T H U R S D A Y ,   J U N E   1 5 ,   2 0 0 6

      Big "I" National News

C A R R I E R   N E W S
St. Paul Travelers Streamlines Brand to Travelers

St. Paul Travelers announced this week that it will now market its products simply under the name "Travelers" in the United States and Canada. The new identity’s launch coincides with the company’s new advertising campaign. IN&V spoke to company spokeswoman Marlene Ibsen about the branding decision, and what independent agents and brokers can expect from the change:

What brought about the shift away from using the name St. Paul Travelers?

"The company name has not changed. We’re going to market as Travelers for our products, but the company name is still St. Paul Travelers.

"We’re going to market as Travelers because it’s simpler. We want to provide a single, unified brand in the market place. By raising awareness through advertising, we hope it will make it easier for independent agents to make their recommendation of Travelers to their clients and create more opportunities for both our agents and our enterprise to grow."

What research went into this decision?

"A lot of research was done with focus groups, policy holders, agents, employees, other kinds of market research. And what we learned was that the Travelers name was the most recognized among St. Paul Travelers, St. Paul and Travelers. Since we had made the strategic decision to embark on a branding and advertising program, it made sense to simplify and unify the brand in the marketplace to get the most leverage out of that advertising."

How will the new brand impact independent agents?

"This is a branding initiative, and it won’t affect the underwriting companies or our business functions in any way. What we hope it will do is be a reminder to agents and their policy holders that we are an insurance company that is in sync with their needs today and going into the future."

What are the details of the new brand campaign?

"Our brand’s position is that Travelers is the company that understand that life and business are inherently dynamic and that the best way to serve our customers is to provide insurance that behaves the same way --- evolving to keep in step with life and business as they change. We’re short handing that with a tagline: Insurance. In-synch.SM That tagline and the concept of keeping insurance in sync with your needs will be in televisions ads, print ads and Internet advertising for, so far, the end of the year. And we expect this will be a much longer-term proposition. June 12 was when the new ads began appearing in both print and on television. Everything is focused on reinforcing that brand concept of being in sync."

Jennifer Sikorski (jennifer.sikorski@iiaba.net) is IA’s associate editor.

C A R R I E R   N E W S
Swiss Re Completes GE Insurance Solutions Acquisition

Swiss Re completed the acquisition of GE Insurance Solutions last Friday, June 9. The acquisition creates the world's largest and most diversified global reinsurer. GE Insurance Solutions, which will be integrated into Swiss Re over the next 18 months, adds further momentum to Swiss Re's sustainable earnings growth.

"The acquisition of GE Insurance Solutions consolidates further Swiss Re's global leadership position," says Swiss Re CEO Jacques Aigrain. "We will now move swiftly to integrate GE Insurance Solutions, adding new talents to our global workforce and building on the benefits of an enlarged client base and expanded product offerings."

With the transaction now closed, Swiss Re commences integrating GE Insurance Solutions, building on its talents, franchise and client base. Functions and teams will be merged, leading to an overall reduction of office locations as well as staff reductions in a number of locations. Through the organizational streamlining, Swiss Re expects to capture cost synergies of at least $300 million per year, to be realized by the end of 2007. Overall the acquisition will be accretive to earnings already in 2007.

As IN&V reported in November, in the deal, Swiss Re not only gains enough reinsurance business to vault it past rival reinsurer Munich Re, but it also obtains an important product endorsement by the Independent Insurance & Brokers of America and its 51 member state associations.

The Big "I" Professional Liability Program, known for leading the insurance agency/broker professional liability industry in providing innovative coverages, has consistently been one of the top association insurance programs in the United States. Nearly two-thirds of Big "I" member agencies obtain their professional liability coverage through the program. Member agencies access the program through the trusted counsel of their state Big "I" associations, and watching over the program at the national level is a committee of member, state association and national staff the Big "I" president appoints annually.

Stay tuned to IN&V for future updates.

L E G A L   A D V O C A C Y
Teachers Union Settles with Spitzer for Undisclosed Payments Involving Retirement Products

New York Attorney General Eliot Spitzer announced June 13, 2006, a settlement of an investigation involving retirement products. While insurance carriers have been parties to a number of settlements, this settlement was with the New York State United Teachers (NYSUT), a federation of 900 local unions representing more than 525,000 people from New York’s primary schools, colleges and healthcare facilities, for activities of a trust it created in 1983 to provide benefits to members of NYSUT and affiliated unions.

Spitzer alleged that the NYSUT’s Member Benefits Trust (renamed NYSUT Member Benefits after the New York investigation began), which endorses and monitors insurance plans, investment products and benefit programs provided to NYSUT members, accepted payments from ING Life Insurance and Annuity Company and its predecessor Aetna Life Insurance and Annuity Company to promote the insurance company’s 403(b) retirement plan to NYSUT members. The trust allegedly exclusively endorsed the ING/Aetna plan in return for payments not disclosed to members of NYSUT until the trust learned of the investigation by the New York attorney general. Those payments were initially negotiated in 1988 to be for expense reimbursements of approximately $40,000 but increased over the years to reach $2,402,000 for 2006. With additional "per head" endorsement fees, those fees were projected to be more than $3 million in 2005 and 2006, and to rise to $4.2 million in 2009.

The settlement alleges that the trust instructed its employees to redirect calls about one of the programs to ING/Aetna employees who would not identify themselves as such to callers. It also alleges that a trust coordinator who promoted its offerings to members claimed that his/her pay was "not tied in any way to ING" when ING paid his/her entire salary.

The settlement also alleges that the trust "never conducted an effective review unencumbered by loyalty to the current provider" and that certain benefits offered were and remain "far more expensive than low cost retirement plans offered by other providers."

Instead of providing enhanced services to members using the money received from ING/Aetna, the trust is alleged to have used a portion of the money for its own overhead and pools of excess cash that grew to $5.5 million in August 2005.

The settlement with NYSUT’s Member Benefits provides that it must: (1) hire an independent consultant to oversee implementation of the remedial measures required by the settlement; (2) pay $100,000 to the New York for the cost of the investigation; (3) conduct open bidding for retirement plan endorsements if the consultant determines that members will be best served by the trust’s endorsement of retirement plans, and endorse at least one low-cost plan if any endorsements are given; (4) disclose specified information in a letter to all members, including a comparison of fees and expenses of the endorsed plan provider and their impact on long-term investment returns, and "an explanation disclosing in simple and clear language the arrangement between the endorsed provider and the trust"; (5) allow members to roll over savings to a new plan at no cost; (6) limit payments from carriers to reimbursements for actual expenses incurred in its oversight role and not used to promote any plan; (7) spend the remaining ING monies on improved investment products for members, and not for salaries, overhead, conventions, hotel charges or entertainment; (8) provide free unbiased investment advice to members at least once per year as long as the trust endorses any retirement products; and (9) provide full cooperation by the trust with the investigation and any related proceedings and action by the New York attorney general.

This settlement is part of an ongoing investigation into the marketing of retirement products.

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

O N   T H E   H I L L
Big “I” Praises Senate Markup of Military Insurance Bill
Legislation would curb questionable insurance sales practices at military bases

The Big "I" praised Wednesday’s Senate markup of the Military Personnel Financial Services Protection Act as a great step forward in protecting military personnel from unscrupulous sales practices.

The bill would help stop questionable life insurance sales practices aimed at members of our nation’s armed forces. The legislation would ban the sale of contractual plans, clarify the scope of state jurisdiction over insurance sales on military bases and require pre-sale disclosures to military personnel.

The Big "I" strongly disapproves of these types of dubious life-insurance sales practices. It appears that a very limited number of individuals engage in these life insurance sales practices.

"We have an obligation to protect the brave men and women of our armed forces against a few bad actors who are perpetrating bad-faith sales practices," says Charles E. Symington Jr., Big "I" senior vice president for government affairs and federal relations. "Our armed forces are fighting for our country, and we owe it to them to keep them from being misled. We support this legislation curbing life-insurance sales abuses."

 "We are very pleased that the Senate is moving forward on this crucial legislation," says Brendan Reilly, Big "I" assistant vice president for federal government affairs. "For the good of the heroic men and women serving our nation, we must put an end to this questionable life-insurance sales practice. Independent insurance agents and brokers support this bill."

Cliston Brown (cliston.brown@iiaba.net) is Big "I" director of public affairs/government relations.

L - H   T RE N D S
You Know What They Say About Assumptions…

When Winston Churchill was prime minister of England, he was asked for a number of statistics relating to England’s economy. In response, he promised to have the voluminous list available to Parliament within a day. Walking back to Downing Street, his exasperated aide asked Churchill how they would they be possibly able to produce so much information in such a short period of time. His aide told him it would take at least six months to provide credible information. "Exactly," Churchill replied. "In fact, it will take them at least six months to prove it wrong."

When helping customers meet their personal financial objectives, it is crucial to use reasonable assumptions to determine how to meet their goals. This is perhaps one of the thorniest problems confronting agents. First off, customers have a tendency to frame financial planning with the current economic environment instead of using a long-term viewpoint. For example, the high interest rate environment of the 1980s which led to the initial explosive sales growth of interest rate sensitive universal life policies, also led to policy illustrations that were not realistic or sustainable over the long term. The so-called "vanishing premium" policies---policies that would accumulate so much additional cash value that premium payments would cease for the duration of the policy after just eight years--- resulted from relying on a best-case scenario and were not sustainable based on a double digit interest rate environment. Of course, when these types of policies required continued funding to avoid lapsing, many angry policy holders blamed their agent.

The high interest rate environment, couple with dramatic stock market assumptions for variable life insurance policies led to mandated policy illustrations that required that the guaranteed policy rate, an in between return assumption and an aggressive assumption of no more than 12% annually be used in the sales proposals. Aside from aggressive investment return assumptions, perhaps the biggest problem in using an annual return assumption is that stock (and bond returns to a lesser extent) market performance is very volatile and an average return assumption can mask the volatility (or standard deviation) of the returns. To tell someone that a particular equity separate account has averaged 6% annually during the past three years is not quite the whole story. In reality, it earned 25% in year one, lost 30% in year two and earned 35% in year three. Human nature being what it is, many investors many not have had the stomach to leave the investment alone after year two and, as a result, transferred their account to a less-risky investment, hence locking in their loss and not realizing the large gain in year three.

Independent insurance agents should remind clients that average assumptions will vary from year to year. Turn to independent, objective data such as Standard & Poor’s, Barron’s, etc. as a good approach to developing realistic assumptions. Make sure that your files indicate the used assumptions and have customer initial next to the assumptions so that they don’t have a faulty memory about the basis for the plan.

Lastly, it’s always a good idea to do a "sensitivity" analysis of the assumptions. This involves running the data with at least a couple of scenarios that use varying assumptions---investment returns at 5%, 6% and 7%, inflation at 3%, 4% and 5%, etc. This shows your customer the material impact of long-term results that are different than the assumed returns. This is especially important in performing Capital Needs Analysis (or Family Needs Analysis) to determine how much life insurance is needed to fund the insured’s objectives in the vent of his premature death.

Average return assumptions can be misleading. I learned firsthand that you can’t have 2.3 kids.

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

  V I E W :   T E C H   U P D A T E
AUGIE Survey Shows Technology’s Big Payback

The AUGIE survey results are in. They paint a picture of the industry’s progress on agency technology while highlighting as areas of continued inefficiency that need to be addressed.

While reviewing the results, one thing struck me first and foremost: there is a group of agencies that derive enormous benefit today from implementing the latest technologies, while there are others that only see a modest benefit, if any. Of the survey respondents, 65% said their agency value has increased due to implementing new technology procedures, while 34% said these technology procedures resulted in no change in agency value. In addition, 44% said that new technology procedures significantly impacted the time their staffs spend processing, while 41% noted only moderate impact and 16% responded that these new procedures had had very little or no impact.

Only some agencies use these new efficiencies to change their staffs’ focus. Of the respondents, 44% strongly agreed that the adoption of new technologies has enabled their agency to become a more effective sales organization, 45% only somewhat agreed and 11% disagreed. Also, 42% said that new technology procedures have significantly impacted their ability to provide proactive client servicing, 46% said these new procedures have only had a moderate impact for them in improving servicing and 12% said there has been very little or no impact on servicing for them.

I believe several factors enable some agencies to derive significant efficiencies from technology while others do not. First, technologically successful agencies are passionate about continuously improving their processes. These agencies are represented in the 55% of respondents who strongly agreed with the statement that their agency has an active strategy to continuously improve the business by implementing technology improvements as they are introduced. In contrast, 40% of agents said that they only somewhat agreed with this statement and 5% disagreed.

Second, you can only derive benefit from a new technology if your staff implements it. Of the respondents, 76% said that their agencies require staff to implement technology improvements when the agency adopts them, but 22% only somewhat agreed and 2% disagreed. Documenting the new workflows that implement the new technology and then driving these new workflows down throughout the entire organization, with the agency management’s full backing, are crucial steps in the implementation process that agencies often do no carry through. A focus on disciplined implementation, coupled with auditing employees’ work for compliance with the new workflows, can help agencies increase payback from new technologies.

Providing systematic training to employees on new technologies and workflows is another key step. According to the survey, 42% of respondents said they strongly agree that they provide such training, 47% said they only somewhat agreed and 11% said they disagreed. A heightened commitment to employee training and coaching can provide an enormous payback to agencies, and there are a wide variety of training opportunities on the new technologies available through the user groups, vendors, carriers, consultants and agent associations.

Agencies that most effectively implement new technologies are taking advantage of the gained efficiencies to change their staffs’ role and to transform their organizations’ inward focus on processing paper to an outward focus on proactive service, cross-marketing and sales.

Agencies that consistently and successfully implement new technologies are starting to see a multiplier effect. The biggest benefit: these efficiencies enable agencies to grow without increasing staff. In the words of one agent respondent: "We grew 35% last year, but we did not have to add any employees." You hear this time and time again from agencies that made a commitment to stay current with new technology opportunities.

Another agent spoke of the benefits of going paperless: "We converted to an image-driven workflow about two years ago in personal lines. The result was an increase of revenue per CSR of about $75,000 each. In commercial, imaging was implemented six months ago [and] average increase in revenue per CSR to date is about $40,000."

In spite of the huge payback many agencies realize from their paperless initiatives, only 41% of respondents strongly agreed that their agency has a major strategy to go paperless or remain paperless. In addition, 35% somewhat agreed that they were implementing such a strategy and 24% are not pursuing such an initiative.

A number of agencies are embracing how today’s technologies and workflows—real-time, personal and commercial lines download, direct-bill commission statement download, eliminating paper, maximizing agency management system capabilities—can enable the agency to become more efficient, more sales oriented and more proactive and professional with its customers.

As an agent at the recent ACT and AUGIE meetings said: "We all know how hard it is to grow the agency’s bottom line, and yet many agencies, by not taking advantage of the technology opportunities that are available to them today, are just leaving money on the table that could be flowing to their bottom line."

More than 7,500 independent agents, brokers and wholesalers took part in the survey, and 4,000 completed it. To access the AUGIE survey, go to www.ACORD.org and click "Information for Agents, Brokers and Distributors."

Jeff Yates (jeff.yates@iiaba.net) is executive director of the Agents Council for Technology. This article reflects the views of the author and should not be construed as an official statement by ACT.