Two for Tuesday: January 12, 2016

In This Issue:

Year-End Surety-Oriented Considerations

More Personal Umbrella Mythbusting

Special Feature: Request an E&O Premium Estimate

Additional Items:

Webinars

Parting Shot

Last Week's Most Clicked

Sale of the Week

Surety-Oriented Considerations at Year-End

How a company deals with year-end planning issues can have a significant effect on what kind of surety support Goldleaf can achieve for them in the upcoming year.

Owners/managers whose businesses are profitable and growing sometimes fail to prioritize year-end issues with their future surety support in mind. They may consult other professionals - for example, their attorneys, bankers and tax accounts. However, good advice from these perspectives may not further, and actually can compromise and destroy, a company's surety capacity. Therefore, if continued or expanded surety support is critical to a company's growth next year, they need to weigh surety-oriented considerations against the other considerations that guide their year-end planning.

Consider upgrading the company's year-end financial statements. Increased surety capacity depends greatly on the "reliability" of the financial information provided to the surety company. Generally, surety companies prefer to see financial statements prepared by a respected certified public account (CPA) that is familiar with the company's industry. In all cases, you should have your year-end statements prepared on the "accrual basis." Statements prepared on the "income tax basis" or "cash basis" will present the weakest picture of the company's financial position.
Build equity. If a company is a "S-Corp," accumulating equity may seem counter-intuitive. After all, owners are paying personal income tax on the company's earnings, and it may seem right to take out what you have been taxed on. However, a company's bonding capacity depends, in large part, on company equity.
Do not over-emphasizes tax planning. No one wants to make money and send it all to Washington, D.C. However, if a company has had a profitable year and wants to continue growing with contracts that require bonds, they need to balance their tax planning against the other goals of the company. Reducing taxable income means reducing the net income that otherwise can be used to show profitability and equity growth on the company's financial statements.
Owners should check their personal credit scores. Individuals are now entitled to obtain a free copy of their personal credit report from the three major credit reporting agencies each year. Owners should take advantage of this as all surety companies check personal credit when underwriting for surety support.
Improve the company's "working capital" position. Positive working capital is a major factor in bonding.
Improve the company's "liquidity." Before year-end, clean up as many of the accounts receivable as possible and convert to cash.
Obtain an increase on the company's operating line of credit. As a company's revenues grow, its operating credit facilities should be growing as well.
Do not undertake ownership changes without considering the surety implications. Depending on how they are financed, buy-outs and other ownership changes can compromise (and, in some cases, can destroy) a company's bonding capacity. Anyone planning to stay in the company should be aware that if an ownership change in not handled properly from the surety company's perspective, the resulting loss of bonding capacity will drastically drop the value of the surviving company.

It is not only at year-end when companies may be making decisions which will impact their financial statement. During anytime of the year when decisions arise which may impact the financial statement, companies should contact Goldleaf to discuss the impact of those decisions on their bonding support. Goldleaf Surety can provide counsel to agents and their insureds - both with year-end considerations as well as other surety considerations - needed to grow and improve the company's surety support. For more information on bonds - or for help with your client's bonds needs - log in to www.bigmarkets.com or email us at bigimarkets@iiaba.net and an underwriter will contact you.

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Special Feature:

Request an E&O Premium Estimate

By Elif Wisecup, Director of Marketing of Big I Advantage^®

The Big "I" Professional Liability program is administered by Big "I" state associations. Your state association provides superior customer service and expertise while acting as your agent for E&O.

If you're not already an E&O policyholder with us, did you know that in just a few minutes you can request an E&O premium estimate by using our on-line request form? Simply enter the requested information and select "Request Premium Estimate."

Your dedicated Big "I" state E&O representative will respond to your request within 2 business days.

We look forward to welcoming you into the largest E&O program for independent agencies in the U.S. We are much more than just E&O insurance-we are a program that is centered on risk management, market leading coverage, stable rates with program oversight by group of your peers-agents just like you!

Please note that this is not an offer of coverage. An offer of coverage is subject to a full review of an application. Coverage is not bound until confirmed directly by the state association.

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More Personal Umbrella Mythbusting: Myth #3

By: April Shrewsbury, Big "I" Umbrella Program Manager

If you've been following the Personal Umbrella Mythbusting series, you've seen us bust 2 myths so far:

Myth #1: A personal umbrella is something agents only need to offer to wealthy customers.
Myth #2: Millions of dollars in liability coverage must be really expensive.

Let's continue on in our personal umbrella mythbusting by tackling yet another myth that prevents some agents from offering or selling umbrellas:

MYTH: You can't obtain an affordable umbrella for a police officer, doctor, pro athlete, or politician.
TRUTH: Some carriers accept these occupations without any additional underwriting or charge.

It's true that personal umbrella carriers ask about certain occupations that they believe present significantly greater risk. Some carriers won't offer coverage for those in high-risk occupations. Others will offer coverage at a higher premium to cover the additional risk they're taking on by insuring those folks. Still yet, other carriers will offer coverage without even charging extra premium for the occupation. If your customer has an occupation that may be concerning to an umbrella carrier, check with multiple carriers to find the best fit.

Also, occupations that are undesirable to some carriers may not be at all concerning to others. Examples are police officers, doctors, judges, local politicians, and even teachers. Some occupations definitely require additional underwriting or approval though, such as professional athletes, TV or radio personalities, and state senators. However, there are carriers who are willing to offer coverage.

It's important to note that, regardless of an insured's occupation, personal umbrellas typically exclude coverage for injury arising out of the insured's occupation or business pursuits. There are a few exceptions (family farm operations may be an example), but a customer should not rely on a personal umbrella to extend to business pursuits or business property.

Personal umbrella carriers vary significantly on what's considered a high-risk occupation. When you have access to multiple personal umbrella carriers, you can obtain coverage for everyone from Tom Hanks to the guy who gets his coffee. As an IIABA member, you have access to two hand-picked, highly-rated personal umbrella carriers. RLI Insurance, IIABA's preferred and endorsed personal umbrella carrier, has been working with Big I members for 25 years. They have broad underwriting guidelines and a simple, self-underwriting application. Anderson & Murison is IIABA's alternative umbrella market and is available when a customer won't qualify with RLI. Access both at www.bigimarkets.com or www.iiaba.net/umbrella.

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New Webinars

Webinars

Join DocuSign for an Introduction to ESignature

Join DocuSign for a complimentary webinar on January 14th at 1PM EST to learn more about DocuSign for your agency. DocuSign staff will show you how you can use DocuSign for everything from new policy applications to coverage election forms. DocuSign will cover the basics, including how to take advantage of your exclusive Big "I" member price discount, and leave plenty of time for you to ask us questions:

Legality and security: We'll show you how DocuSign is a best practice in keeping you and your clients safe
Ease and convenience: See what your clients will see when you send documents through DocuSign, and learn just how easy it is to sign
Sending, templates and account management: We'll get you up to speed on setting up your account, short cuts with document templates, and account management 101

Register online for the January 14th session. Learn more about your exclusive Big "I" DocuSign discount at www.iiaba.net.

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>Big "I" Virtual University Webinars

Don't miss the following education opportunities provided from the Big "I" Virtual University experts that focus on topics agents need to know to make a smart start in 2016. For more information, contact national staff.

January 27. "Insurance in the Headlines" webinar which examines over a dozen current issues in the news (both consumer and industry) and their insurance implications ranging from car sharing to NARAB, generational changes, homeowners loopholes and more. This webinar is approved for 3 hours of CE in Idaho, Maine, Montana, North Carolina, Oregon, Virginia, Washington and Utah. Click here to learn more and register.
February 1. "First Monday LIVE!" a free monthly webcast hosted by the VU's own Bill Wilson and guests on the first Monday of the month, to discuss the wide world of insurance. Each 30-minute webisode will cover "what's going on" (drones, car sharing, concealed weapon laws, legalized marijuana, legislative issues) and the implications along with hot topics, your feedback and more. The inaugural broadcast will discuss "price optimization or price gouging?" and have time for audience Q&A. Click here to learn more and register.
February 24. Emerging Insurance Pricing Mechanisms..The End of Underwriting? This two-hour program examines past, recent, current, and emerging pricing mechanisms, from the inception of judgmental underwriting to class rating to data analytics and predictive modeling. Click here to learn more and to register.
March 23. "Horrible Commercial Lines Policy Forms and Endorsements to Avoid or Be Wary Of" This program examines dozens of commercial lines policy forms and endorsements that business entities should avoid in their insurance programs if at all possible. Discussion topics range from why be concerned to who's to blame, to Non-ISO and ISO Policy Forms and Endorsements and what to do, along with time for questions and answers. Click here to learn more and register.

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Remember that you can view the following webinars 24/7 by checking out the BIM Webinar Library. To do that log onto Big "I" Markets and click on "Publications".

Personal Liability Trends - Fireman's Fund
TravPay
Commercial Lessor's Risk
Affluent Homeowners
Travelers Select Products (series)
Travel Insurance
Community Banks
XS Flood
Real Estate E&O
RLI Personal Umbrella
Affluent Homeowner
"Oh, by the way...Flood Sale"
Habitational
Non-standard Homeowner
Student Housing

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BIM WEBSITE TRAINING WEBINAR

For all you folks who recently registered for Big "I" Markets, remember you can participate in a webinar from the comfort of your office to help you learn how to navigate around the system. Every Thursday at 2:00 p.m. EDT we'll show you how to navigate the Big "I" Markets platform, including how to submit a quote! A recording of this webinar can be found under "Publications" after logging into Big "I" Markets.

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Flood Insurance Premiums vs. Losses State by State
Offer and Document…Offer and Document…Repeat

By Paul Buse, President of Big I Advantage^®

Recently I was surprised to see a nice summary of the state-by-state ratio of premiums paid to the losses covered by the NFIP (the "National Flood Insurance Program"). Most states are self-supporting in that their citizens more in NFIP premiums than there has been in claims. That is, all insurance - to be self-sustaining insurance - must pay for itself. In the chart below, the lighter the color, the higher the ratio of premiums to losses. Florida in particular surprised me. With less than 10% of USA population their citizens have over 40% of the policies and Florida paid over $3.6 in premiums for every $1 in paid claims over the study period.

NFIP Policyholders' Balance by State, 1978-2008
Ratio of flood insurance premiums collected over flood claims paid

Click for larger version

Source: A.M. Best Aggregates and Averages IEE and Underwriting and Investment Exhibit

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Last Week's Most Clicked Links

Here are the top three items that got BIM agents clicking from our last edition... see what you missed!

Horrible Commercial Lines Policy Forms and Endorsements to Avoid or Be Wary Of Webinar Info & registration

Bizarre Christmas Claims

Round-The-Clock Travel Assistance with AIG Affluent

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Big "I" Markets Sale of the Week
Congratulations to our agent in Idaho on a travel insurance sale of $1,581 in premium!

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Tuesday, January 12, 2016

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TFT is authored by Michael Welch
Big "I" Markets Marketing Assistant