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Big “I” National News

Carrier News

Progressive Repositions Agent Brand

All products will now be positioned under Progressive name.

Two and a half years after introducing the Drive brand, Progressive announced today that it will again re-brand its agent distribution channel---under the Progressive name.

In an exclusive interview, John Barbagallo, agency group president, told IN&V that research has shown Progressive that consumers think of the company as one brand. “I hope that agents are as excited as I am and that they embrace it,” Barbagallo says. “We’re restoring to prominence the Progressive name for agents.”

The one-brand strategy means the products will now be called Progressive Commercial, Progressive Motorcycle, Progressive Boat, etc. Because the private passenger auto products and prices sold directly by the company and by agents differ, they will have different names. The private passenger auto product sold by agents will be called Progressive Drive Insurance. Private passenger auto insurance sold by the company directly over the Internet and by phone will be called Progressive Direct.

For agents who are concerned that the shift might represent a pullback on the carrier’s commitment to the independent agent channel, Barbagallo says the opposite is true. “We knew that the Drive brand wasn’t working hard enough for independent agents,” he says. “Under Drive, some agents told us that they felt they were being de-emphasized and separated from the Progressive name. This change will allow them to re-connect with the Progressive name in a meaningful way. With a single brand we can promote the advantages of being a Progressive policyholder no matter how you buy the policy.”

Agents will see a change in Progressive advertising going forward and Barbagallo says the company’s agent council has been involved throughout the process. “Our agents committee began to appreciate the economics of the situation and that we were underweight in our spending for agents,” he says. “Now we have one pool of funds and we will include agents in the message.”

As a part of the shift, Barbagallo says that Progressive will allocate more resources to local marketing applications, including print ads and direct mail efforts. The company also will swap out the nearly 15,000 existing Drive Insurance interior and exterior signs for agents starting this summer. The new signs will say simply “Progressive.” Another change: Advertising will now include a focus on other products in addition to auto.
 
Along with the name change, the company is rolling out  a new policy contract; more preferred features and discounts; and more products, including a Progressive-underwritten Personal Umbrella product and a joint marketing agreement with Homesite Insurance Group that lets agents sell two monoline policies—auto and home—right on ForAgentsOnly.com (FAO).

Barbagallo also emphasized the role that claims service plays in the company’s brand. “Our claims service is a differentiating feature for us and we had heard from agents that they didn’t feel a part of our claims service under Drive,” he says. “Now, agents will be able to leverage Progressive service centers without any brand confusion for consumers.”

Throughout the transition process, Barbagallo says that the company has gained clarity around what the Progressive brand stands for. “Agents have been—and continue to be—critically important to Progressive,” he says. “A brand is more than just an ad—a brand is an experience—and we will continue to have conversations with agents about what that brand stands for.  It will resonate with consumers because of the type of service that independent agents are uniquely positioned to give.”

Katie Butler (katie.butler@iiaba.net) is IA editor-in-chief.



Producer Compensation Issue Update

New Jersey Federal Court Approves Zurich Settlement
 

As previously reported in IN&V, Zurich sought court approval of its proposed settlement agreement with the plaintiffs in a class action case in federal court in New Jersey involving compensation disclosure. The court approved the proposed settlement Feb. 16, 2007, ending Zurich’s involvement in the lawsuit.

The settlement agreement incorporates Zurich’s prior settlement with some state attorneys general (the “multi-state agreement”), including the $51.7 million in payments to insureds covered by the settlement. It also adds an additional $70 million to the settlement fund for policyholders in states that were not parties to the multi-state agreement, making it a truly nationwide settlement. In approving the settlement, the court found the settlement to be “fair, reasonable and adequate as to, and in the best interests of, each of the settling parties and the settlement class members.”

The approval of the settlement finalized the class of insureds eligible to receive money from Zurich for the claims covered in the lawsuit (“settlement class”). The Settlement class consists of all policyholders, who, from Aug. 26, 1994 through Sept. 1, 2005 used the services of: (1) one of the large brokerage firms which is also a defendant in this class action lawsuit or any of its subsidiaries or affiliates in connection with a policy purchased from any Zurich insurer, any insurance carrier which is also a defendant in the class action or any insurance company that is not an affiliate or subsidiary of a Zurich insurer; or (2) any other broker in connection with a policy purchased from any Zurich insurer. The settlement class specifically excludes: (1) persons or entities who opted out of participating in this settlement; (2) persons or entities who already settled with Zurich; (3) persons or entities who elected or will elect to participate in the three-state settlement between Zurich and the attorneys general of New York, Connecticut and Illinois (except to the extent that they have additional policies that are subject to this settlement and not the three-state settlement); (4) entities who also are named defendants in this class action; (5) entities in which Zurich has a controlling interest; and (6) officers and directors of Zurich.

The court also approved the allocation plan for the distribution of funds from the settlement as “a fair and reasonable method to allocate the relevant settlement proceeds among the settlement class members.”

The settlement approval permanently stops all settlement class members from ever suing, participating in any actions or receiving any benefits from any other lawsuit or other proceeding against Zurich involving the issues in this class action lawsuit. Zurich also is prohibited from filing any lawsuits based on its liability to the settlement class.

The settlement approval order specifically states that neither it nor the settlement agreement constitute any admission of liability or wrongdoing by Zurich. As such, it cannot be used against Zurich to establish any liability.

This approval of the settlement involving Zurich does not release the remaining defendants from the class action in New Jersey. It only releases Zurich from the litigation. The brokerage firm of Arthur J. Gallagher has also sought to settle the class action claims against it, and the court has not yet ruled on that proposed settlement.

All members of the settlement class members should have received notice in late 2006 of the proposed settlement covering about how to participate in or be excluded from it, along with information about the timing and process to submit required documents relating to any claims.

Information regarding the Zurich settlement is posted on the members’ only Legal Advocacy page of www.independentagent.com under “IIABA/Industry Information & News.”

IIABA will continue to report on significant developments involving producer compensation, including those involving this class action.

For more information, contact Kathleen Graber, associate general counsel at 703-706-5432; kathleen.graber@iiaba.net.



On the Hill

Big “I” Urges Caution on McCarran-Ferguson Changes

Last week, the Big “I” called on Congress not to support proposals that would completely repeal the McCarran-Ferguson antitrust exemption for the business of insurance.

The Big “I” argues that significant changes to the exemption could have negative implications for insurance purchasers. Legislation that would alter the exemption was introduced concurrently in the U.S. Senate and the House of Representatives.

“We are concerned that an outright repeal of the antitrust exemption in McCarran-Ferguson could have a negative impact on small and medium sized insurers in the marketplace resulting in reduced competition and potentially decreasing the availability and increasing the cost of insurance for consumers,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations.”

The Big “I” testified before the Senate Judiciary Committee in June 2006 that the financial condition and state of competition and consumer choice in today’s insurance marketplace are quite high, and that direct state insurance supervision and law enforcement, in conjunction with the qualified application of federal antitrust law has served both the industry and consumers well. It urged the committee, at a minimum, to await the report of the Antitrust Modernization Commission, established by Congress two years ago to study a variety of antitrust issues, including the multiplicity of exemptions and privileges currently existing.

“There is little evidence indicating that wholesale changes to the McCarran-Ferguson antitrust exemption are needed or even desirable,” says Tom Koonce, Big “I” assistant vice president for federal government affairs. “We urge Congress to think very hard and deliberately before taking any action that could harm insurance consumers and affect competition, particularly the ability of small and medium sized insurance companies to compete in the marketplace.”



On the Hill

Surplus Lines Bill Reintroduced
Legislation is crucial first step toward producer licensing uniformity.
  

Rep. Dennis Moore (D-Kan.) and Rep. Ginny Brown Waite (R-Fla.), reintroduced a surplus lines bill, H.R. 1065, on Feb. 15. The legislation singles out two areas—surplus lines regulation and reinsurance supervision—where there is general consensus for reform. Independent insurance agents and brokers play a crucial role in surplus lines (or nonadmitted) insurance, which provides coverage for unique or hard-to-place property-casualty risks.

“The nonadmitted marketplace continues to function as a crucial ‘safety valve’ for the entire insurance market,” says Tom Koonce, Big “I” assistant vice president for federal government affairs. “The existing state-based regulatory system has some inefficiencies that disrupt the nonadmitted marketplace regarding the allocation and remittance of premium taxes, licensing of nonresident surplus lines brokers and duplicative regulation of the nonadmitted market.  This legislation will correct this.”

Additionally, the bill streamlines surplus lines regulation by making the insured’s home state the source of regulation for individual surplus lines transactions. The legislation’s second title would seek to reduce overlapping, multiple-state regulation of both reinsurer financial condition and credit-for-reinsurance on the balance sheets of ceding insurers. This is important to the Big “I” due to its reaffirmation of state regulatory system, which the Big “I” supports, with modifications such as those contained in this bill.

In the 109th Congress, similar legislation passed the House on a unanimous 417-0 vote, and the Big “I” is hopeful that this legislation will also receive such favorable consideration this session.

“We believe that the unanimous House vote of 417 to 0 to approve this legislation last year is testament to the support that can be generated for federal legislation reforming state insurance regulation,” says Charles E. Symington Jr., Big “I” senior vice president for government affairs and federal relations. “This consensus legislation contrasts sharply with proposals such as the ‘optional’ federal charter, which is very controversial both within the industry and on Capitol Hill. Four hundred and seventeen House members supported targeted reform last year, and we believe this action speaks volumes about the proper approach to reform the insurance market.”



L&H Trends

Paradigm Continues to Shift
As country’s age demographics change, need for self-reliance greater than ever.

As the demographics of the American citizenry continue to evolve, independent insurance agents should look backward to gauge what the future may hold and to decide how to position the agency’s services.

It’s no newsflash that people are living longer. In 1900, only one out of 25 people were age 65 or older. By the year 2020, it’s expected that one out of four people in the general population will be age 65 or older. This aging of the population is creating huge problems for our “pay as you go” structure of Social Security and other age-related government programs---and the fiscal pain hasn’t even begun yet because payroll taxes create a surplus that actually offsets some of the burgeoning federal deficit. Around the year 2012, the surplus will no longer exist and funding the baby boomers’ retirement and long-term care costs (through Medicaid) will create a strain on federal and state governments.

How big is the problem? In 1956, defense-related expenditures consumed approximately 60% of the federal budget. In 2006, only 20% of the federal budget went toward defense costs---and the country is at war, unlike in 1956. So where is the majority of the federal budget directed? About 60% goes toward federal entitlement programs such as Social Security, Medicaid and Medicare. Even with a surplus from payroll taxes to offset entitlement programs, the government’s budget is bursting.

Just like in a business, the federal government needs to increase revenues and cut expenditures. However, almost 9% of the federal budget goes to funding the interest on the federal debt. And since the country’s national security faces several threats, it will be difficult to trim defense-related expenses. So, where will the government have to take the fiscal scalpel? Among the measures that could be taken: Postponing the eligibility age for benefits, which is already happening with Social Security; means testing, which is already happening with Medicare Part B contributions (as of Jan. 1, 2007, the federal subsidy is being phased out for higher-income retirees) and the expansion of the “look back” period for Medicaid eligibility for asset transfers from three to five years (as of Jan. 1, 2006).

There are ways for middle- and upper-class Americans to have some control over future changes to government-provided benefits. They should supplement the “safety net” by saving more for retirement to offset later normal retirement age for Social Security benefits. They also can purchase long-term-care insurance so that they have control over and assess to quality assistance when they need it.

It is not to late to help clients devise a plan to deal with the demographic realities and the collision course between providing government benefits and being able to provide a strong national defense, viable infrastructure and other essential government services. And don’t forget to take the time to perform the same planning for your agency and your personal situation. This country was built on a principal of self-reliance, and personal responsibility will become more prominent in the future decades.

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