T H U R S D A Y ,  M A R C H   2 7 ,  2 0 0 8 

Big “I” National News

P&C Trends
Rain, Rain Go Away
NOAA predicting above-average rainfall, more flooding this spring.

April is typically the month synonymous with spring showers, however March has brought significant rainfalls and major flooding to the Midwest and it’s only the beginning of what’s predicted to be a very rainy season, according to the National Oceanic & Atmospheric Administration (NOAA).

NOAA’s National Weather Service is predicting above-average flood conditions this spring due record rainfall in some states and snow packs, which are melting and causing rivers and streams to crest.

“We expect rains and melting snow to bring more flooding this spring,” says Vickie Nadolski, deputy director of NOAA’s National Weather Service. “Americans should be on high alert to flood conditions in your communities.”

According to NOAA, above-normal flood potential is already present in the majority of the Mississippi River basin, the Ohio River basin, the lower Missouri River basin, Pennsylvania, New Jersey, most of New York, all of New England and portions of the West, including Colorado and Idaho. Some areas are also expected to continue to experience increased flooding due to the following conditions:

* Heavy winter snow combined with recent rain indicates parts of Wisconsin and Illinois should see minor to moderate flooding, with as much as a 20 to 30% chance of major flooding on some rivers in southern Wisconsin and northern Illinois.

* Current snow depth in some areas of upstate New York and New England is more than a foot greater than usual for this time of the year, which increases flood potential in the Connecticut River Valley.

* Locations in the mountains of Colorado and Idaho have 150 to 200% of average water contained in snowpacks leading to a higher than normal flood potential.

While the number of claims and damage caused by the most recent flooding remains undetermined, there are a number of things independent agents can do to help their insureds prepare for future floods. The Insurance Information Institute (III) recommends reminding customers to purchase homeowners coverage through the National Flood Insurance Program (if available) and educate them about the repercussions of not having a policy. The III also offers the following tips agents can pass along to their insureds:

* Standard homeowners and renters insurance does not cover flood damage. Flood damage is excluded under standard homeowners’ policies. Only a flood insurance policy, available to homeowners and renters through the federal government, will cover flood-related losses.

* Flood insurance is easy to purchase. Federal flood insurance can be purchased directly from an insurance agent and is available to communities that participate in the National Flood Insurance Program. Nearly 100 insurance companies write and service NFIP policies. In order to find an agent servicing your area, visit  FloodSmart.gov or call 888-379-9531.

* It is easy to assess your flood risk. More than 20,000 communities in all 50 U.S. states and territories voluntarily participate in the NFIP, encompassing nearly all properties in the nation’s high-risk flood zones. For more information, visit the Your Flood Risk section of the NFIP’s FloodSmart Web site; in the lower left hand corner is a One Step Flood Risk Profile tool where you can enter your address to determine your level of flood risk.

* Flood insurance is affordable. The annual premium for a homeowners NFIP policy starts at $112 per year, according to FEMA, and increases according to the level of flood risk and amount of coverage needed. The maximum coverage amount is $250,000 for the structure of the home and $100,000 for the contents of the home. Renters can pay as little as $39 per year for $8,000 in contents coverage. Flood insurance is available on a replacement cost basis for the structure of the home and on an actual cash value basis for personal property

* Excess flood insurance policies add an extra layer of coverage. A growing number of private insurers have begun offering excess flood policies, intended to provide water damage protection to homeowners over and above the coverage provided by the NFIP policy.

* Without insurance, relief from floods primarily comes in the form of loans. If a community is declared a disaster area, no-interest or low-interest loans are usually made available by the federal government as part of the recovery effort. These loans are just that—loans—and must be paid back. Obtaining a flood insurance policy is the only way to protect you fully from the cost of flooding.

Michelle Payne (michelle.payne@iiaba.net) is IA’s managing editor.




P&C Trends
Bargaining for Trouble
Helping insureds understand the lowest price isn’t always the best deal.

With premium prices on the decline, independent agents are faced with the challenge of maintaining their insureds’ expectations of low rates, while preserving the vitality of their agencies --- not such a simple task considering many customers are just looking for the best bargain.

Cheaper is not always better, but getting insureds to understand that concept is difficult when they are constantly being bombarded with offers of lower rates. NAPCO, a New Jersey-based brokerage firm, recently published a report highlighting key talking points for agents and brokers to use when explaining to customers why bargain basement prices aren’t always the best deal. NAPCO offers the following suggestions:

Renewals
A benefit to having an agent is that he/she knows whether and when to re-write or extend a policy in order to get a better rate for the insured. Agents and brokers are fully aware of the issues and can provide an experience-based evaluation of the market to help customers make the best decision possible on exposures and various other circumstances.

Personalized Service
While paying less for insurance is a goal for many customers, producers can demonstrate their value to clients by offering a strategic evaluation of their insurance program that takes more than price into account.

Reevaluating Retention
In light of a softening market, agents can help clients reconsider their retentions. Many insureds took larger deductibles and retentions to reduce their premiums during the hard market. In today’s market, it is possible to trade retained exposure for the same or a moderately lower premium. For customers comfortable with their current insurance budget, it might be time to transfer more risk back into the market.

Professionalism
The ability to help clients view their insurance programs strategically and to successfully manage expectations requires a high degree of market knowledge, experience and professionalism. It is tempting to offer a client the moon when a competitor is lying in wait. But strategic guidance can win the day when a producer can accurately assess and communicate the characteristics of the risk and provide an up-to-date view of the fast-changing market. A comparison must include more than just price; it needs to evaluate a policy’s coverage, terms, conditions and deductibles relative to what other markets may offer and in preparation for future market cycles.

Michelle Payne (michelle.payne@iiaba.net) is IA’s managing editor.




P&C Trends
Hiring Hiatus
A decline in insurance jobs during the first two months of 2008 could be an omen for the industry.

According to the Bureau of Labor Statistics, a branch of the Department of Labor, jobs in the insurance industry and related areas dropped 2.3% to 2,311,300 in February compared to 2,316,600 in January.

Employers nationwide cut 63,000 jobs last month, the most in five years. However, the industry still has 16,000 more employees than it did a year ago --- making it an outlier among other sectors --- especially give declining prices and a soft market.

Nationwide, the unemployment rate dropped to 4.8% in February from 4.9% in January. Yet the unemployment rate for the insurance industry decreased from 2.9% in January to 2.6% in February 2008, according to the Bureau.

The decline in jobs could be linked to a drop in confidence among small business owners, including independent agents. According to the Small Business Research Board (SBRB), its U.S. Small Business Confidence Index dropped almost 10 points from 43 to 33.67 during 2007 --- the lowest number on record since the SBRB started reporting the index in 2006.

SBRB polled more than 950 businesses nationwide to measure their confidence in business and found most aren’t very optimistic about hiring trends for 2008. Only 24% of respondents said they intend to increase hiring in the next year, a decrease from the 39% reported in the previous study.

The decrease in the confidence index could have a ripple effect that starts with consumers and eventually reaches independent agents. As insureds are pinched by escalating prices and fewer jobs, there’s less money for extraneous expenses. According to the SBRB’s poll, pending home sales and auto sales are already lower than previous periods, which could translate into less business for agents if the decline continues. Consumers may also scale back or eliminate peripheral costs, making non-mandated products such as life insurance or personal umbrellas less of a commodity.

While the industry is off to a slow start in 2008, the Bureau has recorded a steady increase in employment rates in the industry over the last decade (see chart below), which could help off-set any minor declines experienced in the next year.



Michelle Payne (michelle.payne@iiaba.net) is IA’s managing editor.




VIEW: Tech Updates
The Future of Real Time
A carrier weighs in on the importance of the agent-carrier partnership in promoting Real Time.

Real Time – referred to in the past as “SEMCI” (Single Entry Multiple Company Interface) – has been a goal within the industry for almost 30 years now. While this initiative has gone through a number of iterations, the fundamental industry goal has remained constant --- to provide agents the easiest and most efficient methods of writing and servicing business. One thing that has noticeably accelerated is the pace with which technology has made advancements possible. 

No matter where a consumer looks there are examples of how technology is delivering easy-to-use, instant services. This drives the level of customer expectations and has put a premium on execution – both for carriers and agencies. The Real Time initiative has gained a strong foothold within the insurance industry. Thanks to promotion and educational tools by the Real Time/Download Campaign (www.GetRealTime.org), ACT (Agents Council for Technology), AUGIE, www.ACTTech.org, as well as vendor and carrier adoption, we can take a measure of pride in where we’ve come, especially in the past few years. Real Time has become a reality, but it’s certainly not where it needs to be.

There are several keys to more fully driving the advancement of Real Time, including one of the crucial points – the role of the company sales manager/ agency relationship in advancing the understanding and use of technology.

The Carrier’s Role
There are four crucial elements to maintaining strong, profitable relationships with the best agents. These are not nice-to-haves, but must-haves. These days, they are the price of entry:

1. Strong Product Set. For carriers, it’s important to provide agents with a breadth of product and a depth of product. Depth means continually creating features and benefits unique to the industry to help set the company and its agents apart. In effect, this is to de-commoditize the business.

2. Competitive Price. It doesn’t have to be the lowest, but it has to align with the perceived value of the product by the agent and customer.

3. Compensation. The agent must be paid fairly and fully.

4. Ease Of Doing Business (EODB). The carrier absolutely must be easy to work with. This means the carrier is easy to communicate with, is flexible and provides a well-designed process to place business. Of course, technology – while not the only important element of EODB – is a crucial component.

At the end of the day, EODB is the most critical of all four elements. If you have the reputation among the people placing business in an agency (CSRs and producers) as being easy to work with, that can transcend many perceived shortfalls in other areas.

Industry Importance
The next generation of agents, and certainly customers, will demand to do everything instantaneously, primarily using some form of web application. Customers are increasingly quoting and comparing online, however, they are also relying on agents to understand their needs, and they demand rapid service. The agents, in turn, want to service their customers’ business quickly and offer value-added services to differentiate themselves.

Thus, Real Time is invaluable to agents for several reasons. It allows them to provide ease of doing business functionality, save time, keystrokes and errors, provide the best service to the customer and bridge the gap of different interfaces provided by carriers.  The impact of all this is better margins and more earnings.

For carriers, Real Time is a business imperative. It can help streamline internal processes, speed up transaction processing windows, minimize reliance on call centers and help desks and increase profits. In the not-too-distant future it will be very difficult – or even impossible – for carriers to compete without robust Real Time functionality.

The bottom line is that in the current business climate, it is essential to make doing business easy for agents and customers. When all other aspects are even close to being equal, agents will do business with carriers that make their processes easy and error-free. Even more important, most agents will choose not to do business with carriers who fail to provide EODB functionality.

So, if it’s obvious that Real Time is a good thing for all parties, why is the industry still struggling with it?

The Challenges
First of all, the vendor market is quite fragmented, which causes a serious challenge for agents and companies. From the agent perspective, this fragmentation creates confusion over which tools are appropriate for a specific agency. Of the many choices out there, some are Real Time. However, some are not. Some of the carriers are on board with Real Time for some of the vendors, some are not. This adds complexity and time to agency workflow.

For carriers, much of the challenge lies within prioritization – prioritizing different vendors in different geographic areas. Which are the “impact” vendors? Prioritizing the differing workflow needs of the agents also plays a part – some use management systems, others rely on comparative raters. Still others go directly to carrier Web sites to quote, bind and service business. At a higher level, it is the reality of balancing resources for new Real Time functionality with necessary internal carrier system enhancements and regulatory requirements.

The Future of Company Sales Managers
The company sales manager of today – and the future – must understand and support the technology direction of both the industry and the company. The sales manager must have the knowledge to actively assist agencies in effectively implementing Real Time technology. Some agency aids could include:

* Help agents get more out of their management systems, and better leverage their technology.
* Help set up procedures to ensure staff compliance.
* Provide model cost/benefit analysis.
* Create awareness of the resources available to agents.

As agency advocates, sales managers should be able to be active conduits for agents to provide feedback on carrier and industry technology, help resolve issues and speak to future direction. The future sales manager should also be able to clearly advocate the producer impact of potential carrier strategies.

At the end of the day, agents and carriers will be more successful when they involve well-trained company sales managers – those who not only speak to carrier technology direction, but also support their agencies by helping them understand and fully utilize Real Time functionality. This will benefit the agencies by helping them to minimize duplicate entry, and help them serve their customers in the best way possible. Putting in place sales managers who can actively obtain and accurately relay agency Real Time feedback to the carrier management will help improve the carrier’s Real Time implementations, increase its EODB and generate more business from its agents.  

Scott Kuczmarski (skuczmarski@metlife.com) is Vice President of agency distribution for MetLife Auto & Home, based in Warwick, R.I. 

This article reflects the views of the author and should not be construed as an official statement by ACT.




Agency Management
Staying Power
Creating a good sales environment is the key to keeping talented producers.

A recent, unpublished study of young and good producers discovered that at least half left their jobs after a short time due to their agencies’ poor sales environments. These were certifiably good producers, the kind of people this industry critically needs. A new producer costs a minimum of $150,000 in the first three years with minimal production. These are very costly losses and all because of a poor sales environment—what a waste.

How can agencies turn this around? The key is understanding the difference between being producer-friendly and creating a good sales environment. Most agencies with poor sales environments are overwhelmingly lax in making their producers accountable for sales…or anything else. A common assumption is that because producers are paid commissions, commission-based compensation should take care of everything else. But it doesn’t! Creating a good sales environment requires discipline.

Producers must follow agency rules and procedures. They must provide staff and companies adequate information. Producers must offer customers all the coverages they need, not just the coverages the producer thinks the customers might buy. This is not asking for too much. These are the basic requirements of the job.

If a producer protests these very reasonable requirements because it takes him or her away from making sales, take a look at how much the producer is really selling even without these requirements. I'll bet it won't be much. So, does their argument have any merit? It’s doubtful. Good producers, and especially good young producers, usually have no problem with these requirements --- they expect accountability. On the other hand, when a new producer sees other producers who do not produce and are not accountable, do you think they perceive the agency has a good sales environment?

When producers lack accountability for following agency rules and procedures, especially when these same producers do not produce, then successfully developing young talent is virtually impossible. New producers will not respect their coworkers for long, nor will they respect management. Management will soon lose respect for the producers and the remaining employees will eventually follow. Loss of respect for coworkers and management will flow through the agency like a virus. In addition to the poor environment, the new producers are not able to get the help and guidance they need because the staff is too busy fixing the other producers’ problems, and resenting them for it.

A good sales environment is further enhanced by mentoring young producers.  Agencies shouldn’t expect success simply by giving producers a few tools, pointing them in the right direction and saying, “Go get ‘em Tiger!” For new producers to succeed, agency management must help these young people find their own style, confidence and provide proactive guidance to succeed. Nothing beats success for paving the way for more success.

Young people are still growing and are eager to learn. Nothing is more stifling than being in an organization where no one else is growing. When all the other producers have built books of an adequate size to support their living standards, who is a young producer to look up to as a guide for building a book?

Developing good young producers and growing an agency through new account sales is the key to an agency’s future, and both are dependent on having a good sales environment.

To read this and other sales articles online, click here. 

Chris Burand (chris@burand-associates.com) is the president and owner of Burand & Associates, LLC.