FMS Advisor

Vol. 2 — Bulletin #1 October 30, 2004

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In This Issue:

Bonus

ACE

Important Workers' Compensation Update!

NEW-Courtesy Computers Program!

Disaster Tip

E&O Tip of the Month

Contact Information

IT’S BONUS TIME!!!—We’ve been telling you about the “utilization bonus” that FAIA members will be eligible to receive for over a year now. Well, that time has finally arrived! Even as this newsletter is being written, the checks are being cut.

Originally the FMS Board of Directors voted to return $25,000 to members using FAIA-endorsed products and services. That amount was doubled in May and then doubled again in August making a total of $100,000 available for bonus checks to qualified members. Unfortunately, as of this writing there are about 62 agencies eligible for a bonus that have not yet renewed their membership.

Bonus checks will be distributed between November 1 and December 31, 2004. FMS is teaming up with the local associations and will be presenting checks to eligible recipients at local association luncheons and dinners. All agencies in those areas will be invited to participate in the ceremonies. FMS Managing Director Jay Williams, Director of Business Development Fred Phelps, or Marketing Representative Mike Smith, along with FAIA Board members will hand out the checks. Alternate distribution methods will be used in areas where there is no local association.

If you’re not sure of what programs qualify you for a bonus, here’s a list for you:

$ Errors and Omissions Coverage

$ RLI Umbrella and In-Home Business Policies

$ Old Dominion Flood Program

$ ACE International Advantage Program

$ Agent$ource Premium Finance

$ Courtesy Computers, Inc.

$ Office Depot Discount Program

$ Coastal Insurance Underwriters Condo DIC Program

$ UPS Discount Program

$ ChoicePoint MVR Program

If you missed out on a bonus this year, NOW’S THE TIME TO GET STARTED FOR NEXT YEAR…keep using those products and services…use them more…use them often…the more you use, the bigger your share of that bonus money will be. We’ll keep you informed of new programs and bonus amounts as the year progresses. Until then—keep racking up the revenue!

The ACE Up Your Sleeve—In our last issue (yes, it’s been a while!) we gave you some claim scenarios to illustrate some of the coverages available in the ACE USA International Advantage® program. This issue we’d like to give you a couple more which are available on the co-branded website. This site was developed exclusively for FAIA members and contains a myriad of information useful for determining your client’s need for coverage and then providing that coverage. If you haven’t checked it out yet, all you need to do is CLICK HERE (or type http://faia.usiadvantage.com into your browser) and you’ll be transported electronically to a world where the language of international coverage is spoken quite fluently.

Here are some new examples for you:

Commercial General Liability

Real World Claim Scenario

Solution

Europe-bound Cargo Destroyed in Heavy Seas

Ø U.S.-based manufacturer ships approximately $1 million in goods to Europe annually.

Ø Cargo ship carrying $25,000 shipment for company is crippled by high seas and takes on water; all merchandise aboard is destroyed.

International Advantage policy pays for all cargo losses in course of shipment (subject to applicable deductible, policy limits, and policy terms and conditions).

Commercial Auto Liability

Real World Claim Scenario

Solution

Voluntary Compensation: U.S. National Stationed in Latin America

Ø While working in Latin America, U.S.-based chief engineer contracts Hepatitis B.

Ø Employee has no coverage for endemic disease under domestic workers’ compensation policy.

Provided Hepatitis B is contracted in Latin America as result of employment, voluntary compensation applies under International Advantage policy.

You’ll also find sales information and editable PDF application forms that you can download, fill out, and email directly to the underwriter. ACE promises fast turn-around for most quotes. There’s even a page where you can enter your feedback about the site so that improvements can be made continuously. For more information about the program and how you can participate, go to the ACE site customized for FAIA members, or contact FAIA, or the International Advantage team at the Contact Us Page on the ACE site…or sit through “Managing Your Global Insurance Program” coming to a local association near you.

Workers’ Compensation News—Choice Underwriters announces a third workers’ compensation alternative…the new FWCJUA takeout program. If you have quality accounts in Tier 1, 2, or 3 you owe it to your client and yourself to contact Choice. Need some good reasons to do so? Here are a few:

ü FWCJUA will cancel the current policy pro-rata (no penalty)

ü Your insured will have a monthly or quarterly premium pay plan

ü Your insureds new down payment should be close to their next quarterly payment to the FWCJUA

ü Choice only issues non-assessable policies

ü The policy will be with a standard, admitted carrier

And if those aren’t enough reasons, let me give you one more: MORE COMMISSION! That’s right, Choice pays you a higher rate of commission. FWCJUA pays commission based on the standard premium regardless of the actual Tier 1, 2, or 3 premium (JUA standard premium multiplied by the Tier surcharge). Choice pays a higher rate of commission AND pays it on the actual computed premium. That means significantly more revenue in your pocket. For more information go to the Choice Underwriters page on the FMS website or contact Fred Phelps or Mike Smith.

FMS Welcomes Courtesy Computers, Inc.—We at FMS are proud to welcome the addition of Courtesy Computers, Inc. to the family of FAIA-endorsed products and services. Courtesy has been doing business with and offering discounts to some of our members for a couple of years now. Based on that relationship the FMS Board decided to make it “official.” Here’s a small sample of what Courtesy offers:

Ø Network monitoring

Ø Managed services such as:

8 Security updates

8 Internal/External security audits

8 IT consulting

8 IT business continuity planning

8 Notification and installation of critical system patches and updates

8 Virus detection

8 Network backup monitoring

8 Attempted hacker intrusion detection and monitoring

8 SPAM management services

Ø Block time plans

Courtesy is also proud to announce the most recent addition to its services—Courtesy Care Online Backup Solution. This new service offers secured off-site data storage, user-friendly web interface, automated data encryption and compression, immediate recovery of critical data 24/7, and many other features.

FAIA members get discounted rates! Call Courtesy Computers today to see how they can help you. For more information just click here to visit their page on the FAIA Member Services website.

Old Dominion Flood—As many of our members, their employees, and their clients recover from the devastating effects of four major hurricanes, one of the major issues that we have noted is the need for adequate flood insurance. News broadcasts and papers statewide have highlighted incident after incident of individuals and families without insurance coverage for their losses…many of them related to storm surge, which is covered by the flood policy only. The question, then, becomes “what does a person do when they have no flood insurance?”

Unfortunately the reality of disaster relief is not a pretty picture. To begin with, Federal Disaster Declarations are only made after about 50% of flooding incidents. Then, FEMA Individual and Family Grants (IFG), used to provide funds for what is not covered by insurance, are limited to an inflation-adjusted figure of about $15,000 per family. The average IFG is somewhere between $2,000 and $4,000.

The Small Business Administration (SBA) does provide loans to small businesses, homeowners, and renters. Homeowners are eligible for up to $240,000 and small businesses up to $1.5 million. The downside is that these are loans, which must be paid back with interest. Many times the cost of the borrowed money exceeds the cost of flood insurance that would have been purchased for the years prior to the loss.

Once again it was demonstrated that flood coverage is very important even in higher elevated areas such as B, C, and X zones. Storm surge produces devastating effects. The proof is in the pictures from Pensacola after Hurricane Ivan and the Treasure Coast after Hurricane Jeanne. While we hope for the best…that another season like this one is a long way off…we need to be prepared for the worst.

Old Dominion can help your clients be prepared with its FAIA-endorsed flood program. Getting started is easy and you instantly earn 20% commission. By using the FAIA-Old Dominion flood program you also increase your participation in the Utilization Bonus for 2004-2005. For more information click here to visit the Old Dominion page on the FMS website or contact Fred Phelps or Mike Smith.

10% Credit On Your E&O Premium!!

Remember, by attending FAIA E&O class you can qualify for the 10% Loss Control discount on your Westport E&O policy. E&O classes start in December, so keep an eye on FAIA’s 2005 Education Calendar for dates and cities near you.

Make plans NOW for your staff to attend.

E&O Tip of the Month

Signatures—Wet or Electronic

By Jay Williams

Recently I received a couple of emails from agencies using scanning and imaging technology. Here is a sample of the questions:

Ø We are trying to find out which companies and states allow scanned documents to be accepted as original documents; and

Ø We've been scanning for a few years now and were under the impression that we were OK to keep only the imaged signatures for apps, LPRs, etc. I recently spoke with someone who told me the electronic signature issue is being challenged in court because a handwriting analysis can't be done on it. Then last week at a user group conference, I asked a consultant who was teaching one of the classes her opinion. Her opinion was that we need to be keeping the wet signatures in t-filing after we have scanned them. I am very interested to hear what you think.

These concerns are quite common among agencies currently using or considering this valuable technological tool. As I write this I can hear the common question—“Valuable? Why do you think this is so valuable?” I can sum it up in one word: “EFFICIENCY.” I’ve always been able to see the time savings created by this method of technology in the insurance industry. But recently I learned some facts that confirmed what I long suspected.

A recent study of insurance agencies revealed that employees spend an average of seven minutes for each file they retrieve from the file cabinet. This takes into account those files that may be more difficult to find because they’re on someone’s desk or misfiled. But let’s be generous—let’s say your agency is better than most at keeping track of files so your average is five minutes. It would be quite realistic to say, then, that each employee spends about an hour a day pulling files (that’s only 12 files a day). Now, let’s say that your agency has 10 employees. Okay…let me break out my calculator and do the math:

Time spent by each employee pulling files each day—1 hour

Time spent by all employees pulling files each day—10 hours

Time spent by all employees pulling files each week—50 hours

Time spent by all employees pulling files each year—2,400 (average of 48 weeks per year)

Cost of time spent pulling files each year—$28,800 (2,400 hours x $12 per hour average wage)

That’s a tremendous savings from a cost standpoint not to mention the time freed up to service more clients! That’s great, Jay, but what about the original question? How do you answer the common concerns that agencies have? Well…here it is:

The best way to overcome what someone says is to ask them for details of the case. Rumor runs rampant and I remember my mother always telling me: “Don’t believe anything you hear and only half of what you see!” (I guess I’m a little skeptical sometimes.) There is nothing in Florida or any other state law that I’m aware of that does not allow electronic versions to be legally considered original documents. In fact, Federal legislation makes it possible through the Electronic Signature Law. The Electronic Signatures in Global and National Commerce Act has been cited in at least one case where documents (in this case it was email) were challenged because they did not contain a wet signature at all (Cloud Corporation v. Hasbro, Inc.). The court used the act to validate email transactions that were alleged to be invalid because they did not have a signature. Other than that, I could find no cases that show any challenge to the Act.

Based on the above Act, the scanned or imaged signature is 100% valid and storage of original wet signatures is not necessary. In fact, the very act of doing so may cause an issue if a suit needed to be defended. The courts accept the electronic files as evidence unless there are paper files—then the paper takes precedence over the electronic version. The only other hurdle to overcome is if the carrier will not allow you to dispose of the original signatures. My suggestion would be for you to contact each carrier just to make sure (get something in writing if you can) and then scan and shred away.