T H U R S D A Y ,  A U G U S T  2 0 ,  2 0 0 9 

                                                       Big “I” National News

 
                     

P-C Trends
Price Drives High Satisfaction with Auto Insurance
Agents look ahead to prospective hard market, hone customer service strategies.

When it comes to overall customer satisfaction, auto insurers are getting high marks from their insureds, but that’s expected to change soon as the economy rebounds and the insurance industry returns to a hard market.

Overall customer satisfaction with auto insurers increased dramatically in 2009, according to a recent study by J.D. Power and Associates. However, the looming hard market and rising prices that typically accompany it are expected to challenge agents’ ability to keep customer satisfaction at its peak.

Jeremy Bowler, director of the insurance practice at J.D. Power and Associates, notes that customer satisfaction declined sharply as rates increased following the recession of 2001-2002. Bowler anticipates a similar downturn in satisfaction if rates harden within the next several months as expected. 

“The customer will react to a soft market,” says Bowler.  “At a time when everything is costing more, many customers didn’t switch insurers (but still) got a better price than a year ago."

Although price played a significant role in customer satisfaction, the study also rated carriers based on interaction with customers, policy offerings, claims service and billing and payment. For the tenth consecutive year, Amica Mutual took the top spot in overall satisfaction, followed by State Farm, Shelter, Auto-Owners, Erie Insurance and COUNTRY, respectively. More than half of the 32 companies ranked in this year’s study improved considerably compared to last year, with the most significant improvement in the price category. Because the market will inevitably harden, Bowler says companies and agents who engage customers in discussions about rate increases prior to renewals will come out ahead in future satisfaction surveys.

After customers began to complain about sub-par claims service from some carriers about five years ago,  the Jamieson Insurance Agency in Waitsfield, Vt. went on the offensive and now the agency’s owner, Jon Jamieson, calls insureds who file claims to ensure they’re receiving the best service possible. In addition, if a customer’s bill increases by more than $75  in a six-month period, the agency reaches out to them, explains the situation and finds a better rate if possible.

Jeffrey Coup, president of The Coup Agency in Milton, Penn., says he re-shops  auto policies for customers whose rates have become uncompetitive, even if the customer does not ask for it. He plans to continue to review policies as much as possible once the market hardens.

“When we are doing our jobs correctly, (customers) move because of price, not service,” says Coup. “The one flaw in our system is small rate-creep, where there is no big rate hike that our system alerts us to, just small increases over the years.  Sometimes the client moves for price without letting us re-market.”

Bowler says that while agents have the unique ability to address customers’ questions face-to-face, the Internet and call center models are beginning to seriously compete with the agency system.  J.D. Power’s study shows that agents still scored the highest in customer satisfaction, with an average of 844 on a 1,000-point scale. However, Internet and call center models crept closer to that number than ever before, at 800 and 812 points, respectively. Bowler attributes the trend to convenience, improved online and call center service and the preferences of younger generations.

“The consumer who is buying is changing, and consumer needs are evolving,” says Bowler. “Consumption via the Web has been growing, and the majority of customers under 35 used the Web at least once to interact with their insurance carrier in the last 12 months.”

When it comes to convenience, Jamieson admits that one of the challenges of competing with online and customer service center models is being available at all times. He provides customers with his personal telephone number and stays in touch via his Blackberry when the office is closed. However, he believes agents need to do more in general to demonstrate their value to customers.

“We need to show people what we do, because many don’t really understand what we do, especially younger people,” says Jamieson. “Otherwise, (agents) will continue to lose market share in personal lines.”

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

 

P-C Trends
Quick Takes from the Top: Q&A with Carrier CEO Ayer
The Hartford’s Ramani Ayer talks about the economy, the AARP program and the role of agents.

Ramani Ayer, president and CEO of The Hartford, has seen many significant changes to the insurance industry over the course of his lengthy career. Although Ayer has announced his retirement, he is currently navigating his company through a challenging marketplace with the introduction of new products and a continued focus on independent agents. Following the release of The Hartford’s recent quarterly earnings report, Independent Agent spoke with Ayer about his assessment of The Hartford’s current position, the economy and the future of the independent agency system.

IA: What are the top challenges facing independent agents today?

The economy is the biggest challenge. Businesses are closing locations, shedding payroll and trying to cut costs. All of that translates into less commission revenue. Agents are under severe revenue pressure and are trying to find more ways to sell more products to the same consumer. There is the technology challenge to continue to pare down costs to maintain margins, and the automation age has impacted how agents need to interface with clients and carriers and how they support marketing, underwriting and claims. The regulatory environment has altered the compensation system and structure, and agents have to restructure their business approach to meet that (challenge).

IA: What is your assessment of where we are in the current recession? How will the overall economic climate continue to affect the insurance industry?

Looking forward, consumer as well as business demand has got to increase for the economy to create sustainable growth. There is no question that the economy has hurt a lot of small businesses, with customers reducing payroll, restructuring coverages and putting pressure on agents to shop accounts more often. The economy will gradually recover from here with expected third quarter positive GDP growth. 2010 will be marginally better, but it will not be the typical rates of growth we have seen. (However), small business, which is a growth engine, will recover over the next 18 months.

IA: What kind of reception are you getting on the rollout of the AARP program to independent agents? 

It’s very exciting. We are now bringing this program to independent agents and it will be available to as many as 20 states by the end of year. It will increase agents’ flow of business, and not only have we provided a product, but we’re training agents to help address senior customers and their unique needs. The program is designed for customers 50 and older and has a high level of business and ethics standards. (It has started with ) 2000 agents and has been fantastic in the first 20 states. The overall quote volume is 40% higher because of agents.We learned that 80% of the 50 plus market prefers to work with an agent. The program has unique attributes such as a lifetime continuation agreement and recovery care options that can help customers pay for daily errands and cooking if they’re injured, all in a standard 12- month rate product.

IA: Does The Hartford plan to stay in the life insurance business? 

We are now telling our investors that we will be a U.S.-focused insurance company. We will sell to individuals, businesses, life insurance, group life and disability, a wealth management business and a restructured annuity business. Retirement plans are critical to small business and benefits insurance. Dominant businesses going forward will be protection for businesses and individual life insurance. In the individual annuity business we will move toward greater simplicity and transparency.

IA: What are the biggest changes you have seen in the insurance industry, and specifically in the independent agency system, during your career?

The independent agency  system has gotten better. First, there are more mid-size regional professional agencies that are getting stronger and are the dominant force in the market.  Technology, over time, has dramatically re-shaped the workflow inside of the agency in a material way; agents are a much better sales organization both in terms of sales management and the ability to focus on industry verticals.And agents are broadening their business portfolio to include benefits.

What role will independent agents play in the Hartford’s future?

The independent agency  system is critical to The Hartford’s future. We have a 200-year relationship with independent agency system, starting with our first agent, Jonathan Trumbell. Every morning I sit at my desk and I see (his picture) and I am always reminded of the importance of independent agents. I never forget that.

Editor’s Note: This article is the first in a continuing series of Q&As with insurance carrier CEOs on the trends affecting the economy, the insurance industry and the independent agency channel.

Katie Butler (katie.butler@iiaba.net) is Big “I” associate vice president of communications and IA editor-in-chief.

   

On the Hill
Senators Urge Cooperation in Crop Insurance Negotiations
Bipartisan group of senators sends letter to the Obama administration.

A bipartisan group of 10 senators, nine of whom serve on the U. S. Senate Committee on Agriculture, Nutrition and Forestry, recently sent a letter to William Murphy, the administrator of the U.S. Department of Agriculture Risk Management Agency, urging a fair approach to any updates to the Standard Reinsurance Agreement (SRA) and requesting that farmers and ranchers have adequate access to insurance. The lead signatories on the letter are Chairman Tom Harkin (D-Iowa) and Ranking Member Saxby Chambliss (R-Ga.).

The Big “I” strongly supports the Federal Crop Insurance Program (FCIP) and has been instrumental in urging Congress to continue this valuable program, and  ensure that independent insurance agents continue to receive just compensation for crop insurance sales and servicing ,. The SRA is the agreement between the private insurance companies participating in the FCIP and the federal government. The current SRA expires in 2010 and a new SRA must be agreed upon to take effect in 2011. The association strongly supports the bipartisan group's goals of ensuring a fair and equitable new SRA through substantive, mutual negotiation. The Big “I” has pledged to work with the Risk Management Agency (RMA) and Congress to clearly communicate its views throughout the negotiations of the new SRA in order to improve this key risk management tool that’s vital to American agriculture.

The bipartisan group called for cooperation in the process and said, “Consequently, we would ask that any analyses of the impacts of alternative approaches conducted or commissioned by RMA be shared with the AIPs (with whom you will be negotiating), other interested parties (such as groups representing crop insurance agents) and relevant congressional committees, in order to allow an opportunity to critique the assumptions and methodologies used.”

The letter was also signed by Agriculture Committee members, including senators Max Baucus (D-Mont.), Michael Bennet (D-Colo.), Kent Conrad (D-N.D.), Chuck Grassley (R-Iowa), Ben Nelson (D-Neb.), Pat Roberts (R-Kan.) and John Thune (R-S.D.). Sen. Kay Bailey Hutchison (R-Texas) also signed the letter.

Click here to view a copy of the signed letter.

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


L-H Trends
Economy, Consumer Spending Send Mixed Signals
Now is the time to talk to customers about how to fix their finances.

The economy continues to be a vexing conundrum. July and August have been robust for the domestic stock markets, and at the beginning of the month many economists and financial reporters were declaring the recession over. But that’s not likely.

Even as housing and employment improve in many areas, financial pundits are still quick to point out that the economy is not out of the woods yet since the unemployment rate remains high and residential foreclosures continue to be a challenge. Commercial real estate is also now taking a hit due to overbuilding and decreased demand in many cities, resulting in high vacancy rates.

Given all these factors, there are some interesting points independent agents need to consider. First, this past week’s stock market slide can be chiefly attributed to the significant decline in consumer spending for July. Since consumer spending drives approximately two-thirds of the U.S. economy, anemic consumer spending is difficult  for retailers to swallow. Further,early back-to-school spending is off almost 8% from a year ago. 

However, Fidelity Investments recently reported that employees who contributed more money toward their 401(k) plans in the second calendar quarter of 2009 outnumbered the number of employees who decreased their contributions to their 401(k) plans. This reversed a trend over past quarters when employees reduced their contributions. This trend seems entirely rational since most workers need to rebuild their retirement savings.

Agents should note that while the economy will continue its gyrations, and consumers will closely watch their expenditures, many people are assessing their financial situations to determine how best to reposition themselves --- as evidenced by increasing contribution rates to 401(k) plans. Now is an opportune time for independent agents to contact their customers and review their retirement and savings objectives to develop strategies to achieve them. Many people are contemplating whether to convert some of their IRAs to a Roth IRA in 2010 as the income ceilings for conversions is lifted, and agents can be a valuable source of information during this decision-making process and beyond.

What will the return to higher income, capital gains and estate taxes mean for business owners and their financial planning? And, how should estate plans be tweaked in response to the changes in the tax laws? Even though people are busy, most know they need to take the time to discuss their financial plan with their trusted advisors. Agents should take advantage of the current environment to invite their customers in for a review of their situation – before someone else offers them the invitation.

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

Agency Management
Establish Customer Service Standards
Putting standards in writing is a good way to stand out from the competition.

Customer standards tell employees and customers what an agency expects from its staff and what customers should expect from their interaction with the agency. Focusing and clarifying  standards can be a strong, positive statement that helps an agency stand out. While most agencies say that they provide excellent service, few are committed enough to actually put it in writing and share service standards with their clients.

Should agencies establish and publish customer standards? The simple answer is, “of course,” but it's not really that simple. There are dangers involved in establishing customer standards and even more potential pitfalls in publishing them.

The obvious problem is the agency's legal liability in the event that the standards are not met. Could customers sue the agency if it didn't meet its own standards?

The second problem involves establishing expectations that customers will adopt and that employees must achieve. Many agents adopt excellent standards of conduct for sales and service functions. However, the standards are often closer to those the principal would like the agency to reach than to those that are currently being achieved. Setting standards before developing the systems and procedures to reach those standards lowers employee morale and results in dissatisfied customers who, until the standards were published, did not expect greater service than they received from the agency.

So, with these issues in mind, should agencies establish and publish customer standards? The answer is still, of course. Here are some examples:

1. Prospects are treated as valued clients when they call or visit the agency or when an agency representative visits them.
2. The producer or sales representative will establish a relationship with the prospect that is built on respect and attention to his or her individual needs.
3. Representatives will make it easy for the client to finalize the policy and payment terms.
4. The agency will deliver new policies when promised, as promised and without errors.
5. An agency representative will call every client after the sale to confirm that the client is completely satisfied.
6. The agency will be responsive to questions and concerns identified by the client."

To read the expanded version of this article, click here.
 
Bill Wilson (bill.wilson@iiaba.net) is director of the Big “I” Virtual University.