Happy Wednesday! We hope that everyone enjoyed their Fourth of July weekend and using information last week's Big I Buzz, you were able to avoid some of the holiday travel! 

This week we are sharing information about Wisconsin State Law license plate regulations, what's driving the cyber insurance market and how the federal interest rate hike can affect the insurance industry. 

License Plate Reminder

Now is a great time to remind your clients about Wisconsin State Law license plate regulations to help them avoid unnecessary tickets. Feel free to share the below image and copy on your social media pages. 

Did you know that per Wisconsin State Law if you are issued two license plates you must attach both to your vehicle? Your license plate must be kept in a legible condition, which means no plate covers. This also means that your registration plate lamps, wiring and connections must be maintained in a proper working condition. Finally, if you are given two license plates you must attach the validation sticker to the rear plate as shown below. Connect with your local Trusted Choice independent insurance agent to make sure you've got the coverage you need when it comes to your vehicle! 

Evolving Risk is Driving Cyber Insurance

According to the 2021 NetDiligence Cyber Claims Study, the top five causes of loss for samll and medium-sized enterprises over the last five years based on number of claims was: ransomware, hackers, business email compromise, staff mistakes and phishing.  The increase in ransomware attacks since 2016 has encouraged underwriters to focus on cybersecurity and putting controls in place to help mitigate the impact of cyber events. While there's no way to eliminate cyber risk, insurers are applying minimum requirements on risk controls to obtain cyber coverage like multifactor authentication, endpoint protection and firewalls. Read more about upcoming regulatory enforcement and prevention and resilience here. 

What Fed's Interest Rate Hike Means for Insurance

The Federal Reserve again hiked interest rates Mid-June by 0.75%. Insurance Business reports, that Mark Bernacki, Amwins Chief Underwriting Officer believes,  "Insurance agents should be talking to their clients to make sure they have "sufficient insurance" against a backdrop of soaring loss costs as the Fed seeks to dampen the effects of inflation. They should also be educating them on what the interest rate change means for the insurance market." So, what does this mean for the insurance market? Bernacki stated to Insurance Business Mag, "Obviously, there's the expectation that this could have some short-term pain, both for the economy as well as the insurance industry, but long term this should ultimately be good for both the economy and the insurance industry and also strengthen the labor markets that we're seeing." Read more from the report here. 

For more news, check out the Action News section of our weekly e-newsletter, Big I Buzz. If you aren’t subscribed, click here to add your email to our emailing list. Additionally, we send out monthly newsletters with content curated just for you and your role. Make sure you're on the list to receive our communications by heading to bit.ly/industrynewsforyou to stay in the loop!

Independent Market Solutions (IMS) was established in 2007 with the goal of creating greater market access for member agents. Wisconsin made the investment to be a part of IMS and we have grown market availability in Wisconsin to include nine participating carriers that offer personal, commercial and various specialty lines. 

The purpose of IMS is to provide member agents access to quality insurance markets and alternatives that may be otherwise unavailable. IMS creates marketplace leverage through its negotiated contracts, which can be particularly helpful for smaller or rural agents. 

IIAW membership allows your agency to sign up for the program and gain carrier appointments as an IMS sub-producer at no additional cost. Agencies are paid competitive commissions, enjoy 100% ownership of expirations and can participate in earned contingencies. Additionally, several IMS markets feature the opportunity to "graduate" to a direct appointment once certain production goals are met - again, at no additional cost to your agency. 

Ultimately, our mission is to add to the success and prosperity of independent agencies by providing viable market access through IMS. Wisconsin is a proud owner of IMS, along with our association colleagues in other states. To learn more about the carriers IMS could help connect you with, click here. 

By: WAHVE (Work at Home Vintage Experts)

It’s no secret that today’s job candidate is looking for a different work-life balance. The pandemic and the subsequent onset of the Great Resignation has pushed employees to re-evaluate everything. Amid the pandemic fatigue and feelings of being overwhelmed and stuck, one thing emerged: employees want more.

And organizations should be paying attention. As about 4 million workers quit their jobs monthly (US Bureau of Labor Statistics), employers need to find ways to not only attract new hires but also keep the employees they have.

That’s created a virtual feeding frenzy among companies across the country. In many cases, it’s an unfair fight – smaller organizations are left with finding ways to compete with big-city salaries and perks while still trying to operate on very local budgets.

Yet while salary is the main reason employees are leaving for greener pastures, employees want more. According to Jobvite data, remote work flexibility ranks right up there with flexible work days and company culture as the things most important to job seekers.

That means your company, no matter what size, can easily compete for the best candidates. By offering remote work and a flexible workday (allowing employees to work during the hours when they’re most productive), your organization can keep the valued talent you have and attract talent from anywhere in the country to your operations.

But there are other reasons for wanting to offer remote work. Researchers in Houston analyzed the data from 264 employees to understand the impact of remote work on the business. The company was closed due to hurricane flooding. Researchers found that during a seven-month period of remote work, employees work behaviors matched the pre-hurricane production levels, even though they were not logged on to their computers as often. The study also revealed that both company and employee resiliency improved as a result of remote work.

As many of us discovered when forced to scale back (or close) operations amid the worst of the pandemic lockdowns, remote management can work. Our own company, WAHVE, has been fully remote since its inception. It takes reimagining your operations – and your approach – for remote operations to be successful.

We suggest restructuring the workday to fit the employee’s best hours, not the standard eight-hour, nine-to-five drill. Measure by outcomes achieved, not hours put in. Set goals and expectations with employees, and trust them to deliver.

Above all, provide open channels of communication. Your employee should be able to reach you and feel able to discuss issues, struggles, and receive performance feedback as well as any training or mentoring support.

As your organization looks to compete in a tight labor market, you can attract candidates and even retain key employees by offering remote work and flexible work arrangements. Organizations everywhere have discovered that remote work is possible. Giving job candidates and your talent the option to work remotely gives them an important component of a healthy work-life balance, and allows you to find top talent no matter where they are located.

By: Nancy Germond, Executive Director of Risk Management & Education, Big "I"

Are your clients, both commercial and personal, at a greater flood risk than they know? If your clients rely solely on the Federal Emergency Management Agency (FEMA) flood maps, your clients' property may be at much higher risk than predicted by FEMA maps. According to the New York Times, FEMA maps do not account for intense rainfall-created flooding.

Climate challenges change flood risks throughout the US and abroad

Until recently, reinsurers considered flood risks “secondary perils." Primary perils are events that generate large losses and are routinely “modeled," such as earthquakes and tropical cyclones. Many carriers had considered flooding a “secondary peril," a smaller or mid-sized event. However, those days are gone, according to one expert in a recent Burns & Wilcox online seminar on flooding risks. Flood risk is a major concern to today's insurers and reinsurers.

In the U.S. according to CBS news, over 700,000 commercial real estate buildings, apartments, malls and office complexes face flooding risk in 2022 that could reduce business access and incur economic losses approaching $50 billion yearly. Homeowners, too, face significant flooding risks from rising inland waters, coastal storms, increased rainfall, and other water-related deluges.

Add increased urban infill and greater population growth along coastlines to the mix and your insureds may not recognize the risks facing them.

A New Tool to Measure Flood and Wildfire Risks

A non-profit, First Street Foundation, formed by academics and climate experts, offers a free, online tool that analyzes current flood data to predict a property's flood risk. The tool categorizes flood risk from minor to extreme. After entering an address, you will receive a “Risk Factor™" analysis, with flood-risk categories ranging from minor to extreme. The analysis includes flooding that can occur from swollen rivers, rainfall, tidal flooding, and storm surge. Enter the property location to determine its risk of flooding and wildfire.

An article in the New York Times stated that Risk Factor showed a “vast increase in [flood] risk compared with official estimates." Even updated flood maps are “decades old," according to the Times article, and Risk Factor includes areas not yet mapped in some instances. The article went on to say that even though Risk Factor may “overestimate some risks," FEMA welcomed the additional input provided by Risk Factor.

Relying Solely on FEMA Flood Maps Can Be Problematic

First Street Foundation evaluated the City of Chicago's flood risks. While FEMA maps showed that 0.3% of properties in Chicago were within the 100-year flood zone, First Street found about 13% of the Chicago properties were in danger of flooding. This was more than 75,000 properties than FEMA maps predicted.

Put your own property address in at this link to see both flood risk and wildfire risk. For example, I put in our vacation property address located in Skull Valley, Arizona (it's prettier than it sounds), population 350. While our property address did not appear, the 86338-zip code did, and I received this result.

As you can see, we're more at risk from wildfire, but flood risks could also be problematic. But wait, there's more. The model also predicts the impact of flooding on roads, commercial buildings, and critical infrastructure in that zip code.

Risk Factor is a new tool you can use to help your insureds decide on their need for flood insurance, and to evaluate their wildfire risk.

Reminding your insureds about their flood risks and coverage options

It is always prudent to remind your insureds that their property coverages do not include the risk of flooding (where applicable). Simply because their lenders do not require flood insurance does not mean their property is not at significant risk of flooding. With the summer monsoon season and hurricane season ahead, reminding your insureds of flood coverage limitations can help protect your agency in the event of a claim involving surface water.

Additionally, National Flood Insurance policies may not provide adequate coverage for your clients' property values, especially considering recent greatly increased construction costs.

Risks of flooding and wildfire are two great reasons to reach out to your insureds

With the increase in flooding risks, you can protect yourself and your agency by recommending flood insurance with every property policy you place, even if the lender does not require flood insurance. Reminding your clients at policy inception and at policy renewal that no flood coverage applies under the homeowners policy, or the commercial property policy, can help guard you against a professional liability claim.

This article was originally published on independentagent.com in May.

By: Richard F. Lund, JD, Vice President and Senior Underwriter, Swiss Re Corporate Solutions

With yet more apologies to William Shakespeare.

As time changes, you may find yourself in the position where either you decide it is time to sell your agency, or you are on the other side and considering the purchase of an agency. In either case, something that must be considered by both the seller and the buyer is whether an ERP (extended reporting period), sometimes called “tail coverage,” should be purchased. Regardless of what you call it, the purpose is to provide coverage for errors and omissions that happen before, but the claim is made during a specified period of time period after, the date of sale/purchase.

Most, if not all, insurance agents errors and omissions professional liability policies are either “claims made” or “claims made and reported,” meaning that the claim must be made and/or reported WHILE the policy is in place. This is different than most liability policies that you are probably more familiar with, where claims are covered on an “occurrence” basis, in which case the insurance policy in place on the date of the underlying occurrence provides coverage.

The purpose of the ERP is to provide more time to report claims that could be made after the policy has expired, but still provide coverage for claims for wrongful acts that occurred during the original policy period. Let’s provide a few examples to illustrate different situations that could happen.

1. An insurance agent sells her agency effective on January 1. Their E&O policy expired on December 31 in the previous year. The agent purchased an ERP that will allow her to report claims for a three-year period after December 31. The agreement provides that all policies will transfer to the buyer on January 1. On January 20, the seller receives a demand letter (or a lawsuit) from a former customer’s attorney for alleged wrongful acts that occurred in November of the prior year. Because the seller had the three-year ERP, she can report the claim/demand/lawsuit to her E&O carrier, and it would be covered subject to the terms of the policy. She would be able to report the claim and any other claim during the three-year ERP period, but only if the error or omission occurred during the policy period before the effective date of the ERP.

2. An insurance agent sells his agency effective on January 1. His E&O policy expired on December 31 in the previous year. The agency did not purchase an ERP on his E&O policy. On January 20, the seller receives a demand letter (or a lawsuit) from a former customer’s attorney for alleged wrongful acts that occurred in November of the prior year. Since their policy expired on December 31 and no ERP was purchased, there would be no coverage for the claim. Note: If the claim was actually made during the original policy period, e.g., on December 31, it typically can be reported during a brief period specified in the policy – typically two to three months.

3. An insurance agent sells her agency effective on January 1. Their E&O policy expired on December 31 in the previous year. The purchase agreement provides that the book of business will roll to the purchaser at renewal. There is the potential for the book to have policies that will roll over for 12 months after the purchase. During this period, the seller may still be servicing the policies that have not renewed. In this case, the selling agency needs to maintain their E&O policy until such time as all policies have rolled to the purchaser and no further servicing will be done by the seller. Once all business has moved and all of the seller’s servicing responsibilities have rolled to the buyer, the seller should purchase an ERP that becomes effective concurrent with termination of the policy. If any claims occur after the date of sale, but before all policies roll over and their E&O policy remains in place, the claims would be covered under the terms of the policy as usual. Subsequent claims for errors/omissions that occurred during the policy period would be covered pursuant to the terms of the ERP.

4. Here’s the tricky one. The facts are just as in No. 1 above, but for some unknown reason, the selling agent is contacted by a former customer on February 20 (after the sale and transfer to the buyer) to take some action on behalf of the customer, which may be as simple as answering a question about coverages/limits. The selling agent takes the action requested by the customer, e.g., answers the question, but commits an error. At some later date, the customer makes a claim against the seller for the error. Because the policy expired on December 31, there would be no coverage for the claim. Why? The E&O policy itself expired on December 31. But what about the ERP? Why won’t that cover the claim? Because the policy only provides coverage for claims for wrongful acts while the policy was in place and active, and the acts occurred after the policy expired, there is no coverage for activities after that time, even though an ERP has been purchased. The ERP only provides the ability to report claims for wrongful acts while the policy was in place and active, NOT for acts after the policy has expired. Every inquiry, no matter how small or seemingly innocuous, needs to be referred to the buying agency that is now responsible for servicing that account.

Those are just a few of the potential ERP examples. Another frequent scenario is when the buyer and seller put their heads together and decide, “Hey, we can save a bunch of money if we skip the ERP and have [the buying agency] cover any claims!” Have you ever heard the phrase “penny wise and pound foolish”? That’s exactly what this is. Unless the buying agency’s E&O policy expressly accepts coverage for the selling agency’s errors and omissions, they probably will not be covered, regardless of any agreements made by them. E&O insurance carriers are not necessarily going to agree to accept those conditions. More importantly for both the seller and the buyer, that ERP cost represents the risk presented by years of possible errors & omissions that won’t come to light until after the sale. The selling agency doesn’t want to be “naked” with respect to coverage for E&O claims made after the sale, and the buying agency doesn’t want to bear the reputational and financial cost of its predecessor’s mistakes. The best bet for both parties is for the seller to purchase an ERP, the cost of which is considered in negotiations between buyer and seller.

So, back to the title: “To ERP or Not ERP, That is the Question”. The answer is:

1. As long as you are actively in the insurance business, even if it is only to provide servicing of a sold book of business, you need to keep your E&O policy in place.

2. When you are no longer actively in the insurance business, you should terminate your E&O policy and purchase an extended reporting period.

3. What time period should the ERP cover? Ask your attorney what the applicable statute of limitations is in the state(s) where you do business, and go with the longest applicable time period.

4. And after the effective date of the ERP, you should no longer provide any services to your former customers. Instead, refer them to the firm that purchased their business. That agency has E&O coverage in place for current errors and omissions. You do not.

If you do these things, then you can take time to enjoy fond memories of your former profession.

For more information about buying, selling and merging agencies, there is a great webinar on the E&O Happens website called ” Agency Risk Management Essentials: Navigating the Hazards of Buying, Selling and Merging an Agency” available to IIABA members who are also Swiss Re Corporate Solutions insureds. It provides a more in-depth discussion, more examples and additional information from industry professionals who have helped agency owners navigate these waters.

This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose. Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article. The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice. The views expressed in this article do not necessarily represent the views of the Swiss Re Group (“Swiss Re”) and/or its subsidiaries and/or management and/or shareholders.

*Richard F. Lund, JD, is a Vice President and Senior Underwriter of Swiss Re Corporate Solutions, underwriting insurance agents errors and omissions coverage. He has also been an insurance agents E&O claims counsel and has written and presented numerous E&O risk management/ loss control seminars, mock trials and articles nationwide since 1992.

This article was originally published on eoguardian.com.