Changes In The Fair Labor Standards Act

FLSA General Overview – Insurance Industry

In general, the Fair Labor Standards Act (“FLSA” or the “Act”) requires employers to pay employees one and one-half times their regular hourly-rate when they work overtime (more than 40 hours in a week). Some employees, however, are exempt from this general rule (i.e., overtime ineligible) and do not need to be paid extra for overtime hours worked.

This memorandum analyzes the Department of Labor’s (“DOL” or “Department”) final rule, issued on May 23, 2016, that is likely to reduce dramatically the number of employees who will be exempt from overtime pay requirements. The rule doubled the minimum salary threshold required to qualify for the Act’s “white collar” exemptions to $47,476 per year ($913 per week), substantially greater than the yearly salary of $23,660 per year ($455 per week) contained in current regulations. The new salary threshold will go into effect on December 1, 2016 and would then be updated automatically every three years beginning on January 1, 2020. DOL expects the final rule to reduce the number of employees exempt from overtime pay requirements by nearly 4.2 million people within the first year of its implementation.

These revised overtime regulations will have a significant impact on businesses of all shapes and sizes, including the insurance industry. For example, even though the Department will now allow a portion of earned commissions to be applied to the overtime eligibility salary threshold, an individual’s base salary before commission must still be at least 90 percent of the threshold. Employees who satisfy the “outside sales” personnel requirements may be excluded from this entire regime (so no overtime need be paid). To the extent a firm has treated sales personnel as “independent contractors,” the Department’s separate independent contractor Guidance issued in July 2015 may effectively bar many commissioned sales personnel – including most insurance producers – from being treated as independent contractors going forward. Producers thus generally will have to be paid a minimum base salary of almost $43,000 unless the “outside sales personnel” requirements are satisfied to avoid overtime pay requirements.

Employers should reevaluate their existing employment relationships with special attention to existing and potential overtime obligations based on the final rule. Once the rule goes into effect, it is highly likely that the Department – and zealous plaintiffs’ attorneys – will be vigilantly monitoring and litigating potential overtime misclassifications and business noncompliance.

Provided in cooperation with HR Workplace Services

National Association of Professional Insurance Agents
400 N. Washington St., 2nd floor, Alexandria, VA 22314-2353
main 703.836.9340 | fax 703.836.1279 | www.pianet.com

PIA Research Reveals Commercial Lines Customers Continue to Prefer Independent Insurance Agents

 

WASHINGTON – Extensive nationwide research conducted by the agency-company council of the National Association of Professional Insurance Agents (PIA) has found that small business owners (SBOs) strongly prefer independent insurance agents as they make choices in today’s online world, but agents must take steps to continue to demonstrate their value and be more engaged online.

The research results are part of “Small Business Insurance & The Internet—The Voice of the Commercial Lines Customer,” the latest project of PIA and The PIA Partnership, designed to provide independent insurance agents with tools to meet the new challenges posed by online providers and direct writers.

“Our results affirm that while small business owners continue to greatly value the professional advice and personal service of an independent agent, there is an expectation that their agent will be more capable of online interaction concerning their accounts and that the agency will have a fully credible online presence,” said PIA National Executive Vice President & CEO Mike Becker.

“This is both an affirmation and a wake-up call for agents,” Becker said. “Commercial lines customers want agents as experts who are backed by the efficiency of the Internet.”

The research project included qualitative focus group research, involving business owners and insurance decision-makers, conducted in multiple cities by research consulting firm The Pert Group; and quantitative research involving an online panel provided by Survey Sampling International, LLC (SSI), consisting of a random national sampling of 1,000 SBOs with companies of 50 employees or less.

Agents the Clear Choice

The research by PIA and The PIA Partnership also found that what is evolving over time is how some customers would like to see what they value delivered when it comes to their insurance in today’s online business environment. This presents new opportunities for independent agents in how they reach and serve their customers.

The research found that choosing a Professional Independent Agent continues to be the clear preference for small business insurance decision-makers. The attributes that are most important to small businesses when it comes to their insurance are those offered by independent agents. These include:

  • Belief in the person or company
  • Having a person who understands my business
  • Quick service response
  • Personal attention
  • Providing me with confidence that I am making the right insurance decisions

“Much has been said and written about plans by companies such as Google attempting to challenge the dominance of independent insurance agents in commercial lines,” said PIA National President Richard A. Clements. “That’s why we asked commercial lines customers what they want. We found they want what we provide, and that they also want us to provide more. As for competition, I say what agents have always said: ‘Bring it on!’”

The research found that just as agents have adapted to change in the past, that adaptability is being called for again today as SBOs and decision-makers routinely use the Internet for shopping, evaluating and improving the efficiency with which they communicate and gain and share information.

“Some studies backed by direct writers and captives had contended that buyers of small and midsize business owners policies (BOP) wanted to purchase such coverages online,” said PIA Partnership Chairman John Petrucci. “We decided that a more objective picture of buyer preferences was required.”

“The message is clear,” said Petrucci. “The Internet is here to stay. It is not the opponent of agents. But while it can be a source for competition, it can also provide an opportunity for agents when they use it to their own advantage. Responding is about evolution, not revolution.
The changes taking place in the marketplace provide an excellent opportunity for independent agents to increase their dominance in the CL market, but the one thing that is not an option for independent agents is inaction.”

Among other findings:

  • In order to be competitive, independent agents must have a full, credible online presence.
  • Small business owners most value agents with professional, industry-specific knowledge.
  • Most small business owners who shop insurance online still lack confidence in themselves to make ideal insurance choices, and they want help.
  • Agents need to sell their value. Without more frequent demonstration of value, alternatives like bypassing the agent by going online will encroach further.

The research showed that even when the insurance process starts online, small business owners still want to depend on an agent to check and confirm, as well as validate and question assumptions. They overwhelmingly prefer such personal contact throughout the transaction.

Detailed research results, along with agent-specific recommendations and tools developed through this research, are being provided to all members of PIA nationwide by The PIA Partnership.

This project is a follow-up to The PIA Partnership’s “Voice of the Customer—Personal Lines,” an extensive nationwide survey of personal lines insurance customers. It also clearly showed that consumers want what professional insurance agents offer: expert advice and counsel, personalized attention and interaction, the ability to offer comprehensive protection to meet individual needs and excellent “relationship-based” customer service.
The PIA Partnership, originally established as the Company Council of Executive Officers (CCEO) in 1996, is a group of insurance companies that work collaboratively with PIA National to conduct research and develop tools and resources designed to benefit professional independent insurance agents.

Current PIA Partnership companies include: Encompass Insurance; Erie Insurance; Harleysville Insurance; Liberty Mutual Insurance; MetLife Auto & Home; Progressive Insurance; Selective Insurance Group; State Auto Group; The Central Insurance Companies; The Hanover Insurance Group; The Hartford; and The Motorists Insurance Group.

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America SM. PIA’s web address is www.pianet.com.

Small Business Insurance & The Internet
The Voice of the Commercial Lines Customer
http://voiceoftheclcustomer.com/

Research from The PIA Partnership

This press release is online at: 
www.pianet.com/news/press-releases/2015/piaresearchescommerciallinescustomers081015

Ted Besesparis
Senior Vice President, Communications
direct 703.518.1352 | tedbe@pianet.org

National Association of Professional Insurance Agents
400 N. Washington St., 2nd floor, Alexandria, VA 22314-2353
main 703.836.9340 | fax 703.836.1279 | www.pianet.com