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Big “I” National News

Tech Update

A New Look at Real-Time
Unprecedented initiative reaches out to agency owners.

With all of the issues facing agents and brokers today, it can be hard for them to focus on technology. However, the new technology tools available today can help—probably more than anything else—an agency achieve the goals its leaders want for the business.

To spur the integrations of new technology, the industry is launching the Real-Time/Download Campaign, an unprecedented initiative to educate agency and carrier business leaders about the importance of implementing real time.

Real time is a key technology “enabler” that will transform how agents do business in the future. Real time gives time back to agency employees and creates a professional environment that can respond to customers immediately. This positive result will not occur, however, if agency principals simply delegate real-time implementation down to others in the agency and do not make clear to all employees that senior management expects all employees to implement real time wherever possible and then monitors that implementation.

Real time directly addresses the major frustrations that agencies have expressed with automation today, most of which deal with carrier Web sites and all of the passwords, separate logons, different workflows, double entry and additional employee training these sites require.

Real time, in contrast, enables agents to perform inquiries and transactions directly from their agency management system or comparative rater. Passwords and logons are handled automatically, data is only entered once, and employees can be trained on a single workflow. Real time is not only more efficient for employees, it allows employees to respond to customers on the spot.

Savvy agents have clocked the time that real time saves them, and they are utilizing that saved time in a more productive manner. Consider the cases of two agencies that have implemented real time inquiry functions (billing and claims inquiry, electronic policy view and automatic logon to carrier Web sites). The first, an upstate New York agency, is now saving more than three hours per month per CSR over what it took the CSR to perform the transactions on the carrier Web site. This agency has six CSRs, so it is saving 18 hours per month. The second is an Ohio agency and each of its CSAs saves more than 5.5 hours of time per month. Consider the impact these kinds of savings can have on eliminating agency backlog and improving staff morale. The Ohio agent has taken the second important step of tasking his employees to use this saved time to make targeted phone calls to the agency’s best customers. At first, the customers were surprised by the calls, but now they are very pleased with the extra attention. This agency’s goal is to apply these time savings to begin the transformation of its staff to that of being trusted advisors.

In recent years, the Best Practices agencies have jumped on the opportunity presented by real time to enhance their productivity. Ninety-three percent of Best Practices agencies are currently using real time for inquiries; 50% are performing this function with five or more carriers; and 91% are achieving time savings from this technology. Eighty-two percent of Best Practices agencies are using real time for personal lines rating; 54% are performing this function with at least three carriers; and 79% are achieving time savings.

Agencies can save time with real time by implementing it today with carriers that offer it. The best way for agents to get more companies on board with real time is to increase their agency’s usage because several carriers are watching these usage numbers very carefully before deciding to invest in real time themselves.

Many carriers would be content to stick with carrier Web sites for the long term. After all, the Web sites eliminate the work from the carrier’s side. But savvy agencies do not want to face a world of carrier Web sites five years from now because they are inefficient, make it difficult to represent multiple carriers effectively and poorly position the independent agency system against competing distribution systems which are single company focused.

The goal of the Real-Time/Download Campaign is to help position the independent agents for the future. Over the next year, the goal is to double the use of real time in the industry. Go to www.getrealtime.org  to learn more about the campaign and to find specific tools to help with implementation, including an agency implementation guide and links to specific vendor and carrier real-time information. Also be sure to review the stakeholders’ commitments information, which contains the specific actions the campaign requests of independent agents, carriers, vendors, national and state associations, user groups and others to further the industry’s transformation to real time.

Jeff Yates (jeff.yates@iiaba.net) is ACT executive director.

P&C Trends

On the Record with New MetLife Auto & Home President
Bill Moore talks about new job, company’s future,  agents’ role in brand.

In January, Bill Moore was chosen to succeed William Mullaney as president of MetLife Auto & Home and now, after only three months in his new role, Moore has officially taken the reigns of one of the nation’s largest personal lines property-casualty companies.

Since it was established in 1972, the Warwick, R.I.-based MetLife Auto & Home has grown to include nearly $3 billion in premiums by offering insurance products such as automobile, homeowners, boat, excess liability and various other personal lines p-c insurance to customers in 50 states and the District of Columbia. As president of the subsidiary, Moore, a former senior vice president for eastern zone individual business at MetLife, is now responsible for maintaining relationships with 4,300 independent agencies, which represent approximately 20,000 agents across the country.

Moore recently talked exclusively with IN&V about his new position with the company, the goals and challenges MetLife faces and independent agents’ role in the organization.

IN&V: What do you hope to accomplish in your new role with the company?

Moore: “If I thought about a main goal it would be to continue to build on the success of the organization and execute our business plans…Long-term it’s to be one of the top 10 personal lines carriers. We are not obsessed with becoming one of the top 10; what’s more important is for us to continue to grow our organization and accelerate our earnings.”

IN&V: What role do independent agents play in your distribution channel strategy?

Moore: “We’re extremely committed to the independent agent system and all our agent partners. Independent agents are key for many consumers who want face-to-face contact. We have 4,300 independent agent contracts with MetLife Auto & Home and $1.1 billion of MetLife Auto & Home business is from independent agent partners.”

IN&V: Do you see this role changing in the future?

Moore: “I think it will continue to grow…as we look at white space across country, we think independent agents offer the greatest opportunity to do business in those markets very quickly. One of the other things is that our goal is for MetLife Auto & Home to be No. 1 or No. 2 in every agency we do business with.”

IN&V: What do you think is the p-c industry’s biggest challenge right now?

Moore: “It’s been pretty much the same for all successful companies in the industry: It’s navigating the business cycle. Those who are able to do it will be successful and those who cannot won’t. There’s not a tremendous amount of pricing power (in the market) and while frequencies are fairly flat, it’s important to focus on fundamentals everyday and make sure you have that in order in order to continue earnings and revenue.”

IN&V: What is your outlook for MetLife Auto & Home over the next year?

Moore: “We reorganized our sales force and in 2006 sales were up. We’re excited about what we see and we’re off to a good start in the first quarter of 2007…I don’t think there has ever been a better time to be a member of MetLife and MetLife Auto & Home.”

Michelle Payne (michelle.payne@iiaba.net) is Big “I” writer/editor.

Legal Advocacy

Allstate Hit with $2.8 Million Katrina Jury Verdict

A federal jury in New Orleans awarded a homeowner, Robert Weiss, $2.8 million for the loss of his home caused by Hurricane Katrina. Allstate had insured the property, and claimed that the majority of the damage to Weiss’s home was due to storm surge, which was not covered by his Allstate homeowner’s policy. The jury disagreed and concluded that Allstate owed Weiss $561,600 for wind damage to his home and its contents, plus an additional $2.25 million for failure to act in good faith in settling the claim.

Press reports indicated that Weiss had already received more than $400,000 in insurance payments, including $350,000 from federal flood insurance. Weiss’s Allstate policy had limits of $343,000 for the dwelling and $240,100 for the contents. Because Allstate had claimed that the majority of the damage was caused by water, it paid Weiss $29,483 for structural damage and $14,787 for additional living expenses. The $561,600 amount awarded by the jury includes the full limits of both his flood and homeowner’s policies.

Weiss’s attorneys explained that the house was 17 feet above sea level and only 14 feet of storm surge hit the area. Although the initial inspection for Allstate concluded that wind destroyed the home before the water washed its contents away, the inspector backed off of that conclusion after a different engineering consultant hired by Allstate concluded that storm surge destroyed the house, even though he did not inspect the property until after writing the report. The jury foreman told the press that the jury was swayed by the fact that the second engineer did not even visit the house until after writing his report, drawing the jury to conclude that Allstate did not act in good faith.

Some industry observers were surprised by the amount of the verdict, especially given the amount of flood insurance paid to Weiss. Randy Maniloff, a lawyer who represents insurers, said, “It just leaves you scratching your head. I thought the judge said you can’t double-dip, and this is exactly what [the jury] did.”

Robert Hartwig, president of the Insurance Information Institute, said that the verdict “adds a significant degree of uncertainty for insurers hoping to do business in the state.”

This is the first federal jury verdict on a Katrina claim in New Orleans. Hundreds of other lawsuits have been filed and are pending. According to an Allstate spokeswoman, the company will appeal the decision.

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




Legal Advocacy

U.S. Supreme Court Upholds Federal Regulation of Bank Subsidiaries

The U.S. Supreme Court ruled Tuesday in Watters v. Wachovia that state laws do not regulate mortgage-lending subsidiaries of national banks. The decision answered the important question about what the role is of the Office of the Comptroller of the Currency (OCC), the federal agency charged with supervision and oversight of national banks, in regulating the activities of operating subsidiaries of national banks. In short, the court decided that the OCC regulates national banks when conducting the business of banking, including mortgage lending. 

The court said that it repeatedly has decided that federal regulation protects national banking “from unduly burdensome and duplicative state regulation.” The court continued that “just as duplicative state examination, supervision and regulation would significantly burden mortgage lending when engaged in by national banks…so too those state controls interfere with that same activity when engaged in by an operating subsidiary.” The court was especially mindful that subjecting the subsidiaries to state mortgage laws “would surely interfere with the banks’ federal authorized business...”

The court made the distinction between regulation of the banking functions of the national banks and their subsidiaries, and other state laws that generally apply to others in the state, such as general corporate laws. The court made it clear that “federally charted banks are subject to state laws of general application in their daily business to the extent such laws do not conflict with the letter or the general purposes of the (National Banking Act).” The court looked to the decision in Barnett Bank of Marion County v. Nelson several times to support the conclusion that the National Bank Act preempts state regulation of banking as to national banks. “When state prescriptions significantly impair the exercise of authority, enumerated or incidental under the (National Banking Act), the state’s regulations must give way” (citing Barnett). The court explained their decision was based on the functions being performed by the subsidiary of a national bank, not the corporate structure of the subsidiary.

In presenting arguments to the court, all 50 states argued that they should be entitled to create stricter regulations for lending subsidiaries of national banks to protect their citizens from predatory and other anti-consumer practices. The national banks, on the other hand, successfully argued that application of the patchwork of state regulations would make it difficult for their subsidiaries to do business.

The decision was 5-3, with Justice Ginsberg writing the opinion for the majority, which Justices Kennedy, Souter, Breyer and Alito joined. Justice Stevens wrote a dissenting opinion, which Justice Scalia and Chief Justice Roberts joined. Justice Thomas did not take part in the decision.

In dissent, Justice Stevens said that “Notwithstanding the absence of relevant statutory authority, today the court endorses an agency’s incorrect determination that the laws of a sovereign State must yield to federal power.” The Congressional silence on preemption as to this issue was troubling for the dissent, which stated that “the court’s eagerness to infuse congressional silence with preemptive force threatens the vitality of most state laws as applied to national banks – a result at odds with the long and unbroken history of dual state and deferral authority over national banks, not to mention our federal system of government.”

A copy of the Watters and Barnett decisions are posted on the members-only Legal Advocacy page of www.independentagent.com under “Cases.”

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




Legal Advocacy

With Spitzer Gone, Other States Pick Up Settlement Slack

The legal settlements involving allegations of bid-rigging and steering in the insurance industry have not ended just because Eliot Spitzer is no longer the New York attorney general. Instead, other state attorneys general have filled the void, commenced with their own investigations and entered into their own settlements, with Texas being the latest.

Last week, Texas Attorney General Greg Abbott settled with Allied World Assurance Co. (AWAC) for $2.1 million to resolve allegations of conspiracy to avoid competition with its original investors. AWAC was created in 2001 as a Bermuda-based surplus lines property and casualty insurer, with founding investors including AIG, Chubb and Goldman Sachs. Former AIG Chairman Maurice “Hank” Greenberg served as AWAC’s chairman until 2004. Despite AWAC’s investors, the private placement memorandum from its formation noted that it would to operate as an independent company, and compete with its investors for surplus lines business.

According to a lawsuit filed by the Texas attorney general concurrently with the settlement, AWAC and AIG informally agreed not to compete with one another. The complaint alleges AWAC and AIG shared information, coordinated responses to bidding opportunities and refused requests for quotes when the other was the incumbent carrier. To facilitate this arrangement, AIG purportedly provided AWAC with access to AIG’s universal E-Start system identifying business it planned to quote so AWAC could refrain from bidding on that business.

In addition to the payment by AWAC of $2.1 million, it agreed in the settlement to refrain from using policyholder databases of its insurer shareholders and not to violate the antitrust laws. AWAC is reported to have denied wrongdoing, opting to settle rather than face the uncertainty and cost of litigation of unpredictable duration.

This is not the first time Texas has played a leading role in bid-rigging claims involving the insurance industry. Texas served as a leading state in the multi-state agreement which settled producer compensation issues involving Zurich, and took the lead in the settlement of some claims in the multi-district class action litigation in New Jersey federal court involving producer compensation issues.

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




L&H Trends

A Little Education Goes a Long Way
Agents have an obligation to improve clients’ financial literacy. 

The sub-prime mortgage lending industry is making headlines recently. With increasing defaults and resulting foreclosures, the general public has begun to focus on the practices of offering teaser adjustable rate mortgages that increase, sometimes dramatically, over time. It is very easy to understand the motivation of this segment of the population, which is to stop paying rent and instead become a homeowner. With financial literacy being what it is today, it’s also easy to understand how some people might not understand the obligation they are making to pay higher monthly amounts. Naturally, if housing prices rise and the homeowner’s credit improves, he/she can refinance and/or sell the property for a gain. However, when housing prices fall, the homeowner can be trapped in a situation where they are straining to make the payments. Even though property taxes and homeowner’s payments are escrowed with the mortgage, many independent agents get notices informing them when customers are behind on their homeowners’ coverage.

While many people may not be directly impacted by the sub-prime lending problem, an equally insidious situation may crop up on a daily basis: credit card companies’ solicitations. They arrive daily in the mail. The most distressing aspect is not necessarily the solicitations working adults receive, but rather the offers college students receive from the leading credit card issuers. The notion that full-time college students, many of whom have college loans, need additional installment debt offered at a high interest rate is unprincipled. There’s nothing wrong with college kids having debit cards. And what parent hasn’t gotten a cheery phone call from their college student that eventually ends in, “Could you move some money over into my account?” But at least with debit cards, there isn’t an open-ended opportunity to spend now and face the consequences later.

Independent agents are in a good position to help educate college students and their parents about financial literacy. Providing information on the agency’s Web site about basic finances and other important topics like having renter’s insurance to cover stolen or damaged property and, more importantly, liability coverage on the premises, is a useful role for the agent. Many parents lack credibility or objectivity in their teenager’s eyes, and having a third party reinforce financial stewardship is an important service that parents will appreciate. Many teenagers are well aware of the cost and need for auto insurance and have some interaction with their insurance agent. There are a number of third-party providers that agents can contract with for newsletters and pamphlets that can be imprinted with the agency’s name. Financial literacy about debt, credit, insurance and liability are important topics that aren’t taught in school unless the kids have taken a business class along the way.

And, it’s not just credit card solicitations in the mail. Also cramming mailboxes are an array of catalogs targeting teens and college students. No doubt younger people are a little more impatient and want immediate gratification, but the reality is that financial institutions will give credit to anyone---at least until they run into problems.

Agents can help society at large and their customers by providing basic financial information to college students and help them pass up the siren call of easy credit.

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