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Tag Archives: Business

Insurance Q & A – Answers from Marjorie Segale

Question 2 – Workers Comp
We have an insured who is a (domestic) employee referral agency. The employee is paid their wages out of a trust account set up by the homeowner using the domestic employee. The employment contract does not specifically require a Certificate of Insurance showing that the employee is covered for workers’ compensation. We are concerned that the referral agency could be considered the employer if the hiring party has no workers’ compensation coverage. We believe they should be asking for a Certificate of Insurance showing workers’ compensation coverage from the employing homeowner.

Answer by Marjorie L. Segale AFIS, CISC, RPLU, CIC, CRIS, ACSR, CISR
Director of Education, Insurance Community Center
I think you are completely correct. Anytime an employee is hurt, the Department of Labor is going to look for any responsible party to pay for the medical treatment and/or lost wages. I think that they should rightfully ask for a Certificate of Insurance (I don’t think that the absence of that requirement in the contract is a big deal). It is very common for people to ask for a COI showing coverage even if there is not a specific obligation to do so in the contract.
More Questions and Answers are on the Homepage of the Insurance Community Center www.insurancecommunitycenter.com

 

 

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Insurance Q & A – Answers from Insurance Professional

Question 1 – Workers Comp
If an employer no longer has any employees is it necessary to maintain a WC policy if the amount of time they will be without employees is unknown? If so why?

Answer by Casey Roberts, ACSR, AFIS, CIC – Laurus Insurance Consulting
As you have probably figured out by now (even though you say you are a newbie) there are very few “yes” or “no” answers in the business of insurance. Let’s say the insured is a sole proprietor and no longer has any employees. In California I would not have a problem with canceling their Workers’ Compensation policy. Note that I would be 100% CERTAIN that they have no employees. Sometimes employers work with “independent contractors” who may or may not be considered as such should a claim occur. If this is the circumstance then I would be loathe to cancel their policy.

If the insured were a Corporation or similar ownership, I would want to make certain that ALL of the officers that have the ability to select to be covered or not to be have selected to NOT be covered. I would want this in writing from the individuals. Far be it from me to cancel a policy without the knowledge of one of those that could potentially be injured and have a claim.

Another consideration is that oftentimes insurers are willing for a minimum premium charge to continue to carry coverage just in case the insured suddenly and without telling you (trust me, this happens a fair amount of the time) hires a new employee. Consider that your insured just got a job and needs someone for two or three days…are they always going to remember to call you? Unfortunately the insurance agent or broker is not always the first person they think to call.

 

 

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Ethics in the Workplace – Six (6) Points To Consider

1) Define your values – remember this is what you are willing to enforce and live to…so make certain that you

Pavilion Office Building

can and will do just that.

2) If you post it, you MUST practice it – walk the talk and talk the walk

3) Integrate it into your workplace – measure it and incorporate it into your everyday processes

4) Watch for the “slippery slope” – make certain that there is a “line in the sand” aver which NO ONE can step…once beyond that line things tend to get a bit slippery

5) Be above reproach – Stay WAY above your line in the sand. It makes it easier to live with that line every day.

6) Get past your self-protective behavior – you are going to make mistakes. When you do own up to them promptly, it is far better for you, your organization and all of those folks you work with on a regular basis.

Written By:

Casey Roberts, ACSR, AFIS, CIC
Laurus Insurance Consulting
www.laurusinsuranceconsulting.com 

 

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Producer Contract Fundamentals

Contracts

One of the amazing things that occurs in some agencies, even successful ones, is that often the producers have not signed contracts.

There are three main reasons for the lack of contracts.

The most common is that the agency owner and the producer has a verbal agreement. Usually the owner is reluctant to put the agreement in writing for fear that the producer will not sign one any way and might leave if forced to sign.

The second reason is that the owner just did not take the time to draft an agreement or did not know were to start. The third most common reason is that the owner feels contracts are a waste of time and money. They believe that if a producer wants to leave and violate the contract they will.

The last reason does have a bit of truth to it. However, if a producer does violate a contract, at least the owner does have a means of recourse. This is especially true if the agreement is fair.

Those who feel a verbal agreement will suffice or fail to take the time to write an agreement are playing with fire, and will get burnt. Without a contract, any dispute must rely on verbal agreements, implied agreements and common practices. The results of such disputes are up in the air. At least with a contract both sides have a common starting point in which to resolve their disagreements.

One of the biggest reasons to have a contract with a producer is to clearly state who owns the business. Producers often feel that since they generated the business they own it. Whereas many owners feel that since they own the agency, they also own all of the business. The conflict arises when these two opposites do business together.

The time and money it takes to put a contract together seems trivial when a producer with a $250,000 commission book of business walks away. Sometimes the ownership issues pop up only when the agency owner is retiring, only to find out their agency is worth a lot less because they do not own the producer’s book of business.

The Starting Point
There are many boilerplate or do it yourself contracts out there. Some of these are quite well written. They can be used as the starting point for negotiations between the parties. Or, you may choose to start with a plain language Letter of Intent that outlines all the terms agreed to by all parties.

The next step is important. HAVE A COMPETANT LEGAL ADVISOR REVIEW AND APPROVE ALL YOUR CONTRACTS. Boilerplates are fine to an extent, but laws change and vary from state to state, so never do all the contract work without an attorney who has experience with producer contracts. If you start with a Letter of Intent, the attorney can use it as the raw material for a contract.

So what are the key elements that make up a good contract? The first thing to consider is that each agency and producer is unique and that a contract can and should vary based on the circumstances. There are, however, some basic components that each contract should contain. The most common elements are:

Parties to the Agreement and Recital – State the name of all parties (individuals and entities) that are entering into the agreement. The recital provides a brief overview of the background and why the agreement is being written.

Term of Employment or Contract – State how long this agreement will run. It can be open-ended, if so desired.

Responsibilities of the Producer – Describe the duties expected from the producer. Always add a line that duties include any reasonable task requested or assigned to him/her by the employer. This is a good “catch-all” phrase.

Obligations of the Employee – Explain what the employer will provide the producer to enable them to perform their work.

Compensation and Benefits – Outline the compensation plan and any benefits provided.

Exclusive Nature of Employment – State that the employee is to devote their full-time and efforts exclusively for the benefits of the business. This section should not be included in a contract with an independent contractor.

Termination of Agreement – Describe what the rules will be for termination of employment.

Death and Disability Issues – Many contracts omit this valuable section. Make sure it is understood how the death or disability of the producer will impact the agreement.

Non-Disclosure and Non Piracy – Clearly state the importance of non-disclosure and non-piracy of the agency materials. If included in the contract, it is most likely to hold up in court.

Ownership of Accounts, Expiration Lists and Renewals – Describe how the ownership of the accounts will be handled.

Injunctive Relief and Damages – Spell out the ramification of any violations of the agreement.

Assignment of Agreement – Allow for the assignment of the contract to a third-party, such as a buyer of the agency.

Invalidity of Specific Sections – This section allows for the rest of the agreement to remain intact, if a specific section becomes invalid for some reason.

In addition to these sections, there will be additional sections related to common legal practices in a contractual agreement, such as Applicable Law, Binding Effects, Amendments, Waivers, Arbitration and Complete Agreement.

Is it Negotiable?
Some of these sections are negotiable, such as Compensation and Obligation of the Employee. It is important, however, that the agency owner not negotiate on other sections such as Non Disclosure, Assignment of Agreement and Termination of Agreement.

The sections that tend to be the most important to the owner and the producer revolve around compensation and ownership issues. The approach towards these two issues needs to be customized based on the needs, expectations and position of the parties.

Insights on how to handle producer compensation was addressed in a prior article (VVVVV). The bottom line on compensation is that it needs to be rewarding and motivating for the producer, affordable to the owner and fair to both parties.

Ownership of Accounts
There is a wide range in how account ownership is handled, or mishandled, by many contracts today. Some agreements have the producer owning it all, some have the agency own it all and some fall in between.

The problem is that sometimes account ownership has been used as the vehicle for a vesting agreement or deferred compensation plan. It is important to keep the concept of account ownership separate from the concept of a vesting agreement or deferred compensation plan.

The ownership of the accounts, renewals and expiration lists should always remain with the agency. The contract should clearly state this fact. This will prevent any misunderstanding about who owns the accounts. The vested interest, if allowed, should be strictly a financial benefit to the producer, not an ownership interest in the accounts.

If the two parties agree to some sort of vesting or deferred compensation, that should be spelled out separately from account ownership. In a vesting agreement, the producer has a vested interest in some portion of the renewal commissions generated by the accounts, while the ownership still remains with the agency. This agreement can be part of the employment contract or it can be its own agreement.

A deferred compensation plan can be effectively the same as a vesting agreement. It is probably less confusing to use the deferred compensation terminology rather than the vesting terminology, since the latter may be confused with an ownership of the accounts.

Keep in mind that a deferred compensation plan can be unrelated to the producer’s book of business. For example, the employee may earn $10,000 in deferred compensation per year of employment.

The terms of the deferred compensation or the vesting agreement needs to be clearly stated. Why bother saying that a producer is 50% vested in their accounts without describing how the value will be determined? Failure to state how the value is determined will only cause more problems.

A “rule of thumb” multiple for value is the most common approach. The main problem with a rule of thumb, such as one times commission, is that it may not reflect the fair value of that particular book of business. It makes sense to include the option for a professional appraisal if a dispute arises.

The contract can also allow the producer to buy the accounts from the agency. This makes the agreement bilateral and may help the agreement to be construed as fair in the courts. The agency, however, should always reserve the right to sell (or not).

Summary
Good producers are hard to find. For an agency owner to spend a lot of time and money finding and developing a good producer, it only makes sense to have a clear understanding of what their agreement is. When both parties know what the terms are and agree to them in writing, it tends to keep both sides honest and more likely to follow the terms.

The legal world is not perfect and valid contracts sometimes don’t hold up for one reason or another. An agency’s clients are better off with the proper insurance then no insurance at all. In a similar fashion, an agency and producer are better off with a written contract then no contract. A well-written producer contract is a form of assurance to a good relationship between the agency and the employee.

About the Authors.

Bill Schoeffler and Catherine Oak are partners in the international consulting firm, Oak & Associates, based in Northern California. The firm specializes in financial and management consulting for national and international insurance agencies, including valuations, mergers acquisitions, clusters, sales and marketing planning as well as perpetuation planning. They can be reached at (707) 936-6565 or by e-mail at catoak@sonic.net. print

 

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2013 Calendar of CE for Insurance Professionals is Unveiled. Complimentary Class Available.

The Insurance Community Center is proud to release the dates of its 2013 calendar of Continuing Education webinars.  Insurance professionals can now take CE classes for credit from the comfort of their office or conference room.

The Insurance Community Center (ICC), known and regarded for its excellent quality, highly regarded Continuing Education classes have just released the schedule for the first quarter of 2013. In addition to the unveiling of the 2013 calendar,  the ICC is reserving an afternoon class where California students can attend free of charge.

Classes that the ICC offers covers the spectrum of different insurance practices. Learning tracks include topics in the following subject areas: Commercial Lines, Personal Lines, Employee Benefits, Life Insurance, Contractors Insurance and Agricultural Insurance. Some of the most popular titles include: Business Income, Ethics, E&O, Intellectual Property, Homeowners, Voluntary Benefits and Construction Contracts.  New this year are titles such as: How to Insure a Manufacturer, Traps & Tricks of Personal Lines, Equine Insurance and Umbrella/Excess. The full calendar can be found at http://insurancecommunityuniversity.com/CEWebinarsCalendar.aspx

All of these webinar titles are between 2 and 4 credit hours.  The classes take place in a live interactive format, online. This allows the student to fully participate, ask questions and receive feedback all from the comfort of his or her office or conference room.

On Wednesday, November 14, the ICC is offering its popular Cyber Liability course for California agents. Anyone can join in on the class but credit if only approved for the state of CA. To register for this class, please click on the following link: https://student.gototraining.com/r/2873578383228194304. Space is limited, reserve your seat today!

 

 
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Posted by on November 7, 2012 in Insurance News

 

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Let’s Sell Life Insurance in 2013 Improving our Bottom Line

 

As we round the corner to 2013, we are all in the budget process and hopeful that our profitability will improve next year. We have already learned to work lean and mean by decreasing our work staff but now we have to look to new ways to make money WITHOUT adding overhead.

The Insurance Community Center and University has a solution for you.

Our world has changed. Ten years ago or more, our property and casualty insurance companies were begging us to sell their life products offering us special trips and prizes tied into life sales. That just is not happening anymore, few property and casualty companies are pushing the life sales with the exception of many of the direct writers. So it amounts to us not having pro-active markets; not being enthused by the sale and passing up the sale—missing the revenue that would be a natural add on to our book of business.

Over the past 30 years, I have talked to many Property and Casualty brokers about adding life Insurance products to their product offerings, rounding out their own accounts. Depending on the size of the agency, we have heard a lot of reasons why they are NOT selling life insurance or how they are attempting to create that sale such as:

We do not want to sell life insurance because:
1. We are a P & C shop and don’t want to get into the life area
2. We are a P & C shop and have no one that knows anything about life
3. We don’t have the time!

We would like to make money selling life insurance, but:
1. We would have to add a life producer to our agency
2. We would have to cross train one of our over-worked P & C people to sell and handle life insurance
3. We would have to refer the life client to the one branch office that handles life insurance
4. We have a relationship with a life agent that gives us a split on the commission
All of these excuses or solutions amount either to lost revenue (premium leakage) or incurring additional overhead expense.

For those P & C agents that have attempted to enter the life industry, many of them have crashed and burned in the process: For those P & C agents that have adopted the procedure of referring their trusted clients to an outside entity, not only are they losing control and revenue but also putting that customer in contact with a firm that is not branded as part of our operation. Whether it is a life wholesaler from one of your carriers, or a firm that you are collaborating with, you still have the issues of trust and access.
We have to approach this New Year with a new directive—to increase our revenue in writing life insurance WITHOUT overburdening our staff or add more overhead cost. By every study that LIMRA has published over the last 20 years the Life Insurance market is under served, fewer people than ever are being contacted about Life Insurance and by all accounts there are fewer agents selling the product. With the contraction of the retail distribution system selling Life Insurance over the past 20 years there are fewer agents being trained to sell the Life Insurance products – so competition, especially for the more complex and lucrative sales is getting lighter and lighters spelling out opportunity for producers.

By partnering with Quick life, you can remove the barriers and expense to writing life insurance. The Quick Life platform solves the structural problems.

Quick Life creates an immediate back office support system, which eliminates the overhead needed to create a life and annuity department. Quick Life is a delivery system that produces consistent results.

Quick Life Structure:
• Provides online quoting of competitive carriers
• Factors in health issues before underwriting
• Allows application taking from all carriers over the phone
• Takes over all parts of the underwriting process, including examinations and signatures
• Facilitates appointments with needed carriers
• Has concierge service which eliminates any producer time
• Will assist in the servicing of in force policies.
• Provides street compensation to the producer

Quick Life Delivery:
• Is structured to allow greater capacity
• Utilizes existing staff
• Integrates internal social media and technology based marketing systems to existing and new clients
• Allows for involvement and control by broker, without commensurate time commitment
I have been using this platform myself for the past 4 years and it has allowed me to create a structure that historically would have required time and capital. Quick Life is working together with the Insurance Community Center to make this platform available to all of its members. For details, please visit – http://www.iccquicklife.com or contact Insurance Community Center Attend our seminar on October 11th titled Sales Opportunities in Life & Annuities—An Introduction to Quick Life taught by George Fraser, Director of Marketing for Quick Life.
This could be the most valuable hour you spend preparing to succeed in 2013.

Written by:
Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President, Insurance Community Center
and
George C. Fraser III,
Director of Marketing
Quick Life

 

 

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Avoid E&O with our E&O class for Insurance Professionals

Join Us this Wednesday & Thursday for an Online & Interactive E&O Class.

REGISTER HERE Space is limited – Reserve your seat now.

This course will discuss the common types of errors and omissions that insurance broker/agents make in the transaction of insurance. The course uses the acronym PRIDE to instruct on how to avoid common mistakes. PRIDE stands for: procedures, regulations, implementation, documentation and education. Following the class, the participants will be in a better position to identify their exposure to making errors and how to implement procedural safeguards.

1. Overview of E & O
2. Procedures
3. Regulations and Requirements
4. Implementation of Procedures
5. Documentation

Wednesday & Thursday
September 12 – 13
Two Day Class for CE Credit

REGISTER HERE

 

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