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Paul Zimmerman
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Protecting Agency/Brokerage Trade Secrets Amidst High Industry Turnover

Today’s workforce is more mobile than ever.  The average worker will change employers eight times over the course of his or her career. This increased workforce fluidity highlights the need for employers to protect their company's assets from being raided by a departing employee and potentially used by a competitor.

The lifeblood of every insurance agency/brokerage is the competitive edge they maintain by doing things better, smarter, faster and more efficient than the competition. That edge is often built upon the company's "trade secrets."

Trade secrets are among the most valuable assets of an insurance agency/brokerage. With such information increasingly accessible through the cloud, mobile devices or portable equipment, employers face challenges in keeping their trade secrets from “walking out the door” with the departing employee.

A trade secret is information not generally known to the public, which confers some sort of economic benefit on its holder, and is the subject of reasonable efforts to maintain its secrecy. In the case of insurance agencies and brokerages, trade secrets include clients’ names, insurance needs and preferences, policy expiration dates, and premiums paid.  In other words -- all of the historical information collected that is used to sell to, upsell or service a client.

Both employers and employees recognize the value of trade secrets. To the employer, trade secrets reflect the ability of the company to develop, market and sell its products and/or tailor services and products to its customers.  To an employee, trade secrets represent an opportunity to market oneself to a new employer by offering to provide the "edge" that the competition is lacking.

Given today's highly mobile workforce, coupled with the speed and ease by which trade secrets can be electronically sent around the world, trade secret owners must impose safeguards on what information can be accessed, when, why and by whom. If those precautions are not taken, the essence and value of the company can be lost with the click of a mouse.

There are several steps that you can take to reduce the risk of trade secret theft:

1.      Identify the information that you consider to be secret

In order to effectively protect the trade secrets – you first need to carefully identify what they are.  In making that determination, you should first look at what information your company deems sensitive and essential to its sales and service operations.  Next, you should identify where that information is located and how it is stored.  You should then mark all digital and hard copy files with a confidential label or designation, establish a protocol to ensure that all future sensitive information is similarly marked, and make sure that informed is secured in a manner that is not publically accessible.

2.      Restrict access to or transfer of electronically stored information

Not everyone needs to have access to the company trade secrets.  Only those persons who need the trade secrets to carry on the business of the company should be given access to the information.  Electronic access can be restricted by secured login credentials.  Also, if an employee wants to confirm that his or her commission payment is accurate, set up a procedure for the employee to check the commission payment using a secure password only for accounts coded to him or her.

3.      Put your policies and agreements in writing

To minimize the risk of a departing employee stealing trade secrets, the company should provide all employees with written guidelines governing their access, use and dissemination of the company's trade secrets. These guidelines should specify what type of information the company considers confidential and how the information should be treated.

Although the remedies available to an owner for the wrongful taking, use and dissemination of its trade secrets are vast--the damage done to a company often cannot be repaired where the trade secrets are quickly and quietly disseminated to a competitor. While civil litigation is often successful in convincing the "new employer" to cease using the coveted trade secrets, that “convincing” comes at a high cost to the trade secret owner, both financially and competitively.

By implementing a few safeguards now, the trade secret owner can significantly minimize the risk of a departing employee stealing the company's trade secrets, and at the same time, ensure that by conspicuously identifying the information and documents as trade secret materials, any competitor who improperly comes into possession of them will immediately know that the trade secret owner will aggressively protect its economic interests in that material.

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.