Florida Association of Insurance Agents

IN THIS ISSUE:

Believe it or not, hurricane season is here. Now is the time to start planning how your agency will deal with the impact of a possible hurricane. According to top hurricane and storm forecaster William Gray of the Colorado State University meteorology team, the 2010 Atlantic hurricane season will be above average. Gray predicted we will see eight hurricanes this season, with four of the eight being major hurricanes. This means that the four that are expected to be major hurricanes would ultimately receive a rating of at least a category three.

It is with these statistics, and the well-being of your agency in mind, that your FAIA Catastrophe Task Force has been planning and organizing resources to assist in your hurricane preparedness and catastrophe plans. If you are already familiar with the Disaster Command Post on the FAIA website, you know of the valuable resources that are at your disposal for disaster planning and preparedness. Such resources include, but are not limited to, our Agency Catastrophe Guide and important phone numbers (i.e. claim numbers, disaster relief numbers, etc.).

In addition to using our Disaster Command Post, we have several ways that you can play an active role before and after a catastrophe. We encourage you to become a volunteer to help with relief assistance in affected areas if or when a storm hits. We all know that there can never be too much help when it comes to relief assistance in catastrophic situations. If you are interested in participating, please click here.

Secondly, we have implemented the Agency Buddy System. The purpose of the proposed buddy system is to facilitate the establishment of relationships between paired agencies. Through these relationships, agencies will be able to assist one another in times of emergency and catastrophic events. As with any proposal from our task force, we hope that we never have to implement them. However, we see this as a great opportunity to enhance relief and disaster assistance to one another as well as further relationships. For details on how the buddy system works, click here. If you are interested in a participating, please click here to sign up.

In any event, it is pertinent that you establish and/or refine your disaster contingency plans. Though we hope that we never have to implement such plans, it is necessary to have them in place and ready to go.

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Before the 2010 Legislature adjourned on April 30, it passed the Safeguard Our Seniors Act, which strengthens senior investor fraud laws in Florida. Many of the issues addressed in the new legislation are covered in FAIA's three-hour senior suitability CE class, "Suitability of Annuity Sales to Seniors." Since January 2009, Florida life agents have been required to take three hours of continuing education on the topic of annuity sales to seniors and FAIA's course meets that requirement.

Florida CFO Alex Sink proposed the legislation for the third straight year in response to consumer complaints to the Safeguard Our Seniors Task Force, which was created in 2008. Safeguard Our Seniors has helped recover nearly $11.2 million for Florida seniors and helped put several senior investment scammers behind bars.

The Safeguard our Seniors Act does the following:

• Increases the financial penalty for the willful act of "twisting" or "churning" of an annuity to a maximum of $75,000, which is intended to be a strong disincentive to this unlawful behavior.
  

• Limits the period of a surrender charge for an annuity sold to a senior consumer (age 65 or older) to 10 years and limits the surrender charge to 10 percent.

• Extends the "free look" period for the purchase of an annuity by a senior consumer from 14 to 21 days.

• Authorizes the Department of Financial Services (DFS) to require an agent to make monetary restitution to a senior consumer harmed by a violation of the insurance code under certain circumstances.

• Includes a third-party marketer that aids and abets an insurance agent in the violation of the Insurance Code involving an annuity sale to a senior consumer as an affiliated party of the insurance agent, bringing that marketer under the regulatory authority of the DFS.

• Gives the DFS authority to take license disciplinary action against an agent who has been disciplined under his or her securities broker-dealer license or a related license.

• Prohibits the DFS from issuing a license to a former licensee who has had his or her license revoked resulting from the solicitation or sale of an insurance product to a senior consumer.

• Extends the prohibition on a life insurance agent being the beneficiary of a life insurance policy by including the agent's family members within the prohibition and by prohibiting the agent from serving as a guardian, trustee, or having power of attorney over the insured.

• Requires an insurer to provide a cover sheet attached to the policy when an annuity is issued, informing the purchaser about the free look period and about how to contact the insurer and the DFS if they have questions about the annuity.

• Allows the use of video depositions in administrative hearings involving a senior consumer and requires compliance with the Rules of Civil Procedure.

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The recent changes ACORD made to the most popular insurance documents in history (Certificates of Liability and Property) will likely be discussion points for the near future. Two new tools are at your disposal in helping to address these changes.

First, ACORD has put together a list of Frequently Asked Questions. This list could be a valuable tool for staff, insureds, and certificate holders in learning some general tips on these recent changes. To access this list, use this link.

Second, Bill Wilson of IIABA (with some assistance from FAIA) has compiled a list of its own Frequently Asked Questions involving certificates, including changes found in the new forms. These are real-world tested questions and answers and should be required reading for all those who deal daily with certificate requests. To access this list, use this link.

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Management help, including sample job descriptions, training manuals, office organization, and hiring practices, is available on FAIA's website. Just click on the "Ops in a Box" logo on the left. While you're there, check out all the topics and learn how to run your agency better! This section is frequently updated as we discover new and better information. Remember, you'll need to log in; this valuable resource is for FAIA members only!

Joe Landlord recently had a builder construct a ten-unit shopping center for a price of $2 million. Once the construction was completed, Joe's insurance agent cancelled the Builder's Risk policy and wrote the standard Insurance Services Office (ISO) Building and Personal Property Coverage Form with $2 million of building coverage and an 80 percent coinsurance clause. Over the course of a few months, Joe was able to lease all ten units to tenants. Since the units contained little more than bare walls and floors, each tenant had to put in, at their own expense, building items like wall-to-wall carpet, wallpaper, new interior walls, toilets, sinks, and built-in cabinets and shelving. Each tenant spent about $100,000 on these building additions, commonly referred to in the insurance industry as Tenant Improvements and Betterments (TIBs). The lease between Joe Landlord and each tenant required the tenant to insure these TIBs. Joe and his insurance agent were very happy…until the major fire struck.

After the fire, Joe met the adjuster at the shopping center to inspect the damage. The adjuster had a copy of the policy showing the $2 million of coverage, and Joe had all the leases showing where the tenant was required to insure the TIBs. After looking at the damage, reading the policy, and looking over the leases, the adjuster told Joe, "I am very sorry sir, but your building coverage is not adequate, and a feature in your policy called coinsurance is going to come into play. Unfortunately, this loss of $500,000 won't be paid in full…there is going to be something we refer to as a coinsurance penalty. Even before I talk about the deductible, I have to apply a penalty of about 17 percent because you are underinsured. That means of your $500,000 loss I'll pay only about $415,000 and then I have to apply your $5,000 deductible."

Joe, as well as his agent, thought the adjuster was incorrect. After all, the leases required the tenants to insure the TIBs, and the TIBs were not even put in at Joe's expense. Unfortunately for Joe, the adjuster was correct…when the tenants installed building items, even at their own expense, Joe's policy needed to be adjusted.

Why is this the case? The Independent Insurance Agents and Brokers of America's (IIABA) Virtual University has an article dealing with this issue which can be viewed by clicking here. The site is free to FAIA members, but registration is required. (The website has over 1,000 insurance-related articles.) If you don't know your user ID or password, you can get them from IIABA. Just send an email with your name and your agency name and address to logon@iiaba.net. IIABA will provide you with the necessary login information.

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by Melissa Champany, CCSR, API

It's time for a serious talk. Florida currently has nearly 300 YAC members. That's not a bad number; it's not great, either. What's worse? Only 28 of you have registered for FAIA's Community YAC page. What's the big deal, you ask? This is FAIA's social network. It's for agents and about agents. As young agents, we should be at the forefront of this endeavor. Soon, this may be the primary method of receiving information from FAIA. So, sign up today. Come September, this is where our calendar will reside.

In the meantime, please note our activities at Convention and our sponsors. In brief, we're hosting a golf tournament for all FAIA members to benefit the Folds of Honor Foundation on Wednesday afternoon. That evening, we'll hold a reception and hand out the tournament prizes. On Thursday and Friday, we'll have our customary booth in the Exhibit Hall. And, we'll also have our YAC invitation-only lunch on Friday; you don't want to miss guest speaker Major Ed Pulido from the Folds of Honor Foundation!

SmartStart4Kids is just around the corner! We'll be collecting school supplies for underprivileged students—your future employees and clients—in each of our zones to help prepare them for academic and life-long success. Check the SmartStart4Kids website for more information.

Marching on the heels of SmartStart4Kids is FAIA's Planning Session. This is where we lay the groundwork for the specific plans and projects to be accomplished during the upcoming fiscal year, which starts September 1, and we need your input. What do you want from your YAC membership next year? How can we better achieve our goals? Are there other questions we should be asking? We won't know without your participation. Mark August 12–14, 2010, on your calendar and plan to meet us in Palm Beach at the Four Seasons Resort. Click here for a brochure and schedule.

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There are no enemy lines here you have to worry about. You'll learn from others' ideas throughout FAIA's 106th Anniversary Convention & Education Symposium. You'll gain insights from strategic communication that will help you become more valuable to your agency or company and better prepare you for the future on the insurance battlefield. Here is a preview of one of the many breakout sessions we have planned.

Execution or Extinction with John Wepler, president of MarshBerry. The combined impact of the economy and the insurance market has wreaked havoc on insurance agencies in Florida. While many agencies will face extinction, countless others are turning risk into opportunity by executing a carefully crafted business plan founded on achieving predictable, profitable organic growth. This session will provide attendees with a comprehensive overview of the best practices of high growth agencies, including new business comparables, producer book expectations, accountability, producer recruiting, differentiation and service management processes to ensure customer retention. The presentation will also provide an update on the value of insurance agencies and how performance correlates to agency value. Be sure to attend this session as attendees will be provided with tools and metrics critical to ensure long term viability and the maximization of agency value.This session has been approved by the DFS for two (2) hours of continuing education credits (intermediate) CE # 73113,CE0220—General Lines (Property & Casualty); Adjuster Optional CE#73114, CE0324. This session is sponsored by United Property & Casualty Insurance Company.

Please click here to register for the Convention.

Please click here for a complete version of the online Convention brochure.

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DISCLAIMER All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the prior written permission of the Florida Association of Insurance Agents.

NOTE: FAIA is not in the business of giving legal advice. Whenever questions arise, agents are urged to seek the counsel of a competent attorney licensed in Florida and familiar with the Florida Insurance Code.

Please note that all coverage analysis done by FAIA is based on standard ISO forms. Many carriers in Florida file their own forms with the OIR, some of which are derivations of ISO and some that are unique. It is imperative that you carefully read your carriers' forms to make an informed decision about coverage questions.