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Big “I” National News
P&C Trends
Hurricane Predictions Take a Dip
The insurance industry let out a small collective sigh of relief as many experts downgraded their expectations for the 2006 hurricane season. While still predicted to see above-average activity, the hurricane season most likely will not include a storm with the magnitude of Hurricane Katrina.
The National Oceanic and Atmospheric Administration (NOAA) updated its outlook on Tuesday, saying there is a 75% chance of an above-normal season and a 20% chance of a near-normal season. The NOAA now predicts 12 to 15 names storms, with seven to nine becoming hurricanes and three to four developing into major hurricanes. In May, it had predicted 13 to 16 named storms, eight to 10 hurricanes and four to six major hurricanes.
Although this is hardly a rosy forecast, it’s certainly a bit of good news given 2005’s destructive hurricanes.
What accounts for lowered expectations? According to NOAA, “Atmospheric and oceanic conditions are not as conducive as previously forecasted, the transition away from La Nina-like rainfall patterns occurred more quickly than expected, and the very persistent upper-level ridge patterns over the eastern U.S. and western Atlantic, which contributed to the extremely active 2003-2005 hurricane seasons, is not present.”
The 2006 season could differ from 2005’s in not only the number of storms, but also the location of them. According to one expert, the East Coast---not the Gulf region---may be the more likely victim of hurricanes.
“Overall we think the 2006 Atlantic basin tropical storm season will be somewhat active,” Phillip Klotzbach, lead forecaster of Colorado State University’s Tropical Meteorology Project, told the Associated Press. “This year it looks like the East Coast is more likely to be targeted by Atlantic Basin hurricanes than the Gulf Coast, although the possibility exists that any point along the U.S. coast could be affected.”
Jennifer Sikorski (jennifer.sikorski@iiaba.net) is IA’s associate editor.
On the Hill
McGavick Looks to Turn Tables in Washington State
With Congress in summer recess, talk around Capitol Hill now focuses largely on the upcoming election season. In the coming weeks, IN&V will explore several races of particular interest to independent insurance agents and brokers and to InsurPac. This week’s opening article focuses on the U.S. Senate race in Washington state.
In the Evergreen State, Republican Mike McGavick, the former Safeco CEO, faces freshman Democrat Maria Cantwell, who won a close race after a lengthy recount in 2000. McGavick’s candidacy has the widespread support of the insurance industry, and he is considered one of the few Republicans with a real chance to beat an incumbent Democrat this cycle.
Prior to taking the reins at Safeco, McGavick served as chief of staff to former Republican Sen. Slade Gorton, whom Cantwell ousted in 2000 by a scant 2,229 votes out of nearly 2.4 million cast---a difference of eight-hundredths of 1%. Cantwell won this nail-biter in a Democratic year, as far as Senate races were concerned: Democrats picked up six formerly Republican-held seats while losing only two of their own.
Despite the closeness of Cantwell’s 2000 win, there are admittedly a number of factors that would seem to play against McGavick. First, Washington state is a “blue” state, having last elected a Republican to the Senate in 1994 (Gorton) and having last supported a Republican presidential candidate in 1984 (Reagan). The state supported Al Gore by 5% in 2000 and John Kerry by 7% in 2004—surpassing the national Democratic percentage significantly in each case. And as is well known, Republicans face a tough political environment in 2006, with losses expected and gains considered unlikely.
Yet, there are underlying, less obvious factors that show the McGavick-Cantwell race will be more competitive than might otherwise be expected. While Republicans haven’t won many statewide races in Washington in recent history, they have been competitive, and have come tantalizingly close on several occasions, including Gorton’s squeaker loss in 2000 and gubernatorial candidate Doug Rossi’s hotly disputed recount loss to Christine Gregoire in 2004. The state legislature in recent years has been tightly contested as well, sometimes turning on a single seat. There is a strong Republican base in the eastern part of the state.
And finally, there is the quality of the candidate. McGavick has drawn praise from media observers for his energy and charisma, as well as his pragmatic approach to issues, which is necessary for any Republican to be competitive in this moderate-to-liberal-leaning state. In The Weekly Standard, respected pundit Fred Barnes writes: “… Republicans have a realistic chance of capturing the Senate seat now held by Democrat Maria Cantwell, 47, who ousted Gorton six years ago. The reason is the Republican candidate, Mike McGavick, a former insurance executive and titan of the Seattle business and civic community. To be successful in Washington … a Republican candidate must be ‘conservative enough to unite the base, moderate enough to win.’ And McGavick, 48, ‘fits perfectly.’” It is widely known that McGavick has all the tools to be a great senator: intellect, great communications skills, sound judgment and charisma.
McGavick, who trailed by double digits in early polls, is gaining ground, and in the last four polls, taken since June, he has been within four points in three of them.
This is one of the leading races in America for the Big “I” and InsurPac. Big “I” CEO Bob Rusbuldt serves on McGavick’s Steering and Finance Committee and is an informal adviser to the McGavick campaign. InsurPac is providing strong support to McGavick.
Cliston Brown (cliston.brown@iiaba.net) is Big "I" director of public affairs/government relations.
L&H Trends
Tax-Efficient Charitable Giving
There are limitless worthy charitable organizations to donate time, talent and treasure to. Americans are well known for being generous especially in times of disaster. For example, last year agents and carriers gave generously to the Big “I”-sponsored Katrina Disaster Relief Fund. The desire to help others’ financial, medical and spiritual needs motivates people to donate to charities. So discussing the income tax implications of charitable gifts may seem to lessen the spirit the gift is made in.
However, the Internal Revenue Code is really a collection of preferences that reflect society’s---and some lobbyists’---goals. Society believes it’s worthwhile to encourage families (good for the economy), so families receive a tax deduction/exemptions based on their income and size. Similarly, charitable giving is another tax preference deemed beneficial for society in general.
What does this have to do with independent agents? Let’s take an example of an agency principal who donates to several charities. If he earns $85,000 annually, he is under the Social Security Wage Base. That means that if he can choose to have a business deduction, which is an above-the-line business expense, it will reduce the taxable income of the agency. So instead of receiving the amount of the intended charitable contribution---say $4,000---as pay subject to FICA taxes (15.3% combined) and federal and state income taxes, the principal will have a lower overall tax burden by writing the charitable contribution from the corporate account. One important consideration is that corporations normally can give up to 10% of their taxable income to qualified charitable organizations and be able to deduct it. So if the agency’s net taxable income is $40,000 in this example, the agency could make a deductible contribution of up to $4,000 for the year.
In fact, a less-active agency principal who has paid off his mortgage and is drawing a lot of income from the agency may no longer itemize his deductions but instead take the standard deduction. In that case, he might be better off having the agency make the contribution and deduct it off its corporate return.
As always, bounce tax questions off your accountant so that you make the appropriate tax decision. Take advantage of tax laws to maximize your charitable contributions benefits everybody. Several of your commercial customers might benefit from this approach, so don’t hesitate to bring it up the next time that you meet with them. They may appreciate the idea.
Dave Evans (dave.evans@iiaba.net) is a certified financial planner and IA l-h contributing editor.
IIABA News
Edens Wins Back-to-Back Titles
Phoenix golfers take boys’ and girls’ titles in 38th Annual Trusted Choice® Big “I” Junior Classic.
The storylines were numerous at this year’s 38th Annual Trusted Choice® Big “I” Junior Classic, but none were bigger than the ones produced by Phoenix’s Cameron Edens.
Edens, 17, made history when he became the first player in 25 years to win back-to-back Boys’ Division championships. The soft-spoken Edens joined the ranks of professional golfers Tiger Woods and Billy Andrade as one of the few participants to win this tournament twice, and only the second Boys’ Division player to win back-to-back titles
Andrade previously had been the only back-to-back winner among the boys, in 1980 and 1981, and Cristie Kerr, who also went on to a successful professional career, is the only Girls’ Division champion to win repeat titles (1994 and 1995).
Edens found himself in rare company by pulling off the nearly unprecedented repeat, and he could soar even higher next year. Nobody has ever won this event more than twice, either among the boys or the girls.
“I’m already looking forward to next year,” Edens says. “I hit the ball pretty well but was really happy with my putts. I made the lengthy ones and worked hard early on in the tournament at them.”
En route to snagging the rare double-dip, Edens also set another record by shooting 271 over the four-day, 72-hole event, the new all-time low score. His 17-under-par performance beat the old tournament record, a 15-under-par 273 set by Martin Catalioto at the 32nd Annual Classic in 2000, and it propelled Edens to a four-stroke victory.
As if these storylines weren’t enough, there was also the continued dominance of Arizona golfers. For the second consecutive year, the Boys’ and Girls’ Division champions both hailed from the Phoenix area.
In the Girls’ Division, Kristen Schelling, 16, a second place finisher on a tie-breaker last year, emerged from the competitive field as the champion. She wrested the title from defending champion Cheyenne Woods, Tiger Woods’ niece, also of Phoenix.
“I tried to play this whole tournament one shot and a time,” Schelling says. “It’s a long tournament with a field of great competitors. I knew it wouldn’t be enough to shoot one good round—I needed to be consistent and play solidly the entire time.”
Schelling did just that, shooting a 1-under-par 71 to tie for the first-day lead, and ending up with a 2-over-par 290 for the tournament. Like her Arizona compatriot Edens, she also won by four strokes.
The competition was close in both divisions this year, much like the boys’ field last year, but vastly different from the girls’ field, which Woods dominated in 2005. It wasn’t just the competition that made this year’s event an outstanding success, however.
As 165 of the nation’s top junior golfers arrived in Odessa, Texas, the small-town community welcomed the golfers with open arms. Host Chairman Tim Edgmon, of the Edgmon Insurance Agency in Odessa, estimates that more than 500 local volunteers, including independent agents, spent their time and energy helping the Trusted Choice golfers. Mr. Edgmon also estimated that between 50 and 60 local businesses contributed to the tournament.
Edens, already one of the most successful players in the history of the event, had high praise for the tournament.
“This is the best run tournament,” Edens says. “They treat you really well and its lots of fun to stay with a host family. The Big ‘I’ makes you feel like a real golfer in a professional tournament. It’s really cool.”
This year’s event took place July 31 through Aug. 3. Since 2001, the Tiger Woods Foundation has been the presenting sponsor of the Trusted Choice Big “I” Junior Classic. Established in 1996 by Tiger Woods and his father, Earl, the Tiger Woods Foundation empowers young people to reach their highest potential by initiating and supporting community-based programs that promote the health, education and welfare of America’s children. Allied Insurance was the lead sponsor.
During the tournament, 108 boys and 57 girls competed for the coveted Robert Trent Jones Trophy (boys) and the Mayerstein Trophy (girls).
Next year’s Trusted Choice® Big “I” Junior Classic will be played at Crane Creek Country Club in Boise, Idaho.
Emily Crane (emily.crane@iiaba.net) is Big “I” manager of media relations.
Agency Management
Soothing Upset Employees
Dealing with upset customers can be difficult. Sometimes their disposition arises from an employee becoming upset. As a manager, there are things you can do during and after the confrontation to ease the situation and prevent its reoccurrence.
During the Incident
Whether she was right or wrong, it's important for you not to make your employee look foolish or incompetent. If she was right in what she told the customer, say so. “Mrs. Customer, I’m sorry to tell you that your Blue Bird phone service allows you to receive discounts on calls made inside your area code between noon and 2 p.m. As Nancy explained, this is the reason for the calls at 2:08 and 3:32 being charged at the full rate."
If only you can make an exception to the policy your employee stated, tell the customer so. Emphasize that she was doing her job well.
If the employee was wrong, explain that there must have been a misinterpretation of policy. Emphasize his value in front of the customer. "Yes, Mr. Jones, you are right that you shouldn’t be charged for cashier’s checks on your Senior Special account. Obviously, there was a misunderstanding about this. Bill is one of our finest tellers, so I'm sure it was an oversight. At our next meeting I'll remind all our tellers. I’m sorry for your inconvenience. Of course, we’ll waive the fee for your cashier’s check. Is there anything else we can do for you today?”
After the Customer Leaves
Your employee may be shaken, angry or on the verge of tears. Allow her to retain self-respect and composure in front of her peers and the other customers. Let her take a 10-minute break so she can compose herself.
If at all possible, accompany her and talk to her about the exchange, listen to her vent her anger and reinforce your support of her actions. When she’s calm enough, discuss with her how she might handle the situation differently next time. If she’s very upset, postpone the discussion until another time. Solicit her ideas before telling her yours. The last thing she needs right now is a lecture.
Debrief the Rest of the Staff
If the rest of the staff heard or saw the incident, it may be appropriate to discuss the scene with them. If it was a serious or physical altercation, debrief them as soon as possible, preferably at the close of that business day. If it was less serious, discuss it at the next staff meeting. Be sure to discuss it with the involved employee beforehand and check whether this would be all right with him or her.
Recap what happened, then focus the discussion on what can be learned: what worked to help calm this customer, and what might be tried differently next time. Don’t make negative remarks about the customer's behavior or character.
For more information, click here.
Rebecca Morgan (rebecca@rebeccamorgan.com) is a speaker and author of six books.
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