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Big “I” National News

P&C Trends
A Presidential Affair
Company presidents weigh in on the strengths, weaknesses and direction of the independent agency system.

Independent agents were given some inside insights from a panel of insurance company presidents last week in conjunction with the Big “I” Legislative Conference & Convention in Washington, D.C. The panel, held as part of a Young Agents breakfast, provided agents of all ages with feedback on the profile of an ideal agent, the strengths and weaknesses of the industry and the direction in which it’s headed.

Panel members, including Cynthia Young, president, Encompass Insurance; Michael Browne, president and CEO, Harleysville Insurance; John Barbagallo, president, commercial lines group, Progressive; Neal Wolin, president and COO of p-c operations, The Hartford and Bob Fulwider, chairman of IIABA, kicked off the discussion by profiling the characteristics of an idea agent. Panelists cited a strong customer focus, willingness to invest in technology and an interest in growth as some of the key attributes necessary for success.

“We’re looking for agents who are customer focused…who know why the independent agent channel is the best place to purchase from…(and) agents focused on growth. That suite of attributes well describes what were looking for in our agencies,” Wolin said.

“We’re looking for agents who will embrace technology,” Barbagallo added. “We think all agents should have a Web site…We’re looking for agents who are data driven.”

Strengthening the independent agent system, despite the softening market and struggling economy, was another talking point for panelists. Browne said attracting new talent to the industry is critical to maintaining and improving the independent agent system. He acknowledged that current recruiting efforts are not enough and suggested implementing more creative and aggressive tactics, including offering summer job programs for high school students.

Wolin said agents’ innate understanding of a broad spectrum of industry issues is one of the core strengths of the channel and he urged agents to continue to use that knowledge to their advantage.

“I think your expertise on coverages, on risk classes…. gives you all a tremendous amount of strengths that are core to continued success,” he said.

Young encouraged agents not to be discouraged by the struggling economy, reminding agents of the market’s ever-evolving nature.

“We talk about insurance as the oxygen of the economy --- in order to make that happen, the advocacy role is so important,” she said. “I think an approach based on fear won’t work…We need to spend less time on what the threat might be and more time understanding it...[The market] is always going to change and with pressure on the economy, it will continue to change.”

“The unique proposition of independent agents is still very powerful,” Barbagallo added. “If we get caught up and build profitability, we’ll be well positioned.”

Wolin also emphasized that carriers are facing many of the same issues and threats as agents and that a partnership between the two is the best way to solve any issue.

“The things that are threatening to you are the same things that are threatening to us. We as carriers are here to work through these things with you,” he said.

One of the most predominate themes of the discussion was the role technology will play in the future of the industry. All panelists agreed that an emphasis needs to be placed on implementing Real Time rating capabilities and comparative ratings systems.

“If we’re not on board, companies are going to pull the plug on the financial input that keeps [Real Time] going,” Fulwider said. “We as agents have to educate staffs to use it --- it’s a conversion that needs to take place. We’re all in this together and we need to stay there, work hard and make it work.”

Barbagallo stressed the need for agents to stay on technology’s cutting edge by getting their agency involved in paid search on search engines and keeping Web sites up to date.

“We want to see agents increasingly data driven,” he said. “In terms of Web sites, a lot of you don’t have them and those that do, they aren’t enough.”

Browne also cautioned agents against becoming satisfied with the bare-bones of technology.

“Technology is a very fast-moving part and companies and agencies that think they’ve got that licked will very quickly find it’s moved past them,” he said.

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




P&C Trends
Hartford CEO Shares Thoughts with Agent Leaders
Ayer offers assessment of market cycles, branding and natural disaster risk.

The industry must not repeat the mistakes of previous market cycles---that was just one of the messages Hartford chairman and chief executive officer Ramani Ayer shared with the Big “I” Board of Directors during a meeting last weekend.

Ayer noted that the industry is clearly in the midst of a down underwriting cycle.

“I have seen three down underwriting cycles and we’re going into a fourth or in one now,” he said. “Bankruptcy in the industry (after previous cycles) created restructuring that caused you and your customers’ pain. I hope we have learned the lessons from previous underwriting cycles.”

He observed that this market cycle is behaving differently than previous cycles in that prices are declining more slowly, noting that in personal lines, some carriers are starting to take increases in auto coverage. But he said he believed rate deterioration will continue into 2009 and warned of the dangers of irresponsible market pricing.

“The foundation of your promise is the market you’re using,” he said. “Extinction is close when you participate in the cycles.”

On the heels of the recent announcement that The Hartford has joined Trusted Choice®, Ayer touched on the importance of branding.

“Brand is something we care deeply about,” he said. “A trusted brand is critical and The Hartford is trying to brand its image with protection and asset accumulation. Our independent agents are a trusted brand, and we want The Hartford to be the same…The advertising arms race is something that is a factor in the industry and it will continue.”

One issue that Ayer sees as a threat is natural disaster risk, saying that if the industry doesn’t solve the issue, it will ultimately lose with consumers. The Hartford is currently working on a natural disaster proposal that he said will contain elements that will unify agents and carriers in the insurance community.

“Natural disasters are costing the country huge amounts of money to recover (from),” he said. “Markets are disappearing around us and the tail risk is growing due to construction in coastal communities. You saw what tail risk did to Bear Stearns.”

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




P&C Trends
Hurricanes Top Risk for Insurers
Storms continue to be greatest “act of nature” risk to the industry.

Hurricanes are the top U.S. insurance risk for 2008, according to EMB, a global actuarial consulting firm. With hurricane season fast approaching, the storms pose the greatest “act of nature” risk to the industry this year, according to a report released by the firm last week.

The firm’s predictions are based on conversations with clients on how they are managing risk and also on past experiences, according to Tom Hettinger, managing director at EMB America and Alice Gannon, senior consultant of EMB America.

“We considered it not just in terms of the size of the event, but the likelihood of the event,” Hettinger says.

Gannon notes that if you look at top 10 events in terms of loss dollars, eight or nine of them are hurricanes.

The threat of hurricanes has been at the top of EMB’s risk list for insurers since Hurricane Andrew hit the southern Florida in 1992 causing $26.5 billion in damages and has held its place despite a drop in land-falling hurricanes over the past two years.

Gannon attributes hurricanes’ stronghold on the list to the storms’ unpredictability.

“Every year there are a number of non-hurricane windstorms…so managing that is very easy. It’s a matter of pricing it in the premiums you charge,” she says. “With hurricanes there are years where no losses occur, and then there are years like 2004 and 2005 that are devastating. Certainly everyone is very conscience of hurricane risk following 2004 and 2005, but now we’ve had two good years in terms of insured losses…they were actually active hurricane seasons, but they didn’t make landfall in the U.S… Insurance companies and regulators may be a little more relaxed and they shouldn’t be.”

Citing the unseasonable tornadoes that hit Atlanta last month and the wildfires that plagued southern California last fall, EMB also ranks tornadoes, earthquakes and wildfires among other possible risks for insurers this year. Terrorism, while in a category unrelated to natural disasters, is also one of the industry’s top concerns, according to Hettinger.

“9-11 opened the window that there could be serious size events that aren’t natural cats,” he says. “In 2001 terrorism was much higher on the list, but that does that mean it’s been forgotten about? No… it’s still out there.”

Regardless of the type of risk, EMB says preparedness is ultimately the way for the industry to protect itself against significant losses.

“We seem to be getting into the mega-cat world, where we have a consistent mega cat once every five to 10 years and whether that comes from earthquake, hurricane or terrorism, it doesn’t matter if we’re prepared for it,” Hettinger says.

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




VIEW: L&H Trends
No Substitutions
Use technology to enhance customer relationships, not replace them.

The annual Big “I” Legislative Conference & Convention recently came to a close and in reviewing notes from the myriad of meetings and speakers there were a number of important takeaways, but one in particular stood out. During a presidents’ panel for Young Agents, an insightful observation was made on the use of technology. The comment was that over time, there will continue to be more consumer-facing technology which will enable agents’ customers to access asset totals, investment allocation, contribution information and other related information. This is definitely a useful and important capability so that customers can see their own information. In fact, it is necessary to meet emerging consumer behavior and agents need to consider avenues to provide information through their agency portal and to vendors. Also, having a dynamic Web site is critical to supplementing vendor resources so the independent agent/advisor is seen as a dynamic partner.

However, providing more technological capabilities to consumers means putting the capabilities in their proper context. Previously, agents would sit down with their financial services customers on a semi-annual or annual basis to review the financial performance of their assets and investments. Since customers now have that inquiry capability on an almost daily basis, agents need to make sure they focus on continuing to see their customers regularly and focus the discussion on addressing that customer’s evolving  needs. Also, with the constantly changing tax laws  --- there are many sunsets on estate taxes and incomes taxes coming up in the next three years --- agents need to review each  customer’s financial plan to ensure it is still the best way to deal with their objectives relative to the tax laws.

Real-Time technology also creates another caveat for agents. Years ago, policyholders and participants in 401(k) plans could only make changes to their accounts on a periodic basis such as annually or quarterly. If a plan participant wanted to make a change in their investment allocation due to a current economic event or political situation, they had to satisfy the cadence of the change election period, which could be three months or up to 12 months. While this may have been inconvenient, it also served as an “impulse buffer” to keep an individual from overreacting to a dismal economic news report. While technology provides more control to the individual customer, it is a double-edged sword, as daily inquiry ability conflicts with long-term objectives and goals.

Agents should stay in touch with their customers and educate them regarding long-term trends. Reactive decisions should never replace proactive planning. Technology should aid agents with their customer relationships, not replace them.

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




Agency Management
Client Prospecting For the Modern Age
What to do when referrals and networking don’t work.

Independent agents no longer knock on doors to uncover prospects. Today, agents rely on referrals, of course, and networking. But when that doesn’t cut it, or when more aggressive marketing is called for, where can agents turn?

Fortunately, someone already gathered precisely the prospect information agents need, and these businesses will make it available, often at a fairly reasonable cost. Lists cover almost every conceivable description, affiliation and category. The trick is to figure out where to find them. To start, it pays to look online for list compilers or list managers.

List compilers include Dun & Bradstreet and R.H. Donnelly – names that have been around since the dark ages of pre-Internet marketing. These firms count every business in the country from various sources, then verify and expand that data from other sources.

List managers offer a different twist, selling names gathered from magazines, newsletters and other sources. These are known as responsive lists, because each person on it responded in some way to an offer. They’re very targeted, and cost more than compiled lists. But they’re generally worth more, because they contain exactly the desired prospects – whether widget makers or welders.

Not long ago, these lists were available only on paper or CD-ROM. Today, they’re immediately available to download onto an agency’s computer directly from the Internet. Several Web sites provide prospect lists worth considering.

InfoUSA.com: This firm provides access to business and consumer prospect information. Pricing is based on the specific list selected. After completing the selection process, the price appears, based on the number of prospects and amount of data requested. The site offers “print and mail” and a host of other services.

CorporateInformation.com: This site looks busy at first, but it’s actually very simple and powerful. The site is free, and doesn’t even require registration. Use it for company research, and get links to corporate profiles, news archives, financial information and message boards dedicated to a particular firm. Research an industry and find industry profiles, news and more. If you don’t know what to research, that’s okay. The site offers a “resources” section to trigger ideas. Some links are old, and information is not universally available, but it’s a good starting point.

Dun & Bradstreet Small Business Solutions: D&B’s small business site (www.smallbusiness.dnb.com) offers a suite of tools and services. Tracking folders allow you to follow existing customers, suppliers, prospects and competitors. Basic services are free, and include up to 15 “tracked” companies. Additional services, such as credit evaluations or demand letters, are reasonably priced. D&B will compile a list of new, credit-screened prospects by location or by industry, for less than a buck a record.

Hoovers Online: Hoovers (www.hoovers.com), another D&B unit, provides in-depth corporate and industry coverage, accurate lists of decision-makers and powerful searching and targeting tools. The information comes from thousands of sources, including proprietary databases, magazines, newspapers and industry journals. Hoovers details 12 million global companies, public and private, in more than 300 different industries.

DataLister.com: For workers’ comp information, it’s worth a look at this site. The firm says it has compiled more than 3.5 million employer records from 31 states, and is adding more each month. Records typically include employer information, current comp carrier and policy expiration date. Information is available via CD or online. Benefits may extend beyond workers comp, because many employers – the site says 70% of them – renew their property and liability coverage at the same time as their workers comp coverage.

Real-Info.com: This site offers a host of up-to-date information on real estate transactions throughout the country. An annual subscription service offers unlimited data research for all properties within subscribed counties. One element is property record data, which includes all details on an individual property, such as owner, mailing address, structural, lot, improvements, recent sale, sale history – all based on local records.

To read the entire article, including many more resources, click here.

Steve Anderson (www.SteveAnderson.com) is a licensed insurance agent and editor of The Automated Agency Report.