|
|
 |
 |
T H U R S D A Y , M A Y 1 7 , 2 0 0 7
Big “I” National News
P&C Trends
Making a Brand Stick
Insurance companies rank high when it comes to brand satisfaction.
MetLife has Snoopy, Geico has its gecko and its cavemen and Travelers has recently reacquired its famous red umbrella---all of these icons are synonymous with their respective insurance companies’ brands, but are they really successful in getting customers to identify with their products? According to a recent survey, the answer is yes.
All three of these companies were ranked as having the best branding and customer loyalty in the annual Brand Keys Customer Loyalty Engagement Index. The index, filed annually every fall and spring, examines customers’ relationships with 362 brands in 56 categories, including insurance, and identifies customers’ expectations. It also paints a picture of the category drivers that engage customers, engender loyalty and drive profits.
“These drivers not only define how the consumer will view the category, compare offerings and, ultimately, buy, but also identify the expectations consumers hold for each driver,” the Brand Key report says. “The brand whose drivers come closest to meeting (or even exceeding) those of the category ideal is always the one whose customers will demonstrate the highest level of engagement and loyalty over the next 12 to 18 months.”
The Brand Key Index includes categories for auto insurers and insurance companies. Insurance companies with the highest branding loyalty include: NY Life, ING, The Hartford, Travelers, Prudential, AXA and Atena. For auto insurers, companies with top brand loyalty include: Geico, State Farm, Allstate/Nationwide (tie) and Progressive.
While Brand Key’s survey does not include specific branding statistics based on age, a large part of these brands’ success may be attributed to a particular age group, according to another study by Focalyst.
Focalyst, a marketing and consulting firm that focuses exclusively on baby boomers and older consumers, recently surveyed 30,000 U.S. adults over the age of 42 in the and found that baby boomers are more likely to remain loyal to services such as auto, home, medical and life insurance companies in comparison to products such as computers, apparel and home appliances.
The survey found that the lowest boomer brand loyalty is the following categories (percentage of those loyal): television, 22%; computers, 24%; apparel, 27%; home appliances, 30%; and prepared food, 36%. Conversely, insurance and banking services ranked high with the generations with the highest brand loyalty being for auto and home insurance, 72% of respondents said they were loyal to one company, followed by medical insurance with 67%, life insurance, 65% and banks, 63%.
For more information on the index, visit www.brandkeys.com/awards.
Michelle Payne (michelle.payne@iiaba.net) is Big “I” writer/editor.
P&C Trends
P-C Insurance vs. the Fortune 500
Are the largest company partners super profitable or just average?
The results of the annual Fortune magazine study of the largest 500 companies in America are in. As documented in the April 30 issue, it was a good year to be in a business of making money from money. While the largest p-c insurers are not the securities or even the banking industry, the product manufacturers of the industry did see profit growth in 2006 that well outpaced the median at 34% and 11.8%, respectively. This is, undoubtedly, no small part of the reason p-c insurers are getting some unwanted attention from lawmakers.
A deeper look, however, tells a more balanced story than last year’s rapid growth in profits might indicate. Total returns of these large bellwether insurance companies were actually very average last year (14.9% vs. 15.4%) and over the past 10 years as well (11% versus 11.3%). While industry watchers (like Robert Hunter of the Consumer Federation of America) have pointed out singing the blues over insurer profitability by citing broad industry statistics on return on equity is specious (because of the inclusion of less profit-minded mutual insurers), a look at the industry as measured by household name insurers like State Farm, Progressive and Allstate against everyday corporate America household names like Wal-Mart and Microsoft shows no indication of capitalism run wild at the hands of actuaries and financiers.
Overall, p-c insurers represent 20 of the Fortune 500 companies or about 5% of the group. The five insurers with the highest ROE as assessed by Fortune include:Progressive, 24%;Allstate, 23%; Safeco, 21%; W.R. Berkley, 21%; and Chubb, 18%.
Agents may be interested to see they are all companies with significant independent agent distribution forces. Notably, Aon and Marsh & McLennan are not included in the p-c industry figures as they categorized by Fortune as Diversified Financial Companies. Aon and Marsh returns were both quite respectable at 14% and 17%, respectively. For more information on the Fortune 500, readers are directed to go to the Web site at: www.Fortune.com/Fortune500.
Paul Buse (paul.buse@iiaba.net) is president of Big “I” AdvantageSM.
P&C Trends
A Lot of Stolen Fuzzy Dice
Vegas tops list of car theft hot spots.
Las Vegas is a city of high-rollers, drive-thru wedding chapels, Elvis impersonators and, according to the National Insurance Crime Bureau (NICB), a whole lot of car thieves.
Las Vegas tops the 2006 Hot Spots ranking, the NICB’s annual report on auto theft rates, for the first time, beating out the previous No. 1, Modesto, Calif., which fell to No. 5 after holding the top spot for three consecutive years.
The NICB study annually ranks metropolitan areas based on their per capita vehicle theft rate and as in 2005 it once again found the western United States ranks highest when it comes to car thefts. All 10 cities on this year’s list are in the west---five of them in California alone. List-makers include:
1. Las Vegas/Paradise, Nev.
2. Stockton, Calif.
3. Visalia/Porterville, Calif.
4. Phoenix/Mesa/Scottsdale, Ariz.
5. Modesto, Calif.
6. Seattle/Tacoma/Bellevue, Wash.
7. Sacramento/Arden-Arcade/Roseville, Calif.
8. Fresno, Calif.
9. Yakima, Wash.
10. Tucson, Ariz.
The NICB used data from the National Crime Information Center (NCIC) to rate each of the nation’s 361 metropolitan statistical areas, as designated by the Office of Management and Budget. The rate of theft is determined by the number of automobile thefts per 100,000 residents using the 2005 U.S. Census Population Estimates, which are the most current figures available.
“People can take any number of precautions to protect themselves from vehicle theft and, in most cases, those are sufficient to prevent theft,” says NICB President and CEO Robert Bryant. “But a determined thief, a serial vehicle thief, is someone for whom there is no absolute deterrent---except prison.”
The good news for agents is that, according to preliminary FBI data, there was a 2.3% decrease in motor vehicle thefts from January to June 2006 in comparison with the same period in 2005. Nationally, 2006 is the third consecutive year in which the theft rate has decreased, according to the NICB.
In addition to warning insurers about areas at high risk for car theft, the NICB has also compiled a list of guidelines that agents can pass on to their customers on how to prevent their automobile from being stolen.
The NICB recommends car owners take precautions with their cars. Independent agents can share the following list with their clients to promote safety:
Use Common Sense --- An unlocked vehicle with a key in the ignition is an open invitation to any thief, regardless of which anti-theft device is used. The common-sense approach to protection is the simplest and most cost-effective way to thwart would-be thieves. Secure vehicles even if parking for brief periods. And always remove keys from the ignition, lock doors, close windows and park in a well-lit area.
Warning Device --- The second layer of protection is a visible or audible device that alerts thieves that a vehicle is protected. Popular second layer devices include: audible alarms, steering column collars, steering wheel/brake pedal lock, brake locks, wheel locks, tire locks/tire deflators, theft deterrent decals, identification markers in or on vehicle, VIN etching and micro dot marking.
Immobilizing Device --- The third layer of protection is a device that prevents thieves from bypassing the ignition and hot-wiring a vehicle. Some electronic devices have computer chips in ignition keys. Other devices inhibit the flow of electricity or fuel to the engine until a hidden switch or button is activated. Popular third-layer devices include: smart keys, fuse cut-offs, kill switches, starter, ignition, and fuel pump disablers and wireless ignition authentication.
Tracking Device --- The final layer of protection is a tracking device that emits a signal to police or a monitoring station when the vehicle is stolen. Tracking devices are very effective in helping authorities recover stolen vehicles. Some systems employ “telematics” which combine GPS and wireless technologies to allow remote monitoring of a vehicle. If the vehicle is moved the system will alert the owner and the vehicle can be tracked via computer.
Michelle Payne (michelle.payne@iiaba.net) is Big “I” writer/editor.
Producer Compensation Issue Update
Pennsylvania Steps into the Producer Compensation Fray
ACE to pay state $9 million settlement.
On Monday, Pennsylvania became the latest state to announce a settlement with a major insurance carrier involving allegations of bid-rigging and steering in the excess casualty market.
The $9 million settlement was announced by Pennsylvania Attorney General Tom Corbett with ACE, Ltd., a Bermuda-based insurance carrier (ACE). Pennsylvania is the domestic domicile of ACE’s U.S. operations.
“The bid-rigging that ACE engaged upon in this scheme essentially raised premium prices for insurance customers and steered business directly to themselves, which stifled competition without the policyholders knowledge,” Corbett says.
The settlement requires ACE to: 1) pay $9 million to Pennsylvania, consisting of a $6 million penalty and $3 million in reimbursement for fees and costs related to the investigation and settlement; 2) fully disclose compensation information to prospective policyholders; 3) establish a toll-free telephone number to allow existing policyholders to request compensation information; 4) post a compensation disclosure on its Web site; 5) prohibit any illegal pay-to-play arrangement; and 6) refrain from providing or offering a “false, fictitious, inflated, artificial, ‘B,’ alternative, back-up or throw away bid, quote or indication, or any other illegal quote or indication that is not based upon bona fide business, actuarial or underwriting considerations when the quote or indication is given.”
In addition, ACE agreed to cooperate with the Pennsylvania insurance regulator in connection with any investigations concerning the alleged improper quotes or contingent commission payments. The settlement gives ACE the right to request modification of the agreement if it becomes impracticable.
“This settlement is an important step toward closure of the insurance industry investigation that began in 2004,” according to Robert Cusumano, general counsel of ACE. He also said that: “The settlement reinforces our belief that the reforms and guidelines that the company put in place two years ago continue to be state-of-the-art safeguards that the regulatory community will embrace.”
These reforms arose out of previous settlements announced by ACE in 2006 with New York, Connecticut and Illinois, under which the company agreed to pay $40 million in restitution to policyholders. In an SEC filing last week, ACE stated that the settlement is to “assure ongoing antitrust compliance in its domestic operations.”
For more information about producer compensation issues, log in as a member to www.independentagent.com, go to Legal Advocacy and select IIABA/Industry Information and News, or contact Kathleen Graber, associate general counsel at 703-706-5432; kathleen.graber@iiaba.net.
L&H Trends
Don’t Underestimate Retiree Healthcare Costs
According to Fidelity, lifetime healthcare costs are on rise.
A 65-year-old couple retiring in 2007 will need about $215,000 to cover their medical costs in retirement, according to Fidelity Investments’ update of its annual estimate of lifetime healthcare costs. This is a 7.5% increase over the 2006 estimate of $200,000.
Fidelity bases its calculation on individuals who do not have employer-sponsored retiree health care coverage and includes Medicare Part B and D premiums, Medicare cost-sharing provisions and out-of-pocket prescription drug costs.
Another way of looking at the $215,000 number, says Fidelity, is to consider that a 65-year-old worker with a $60,000 salary who retires at the end of 2007 “should expect that 50% of his or her pre-tax Social Security benefit will be used to pay for personal health care expenses in the next 16 to 18 years.”
Keep in mind that the Fidelity estimate is an average cost. If people live longer, they can have a significantly higher lifetime costs. This is why healthcare is usually the No. 1 concern among retirees. Fewer and fewer people have retiree medical insurance through their employer and if they do, they are paying for the coverage. Since Medicare doesn't become available until age 65 (unless a disability is involved), most people cannot afford to pay for coverage and retire prior to age 65. And, since the eligibility age for Social Security benefits was changed years back and is tied to date of birth, there is a possibility that in the future the same approach could be adopted for Medicare to help mitigate the cost. Medicare is projected to run short of funds well before Social Security will.
Independent insurance agents can help their clients plan for retiree health expenses by educating them on the magnitude of this expense. Second, they can discuss whether a health savings account, when used in conjunction with a high-deductible health care (HDHC), may be the right vehicle for their business to offer, which will allow the employees to accumulate a tax-free account which can be rolled over from year to year and used to pay for health care expenses in retirement. Third, independent agents should have a conversation with their customers about long-term care insurance (LTCI) and assist them with getting their policies bound while they are young enough to afford them. Having adequate LTCI coverage will allow people to focus on building a nest egg to have an enjoyable standard of living in retirement without worrying about their savings being depleted by long term care expenses.
With the cost of housing, transportation, food, education and the rest of life's expenses, the public needs to develop a long-term strategy to deal with burgeoning costs. The mentality that “the government will provide for my needs and that I won't have to deal with these issues” is rooted in the ignorance of the demographics of the baby boomers. Independent agents can be a catalyst to get their customers to begin identifying and then funding a plan to deal with these costs. Clearly, the cost of healthcare is not slowing down. It continues to outpace inflation. Having a game plan to deal with it is better than living with the anxiety of playing roulette with a retirement lifestyle. Taking advantage of the tax code to build funds tax free to help meet this obligation is the best opportunity to meet the challenge.
Dave Evans (dave.evans@iiaba.net) is a certified financial planner and an IA l-h contributing editor.
|
|
