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Big "I" Supports Flood Bill Containing Agent-Backed Reforms |  House, Senate Move Forward on Terrorism Backstop |  Prominent Regulators Convene Natural Disaster Summit |  Upland Mutual Insurance Newest Trusted Choice® Company Partner |  Do You Offer Retirement Risk Management? |  17 Ways to Build Your Personal Lines Book |  Big "I" National News

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Big “I” Supports Flood Bill
Containing Agent-Backed Reforms
Oxley-Frank bill includes a number of Big “I” proposals.

The Big "I" strongly supports a bipartisan flood insurance bill introduced in the House Tuesday, and marked up yesterday, that contains major reforms supported by independent agents and brokers.

House Financial Services Committee Chairman Mike Oxley (R-Ohio) and Ranking Member Barney Frank (D-Mass.) introduced the bill, H.R. 4320, the National Flood Insurance Program Commitment to Policyholders and Reform Act of 2005. It contains a number of the reforms suggested last week in a comprehensive flood modernization agenda released by the Big "I." Click here to see the Nov. 11 release. Chief among these are the addition of optional business interruption coverage on commercial policies, increases in the maximum coverage limits and the inclusion of additional living expenses coverage for residential policies.

"The Big ‘I’ thanks Chairman Oxley and Ranking Member Frank for moving so quickly on an issue of the utmost importance to property owners throughout the country," says Charles E. Symington Jr., Big "I" senior vice president for government affairs and federal relations. "We strongly support their legislation and are very pleased that a number of our reform principles have been included in this bipartisan, forward-looking bill. This legislation will bring about many needed reforms that will not only assure the solvency and effectiveness of the National Flood Insurance Program for years to come, but also help consumers by providing new levels of coverage, such as business-interruption insurance. This bill is good for the program and for policyholders all over America."

Big "I"-backed provisions in the bill include:

1. Business Interruption: The inclusion of optional business interruption insurance for commercial policyholders.

2. Maximum Coverage Limits: Increase the maximum coverage limits above current $250,000/residential $500,000/commercial limits to correspond with modern-day real estate prices.

3. Additional Living Expenses Coverage: Provide an automatic, base amount of additional living expenses coverage on residential policies with an option to purchase increased coverage for a fee.

4. Repetitive Losses: Consider elevation/retrofitting/buyout for properties prone to repetitive flooding.

5. Mitigation: Enforce mitigation provisions from the Flood Insurance Reform Act (FIRA) of 2004.

6. Coverage Model: Extend the mandatory coverage model beyond the one-in-100-year floodplains to one-in-500-year floodplains.

7. Levee-Protected Areas: Mandate coverage for those living in levee-protected areas.

8. Mapping: Report to Congress on the progress of map modernization.

9. Tracking System: Improve oversight to ensure full participation in the program for owners of properties for which participation is mandatory.

10. Policy Language Clarification: Coordinate flood policy descriptions with other property-casualty lines of insurance to avoid inconsistency in terms.

"The inclusion of these provisions is terrific," says Patrick O’Brien, Big "I" director of federal government affairs. "In addition to extending the offer of business-interruption coverage and living-expenses coverage, it also will strengthen the enforcement of mandatory participation requirements and fully implement the mitigation pilot program in FIRA 2004. This will go a long way toward keeping this valuable program viable while at the same time ensuring a quality product and quality service to insurance consumers."

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

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O N   T H E   H I L L
House, Senate Move Forward on Terrorism Backstop
Committees in both chambers mark up legislation Wednesday.

The House and Senate both moved forward this week on legislation that would keep a federal backstop in place for terrorism risk insurance. Subcommittee Chairman Richard Baker (R-La.) on Monday introduced H.R. 4314, the Terrorism Risk Insurance Revision Act, in close cooperation with House Financial Services Chairman Mike Oxley (R-Ohio), and several senators brought forth an amendment to S. 467.

A new backstop is needed to help insure against catastrophic terrorism losses in place of the Terrorism Risk Insurance Act (TRIA), which expires Dec. 31. The bill extends the needed federal backstop to help insurers cover catastrophic terrorist acts while helping the insurance market develop the risk capacity it will need when federal involvement eventually is phased out.

"The Big ‘I’ has consistently supported the continuation of the current terrorism insurance backstop or a modified one for one reason—to protect our business customers and their employees," says Big "I" CEO Robert Rusbuldt. "At this time, there is no viable market for terrorism insurance, so we need to have a way to protect the businesses of America, our workforce, and the economy of our nation. Chairmen Baker and Oxley understand the need for this bill, and Chairman Baker has done an excellent job in putting together a proposal that will help provide economic security for our nation against a terrorist attack."

"We are glad that Chairman Baker’s bill, if it becomes law, will ensure terrorism insurance is not only made available, but also more affordable for the consumers our members serve," says Charles E. Symington Jr., Big "I" senior vice president for government affairs and federal relations.

The Big "I" also notes that the availability and affordability of terrorism insurance is a business customer problem throughout the nation. Take-up rates under TRIA have continued to grow across the country, and a variety of interests have purchased terrorism coverage, from small towns in Mississippi to small and large businesses in New York City.
 

"It is very important that this bill recognizes the potential for terrorist attacks to take place at any place and any time, and puts forth reasonable trigger levels that are important to agents in large and small communities across America," Symington says. "We support the chairman’s efforts and thank him and his colleagues for their diligent work."

In addition to extending the federal backstop on a short-term basis, the bill helps address the long-term need for coverage. It will encourage risk-sharing mechanisms and authorize capital-reserve accounts to help the market increase its own capacity. The bill proposes a public-private, nine-member commission and several studies, including a Big "I"-supported natural-disaster study, and the legislation would require consultation with independent insurance agents and brokers.

"We are very optimistic that a unified bill can come out of Congress," says Brendan Reilly, director of federal government affairs. "We will continue to work with members of the House and the Senate, if and when a conference committee is necessary, to produce uniform legislation that can pass both houses."

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

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I N   T H E   S T A T E S
Prominent Regulators Convene Natural Disaster Summit

In the wake of the massive hurricanes that recently wrecked havoc on coastal regions, the primary concern of industry and public officials has been to address the immediate needs of affected individuals and communities. However, even as the initial response to Katrina, Rita, and Wilma continues, some of the nation’s most prominent insurance regulators have begun to discuss what the industry and government can do to prepare for similar and perhaps even more powerful catastrophes.

The first discussion of these issues began in earnest on Tuesday and Wednesday of this week as the chief regulators from California, Florida, Illinois, and New York convened a "National Catastrophe Insurance Summit." The summit brought together a small and select group of industry leaders (including participation from the Big "I"), economists, disaster modelers, state policymakers, and representatives from federal government agencies. Over the two days, summit attendees heard from many of these constituencies, and each group suggested that something must be done to prepare the country for future catastrophes.

No formal proposal was unveiled at the summit, but the four regulators headlining the event appeared to be unified on two key objectives. First, they hope the summit will start a national dialogue on these issues that will continue in the months to come, and they were optimistic that policymakers at all levels of government would begin to tackle these issues in greater detail. Given the extensive media coverage of the summit, they were successful in shining a spotlight on their efforts, although it remains to be seen whether this discussion will gain momentum.

The commissioners also agreed that a national catastrophe plan is sorely needed, and they called for a multi-layered response that would result in the spreading disaster risk among consumers, insurers, states (perhaps through the creation of new "cat funds"), and the federal government. They argued that insurers are not in a position to handle these risks alone and that some type of mechanism for spreading risk and expanding industry capacity is essential. Few specific recommendations were outlined at this initial gathering, but it is clear the commissioners would like to see (1) a focus on mitigation, stronger building codes, and other actions that promote personal responsibility and (2) the involvement of the federal government. In recent years, numerous proposals have been submitted to Congress that would establish a national reinsurance backstop and allow catastrophe reserves to grow on a tax free basis, and these same concepts were prominent elements of the discussion this week.

While optimistic, the host regulators recognized that achieving consensus and ultimately national reform will not be easy. Similar policies have been pursued by lawmakers and elements of the industry before without success. One of the big challenges for these commissioners will be the divided views of the industry, and this disagreement was apparent this week. While there is strong support for federal participation in a multi-layered response, there are many who also believe the private insurance market is largely prepared for mega-catastrophes and that any form of a federal reinsurance backstop would force the private sector from a role that it is willing and capable to provide.

In the coming weeks, the four commissioners will continue to press these issues and discuss possible catastrophe insurance solutions with other regulators, policymakers, and constituencies. It is impossible to predict what will ultimately happen, but those involved with this week’s summit hope they have ignited a debate that will result in meaningful action in the near future.

Wesley Bissett (wes.bissett@iiaba.net) is Big "I" senior vice president, government affairs and state relations.

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C A R R I E R   N E W S
Upland Mutual Insurance Newest Trusted Choice®
Company Partner

Upland Mutual Insurance, Inc., a mutual insurer based in Junction City, Kan., is the 32nd company to join the growing Trusted Choice® consumer brand movement.

"We are excited about our new relationship with the Trusted Choice® brand movement," says Upland Mutual Insurance President Chris Brown. "We believe that Trusted Choice® is the future of the agency system, including our appointed agencies as well as our company."

Ronald A. Smith, CPCU, brand program board chairman, says, "Upland Mutual Insurance is a great addition to the Trusted Choice® brand movement. The company has a long and well-established history in the independent agency system and is a valuable partner to its agencies."

Today, more than 5,300 independent agencies and brokerage firm locations throughout the country participate in the brand program. "I am thrilled as a Kansas agent and a past president of the Kansas Association of Insurance Agents to welcome Upland Mutual Insurance as the first Kansas insurance company to partner with the Trusted Choice® brand program," says Don Morris of Paola, Kan.-based Morris & Associates, Inc., a Trusted Choice® and an Upland-appointed agency.

Upland Mutual Insurance formed in 1896 as a cooperative to provide fire and lightning coverage to local customers. Over the years, Upland Mutual’s offerings increased to include seven lines of business including homeowners, farmowners, farm property, dwelling fire, mobile homeowners, personal and farm auto, as well as inland marine coverages.

Jeff Myers (jeff.myers@iiaba.net) is executive director of Trusted Choice®.

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L & H   T R E N D S
Do You Offer Retirement Risk Management?

Independent insurance agents are very adept at helping customers manage property, auto and business risks. To protect clients from risks that are inherent in today’s litigious society, agents must understand their business and personal objectives and then deploy resources to meet those needs. This invaluable service also helps the country’s commerce.

Now another significant movement is occurring---the aging of America. This week’s Newsweek cover features photos of prominent Americans that are or soon will turn 60. If you review your customer list, you might be equally surprised by the number of clients joining this group.

The American Society of Actuaries estimates that the probability of a 65-year-old male living to age 85 is 50% and to age 92 is 25%. For females age 65, the probability of living to age 88 is 50% and living to age 94 is 50%. For a couple both age 65, the probability that one of them will live to age 92 is 50% and to age 97 is 25%. The well known and revered management guru Peter Drucker passed away this week just shy of his 96th birthday. Is your agency in a position to help customers plan for retirement?

Customers have two chief concerns when it comes to retirement: health and adequate retirement income. Discuss with your customers Medicare supplements (including the new Medicare Part D coverage) and long-term care insurance. Just picture a situation where a long-time customer comes into the agency and tells you that she can no longer take care of her husband and he is going into a nursing home that costs more than $1,000 a week. Wouldn’t you feel terrible that you hadn’t broached the topic with the couple years ago? Think now about your current agency customers in their 50s and 60s and extrapolate this situation 10 or 20 years into the future.

Retirees also worry about outliving their income. Many agents are familiar with immediate annuities, where customers purchase a guaranteed monthly amount of income for the rest of their lives (or over two lives). While this may not sound like an exciting product, the industry has come up with variations that provide more flexibility. The new generation of annuities, such as one New York Life offers, allows participants to vary the amount of their withdrawals (accelerate a portion) or allows for a guaranteed remainder interest regardless of how long the annuitant lives. There are also new riders to deferred annuities that will guarantee a 5% annual withdrawal for the life of the individual without having to annuitize the balance. This assures that that the contract holders can take out 5% a year for the rest of their lives, and the balance will be passed on to a beneficiary.

Independent agents are in a great position to pick and choose the best product to meet customers’ needs based on a carrier’s financial rating, service and other factors. Don’t let this opportunity to grow your agency’s revenues and help your customers pass you buy.

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

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A G E N C Y   M A N A G E M E N T
17 Ways to Build Your Personal Lines Book

The words "personal lines" should not make you shudder or roll your eyes. The orphan child of insurance can still make you money—if you do it right.

You’ve heard the bad news about personal lines: Agency companies leaving markets; commission cuts; and relentless competition from direct writers, who now write 70% of the business.

The good news: Independent agents can fight back if they are willing to make some changes in the way they do business. Here are 17 ways to help you build your personal lines book. If implementing all of them seems like an impossible task, try three or four. Make a commitment, and go for it.

1. Set up a profit center for personal lines. Set up your accounting system to calculate exactly what your agency makes in personal lines. For example, how much commission income do you need to breakeven?

2. Select your carriers. Choose four or five that make it easy for the agency to do business, offer some added value, give competitive pricing and are committed to the personal lines marketplace.

3. Hire the right people. Producers should produce. Period. If an agency hires a full-time personal lines producer, he or she must be an aggressive salesperson with a strategy for producing at least $25,000 in new business commissions.

4. Write it down. Put your sales strategies on paper. How will you assist your producers with warm leads? Where will new sales come from? The plan should list the specific tactics you’ll take to complete your mission, such as the number of new referrals and contacts needed on an average day.

5. Think new business. Don’t hang out a shingle and wait for the business to come in the door. The clients who come in will be those rejected elsewhere and may not be what your companies want to write.

6. Dump outdated sales techniques. You must use relationship-selling techniques to make the sales and maintain ongoing contact after the sale.

7. Create a consistent marketing campaign. Agencies need to decide who their profitable personal lines clients are and develop strategies for selling to more of them. The agency’s marketing techniques will vary depending on the type of clients, size of territory, sales force, etc. But marketing should be consistent. Sending a letter once or trying an ad campaign for a while won’t deliver the message often enough.

8. Cross-selling fills in the gaps. The average family has five insurance policies, but the average agency writes only 1.3 policies per family. Launch a sustained effort to round out accounts, and your agency easily could add an average of a half-policy per account.

9. CSRs already are selling; they just don’t know it. Organize a plan and make CSRs realize they are really salespeople, even though it may not be palatable to them.

10. Take advantage of co-op advertising. In an effort to produce warm leads, companies often are willing to share the cost of direct mail and advertising.

11. If you can’t beat ’em, copy ’em. Many people around the industry say it’s time to stop fighting the direct writers and begin emulating their tactics. Independent agents should also learn from the experiences of major agency companies that left personal lines.

12. Compensation breeds motivation. CSRs’ annual increase and/or bonus should be tied to sales and service goals, use of automation, retention of the business, educational accomplishments and teamwork.

13. Do you and your customers have the same definition of good customer service? Many agencies assume they are providing good service when they are not.

14. Keep an eye on the customer service centers.

15. Consider a cluster or similar arrangement. Forming partnerships with other agencies means you can wield greater premium power for potential markets.

16. Automate!

17. Find your own perspective. For many agencies, that’s not being the biggest agency in town...just the most profitable one.

For more on these 17 points, and to access real agency examples, click here.

Peter van Aartrijk, CIC (peter@aartrijk.com), is founder and managing director of The van Aartrijk Group LLC.

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