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legislation

Insurance agent enters guilty plea

A South Abington Twp. insurance agent pleaded guilty to collecting insurance premiums from construction companies and never buying the insurance on their behalf. Timothy A. Hewitt, 41, billed six clients more than $200,000 for performance bond insurance without buying the insurance from Liberty Mutual, Lackawanna County Assistant District Attorney C.J. Rotteveel said Wednesday. Hewitt pleaded guilty Monday in Lackawanna County court to five counts of insurance fraud and one count of forgery, all third-degree felonies punishable by up to seven years in prison and a maximum fine of $15,000. Rotteveel, the prosecutor for the Northeastern Pennsylvania Insurance Fraud Task Force, said he plans to seek prison time for Hewitt and restitution for the payments that never covered the companies. The companies were Arc Electric of Hazleton; Hi-Tech Flooring and Designtech Interiors, both of Kingston; Diaz Forest Products and Diaz Stone and Pallet, both of Harford; and Diaz Manufacturing of Montrose. Fortunately, he said, the companies never had to make a claim against the phony bonds. http://citizensvoice.com/news/insurance-agent-enters-guilty-plea-1.2319384

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SCC sues DOT, construction company over damaged building [Liberty Mutual]

Southwestern Community College is seeking compensation for damage to the Balsam Center building that it believes resulted from the R-5000 road project, a 0.7-mile connector road between N.C. 107 and N.C. 116 that wound up costing $30 million. A three-way finger-pointing contest over the damage has been ongoing since 2015, with SCC blaming DeVere Construction Company Inc. and the N.C. Department of Transportation, and DeVere and the DOT each claiming that the other is responsible for the mess. In the suits, SCC claims that DOT’s construction easement for the culvert project associated with the R-5000 project was limited to the Balsam Center parking lot, but that the easement stopped at the concrete sidewalk in front of the building. However, the suits say, when DeVere installed helical anchors to secure metal sheeting for the project, those anchors extended under the Balsam Center’s foundation. In January 2015, the suits say, DeVere began removing the metal sheeting and the helical anchors, but no fill or grout was placed in the holes created when those anchors came out. This caused holes in the ground under the building’s foundation. As a result, the suit said, vertical and horizontal cracks appeared in the Balsam Center’s interior and exterior walls and floors. “Due to NCDOT’s and DeVere’s actions and/or omissions stated above, the subsurface soil underneath the Balsam Center Building’s foundation was disturbed and compromised, leading to soil settlement and shifting underneath the Balsam Center Building and is the direct and proximate cause of the Balsam Center Building’s settlement-related damages,” both suits read. SCC claims that DeVere failed to adhere to its own plans and specifications, charging the company with negligence and trespass to real property. In its complaint against the DOT, SCC further states that a copy of a subsurface report commissioned for the project, which DOT received in September 2012, was not shared with SCC. It also claims that the alleged trespass of the helical anchors outside the project right-of-way amounts to taking of a “compensable interest” of SCC’s property and that SCC is due compensation for this taking, as well as recovery of court, attorney, appraisal and engineering fees. In its response to the lawsuit filed March 8, DeVere denied many of the central claims in SCC’s complaint. DeVere denied the assertion that the right-of way was limited to the parking lot area, as well as the claims that no fill or grout was placed in the holes when the anchors were removed, that DeVere did not use proper desaturation protocol, that DeVere failed to adhere to its own plans and specifications and that damage to the Balsam Center Building was the result of DeVere’s negligence. The DOT approved all of the construction plans, DeVere said, and any damages that occurred “were caused by defects in the plans and specifications provided by NCDOT and were not caused by DeVere.” In addition, the company said, because it did its work in accordance with the specifications from DOT, it can’t be held liable for any damages resulting from performance of that work. If damage did result from the work, the response said, SCC should seek compensation by suing DOT for compensation for property taken — which, as it happens, SCC is doing. DeVere further expounded on its complaints against DOT in a third-party lawsuit attached to its response, bringing in the DOT, CALYX Engineers and Consultants Inc. and engineer Dave Wissell as third-party plaintiffs in the case. According to this complaint, the DOT and the engineering firm CALYX knew or should have known about saturated soils and subsurface water under the Balsam Center. These entities “were negligent and breached their duties of care owed to the College by preparing drawings, plans and specifications that were defective, and those defects were the proximate cause of any property damage alleged by the College,” DeVere said. The plans were defective, DeVere said, because they required stone to be placed around the subgrade culvert, which would have allowed water to migrate from the Balsam Center’s foundation, creating voids underneath and causing the building to settle. DeVere also pointed the finger at engineer Dave Wissell, who it says designed the temporary shoring that SCC alleges ultimately created the problems, saying that the “alleged but denied property damage arises from and relates to the acts and/or omissions of Wissell.” DeVere states that its agreement with Wissell included a provision that Wissell would reimburse DeVere for any costs it should be required to pay for settling claims related to the work. DeVere closed by asking that SCC’s claims against it be dismissed and that any costs or liability associated with the case by covered by DOT, CALYX and Wissell. DOT has not yet filed a response to either SCC’s lawsuit or DeVere’s third-party complaint. When asked about the case, a DOT spokesman said that the department has a policy against commenting on ongoing lawsuits. “CALYX was only recently added to the lawsuit by DeVere, and as such, it is too soon to offer any detailed response,” said Candace Austin, communications manager for CALYX. “Based on what we know at this time, CALYX strongly denies any and all liability in this matter.” A request for comment sent to Wissell was not immediately returned. This is not the first time that DOT and DeVere have been at loggerheads. In January 2016, the company walked away from DOT projects across the state, including its $15.9 million contract for the R-5000 project. Despite warnings from the DOT, DeVere defaulted on the project, initiating a bonding procedure that resulted in DeVere’s bonding agency, Liberty Mutual, suing the company in federal court. Liberty sued the company for $12.5 million, saying that it had “willfully breached” its duty to Liberty in the way it spent funds from the bonding company, and that DeVere “intentionally submitted false, misleading and/or inaccurate information contained in the financial statements submitted to Liberty.” For example, said Liberty, financial statements submitted in 2013 to assure Liberty that there was enough collateral to protect Liberty from

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Pennsylvania Mortgage Servicers Now Required to Get Licensed and Bonded

As of June 2018, Pennsylvania non-bank mortgage loan servicers have to get licensed in order to operate in the state. The changes are introduced by Senate Bill 751, which makes alterations to the Pennsylvania Mortgage Licensing Act (MLA) The bill sets licensing requirements for mortgage servicers, such as meeting surety bond requirements, as well as posting a fidelity bond. Licensees will also need to meet fixed level of net worth criteria. The changes with the new bill In most states across the country, mortgage servicers have to obtain a license prior to conducting their activities. With Senate Bill 751, Pennsylvania becomes the next state that introduces a regulatory procedure for this type of mortgage professionals. In this way, it aims to guarantee better compliance of mortgage servicers with federal and state laws. By amending the state’s Mortgage Licensing Act, legislators aim to bring legal clarity and ensure higher safety standards for the general public. The new legislation comes as a legal answer to cases of consumer complaints from servicers in Pennsylvania. For offences committed by servicers, the current MLA fines of $10,000 per occurrence apply as well. Servicers’ licenses can also be revoked and suspended, if deemed necessary. Besides the licensing criteria, the new bill also introduces important definitions of key terms and sets disclosure rules. It creates a wholesome legal framework for mortgage servicers in Pennsylvania. The licensing requirement for PA mortgage servicers With the introduction of the bill, the Department of Banking and Securities becomes the regulatory body that oversees non-bank mortgage loan servicers in the state. It takes over the responsibility to ensure that mortgage servicers comply with the Consumer Financial Protection Bureau’s regulations at 12 CFR, Pt. 1024. License applicants will have to submit their documents through the Nationwide Multistate Licensing System (NMLS), similarly to most other mortgage professionals in the U.S. You will be able to file your application starting April 1, 2018. The licensing process for non-bank mortgage servicers will entail obtaining a $500,000 surety bond. You will also need to get a fidelity bond in a sufficient amount set by the authorities, and the bond should be approved by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation. Mortgage servicers will also need to maintain a minimum of $250,000 net worth at all times during the licensing period. You will have to cover licensing fees as well. Initial licenses cost $2,500 for the first office and $1,250 for each additional branch. For renewals, the fees are $1,000 for the principal office and $500 for additional ones. Meeting the bonding criteria One of the major licensing requirements you have to comply with if you want to run a mortgage servicing business in Pennsylvania is to obtain a $500,000 surety bond. The bonding functions as an extra layer of security for the state and consumers. For example, if a customer is subjected to any damages as a result of your actions as a mortgage servicer, they can file a claim against you. On proven claims, affected parties can receive a compensation that is up to the bond amount you have posted. In the case of Pennsylvania mortgage servicer bonds, this is $500,000. In order to get bonded, you don’t need to cover the whole required amount. You only have to pay a small percentage of it, which is often between 1% and 5%. This is called the bond premium and is determined on the basis of your personal and business finances. The better your overall profile is, the lower your bond cost is likely to be. https://nationalmortgageprofessional.com/news/66526/pennsylvania-mortgage-servicers-required-licensed-bonded

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Are agents really that satisfied with their P&C carrier partners?

2018 Agent Study reveals the level of satisfaction with insurers, and how producers perceive the quality of commercial carriers. In 2017, NU forged an alliance with the National Association of Professional Insurance Agents (PIA) and Flaspöhler | NMG to conduct the inaugural Independent Agent Study — a research project designed to annually take the pulse of independent Property & Casualty insurance agents throughout the U.S. and provide revealing insight into the demographics, books of business and challenges they face, and reveal their most highly rated carrier partners. Today, we look at the findings around how respondents rate their level of satisfaction with their commercial P&C carrier partners, and the various criteria by which producers perceive the quality of those commercial carriers. When asked what indications of quality they value most in a commercial P&C carrier, 64.3% of our study respondents said “ease of doing business,” which was the No. 1 response. That was followed by “fair, timely claims handling” (46.1%) and “strong, knowledgeable underwriting” (38.7%) “superior customer service” (37.4%) and “consistent underwriting” (36.5%). What do those numbers reveal? That independent agents want to serve their clients quickly, effectively and with minimum agony. Carriers would do well to consider in their own workflows what can be done to better facilitate meeting those goals. When asked to rate their overall level of satisfaction with the commercial carriers they use, 36.8% of respondents said they were “very satisfied” while 52.5% said they were “somewhat satisfied.” While only a small percentage openly said they were unsatisfied, that “somewhat satisfied” segment warrants further listening by carriers. Food for thought: What can be done on both sides to improve those relationships? Flaspöhler has long conducted its own larger annual study of agents (the Flaspöhler | NMG Producer Study) on behalf of key P&C carriers, which use the results to help them best meet agent needs. The data included in the study featured in NU and on PropertyCasualty360.com this month are extracted from Flaspöhler’s larger research study (upward of 300 pages), which the firm makes available to rated P&C commercial lines carriers. (Contact [email protected] for more information.) https://www.propertycasualty360.com/2018/03/12/are-agents-really-that-satisfied-with-their-pc-car

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legislation

Supreme Court of Canada Provides Guidance on Trustees’ Duty to Disclose Construction Bonds to Beneficiaries

The Supreme Court of Canada (SCC) ruled in its recent decision, Valard Construction Ltd. v. Bird Construction Co. (Valard Construction), that an “obligee” or trustee under a labour and material payment bond (usually the owner or general contractor) may be required to disclose the bond’s existence to its beneficiaries (usually subcontractors). Prior to this decision, Canadian courts held that an obligee is only required to disclose the existence of a bond in response to a demand for information, such as demands made under applicable builders’ lien legislation. From now on, owners and general contractors will need to notify potential claimants of the existence of a bond in certain circumstances. OVERVIEW Valard Construction arose out of a claim by a utility sub-subcontractor (Valard) for directional drilling work done and materials provided to an oil sands worksite located near Fort McMurray, Alberta. The electrical subcontractor that engaged Valard became insolvent and some of Valard’s invoices went unpaid. Valard later learned of a bond obtained by the electrical subcontractor, which named the general contractor as obligee and the electrical subcontractor as principal, and sought to claim under the bond. The bond at issue was a standard form CCDC 222-2002 labour and material payment bond, which provides that a beneficiary who has not received payment within 90 days of the last day on which it provided work and/or materials may sue the surety on the bond for the unpaid sum. The beneficiary is required to provide notice to the surety, principal and obligee of its claim within 120 days of the last date that the work and/or materials were provided to the project in order to claim under the bond. Valard did not learn of the bond until seven months after the 120-day notice period had expired. As a result, the surety denied Valard’s claim. Valard then commenced a claim against the general contractor for the amount it would have claimed under the bond. SCC Decision The majority of the SCC found that the general contractor was liable to Valard for the sum that it could have obtained under the terms of the bond, had it been aware of its rights. According to the SCC, obligees are required to inform potential beneficiaries of the existence of a bond where the beneficiary would, objectively, suffer an unreasonable disadvantage by not being informed of the bond. Whether a beneficiary would suffer an unreasonable disadvantage is determined based on the circumstances in which the bond was entered into, including its terms, the nature of the industry and the beneficiary’s entitlement under the bond. In Valard Construction, the majority of the SCC held that the general contractor was required to inform Valard of the bond’s existence because labour and material payment bonds are unusual in private oil sands projects, Valard was unaware of the existence of the bond, and its entitlement was time-limited, such that it was unable to claim on the bond due to the expiry of the notice period before it learned of the bond. IMPLICATIONS Owners and General Contractors (Obligees) For obligees, Valard Construction creates a new administrative burden and legal risk. The test of whether a beneficiary would “suffer unreasonable disadvantage” due to lack of notice of the bond is unclear. Barring long-standing and well-known requirements for bonds on the type of construction at issue, it appears likely that notice of a bond will be required, or at least prudent. The next question is “what is sufficient notice?”. The SCC noted that the general contractor could have satisfied its duty by simply posting a notice of the bond at its on-site trailer where workers were required to attend site meetings on a regular basis. This would have ensured that a “significant portion” of the potential beneficiaries would have had notice of the bond. This seems simple enough, but it is not hard to imagine scenarios where such posting does not in fact notify subcontractors and suppliers. For example, suppliers who simply drop off materials at the job site may never enter the trailer. Alternatively, there may be multiple job sites. If a notice is visible only to front-line employees of a subcontractor, is that sufficient to inform the subcontractor’s management of the existence of the bond? Would an email suffice, or a clause in standard terms which all subcontractors are required to acknowledge? These and other questions will remain to be addressed over time as the extent of this new obligation is defined by parties and courts. Read More … https://www.jdsupra.com/legalnews/scc-provides-guidance-on-trustees-duty-40482/

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Int’l Demand guarantees versus sureties on first demand

In a recent decision,(1) the Supreme Court clarified its position on sureties payable on first demand and confirmed its view on the interpretation of contractual undertakings (eg, guarantees or sureties)(2) by which one party assumes a personal liability for a third-party debt. Considering the significant different legal consequences for a beneficiary’s position following a qualification as either an abstract guarantee or an accessory surety, the guidelines provided by the Supreme Court on how it interprets wording included in such contractual undertakings are of the utmost importance for Austrian legal practice. Read More … http://www.internationallawoffice.com/Newsletters/Banking/Austria/Graf-Pitkowitz-Rechtsanwlte-GmbH/Demand-guarantees-versus-sureties-on-first-demand

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Auditor Wants Surety Bonds For Medicaid Providers, Saying Most Overpayments Don’t Get Paid Back

The state auditor says he wants Medicaid providers to insure that they’ll do the work the state is paying them for by putting up some money to prove it. He’s backing a bill that he says will help the state recover money spent on fraudulent payments. Auditor Dave Yost said in December that his team found overpayments to 133 Medicaid providers since 2011 that added up to nearly $35.7 million with interest – and that more than 90 percent of that money hasn’t been paid back. Yost said he wants professional Medicaid providers to have to acquire surety bonds as insurance to back their work. “Indiana, Texas, Florida and New York already use an approach like this, and we think Ohio needs to do this too,” Yost said. Transportation and home health care agencies would be required to secure $50,000 surety bonds, and home health aides $10,000 bonds. The bill would also require Medicaid providers to complete certification before payment. Yost said most overpayments are the result of insufficient documentation or uncertified care. http://wvxu.org/post/auditor-wants-surety-bonds-medicaid-providers-saying-most-overpayments-dont-get-paid-back#stream/0

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Nevada To Regulate Tax Preparers, Require Bonds

Nevada tax preparers have been required to comply with a number of new requirements as of July of last year. These requirements include the necessity to pay application and renewal fees to become registered as a document preparation service, as well as to obtain and maintain a surety bond. Requirements of Assembly Bill No. 324 AB 324 introduced a series of new registration requirements for document preparation services in the state of Nevada. To begin with, the bill expanded the definition of such service to also include: Anyone who receives payment to assist other persons in preparing all or most of their federal or state tax returns as well as claims for tax refunds (i.e. tax preparers) Paralegals who perform such services, unless they work under the direction and supervision of an authorized attorney Bankruptcy petition preparers Enrolled agents authorized to practice before the IRS Along with the expanded definition, the Bill also amends the requirements for being allowed to practice as document preparation service in the state. Previously, licensees were not required to pay application or renewal fees which has now changed. Beginning July 2017, applicants for a document preparation service registration are required to pay a $50 nonrefundable application fee and a $25 renewal fee. Registrations expire on a yearly basis, and must be renewed prior to running out. Bond Requirement for Tax Preparers Since AB 324 includes tax preparers in the definition of document preparation service, they are required to post and maintain a $50,000 surety bond with the Secretary of State as part of their registration. This makes Nevada the fifth state to have introduced regulations and a bond requirement for tax preparers. The Nevada Revised Statutes (NRS) Chapter 240A specifies the conditions of the bond and its purpose. The bond is required in order to provide compensation to any person who suffers a loss or damage due to a tax preparer’s actions, as they are specified in the Chapter. Such actions include fraud, dishonesty, and negligence. But they also include any acts or omissions that violate any other provision of the chapter, but also federal and state law. In any of the above instances, if a complaint is brought against a tax preparer by a customer to request indemnification, a claim can be filed against the bond. When a claim is filed against a surety bond, the surety usually extends compensation to claimants which can be as high as the full amount of the bond. In return, the bonded tax preparer must then reimburse the surety for any such compensation in full. An important point here is that the cost of the bond is not the same as the bond amount! Cost of Your Bond First-time applicants for a bond often wonder if they need to pay the full bond amount to get bonded. Bond amount and bond cost are different! The amount of your bond, also known as the penal sum, is the full amount of compensation that can be made available by the surety in case of one or several claims. The cost of your bond, or the premium, is the sum you need to pay to obtain the bond from the surety company. This cost is typically a small fraction of the full bond amount. It is determined by the surety when you apply. In determining the cost of your bond, the surety will review your personal credit score and possibly a number of other items, such as your financial statements, your assets, and even your industry experience. Applicants with high credit scores are typically offered low rates on their bond, which can be as low as 1% of the whole bond amount or lower. The exact rate is determined once you apply for your bond. http://www.cpapracticeadvisor.com/news/12400338/nevada-to-regulate-tax-preparers-require-bonds

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California Offers First Cannabis Surety Bond to Protect Nascent U.S. Industry

The state’s budding cannabis industry gets a push in the right direction via a new surety bond issuance. The cannabis industry continues to struggle for recognition in the U.S., even as more enlightened policies in Canada have tilted the competitive advantage in that country’s favor. But a new surety bond approval from the California Department of Insurance is giving the state’s cannabis industry a push in the right regulatory direction. The department approved a surety bond issuance from Continental Heritage Insurance Co. Continental is also offering surety bonds to licensed cannabis businesses in Ohio. Surety bonds provide cannabis industry players of a way to make sure they can can comply with relevant regulations. For instance, if a company’s product was contaminated, the bond would allow the company to cover costs of destroying or otherwise disposing of the product. Such material could not just be thrown in the trash. In the case of California, the insurance regulator department appears aggressive in its support for the cannabis industry — and making sure it’s properly insured. When it comes to U.S. cannabis businesses, Canada has a competitive edge as medical marijuana is legal at the federal level, and recreational use will likely be legalized this year. Consequently, institutional capital is flowing into Canadian cannabis businesses. Last year liquor company Constellation Brands (STZ – Get Report) invested more than $200 million in a cannabis company, and another company set its self up for the $1 billion acquisition of CanniMed Therapeutics Inc. that was funded partially by a large PIPE transaction. California’s position may create a conflict with the federal’s government’s hostile policy changes on cannabis as delineated by attorney general Jeff Sessions, but that may not be a problem at the moment in the Golden State. The federal government in the U.S. has been known to alternate between passive and aggressive policies on cannabis enforcement. This regulatory uncertainty is one of the factors that makes institutional investment in the industry highly problematic. “Californians voted to legalize the adult-use of cannabis in 2016 and the medical use of cannabis in 1996,” a California Department of Insurance spokesperson told the TheStreet. “The department will continue to encourage insurers to write cannabis insurance products for the cannabis industry.” They added, “Moreover, as long as the Rohrabacher-Blumenauer amendment is in effect, which it is until March 23, the federal government cannot use federal funds to prosecute state-compliant medical cannabis businesses.” The insurance department has its own goals. “Cannabis businesses should have insurance coverage available to them just like any other California business,” Insurance Commissioner Dave Jones said in a Feb. 21 news statement. “As Insurance Commissioner, my mission is insurance protection for all Californians, which includes insurance for California’s legalized cannabis businesses. I encourage more insurance companies to file cannabis business insurance products with the department to meet the needs of this emerging market.” It remains to be seen how much of a conflict will develop between California and the U.S. federal government. https://www.thestreet.com/story/14501469/1/cannabis-surety-bond-hits-the-market.html

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Portals are dead. Brokers have moved on to real-time

As insurers move away from their legacy systems and onto more flexible platforms such as Guidewire and Duck Creek, the days appear numbered for portal solutions. Real-time data exchange is now front and center as a priority for the Insurance Broker Association of Canada (IBAC), the national broker association announced Tuesday. The current work towards real-time data exchange is possible because insurance companies have spent a lot of time and “hundreds of millions” of dollars updating their legacy systems, says Michael Loeters, co-chair of IBAC’s technology committee. “What [the insurers’ platform updates] have allowed us to do is move away from portals, which insurance companies have spent a lot of time and money building over last number of years,” Loeters said. “The reason why they were limited to portals was because they didn’t have the technology platforms behind those portals that could easily or cost-effectively with a broker management system. “As those legacy systems move away, and as you replace the back of those portals with modern, flexible platforms, now you have created the enablement for real-time integration with brokers.” Portals were a necessary bridge to real-time data exchange, Loeters pointed out. He likened the evolution of broker tech to the evolution of GPS technology since the 1990s. “There are a lot of technologies out there that people talked about for a long time before they became a reality,” Loeters said, referring to broker discussions about real-time data exchange. “For example, if you bought a GPS unit in the early 2000s, it didn’t work well. A lot of times, it took you to the wrong place. It took a lot of time to evolve to the point where it was ready for prime time.” Now upon us is the era of real-time data exchange, which features heavily in IBAC’s three tech priorities moving forward. IBAC’s three major tech priorities are: First, IBAC has launched its “IBAC D/X Action Plan” to ensure the national adoption of its Data Exchange (D/X) Model as the method for real-time technology integration between insurance brokers, insurance carriers and partners. This will include plans to develop an assessment of the readiness of insurers and broker management system (BMS) vendors across Canada, and the creation of a D/X Certification process. Second, IBAC is urging identification of “off-the-shelf” technologies that can be adopted by the industry to enable faster and easier real-time technology integration between brokers and industry partners using the D/X Model. Examples might include Duck Creek’s ‘Agent Connect,’ essentially a translator that allows Canada’s major broker management systems to connect with the Duck Creek platform. Similar, translator-style offerings are available from Brovada and Willis Towers Watson. “As brokers we need to strongly encourage insurers to make those kinds of investments [in off-the-shelf technologies] to move away from portals top real-time integration, and then we both win,” said Loeters. Third, IBAC will be conducting a National Broker Technology Survey. https://insurtechnews.com/aggregator/portals-are-dead-brokers-have-moved-on-to-realtime

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