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Task Force on Agency Ownership Publishes Report

Over the past several years, there has been increasing confusion about what independent agency owners actually own. This is the result of an assault...
February 26, 2008

By Susan A. Sallada

Over the past several years, there has been increasing confusion about what independent agency owners actually own. This is the result of an assault on the definitions of what constitutes a book of business. That's why PIA National began a public education effort that speaks to critical aspects affecting the ownership, content and control of the independent agency's core asset - "the book of business" - as well as the other assets of their agency business.

PIA's effort to educate in this area began with the publication of a series of articles that explained the issue. After that, in 2005, then-PIA National President Ray Peretti appointed a special Presidential Task Force on Agency Ownership to look at the broader issues involved and recommend additional actions.

The final full report of our Task Force was released in September 2007, at which time the Task Force was dissolved. Going forward, the results of our efforts will be reported in more detail in a series of upcoming articles of PIA Connection. In addition, the Task Force's report is now available to all PIA members here.  Last, PIA National will continue to work with PIA affiliates and members in adding to and refining this resource center.

Our Findings

The Task Force confirmed that PIA members currently are confronting an increased number of challenges in the area of agency ownership rights.  In evaluating these challenges, the Task Force has come across market data demonstrating that too many critical groups:

  • Are unclear how property law applies to, affects, and supports agency ownership rights.
  • Are unable, or sometimes unwilling, to form a consensus as to what constitutes the entire "expirations" asset that belongs to the independent agency.
  • Do not recognize "control" as a critical element of agency ownership rights.

Also among the "critical groups" is PIA agency owners themselves. Too often, independent agencies shy away from or overlook regular, public, assertive, and/or effective demonstration of their ownership rights.  Independent agencies own the expirations not only because the law says so, but also because they demonstrate ownership.

The scale, scope and number of challenges that agencies owners face in this area will continue to increase in the near future.  This creates a potential for material, adverse effects and interferences with PIA agency ownership rights.

The core nature of these threats has greatly changed and now present much more complex and sophisticated challenges that are somewhat similar to playing a multi-dimensional game of chess.

Because advocacy for and of agency ownership interests of PIA members continues to be one of the fundamental stewardship responsibilities of the PIA organization, the Task Force looked at a range of potential actions in formulating its recommendations.

For example, agencies could better establish written practices and policies making clear to staff and others as to what comprises the agency's assets, the scope of ownership and control the agency has over these assets, that the agency will exercise and protect its rights of ownership and control over these assets, and that staff and others are required and expected to operate within these understandings.

To best support independent agency interests in this ever evolving and active area, the PIA organization and PIA members must share the same knowledge base, legal presentations and goals for outcomes in a coordinated and deliberate effort to protect PIA members.

Actions Going Forward

Members of the Task Force believe that the PIA National President and Board should decide what course of action PIA National will take to further develop resources to protect our members' ownership interests. We present a series of detailed possible steps in our report for consideration.

PIA National should undertake a public education campaign to reach critical audiences (i.e., insurers, wholesalers, regulators, and PIA members), making it clear that PIA National will continue to press for the respect, consideration, value, and protection of these rights of and for PIA members.

Our report provides the basis for a PIA National information series in PIA Connection as well as other publications.  It also suggests how PIA National should modify its agency review service, thus providing a more useful final product for members' reference. A suggested first-step implementation action follows the report.

We would like to thank the members of the Business Issues Committee, who provided key assistance throughout our work on this project.

In addition, special recognition is due to the members of the Task Force: Don Flanders (VT), Jose Ortiz Garcia (PR), Rick Russell (PA-MD-DE) and Fred Thomas (MT), along with Executive Committee Liaison Kenneth R. Auerbach (NJ) and ex-officio committee member Ray Peretti (WA) - who, during his term as PIA National President, had the foresight to identify this need and appoint our group. PIA National staff provided us with valuable assistance. With the publication of our final report, the Task Force was dissolved as of September 30, 2007.

Susan A. Sallada, CIC, is a national director of PIA from Pennsylvania, Maryland and Delaware.

PIA Connection

This article originally appeared in the Feburary 2008 issue of PIA Connection.