iiai viewpoint magazine

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VOLUME 28 / ISSUE 1 / WINTER 2010 INDEPENDENT INSURANCE AGENTS OF IOWA IOWA INDEPENDENT AGENTS Trusted Choice ® MEET YOUR IIAI STAFF As the staff of IIAI, we strive to make this a premier insurance association. We seek to be advocates for all independent insurance agents in Iowa. We are committed to a quality of service that noticeably exceeds our members’ expectations. In achieving these objectives, IIAI employs a distinctly competent staff and we focus on our continuous improvement, as well as improving the service we give to our members. INSIDE: Credit Scoring, Who Likes It? Who Needs It? Adapting To The Cards That Are Dealt Your IIAI Staff Security Breach Law And Your Respon- sibility To Protect Sensitive Client Data Are Your Employees Exempt Or Non-Exempt? IIAI’s Top 10 Contracts For Reporting Agencies Are Agent's Associations An Endan- gered Species? Are Independent Agents Endangered?

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Page 1: IIAI Viewpoint Magazine

VOLUME 28 / ISSUE 1 / WINTER 2010INDEPENDENT INSURANCE AGENTS OF IOWA

I O WA I N D E P E N D E N T A G E N T S TrustedChoice®

M E E T Y O U R I I A I S T A F FAs the staff of IIAI, we strive to make this a premier insurance association.

We seek to be advocates for all independent insurance agents in Iowa. We

are committed to a quality of service that noticeably exceeds our members’

expectations. In achieving these objectives, IIAI employs a distinctly

competent staff and we focus on our continuous improvement, as well as

improving the service we give to our members.

INSIDE: Credit Scoring, Who Likes It?

Who Needs It? Adapting To The Cards That Are Dealt Your IIAI Staff Security Breach Law And Your Respon-

sibility To Protect Sensitive Client Data Are Your Employees Exempt Or

Non-Exempt? IIAI’s Top 10 Contracts For Reporting

Agencies Are Agent's Associations An Endan-

gered Species? Are Independent Agents Endangered?

Page 2: IIAI Viewpoint Magazine

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(888-576-2438)societyinsurance.com

Laptop. Appointments. Self-Assurance. Society.It’s what you need to do business.In any business, having the right equipment makes all the difference.

And when it comes to business insurance, nobody is better equipped

than Society® Insurance. You see, business insurance isn’t just our

core business; it’s our only business. That’s why we can offer truly

unique solutions that provide high-quality specialized services and

fully comprehensive coverage. It’s this focus that gives us superior

expertise, not to mention a more thorough understanding of the

intricacies of your clients’ businesses that other insurance companies

just don’t have. So, if you’d rather do business with an insurance

company that’s all business, call Society or visit our website.

Restaurants • Bars • Lodging • Medical Offices • Grocery • Workers Compensation

WIS

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dc.8002_agent_ad_WisProfAgt.indd 1 4/30/09 3:46:52 PM

Page 3: IIAI Viewpoint Magazine

PresidentJeff Bohnenkamp, CIC - Spencer

President-ElectMark Currie, CIC, CPIA - West Des Moines

TreasurerBrian Petersburg - Decorah

National DirectorTom Richardson, CIC - Keokuk

DirectorsPaul Pohlson - GrinnellTerry McDonald, CIC - Iowa CityScott Morningstar, CPCU - LisbonJerry Mease - WintersetEldon Hunsicker - OttumwaTerry Friedman, CPCU - DubuqueTim English, CIC - DyersvilleJohn Dalton - Council BluffsSteve Madsen - Marshalltown

Past PresidentHans Boehm, CPCU - Boone

Chief Executive OfficerBob Skow, CPCU, [email protected]

Membership Operations CoordinatorMelissa [email protected] • Ext. 15

Technology & Communications AdministratorJeanne [email protected] • Ext. 17

Membership Services CoordinatorMarilyn Paul, CPCU, AIT, AAM, [email protected] • Ext. 11

Membership Services CoordinatorLinda [email protected] • Ext. 16

Membership Services CoordinatorBrenda Kluger, MBA, CIC, CISR, [email protected] • Ext. 14

Membership Services CoordinatorMarie [email protected] • Ext. 22

ReceptionistCindy [email protected] • Ext. 12

IIA

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SI O WA I N D E P E N D E N T A G E N T S Trusted

Choice®

Viewpoint is a publication of the Independent Insurance Agents of Iowa.

Viewpoint is published quarterly: Winter, Spring, Summer and Fall. Viewpoint is mailed to Iowa

insurance agents, Iowa Home Office Executives, Affiliate members, and other state associations

and organizations.

Independent Insurance Agents of Iowa4000 Westown Parkway

West Des Moines, Iowa 50266(515) 223-6060 • FAX (515) 222-0610

800-272-9312 (In-State only)

Advertising EditorMelissa Meiners

43 Acuity

10 AMERISAFE

33 BerkshireHathawayHomestate Companies

14 Burns&Wilcox

25 EMCInsuranceCo.

17 FirstWesternInsurance

4 GeneralCasualty

29 GrinnellMutualReinsuranceCo.

16 IIAI

42 IIAI

32 IIAI

16 TheIMTGroup

22 IMWCAIowaMunicipalities Workers’CompensationAssociation

35 IowaMunicipalInsurance,LTD

40 IowaMutualInsuranceCo.

28 InsuranceFinanceCorporation

30 IntegrityInsurance

36 MerchantsBondingCo.

34 M.J.KellyCompany

17 NorthernStatesAgency

10 PekinInsurance

38 Progressive

37 RainandHail

22 RDSGroup

35 Ringwalt&LiescheCo.

24 RuralCommunityInsuranceServices

26 StateAutoInsuranceCompanies

21 SECURAInsuranceCo.

2 Society®Insurance

6 TaylorInsuranceServices

26 TruckersInsuranceAssociates,Inc.

8 WestBend

We would like to thank our advertisers for their support. This magazine would not be possible without them.THANK YOU!

MISSION STATEMENT: TheIndependentInsuranceAgentsofIowawillbeanunrelentingadvocateofthebusiness,professionalandpoliticalinterestsofitsmembers;doingsobyworkinginthepublic’sbestinterestandwiththehighestethicalstandards.

Advertisers

President’s ReportCredit Scoring, Who Likes It? Who Needs It?

“I have never been a proponent of the use of credit scores as an underwriting or rating tool.”

by Jeff Bohnenkamp, CICPage 5

National DirectorsMessageAdapting To The Cards That Are Dealt

“What I have come to admire about the people who make up our industry is the ability of agents to change with the times, and adapt to the cards they are dealt.”

by Tom Richardson, CICPage 7

In This Issue

Your IIAI StaffPage 9

Security Breach Laws And Your Responsibility To Protect Sensitive Client Databy Steve AndersonPage 18

Are Your Employees Exempt Or Non-Exempt?Page 27

Agency E&O Considerations When Using Social Mediaby Sabrena Sally, CPCUPage 31

Top 10 Contracts For Reporting AgenciesPage 37

Are Agent’s Associations An Endangered Species? Are Independent Agents Endangered?by Bob Skow, CPCU, CAE — Chief Executive OfficerPage 39

Page 4: IIAI Viewpoint Magazine
Page 5: IIAI Viewpoint Magazine

Credit Scoring,Who Likes It?Who Needs It?by Jeff Bohnenkamp, CIC

Ihave never been a proponent of the use of credit scores as an underwrit-ing or rating tool. I have not believed

this is an actuarially sound mechanism such as the “law of large numbers” and the “spread of risk geographically”. The use of credit scores has been a nightmare for the personal lines agents trying to place customer’s coverage and explain-ing the increased prices in a downturn economy due to the lowering of credit scores. It started with the direct writer personal lines companies buying into the concept of credit scoring in insurance. The industry followed. Then there was the battle to protect and prohibit the sale of expiration dates by the same company that created the credit score mechanism. Across the country, consumers have complained to their respective state insur-ance departments and commissioners that they don’t like the practice and felt it was discriminatory. At the advent of use of credit scores, companies would share the information of their losses broken down by score with agents. Our agen-cies experience, when broken out in this manner, did not support the validity of the mechanism. In fact, at that time, our auto insurance customers with the lowest scores had the lowest rate of reported claims. I felt this had to do with the group of customers self insuring physical dam-age on their vehicles. When money is tighter the physical damage coverage does

|president’s message|

not seem to be purchased and therefore not as many physical damage claims are turned in on owned vehicles. Recently a study was released by St. Ambrose University on this very subject to the Iowa Insurance Depart-ment. The 44 page study was interest-ing reading. The title of the study was “Use of Credit Scores by the Insur-ance Industry: Iowa Consumers’ Perspec-tive”. The survey of 1,200 Iowa consum-ers was used to determine the attitudes, knowledge and beliefs about the use of insurance based credit scoring. While it is unsure what all can be concluded from the study, there does seem to be two main

points. Iowa consumers do not believe credit scores are a good indicator for the likelihood of a claim to be filed. However, the study concludes that the use of credit scores does reflect the likelihood of one

to file a claim. It will continue to be interesting to watch how the study is interpreted and used by the Insurance Department and the Legislature. To the members of the Independent Insurance Agents of Iowa, I wish you all

a fun, prosperous, and safe 2010. Thank you again for allowing me to serve as your President.

WINTER 2010 | | 5

The survey of 1,200 Iowa consumers was used to determine the attitudes, knowledge and

beliefs about the use of insurance based credit scoring. While it is unsure what all can be

concluded from the study, there does seem to be two main points. Iowa consumers do

not believe credit scores are a good indicator for the likelihood of a claim to be filed.

However, the study concludes that the use of credit scores does reflect the likelihood

of one to file a claim.

Page 6: IIAI Viewpoint Magazine
Page 7: IIAI Viewpoint Magazine

WINTER 2010 | | 7

Adapting To The Cards That Are Dealtby Tom Richardson, CIC

|national director report|

We’re starting a new year, and more than likely, a new set of challenges and issues which

will affect our businesses. The Insurance industry and small business as a whole has always been about changing and adapting, and I’m sure this coming year will be no different. What I have come to admire about the people who make up our industry is the ability of agents to change with the times, and adapt to the cards they are dealt. Over the years we have dealt with cycles of soft markets, hard markets, no markets and yes, more markets than we could make happy. But in the end, Independent Agents prove year in and year out that they are true en-trepreneurs in the small business world. They adapt, they work, and they seem to have the innate ability to go with the flow, make the best of a bad situation, and be productive and effective leaders in their respective community’s. By the time this article is published, there is a very good chance that there will be a health care reform bill that is signed, or about to be signed into place by the President. Regardless of the final makeup of the health care bill, one thing is certain, it will in some way impact Independent Insurance Agents. As of the writing of this article, there was still no final bill to talk about, but however it impacts agents and our industry, we will go forward and make the best of it. I am concerned that

this whole reform process has taken place in just under a year, and so far I believe the only thing that will be accomplished is that health insurance rates will go up for individuals and small business. Yes, we may get more people insured, but as always it seems that middle class America will shoulder the financial burden. Real reform that is so badly needed would mean making health care affordable to all Americans, without placing unnecessary economic burdens on those that are already starting to collapse under the strain of more taxes and less income to spend. This was a chance to have real health care reform, but so far it appears that we have only bandaided the prob-lems and not even begun to solve them. Independent Agents are survivors and

opportunists in an increasingly hostile environment. It’s easy for the Washing-ton DC politicians to make the Health Insurance Industry out to be the villain in the health care reform debate, and we seem to be an easy target to hit. But then, I come back to my original point, and that is the Independent Agent will come through this and figure out a way to thrive

and make the most out of whatever form the health care reform legisla-tion takes. We are survivors, and we’ll make the best of it. In fact, I have all of the confidence in the world, that whatever happens, Indepen-dent agents will

take it in stride, take this new challenge head on, and then go on to solve the next problem. Have a safe and prosperous

New Year.

The Insurance industry and small business as a whole has always been about changing and

adapting, and I’m sure this coming year will be no different. What I have come to admire

about the people who make up our industry is the ability of agents to change with the times,

and adapt to the cards they are dealt.

Page 8: IIAI Viewpoint Magazine

You won’t be with West Bend.

That’s because independent agents

believe West Bend makes it

easy to do business!

A nationwide ease-of-doing-business

survey polled 8,600 agents and brokers

who ranked West Bend at the top when

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effective and user friendly technology,

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Tired of doing things the hard way?

Page 9: IIAI Viewpoint Magazine

IIAI

WINTER 2010 | | 9

A V A I L A B I L I T Y . P A R T N E R S H I P. A D V I C EYOUR IIAI STAFF

n We do our best to be accurate. We know you expect accuracy and we pledge to do our very best in meeting your expectations.

n Availability – while our business hours are from 8:00 a.m. to 4:30 p.m. Monday through Friday, we always attempt to do our best at being avail-able to the membership. Our goal is to return all calls and emails in a timely fashion.

n The staff of IIAI partner with you in advocating for independent agents. The collective staff has over 100 years of insurance experience. We all understand the partnership IIAI has with the agents and their agencies that belong. We pledge to do our best to listen to the needs of Iowa’s Independent Agents.

In this issue of IIAI Viewpoint Magazine we are featuring profiles on our staff. IIAI is like every organization; the people who work here are key to the daily operation, and dedicate a significant part of their lives to the interests of Iowa Independent Agents.

The IIAI staff has its own unique mission statement which is:

As the staff of IIAI, we strive to

make this a premier insurance

association. We seek to be advocates

for all independent insurance agents

in Iowa. We are committed to a

quality of service that noticeably

exceeds our members’ expectations.

In achieving these objectives, IIAI

employs a distinctly competent staff

and we focus on our continuous

improvement, as well as improving the

service we give to our members.

n Advice – Advising and counseling members is something that the IIAI staff strives to perform. We believe our education programs, our commu-nications and availability to visit via phone, in person, or by email all are key services we provide to members. Our website advancements and tools like “Ask the Expert” all are efforts to be here as a resource you can look to for advice. If you have legal issues, E&O concerns, or Buying and/or Sell-ing questions, your IIAI staff is here to assist you.

We hope the profiles help you put a face with a name. Everyone associated with the Independent Insurance Agents of Iowa thanks you for your support. Together we make a difference!

Continued on page 11 ‹

The employees of the Big “I” focus our call to service on four basic principles.

Page 10: IIAI Viewpoint Magazine

Since 1921

The catalyst for everything we do is making certain that our programs aid ouragents in becoming more efficient and profitable, and our products make themmore competitive and responsive.

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• Wide Array of Competitive Products(Life, Health, Annuity, PersonalLines, and Commercial Lines)

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Extension 2662 www.pekininsurance.com

Good Chemistry Creates SUCCESS

Page 11: IIAI Viewpoint Magazine

WINTER 2010 | | 11

MELISSA MEINERS

n What you do at the Big “I”: I do a variety of task here at the Big “I” — I handle new IIAI & Affiliate Membership, Dues, Accounting; Convention plan-ning; Rural Agents Conference planning; Young Agents Conference and Agency Management/Technology Expo planning; Education — setting up yearly calendar, organizing classes and finalizing classes; Viewpoint Advertising Editor and proofer;

Organize Annual Planning Conference; handle Des Moines Association database; Westown Owners Association; building maintenance and Iowa Cub ticket sales.

n What do you like most about your job: I like the planning aspect of my job — but there are times I do wish my life away because I will sometimes wish that a conference or Convention is over due to all of the work that goes into it.

n Education: Graduated from North Polk High School in 1987 and attended American Institute of Business; graduated in 1989 with and Office Degree. Received my Personal Lines license in 2002.

n Family: I have been happily married to Paul for 18 years this past December. We have two children — Allyson who turned 14 this January and Austin who just turned 9 in December. We also have a cat — Coco — who is the best cat ever!

n Most Proud moment: The birth of my kids and marrying Paul!

n What you do when you are not at work: We like to do many things — Attending all of our kid’s activities which include soccer, baseball, basketball, soft-ball, volleyball, track and football. When

we are not doing that we like go to stock car races and I also like watch Paul race when he can. We also like to snowmobile which we are enjoying a lot this year in the wonderful state of Iowa. Also enjoy spend-ing time with family and friends. We love to go to Northern Minnesota — where one day I hope to own some property.

n Words to live by: My father always said “Life is short play hard!” I live by those words as he is no longer with us and he did play hard up until his final days.

n Favorite food: Crab Legs, Steak and Lobster.

n Favorite Movie: Dirty Dancing and Grease.

n Favorite color: Purple and Green.

n Pet Peeve: Slow Drivers and Dishonesty.

n Last Book you read: A romance novel by Danielle Steele.

n If you could do something else: Stay at home Mom.

n Favorite place to go on vacation: Northern Minnesota Ely area in the boundary waters.

Melissa MeinersMembership Operations Coordinator

[email protected] ext 15

JEANNE REYNOLDS

n What you do at the Big “I”: Primary responsibility is maintaining the IIAI co-branded website. This includes keeping information current and accurate, test hyperlinks for accuracy, keep IIAI staff current on new additions, issue ID’s and passwords when requested, set-up online class registration on the website and set-up and periodically update the annual calendar on the website. Construct and send the semi-monthly Association News-letter, the Government Affairs Newsletter

three times during the legislative session, and all broadcast emails for newsletters, CE classes, action alerts and other impor-tant information. Help plan the Summer Board Meeting including confirmation of the date and location of the event, coordinate the license exam schools. Responsible for the State and National Political Action Committees including entering contributions for both PACs in our database, forward InsurPac checks to National, reconcile the IIAI/PAC checking account and make deposits, write PAC checks to Iowa Representatives/Senators, submit PAC reports to the Iowa Ethics & Campaign Disclosure Board and submit Lobbyist Reports for Bob when required. Assist Melissa with CE classes, includes entering registrations in the database and weekly education deposits. Assist Marilyn with the automatic renewals of the Phila-delphia D&O policies.

n What do you like most about your job: What I like most about my job is the variety of work and the fact that I don’t do the same things day after day. My job is challenging at times and I have the oppor-tunity to learn something new every day.

n Education: Graduated from Roosevelt High School, Des Moines, completed one-year Secretarial Program at Ellsworth Jr. College in Iowa Falls, earned the Certificate of Completion in the Introduction to Prop-erty and Liability Insurance course, licensed

in Personal Lines. Have experienced over 30 years in the insurance business.

n Family: Paul and I own a home in West Des Moines. I have two daughters, Chrissie who lives in Overland Park, Kan-sas with her husband John, and their two daughters, Emma 8 and Cate 6, and Kim who is single and lives in Dallas, Texas. Kim has a black Lab named Gracie.

n Most Proud moment: I will always say the births of my two daughters are my most exciting moments, followed by the births of my 2 granddaughters.

n What you do when you are not at work: I enjoy walking/exercise, golf, spending time with family and friends.

n Words to live by: Life is a gift, make the most of it.

n Favorite food: American and Italian.

n Favorite color: Blue.

n Favorite Movie: Blind Side.

n Pet Peeve: People who exaggerate and are not truthful.

n Last Book you read: Mounting Fears by Stuart Woods.

n If you could do something else: Not work and have the time and the financial resources to travel to every state in the U.S. that I haven’t already visited.

n Favorite place to go on vacation: Arizona (Scottsdale and Mesa).

Jeanne ReynoldsTechnology & Communications

[email protected] ext 17

Page 12: IIAI Viewpoint Magazine

12 | | WINTER 2010

MARILYN PAUL

n What you do at the Big “I”: I work with the Agents Professional Liability Program, assist agents with other IIAI programs, i.e. Big “I” Markets, ASP (Agency Shield Program), E & O Happens and answer miscellaneous questions from our member agents. I am the liaison for the Technical Affairs Committee. Behind the scenes I work with the back office accounting for IASC (Independent Agents Service Corp).

n What do you like most about your job: My job has variety, great co-workers and I really enjoy helping our agents.

I have worked in three areas of the Insurance Business, Company, Agency and now Association. It’s great to be able to use that background to assist our agents. I enjoy visiting with them by phone, e-mail and at our events.

n Education: High School and some college at GrandView and Simpson. I earned my AAM (Associate in Automa-tion Management) in 1989, AIT (Associate in Information Technology) in 1999 and CPCU 1999, I also have my CPIW (Certi-fied Professional Insurance Woman) a designation presented by NAIW (National Association of Insurance Women).

n Family: No children, five nephews and one niece all in Arkansas whom I spoil as much as I can.

n Most Proud moment: This is tough so I changed to what you might not know about me. I attended Clown Camp in LaCross, WI and although I am no longer clowning I might take up again when I retire. Clown name was “Poppy”. I am an Arkansas Razorback fan and the first IIAI convention I attended Lou Holtz was the luncheon speaker. What a thrill.

n What you do when you are not at work: I’m a joiner and belong to 2 organizations, IAGDM (Insurance Associa-tion of Greater Des Moines) and Kappa Chi Chapter of Phi Tau Omega Sorority. (National Social & Philanthropic Organi-

zation.) I am an active volunteer in both organizations. At one point I belonged to three organizations but gave up Toast-masters a couple years ago. I love mov-ies, theatre, and all live entertainment. A high light this year was sitting in the front row at the James Taylor concert at the Civic Center in May.

n Words to live by: Think you can or Think you Can’t, Either Way You’ll Be Right – Henry Ford. Life is too short to be serious – Unknown.

n Favorite food: Artichokes.

n Favorite color: Red.

n Pet Peeve: When you dining out and the server brings your entrée when you have not finished your salad. People who leave a voice mail and you can’t under-stand what they say their name is.

n Last Book you read: The Last Lecture – Randy Pausch. I also read a lot of mys-teries. My favorite mystery authors are Sue Grafton and Robert Parker.

n If you could do something else: Something to do with humor and healing. Resident humorist at a hospital or care facility. Children’s librarian.

n Favorite place to go on vacation: Europe, New York. There are many states I have not been to so that’s on my “bucket list”.

Marilyn Paul, CPCU, AIT, AAM, CPIWMembership Services Coordinator

[email protected] ext 11

LINDA BRAZELTON

n What you do at the Big “I”: My primary responsibility is working with the professional liability program available to insurance agencies through the IIAI.

n What do you like most about your job: I really enjoy working with the insurance agencies and helping them with the variety of situations

involving their agency’s professional liability coverage. Working at the associa-tion also provides a great opportunity to interact with others affiliated with the insurance industry. This association does a great job representing the interests of those involved in insurance. The sup-port of the member agencies, company sponsors and those individuals that share their time and knowledge through their participation with our board, committees, education, etc. contribute to the continued success of the association.

n Education: Graduated from North Polk Community High School; attended Grand-View College in Des Moines, Iowa.

n Family: My immediate family is my husband and very best friend, Alan. We celebrated our 36th anniversary in December. We have one son, Tom and his wife, Cami and their children Henry who will be 3 in February and Pearl who was born this past December. I also need to include their beagle, Truman, another very important part of my family! They live in West Des Moines and we are very fortunate to have them living so close to us which allows us to spend as much time as possible with all of them!

n What you do when you are not at work: Spend time with family, Travel and Gardening.

n Words to live by: Promise only what you can deliver.

n Favorite food: Salads.

n Most Proud moment: Life is full of moments and they are all memorable.

n Pet Peeve: Dishonesty.

n Last Book you read: The last book that I read was to our grandson. It was “How Do Dinosaurs Say Good Night?”

n If you could do something else: Landscape design or florist.

n Favorite place to go on vacation: I’ve been going to Scottsdale, Arizona for 36 years so I would say it’s my favorite place but I also enjoy visiting the wine regions in California.

Linda BrazeltonMembership Services Coordinator

[email protected] ext 16

Page 13: IIAI Viewpoint Magazine

WINTER 2010 | | 13

BRENDA KLUGER

n What you do at the Big “I”: Work on the Errors & Omissions Program doing renewal solicitations, review applications, issue quote proposals and upon receiving request to bind, issue policies. Process checks and prep for deposit. Have made some agency visits.

n What do you like most about your job: Getting to work with the variety of agents.

n Education: Morningside College: Bachelor of Science in Business Admin-istration, Bachelor of Science in Business Education and Indiana Wesleyan Univer-sity: Master of Business Administration.

n Family: Husband: Monty — Living in Quad Cities and is going to Palmer College of Chiropractic. Dog: Moyra (Derived from names of my grandma, Myrna and Monty’s grandpa, Roy).

n Most Proud moment: I enjoy learning and had wanted to get my MBA so made it a goal to do so before I turned 35. After 28 months of classes and just a few weeks prior to my 35th birthday, I received my MBA. It was made special by the fact that my family had all traveled out to Indiana to be there for the commencement ceremonies.

n What you do when you are not at work: I am involved in Insurance Association of Greater Des Moines and Junior League of Des Moines so participate in their meetings and

activities. I also like to scrapbook and enjoy baking.

n Words to live by: Everyone can use a little help now and then so I try to make it a habit of helping others whether I know them or not, no matter how small the good deed.

n Favorite Movie: Steel Magnolias as I can.

n Favorite color: Blue.

n Pet Peeve: Slow drivers.

n Last Book you read: Does studying for test for Certified Risk Manager-Prac-tice of Risk Management count? Cross your fingers for me that I passed!

n If you could do something else: Commercial Airline Pilot (I haven’t given up on the idea of someday taking lessons and getting my pilot’s license).

n Favorite place to go on vacation: Monty and I like to visit new places when we can but if I had to pick someplace to go back to it would be the Mayan Riviera in Mexico or visiting my brother in New York City.

Brenda Kluger, MBA, CIC, CISR, CPIWMembership Services Coordinator

[email protected] ext 14

CINDY GRIM

n What you do at the Big “I”: I work part-time to accomplish the following tasks: answering the telephone, greeting visitors, filling study manual orders, filing, typing, copying/binding class handouts, preparing prospect or new member bind-ers, and ordering supplies for the office and equipment. I am also the staff liaison for the Young Agents Committee.

n What do you like most about your job: I like the variety of tasks that my position offers.

n Education: I graduated from Dallas Center-Grimes High School in 1988. I went to college at the American Institute of Business and graduated in 1990 with an Associate Degree in Business Administration and Office Management.

n Family: Husband Tim, 16-year old son Evan and 13-year old daughter Emily.

n Most Proud moment: The births of my two children.

n What you do when you are not at work: I spend a lot of time attending my children’s athletic, choir and band events. My husband and I are active volunteers in the weekly youth program at First Presbyterian Church in Grimes. I enjoy participating with the youth in monthly volunteering for various organizations in Grimes and the Des Moines area. Traveling with my husband and children; watching movies; playing cards; and spending time with family also bring me joy.

n Words to live by: “Everything happens for a reason, accept and move on”.

n Favorite food: chicken.

n Favorite Movie: Shining Through.

n Pet Peeve: Continual laziness.

n Last Book you read: Marley and Me.

n If you could do something else: Accounting/financial work.

n Favorite place to go on vacation: I have been fortunate enough to enjoy several vacations through the years, but Chateau on the Lake in Branson, Missouri was an extremely relaxing place.

Continued on page 15 ‹

Cindy GrimReceptionist

[email protected] ext 12

Page 14: IIAI Viewpoint Magazine

When it comes to protecting your clients, waiting days for a quote just won’t fl y. At Burns & Wilcox we have the expertise to write and bind specialized programs with the speed only an internal underwriting department can provide. Do you have brokerage or specialty contract business needs? Don’t wing it. Turn to Burns & Wilcox – the specialty insurance MGA/wholesaler that soars above the rest.

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Alan Jay KaufmanChairman, President & CEO

St. Paul, Minnesota

651.487.2800 toll free 800.637.7318 fax 651.487.2010 stpaul.burnsandwilcox.com

Page 15: IIAI Viewpoint Magazine

MARIE HUGGINS

n What you do at the Big “I”: In 1996 when the ERC/Westport/SwissRe Profes-sional Liability program transitioned from ERC to the State Association offices, I began working with the E&O program and have continued in that capacity to the current date.

n What do you like most about your job: The challenge to stay current on changes and; of course, the interaction with Big “I” members. Our members are

very understanding when you explain why the additional information is requested.

n Education: High School plus 13 years in life insurance, 16 years in a P&C agency and 13 years working with the Professional Liability program.

n Family: Husband: Lowell and two children daughter Michelle and son Brian. Two grandchildren ages 14 and 11. Also two dogs are a part of the family, a Miniature Beagle and Black Lab and two grand doggies!

n Most Proud moment: I have been blessed in many ways throughout the years and to pick one defining moment is hard. The top of list would be: Marriage, birth of children, children graduating from college and being honored to receive the Big “I”’s Presidential Citation.

n What you do when you are not at work: Attend the grandson’s activities; i.e., basketball, baseball, school concerts, and hockey (some out-of state). I also serve as my church’s secretary doing the weekly bulletin and monthly newsletter along with being Membership Secretary and Historian. In 2002 we joined the Excel of Iowa Camping Club and I serve as Secretary/Treasurer for the camping club. My days off are filled with these volunteer jobs. I also like to study my

computer programs to learn the “func-tionality” and shortcuts of the various programs whether it be on-line demos or just experimenting with the programs.

n Words to live by: Don’t make moun-tains out of mole hills. Be patient, engage brain before mouth.

n Favorite food: Homemade noodles cooked with home-grown chicken (not store boughten chicken). It is “fun” to dress your own chickens. Enough said!

n Favorite color: Metallic green and rust/bronze were my wedding colors 50 years ago.

n Pet Peeve: Those who do not clean up after themselves and leave things the way they found it.

n Last Book you read: The Christmas Carol by Charles Dickens.

n If you could do something else: Find the time to take advanced computer classes to maximize using existing software packages.

n Favorite place to go on vacation: Federal Campgrounds with family when possible.

Marie HugginsMembership Services Coordinator

[email protected] ext 22

BOB SKOW

n What you do at the Big “I”: A little of everything! My job is to advocate for and on behalf of independent agents. I lobby, write the newsletter, editor of our magazine, speak, manage the association, and advise and counsel members.

n What do you like most about your job: I love the insurance business, and I love politics so I have the perfect job.

I find a great deal of enjoyment in representing the business interests of independent agents.

n Education: BS Drake University, Chartered Property Casualty Underwriter designation (CPCU), Certified Association Executive designation (CAE) and 36 great years in the insurance business

n Family: Wife of 37 years Connie, two married daughter Dr. Emily Skow Grant and husband Jared two grandchildren Max and Eva, and Laura Smith and husband Neal and grandchild Rowan…oh and 17 wonderful Labrador Retrievers!

n Most Proud moment: Not just one, but the top ones would be getting married, birth of my two daughters, being elected to the Iowa House of Representatives at age of 27, my Eagle Scout award at 8 days past my 13th birthday.

n What you do when you are not at work: I love living in the country, live on 45 acres in rural Dallas Co, spending time with the family and dogs.

n Words to live by: Do onto others as they want to be treated.

n Favorite food: Spaghetti.

n Favorite color: Blue.

n Pet Peeve: Laziness.

n Last Book you read: First, Break All The Rules by Marcus Buckingham and Curt Coffman…every agency manager should read this book.

n If you could do something else: Member of U.S. Congress.

n Favorite place to go on vacation: Belize or England.

Bob Skow, CPCU, CAEChief Executive Officer

[email protected] ext 13

WINTER 2010 | | 15

Page 16: IIAI Viewpoint Magazine

DON’T GET BITTENBY AN E&O CLAIM

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AVOIDED.

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insurance is written by Swiss Re

through the Big “I” Professional

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more.

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Big “I” Risk Management Website

Page 17: IIAI Viewpoint Magazine
Page 18: IIAI Viewpoint Magazine

security breach laws and your

responsibility to protect sensitive

client data“An insurance agency maintains more

private and personal information about their

clients…than just about any other business

type. Agencies face growing exposure and

liability if the information in their care

is compromised.”

Page 19: IIAI Viewpoint Magazine

As of November 18, 2009, there have been 512

confirmed cases of a business, university, or government agency compromising the per-sonal information of in-dividuals in their care. This represents over 11 million records that have been breached. An insurance agency maintains more private and personal information about their clients (personal lines, group and indi-vidual health, and commercial lines) than just about any other business type. Agencies face growing exposure and liability if the information in their care is compromised. There are both federal and state laws that require an organization to take appropriate steps to make sure that private client data is kept private. It is important to note that these regulations include the insurance industry (compa-nies and agencies) under the definition of “financial institution.” Don’t make the mistake of thinking that these regulations only apply to banks. Following is a short description of these laws.

Gramm-Leach-Bliley (GLB) ActThe GLB Act includes two privacy rules— the Financial Privacy Rule and the Safe-guards Rule. The Financial Privacy Rule enforces financial institutions to protect information collected about individuals. The Safeguards Rule requires insurance companies to have reasonable poli-cies and procedures for the security of customer information. These policies and procedures must be appropriate to the company’s size and complexity, the nature and scope of its activities, and the sensi-tivity of the customer information it handles.

WINTER 2010 | | 19

by Steve Anderson

Health Insurance Portability and Accountability (HIPAA) ActHIPAA’s Security Rule requires organizations to ensure the confidenti-ality, integrity, and availability of all electronic protected health infor-mation (ePHI) that is created, received, maintained, or transmitted by the company. They must also protect against any reasonably anticipated threats or hazards to the security or integrity of such information and protect against any reasonably anticipated uses or disclosures of such information that are not permitted or required.

HITECH Act of 2009On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (aka the Stimulus Bill) was signed into law by the federal gov-ernment. Included in this law is a provision that is intended to be used to increase the use of Electronic Health Records (EHR) by physicians

and hospitals. Part of this act requires “reasonable security policies and procedures to protect computerized data containing personal information,” as well as nationwide notice in the event of a security breach.

The Advent of State LawsCalifornia was the first stare to enforce a data security breach notification law in July 2003. As of October 2009, only five states in the United States do not have a state-specific data security law: Alabama, Kentucky, Mississippi, New Mexico, and South Dakota. All other states have since implemented similar laws modeled after the California law. A brief look into the California law provides a glimpse of the data security breach laws across the United States. Any personal, non-public information that has not been encrypted and includes a person’s first name or initial and last name plus a wide variety of data, including Social Security number, driver’s license number, or financial account number, in combination with any password that would permit access to a financial account, is covered by the California statute. Any entity that conducts business in California and owns, licenses, or otherwise maintains computerized data about a customer or client located in California is subject to these statutory provisions. The law states that companies must notify any resi-dent of California whose unencrypted personal data were, or are reasonably believed to have been, acquired by an unauthorized person that a security breach has taken place. We see from these examples that insurance agencies have a lot to lose in case of data breaches. The most glaring drawback is the time, effort, and tremendous amount of money that has to be spent for investigation, corrective action, and litigation. Private customer data leakage may also attract heavy fines from regulatory authorities. Such incidents also influence customer perception and lead to loss of trust. This results in customers moving over to the competition, ultimately eroding the business value of the organization. Therefore, it is of extreme importance that confidential data is identified, protected, and destroyed appropriately. It is also vital that the security structure of the organiza-tion is taken seriously, because the security of an organization is ultimately only as strong as its weakest link. The rest of this article provides some basic details on the areas to consider while securing information within your agency.

Reprinted from the December 2009

issue of TAAR with permission from The

Anderson Agency Report (www.taareport.

com). For additional information about

Client Information Security visit www.

ClientInformationSecurity.com.

Page 20: IIAI Viewpoint Magazine

“…insurance agencies have a lot to

lose in case of data breaches. The most

glaring drawback is the time, effort, and

tremendous amount of money that has to

be spent for investigation, corrective action,

and litigation… Such incidents also

influence customer perception and lead to

loss of trust.”

What data needs protection?The first step in securing your organiza-tion from data breaches is to identify the data that needs to be protected. Note that information could be present in physical or computer format. Data used by the agency must be first classified based on the information value of the data, critical-ity of the information, and the impact in case of its breach. Classification should be applicable to all information, whether stored or transmitted, which is in the pos-session or under the control of the agency. Typically, classification of informa-tion can be a combination of their CIA (Confidentiality, Integrity, and Availability) criteria. Based on an information asset’s classification, a security plan can be de-signed for data that needs to be protected. For example, in the figure below, con-trols to secure data can be determined based on the colored groups. Information that is Highly Confidential, Highly Un-stable, and Highly Critical falls under the “Highest Level of Security” group and will be fully protected using the strongest set of information security controls. Informa-tion that is Public, Highly Stable, and Non Critical falls under the “Lowest Level of

Security” group and does not need to have any security controls.

Steps to Protect Client Data Take stock—what personal infor-mation do you maintain? The first step in protecting data is to have complete

control of the data stored or transmitted within the organization. An inventory of all “Highest Level of Security” infor-mation, and the software, applications, hardware, services, or other assets that interact with this information during stor-

20 | | WINTER 2010

Highly Confidential

Confidential

Departmental

Internal

Public

Confidentiality

Highly Unstable

Unstable

Unsteady

Steady

Highly Stable

Integrity

Highly Critical

Critical

Vital

Sensitive

Non Critical

Availability

Highest level of security Moderate level of security Lowest level of security

Continued on page 23 ‹

|security breach laws|

Page 21: IIAI Viewpoint Magazine

Success is finding an advantage.

If you want to win, you have to come prepared. Agents know this. That’s why so many choose

SECURA to grow their business. Please call us at 1-800-558-3405.Write your own success story.

©20

08S

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sura

nce

4260 Secura_BaseDuck_2008.qxp:Layout 1 6/18/09 10:29 AM Page 1

Page 22: IIAI Viewpoint Magazine
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WINTER 2010 | | 23

age, transmission, or destruction, should be maintained.

Scale down—keep only what you need. Data minimization is the practice of eliminating unnecessary information stored by an agency, organization, and/or individual for the purpose of decreasing risk of information and, possibly, identity theft. Recommendations for proper data minimization include:

Don’t acquire information unless it’s needed. Minimize the number of places where information is stored and retained.

Purge data once the need for it has expired. For most insurance orga-nizations, the more you know about a client or a prospect, the better. There may be very little you can do to reduce the scope of this type of data. However, any other data used in the organization should be re-looked at from an importance perspective. This will mostly include data that falls under the Public, Highly Stable, and Non Critical classifications, but could also include other categories. For ex-ample, keep only as much employee detail as is required by law.

Learn about where information is stored. This may include databases, digital documents, physical paper documents, computer printouts, etc. for a single piece of information. Try and reduce this redundancy so that you maintain only original and backup copies as far as possible.

Once data is no longer required, it should be destroyed. This may include insurance policy schemes that have been scrapped more than five years ago, or details of clients who have died more than seven years ago (data relating to ex-clients may still be maintained as they could still be potential clients for a new product), or financial information from 10 years ago.

“…keep only as much employee detail as

is required by law.”

|security breach laws|

Lock it—Protect the information. As discussed before, data protection depends on CIA criteria. Ideally, all the controls stated below will be applicable to information in the “Highest Level of Security” group. This includes personal customer data. Information that forms part of other groups should be secured by a subset of these controls, based on their classification.

Policies and proceduresInformation security policies ensure that a standard level of information security is maintained across the organization. They demonstrate management’s resolve to implement controls and checks to secure data. They serve as a reference to follow when new processes and new types of information make their way into the organization. Procedures contain the steps required to accomplish what the policies aim to achieve. Procedures contain the exact method of implementing information security controls that an organization wishes to follow. This top-down method ensures a uniform approach to data pro-tection and maximizes its effectiveness.

Access controlData stored in digital form must be protected at all points of access. The following controls can be implemented for optimized security.

User Account Management: User credentials required for access to various information systems should consist of a user ID and password or other credential (such as digital certificates, token, etc.) that is unique to an individual. Common user IDs should not be issued to multiple users when it is technically and functionally feasible to provide individual user IDs.

Privilege Management: Minimum privileges required for every job function and role should be identi-fied based on discussions with the functional teams. Privileges should be allocated to individuals based on the requirements of their job function and role and on authorization from appropriate personnel. Additional privileges should be allowed after getting approval from appropriate personnel.

Password Management: User passwords should remain confiden-tial and not shared, posted, or otherwise divulged. However, the system administrators may share power-on passwords of PCs, as the same PCs are shared among them in different shifts.

Monitoring Access: User activities should be logged by the operating systems, agency management system, applications, other databases, and network elements. This may be ex-tensive logging, but to reduce system load and performance degradation, restrictive logging and monitoring of critical commands can be configured.

User Access Policies: A policy should be created, making the user aware of their security responsibili-ties by the acceptable use of systems and infrastructure. The objective of the policy should be to ensure secu-rity of the information and informa-tion resources they interact with.

Network Equipment: All network equipment and communication lines should be identified, documented, and updated regularly.

Encryption: Data flowing through public networks has to be securely channeled. Encryption ensures

Page 24: IIAI Viewpoint Magazine

24 | | WINTER 2010

|security breach laws|that data is not sabotaged in such cases. Encryption of stored data also protects data when storage devices are stolen. At a minimum, Transport Layer Security (TLS) should be used whenever possible.

Backup and Recovery: All appli-cation and operating system soft-ware, data (including databases), application and operating system configuration information, hardware configuration information (where ap-plicable), and log files/logs from vari-ous systems that need to be backed up should be identified. Backup data should be provided for recovery after appropriate approvals.

Anti-virus: All possible and feasible measure should be taken to prevent the introduction of viruses and malicious software into information systems.

Physical Security: Physical access to information processing areas and their supporting infrastructure (communications, power, etc.) should be controlled to prevent, detect, and minimize the effects of unintended and unauthorized access to these areas.

Media Handling: A stock or inventory of all media should be maintained. All movement of material going in

and out of premises should be authorized and tracked.

Personnel Security: The organiza-tion should ensure that personnel at all levels are required to contribute to maintaining an appropriate level of Information Security. Background checks should be performed on all personnel (including temporary personnel and contract personnel) performing sensitive or critical job roles before they are selected for the position or transferred to the position.

Pitch—Properly Dispose: Any infor-mation that is of no use to the agency for business purposes should eventu-ally be discarded. HIPAA states that any record which contains client protected health information must be maintained for a minimum of six years. A retention policy should be charted based on these as well as agency requirements.

Plan Ahead: Create a plan to re-spond to a security incident. After a breach, many companies don’t know what to do. If a breach occurs, the ability to respond must be timely. Companies only have about 30 days or less. It is thus essential for an agency to have a sound incident management plan in place.

Insurance coverage availableImplementing the controls described above tremendously reduces the risk of a data breach to an agency’s data. How-ever, it does not entirely eliminate the possibility of a breach. An organization may not be able to implement all controls due to financial or other business rea-sons. A new virus, an unknown backdoor, an intelligent hacker, or a disgruntled employee may find a way to violate an organization’s data. It is unlikely that a general liability, business owners, or agency errors and omissions policy will provide coverage to an agency to help pay for the consequenc-es and expenses associated with a data security breach. There are a growing number of data security breach poli-cies that have become available that you should consider in order to provide some level of protection for your organization.

Final thoughtThis issue is not going to go away. The insurance industry, and especially agencies, needs to review their internal data security controls and create a plan for effectively protecting private client data.

Page 25: IIAI Viewpoint Magazine

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Page 26: IIAI Viewpoint Magazine

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Page 27: IIAI Viewpoint Magazine

WINTER 2010 | | 27

But, in fact, most agency employees are, by DOL (Department of Labor) definition, non-exempt, regardless of how agency owners or employees would like to view themselves or each other. And, if you think that no one notices, here are a few statistics:

1. In 2005 there were 5,290 FLSA complaints registered. In 2008, the number of complaints were more than 23,000.

2. The results of FLSA complaints re-cently cost U.S. businesses individu-ally over $120 million in back wages.

3. State Farm was fined $135 million and Allstate paid $120 million in class action suits for adjusters when the companies tried to make them exempt from overtime.

4. Countrywide Financial paid $30 million when they claimed account executives were exempt.

There are five classes of possible exempt employees:

Executives — must earn no less then $455/wk or $23,660/yr, must manage the agency or a division or department as a primary part of their job, must have the authority to hire, fire, evaluate and set compensation for employees (giving evaluations is not, in itself, sufficient) and must manage at least two employees.

Professionals — May be one of three types, Creative (artists, musicians, etc. – that does not apply to agencies, Computer (primarily system analysts or programmers, so repair and mainte-nance employees don’t count as exempt), and Learned (intellectual and advanced knowledge in a field of science or learning specifically that requires consistent exercise of indepen-dent discretion and judgement). This area has been attempted for use by

agencies to exempt service employees. If the employee must follow guidelines (like system requirements or underwrit-ing requirements) they will be treated like the claims adjusters who were judged to be non-exempt since they must follow their companies’ claims guidelines in their adjustment efforts. Moreover, jobs in which most employ-ees gain their skill and knowledge by experience does NOT qualify for

ARE YOUR

EMPLOYEES EXEMPT OR NON-EXEMPT?

by Al Diamond

The FLSA (Fair Labor Standards Act) requires three things to make an employee exempt, compensation above a weekly minimum ($455/wk or $23,600/yr), the employee must be salaried, as opposed to hourly and must perform “certain” exempt duties. While

there are no standard reasons for making employees exempt or non-exempt, many agency owners over-simplify the decision based only on whether the employee would or should receive overtime pay. And some employees would like to be considered exempt, over-simplifying the reason for being salaried as avoiding potential loss of income if they

are not able to work the full work week. Others, who work longer hours, want to be hourly to be eligible for overtime pay for time worked over 40 hours.

Reprinted from the PIPELINE, the

national newsletter for agency princi-

pals, by permission of Agency Consult-

ing Group, Inc. a leading consulting

firm for Independent Agents in the U.S.

for 27 years. Call 800-779-2430 for

information or subscription; e-mail,

[email protected];

website, www.agencyconsulting.com

Page 28: IIAI Viewpoint Magazine

exemption. Most agency staff would be considered technicians (also not permit-ted to be exempted).

Computer — must earn either $455/wk salary or $27.63/hourly AND must have primary duties systems analy-sis, computer systems programming or design — well out of range of most computer employees in agencies.

Administration — Primary duties must be related to the management or (non-manual) general business opera-tions with independent discretion and judgment on significant matters with primary responsibility for keeping the business running. It would be very difficult to include most agency administrative staff in these definitions of exemption.

Outside Sales — This is a good opportu-nity for exemption of sales employees, but, he warned, IT APPLIES ONLY TO OUTSIDE SALESPEOPLE (primary

|are your employees exempt or non-exempt?|responsibility selling and working with clients and prospects primarily outside of the office)!

The issue with producers is the gen-eral use of 1099 independent contractor agreements (trying to avoid payroll tax loads and T&E expectations) for people who the IRS will categorize as agency employees. If you provide desk space, benefits, working hour assignments, pros-pects, clients and expectations of produc-tion (goals, monitoring, management, etc) and maintain ownership of the accounts generated for 1099 producers and if they only work for your agency, the chances are that, in an audit, these people will be considered agency employees and you will face fines and penalties. Producers have no minimum compensation levels and they can be paid in any way (including pure commission) and still be considered agency employees by the government oversight bodies.

RECENT QUESTIONS TO AGENCYCONSULTING GROUP, INC. REGARDING

PRODUCERS AND EXEMPT EMPLOYEES:

I have had a producer on commission only as a 1099 independent contrac-tor for years. He is devoted to selling insurance for us and is a sub-producer on our agency management system. He works his own schedule, can either work from his office at our agency or from home, can work or not based on his initiative and either earns commis-sion or not based on his sales activity. He can work as few or as many hours as he wants and it doesn’t directly affect his compensation. He pays his own T&E and schedules his business expenses on his own tax return. We give him a fair commission on his sales.

The good news is that you can certainly pay him straight commission and he is by definition exempt from overtime issues

28 | | WINTER 2010

Page 29: IIAI Viewpoint Magazine

WINTER 2010 | | 29

|are your employees exempt or non-exempt?|since his role is in outside sales. The bad news is that, by IRS definition, he is an employee, meeting most (if not all) of the qualifiers of an employee.

Just because a person is on commission doesn’t mean that they are (or are not) qualified as employees. Just because a person is a producer doesn’t auto-matically make them an exempt employee (they must be “outside” salespeople to become exempt).

We have three owners in our agency. My partner and I own 45% each. He is the primary outside salesperson for the agency. I run the agency. We recently gave our most loyal and important (to us) customer service representative 10% of the agency to reward her, give her a stake in the agency for its growth and her retirement

benefit and to protect us from competitors trying to take her from us. We are all exempt, of course, as executives and professionals — aren’t we?

Ownership does not necessarily make an employee an executive or not, profession-al or not and is not, in itself, an equiva-lence to exempt status. Many employees of major corporations purchase stock in their company. That certainly does not make them executives, nor does it change their exempt/non-exempt status as an employee.

Most small to medium sized agencies do not have professional HR managers who understand FLSA rules. More than 70% of small businesses in the U.S. would fail on FLSA Audit. Your best bet to avoid this situation is to perform an annual self-audit, or have Agency Consulting Group,

We are all exempt, of course, as

executives and professionals —

aren’t we?

Inc. audit your FLSA Exemption Status specifically indicating the exemption sta-tus and the rationale for each employee. A business may correct any deficiency through the Safe Harbor provision of the Act that permits employers to correct im-proper deduction mistakes without losing an employee’s FLSA exempt status. This indicates your good-faith efforts to ward off double damages to those misclassified exempt employees.

Page 30: IIAI Viewpoint Magazine
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Article Synopsis:A lot has been written about how agencies can use social networking tools to en-hance their online marketing and market reach. This article explores how the use of social media can impact the E&O risks agencies face and recommends specific steps agencies can take to mitigate those risks, so that the agency can get the full benefit out of these new tools.

Not a day goes by without my email containing an invitation to join a social networking site. Whether

used for business contacts, maintain-ing contact with friends and family, or to reconnect with acquaintances from years past, the use of social networking sites is rapidly increasing. According to one Internet research firm, 2008 saw the use of social networking sites overtake email by Internet users across the world. Much discussion has taken place on how to best harness the power of social networking for the benefit of your insur-ance agency. ACT and other organiza-tions have written extensively on the power of social media to enhance agency online marketing and to generate “virtual” referrals. The focus of this article, how-ever, is to examine the risks that agen-cies need to take into account when they take advantage of these opportunities to broaden their reach. I will examine the more common errors and omissions risks that can be associated with the use of social networking, along with steps you can take to mitigate those risks. If you are not familiar with social net-working sites, here is a brief discussion of the most common functionalities. This is

Agency E&O ConsiderationsWhen Using Social Mediaby Sabrena Sally, CPCUSenior VP, Westport Insurance Corporation

by no means all-inclusive, as the technol-ogy changes daily. Most sites offer the ability to create a home page following a template provided by the site. Depend-ing on the site being accessed, the profile template may be limited to key informa-tion you wish to be known about your agency along with an uploaded photo, or it can be as robust as a site contain-ing multiple photos, videos, and links to other sections of the site (as well as to other sites) containing additional content you have created and posted. Users of the site typically invite other users to join their community, and the invitee is free to accept or decline. Most sites also offer blogs, chat rooms, forums, and search capabilities to help locate other users based on your chosen search filters.

Rules of the Site Posted privacy statements and user agreements are standard on social net-working sites, and most also include a list of “dos and don’ts” to follow when using the site. Although containing lengthy legal terminology, it is in your best inter-est to fully read a site’s user agreements and privacy statements before agreeing to the terms of usage. User agreements tend to be very broad in favor of the site owner, commonly giving the rights to the site to use all content posted by users, and retaining the right to remove, discard or withhold user posted information at any time. User agreements usually state that the site assumes no responsibility to monitor disputes between users, and contain hold harmless/indemnification agreements in favor of the site for dam-ages suffered by the site as a result of

content posted by a user or as a result of any actions of the user while using or misusing the site. Now, let’s assume you have read the user agreements, privacy statements, and “dos and don’ts” of a site you have chosen to use. You are ready to sign up. But wait! Don’t hit that submit button too quickly. Instead, take some time to con-sider what type of errors and omissions exposures your agency may face by using the site.

Overview the E&O ExposuresThe exposures can range from advertis-ing, contractual liability, defamation, offering erroneous recommendations, and may even extend to antitrust issues. These are not new exposures to your agency, but the nature of social network-ing sites does impact errors and omis-sions exposures in several ways. Information entered on social network-ing sites is able to achieve instantaneous worldwide distribution in a matter of seconds. An electronic record is also created which can survive indefinitely. In addition, discussions taking place on these sites tend to be more casual and take place more quickly than even email communication, making it easier for a statement to be taken out of context. Let’s drill down to the most common errors and omissions exposures faced by agencies using social media.

Contractual LiabilityThe user agreement on the site most likely contains a requirement that you

|Agency E&O|

WINTER 2010 | | 31

Continued on page 33 ‹

AGENCY E&O

Page 32: IIAI Viewpoint Magazine

www.iiaba.net/Flood

Just a guppywhen it comes to selling flood?

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FLOODIn, Above, and Outside the NFIP!

There’s a lot to understand when it comes to flood insurance. We admit it! From changing flood zones to determining the best level of protec�on for our client, there is a lot to navigate. So even though you’re a big fish when it comes to selling other coverages, flood can make you feel like a guppy! But don’t let this prevent you from offering flood coverage to your clients. We’re here to help you understand and sell flood.

Big “I” Flood provides:ACCESS - In, Above & Outside of the NFIP!EDUCATION - Classroom CE or the new Flood Learning Center on VUADVOCACY - Representa�on on Capitol Hill & NFIP advisory commi�ees

Learn more at www.iiaba.net/Flood, or contact Big “I” Flood Program Manager Linda Mackey at [email protected] or (800) 221-7917. Let us explain how we operate in, above, and outside the NFIP!

Page 33: IIAI Viewpoint Magazine

hold harmless and indemnify the site. The agreement at one popular site is quite broad, stating: “you shall indemnify and hold us harmless from any damages, losses and costs related to third party claims, charges or investigations, caused by your failure to comply with this agree-ment, including without limitation your submission of content that violates third party rights or applicable laws, caused by any content you submit to us, or caused by any activity in which you engage through the site.” That provision in itself is amazingly broad, but it becomes even more so when you look at the definition of the site agree-ment. The site agreement in this par-ticular case states that you must comply with all applicable laws, the “dos and don’ts” posted on the site, the notice and take-down procedures of the site, the site privacy policy, and any other notices of the site.

Loss Control Tip:• Read the user agreement, privacy

statement, and “dos and don’ts” thor-oughly. Consult with your legal counsel if needed to be sure you have a full understanding of the liabilities to which your agency is agreeing.

Advertising LiabilityYou most likely will create some type of agency home page, so let’s look next at advertising exposures. The insurance regulations in several states specifically mention Internet advertising. For exam-ple, this excerpt from NY L Circular Letter No. 5 (2001) is both specific to Internet advertising and broad in scope: “Advertisements that appear on the Internet are subject to all applicable ex-isting statutory and regulatory guidelines and restrictions applicable to advertise-ment in any other medium.” It is clear that the same level of care should be given to agency advertising on social networking sites as is given to the agency’s traditional advertising. Where the line can easily be blurred, however, is when an individual agency owner or employee uses the agency name, logo, or

other advertising identifier as part of their personal social networking site. Does that then constitute advertising for which the agency can be held liable? That question has yet to be settled. The agency’s expo-sures from advertising on these sites can be mitigated by following the same legal vetting process as is used for traditional advertising. An agency procedure should also be established that addresses to what extent employees have permission to link to the agency’s sites, or use the agency name, logo, or other advertising mate-rial on their personal sites (more on this procedure later).

Loss Control Tips:• Be sure your agency advertising on

the site complies with all statutory and regulatory guidelines.

• Establish an agency procedure address-ing employee linking to agency sites

or use of agency name, logo, or other advertising on their personal social networking sites.

DefamationMost social networking sites feature blogs, chats or forum discussions. Participating in these discussions can present expo-sure to defamation, or in this case libel since the discussion is in written form. Your agency has always faced exposure to defamation from verbal discussions and written communications. On social networking sites, however, discussions taking place on blogs and in chat rooms or forums tend to be less formal, may include more opinion than fact, and tend to move quite rapidly between many par-ties. In fact, the popular site Twitter limits text comments to no more than 140 char-acters. The end result is that it is much easier to make a statement that is taken

|Agency E&O|

WINTER 2010 | | 33

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34 | | WINTER 2010

out of context. Unlike verbal discus-sions, comments made on the inter-active features of social networking sites or in blogs that accompany online articles are captured electronically and can be stored indefinitely, further exacerbating the issue of less formality. Keeping in mind that commercial speech — speech which proposes an economic transaction — if entitled only to limited First Amendment constitu-tional protection, there is a real ques-tion as to the level of First Amendment protection business representatives will receive when they write or respond to a blog. The Answer is not yet clear. As this area continues to develop, you would be well served to consult with legal counsel experienced in First Amendment law for guidance on creating the agency’s policy regarding the content you will permit on blogs on your agency’s behalf.

Loss Control Tip:• Consult with qualified legal counsel

for guidance on the agency’s policy on blogging.

Privacy IssuesClosely tied to defamation is public disclosure of private facts, which occurs when someone reveals information that is not of public concern, and the disclosure of the information would be offensive to a reasonable person. The interactive spaces on social networking sites are not secure spaces for discussing personally identifiable information.

Agency Procedures for Social Web UseAgency procedures for social networking should require employees to keep their discussions professional and they should distinguish between statements of fact versus those of opinion. Comments that

can be construed as leading or partici-pating in attacks on either individuals or businesses should be avoided. Employees should limit their focus to a generalized discus-sion of an insur-ance topic. When a discussion becomes specific as 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 work flow process. This provides the standard servicing and documentation that would occur

had this discussion taken place in person, via phone or within email.

Loss Control Tip:Establish written agency procedures ad-dressing employee use of social network-ing sites, including:

• Who within the agency has permission to participate on behalf of the agency.

• Define acceptable behavior (profes-sional, fact versus opinion, no leading or participating in attacks on individu-als or businesses).

• Employee sites should make clear they reflect their own views and not those of the agency.

• Identify when a discussion should be moved offline and into a agency work flow.

• State the consequences of non- compliance.

• Incorrect Advice.

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 pro-vided as part of the agency home page or comments made in a chat area discussion, the standard of care in providing profes-sional services is no less than what exists in more traditional venues. The standard disclaimers used on your agency’s voice mail, email, and website should also be used on social network-ing 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. As mentioned above, the interactive features of social networks do provide unique challenges. The written procedures your agency es-tablishes 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.

|Agency E&O|

Continued on page 36 ‹

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36 | | WINTER 2010

Loss Control Tips:• Use standard disclaimers such as

those used in voice mail, email, and on website.

• Be clear in the agency’s procedures that established processes and work flows apply to all discussions and service focused on an identifiable risk or indi-vidual or business generated through the social network 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 unexpect-ed 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 more as another venue in which to adver-tise 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 applying the loss control tips I just discussed, you will be ready to enjoy all the benefits of social networking with the peace of mind of knowing you have taken steps to mitigate the risks.

This article is intended only for educa-tional or illustrative purposes and should not be construed to communicate legal or professional advice. You should consult legal or other professionals with respect to any specific questions you may have. Further, the statements and/or opinions contained are those only of the author

|Agency E&O|and do not constitute and should not be construed to constitute any statement, opion or position of Swiss Re.

Sabrena Sally, CPCU is Senior Vice President of Westport Insurance Corporation, a Swiss Re company who manages the Big “I” Agency Profes-sional Liability Program. Sabrena can be reached at [email protected] Sabrena produced this article for the Agents Council for Technology (ACT), a part of the Independent Insurance Agents & Brokers of America. For more informa-tion about ACT, visit www.independenta-gent.com/act or contact Jeff Yates, ACT Executive Director at [email protected]. This article reflects the views of the author and should not be construed as an official statement by ACT.

Page 37: IIAI Viewpoint Magazine

WINTER 2010 | | 37

WellmarkSagamore

Rain & Hail

Progressive

Iowa MutualIMT

Grinnell Mutual Reinsurance

Farmers Mutual Hail

EMC

Continental Western

Allied

United Fire & Casualty

General Casualty

Progressive

Iowa Mutual

IMT

Grinnell Mutual Reinsurance

Auto-Owners

EMC

Continental Western

Allied

IIAI’s Top 10 Contracts for Reporting AgenciesAgencies with Commissions of $300,000 or LessAgencies Listing Contracts 408

Number of Reporting Agencies Listing:Progressive 240Allied 145EMC 119IMT 116Rain & Hail 86Grinnell Mutual Reinsurance 85Farmers Mutual Hail 81Iowa Mutual 72Continential Western 55Wellmark 54Sagamore 54

Agencies with Commissions of more than $300,000Agencies Listing Contracts 273

Number of Reporting Agencies Listing:Progressive 217Allied 185 EMC 152Continential Western 113IMT 106Auto-Owners 84United Fire & Casualty 77General Casualty 72Iowa Mutual 67Grinnell Mutual Reinsurance 64

Page 38: IIAI Viewpoint Magazine

Signature Agent is a new rewards program for independent agents in Iowa*. To qualify, sell

an average of one policy per week to preferred customers. That’s someone who owns a home,

has a good driving record, and has continuous insurance with no lapse.

HigHer commission is only tHe beginning

Progressive Signature Agents are rewarded with numerous special benefits including:

15/12 commission on preferred personal auto

A $2,000 annual marketing allowance for exclusive Signature AgentSM goods and services

An appointment to sell the Progressive Home Advantage and Personal Umbrella – both offer 15/12 commission

Increased opportunity to put Progressive’s marketing power to work for your agency

become a signature agent

Ready to learn more? Contact your Progressive account sales representative.

more commission. more rewards.

more reasons to Prefer Progressive.

earn higher commission and put Progressive’s marketing power to work

for your agency with the Progressive Signature Agent program

©2009 Progressive Casualty Insurance Company and its affiliates, Mayfield Village, Ohio. *The Signature Agent Program is not available in all states. For a list of states it is available in contact your Progressive account sales representative. 09A00214.IA_IA (11/09)

09A00214.IA_IA_Sig_Agent_7.5x10.083.indd 1 11/23/09 1:23:19 PM

Page 39: IIAI Viewpoint Magazine

|the last page|

WINTER 2010 | | 39

I was recently asked by an insurance company marketing person “Are Agent Associations an Endangered Species?”

I responded “What?” He said it appeared to him that “The Iowa Big ‘I’ was kind of the lone survivor when it came to local operated agent’s associations.” Huh! I had never thought about it, but he was kind of right. The Independent Insurance Agents of Iowa is the only agent’s trade association operating in the state with an official office and staff. That caused me to start doing a lot of thinking. The very future of the indepen-

Are Agent’s Associations An Endangered Species? Are Independent Agents Endangered?by Bob Skow, CPCU, CAE - CEO

I was recently asked by an insurance

company marketing person “Are Agent

Associations an Endangered Species?”

I responded “What?” He said it

appeared to him that “The Iowa

Big ‘I’ was kind of the lone survivor

when it came to local operated agent’s

associations.” Huh! I had never

thought about it, but he was kind of

right. The Independent Insurance

Agents of Iowa is the only agent’s trade

association operating in the state with

an official office and staff.

dent agent delivery system could be at risk. As insurance companies demand more volume we are seeing an alarm-ing number of mergers and acquisitions. Could the companies be causing the shrinking agency universe by demand-ing more volume? Could reductions in commissions, increase in workload, and growing overhead costs be driving agents to consolidate? Could loss of population in rural communities be causing agencies to merge? I guess the answer is yes to all of these. One thing is clear with fewer agencies

comes two critical problems; shrinkage of insurance industry grassroots, and loss of dues dollars for agent trade associa-tions like the Big “I”. The Independent Insurance Agents of Iowa is one of the strongest state agent associations in the country. We have almost every indepen-dent agency in the State as a member; today the membership is 710 agencies, and almost 300 branch offices. We own our building; in fact, we have rental in-come which helps with operational costs. We are strong and viable; we mirror the membership we represent. Our success and future is dependent on yours! Included with this article are two pie charts showing where your association income comes from and where we spend money. A few items are important to note, first dues income accounts for 37% of our operating budget. Of the dues we collect, 35% goes to the National Associa-tion meaning we only retain about 65% of your dues here in Iowa. Our minimum dues are $350 and $200 of the $350 goes to our parent organization, the Inde-pendent Agents and Brokers of America (IIABA). Our maximum dues category is $1,750 and $751 of those dollars goes to IIABA. So, as you quickly see, we need more than dues dollars to keep our door open. Our dues income for the first

Page 40: IIAI Viewpoint Magazine

40 | | WINTER 2010

|the last page|time in years dropped in 2009. But the amount we owe to our national associa-tion basically remained the same! Education programs account for 14% of our income, but account for 12% of the expenses. In 2009, we basically broke even on education. We discovered it takes a minimum of 63 students for us to pay the bills for a class. We continually get requests to hold classes at more locations, but reality is that is just not economically feasible. Many members choose to attend alternative CEC programs which take away from our programs making them even more difficult to cash flow. Let me ask, does a class put on by St. Ambrose, Drake, or one of the community colleges cost you less…the answer is no. In fact, they cost more! Do the alternative pro-viders advocate for you with the pub-lic, carriers, and regulators? Will they provide you with valuable information and assistance when you call? Of course everyone knows the answer…no! We

have witnessed an increase in insurance companies providing free classes, on-line competition, and a growth in programs like CIC which all take students out of our classes making it difficult to pay the costs. IIAI will not be increasing our education fees in 2010. We will continue to pro-vide you lunch (virtually no one does this in their fees), top speakers, and topics important to you. We remain commit-ted to providing our members excellent education programs at affordable and discounted fees. But we can only do so if our membership sends their staff to our classes. The third major source of income for operating your Association comes from your business partners, the companies. Between program sponsorship, and ads in our magazine they account for a criti-cal 12% of our revenue. So please thank them, support them, and respond to their ads in IIAI Viewpoint Magazine without company support there would be no

Conducting business in today’s marketplace is not for the faint-hearted. We recognize that every decision must reflect our dedication to continuous improvement. Our associates understand this need, and they are meeting the challenges daily.

We offer tools to help your agency navigate the stormy insurance industry climate.

How about a company that: • has competitive, family friendly personal lines products • has local district sales managers with full underwriting authority • fully supports the independent agency system • has been providing innovative commercial products to the Midwest for over 100 years

Proudly exceeding expectations—every time, every day.

Interested in knowing more about Iowa Mutual? Contact Jack Dunning, Vice President, Marketing, at 800-456-5259, extension 3253; at Iowa Mutual Insurance Company, 509 9th Street, DeWitt, IA, 52742; or at [email protected].

Iowa Mutual is proud to beassociated with Independent Insurance Agents & Brokers of America and to participate in its programs.

www.iowamutual.com

Big “I” as we know it. The last major source for operating in-come is the Errors & Omissions programs we offer at membership discounted rates. We offer Fireman’s Fund, UTICA and Westport (Swiss RE). Our E&O program accounts for 8% of our income, but it also accounts for significant staff expenses. The IIAI nets a very small amount of margin in handling members E&O. But, it does allow us to create a volume of business that helps us develop a pool of expert witness, great defense counsel, and resources to help you avoid liabil-ity losses, and design risk management programs for independent agents. The E&O program is a key component for our continued success. When you look at our expenses it should be no surprise that staff salaries are like your agencies is the single largest expense. We have a great staff with over 100 years of combined insurance expe-rience, two CPCU’s, an MBA, CIC, and

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WINTER 2010 | | 41

|the last page|everyone is licensed except our reception-ist. These talented people make the IIAI one of the most successful agent trade associations in the industry. A significant amount of money has been allocated to our marketing program. Hopefully you have seen our ads on T.V. The Big “I” Trusted Choice advertising program represents 16% of our expendi-tures for 2010. The ads explain to Iowans the value an Independent Agent brings to their communities, someone they can trust and someone who gives them choices…your Trusted Choice Independent Agent. We think promoting the value of using an agent is key to your success. Our survey in 2008 indicated a vast majority of our membership wanted us as an orga-nization do a better job of telling consum-ers the value you bring to them when they purchase insurance from an independent agent. The Trusted Choice T.V. campaign is your association’s response to that call. While the IIAI remains a strong voice for Iowa’s independent agent community, we know we need to continue to do better. You can help us by doing the following: • Encourage every independent

agency in the state to belong. We have approximately 60 who do not. And most important, we need you to continue your support of IIAI.

• Attend IIAI CEC programs, go to our State Convention in September, and attend the Rural Agent & Small Town Agency Conference in January each year. Participate in our EXPO, and encourage those under 40 to go to our Young Agents Conference in May. We need your support of our programs!

• Use the Iowa Big “I” for your E&O coverage. We have the three top markets and will save you money. If you are not insured with one of our programs, give us a chance to quote — you’ll be glad you did!

• Thank the companies who help sponsor your association’s pro-grams and advertise in IIAI View-point Magazine. If they aren’t a program sponsor ask them why.

Without company support we would have to increase our dues and fees for our programs. The company support is critical.

• Allow us to email you! A surpris-ing number of agents will not give us their email address. Using email allows us to do two important things: save money and communicate rap-idly. If you are not receiving your newsletter, and updates from us by email, please contact us today. Help us do a better job of communicating with you and your staff.

Together we make a difference. IIAI spends significant resources lobbying, attending meetings representing indepen-dent agents, advocating on your behalf with the companies, and telling your story. If we weren’t here doing that…who would be? The IIAI is the last remaining voice for the Iowa agent community…a strong voice because of your support! No, we are not an endangered species! IIAI is a strong and vibrant voice for Iowa’s independent agents and together independent agents will remain Iowa’s strongest insurance marketers!

Affiliate Dues 3%

Convention Registration 5%

Investment Income 2%Viewpoint Advertising 3%

Golf Tournament 1%

Rental Income - Tenants 5%

Publications (Study Manual Sales)

4%

Education ClassFees 14%

CompanySponsorships 9%

E&O Program 8%

National IIABA Dues for Members

13%

Dues 37%

Educational Expense

12%

Convention Expense

7%

Viewpoint Expense 3%

Study Publications Expense 2%

Lobbying Expense 1%

Board/Officer Travel & Meeting

Expenses5%

ConventionGolf Tourney

1%

Staff Salaries21%

Payroll Taxes 1%401K 2%

Employee Insurance 2%Audit & Accounting 1%

Auto & Travel 1%

Insurance 1%

Big “I” TV AdvertisingProgram

16%

Postage/Telephone & Utilities 2%

Office Supplies & Printing 2%

Other 2%

Property Taxes

2%

Building Maintenance

& Repair2%

Computer Expense 1%

I IAI’S INCOME

IIAI’S EXPENSES

Page 42: IIAI Viewpoint Magazine

You’re an independent agent.

Don’t forget your helmet.

Protect.Our superior coverage and expert claims teams are in your corner in the event of a claim.

Prevent.Our risk management resources keep your agency from making common preventable mistakes.

Prosper.When you know you have the best E&O protection, you can focus on growing your most important asset–your business.

www.independentagent.com/EO

The Big “I” Professional Liability Program

The Big “I” and Swiss Re are jointly committed to providing IIABA members with leading edge agency E&O products and services. The IIABA and its federation of 51 state associations endorse Swiss Re’s comprehensive professional liability program.

Insurance products underwritten by Westport Insurance Corporation, Overland Park, Kansas.Westport is a member of the Swiss Re group of companies and is licensed in all 50 states and the District of Columbia. ©2008 Swiss Re

Page 43: IIAI Viewpoint Magazine

trust.

acuity.com

Page 44: IIAI Viewpoint Magazine

INDEPENDENT INSURANCE AGENTS OF IOWA4000 Westown Parkway, Suite 200West Des Moines, Iowa 50266

PRSRT STDU.S. Postage

PaidDes Moines, IA

Permit No. 2538

THANK YOU FOR YOUR SUPPORT!

IIAI SPONSORSListed are the companies who strongly support the Independent agency system and the Independent Insurance Agents of Iowa.

SILVERFarmers Mutual Hail Ins. Co of IowaGuideOne InsuranceIndiana InsuranceMerchants BondingState Auto Insurance

BRONZEAccident Fund/United Heartland

Acuity

Berkshire Hathaway Homestate Companies

General Casualty

LeMars Insurance Company

North Star Mutual Insurance Co.

RDS Group

SECURA Insurance

Selective Insurance Co of America

West Bend

Westfield Insurance

PLATINUMAllied Insurance

EMC Insurance CompaniesThe IMT Group

Independent Agents Service Corp.Iowa Mutual Insurance Co.

Pekin InsuranceProgressive Insurance

GOLDContinental Western Group

Grinnell MutualRain & Hail LLC

United Fire Group