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January 13, 2010

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In this Issue

•  Time Left to Comment on Proposed NY Producer Comp Disclosure Rule 
•  IIABNY Capital Event Workshops Focus on Increasing Sales 
•  Insurance Dept. Issues Draft Circular on Contract Certainty, New OGC Opinions 
•  Study Finds Many Agent Commissions Likely to Decrease in 2010; Podcaster Reacts 
•  Big 'I' Weekly Health Care Reform Update 
•  InsurPac Surpasses Million Dollar Mark 
•  Participating Agents Set Big 'I' Markets Sales Record 

 Hot Links  Local Events | Education Calendar | E&O Reports |Capitol Reports | The Situation Room | Technology
Word on the Street Podcast | Ask Tim Podcast

Time Left to Comment on Proposed NY Producer Comp Disclosure Rule
Two days remain for IIABNY members to submit their comments to the state Insurance Department regarding the department’s proposed rule on producer compensation disclosure. IIABNY issued a grassroots alert Jan. 8, encouraging members to express their opinions in writing about the rule before the 45-day public comment period ends on Friday.

As the alert indicated, a message prepared in your own words will have the greatest impact, so please customize your comments to reflect your agency's circumstances. However, if you just can't take the time to customize your comments, you may use a sample e-mail message IIABNY has drafted. When your remarks are ready, you can e-mail them to Matthew Gaul, Special Counsel for the New York State Insurance Department. Comments must be received at the Insurance Department no later than the close of business on Jan. 15. It would be very helpful if you would also send a copy of your message to IIABNY.

In your comments, you may want to emphasize:

• How often your clients actually ask you about your compensation
• How much it will cost you to provide compensation disclosure notices to every new and renewal client you have each year
• How much it will cost and the time it will take to comply with the notice provisions and record keeping requirements

As you may know, the department would require insurance producers to disclose to their clients certain information about how they are compensated if the rule is implemented as published. While maintaining that the regulation is unnecessary, IIABNY has worked with the Insurance Department for the last year so that, in the event a rule takes effect, it will present the least possible burden on insurance agents and brokers. IIABNY believes the rule the department has proposed is still unacceptable. 

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IIABNY Capital Event Workshops Focus on Increasing Sales
IIABNY’s Capital Event offers a choice of two new seminars that will provide insurance agents and brokers with tools and resources to boost new business sales. Attendees can choose from two sessions that run simultaneously on the afternoon of Feb. 8 at the Crowne Plaza in Albany:

Produce or Perish: Producer Goal Setting, Compensation & Accountability to Drive New Business Sales (Non-CE)
"Produce or Perish" is the new mantra of today’s leading sales organizations. Organic growth is the key to a successful agency. Competition is everywhere, and agency sales teams need to be aggressive, professional and effective.

This seminar will provide agents and brokers with the information and tools necessary to maximize new business sales. You'll learn how to redefine producer roles and responsibilities. You'll also learn how to develop a mutually agreed upon compensation plan with your producers designed to encourage reaching specific sales goals. Finally, you'll be provided with information on how to mentor and monitor your producers to reach their sales goals.

This seminar will be presented by Patrick Linnert, executive vice president of MarshBerry. Don't miss this opportunity to learn from an expert at MarshBerry, a nationally known and respected insurance agency and brokerage consulting firm.

From Apps to Tweets: Best Practices for Using Social Media to Increase Sales (Non-CE)
Rick Morgan, a social media expert and IIABNY at-large director, will discuss the use of social media at an independent agency. This seminar will explore the impact social media is having on our society and how it is fueling a transformation in consumer-business interaction. You will learn how to leverage the tools of the Social Web to build and strengthen trusted relationships, improving your communication with prospects as well as customers. Morgan will also cover "Best Practices" for developing a social media policy, putting a Social Web team in place and tools used to monitor your agency's Return on Investment.

On-line registration is now available 

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Insurance Dept. Issues Draft Circular on Contract Certainty, New OGC Opinions
The New York Insurance Department last week published a draft letter providing new guidelines on how to meet contract certainty requirements and several new opinions from the Office of General Counsel that impact insurance producers.

The draft circular is a supplement to Circular Letter No. 20 of 2008, in which the Insurance Department instructed insurers and producers to develop and implement procedures for issuing policies promptly. In the new letter, the department said that it would focus on policies most likely to have issues regarding contract certainty, including those covering large risks or risks of a unique nature. The letter cautions that, "In the latter half of 2010, the Department (sic) may issue letters of inquiry to licensees aimed at gathering information regarding how, and to what extent, licensees have developed and implemented practices to assure that contract certainty is routinely achieved." It also explains what the department means by the term "policy documentation," which insurers and producers must have in order to show that they are meeting the requirements.

The Office of General Counsel issued the following advisory legal opinions in December:

• If an insurer meets certain conditions, it may issue debit cards to claimants on a voluntary basis in lieu of issuing settlement checks to pay property/casualty insurance claims.
• An otherwise valid notice of cancellation for non-payment of premium for a personal lines package policy is effective if, after it mails the notice, the insurer receives a check from the insured, notifies the agent that it will reinstate the policy, but the insured’s bank dishonors the check. The insurer has no legal obligation to inform the agent that it will not reinstate the policy.
• An insurer must obtain an agent’s consent to engage in an electronic insurance transaction before sending policies and related documents to the agent electronically. An agent’s acceptance of electronic documents over a period of time is considered to be implied consent.
• An agent’s proposed educational seminars on retirement planning do not constitute insurance consulting services. An agent offsetting his fee for the lecture against later compensation paid for insurance would violate the law against rebating.
• New York Insurance Law does not prohibit an insurance producer from refusing to accept cash premium payments from insureds. However, the producer should fully explain to clients any refusal to accept cash, and the producer should accept cash payments when the insured has a cancellation for non-payment imminent.
   

All opinions issued since 2000 are available on the department’s Web site. For more information on contract certainty, read the November 2009 issue of The E&O Report. 

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Study Finds Many Agent Commissions Likely to Decrease in 2010; Podcaster Reacts
Ward Group, an insurance industry consulting firm, recently published its findings from an in-depth study of Agency Compensation and Management Practices for property-casualty insurance companies. The study focused on commission practices, agent incentives and other agency management practices and includes aggregated results from 2008 and 2009 for a diverse group of 99 companies. Independent agency companies represented 80 percent of the participants.

For most property-casualty insurance companies, expenses relating to the distribution system represent the largest expense component outside of loss payments, according to the Ward Group. The firm conducted the Agency Compensation and Management Practices Study to help companies measure their performance and establish benchmarks. Highlights of the study results and general observations follow.

Plans to lower agent compensation in 2010 outweigh plans to increase compensation by nearly a 3-to-1 margin. The study identified several notable trends for contingent commission planning, including:

• 40 percent of companies plan to modify their contingent plan in 2010
• 10 percent of companies plan to increase premium volume requirements compared to 4 percent that plan to decrease the volume requirement
• 6 percent of companies plan to increase the stop loss thresholds compared to only 1 percent that plan to decrease the amount
• 12 percent of companies plan to change their contingent formulas to pay less contingent commission compared to 4 percent that expect to pay more
• 6 percent of companies plan to add growth requirements to their contingent formulas and 5 percent plan to add retention requirements
• 3 percent of companies are considering eliminating their contingent commission plan completely

Ward Group said it also found that top-performing insurance companies achieved 34 percent more premium than average per agent. Key agency management business practices adopted by this group suggest that they:

• Are more likely to modify base commission by line of business
• Are more likely to modify base commission by new and renewal business
• Are less likely to have separate plans for personal and commercial lines
• Have 20 percent fewer agents per manager than average
• Require their top tier agents to demonstrate exceptional characteristics and proven commitment to the company. This benchmark had 50 percent fewer agents in their top tier and had implemented more challenging criteria for their top agency selection (in terms of higher production and lower loss ratios requirements).

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Big 'I' Weekly Health Care Reform Update
The wish list. The White House – House – Senate bartering game began to take shape this past week as House Speaker Nancy Pelosi (D-CA) circulated her wish list to negotiators. Using the more moderate Senate bill as a benchmark, Pelosi’s document outlined a number of provisions that she would like amended in order to score a couple of victories for the liberal wing of her caucus. As arbiters of negotiations, Pres. Barack Obama and his chief of staff, Rahm Emanuel, are faced with the difficult task of threading a needle between the liberal and moderate factions of their party. They must find a way to appease House Democrats on a couple of issues while maintaining the fragile 60-vote Democratic coalition in the Senate. Below is an overview of the issues included in Speaker Pelosi’s list:

• Subsidies
  The House negotiators would like to increase the subsidy amounts for those in lower income brackets.
   

Both the House and Senate bills establish subsidies for individuals and families with incomes between 133 percent and 400 percent of the federal poverty level. However, the House bill distributes more generous subsidies to individuals/families at the lower end of the subsidy spectrum.

Last week, Pres. Obama stated that he supports expanding subsides.

The subsidy expansion would add significant costs to the bill, which are likely to be offset with additional tax increases.

• Implementation Date
  The House negotiators would like all health care reform provisions to be fully implemented by 2013.
   

The Senate bill staggers the implementation of health care reform provisions over the next five years with most of the core provisions taking effect in 2014.

The White House has not taken a formal position.

The one-year acceleration is very costly – somewhere in the neighborhood of $100 billion.

• Employer Mandate
  The House negotiators would like to impose an employer mandate, similar to the version included in the House-passed bill.
   

The House bill would require employers to pay 72.5 percent of the premium for individual policies and 65 percent for family policies or pay a fee equal to 8 percent of payroll. Small businesses with payrolls less than $500,000 per year would be exempt. In the Senate bill, employers with more than 50 full-time employees who do not offer health insurance and have at least one employee who qualifies for a tax credit would have to pay a fee of $750 for each full-time employee.

The White House has not taken a formal position.

• National Exchange vs. State Exchanges
  The House negotiators would like to implement a one-size-fits-all national exchange, as included in the House-passed bill, rather than create state-based exchanges.
   

The Senate bill instructs each state to create and design an exchange.

The White House has not taken a formal position.

• Cadillac Tax
  The House negotiators would like to exempt middle-income individuals and families from the Cadillac tax. The exemption would likely come in the form of increased thresholds for the tax.
   

The Senate bill would impose a 40-percent excise tax on insurance companies who sell an employer-sponsored health insurance plan that has an aggregate value of $8,500/individuals and $23,000/families. The excise tax is imposed on the amount above the stated threshold. The House bill includes no such tax.

The White House has stated that it wants the Cadillac tax included in the final bill. It is unclear whether or not the Administration is willing to budge on the threshold amounts.

If the threshold amounts are increased, it is likely that policymakers will look to increase the Medicare payroll tax on wealthy Americans to offset the loss in tax revenue.

What to watch for this week:

1. Pres. Obama is scheduled to address the House Democrats at their annual retreat this week as is former President Bill Clinton. What will President Obama’s message be on health care reform?
2. The White House has yet to announce the date of the State of the Union address. The Administration is delaying the announcement in hopes of scheduling it in coordination with the passage of health care reform. Watch for an announcement of the date – it will indicate that a deal is imminent.

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InsurPac Surpasses Million Dollar Mark
IIABA recently announced that InsurPac, its political action committee, raised slightly more than $1 million ($1,006,970.50 to be exact) during the 2009 calendar year setting a new record for receipts in a calendar year and breaking the one million dollar mark for the first time in one year since its inception. IIABNY members contributed more than $52,000 to the total.

In 2008, InsurPac broke the previous record by raising $901,985.84. In the 2007-2008 election cycle, over $1.6 million was disbursed to representatives, senators and other candidates for federal office. Ninety-two percent of InsurPac-supported candidates won in 2008 with 222 victories of the 241 races it supported.

"InsurPac donors can be extremely proud of how effectively their donations have been put to use," says Nathan Riedel, Big "I" vice president for political affairs. "Very few PACs can claim such a high winning percentage and such noteworthy fundraising records. The Big 'I' is proud that InsurPac remains the largest property-casualty PAC and has broken records for the 9th consecutive year."

In disbursing contributions, InsurPac does not look at party affiliation but supports representatives, senators, and candidates for federal office that have been advocates and supportive of the independent agency system.

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Participating Agents Set Big 'I' Markets Sales Record
Despite the softest market in recent memory, independent agents wrote 31 percent more premium on Big "I" Markets during 2009 than they did in 2008, and shattered the record for most new premium written in a year. So with more markets soon to be announced, there is hope that more agents will write more new business with Big "I" Markets than ever before. 

A lot of people enjoy the "year in review" type stuff, be it a list of the best movies, books, etc. Interested in what music topped the charts? Check out this link to Billboard's chart toppers for 2009. For a look at the Big "I" Markets chart toppers, look no further! 

* Includes community banks and real estate agents E&O 

Other results of note from 2009 include the following: 

• 1,131 agencies registered for Big "I" Markets for the first time in 2009, which brings the total number of registered agencies to over 8,500. 
• 13,416 quote requests were submitted, an increase of 25 percent from 2008. 
• Big "I" Markets helped members place 2,932 pieces of business they may not have otherwise been able to write. This represents a 24 percent increase from 2008. That means Big "I" Markets is succeeding in helping member agents where it helps the most: closing sales, generating revenue and making money. 

Product round-up:

• The affluent homeowner program grew more than 30 percent in premium over prior year. Many agents are availing themselves of the Chubb Masterpiece^® product and/or the Fireman's Prestige^® Portfolio product to provide superior coverages to the high end market. Don't let the mortgage crunch and down economy fool you. While it is true that many high net-worth households are challenged by the economic times, they still have risks that require the unique coverage options offered via the affluent program in order to get the most appropriate coverage. Keep an eye out for some more Webinars designed to educate you on the coverage advantages of our affluent products. 
• Habitational: With this market you can write apartment buildings, condominiums, and in some states, vacation rental property. Specialty niches include student housing, senior housing and affordable housing. 
• Non-standard Homeowners: Many agents have taken advantage of this excess and surplus market, especially the coastal homeowners and the non-admitted vacant home product. Also, don't forget that if an agent has a high value home that is declined for value, unprotected town class or seasonal exposure, Big "I" Markets can help. A listing of all markets that fall under the banner of non-standard homeowners can be viewed online and downloaded. 
• The restaurant markets recently expanded to include multiple classes of hospitality markets. Here is a list. 
• In this difficult real estate market, now more than ever real estate agents need errors and omissions protection, and independent agents can offer them the best product on the market – 1stChoice+^SM from Travelers. Meanwhile, all the news regarding community banks is less than encouraging, so they, too, need the best insurance coverage they can get. The SelectOne^® product from Travelers offers one of the most flexible policy forms on the market. 

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