T H U R S D A Y ,  S E P T E M B E R   4 ,  2 0 0 8 

 Big “I” National News

P-C Trends
Hurricane Gustav Huffs and Puffs, but Doesn’t Blow Gulf Coast Down
Losses from Category 2 storm could top $10 billion.

As Hurricane Gustav churned through the Gulf Coast over Labor Day weekend, many worried it would be reminiscent of Hurricane Katrina --- which made landfall almost three years to the day of Gustav’s arrival. However, while the two storms’ paths were similar, when the winds died down and the rain subsided, Gustav did not live up to the record-breaking Katrina.

Insured losses from Gustav are estimated to be $4 to $10 billion, according to initial estimates from Risk Management Solutions (RMS). The projected figures for the Category 2 storm, which made landfall Monday on the coast of southeast Louisiana, include losses offshore ($1 to $3 million) and onshore ($3 to $7 billion), but do not account for any potential damage to levees in New Orleans or coverage from the National Flood Insurance Program (NFIP). EQUECAT Inc., a catastrophe risk modeling company, is also estimating losses at $3 to $7 billion and AIR Worldwide Corp, another catastrophe risk modeling service, projects losses at $4.5 billion on land and an additional $4.5 billion offshore.

Standard & Poor’s doesn’t expect Gustav to have much of an influence on the creditworthiness of the industry either and predicts few, if any, rating changes.

“…Gustav is just the latest --- and the most severe--- catastrophe in a year of an unusually high frequency of modest-sized catastrophes (and large individual commercial claims),” says S&P. “This has been a contributing factor in the revision of the outlooks on some companies, reflecting adverse turns in their performance as a result of accumulation of exposures to these modes catastrophes. It is possible that further accumulated losses from small catastrophes --- or a substantial loss from one of the currently developing tropical storms --- could have a more material adverse effect on ratings.”

While losses from Gustav will be dramatically less than the record-high total of $80 billion caused by Katrina, the numbers could climb as residents return to the area. And if total losses from Gustav end up on the higher end of these projections, the storm would rank seventh in the top 10 most costly hurricanes, according to the Insurance Information Institute. Meanwhile independent agents in Gustav’s path are beginning to pick up the pieces.

“People are just returning home and getting over the shock of what happened,” says Randy Lanoix of the Lanoix Insurance Agency in Lutcher, La. “My agency is without power so I have no phones or computers until agility recovery delivers my generator. (My) insureds are doing OK --- (they’re) trying to cope with finding essentials like gas and water and coping with no electricity. My No. 1 concern is getting my offices up and running so we can serve our insureds.”

Craig Thomson of Hebert & Thomson Insurance Agency, Inc. in Franklin, La. is located right outside of Houma, La. which caught the brunt of Gustav. He says damage caused by the storm wasn’t as bad as expected, but not everyone has returned home.

“Our area, including my home and office are fine. (There’s) very minimal damage from tree limbs...no serious structural damage. Same (goes) for most of our clients in the Franklin area,” he says. “I still think some insureds have not returned, (but) most of town has electricity, so they should be back by Thursday.”

As the Gulf Coast cleans up after Gustav, Hurricane Hanna is brewing in the Atlantic and could threaten the U.S.’s East coast as early as tomorrow. Hanna could also be followed by Hurricane Ike and Tropical Storm Josephine. Thomson says the impending storms are definitely a concern, but not his top priority.

“Hanna is on our radar...but first things first, we need to take care of the serious losses that have happened with Gustav,” he says.

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





P-C Trends
It’s All Relative
The amount of damage caused by a hurricane correlates to the storm’s wind speed.

Early estimates are coming in for Hurricane Gustav and catastrophe modeling firm EQECAT says onshore insured damages should fall between $3 and $7 billion. With non-insured economic damages adding approximately 40% to that, by itself Gustav would be about an average year’s worth of damage in a single storm. This is according to a recent report by industry and academic analysts for the quarterly journal of American Society of Civil Engineers (Natural Hazards Review). The good news is that it could have been much worse.

Gustav had the potential to produce major damage was evident as the storm crossed Pasa Real de San Diego, Cuba. Wind gusts there of 212 mph were recorded before destroying the weather station instruments. As a category 5 storm and moving in the direction of warm Gulf of Mexico, many feared the worst. Fortunately, over the weekend, as Gustav crossed the Gulf between Cuba and Louisiana, it weakened and made landfall with winds of only 110 mph (one mph below a Category 3).

High wind speeds are correlated with high damage totals. Below is a graph showing the top 10 most costly hurricanes in U.S. history and their maximum recorded wind speeds.

 
*Source:  Economic Damages-Normalized Hurricane Damage in United States: 1900-2005, Pielke, Gratz, Landsea and Collins. 

The hurricanes that have caused the most damage have reached speeds of more than 120 mph, but with the Cuban wind speed as an indicator, Gustav’s potential to have been much worse is clear.



*Source: Windspeeds-Wikipedia (see table).

Paul Buse (paul.buse@iiaba.net) is president of Big I Advantage^SM and a licensed p-c agent.





P&C Trends
Commitment is Key
Customers’ devotion to an insurer has a direct impact on renewal rate.

Auto insurance customers who are highly committed to their insurers are less susceptible to pricing offers from competitors, and are more likely to renew policies and make recommendations, according to the J.D. Power and Associates 2008 National Auto Insurance Study^SM.

The study, based on 21,236 responses from auto insurance policyholders, measured customer satisfaction with auto insurance companies across five factors including (in order of importance): interaction, policy offerings, billing and payment, price and claims.

The study found that 59% of insureds with high commitment to their insurer said they would not switch their auto insurance for any price, compared with 9% of low-commitment customers who said the same.

On average, insurers with satisfied customers have a renewal rate that is 9% higher than those with customers who have low satisfaction levels. Almost all (90%) of committed customers said they “definitely will” renew their policy, compared to 14% of low-commitment customers that gave the same response.

Insureds with low-commitment levels are also less likely to give recommendations to friends and family (9%) in comparison with 81% of high-commitment customers. And the average number of customer recommendations from customers with low-commitment to their insured, 1.4, is dramatically lower than 7.7 average made by committed customers.

“Increasing their number of highly committed customers by delivering positive service experiences can be very rewarding to auto insurers and significantly impact their financial returns,” says Jeff Lieman, senior director for the insurance practice at J.D. Power and Associates. “In an industry where a 1% shift in total market share can amount to a $1.6 billion shift in premiums, enhancing the customer experience to gain highly committed customers is absolutely critical to auto insurers.”

According to J.D. Power, overall satisfaction within the auto insurance industry has gone up from 781 points (on a 1,000-point scale) in 2007 to 787 in 2008, and this year eight of the 27 insurance carriers profiled showed significant year-over-year improvements in satisfaction.

Of the 27 carriers included in the study, Amica Mutual ranked the highest in customer satisfaction for the ninth consecutive year, followed respectively by State Farm, Erie Insurance, Auto-Owners, American National Property and Casualty (ANPAC) and the Automobile Club of Southern California. USAA, the insurance provider for U.S. military personnel and their families, also ranked high, but was not included in the rankings.

“Intense competition in the marketplace and the consistent improvement by carriers over time signal that insurance companies recognize that merely satisfying customers is not enough to remain competitive,” Leiman says. “The very nature of the auto insurance market requires continuous improvements in order to keep pace with ever-increasing customer expectations.”

J.D. Power’s study also determined that while all factors of the auto insurance experience are important, insurers can make the biggest impact on customer satisfaction by increasing their interaction with customers.

“Proactive, outbound communications greatly improve the customer experience, as the more engaged auto insurers are, the more satisfied customers become,” Leiman says. “Implementing various key practices --- such as resolving issues on the first contact, offering annual policy reviews, providing online access to policy information and increasing customer awareness of policy discounts --- can also greatly impact satisfaction and enhance the overall experience.”

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




VIEW: Tech Trends
The Web Site Equation
Is your Web site working?

As independent insurance agents continue to assess effective ways to promote their agencies, an engaging Web site remains an important part of the equation. Surveys indicate that 50% to 60% of agencies have some kind of Web site, however, this also means nearly half don’t and could be losing valuable business as a result.

Agencies without a Web presence cite a number of reasons for their absence --- including cost, concerns over hosting/maintaining the site and not a big enough return on investment in terms of the actual number of new policies written as a result of having a the site. Yet independent insurance agents should not underestimate the power of an attractive, interactive Web site --- regardless of the time or cost.

An April 2008 study by comScore indicated some interesting consumer trends, including that the total number of auto policies purchased online increased by 25% from 2006 to 2007. In fact, 75% of consumers said that after seeing an ad for auto insurance, they researched the company online and 48% requested a quote online. Another interesting statistic unveiled during last year’s Kelsey Conference found that 85% of people surveyed (consumers at large) agreed that the quality of a Web site is an important factor in earning consumers’ trust. Seventy-five percent said they were more likely to make a purchase from an unfamiliar business with a quality Web site than from a poor Web site of a well-known business. 

The important point for independent insurance agents is that an increasing number of consumers are going online to research important purchases and the companies they are doing business with. A Main Street agency with a 100-year community history could see its value erode as new consumers look for its Web site and either cannot find it or find one that is static and unimpressive.  As Bob Dillon aptly put it, “The times they are a changin’.” And, as the way in which customers shop for insurance evolves, independent agencies have to do the same.

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




Agency Management
Handling Information Overload
An inundation of information can hurt more than it helps.

Finally! I'm almost done sorting through the stacks of papers, books, notes and professional magazines that I hurriedly tucked away and covered with plastic before the hurricanes started blowing in. Now I can actually see my desktop.

My paper piles are particularly large because like most writers, I save every little thing just hoping that it will be useful. After all these years, I can say with certainty that I will use about one third of everything I save. The thing is I have no idea until months after collecting it all which third will be useful. This makes for quite a bit of clutter. And then there’s my e-mail...yikes!

What about you? Is your e-mail box crammed with industry newsletters, inspirational e-zines and thank you notes from customers and colleagues? Is your Internet “favorites” file overloaded with resources to pep you up, inform or refresh you when you need a breather from the everyday grind?

It’s great to be able to connect with those we care about so easily, and to have access to information on any and everything in just a few quick keystrokes, but it’s also overwhelming at times. In fact, e-info overload can be as challenging as having physical clutter around the office to deal with or clear out.

These days hard drives are chock full of information about everything from customer service stats to neuroscience to the power of optimism. It’s all fascinating and helpful information...when we apply it. But how much of this information do you consciously and consistently use in your relationships with customers and co-workers? How much of other educational and inspirational communications and resources do you repeatedly use to achieve ongoing success?

Human nature being what it is, and the endless barrage of e-info being what it is, only a select few probably use this information. Here are three steps for busting through e-info overload and into success:

1. Select just one piece of great advice from your many e-mails, Web sites and resources and commit to following that advice for the next month. It could be something you read or advice from an insurance guru or maven who’s unlocked and decoded success secrets.

2. Stick with your commitment. In other words, develop a practice of doing it --- no excuses. You’re going to get great at this one thing. On days when you fall off the wagon, start over and get right back on.

3. Succeed! And be sure to track your successes daily by taking a brief moment at the end of every day to jot down your positive experiences with this process. This is very important, because the most effective ongoing inspiration you can give yourself is your own success. And small successes count, too. If you encounter stumbling blocks, jot them down as well, and quickly brainstorm for ways to get through them.

You’re going to select just one piece of wisdom that’s exactly right for you and stick with it. Of course, e-info is going to keep coming, so how do you handle it? Be on the lookout for anything that supports you in sticking to your one commitment. Everything else can either be deleted, passed on to someone who can benefit from the advice or put aside for another day.

To read the entire article, click here.

JoAnna Brandi (joanna@customercarecoach.com) is a speaker, consultant and author of “Winning at Customer Retention - 101 Ways to Keep ‘em Happy, Keep ‘em Loyal, and Keep ‘em Coming Back” and “Building Customer Loyalty - 21 Essential Elements in ACTION.”