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                                              Big “I” National News

P-C Trends
Agents Seek Reliable Contacts, Stability from Carriers in 2010
Survey finds co-op marketing money scarcer than one year ago.

A reliable contact, good technology support and marketing dollars – these are the things agents are looking for from partner carriers this year, according to the 2010 Insurance Agency Satisfaction Study just released by J.D. Power and Associates. In a difficult economy, many agents are also seeking financial stability and profit sharing options from insurers.

“Overall, we still find the same trends we saw last year, where the contact independent agents have with an insurer and the policy offerings are main drivers of satisfaction, followed by technology and claims,” says Kara Steslicki, a senior research manager at J.D. Power. “Technology and price have shown to be a little more important (to agents) than last year, but it’s hard to say whether that’s a true shift in the market or related to how the study was conducted.”

Jeremy Bowler, senior director of the insurance practice at J.D. Power, believes customers’ ties to their agents make it essential for insurers to cultivate good relationships with their agency force.

“Individual policyholders are more likely to be loyal to their independent agent than the insurer that writes their policy,” Bowler said in a statement. “This strong bond between policyholders and insurance agents make it essential for insurers to satisfy their appointed agents in order to grow their business.”

In a reflection of agents’ desire to pass carrier satisfaction on to customers, J.D. Power reports a gap in agency satisfaction of more than 150 points on a 1,000 point scale between insurers who receive 5% or less of an agency’s business and those who receive 60% or more. Twenty-eight percent of the 2,316 insurance agents surveyed said key carrier contacts play the largest role in satisfaction, followed by policy offerings at 20%, technology at 17%, claims and price at 14% each and compensation at 6%.

“There is a strong correlation between agent satisfaction and the amount of business that is sent to an individual insurer,” says Steslicki. “Agents that are satisfied with a particular insurer not only send a larger percentage of their current business, they also intend to send more of their future business to that particular insurer.”

For Brian Hannigan, president of Hannigan Insurance Agency in Clinton Township, Mich., reliability is the most important factor behind his satisfaction with a particular carrier. He says asking customers to change carriers after their current company pulls out of the state reflects poorly on the agency and creates more work for everyone involved.

“We have been approached by a lot of carriers, but you have to be careful about who you work with,” Hannigan says. “We ask carriers, ‘How long have you been writing in the state, and how long have you been around?’ Stability is what we look for – in pricing, and in making a commitment to the state.”

Hannigan recently finished reviewing which carriers his agency will work with in the coming year, using a rubric and point system to compare insurers’ offerings. A carrier’s A.M. Best rating, technology capabilities and rate stability are most important to Hannigan, followed by a good relationship with an underwriter or other company representative. While having a single point of contact at a company certainly helps the agency’s workflow, Hannigan says that relationship is difficult to find and he’s had to accept the realities that come along with using carrier service centers.

“With service centers, you can get five different answers to the same question and if you have one point of contact or an underwriter like we used to have, it made it easier,” he says. “But, it is what it is, so we’ve had to move on.”

Another change that’s becoming a fact of life for agents is the dwindling availability of co-op marketing dollars. Hannigan says his carriers are no longer offering the service, and J.D. Power’s study found that only 23% of agents surveyed are receiving marketing money in 2010 compared with 43% in 2009. Not surprisingly, carrier satisfaction is higher among agents who receive co-op dollars, but Hannigan says he has turned his attention to whether carriers reward his agency’s work with profit sharing options.

“All our carriers have said no to marketing money since 2008,” Hannigan says. “A lot of them don’t even want to grow – they’re just hoping to be flat and get back to making money, so they’re not even encouraging agents to market. Stability, technology and profit sharing are most important to us because we want to be rewarded for writing good business.”

Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.

Legal Advocacy
Additional Changes to HIPAA Rules Take Effect on Feb. 17
Enforcement of “Breach Notification Rule” begins this month.

As previously reported in Insurance News & Views, wide-ranging changes to the Health Insurance Portability and Accountability Act of 1996 (HIPAA) will become effective Feb. 17. The changes will make “business associates,” as defined by HIPAA, directly subject to the requirements and penalties of HIPAA privacy and security rules to the same extent as “covered entities.”  The new rules, which are part of the American Recovery and Reinvestment Act of 2009 (ARRA), will affect other aspects of HIPAA as well.

Also this month, the delay in enforcement of the “Breach Notification Rule,” which became effective Sept.23, 2009, will come to an end.  The U.S. Department of Health and Human Services will begin enforcing the Breach Notification Rule for breaches of “unsecured” protected health information that are discovered (or reasonably should have been discovered) after Feb. 22.

The Big “I” Office of General Counsel recently wrote a memo explaining the Breach Notification Rule, which is available to Big “I” members by logging in towww.independentagent.com and selecting Legal Advocacy, Memoranda and FAQs and then HIPPA Breach Notification Rule.  In addition, the Big “I” will post any additional information it obtains to help insurance agents understand and comply with the new HIPAA rules, such as the article “HIPAA Changes Affect Covered Entities and Business Associates,” written by the well-regarded New York law firm Shearman & Sterling LLP and posted on our site with the firm’s permission.  

The memos titled “HIPAA Security Rule: Executive Summary,” “HIPAA FAQs 2003,” “Executive Summary of the Privacy Rule Implementing HIPAA’s Privacy Requirements” and “Memorandum on Final HIPAA Privacy Regulations,” which are located in the Memoranda and FAQs area of the Legal Advocacy section at www.independentagent.com, will be removed prior to Feb. 17, as they can no longer be used after the Feb. 17 changes to HIPAA take effect.

Scott Kneeland (scott.kneeland@iiaba.net) is Big “I” counsel.

 

P-C Trends
Report Confirms Gravity of Talent Crisis in Property-Casualty Industry
Analysts encouraged by associations’ preparedness, other industries’ successes in war for talent.

It’s no secret that the property-casualty industry is facing a sobering talent drought fueled by the financial crisis and a poor overall reputation. However, industry education programs, the newfound success of other once-misunderstood fields and the disappearance of jobs in other financial sectors have cast a ray of hope on insurers and agents looking for promising young workers.

“We did not realize how fierce the competition will be in next few years when we look at the talent pool shrinking, the need growing and the specialized education required in the (insurance) industry,” says Tanguy Catlin, assistant principal at the firm McKinsey & Co. which recently released a comprehensive report about the talent war in the p-c industry. “It puts the insurance industry in a very uncomfortable position.”

According to McKinsey & Co.’s report, the largest obstacle to improving the talent pool in the p-c industry is its poor reputation – among consumers, the industry ranks at just 60 points on a 100-point scale in terms of positive reputation, or in the bottom quartile among other services industries such as consumer products, pharmaceuticals and media. That poor reputation carries over into students’ career plans, since no insurers are listed in Universum’s lists of the “100 Most Desirable MBA Employers” or “IDEAL Employer Rankings – Undergraduate Edition.”

Although there are several university-level risk management programs available in the United States, graduates from these programs only meet between 10% and 15% of industry staffing needs.

Moreover, the need for talent will only grow in the coming years as much of the industry’s workforce approaches retirement. In the U.S., the number of workers between the ages of 55 and 64 is slated to increase by 25% in the next six years, and the number of insurance employees 55 or older has increased by 74% in the last 10 years, according to McKinsey & Co. 

These staggering statistics have not gone unnoticed by industry leaders; in fact, McKinsey & Co.’s report notes that most industry organizations have the infrastructure in place to address the problem and some, like the Big “I,” have developed specific programs to address the “war for talent.” Nestor Rivero, the owner of Tropical Insurance Company in Miami, has been teaching in classrooms through the InVEST program for many years and says starting in the schools is the best way to find young talent.

Students who really take an interest in the field may make ideal entry-level agency employees, and Rivero says there are clear advantages to taking on an eager high school grad. For example, agencies can benefit from a young employee’s computer knowledge and can hire him or her at a reduced, hourly salary starting as an intern. In addition, the hiring agency principal can take satisfaction in helping a young person launch a career and benefiting the industry. However, Rivero encourages agencies to talk to students’ classroom teachers about their strengths and consider a few factors before hiring.

“You train them for smaller agencies and four or five years down the road, they may leave,” he says. “There also has to be a commitment on the agency’s part. If agency doesn’t want to take time to teach, forget about it.”

Thirteen years ago, Wilson, Washburn and Forster Insurance in Pinecrest, Fla. took on recent InVEST graduate Jacob Lopez as a temporary file clerk. Today, Lopez works full-time at the agency as a customer service representative.

“After I graduated from high school, I stayed here full time and started doing other things. I moved up the ladder, decided to go for my 220 (certification), passed the test and now I’m here,” says Lopez.  “Everybody has this image of insurance agents that they’re out there for the money and trying to sell you things you don’t need. It’s good to learn about the coverages and know what you’re buying. I’m (still) learning new things every day.”

Outreach efforts by industry associations and programs like InVEST have the best chance at turning around the public’s perception of the insurance sector, according to Catlin. Other industries like accounting and teaching have successfully reversed negative public opinion through targeted marketing campaigns and long-term improvement strategies. For example, the American Institute of Certified Public Accountants (AICPA) increased the number of new accounting hires out of school by 83% and contributed to a 30% increase in accounting majors through its “Start Here Go Places” Web campaign.

The insurance industry also stands to benefit from talent freed by layoffs in other financial sectors. Additionally, a survey of recent risk management institute graduates shows the industry’s offerings align well with what younger generations are seeking in a job; 83% said the industry offers good work-life balance, 93% agreed it offered significant intellectual challenges and 94% said insurance provides good value to society.

“There is already some form of infrastructure to take action,” Catlin says. “Industry associations and schools can communicate with talent and make change happen, but right now (efforts are) extremely distributed. It requires collective action and collaboration.”

Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.


L-H Trends
Obama Budget Proposal Includes Employee Benefit Changes
Agents need to prepare corporate clients for possible changes in tax rates, 401K plans and IRAs.

Last week provided the first actual glimpse of President Barack Obama’s proposed budget for 2011. The 2010 budget created large deficits in an attempt to revive the economy and reverse the job losses created by the 2008 economic meltdown. With unemployment still in the double digits, trying to curb federal spending without stalling the economy requires great finesse.

The budget proposes overall 2011 spending of $3.834 trillion and discretionary spending of $1.415 trillion. The projected budget deficit for 2011 is $1.267 trillion or 8.3 percent of GDP, down from $1.556 trillion or 10.6 percent of GDP in 2010.

While it will take time to fully understand the implications of some of the budget’s nuances and provisions, observers can glean that the Bush era income tax reductions for higher earning Americans will sunset as the higher marginal income tax brackets return for 2011. People earning $250,000 or more will see their federal income taxes increase. However, that does not mean workers who earn less than $250,000 will necessarily see their tax bills remain the same for 2011. From an employee benefits, standpoint the budget includes:

• An extension of the federal subsidy for Consolidated Omnibus Budget Reconciliation Act (COBRA) benefits from its current expiration date of Feb. 28 until Dec. 31.

• A proposal that would require employers to offer their employees an automatic individual retirement account (IRA) if they are not offered a qualified retirement plan. Employees could opt out of the automatic IRA.

• A number of regulatory initiatives in the retirement plan area, including regulations on 401(k) fee transparency, unbiased investment advice to participants, clearer disclosure regarding target date funds and promoting the availability of annuities and other forms of guaranteed lifetime income streams.

• An increase in capital gains and qualified dividends tax rates to 20%, effective in 2011 for single taxpayers earning more than $200,000 a year or $250,000 for families, among other tax proposals.

Several other looming issues will also need to be solved, including any final health care reform legislation and the accompanying cost. Also, the estate tax is scheduled to disappear in 2010 only to return to 2001 levels beginning in 2011, so Congress will have to decide on the level of exemption and the tax rate for 2011 and beyond.  And, should Congress restore the estate tax in 2010, there will remain the thorny issue of what the estate tax rate will be for people who died prior to any change in the 2010 zero federal tax rate.

The bottom line is that a number of provisions will affect companies’ benefits programs and their employees, including increasing the pay levels for employees to take advantage of the “savers” credit for contributing to a retirement plan. Also, the budget proposal mentions promoting the use of lifetime annuities as a distribution option from retirement plans.

There is no doubt that the final budget legislation will provide opportunities for agents to assist their clients in utilizing new and/or improved avenues for employees to save for retirement.  Agents should stay tuned and share their feedback with elected officials.

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


On the Hill
Congressman Mike Ross to Address Big “I” Legislative Leadership Luncheon
Blue Dog coalition leader and former insurance agent hailed as a fiscal watchdog and small business advocate.

Rep. Mike Ross (D-Ark.) will address the annual Leadership Luncheon, just prior to the Big “I” Legislative Conference & Convention being held March 3-5 in Washington, D.C.

The Big “I” hailed Ross as a true champion for small business and independent agents who isn’t afraid to tackle tough issues, even if it means disagreeing with his own political party. He is part of the Blue Dog Coalition leadership, an organization of House Democrats committed to “fiscal reasonability and government accountability.” Rep. Ross is also a former insurance agent with a long history of speaking up for the independent agency system and the role it playsin protecting families, consumers and small businesses.

Ross serves on the powerful House Committee on Energy and Commerce (including the Energy, Health and Oversight and Investigations Subcommittees) and the House Foreign Affairs Committee. Viewed as a rising star, his leadership skills and workhorse approach have been hailed in Washington and by his party since he was first elected to Congress in 2000. Ross is in his fifth term and represents the Natural State’s fourth congressional district, which includes the southern region of the state. 

The invitation-only luncheon will be held at the U.S. Capitol Visitor Center on Tuesday, March 2. Attendees will include Big “I” executive and government affairs committee members, agents and brokers from Ross’s home state of Arkansas and other industry leaders.

Other highlights of the Big “I” Legislative Conference & Convention will include in-depth issues briefing sessions; appearances by numerous high-profile speakers discussing important insurance and national issues confronting lawmakers as well as agents and brokers; a CEO panel comprised of top carrier presidents & CEOs (CNA, The Hartford, Fireman’s Fund and Safeco will participate) and hundreds of meetings on Capitol Hill between Big “I” agents and brokers and their elected representatives in the Congress. Click here for registration and event information.

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.