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 Big “I” National News

On the Hill
Big “I” Strongly Opposes Kennedy Health Care Bill
"Navigators” program prohibits agent involvement in health care education and enrollment.

The Big “I” has publically denounced a bill titled the Affordable Health Choices Act as introduced by Sen. Edward Kennedy (D-Mass.), chairman of the Senate Committee on Health, Education, Labor & Pensions.

There is no doubt that drastic steps are needed to reform the problems in the health care system and to lower costs, but the solution must be to fix the problems permanently without displacing the private market or adding to an already ballooning federal budget deficit. The Big “I” supports efforts to provide universal health care coverage and to lower health insurance costs across the board; however, the current form of this bill is not the solution.

While briefly noted in the bill without specific details, Kennedy has expressed his strong support for including a Medicare-like public plan and a "pay or play" employer mandate in the final bill. The Big "I" opposes any effort to implement a public plan and an unreasonable employer mandate. A public plan would be unfairly matched against private plans and according to a 2009 study by the Lewin Group, if the public plan’s reimbursement rates are similar to Medicare, an estimated 119 million people will shift from private insurance to the public plan. Within years, private insurers could be driven out of business and a “single payer system” will evolve. Moreover, an improperly constructed employer mandate could have a devastating impact on main street businesses that would be saddled with a significant economic burden.

The Big “I” is also opposed to the creation of the "Navigators" grant program included in the legislation, which would award grants to public and private entities to conduct public education, distribute information and assist with health insurance enrollment. The legislation specifically states that health insurance issuers, including agents, would be prohibited from participating in the grant program.

A Navigators’ program would mistakenly entrust organizations with no prior health insurance background with the authority to advise individuals on their insurance decisions and would cut experienced and educated agents out of the process of boosting health insurance enrollment. Individuals seeking information on what health insurance plan best fits their needs should be able to count on sound advice from a licensed health insurance agent, broker or consultant. It is simply reckless to hand this trusted role over to random community organizations with no relevant health care background.

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.

  

On the Hill
Big “I” Urges Obama Administration to Oppose Reform Efforts that Could Harm Consumers and State Insurance Regulatory System
Letter highlights how state regulation has excelled at protecting consumers and insurer solvency.

Last week, the Big “I” government affairs staff was invited to participate in a meeting with senior White House and Treasury officials to discuss the Obama administration’s plan to restructure financial services regulation. Modernizing financial services regulation is one of the president’s top three domestic priorities along with health care and energy reform, and details of the plan could come as soon as next week. Robert Rusbuldt, Big “I” president & CEO, sent a follow-up letter to the Obama administration urging them to oppose any financial services regulatory reform efforts that could imperil the strength and stability of the state system of insurance regulation. 

“Insurance regulation is not perfect and improvements certainly should be implemented,” says Rusbuldt. “However, state regulators have done and continue to do a solid job of ensuring that insurers are solvent and insurance consumers are protected and receive the insurance coverage they need. Given today’s tough economic environment, we believe that establishing national standards where necessary and where appropriate would not jeopardize or undermine the viability of the state insurance regulatory system and the 13,000 professional regulators who have an effective track record with respect to solvency and consumer protections.”

Click here to read the letter in its entirety.

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.

 

P&C Trends
Agents Remain Customers’ Top Choice
Survey shows customers prefer purchasing insurance from agents.

Despite the increasing popularity and availability of insurance online, nearly three-quarters of customers would rather purchase insurance through an independent agent, according to a recent survey from Accenture.

“The key takeaway for the independent agent is that your customer may be looking to shop product or gain information about the insurance company, and you need to be involved in that process,” says Michael Costonis, executive director of Accenture’s North American Insurance Practice and Global Claims Lead. “With one in six consumers looking to change companies and 27% of consumers asking for more information on the products, there is a window of opportunity for the independent agent to further demonstrate value to the consumer.”

Although they are the most likely demographics to explore insurance products online, younger (ages 18 to 24 years old) and more affluent customers with incomes of more than $60,000 also prefer to consult with an agent and demonstrate the strongest need for guidance in selecting and understanding insurance, according to Accenture.

 “The younger generations tend to research online, but they buy from someone they know,” says Ashley Whitney, vice president of Harbor Brenn Agencies in Petoskey, Mich. “I’m finding that when you have a relationship with (young people) that extends outside of a business relationship, they are easier to deal with (in a business context). Facebook and Twitter put a personal face on business and you feel you know them better because of the interaction online.”

Rick Dinger, president of Crescenta Valley Insurance in Glendale, Calif., also sees social networking as the tool of choice to attract customers who conduct online research but ultimately seek a personal relationship and guidance from an insurance professional. Dinger says advertising through Facebook has “become an unbelievable draw for new business” because the ads can be tailored to customers’ interests and geographical location.

Accenture’s survey also shows that younger and more affluent customers are the most likely to switch insurers. Dinger says the most affluent customers are often underinsured, so the survey’s results may reflect their search for a variety of products in an increasingly complex and competitive marketplace. Younger customers’ inclination to shop around may reflect their view that purchasing insurance is, as Whitney puts it, “a difficult pill to swallow.” 

According to Accenture, younger customers are the most uncertain about coverage and 43% question whether their carrier will be able to provide coverage in the current economy, while 26% of customers older than 45 years old share similar concerns. Whitney says any uncertainties, regardless of a customer’s age, can be cleared up by sitting down and discussing insurance options with an agent.

“I have heard countless times from customers that ‘no one has ever explained insurance to me,’” says Whitney. “They are extremely appreciative of the time agents take to explain coverages.”

One-quarter of consumers surveyed said they lack adequate information about the impact the economy will have on their life insurance policies, which also demonstrates an opportunity for agents to advise concerned insureds. However, Costonis believes the agent’s ability to explain complex products will benefit customers long after the recession has passed.

“The preference toward agents…demonstrates the fact that consumers prefer advisory-style services for more complex products,” he says. “As the economy stabilizes, we still believe that the agent will remain at the heart of more complex insurance transactions.”

Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.


Tech Trends
Managing Web 2.0 Risks
New technologies driving business must be monitored.

New Web technologies offer independent agencies innovative ways to interact with customers, drive sales and promote visibility. However, online social networking and communications also present uncharted risk management territory.

Drew Bartkiewicz, vice president of cyber and new media risk at The Hartford, recently took time to discuss Web 2.0 risks for independent agencies with Insurance News & Views.

IN&V: What applications are the main sources of Web 2.0 risks, and what specific risks do those applications present to agencies?

DB: I make a distinction between social communication sites like Twitter and…Facebook, in terms of inadvertently communicating information that shouldn’t have been communicated. Employee-to-employee communication creates a liability for companies. In a recent story, an employee twittered a friend about a new company strategy with highly-sensitive information and within a few minutes, it was put into a social communication network.

In the other category, social networking, whether it’s Facebook, My Space or LinkedIn, the line between business etiquette and personal etiquette is getting very blurred. Employees who engage in social networking while on a company computer system or even remotely represent the company in some fashion are creating some uncertainties. There are no laws or regulations yet that govern social networking, so there are no established standards of care for conducting business with social networks – use at your own risk.

Insurance agencies are data-driven and rely on large amounts of data and a network. They have a very high sensitivity to their online reputation. One way for agencies to understand cyber risk is by asking, “How often does our name come up in a Google search? How often are things said or written about us online?”

IN&V: How should agencies go about managing these risks? 

DB: There are technologies related to internet usage at the office that would track or block particular sites an employee could use on company time. It’s not a great solution because the answer is not locking people down and shutting out communications. The benefits of social media far outweigh the risks. The more important solution is to educate employees on how they could leverage Web 2.0 to improve the agency’s brand and use their personal reputation online as an asset to the company. It benefits the agency to have very networked, visible agents. Web 2.0 is a tool as much as it is a weapon. Agencies should ask: “What’s appropriate to say on Twitter and what’s not? What are appropriate comments to make to other professionals and what are not?” Agencies that monitor their reputation in cyberspace are mitigating risks.

Businesses should consider insurance for Web 2.0 liability, because 99% don’t have it or have never heard of it. Social communication, networking and media are three of the most prevalent forms of Web 2.0 right now. What’s coming next? Web 2.0 will keep moving; risks will grow and become more complex, so there will be more reasons to insure them. Any company that is data-driven, network-dependent and has a reputation needs this kind of coverage.

IN&V: Could you weigh the pros against the cons for agencies considering Web 2.0 technologies? 

DB: The train has left the station in terms of companies aggregating more and more data each year. They must understand that data adds enormous value to business but can be an enormous liability. You need data to do anything; it’s a function of lower cost and more efficiency, and those two factors are why companies are moving toward self-service models. Letting employees and customers service themselves online is a lot less expensive, but you also have more exposure for protecting data. No matter what you’re buying, more and more decisions are being made online. People are deciding which product or service to choose based on what they’re reading, and what they’re reading is now more and more reputational comments about products and services. Independent agencies are no different because customers can emphasize the agency’s strengths or can be unaware they exist, or can be unhappy, or can go out of their way to talk about a company’s reputation or lack thereof. You have to be in the Web 2.0 world in order not to get killed by it, and if you’re going be in it, you have to understand its benefits, mitigate its risks and insure for uncertainty.

Veronica DeVore (veronica.devore@iiaba.net) is Big “I” writer/editor.


P&C Trends
Now is the Time for Hurricane Preparation
Statistics show most damaging storms occur later in the season.

Last week’s Insurance News & Views examined hurricane forecasts for the 2009 season that began June 1. Predictions indicate average storm activity this year, but have been made with more uncertainty than usual. And forecasters are cautioning that the Northeastern region is overdue for a sizable hurricane. However, there are many resources available to help agents and insureds endure a disaster, and it is not too late to prepare.

The graph below indicates the percentage of hurricanes since 1851 that reached Category 4 or 5 on the Saffir-Simpson Hurricane Scale, arranged by month. Most hurricanes occur in September, but the two most costly hurricanes measured in today’s dollars occurred in August. By way of probability, however, 75% of major hurricanes form in September or later. While the hurricane season began on June 1, the vast majority of hurricanes and their impact on insureds and members occur later in the season.
 

Source: A.M. Best Atlantic Hurricane Best Track File 1851-2006 and U.S. Hurricane Special Report 

Resources available to Big “I” members can be found on the Big “I” Virtual University. The E&O Happens Web site is also available to member insured with Swiss Re, and searching the site for “disaster” and/or “hurricane” produces valuable resources. A particularly good resource on the E&O Happens Web site is a webinar discussing the E&O exposure of placing flood coverage and features insight from Selective Insurance, the carrier for the Big “I” Flood Program. Members may be particularly interested in a disaster preparedness paper published by the Big “I” Agents Council for Technology (ACT), which includes practical advice and checklists for managing a major catastrophe before, during and after it strikes. The ACT Web site also includes three additional articles on disaster preparedness.

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

For more information on other hurricane season-related products and services, go to www.independentagent.com and click on “Member Resources.”