out to customers very clearly what could happen to them and their home if they drop or fail to add essential coverages.

On the other hand, Consumer Reports’ survey indicates that some insurers are scaling back coverage without customers’ consent, imposing higher windstorm deductibles or cutting coverage for mold and dog bites. While many coastal states such as Florida and North Carolina continue to struggle with adequate coverage options as carriers pull out of some areas entirely, Mike McCartin, a partner at Joseph W. McCartin Insurance in Beltsville, Md., says dropped coverage is extremely rare in his area and usually only occurs as a last resort.

“The two most recent cases I can think of were related to dogs, where people refused to get rid of dogs after biting incidents,” says McCartin. “What we’ll see going forward is that carriers have become aware that their losses are on the rise, so they’ll be a little more aggressive in pursuing properties that need to be inspected and in asking people to make repairs and maintain the house.”

McCartin says he works with homeowners to make sure they have met the requirements for coverage, especially if the home has had prior claims. According to Stanger, the agent’s ability to explain complex coverages led Consumer Reports to suggest in its survey results that consumers contact an independent agent for advice on their homeowners insurance.

“Suggesting that customers go to an independent agent is a change (for Consumer Reports),” says Stanger. “I don’t recall that we’ve said to go to an independent agent before; in the past, we made more of the direct writer.”

Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.

Do three in 10 of your employees telecommute? More than one third of the U.S. working population is expected to be working from home at least occasionally by 2012 according to a recent report from Citrix Online. Many independent agencies exploring telecommuting options are finding that the added flexibility results in more loyal, productive employees.

According to Citrix, although 73% of American workers and 53% of small business owners expressed the desire to work from home, only 56% of workers surveyed say they have ever had a job that allowed them to do so. The perk is also highly prized among workers, since 21% of respondents would give up 5% of their salary to be able to work remotely just a few days per week.

“Flexible hours were considered to be essential for future business success, rated even more highly than health insurance benefits,” says Bernardo de Albergaria, vice president and general manager of global marketing and eCommerce at Citrix. “These findings are amazing, and leave no doubt about the importance of more flexible work policies.”
   
Brian Hannigan, president of Hannigan Insurance Agency in Clinton Township, Mich., employs many agents on commission who choose to work remotely and dial in to an agency server from their home computers. Hannigan says although this option presents his agents with an additional cost of about $100 per month for wireless Internet and server access, most are willing to foot the bill for the added flexibility.

“A lot of our agents are moms looking for other income,” says Hannigan. “In fact, 70% of our agents are women who like the fact that they can be there when their kids come home (from school).”

Indeed, according to Citrix, the main reason why American workers seek the ability to work remotely is to have more control over their daily schedules. Saving money on transportation, a shorter commute time and spending more time with family are also major incentives for telecommuting. However, in general, small business owners are not as enamored with the idea; 38% insist they need workers on site, 19% believe telecommuting hampers relationship building and 15% say it would negatively affect productivity.
 
“Managers fear that employees who are not in the office won’t be working, just as employees worry that being away will leave them out of the loop, and perhaps out of mind,” says de Albergaria. “We found it’s critical to adopt a results-oriented work environment, where goals are clearly delineated and communicated to employees. Managers need to focus on the final deliverables from employees rather than spending time on day-to-day or minute-by-minute supervision.”

Hannigan says productivity has actually increased for his agents who work remotely because of the lack of office distractions.  He also believes giving employees a lot of flexibility is a great way to make sure they are loyal and self-driven but emphasizes the importance of selecting the right employee.

“You have to choose wisely, and if they don’t produce and get the results, it’s a good weeding out process,” he says. “Since they’re on commission, it’s (essentially) their own business.”

The only time Hannigan’s agents come into the office is if they choose to meet with clients there. Otherwise, they can do everything remotely, from generating sales leads through Hannigan’s self-designed online leads generator to taking CE classes via webinar.

Rhonda Hendrickson, an agent at the Reliable Agency in Cloquet, Minn., works from home once a week and has a home office set up with an Internet phone and access to her agency’s database. She originally asked for permission to work from home to take care of her twin sons, and the agency agreed and provided her with the equipment she needed to do so. Hendrickson says the biggest perks have been an increase in productivity and the flexibility to dictate her own schedule.

“The productivity is wonderful, there are no interruptions,” she says. “I worked on a large project over the course of 18 months, and I did the majority of it from home.”

Her productivity improved so much that Hendrickson suggests employers consider allowing telecommuting for special projects, even if it’s just on a temporary basis. De Albergaria believes a sea change is occurring among employers wherein telecommuting is becoming more and more common and accepted.

“Our survey shows more than a quarter of U.S. small business owners believe job duties demand that employees be in the office,” he says. “But changes are definitely underway — almost two-thirds of that same group now shows a willingness to have employees participate in meetings without being there in person.”

Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.



Tech Trends
E&O and Web 2.0 Risks: Monitoring Agency Procedures
Employees should be aware of the rules and disclaimers for social media.

Your producer has 200 friends on Facebook. Your CSR has a LinkedIn account. But do your employees know the professional boundaries for social networking conversations?

Agency procedures for social networking should require employees to keep their discussions professional and they should distinguish between statements of fact versus opinion. Avoid comments that can be construed as leading or participating in attacks on either individuals or businesses.

Employees should limit their focus to a generalized discussion of an insurance topic. When a discussion becomes specific to an identifiable risk or individual, it is no longer appropriate for an interactive space and should be moved offline. Once moved offline, a discussion specific to an identifiable risk or individual should then move into the agency’s established workflow process. This provides the standard servicing and documentation that would occur had this discussion taken place in person, via phone or through e-mail.

Loss control tips:
Establish written agency procedures addressing employee use of social networking sites, including:    
          
• Determine which agency employees have permission to participate on behalf of the agency
• Define acceptable behavior (professional, fact versus opinion, no leading or participating  
in attacks on individuals and businesses)
• Require that employee sites clarify that the content reflects their own views and not those     
of the agency
• Identify when a discussion should be moved offline and into agency workflow
• State the consequences of non-compliance

Agencies face exposure every day when rendering or failing to render professional services.  Operating in the virtual world of the social Web is no exception. Whether it is the advertising of agency services provided as part of the agency home page or comments made in a chat area discussion, the standard of care in providing professional services is no less than what exists in more traditional venues.

The standard disclaimers used on your agency’s voice mail, e-mail, and Web site should also be used on social networking sites. The same agency procedures your staff follows regarding risk analysis, recommendations and documentation also apply to all content and discussions on social networking sites. The interactive features of social networks do provide unique challenges. The written procedures your agency establishes to address social networking will not only guide agency staff behavior while using these sites but will also help protect your agency against allegations of errors and omissions.

Loss control tips:

• Use standard disclaimers, such as those used in voice mail, e-mail, and on your Web site
• Be clear in the agency’s procedures that established processes and workflows apply to all discussions and service focused on an identifiable risk or individual or business generated through the social networking site.

Armed with an awareness of the main errors and omissions exposures that can arise from use of social networking sites, you are almost ready to take advantage of the opportunities presented while still protecting your agency against unexpected exposures. But before getting started, give careful thought to what your goals are in using these tools. Do you plan to use sites such as Facebook or LinkedIn as another venue to advertise your agency? Or, are you considering jumping in with both feet and actively participating in or running an interactive discussion to generate new “fans” who can become prospects? 

Once you have decided on your goals, consult with qualified legal counsel. By following the advice of qualified counsel that is specific to your planned use of these sites and by applying the loss control tips above, you will be ready to enjoy all the benefits of social networking knowing you have taken steps to mitigate the risks.

This is the final article in a series exploring E&O exposures for agencies using social networking sites. Click here to read the first installment, and click here to read last week’s article. 

Sabrena Sally (sabrena_sally@swissre.com), a senior vice president of Westport Insurance Corporation, a Swiss Re company, manages the Big “I” Agency Professional Liability Program.


Forms & Substance
To Name or Not to Name?
Agents wonder when to name employers on employees’ personal auto policies.

Some employers of people who use their personal autos for business want to be named as additional insureds on their employees’ personal auto policies (PAPs). However, many companies refuse to do this because they don't want the broader exposure or the business owner has no insurable interest. Actually, there's no need to name the business as an additional insured on the PAP, although there could be a need for a PAP endorsement similar to a "do nothing" endorsement in the business auto program.

A member agent recently brought up a scenario wherein his personal auto customer works for a large employer and uses his personal truck to travel for work. The employer wants the customer to add him as an additional insured on the personal policy, but some carriers will not comply with the request. Some carriers will only add the employer as an additional interest, and some have said they would add the employer as an additional insured. The agent wonders why some carriers would refuse to add a corporation as an additional insured since it is common practice for marketing representatives to use a personal auto for business. He also wonders how an additional interest endorsement would help the employer if he faced liability claims.

With regard to the first question, if it is regarding an ISO PAP, there is no need to add an additional insured endorsement to the policy since the employer is already covered if  the company is legally liable for the employee's negligence. The employer is an omnibus liability insured because he meets one or more of the policy definitions:
 
"Insured" as used in this Part means:
 
   1. You or any "family member" for the ownership,
      maintenance or use of any auto or "trailer.”
 
   2. Any person using "your covered auto.”
 
   3. For "your covered auto,” any person or
      organization but only with respect to legal
      responsibility for acts or omissions of a
      person for whom coverage is afforded under
      this Part.
 
   4. For any auto or "trailer,” other than "your
      covered auto,” any other person or organization
      but only with respect to legal responsibility
      for acts or omissions of you or any "family
      member" for whom coverage is afforded under
      this Part. This Provision (B.4.) applies only
      if the person or organization does not own or
      hire the auto or "trailer.”
 
In this scenario, the employer fits the third definition of an insured for liability coverage. So, there's no need for an endorsement and ISO doesn't even have one for this. In addition, the agent’s second concern regarding liability is correct. An additional interest endorsement typically protects the other party's insurable interest in the vehicle, not its liability exposure.
 
Aside from those questions, since the employee is using his vehicle to conduct business for the benefit of the employer, the latter should be more concerned about extending coverage to the employee under his own Business Auto Policy (BAP) by providing Symbol 1 or Symbol 9 liability coverage and by adding the employee as an insured endorsement to the BAP. 

Click here to read the full article. 

Bill Wilson (bill.wilson@iiaba.net) is director of the Big “I” Virtual University.


Forms & Substance
Issues in Debris Removal
Do you know what your clients are really storing?

In the event of partial losses, the limit of insurance is usually adequate to include the cost of debris removal. However, in some cases, the limit might not be adequate or the commercial property form's debris removal sublimit might restrict coverage. That begs the question, "How much debris removal coverage do I need?"

There is no hard and fast rule about how much debris removal coverage is necessary  since every insured isunique. The appropriate amount of coverage will depend on the type of building (including size, materials, contents, etc.), nature of operations, location and so forth.

If the policy isn't a blanket agreement or insures a single structure, a debris removal limits decision is in order on every policy. Many policies provide $2,500, $5,000, $10,000 or higher debris removal limits in addition to the policy limit. 

Many other types of debris, in particular fire debris, must be deposited in a landfill. Demolition, haulage and landfill tipping fees can be significant. The 25% allowance in the property policy is usually adequate for partial losses or under a blanket policy where the policy limit isn't reached. In the event of a total loss, the situation is entirely different. The $10,000 or so additional limit for debris removal can leave the insured responsible for  an enormous bill.
 
There are times when the 25% allowance is inadequate as well. Property insured under a Functional Replacement Cost form -- an unusually stout structure with increased demolition expenses and heavy industrial facilities -- are examples. This may also be the case in downtown urban areas, where demolition may be pushed into nighttime or weekend work schedules and heavy traffic and proximity to other buildings may materially increase the cost. In some cities, organized crime allegedly controls demolition and hauling - there is no negotiation over price. In some cases, urban demolition and debris removal have run 40% of the damage. This can quickly become a six- or seven-figure sum that is uninsured.

One risk manager uses the following formula:

•  For every 6,000 sq. ft. of solid brick construction, it takes $70,000 to haul it away.

•  For every 6.000 sq. ft. of steel construction, it takes $60,000 to haul it away.

•  For every 6,000 sq. ft. of frame construction, it takes $50,000 to haul it away.

These costs are about 60% dump fees and 40% labor/trucking.
 
Another risk manager reports that the contents of a chemical storage shed caught fire one night, and  because the shed contained a single one-pound bag of pesticide, the insured had to collect the entire remains of the shed, excavate the soil eight feet down surrounding the area and ship it to another state in sealed, impervious dumpsters. Then the debris had to be burned it again and put it in a landfill. The total cost exceeded $75,000, and 25% of loss for debris removal (or $10,000 limits) would not have begun to touch this. Agents should check what is stored in insureds’ closets or garages before deciding that $10,000 is enough.

Click here to read all of the expert commentary on this subject.

Bill Wilson (bill.wilson@iiaba.net) is director of the Big “I” Virtual University.