July 2014
Burand's Insurance Agency Adviser
Resources and Information for the P&C Insurance Industry
Volume 19, Number 4

~ For a printable PDF version, click here. ~

In This Issue...

10 Questions You Must Ask Before Your Agency Hires a New Producer
by Jim Caragher

When I take on a client for a new producer recruiting engagement, I look for the three critical elements: cooperation, marketability (not only the producer position - also the firm and the hiring manager), and a sense of urgency. I use a checklist of questions to make sure that an agency meets our standards for a successful new producer recruiting search engagement.

Read More...


Partners: Are You All Pulling in the Same Direction?

When an agency has partners all pulling in the same direction, their success is a sight to behold. (One caveat does exist that occasionally occurs and that is when all the partners are pulling in the same unethical direction and because birds of a feather do flock together, when these partners pull together they create a sight too but more like the spectacular roadside crash.)

Read More...


S-Corp's and Independent Agencies

Most agencies today are probably S-corporations or similarly for this article's purpose, an LLC. Accountants have been urging and cajoling their clients to either form their agency as an S-corp from the beginning or convert to an S-corporation. But accountants are often short-sighted, they rarely know this industry, and therefore they rarely ask the right questions.

Read More...


Case Studies...Things that Happen...
by Antoinette "Toni" Gambonini

(Note: This has been reprinted with permission from Gambonini Consulting, Ltd.)

Good Domestic Broker Lands Their First International Client

A very good domestic broker who had never had a client located outside of his country received a call from his client telling him that he had acquired a manufacturing plant in Mexico.

Read More...

Solutions!

Chris Burand,
Accredited Business Appraiser
Institute of Business Appraisers

Burand & Associates, LLC

215 S. Victoria Ave., Suite E
Pueblo, CO 81003
p: 719/485-3868
f: 719/485-3895
chris@burand-associates.com

Visit us at:
burand-associates.com


"Seek simplicity and then distrust it."

-Alfred North Whitehead

Interested in Networking with other Agency Leaders? 
Love the Rocky Mountains?

Then I'd like to invite you to attend the 2015 Keystone Agency Management Meeting, March 2-3, 2015 in Keystone, CO!

This opportunity consists of a small group of agency professionals who meet only during the morning. The group discusses critical agency management topics, as well as attendees' ideas, roundtable topics, successes, questions and concerns.

The schedule leaves the afternoons free for skiing and enjoying the breathtaking Colorado Rockies.

The registration fee for this two day meeting is $549 per person. Please contact me at chris@burand-associates.com to learn more.

We have very limited space available so if you're interested, don't wait!


10 Questions You Must Ask Before Your Agency
Hires a New Producer
by Jim Caragher

When I take on a client for a new producer recruiting engagement, I look for the three critical elements: cooperation, marketability (not only the producer position - also the firm and the hiring manager), and a sense of urgency. I use a checklist of questions to make sure that an agency meets our standards for a successful new producer recruiting search engagement. Agents need to be ruthless when assessing their readiness for a new producer. An agency should be sure that they have the capability to effectively recruit and hire a new producer and also to effectively train, develop, mentor, and manage a new producer. These ten questions are based on lessons learned from new producer recruiting and development, including the mistakes and bad producer hires that we and our clients have made. Answering these ten questions honestly will help an agency determine their new producer readiness.

1) Can we afford to invest in a successful new producer and can we afford to absorb the cost of a new producer failure?

An agency needs to be large enough to afford the investment in a new producer for a 3-year validation plan and also be in a financial position to absorb and tolerate a lost investment if the producer fails. The minimum agency size is ~$2+ Million revenue (~15-20+ employees or $15+ Million total agency premium volume). Ideally, the agency is $5+ Million in revenue (~$40+ Million total agency premium volume).
A growth agency does not shy away from new producer recruiting because of the fear or cost of failure; they understand that failure cannot be eliminated in new producer recruiting but that it can be mitigated. The key is to stack the odds for success in an agency's favor is to (1) recruit and select top sales talent; (2) invest in producer mentoring, development and management after the hire; and (3) recognize what producer failure looks like and cut off the investment as soon as possible. In other words, a growth agency plans for - and builds in the cost of - failure in their new producer strategy.

2) Is our agency an attractive place to work and does our agency's social media reputation reflect this?

An attractive agency has generally satisfied employees and low employee turnover. A new producer candidate will conduct due diligence on an agency as a prospective employer, including talking to current and past employees, agency clients and even the agency’s competitors. Candidates will research the agency’s workplace reputation and employer brand on websites such as Glassdoor (www.glassdoor.com). The agency's website, LinkedIn company page and Facebook company page should be up-to-date and show a candidate that the agency is an attractive employer with a clear brand message and competitive advantages.

3) Are we growing and do we have a clear sales and marketing plan?

A new producer candidate wants to join a healthy, growing agency. Ideally, an agency has  industry niche expertise or unique product specialties that a new producer can target to become successful more quickly. Candidates want to know that an agency can demonstrate an ability to differentiate itself from other agents on the basis of unique value-added services.

4) Does our agency have a track record of investing in and developing new producers?

An agency needs to be prepared for a new producer candidate to ask about the agency's current producer staff and its history of producer hires. If the agency has a strong history of investing in and developing new producers, this is clearly a big selling point. If the agency has either no history of producer hiring and development or a spotty record with many producer failures, the agency will need to be prepared with a cogent and convincing sales pitch for how they are going to support a new producer. Beyond this candidate sales pitch, the agency needs to actually be prepared with an effective plan for developing and managing a new producer!

5) Are we enthusiastic about bringing on a new producer and do we view and treat a new producer as a valuable investment in the firm's future?

An agency's owners should be emotionally committed to and genuinely excited about hiring and developing a new producer. If the agency’s owners are not all on board, the agency should not hire a new producer. The right agency environment has a culture where a new producer is welcomed and supported by the owners, producers, marketers and CSRs as a critical member of a productive agency team. While the agency environment starts at the top with the owners, the harsh reality for some agents is that the inside staff and existing producers will not build respectful, productive relationships with a new producer and lack the ownership's commitment to helping a new producer succeed. Strong communication and management by the agency's leaders are critical.

6) Do we have a sales manager and experience producers available as mentors?

A new producer - even one with significant sales experience - is not going to succeed if an agency expects them to self-manage. A management plan and active, day-to-day sales management is required. For truly "green" new producers, experienced producers are needed to provide encouragement, guidance, and mentoring support. Ideally, an agency has a staff of 5+ commercial producers; these experienced producers can share the mentoring responsibility to guide and support a new producer and take turns accompanying the new producer on early sales appointments.

7) Do we have demanding, but realistic early expectations for a new producer's prospecting and sales results?

An agency should have clear expectations and milestones for a new producer's first year, particularly for prospecting call activity and getting new business appointments. An agency has to recognize that a new producer is typically starting from a cold start without a prospecting pipeline and therefore it's no realistic to expect robust first year sales results. A good thumb rule is that a producer should aim to sell enough in first year total agency commission to approximately cover their starting salary.

8) Are we willing to commit to a reasonable starting compensation plan to attract and retain a new producer?

Depending on both the candidate's and agent's situations, we suggest a first year compensation budget of $35,000 to $70,000, and recommend that an agency has to commit to paying most of this compensation in the form of a guaranteed salary. Candidates simply need a base salary to meet their cash flow requirements as they start to build a book of business. Like most things in life, you will get what you pay for in terms of sales skills and experience.

9) Do we have a realistic plan and time line to validate a new producer?

An agency needs to understand that hiring and developing a new producer is a "long play" in that it typically takes approximately 3 years to grow a validated producer. The idea is to build a bridge to validation by the 3rd year that balances the cost/risk between the candidate and the agency; however, the reality of new producer economics is that the agency will always absorb more of the cost and risk in the early years, but also will earn the lion’s share of the upside once a producer successfully validates.

10) Are we prepared to effectively recruit a new producer?

An agency needs to create a recruiting process that's effective - in terms of finding and attracting top sales talent and tactfully and efficiently screening out people that don’t fit. The recruiting process needs to be repeatable so that it's consistent, reliable and easy to do. An agency needs to balance the need to be thorough and deliberate in hiring with a need for speed and a sense of urgency. Agents compete with other agents and other industry employers for the top sales talent and responsiveness and quickness trumps indecisiveness and slowness. Agents need a candidate sourcing plan to continuously find top sales talent and an effective multiple stage interview process.

Summary

Before an agency decides to make a new producer hire, they need to candidly answer these ten questions to make sure that they are ready. An agency doesn't need a perfect score on these ten questions, but they should seriously pause and reconsider if they answer "no" to several questions or can't find a way to change a few "no" answers to "yes." While recruiting new producers is a core ingredient in a successful agency’s plan to grow organically, increase valuation, and perpetuate, it's not a strategy that every agency can or should deploy. Sometimes the new producer hire that an agency doesn't make can be the wisest decision!


Jim Caragher is CEO of CIB Group Services (www.cibgroupservices.com), a company 100% dedicated to helping agents recruit and develop the next generation of producers. Readers may contact Jim at (973) 300-2478 or by email at jimc@thecibgroup.com.

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Partners: Are You All Pulling in the Same Direction?

When an agency has partners all pulling in the same direction, their success is a sight to behold. (One caveat does exist that occasionally occurs and that is when all the partners are pulling in the same unethical direction and because birds of a feather do flock together, when these partners pull together they create a sight too but more like the spectacular roadside crash.)

The most essential part of much of my consulting work through the years has been helping partners begin to pull together. My clients call it strategy, or E&O, or operations consulting, but the core issue is quite often the partners are not pulling in the same direction thus leading to strategic issues, E&O claims, poor morale, no growth, or poor agency values. Partners pull different directions for many reasons. Sometimes they pull differently because their strengths or their personal weaknesses lead them down different paths.

Sometimes age makes a difference. Sometimes money makes a difference. Sometimes it is just personality, for better and for worse. In fact, a partnership should be signed with someone reciting the wedding vow, "Do you take this partner for better and for worse?"

Some years ago a fantastic book was written regarding partnerships. I believe the genesis of the book was actually for marriages but I've found it works well for business partnerships too. "The Eagle's Secret," by David McNally, separated partners into two basic categories; Thrivers and Survivors. His premise is that if both partners are Thrivers, they will pull together. If both partners are Survivors, they will pull together. The problem occurs when one is a Thriver and one is a Survivor. He provides assessment tests and some solutions in his book for working through differences, if possible.

Working through these situations with agency owners, I have learned that those partners willing to be assessed gain tremendous clarity when they understand better who they are and who their partner is in this context. A Survivor is no better than a Thriver and vice versa. Survivors and Thrivers though pull in quite different directions each and every day so they will get on each other's nerves and the people around them will suffer from lack of direction as they are pulled in different directions by each partner.

If you are a partner then this book is for you. Often a third party is required to facilitate the communication and development of a single track. My partner in these endeavors, Jay Brenneman, of SageQuest Consulting (www.sagequest.com), has amazing skill in assisting business owners to pull together without always having to change strictly from a Thriver to a Survivor or the opposite. Once partners are pulling the same direction, the agency can embark on true strategic planning which is considerable fun and makes an agency a sight for their competitors to behold.

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S-Corp's and Independent Agencies

Most agencies today are probably S-corporations or similarly for this article's purpose, an LLC. Accountants have been urging and cajoling their clients to either form their agency as an S-corp from the beginning or convert to an S-corporation. But accountants are often short-sighted, they rarely know this industry, and therefore they rarely ask the right questions.

Short-sighted advice
The average agency owner is approximately 59 years old. If an agency converts from a C-corporation to an S-corporation, they likely have to wait ten years to gain the full tax benefits of an S-corporation sale. So what is the benefit of converting if the owner is going to sell prior to 69? I am not saying a benefit does not exist, but if it does, exactly what is it? Have the CPA give you a real number that fits your real situation.

Not knowing the industry
Approximately 99% of the accountants I have met or whose works I have reviewed do not know how agency trust accounts work. For that matter, many agency owners do not either so to summarize, agencies in ALL 50 states must remain in trust 365 days a year. This means each agency must have a trust ratio greater than 1.0 at all times (some states have variations on this so check with the appropriate state). To maintain a trust ratio of 1.0 or greater, the agency’s balance sheet must have: (Cash + premiums receivable) / (premiums payable + binder bills) > 1.0.

This means that at year-end, the agency's owners likely cannot legally distribute money or take bonuses or even take paychecks if it results in a trust ratio of less than 1.0. Even if you must pay taxes on these monies, and therefore feel the money is yours, it is not your money to distribute if the trust ratio is less than 1.0. If it is less than 1.0, the agency has effectively spent money that is not its to spend. To that point, accountants that recommend owners take distributions are unknowingly recommending their clients break the law.

A C-corporation does not have this same issue because money can be left in the company, often at a low tax rate. The agency pays the tax, not the owners. In theory an S-corp may be more tax efficient, but only if laws are not broken to achieve such efficiency. When agency owners have to pay taxes on income they do not actually receive, true financial hardship can occur. That hardship outweighs any tax advantages. This is the S-corporation tax trap that is very painfully real resulting in far worse difficulties than in a C-corporation.

Not asking the right questions
First, when talking agency owners into converting to an S-corporation with a goal of reducing taxes upon the agency's sale, the question that needs to be asked is, "Who is the likely buyer?" Almost all external sales are asset sales where an S-corporation often has more tax advantages. However, most internal sales, especially family sales, are stock sales where the S-corporation has limited, if any, advantage. In 20+ years, I have only seen one agency ever have to pay double taxes on their income as a C corporation. That was a highly unusual situation based on extraordinary success. Otherwise, with proper planning, double taxation on income should never be an issue.

Second, accountants do not ask when the owner is likely to retire. I have seen too many situations when agency owners convert to an S-corp though they have plans to retire in less than five years. All the accountant had to do was ask one simple question.

Conclusion
I am not condemning S-corporations. They have advantages. My point though is that S-corporations also have significant disadvantages. Agency owners will make much better decisions if they know the right questions to ask. Agency owners will make much better decisions if they educate their accountants first. Agency owners will make better decisions if they know to change accountants if their accountant only gives them the benefits of an S-corporation, especially if they do not ask the appropriate questions. Without asking the appropriate questions, the accountants are just assuming and everyone knows what making assumptions makes.

NOTE:  None of the materials in this article should be construed as offering tax or legal advice, and the specific advice of qualified accounting/legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.   

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Case Studies...Things that Happen...
by Antoinette "Toni" Gambonini

(Note: This has been reprinted with permission from Gambonini Consulting, Ltd.)

Good Domestic Broker Lands Their First International Client

A very good domestic broker who had never had a client located outside of his country received a call from his client telling him that he had acquired a manufacturing plant in Mexico.

"Congratulations and no problem" said the broker "I'll just tell your carrier to add your new plant in Mexico to your policy."

As far as the client was concerned, he believed that he is covered and that his broker knew everything that needed to be done to insure that his operations in Mexico were properly covered. All was good...

All would have been good if the broker knew what to do...but because the broker

  • had not worked with his carriers on an international basis, he did not know if the client's carrier could or could not actually insure the client's exposures in Mexico
  • did not realize that he was not licensed as an insurance broker outside of his country and that he could not transact business in any country in which he was not licensed
  • had no idea what the actual exposures were to put into the application/submission, he had a few specifications that the CFO had given him over the phone, but he had no one to go out and survey the manufacturing plant for him
  • did not have a trusted insurance broker contact in Mexico to help him understand the legalities and lay of the land when it came to transacting insurance in Mexico
  • did not have a trusted insurance broker contact in Mexico to be his client's trusted consultant for his exposures in Mexico
  • had no idea if there were locally required compulsory coverages
  • had no idea what coverages could and could not be provided on a non-admitted carrier basis in Mexico
  • did not read, speak or write the local language
  • as the list goes on the potential for an Error & Omission claim grows exponentially

Insurance is insurance BUT handling insurance programmes outside of your own country is very different than handling them inside. As with everything in the insurance sector, the handling of international insurance programmes is trainable...you just need to know how to create the structure within your firm, know where to find the right carrier and mentor, with the right resources to help you to:

  • Realize more business opportunities
  • Reduce the potential of your clients being poached by brokers who know how to handle international insurance programs
  • Reduce your exposure to unforeseen and up until today unimagined Errors & Omissions claims

Know that an insurance company will be happy to teach you about selling the coverage in their international policy forms and though this is very important it is equally important for you to know how to handle the process and procedures of doing international business from inside your firm.

You may not believe that your firm has any client's with international exposures...take a look...do an internet search on each of your clients and see where they are telling the rest of the world that they are doing business...

You want to train your people before your client needs them to be trained, so that they will be confident and competent at taking care of the client when the client's next call is about doing business in Namibia! When your client calls they need your firm to be "knowledgeable and connected" at the time of their call...not sometime later.

The Broker of Record Nightmare

A controlling broker took a new client's business over on a mid-term Broker of Record...

The new broker filed the Broker of Record Letters with the carriers and appointed local country brokers. All of the Broker of Letters were accepted by the carriers, as were the local country brokers. As far as the new controlling broker was concerned, his/her job was done. All that the new controlling broker needed to do now was to provide regular on-going policy service to the client (additions and deletions of coverage) on the policies that had been put into force by the former broker...right?

The former broker was a respected professional, what could possibly go wrong?

Let us start with the client's leased office building in Italy. The building burned to the ground after the effective date of the Broker of Record Letters. As it turned out the client had the equivalent of a triple net lease that stated that the client was responsible for indemnifying the property owner and insuring the building for full limits...the former broker had never read the lease (which was in Italian) and neither had the new broker...the building was not covered.

The new broker was now responsible for "answering for" all of the client's policy content, coverage, placements and limits, as of the time of the loss because the loss occurred after the new broker had taken over the policies on Broker of Record.

Not only was there a bad loss, but there were now two new brokers involved - the controlling UK broker and the local country broker in Italy. The controlling UK broker appointed the local Italian broker but never gave the local Italian broker permission and authority to approach the Italian client about their exposure vs coverage situation and the controlling UK broker never requested copies of any of the client’s leases for review.

So what went wrong and whose fault was it?

Well we can say that the client "...never told us..." but that is not going to hold up, because "we" are the professionals and it was our job to ask and read...

The new broker was, in fact, completely responsible for the former broker's coverage placement, as of the date and time that the carrier accepted the Broker of Record Letters. The new broker failed to review all of the client's current exposures, including leases and to compare them to the policies that were in force at the point that he took the client over.

What should have been done?

The new broker needed to do a full client exposure vs policy coverage review, discussing all of the necessary vs optional coverage changes that were needed or could have been made, as of the effective date of the Broker of Record Letters. Next, the new broker needed to review and document all of the client's choices and decisions back to the client and the carriers, in writing, for both the client’s UK and outside of the UK exposures.

The review needed to include reviewing all of the client's leases, including the client's leases outside of the United Kingdom. The new broker needed to authorize and instruct the appointed Italian broker to meet with the Italian client to discuss the current Italian exposures vs the current Italian coverages, which should have included reviewing all of the Italian leases. This process should have been completed for every country the controlling UK broker was appointed to manage, at the instruction of the controlling UK broker.

The new broker made a fatal decision. When he/she decided that the former broker was a professional and that since the former broker had been handling the client for several years that the currently placed coverages must be appropriate to the exposures that the client had, surely at least until the renewal which was in another 11 months.

A few extra bits of salt in the wound...

The new broker was now responsible for all of the client's exposures and coverages, though the new broker would not be receiving commissions or fees on many of the coverage's that were taken over until he/she renewed them. The new broker also discovered that they were responsible for return commissions to the client on all return premium policy adjustments, effective as of the date of the Broker of Record Letters and on any auditable policies that developed return premiums at the end of the year.

The Italian broker was left with a potential Error & Omissions claim and great deal of work mopping up the claim with the local client, with no commissions to be paid.

The reality and the moral of the story...

The excitement and the glory of bringing in a new client fades very quickly when you are sitting with your management team and your Errors & Omissions carrier's attorney, looking at your firm's self-insured retention.

Do not take a client over on Broker of Record that you do not have the time and interest to stop and immediately do a full review of the client's exposure vs coverage, limits, placements and the subsequent critical written documentation - before or as of the effective date of the Broker of Record.

Employee Benefit Liability Case

A client's General Liability policy renewed and the Producer missed writing that the client needed Employee Benefits Liability on the renewal submission. The client stayed with the same Producer but moved carriers for price and coverage. Unbeknownst to the client their General Liability policy renewed without Employee Benefits Liability Coverage.

How did this happen?

After the renewal meeting with the client, the Producer took the expiring submission and made a couple of changes on it. The Producer did not look at the expiring policy or at any of the coverages that were endorsed onto the policy mid-term. The client had purchased Employee Benefits Liability 6 months into the expiring policy's term. The coverage was endorsed onto the General Liability and paid for by the client.

The Producer received the renewal quotes, took a copy of the prior year's renewal proposal, changed the carrier's name, updated a few things on it and sent it off to the typing pool. The Producer never noticed that there was no Employee Benefit Liability on the renewal submission or the new carrier's quotation (the new carrier had no idea that the client had had the coverage endorsed onto the expiring policy).

The Client Service Representative checked the policy when it came in against the renewal submission and the proposal. The Client Service Representative did not also check against the expiring policy and its endorsements.

Around the same time that the client renewed their General Liability coverage, they renewed their Medical Insurance.

Several months into the policy term, the client discovered that they had not added a new female employee who was pregnant, to their medical insurance plan roster at renewal.  The employee had been pregnant at the time the Medical Insurance renewed thus the pregnancy had not been accounted for in the renewal premium. The carrier decided that this was not their error and they were not willing to cover the pregnancy.

The client presented the situation to the broker for coverage under what should have been their Employee Benefits Liability cover, only to find out that there was no Employee Benefits Liability coverage on the client's General Liability renewal policy.

It was not an easy pregnancy and the medical bills for the pregnant employee were significant.

The Producer was at fault for not having renewed the client's Employee Benefits Liability coverage.

The client filed an Errors & Omissions claim against the broker. The claim went through the $250,000 Self-Insured Retention and into the Errors & Omission's policy limits.

What would have helped to prevent this situation?

  • The renewal submission should have been reviewed against the expiring policy and its endorsements
  • The quote should have been reviewed against the expiring policy and the renewal submission
  • The proposal should have been reviewed against the expiring policy, the submission and each carrier's quotation
  • The policy should have been reviewed against the expiring policy, the submission, the selected carrier's quotation and the proposal

The above is a lot of "belt and suspenders" but a $250,000 self-insured retention was a lot of money to the broker.

Now you may wonder what this could have to do with your client's international exposure...if your client has employees in the US and they do not have Employee Benefits Liability coverage on their General Liability policy...they too could be at risk.

Exporters Package Policy Responds

The facts...

  • A distributer of commercial pumps, located in Southern California sent 2 salesmen to Taiwan on a sales trip to sell the company's pumps
  • The Taiwanese client's location was in a very remote location out in the countryside and thus the pump company's salesmen were in that same remote location, something between the size of a town and a very small city
  • It had taken the salesmen a whole day to drive from Taipei out to the client, on narrow, very potholed and sometimes on dirt paved roads
  • After dinner and too much to drink the salesmen got into their rental car and started to drive from the restaurant back to their hotel
  • There was a terrible accident
  • Our driver of the car was determined, by the local authorities, to have been drunk and at fault; he was also injured
  • Our passenger was very badly injured
  • There was damage to 3rd parties but not of significance
  • Both our driver and our passenger were taken to the local hospital
  • Our driver was treated and released into the custody of local authorities - damages and fines were charged and paid and he was released after a couple of nights in the local jail, but he is not whom our story is about...
  • Our passenger was in the only available hospital, which was very small and had very basic facilities
  • He was in a coma with brain damage - the local doctors did the best that they could for him but their background, facilities and resources were very limited
  • Our passenger was in a ward, on a gurney with a drip bag of saline
  • In the meantime the passenger's immediate family (his mother, father and brother) all living in Southern California were informed of the circumstances and how grave the situation was
  • Our passenger was hanging on to life by a thread
  • The family did not have passports and the mother was terrified of flying
  • Our passenger was in very bad condition but it was determined that it was better to try to get him to Taipei where the medical facilities and staff were in a much better position to take care of the patient and hopefully get him in a position to be flown back to the States for treatment
  • The only available ambulance service consisted of a van with a gurney and a drip bag holder, it was not anything like we might imagine that an ambulance would be
  • The ambulance had to take our patient from the remote location to Taipei, over the narrow, very potholed and sometimes unpaved roads
  • The plan was to get the patient stabilized and onto a plane back to the States for treatment
  • The insurance carrier was in the process of arranging to have the seats in the first class section of an airplane removed so that the patient could be wheeled on and tended to throughout the flight by a doctor and a nurse...they were arranging to take over and to close off the entire first class cabin as they airline did not want any of their passengers to be exposed to the situation...this was before carriers were linked up with the specialized medical evacuation and repatriation services of SOS and its equivalents
  • The patient made it to Taipei but died shortly after arriving at a hospital in Taipei
  • His father and his brother arrived just in time to be with him when he passed
  • You might think that this is the end of story...but it is not...
  • Repatriating a body back from one country to another country becomes a difficult and expensive and situation, fraught with rules and regulations that one has never had cause to consider
  • You are not always able to have the body flown directly to the location of the family’s choice, the plane may stop in several countries along the way
  • When you are shipping a body, the preparation of the body must meet all of the rules and regulations of every country that the airplane and thus the body stops in
  • Before the body is shipped you have to find an embalmer who is capable of embalming and preparing the body to meet or exceed each country’s body preparation requirements and many countries have different requirements

The best news that you could have had out of a horrible situation was that:

  • The pump distributor's insurance broker had sold them an Exporters Package
  • As soon as the driver informed his company of the situation, the client called the broker and the broker called the carrier
  • The carrier responded immediately
  • They were in touch with the local hospital
  • They were in touch with the family
  • They helped the father and the son to obtain passports in 24 hours from the US Passport Office in Los Angeles
  • The carrier arranged to fly the family members to Taipei and to get them to the hospital in Taipei as soon as it was possible
  • The Exporters' Package carrier found a properly certified embalmer
  • Arranged for all of the necessary certificates, bills of lading and the shipping of the body
  • The Exporters' Package carrier took care of all of details and paid all of the bills

No one ever imagined how this policy would come into play when the coverage was purchased...

International Payments - To and From You

This is a true story that happened to me!

I provided my 2-day International Property & Casualty and Employee Benefits Business Development Courses to a broker's team outside of the United Kingdom.

The courses went well. The broker's team received exactly what they were looking for and they were happy to engage me for further services.

As is my procedure, I sent the broker a thank you note and my invoice the day after the course was over. The invoice contained the invoiced amount for the courses and the following electronic payment information.

Bank Details:
Name of Bank
Address
City, Zip-Post Code, Country

Sort Code:  
SWIFT Code:
IBAN:  

Account: 

The broker very diligently snail-mailed a check from their country to my office in the United Kingdom and the check arrived exactly on the requested due date.

I was paid on time and yet there were 3 little problems...

  • The broker had sent a check
  • I had invoiced the broker in Great British Pounds (GBP) however, in my effort to be helpful and transparent I had also put an approximate conversion of my GBP invoice into the broker’s local currency - the broker picked up their local currency number not the GBP number
  • The broker wrote their check in their own local country currency - not the currency that they were actually invoiced in and that my company and I are located in

Here is how these 3 little facts caused a problem...

I delivered the check to my local "very international" global bank branch. The bank accepted the check and then advised me that I would receive a letter in several days, from HQ, informing me of how many weeks it would take for the check to clear and for the funds to be deposited into my account. In addition, the bank said that they could not tell me what the exchange rate would be when the check actually cleared. This means that I will not know how much I have been paid until the check clears and the funds are deposited.

I have to admit that I was surprised, but it was my first time working with a broker who paid by check. When I queried the bank about their procedures, they informed me that these are the rules for processing "out of local country checks" and that there was nothing else to discuss!

The next day I went back to my client and advised them that in the future they would want their accounting department to use the details referenced below, in order to make electronic transfers to me in Great British Pounds. I also advised that in the future they will want to pay others, in the payee's local currency. Doing this ensures that the system will work smoothly and all parties will know what to expect.

What should you do...

When you start to invoice international payments due you, you will want to be paid electronically and in your own local currency. You will need to provide proper instruction to those who are paying you, similar to what I have provided below.

In reverse, when people outside of your country invoice you, you will want them to provide you with the same type of information that I have supplied in my invoice below and the instructions for you to pay them electronically in their own local currency.

How have I changed my own invoicing procedures...

I have now changed the payment section of my invoice to read as per below and I will no longer provide a local payee currency conversion on my invoice...

 

DUE AND PAYABLE: DATE

Please make all payments electronically, in accordance with the information provided below, in Great British Pounds

Bank Details:
Name of Bank
Address
City, Zip-Post Code, Country

Sort Code:  
SWIFT Code:
IBAN:  

Account: 

 

 Sometime the smallest of details can make such a big difference!


Antoinette "Toni" Gambonini, CEO of Gambonini Consulting, Ltd (www.gamboniniconsulting.com), is located in the UK and specializes in international insurance consulting services. Readers may contact Toni by email at toni@gamboniniconsulting.com.

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Chris Burand is president and owner of Burand & Associates, LLC, a management consulting firm that has been specializing in the property/casualty insurance industry since 1992. Burand is recognized as a leading consultant for agency valuations, helping agents increase profits and reduce the cost of sales. His services include: agency valuations/due diligence, producer compensation plans, expert witness services, E&O carrier approved E&O procedure reviews, and agency operation enhancement reviews. He also provides the acclaimed Contingency Contract Analysis® Service and has the largest database and knowledge of contingency contracts in the insurance industry.

Burand has more than 20 years' experience. He is a featured speaker across the continent at more than 180 conventions and educational programs. He has written for numerous industry publications including Insurance Journal, American Agent & Broker, and National Underwriter. He also publishes Burand's Insurance Agency Adviser for independent insurance agents.

Burand is a member of the Institute of Business Appraisers, a department head for the Independent Insurance Agents and Brokers of America's Virtual University, an instructor for Insurance Journal's Academy of Insurance, and a volunteer counselor for the Small Business Administration's SCORE program.


NOTE: The information provided in this newsletter is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.

Burand & Associates, LLC is an advocate of agencies which constructively manage and improve their contingency contracts by learning how to negotiate and use their contingency contracts more effectively. We maintain that agents can achieve considerably better results without ever taking actions that are detrimental or disadvantageous to the insureds. We have never and would not ever recommend an agent or agency implement a policy or otherwise advocate increasing its contingency income ahead of the insureds' interests.

A complete understanding of the subjects covered in this newsletter may require broader and additional knowledge beyond the information presented. None of the materials in this newsletter should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this newsletter. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.


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