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May 26, 2010

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In this Issue

•  It's Official: Court Battle Commences in State Supreme Court Over Disclosure Regulation 
•  Report: Two-Thirds of Applicants Fail P/C Licensing Exam 
•  Disciplinary Action Report Cites Unlicensed Producers, Hits Clarendon with Large Fine 
•  IIABA Provides Update on Flood Insurance, COBRA Extension 
•  Trusted Choice^® Survey Finds Many Americans Not Fully Prepared for Natural Disasters 
•  Here's an Opportunity to Share Your Perspective on Independent Agency System 
•  Sales Tips: Maximize the Impact of the Opening of a Sales Call 
•  Office Closing
         IIABNY's office will close at 3:30 p.m. May 28 and remain closed through May 31 in
         observance of the Memorial Day holiday. The office will reopen at 8:30 a.m. June 1.

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

It's Official: Court Battle Commences in State Supreme Court Over Disclosure Regulation
IIABNY and the Council of Insurance Brokers of Greater New York Inc., after jointly filing legal papers yesterday in State Supreme Court, plan to vigorously pursue their argument that the New York Insurance Department does not have the legal authority to require insurance producers to disclose to their clients certain information about how insurance companies compensate them. During the course of the Article 78 proceeding, the organizations will also argue:

• Regulation 194 represents an impermissible attempt to rewrite the Insurance Law on a subject as to which the legislature has already specifically legislated;
• Parts of the regulation "impose massive and unwarranted costs of compliance on brokers so as to constitute an arbitrary exercise of regulatory power"; and
• The regulation violates producers’ rights to due process and equal protection under the U.S. and New York State constitutions.

Attorneys representing IIABNY and CIBGNY filed the legal action in the court’s Third Judicial District in Albany. As reported May 14 in The Situation Room section of IIABNY’s Web site, the association sent the department a proposal for specific language that a producer could use for making the required initial disclosure. The proposal was sent in anticipation the court proceeding might not conclude before the regulation’s scheduled effective date. However, IIABNY emphasized at that time that it still intended to file the legal action.

Insurance Regulation 194, which takes effect on January 1, 2011, requires producers to disclose certain information about their compensation to all clients, regardless of whether the clients have asked for it. Should any clients request more information, the regulation requires the producers to provide detailed information about their compensation for the policy sold and the compensation they would have received had the client chosen a different policy.

IIABNY, which in 2004 called on insurance agents and brokers to voluntarily disclose to their clients the existence and nature of all their compensation, has opposed mandated disclosures as burdensome for producers and of little benefit to consumers. The group’s leadership testified at hearings on the subject conducted by the Insurance Department and the New York attorney general during the summer of 2008, saying that such a regulation is unnecessary and would not be in the best interests of either consumers or producers.

IIABNY also engaged in a series of discussions with the department throughout 2009 aimed at convincing it to drop Regulation 194 or minimize its burdens on producers. While standing up to protect producers’ businesses, the group’s leadership hoped to keep the dispute out of the courts. However, after the department adopted the final version of the rule last winter, IIABNY announced its plans to take legal action. Though it invited other producer trade organizations to join in the action, CIBGNY was the only other group to do so.

To learn more, visit IIABNY's Producer Comp Resource Page and view the video message to IIABNY’s membership delivered by the association’s president and CEO Richard A. Poppa, CAE, AAI. 

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This was the Insurance Department’s first report on this topic since a 2008 change in New York Insurance Law required it to do so. Some of its other noteworthy findings:

• Male applicants have a higher passing rate than do females (43 percent versus 31 percent).
• Those with college and graduate-level degrees had much higher passing rates than those who did not finish college (54 percent versus 22 percent).
• The passing rate for the personal lines agent/broker exam was higher, at just under 50 percent.
• Almost 57 percent of the applicants passed the life, accident and health exam.

The department did not draw conclusions from the data, saying that it would be difficult to find a consistent pattern of results based on only one year. 

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According to the May 21 report, Clarendon violated its personal auto rate filings and "failed to maintain adequate procedures to minimize the occurrence of improperly charged rates." The department’s disciplinary action reports typically do not offer details of the violations, such as number of affected customers or the time in question. The Insurance Department said it took the action on March 12.

Elsewhere in the report, the department said it disciplined at least 12 agents, brokers and adjusters for various violations relating to acting without a license. Some of the fines were for acting as a producer without a license (probably after a license had lapsed at renewal time,) some were for allowing a staff member to act without a license, and others involved conducting business under an unapproved or unlicensed name. Most of the fines amounted to $750; fines were higher in cases where the Insurance Department found additional violations. For example, the department assessed a $1,500 fine after it found that one individual conducted business as an excess line broker after his license lapsed and that he failed to disclose that fact on his relicensing application.

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IIABA Provides Update on Flood Insurance, COBRA Extension
The National Flood Insurance Program and COBRA health benefits subsidies (as well as other programs such as the unemployment benefits extension) are scheduled to expire on May 31. Both the House and Senate are scheduled to consider legislation this week that would extend these programs until Dec. 31. The extensions are included in a larger piece of legislation known as the "American Jobs and Closing Tax Loopholes Act." In addition to the provisions on unemployment insurance, COBRA and the NFIP, the legislation would extend about 50 tax breaks for some businesses, provide a temporary "fix" to Medicare reimbursements for physicians and send aid to states for Gulf Coast cleanup.

In order to help pay for the legislation (priced at about $200 billion over 10 years), taxes on investment partnerships and certain self-employed individuals would be increased, alleged abuse of foreign tax credits would be clamped down and the oil-spill tax on petroleum producers would be increased. Despite their support for some of the tax breaks in this bill, many business groups, including the U.S. Chamber of Commerce, are beginning to vocally oppose the overall bill because of the tax increases. Labor unions, meanwhile, are strongly supporting the bill.

The NFIP extension legislation has once again been rolled into a much larger package of legislation, which, as IIABA has explained before, presents significant political challenges and unfortunately increases the likelihood that Congress may not complete consideration before the expiration deadline. With that said, there still appears to be confidence among Congressional leadership that this "Extenders" Legislation will be passed by both the House and Senate and signed into law by the end of the week.

Should Congress fail to act on this large "Extenders" package, both the House and Senate do have stand-alone bills to extend the flood program that have been filed. These could, at least theoretically, be acted upon by the deadline. In the Senate, Sen. Vitter (R-LA) has filed a simple two-page bill that would extend the program until Dec. 31. In the House, Rep. Frank (D-MA) has filed a bill that would extend the program until Sept. 30 and make some minor reforms to the program. If Congress fails to act on the larger extension package, Congressional leadership could call either one of these bills up for an immediate vote, but that vote would have to be via "Unanimous Consent" (i.e. there must be no objections).

At this time IIABA believes that the most likely scenario is that Congress will pass the large "Extensions" bill this week and extend the NFIP until Dec 31, but the situation is very fluid. We will keep you updated on major developments. 

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Trusted Choice^® Survey Finds Many Americans Not Fully Prepared for Natural Disasters
Most Americans are not fully prepared in the event of a natural disaster, according to a new national survey by Trusted Choice^® and IIABA. Of all survey respondents, less than 22 percent said they felt they are fully prepared in case of a disaster. More than half of respondents (51 percent) admitted they are only somewhat prepared, and more than a fifth of households (22.7 percent) reported that they were not prepared at all.

"Hurricane season officially begins on June 1 and other disasters can happen anytime, anywhere, as we recently saw with the devastating floods in Tennessee," says Madelyn Flannagan, IIABA vice president of agent development, education and research. "Lives and property are saved when people know what to do before, during and after a disaster. This national study further demonstrates that unfortunately most people are not ready in the event of a natural disaster."

The survey further revealed that many households have not even taken the most basic steps to protect against a disaster. For example, more than two-thirds of those surveyed (67.7 percent) said they had not created a photo or video home inventory of their belongings. More than 40 percent have not assembled a disaster and emergency supplies kit in their homes. Sixty-eight percent of homeowners have not made any structural improvements or reinforcements to better protect their property from a disaster.

Of all survey participants, almost 36 percent said they don’t have or don’t know if they have adequate insurance coverage to help them through a disaster, and an alarming 62 percent say they have never discussed a complete disaster preparedness plan with an insurance agent.

"Independent insurance agents not only advise clients about insurance, but they’re disaster readiness experts," says Robert Rusbuldt, IIABA president and CEO. "It is imperative to know what your risks are and what to do in the event of a disaster. We recommend meeting with a Trusted Choice independent insurance agent who is an expert in assessing your risks and insuring that you, your family and your home are prepared in the event of a disaster."

Trusted Choice and the Big "I" offer many disaster-specific readiness and recovery tips for consumers. To access them, click on the corresponding headline.

• Hurricanes
• Flooding
• Tornadoes
• Earthquakes
• Wildfires
• I want to start my disaster preparedness plan. Where do I start?
• How do I prepare a home inventory?
• How do I storm-proof my home?

The survey was conducted for Trusted Choice via telephone by International Communications Research, an independent research company in Media, Pa. Interviews of a nationally representative sample of 1,006 households were conducted this month. The survey has an overall margin of error of +/- 3.1 percent. 

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Here's an Opportunity to Share Your Perspective on Independent Agency System
The 2010 Agency Universe Study is here. The 2010 Agency Universe Study will provide critical information for the independent agency system, the Big "I" and insurance carriers. Future One, a cooperative effort of the IIABA and more than 20 leading independent agency companies, has carried out this research since 1983. Please take part in this valuable research.

IIABA has retained TRC, an independent market research firm, to carry out the survey and ensure the quality and confidentiality of all participant data. Over 30 years, Future One has been able to gather information and opinions from a wide variety of agency principals or managers nationwide, and the information has helped the association carriers better respond to the needs of the independent agency system. The 2010 Agency Universe Study will take a look at the role of social networking in agency operations, as well as a variety of other innovations and challenges affecting today’s business.

You may have already received an e-mail message from IIABA inviting you to participate in this critical research. The e-mail message will include a link to the Web site where you can complete the survey online. The survey should take less than 30 minutes to complete, and responses are completely confidential.

For information or questions about the 2010 Agency Universe Study, e-mail Madelyn Flannagan, IIABA vice president of agent development, research and education. Contact Flanagan if you received the e-mail message previously mentioned but no longer have the link to the survey's Web site.  

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Sales Tips: Maximize the Impact of the Opening of a Sales Call 
by Linda Richardson, Big "I" Virtual University Contributor 

Most salespeople take how they open a sales call for granted. The opening is a place to differentiate yourself and get your calls (especially first calls) off to a great start. But it requires taking the time to plan how you will open. Although it takes a small amount of time, you create the foundation of the entire call with your opening. 

Remember these five important steps when you open—salespeople who master them create a competitive advantage: 

Don't forget about rapport. Prepare for rapport. In addition to what you prepare, look for rapport cues. Be sensitive to customer signals, but don't bypass rapport. People buy from people they like when all else is fairly equal (and sometimes when it is not). 

Rethink your purpose. Instead of saying, "I am here to tell you about us and what we do in …" say, "I am here to learn more about your objectives and share with you what we do in …" (for a first meeting) or "Before I discuss what I have prepared, I'd like to learn about …" 

You probably are well prepared, so leverage your preparation. Say, "In preparation for the meeting, I have … (example: discussed X with our specialists, researched …)" This will help you gain credibility and more time. 

Give a prospect 30 to 60-second overview of your credentials and check if there are any questions. Tailor it to your prospect. 

Lead out of the opening by going into needs vs. your presentation! When you are ready to wrap up the opening, do so with a question that sets the expectation you will be asking questions. This will also help you gain client cooperation. Remember, you have already let the client know you prepared for the meeting, so this will help the client want to give you information. For example, "So that I can focus on what the priorities are for you, may I ask a few questions about … before I share with you what I have prepared?" Then, you are in the need dialogue where you can question, listen and drill down so you can be persuasive when you present. 

These opening steps may seem like small points, but in fact, many, if not most, producers skip one or several of them. 

When you open the call effectively, you open the dialogue. By giving in the opening, you will get a lot more in the remainder of the call! 

Editor's Note: The preceding article originally appeared in the May 20, 2010 issue of IIABA’s Insurance News and Views. 

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