T H U R S D A Y ,   J A N U A R Y   5 ,   2 0 0 6

Financial Industry Missing Branding Mark |  Big "I" Sets 2006 Legislative Agenda |  President Signs TRIA Extension Bill |  Ring in the New Year with LTC Sales |  Set Your Sights on a Goal—and Follow Through | Big "I" National News

P & C   T R E N D S
Financial Industry Missing Branding Mark
Survey shows companies targeting too-narrow audience, utilizing wrong branding message.

Financial service companies, including those in the insurance industry, are not hitting it out of the ballpark when it comes to name recognition with consumers. A new Ipsos Insight survey finds that less than one in five Americans are familiar with the leading financial companies. Why? According to Ipsos, companies are not reaching out to all their potential target markets and are emphasizing the wrong things in their branding messages.

According to the study, companies are narrowly focused on targeting Baby Boomers and neglecting other market segments that hold great potential, including women and middle-income families.

"Despite the financial services industry’s focus on the Baby Boomer market, the survey reveals that most Americans aren’t familiar with the range of financial services brands until after retirement age. By then, most consumers have made their most important financial decisions," says Doug Cottings, senior vice president of Ipsos Insight’s Financial Services Practice.

The study finds that consumers remember companies that emphasize relationships, not those that rattle off product features and service portfolios. Thus, branding messages should highlight relationships rather than specific attributes about product features and price.

"Financial services is a relationship business, and we need to keep that in mind when we’re branding our companies as well," Cottings says. "For a broad brand strategy, it’s important that the emotional and relationship aspects are emphasized. Yes, there is appropriate time for promoting specific features and benefits, like if you have a price cut in a specific product line. But that’s not how you build a relationship and reach the broad audience."

Cottings cites a recent Morgan Stanley commercial as an example of a branding message that is working, based on key measures. In the commercial, an older man is standing next to a college graduate, reminiscing about all the milestones in his life. A passerby comments that his dad seems proud of him, to which the graduate responds that it’s not his dad, it’s his Morgan Stanley adviser. "It’s that deep relationship that’s there," Cottings says.

The study finds that the relationship-emphasizing concept appeals to several market segments. The industry can utilize it in attempts to reach beyond the Baby Boomer market.

"One of the most powerful decisions about branding you can make is to look at what resonates well with not only women, Generation X and other target groups, but also with the groups you’re connecting with today," Cottings says. "You will find that it’s the relationship-type attributes that are consistent across occupation, ages, etc. Weave and incorporate key attributes that involve relationships, trusted advice, those types of things, within brand positioning. When you’re doing that, it’s much more effective than having a custom positioning for one target that’s different for another. There are things that are important across the board, no matter the gender, age, income, net worth.

"Everybody has scarce resources, so it comes down to how to allocate those resources to brand for the greatest return. So, find out what resonates best with all the audiences that the company is targeting and then focus on the key things that will generate the return on investment they’re looking for."

Jennifer Sikorski (jennifer.sikorski@iiaba.net) is IA’s associate editor.

O N   T H E   H I L L
Big “I” Sets 2006 Legislative Agenda
Regulatory, legal and tax reform, natural disaster legislation lead slate

The Big "I" hopes to follow up on a very successful 2005 by advocating aggressively for a number of legislative reforms, at both the federal and state levels, in 2006.

"We had a great 2005," says Big "I" CEO Robert A. Rusbuldt. "Starting with the passage of class-action reform, ending with the extension of a modified federal backstop for terrorism risks, and including major flood-insurance and crop-insurance reforms, among other important issues, we moved our agenda ahead significantly last year. This year, we hope and expect to build on that momentum and achieve a number of new milestones in Congress and in the state legislatures across America."

The legislative agenda for the nation’s largest insurance association this year includes the following items:

Insurance Regulatory Reform—The Big "I" will continue to strongly support the State Modernization and Regulatory Transparency (SMART) Act discussion draft, the result of the joint efforts of House Financial Services Committee Chairman Mike Oxley (R-Ohio) and Subcommittee Chairman Richard Baker (R-La.). Independent agents and brokers hope to see the discussion draft, which would reform the current state-based regulatory system without creating a federal regulator or "optional" federal charter, introduced and moved through the House Financial Services Committee this year.

"The Big ‘I’ and its 300,000 agents, brokers and employees across America strongly support the SMART Act," says Charles E. Symington Jr., Big "I" senior vice president for government affairs and federal relations. "Its approach of targeted, common-sense reform preserves the strengths of the existing system while improving it in the areas where it is needed. We look forward to working with Chairmen Oxley and Baker as they refocus on this very important legislation after they successfully ushered through Congress a TRIA extension at the end of last year. We will also work closely with Chairman Richard Shelby (R-Ala.), Senator Chris Dodd (D-Ct.) and others as the Senate Banking Committee continues its review of insurance regulation."

Producer Licensing—The Big "I" wants all jurisdictions to issue and renew producer licenses on a reciprocal basis and to bring about increased uniformity in key areas. Many states enacted reciprocity and other reforms in the early part of the decade, but the reform effort has waned, and little additional progress has been made since then.

One of the association’s key objectives is to address the requirements in many states that force an insurance agent to obtain three licenses (an individual license, an entity license, and a corporate registration) before placing business in a particular jurisdiction. These duplicative requirements impose significant and unjustified costs on the industry and hinder an agent’s ability to serve customers in a timely and responsive manner. The Big "I" is also developing a targeted list of reforms that will make the licensing process simpler for multi-state producers. For example, it is working to eliminate the requirement that nonresident applicants must provide a letter of certification from their home state regulators.

"Agents and brokers in today’s regulatory environment face imposing licensing burdens, and our members struggle to stay on top of the required paperwork and clear the logistical and bureaucratic hurdles that are in place," says Wesley Bissett, Big "I" senior vice president for government affairs and state relations. "Staying in compliance with the distinct and often idiosyncratic licensing laws of every state is an expensive, time-consuming and maddening effort for many agencies, and a dedicated staff person or costly outside firm is often required to manage an agency’s compliance efforts. Insurance producers across the United States are frustrated by the current system, and they understandably want ease, efficiency and speed in the licensing and renewal process."

Tax Reform—The Big "I" continues to support changes in the tax code to allow a quicker depreciation schedule for intangible assets, such as customer lists, when they are acquired in the purchase of small businesses; and supports legislation to allow purchasers of eligible small businesses to write-off as much as $5 million of purchased intangibles over a five year period, with ratable depreciation over 10 years. It also supports President Bush’s call to make the individual tax rate reductions permanent, which would benefit independent agencies that pay taxes at personal rates ("S" corporations), as well as the elimination or significant reform of the estate tax.

"Insurance agents and brokers, and all small businesspeople, need comprehensive tax reform now," Symington says. "Tax reform will help them grow their businesses, hire more employees, and pass on their agencies to their families when they decide to retire.  Common-sense reforms to the tax code will benefit independent agents and brokers across America."

Legal Reform—Independent agents and brokers will continue their push for much needed reforms to the current litigation system for claims related to asbestos exposure and medical malpractice cases.

"It is time to bring common sense to our legal system, for the sake of businesses and consumers," Symington says. "Asbestos claims, many of them of questionable legal merit, continue to clog the courts. Medical malpractice actions have become so common that their costs are driving good doctors out of business. The enactment of class-action reform was a great step forward, and now we need to continue the job."

Natural Disaster Legislation—The active hurricane season of 2005 reiterated the need for comprehensive natural-disaster legislation in Congress. There currently are four bills on the subject introduced in Congress and two general approaches: the creation of a federal reinsurance program or allowing insurance companies to set aside tax-free reserves for certain catastrophic risks.

"The Big ‘I’ will continue to support federal legislation that leads to greater availability of coverage for catastrophic risk and better markets for consumers," Symington says. "We will also work with others in the insurance marketplace to reach consensus on an approach to deal with this national problem."

This will also be an important issue at the state level, as many states will continue to consider catastrophe-related issues. States likely will look at such issues as enhanced building codes (and the enforcement of such codes) in disaster-prone areas and other ways to promote mitigation before catastrophes strike. In some states, there will be debates about the need for state or regional catastrophe funds, modeled after similar funds in place in Florida and California. State regulators and the National Association of Insurance Commissioners (NAIC) are expected to be active participants in the state and federal debate, and the NAIC is currently working on its own comprehensive proposal.

"The Big ‘I’ supports legislative and regulatory efforts that restore healthy competition, bring insurers back to threatened areas, promote mitigation and effective planning, and take other meaningful steps to ensure that communities are better prepared for future catastrophic events," Bissett says. "There are no easy answers, but we will remain an active participant in these important policy discussions."

Flood Insurance Reform—The Big "I" supports H.R. 4320, the National Flood Insurance Program Commitment to Policyholders and Reform Act of 2005, introduced by House Financial Services Committee Chairman Mike Oxley (R-Ohio) and Ranking Member Barney Frank (D-Mass.). It contains a number of the 22 reforms suggested in a comprehensive flood modernization agenda released by the Big "I." (Click here to see the Nov. 11, 2005, release.) Chief among these are the addition of optional business interruption coverage on commercial policies, increases in the maximum coverage limits, and the inclusion of additional living expenses coverage for residential policies.

"This legislation will create many needed reforms that will assure the solvency and effectiveness of the National Flood Insurance Program for many years, and also help consumers by providing new levels of coverage, such as business-interruption insurance," Symington says. "This bill is good for the NFIP and for policyholders across the nation."

Health Care Reform—Independent agents and brokers will continue to seek increased access to health insurance to help the uninsured obtain the coverage they need. Recent progress in the area of consumer-driven health plans is very promising and the Big "I" will continue to work with Congress and the Bush Administration to improve the nation’s health delivery system.

"Approximately 45 million Americans have no health-care coverage, and a solution is long overdue," Symington says. "We will support legislation that will provide more health-care options, not only for the good of our members, but for the entire nation."

Data Security—Independent agents and brokers will continue to push for legislation that will address this issue while making sure any national standard is not burdensome; any enforcement of the standard should be done through state insurance regulators.

Producer Compensation Disclosure—Very few states enacted any legislation in this area in 2005, and even fewer (perhaps none) are likely to do so in 2006. The educational efforts undertaken by the Big "I" in 2005 were well-received by state legislators and helped prevent knee-jerk policy responses in the wake of the Marsh scandal.

"No state adopted the NAIC's disclosure model in 2005, and the states that did act largely followed the tailored and more appropriate recommendations of NCOIL," Bissett says. "The Big ‘I’ will remain vigilant on this issue and will work closely with policymakers wherever debate arises." 

Cliston Brown (cliston.brown) is Big "I" director of public affairs.

O N   T H E   H I L L
President Signs TRIA Extension Bill
Big “I” legislative priority signed into law.

On Dec. 22, 2005, President Bush signed the Terrorism Risk Insurance Extension Act of 2005 to extend the Terrorism Risk Insurance Act of 2002 (TRIA), which was set to expire at the end of 2005. Enactment of this legislation marks a tremendous victory for the Big "I," which made the extension of the federal backstop a top legislative priority in the 109th Congress. The new law—which extends TRIA through 2007 and went into effect Jan. 1, 2006—will ensure that terrorism insurance is available and more affordable for the consumers Big "I" members serve.

The Big "I" Federal Government Affairs team was at the forefront of these deliberations and asked by policymakers to lead and coordinate industry efforts at many stages throughout the process. Click on the links to access a detailed memo on the  advocacy of the Federal Government Affairs team and a  memo explaining the law by the Office of the General Counsel. You can also access these documents at www.independentagent.com under Legal Advocacy, Memoranda and FAQs.

L & H   T R E N D S
Ring in the New Year with LTC Sales

It’s the time of year for infamous New Year’s resolutions that focus on personal and professional improvments. Let’s leave the personal resolutions to the self-help gurus and focus on the professional side. In the New Year, life-health producers should pledge to get serious about long-term care (LTC) insurance in 2006. 

2005 was a disappointing year for LTC insurance sales, resulting in significantly decreased overall sales compared to 2004. So why would an agency want to focus on the LTC marketplace in 2006? There are two reasons that make 2006 the year of LTC. First, recently passed budget legislation includes a provision that decreases the current asset exemption amount what Medicaid recipients can keep, to reimburse the government for LTC expenses paid by Medicaid. As LTC expenses’ financial strain on Medicaid increases, expect the asset exemption to continue to be whittled down. The only viable risk management strategy for retirees with meaningful assets is to purchase LTC insurance.

Second, new LTC product innovations make the product more attractive. Recent legislation passed by the House would provide favorable tax treatment of "hybrid" financial products that combine life insurance, LTC coverage and/or annuity accumulations in a single product. The Senate needs to reconcile the legislation, but if it is approved, it creates a one-stop approach to address multiple consumer needs in a single product. The tax deferred nature of cash value life insurance, deferred taxation of annuity accounts and the income-tax-free treatment of LTC reimbursements would enable consumers to fund a single product that meets their needs throughout their entire adult life. Nuances remain to be worked out, but hopefully enacting legislation that facilitates innovative insurance products will pave the way for increased consumer acceptance.

Stay tuned during the first half of 2006 for more developments. As the consumer media discuss the impact of the LTC changes in Medicaid reform, more people will consider purchasing LTC insurance. And, if the House and Senate favorably reconcile the tax aspects relating to hybrid financial products, expect insurance companies to roll out new products for agents to bring to their customers. Don't procrastinate on your New Year's resolution to get serious about concentrating on LTC insurance sales in your agency.

Dave Evans (dave.evans@iiaba.net) is a certified financial planner and IA l-h contributing editor. 

A G E N C Y   M A N A G E M E N T 
Set Your Sights on a Goal—and Follow Through

With 2006 now upon us, people are setting New Year's resolutions for organizational goals. And in a few short months, many of those resolutions will be dust in the wind. Most likely, you’ve had little or no success with past resolutions. Why not?

Perhaps the goal did not fulfill a need or was incongruent with your personal or organizational value system and, thus, motivation was lacking. However, goals can meet all of the prerequisites for success, but still not be achieved.

One of the problems is that many of us equate dreams with goals. Dreams, wishful thinking, aspirations and imagination are all essential if we want to more than reactively respond to external conditions and forces...they are essential elements of an overall vision or mission. However, dreams alone are not enough to spark action that will lead to achievement.

Goals give direction and provide points of reference when they are anchored by a value or group of related values. Regardless of how you define success, without specific goals, success is almost certainly unattainable. In contrast, the probability for success is greatly enhanced when you pursue specific goals.

Goals provide direction by determining how you should spend your available time. Value-based goals are the points of reference you use to make time management decisions. For example, if your goal was to invest 20% of your gross income annually, you could potentially be financially independent (depending on the rate of return) in as little as 20 years. It’s not so much the amount of money or principal that’s important, but how effectively you invest it and how you use it. Similarly, you can apply the financial principle of compound interest to time as well. By investing only 1% to 3% of your time in goal-setting and planning, you can reap a return much greater than the initial time invested.

Worthy and achievable goals must be:

1. Motivational
2. Attainable
3. Clear
4. Measurable
5. Time-constrained
6. Written

Keep in mind that the above criteria are just additional prerequisites for the achievement of any goal; none is a substitute for action. With these solid, foundational elements in place, the resulting motivation, coupled with the proper attitude and enthusiasm, should ensure the consistent achievement of your goals.

If you have never put into practice a formal, comprehensive goal-setting methodology, start with the essential foundational principles. If you have established your interdependent relationships and roles, determined your needs and identified your values, then you may proceed directly to the specific goal-setting process. Otherwise, let's assume that you are, for the first time, initiating a goal-setting program for the coming year:

Step 1. Establish Foundational Prerequisites
Step 2. Set Goals
Step 3. Evaluate Goals
Step 4. Formulate an Action Plan
Step 5. Implement the Action Plan

By taking a more methodical approach to goal setting, you will greatly enhance your success rate.

For more information on how to adapt this model to sales production using a downloadable PDF file called "How to Increase Commissions by 50%," click here.

Bill Wilson (bill.wilson@iiaba.net) is Big "I" director of the Virtual University.