VOL. 2, ISSUE 10 – OCTOBER 2009
How to Handle the “Contradictory Customer”
by Steve Lewit, CEO and Founder,Wealth Financial Group
ave you noticed a shift in the customers you’re
seeing lately? I have! Each change in the mar-
ket and economic conditions changes the atti-
tudes and fears of the people we are trying to
help. And, since hope springs eternal for people who
believe in investing in the market, the recent rise in the
market has caused a new ‘market euphoria’ with dazzling
selling consequences. The customer that was very willing
to reposition assets just four or five months ago is now not
sure what to do and sitting tight.
If you recognize this shift in behavior, what are you doing
about it? If you haven’t seen it, where have you been?
Steve Lewit’s Selling World
The changing customer is one of the 25 landmines that
I’ve identified which can blow up a sale. I call it the
Contradictory Customer—the customer who tells you one
thing this week and another thing the next. When customers shift their behavior, they are acting
contradictory than the way they acted in the past. Usually these clients also bring with them two
other selling landmine personalities—“Irrationality” and “Being Unrealistic”. So, the three land-
mines we have to deal with more often now are Contradiction, Irrationality and Being Unrealistic.
IN THIS ISSUE Let’s take a look at how to deal with these folks.
First, here is a little psychology. Understand that at the root of your customer’s changes and irra-
SBI-AXA Life tionality is fear—either the fear of losing something they might get in the future or something
Insurance Goes they have now. Interestingly enough, the fear of loss or something a person could have in the
future, missing out on an opportunity, is often more threatening than losing something that is
Live with Japan’s
already possessed. Now, it’s not just about the money. The fear of missing an opportunity in an up
First Automated market is compounded by numerous other fears which have great impact on your customer—the
Underwriting fear of not being able to keep up with friends when they talk about their great market successes;
Engine for Life the fear of feeling stupid; the fear of being criticized by a spouse without having a good defense
Insurance (place in for not staying in the market (when everyone is losing in the market there is an irrational comfort
Innovation and and explanation for the loss); the fear of missing out on plans and dreams. The compounding
effect of these numerous fears makes the fear of loss of future gain a very potent block to a cus-
Technology) p. 29
tomer’s willingness to change.
Technology Now, your priority as a selling professional is to be aware of this shift in your customers and to
allow your selling system to deal with it (I am assuming here that you have a system and that it
deals with these landmines). Our system deals with these landmines by bringing the customer into
Help P&C Insurers the reality of what they are doing and the decisions they are making. It is only when your cus-
Create Efficiencies, tomer experiences that reality is there any possibility of short circuiting the false hope in which
Save Money p. 34 they believe.
Let’s see how this works:
Annuities Boost Customer: Well, we’ve changed our minds and are going to sit tight—not sure what’s going on
Retirement out there but have a feeling things are getting better.
Confidence of You: Interesting. That’s quite a shift from where we were when we started working together.
Middle-Class Could you tell me more about that?
Americans p. 5 • You always begin by using the sequence of mind mapping questions.
s PLEASE SEE CONTRADICTORY CUSTOMER ON 17
2010 Will Be Better for Insurance Industry, Executives Predict
E xecutives of insurance companies predict that their firms will perform above general mar-
ket expectations next year, but you can’t call their outlook rosy.
According to an annual survey conducted by KPMG, the executives’ expectations on the indus-
try’s ability to generate underwriting profit in the next one to three years remains restrained.
Nearly half (48 percent) of the 271 executives surveyed at KPMG’s 21st annual Insurance
Industry Conference in Brooklyn, N.Y., last month, said they expect their company to perform
ahead of expectations in 2010. This contrasts with KPMG’s 2008 survey, when only 22 percent
saw performance in 2009 being better than expected. Another 36 percent in this year’s survey
said their companies would perform at a level similar to 2009, and only 16 percent said compa-
ny performance will fall below expectations.
However, executives continue to indicate that underwriting profit may elude their companies
for the next few years. In fact, 64 percent see only a moderate ability to increase underwriting
profit, while 27 percent said the chance of increased profit as “weak.”
“While our survey shows some optimism related to future performance, executives have clearly
indicated that the industry still faces many risks and the uncertain economic and regulatory environment poses many obstacles to
growth and recovery,” said KPMG’s Scott Marcello.
Insurance executives said that continued unemployment rates and increasing regulatory intervention inhibit economic recovery.
Another reason is the high cost of capital. Even though 31 percent of executives said they don’t anticipate their company will need to
access additional capital over the next 18 months, it was still cited as the third largest barrier to overall economic recovery.
The difficulty in accessing capital won’t prevent mergers and acquisitions, the executives predict. Seventy-three percent said they
expect an increase in mergers and acquisitions compared with the last 12 months.
When asked to identify the most significant challenges they face in the next three to five years, 30 percent of respondents cited pric-
ing risk, and 23 percent said credit risk.
“As expected, there are clear concerns surrounding access to capital and the proposed regulatory changes,” Marcello said. “However,
there appears to be a multitude of opinions on exactly what the best regulatory solution might be for the industry.”
Similarly, executives don’t agree on the subject of financial regulation of their industry. Twenty-eight percent support an optional
change to a federal regulator, 25 percent would maintain the current state regulatory system (with some supporting an increase in reg-
ulation), and 17 percent favor a mandatory change to a federal insurance regulator. Twenty-five percent do not support any change
and say increased regulation is not needed in the industry.
Favorite “Aha Moments” Will Become Mutual of Omaha’s
2010 Advertising Campaign
M utual of Omaha wants to know what Americans’ favorite
“aha moments” are.
The insurer, who sponsors life’s aha momentsSM, has started an
extraordinary aha moments, real stories from real people, and
we ended up with more than 1,000 uplifting stories,” explained
John Hildenbiddle, senior vice president of brand management
online survey encouraging people to vote for their favorite such and public relations at Mutual of Omaha.
moments of the year. The top 10 vote getters will become Mutual Following the first round of voting, the top vote getter from each
of Omaha’s 2010 national broadcast advertising campaign. of the 25 cities will move into the final round of voting, which
The first round of voting runs October 1–15. It features 75 aha ends on October 31. The results of the second phase will deter-
moments recorded during the company’s recent five-month mine the top 10 favorites, which will become the company’s
national tour. Mutual of Omaha selected three inspirational newest television ads.
moments from each of the 25 markets the tour visited. Mutual of Omaha kicked off its sponsorship of life’s aha
“We set out on the Aha Moment Tour hoping to capture moments in February 2009 with a national advertising campaign,
a Web site devoted to aha moments, and a Facebook page.
4 / INDUSTRY NEWS & TRENDS / CYBER INSURANCENEWS
Jansen, LaFontaine Add Star Power to Annuities Boost
ING Marathon and Run For Something Retirement Confidence of
Better Program Middle-Class Americans
A couple of famous skaters are lacing up their running shoes for the
2009 ING New York City Marathon.
Olympic gold medalist speed skater Dan Jansen and former National
A mericans feel good about their annuities. A
new survey shows that owning non-qualified
annuities boosts the confidence that middle-class
Hockey League player Pat LaFontaine will participate in the 40th run- Americans have about their retirement, and those
ning of the marathon on November 1. Both are serving as ambassadors who own annuities have great confidence in their
for the ING Run For Something Better, which promotes youth fitness financial future, despite the recent recession and
and provides grants and funding to school-based running programs sluggish markets. More than half of annuity own-
across America. ers (55 percent) believe that they have enough or
more than enough money to cover their financial
As they run, Jansen and LaFontaine will wear a pair of ING’s signature
needs in retirement.
orange shoelaces, which are given to those who make a charitable
donation of $10 or more to Run For Something Better. They also will Conducted by the Gallup Organization (Gallup)
raise money for the program through fundraising Web sites. and Mathew Greenwald & Associates (Greenwald)
in conjunction with the Committee of Annuity
Both athletes under-
Insurers (CAI), the survey of 1003 annuity owners
stand the necessity
reveals who purchases non-qualified annuities and
for kids to learn good
why. For instance, eight out of 10 non-qualified
fitness habits and
annuity owners have annual household incomes
stay physically active.
below $100,000, so the majority are middle-class.
By running in the
In fact, 42 percent have annual household incomes
marathon and partici-
below $50,000. Only 4 percent have annual
pating in the ING
incomes greater than $200,000.
Run For Something
Better program, they Annuity owners believe they have done a “very
hope to encourage good job of saving for retirement.” More than 90
kids to get fit and percent say that statement describes them well,
stay fit. and they believe their annuities have contributed
to that condition. Almost 80 percent think that
“As an elite speed skater, it was necessary for me to develop good fit-
annuities are an important source of retirement
ness habits early in life,” Jansen said. “Starting off on the right foot as
security and make them feel more comfortable in
a child makes it much easier to lead a healthy lifestyle as an adult.”
times of financial uncertainty. More than 8 in 10
LaFontaine added, “Not every child is going to become a professional intend to use their annuities to provide a financial
athlete, but they can take the right steps toward leading a healthy life.” cushion in case they or their spouses live beyond
LaFontaine, who played for the New York Islanders, Buffalo Sabres, their life expectancy, and about the same number
and New York Rangers, said his parents helped him focus on proper intend to use their annuities to avoid being a
exercise, training, and nutrition, which became the foundation for his financial burden on their children.
successful, 15-year career in the NHL. The survey also revealed that non-qualified annu-
“Today, these things are still very important to me,” he said. “I’m ity owners are most likely to be older, retired
excited to be partnering with ING and supporting the ING Run For women. The majority are female (58 percent),
Something Better so that other kids can learn these same values.” and 69 percent are retired, up from 58 percent in
Since 2003, more than 50,000 children have participated in ING Run 2005. The average age of owners also increased
For Something Better programs across the country. Children in these from 66 to 70 between 2005 and 2009.
programs have run more than 1.5 million miles collectively. Nationally, Annuity owners told the pollsters they are happy
ING has committed more than $2.5 million to fund grants and school- with their purchase. Owners demonstrate a strong
based running programs through the ING Run For Something Better. loyalty and commitment to their annuity purchas-
“The ING Run For Something Better program is all about teaching our es, with 93 percent reporting that they still own
children the benefits of being healthy and fit, and the dedication it their first annuity.
takes to setting and achieving goals in life,” said Rhonda Mims, presi- “This survey demonstrates that these Americans
dent of the ING Foundation and senior vice president, Office of consider their annuities the answer to both sides
Corporate Responsibility and Multicultural Affairs. “The support we of the fundamental retirement challenge, a
get from Dan and Pat will help us continue spreading this positive method to accumulate retirement savings, and a
message.” vehicle to turn their savings into a steady retire-
ment income stream that cannot be outlived,” said
Deborah Winston of the CAI.
CYBER INSURANCENEWS / INDUSTRY NEWS & TRENDS / 5
Edwards Drives Special Car in Atlanta
Humana Sponsors Race to Support Aflac Cancer Center
Walk It Tee to Green N ASCAR driver Carl Edwards sported a new look in the Pep Boys Auto
500 at the Atlanta Motor Speedway on September 6.
Program at PGA Tour The No. 99 Aflac Ford Fusion car was decked out in a colorful design
inspired by a 13-year-old patient at the Aflac Cancer Center (ACC) in
Events Atlanta, Georgia. Aflac had invited children at the Aflac Cancer Center and
Blood Disorders Service to “Color Carl’s Car” for the race as part of Aflac’s
G olfers who don’t ride carts get in a
lot more exercise than they realize
during a round of golf. So do specta-
effort to generate awareness for Childhood Cancer Awareness Month.
The selected scheme, submitted by Jody Lawrence of Greensboro, Georgia,
tors. was chosen from among 54 other entries. All of the children’s drawings were
And Kentucky-based Humana Inc., the featured on the pit wall banner for the No. 99 race team, and Edwards wore a
official health benefits company of the matching fire suit and a white helmet signed by children at the ACC.
PGA Tour, can prove it. “Aflac is combining our passion for fighting childhood cancer with our
During the weekend of September NASCAR sponsorship of Carl Edwards to raise money and awareness for a
11–13, Humana provided spectators at great cause,” said Paul Amos II, Aflac president and COO. “By showcasing
the Nationwide Tour’s Utah Jody’s compelling
Championship in Sandy, Utah, with free story, we hope to
pedometers to chart the number of steps inspire NASCAR
they took around the Willow Creek fans to help raise
Country Club. Participants in the Walk funds and support
It Tee to GreenSM promotion who walked the research and
at least 7,000 steps were entered to win treatment that takes
an iPod nano, and anyone who walked place every day at
10,000 steps or more were entered into the Aflac Cancer
a drawing for an iPod touch. Center.”
Participants picked up their free Americans can join
pedometers when they registered at the the fight against
Humana booth. They were able to pediatric cancer by
return to the booth throughout the day donating to the ACC
to check the steps “leaderboard.” through the ACC
causes page, which can be accessed on Facebook or through the Aflac Web
This wasn’t the first event in the Walk It
site. Aflac will contribute one dollar for anyone who joins the ACC causes
Tee to Green program. Earlier this year,
page, matching donations up to $1 million.
Humana brought the program to three
PGA Tour stops: the Valero Texas Open Aflac Chairman and CEO Dan Amos kicked off the campaign by making a
in San Antonio, the HP Byron Nelson personal donation of $100,000 and challenged others to contribute to the
Championship in Dallas, and the fight. Edwards announced on Facebook that he will donate his portion
Stanford St. Jude Championship in ($132,706) of the winnings from Sunday’s race to the ACC.
Memphis. Combined, participants at “This is a wonderful campaign and a great example of how Aflac continues
these events took nearly 9 million steps, to support childhood cancer treatment and research,” Edwards said. “I am
or about 4,621 miles. Walkers also proud to be a part of this effort.”
burned 406,732 calories. Aflac is also encouraging NASCAR fans to join the fight against childhood
“The Walk It Tee to Green is a nice com- cancer through a text donation program, which runs throughout September.
plement to a number of initiatives we’re Fans can text “GoCarl” to 90999 using any carrier. The NASCAR Foundation
doing in Utah, including one to get kids will match texted donations up to $10,000.
active,” said Earl Hurst, Humana’s Utah
market president. “The nice thing about
golf, in particular, is that it’s the only
sport that you can actually get exercise
while you’re watching it.”
6 / INDUSTRY NEWS & TRENDS / CYBER INSURANCENEWS
Medical Plan Costs Will Continue to Soar in 2010, Segal Survey Says
H ealth care plan sponsors can’t wait for politicians to figure
out a reform plan. Rising health care costs are forcing them
to look for ways outside the political realm to control costs.
According to a new survey from The Segal Company, increases in
medical plan costs will continue to be more than four times greater
than the annual increase in average hourly earnings and in sharp
contrast to changes in the consumer price index for urban con-
sumers, which has been relatively flat or negative for the last year.
“Health plan cost trends continue to put major pressure on plan
sponsors, who are not waiting for health care reform,” said Edward
Kaplan, senior vice president and National Health Practice Leader.
“They are accelerating their efforts to control health care costs
through renewed wellness and disease management programs,
changes to value-based plan designs, eligibility audits, seeking
more competitive vendor terms through bids, and other innovative
The 2010 Segal Health Plan Cost Trend Survey also found that:
• medical plan projections for most managed care plans in 2010 are similar to those in 2009, ranging from 10.2 percent to 10.8
• high-deductible health plans are projected to increase slightly to 11.9 percent next year
• projected prescription drug trends, which remain under 10 percent for the second consecutive year, continue to decline from a
high of 19.7 percent in 2001
• the cost impact to comply with the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) will be an increase of 1
percent or less for most poll participants
The survey, which is available at The Segal Company’s Web site, was conducted in May and June among 80 health insurers, managed
care organizations, pharmacy benefit managers, and third-party administrators to determine the trend factors they will be applying to
actual medical claims to predict expected claims for 2010.
BCBSA Supports 5 to 1 Age Rating Ratio for Health Insurance Premiums
W hen young people choose not to purchase health insur-
ance coverage, it increases the costs for those who do.
That’s why it’s so important to strike the right balance on the
resulting in a 10 percent premium increase overall for individu-
als in some parts of the country.
“An affordable, sustainable insurance market requires broad
issue of age rating regulations, which affect whether or not participation across all age groups to maintain more affordable
young people buy health insurance, according to the Blue premiums,” said Scott P. Serota, president and CEO of BCBSA.
Cross and Blue Shield Association (BCBSA). “As this analysis shows, overly restrictive age rating regulations
Currently, 42 states permit health plans to vary premiums based would hurt a large portion of those with individual coverage,
on age by 5 to 1 or more. The primary benefit of this ratio is making coverage less affordable and undermining the key goals
that premiums are kept affordable for younger individuals, of health care reform.”
which in turn encourages broad participation. However, if more The analysis also finds that restricting age rating ratios to 3 to
restrictive age ratings were implemented, younger people would 1 would increase premiums in many states by as much as 30
opt out of purchasing coverage. percent for younger people, relative to a 5 to 1 ratio.
A new data analysis prepared for the BCBSA by Oliver Serota said that the BCBSA supports a 5 to 1 age rating.
Wyman’s Actuarial and Health and Life Sciences practice “Younger individuals are much more sensitive to the costs of
shows that a 2 to 1 age rating ratio would increase premiums health insurance compared to older individuals,” Serota said.
for the youngest and healthiest Americans in the individual “The bottom line is that if premiums are too high, young and
market in many states by nearly 50 percent in the first year, rel- healthy individuals simply will not purchase insurance and their
ative to a 5 to 1 age rating ratio. Over a five-year period, more needed cross-subsidies for older, sicker people will be lost,
than 1 million younger members would leave the market, increasing the cost of health care for everyone.”
CYBER INSURANCENEWS / INDUSTRY NEWS & TRENDS / 7
Companies Look to Change or End Defined Benefit Retirement Plans
C hanges are coming for defined benefit retirement plans
that are intended to mitigate risks for employers and
driven investment strategies in DB plans, and the addition of
new risk management features to DC plans.”
Reducing the volatility of their plans’ fund-
A recent survey from CFO Research Services ing status is a high priority for 57 percent of
and Prudential Financial, Inc., shows that survey participants, and 45 percent said
nearly half of senior finance executives said their pension plan performance had a sub-
that their companies are very or somewhat stantial impact on their company’s financial
likely to freeze or end their defined benefit performance in the past year. As a result, 74
(DB) retirement plans within the next two percent said their companies are very likely
years. Seventeen percent have closed their to conduct or have already conducted a for-
DB plans to new entrants, and 27 percent say mal risk assessment of those plans.
that they are very likely to do so in the next Sixty-four percent said they have adopted or
two years. were very likely to adopt a liability-driven
More than two-thirds of the executives, how- investment strategy to help lessen risk.
ever, said that they would like to change their DC account values have plummeted and put
defined contribution (DC) plans so they many employees’ near-term plans to retire
would more closely resemble DB plans. They in jeopardy, the executives acknowledged.
would do this through the addition of guaran- More than 60 percent of respondents said
teed income during retirement. they are more concerned than they were a
The survey of 140 financial executives at year ago about employees who are finan-
companies sponsoring DB and other retire- cially unable to retire and would therefore
ment benefits plans examined how finance “retire on the job.” Executives are preparing
executives are managing retirement benefit programs and relat- to take steps to help participants avoid
ed risks within the recession. future bear markets, with 44 percent saying they are very likely
to add investment products that protect against market declines
“Finance executives are spending more time than ever on man- to their DC plans.
aging their companies’ retirement benefit programs,” said
Bernard Winograd, executive vice president and chief operating To address short-term benefit obligations, 60 percent of respon-
officer of Prudential’s U.S. Businesses. “Importantly, we found dents said they have already increased, or are very likely to
that executives are focused on reducing benefit risks through a increase, contributions to their DB plans.
range of measures, including the implementation of liability-
Most Employees Plan to Keep or Increase Benefit Levels,
MetLife Survey Shows
T he fall “open enrollment” period is just around the corner, and the overwhelming majority of U.S. workers plan to keep or
increase their benefits.
According to MetLife’s 2009 Open Enrollment Poll, almost 80 percent of employees say they will maintain or increase the number of
benefits or level of coverage for the next year, even though 37 percent said their household’s discretionary income shrunk this year.
Just 11 percent of workers plan to decrease their benefits coverage; of these, nearly one-quarter said they will increase their benefits
during next year’s open enrollment period if the economy improves.
“As we approach the fall open enrollment, employee benefits appear to be ‘recession-resistant,’ even though quite a few employees
are feeling the economic pinch,” said Dr. Ronald Leopold, vice president for MetLife’s U.S. Business and author of The Benefits Edge
and A Year in the Life of a Million American Workers. “Recent economic events have caused many to be more mindful and apprecia-
tive of the benefits provided to them at work, which often form the foundation of their personal safety nets.”
The poll of 1,000 U.S employees asked workers a wide range of questions about the open enrollment period. For instance, regarding
their ability to evaluate their options and choose the right benefits, 89 percent said they are somewhat or very confident. Thus, 76
percent plan to spend approximately the same amount of time this year as last in selecting their benefits. Only 13 percent of employ-
s PLEASE SEE MOST EMPLOYEES ON 9
8 / INDUSTRY NEWS & TRENDS / CYBER INSURANCENEWS
ees plan to spend more time during this year’s open enrollment period. Among them, 64 s MOST EMPLOYEES FROM 8
percent cite current economic events/financial security, and 31 percent credit a major life
event as the reason for their greater time investment. Fifteen percent said they think they made some wrong decisions on the employ-
ee benefits they selected during last year’s open enrollment period.
The poll also showed that employer communication makes a difference in how engaged employees become in their benefits deci-
sions. Of employees who said they’ll spend more time making benefits decisions this year, 29 percent say their employer has been
communicating more about the importance of employee benefits.
“Employer communications regarding benefits need to be targeted in a way that encourages dialogue and address all family members,
since half of employees share the benefits decision-making with their spouse or domestic partner,” Leopold said.
MetLife recommends that employers do the following to help their employees get the information they need to make the best deci-
sions about their benefits:
1. Distribute Total Compensation Statements, which communicate the value of employees’ total compensation and benefits. Only
43 percent of employers provide such statements, according to the Seventh Annual MetLife Study of Employee Benefits
2. Steer employees to decision-support tools, such as Web-based calculators. These can help workers select benefits and proper
3. Provide access to information based on an employee’s life stage and life events. Employees want customized advice for “peo-
ple like them.”
4. Use multiple communication channels. People want to receive information in different ways, such as educational programs at
work, consultation services, and online support tools.
5. Thirty-eight percent of employees said they would be interested in learning about and changing their benefits choices more
frequently than once a year. One solution is an off-cycle enrollment period with a focused enrollment on a single benefit. This
could result in higher enrollment rates, greater employee benefits satisfaction, and higher confidence in open enrollment deci-
To prepare for the open enrollment period, the public can visit MetLife’s Employee Benefits Simplifier, a free tool for consumers
available at the MetLife Web site.
Sales of Individual Life Insurance Improve Slightly in Second Quarter
S o far, 2009 has seen individual life insurance annualized
premium take a nosedive, a plunge that has affected all
factor affecting UL premium is a decline in sales to senior buy-
ers. Traditionally, these sales tend to be higher face amounts;
they represented more than half of annualized
The bit of good news in this is that the decline premium sales in 2008.
for the second quarter—20 percent—wasn’t as Whole life and term insurance continue to fare
Whole life the best. Whole life fell three percent in the sec-
sharp as the 26 percent drop in the first quarter,
according to LIMRA’s U.S. Individual Life and term ond quarter and four percent for the year, while
Insurance Sales report. Overall, premium sales insurance term slipped only three percent for both the quar-
have fallen 23 percent for the year so far. ter and year to date. Both products have
continue to maintained their 28 percent market share of new
Ashley Durham, a senior analyst with LIMRA,
said the second quarter performance gives the fare the best. premiums issued.
industry reason for hope. “Forty percent of com- Overall, the number of policies continued to
panies were able to increase their total drop, down four percent in the second quarter
individual life sales over the second quarter of and six percent for the year. Every product except
2008,” Durham said, compared to less than 30 percent in the UL, which increased eight percent, experienced declines in the
first quarter. second quarter.
Fittingly, variable sales, which have the strongest ties to the On average, companies sold slightly smaller policies during the
stock market, continue to suffer the most, down about 50 per- first half of 2009 than they did in the first half of 2008. The
cent for the second quarter and 55 percent for the year so far. average amount of coverage purchased for most products
Universal life (UL) sales were down 29 percent for the quarter remained steady; however, new UL policies tended to be small-
and 27 percent for the first six months. This is the fourth con- er, 18 percent lower than those purchased during the equivalent
secutive quarter of double-digit declines for UL sales. One months of 2008.
CYBER INSURANCENEWS / INDUSTRY NEWS & TRENDS / 9
Majority of Americans Give Passing Grade to
Current Health Care System, CIGNA Survey Shows
T he current health care system gets a passing grade from a majority of Americans, but many would rather not suffer the stress of
thinking about their health insurance.
A recent survey sponsored by CIGNA shows that 87 percent of those polled currently have health insurance, and 79 percent grade the
current system an “A,” “B” or “C”—including 22 percent who assign an “A” to the current system. Furthermore, 62 percent of single
households give the current system an “A” or “B,” while 49 percent of two-person households and 48 percent of households with
three or more do the same.
Significantly, 62 percent of Americans say they get their health care insurance
from their employer.
“People with employer-sponsored health coverage tend to be satisfied with the
plans from their companies,” said Matt Manders, senior vice president of
CIGNA’s health care operations. “We believe this system, while not perfect, is
the bedrock of improving national health and wellness and that we should build
But while most insured Americans say the current health care system works for
them, they also acknowledge that they don’t understand their health care plans
that well and they spend less than half an hour reviewing and choosing their
When asked to rank their understanding of their health insurance plan with
common household contracts, such as mortgages, cell phones, cable TV, retirement plans, and car warranties, Americans ranked their
understanding of their health coverage contract last.
Many Americans—40 percent—are stressed out just thinking about health care coverage and costs. That number rises to nearly 50
percent among Americans with children at home, just over 50 percent among 18- to 34-year-olds, and more than 70 percent among
“Survey results overall are encouraging in that most Americans say the current system works for them. But for some people, health
care is still a stressful subject,” said Karen Kocher, CIGNA’s chief learning officer. “Our constant challenge as a health service com-
pany is to help everyone better understand how to manage their health care and make more confident and knowledgeable decisions.”
Benjamin Karsch, CIGNA’s chief marketing officer, added, “It…requires us to help people before they become ill or injured so that
they will be more knowledgeable and confident in making health care decisions that won’t add to their stress.”
Kocher said “Learn4YourHealth,” CIGNA’s new public education program, is the latest effort of the carrier to help Americans make
informed, confident decisions about their health care.
Pet Insurance Advocacy Group Touts Benefits
of Pets to Human Health
O ne aspect of improving health care that you probably won’t hear from lawmakers is
the role that pets play in the health of humans.
So the North American Pet Health Insurance Association (NAPHIA) is raising awareness
of the value of pets—and pet health insurance—by designating September as National Pet
Health Insurance Month.
As pet owners decide whether buying a health insurance policy for their pets is worth it,
they should consider the role these animals play in their owners’ health. Research from the
Delta Society shows that humans with a dog or cat in their home enjoy better health and
spend less on their own health care than those without pets For instance, pet owners have a
s PLEASE SEE PET INSURANCE ON 11
10 / INDUSTRY NEWS & TRENDS / CYBER INSURANCENEWS
Average Premium for
reduced risk of cardiovascular
disease, higher survival rates
s PET INSURANCE FROM 10 Individually Purchased Health
from heart attacks, significantly lower use of general practition- Policies Grows Modestly
er services, and reduced risk of asthma and allergic rhinitis in
children exposed to pet allergens during the first year of their
life. Furthermore, seniors with pets enjoy a better physical and T he average monthly premium for individual health
insurance policies grew about 1 percent from 2008
to 2009, but the average deductible for those policies
increased by more than 11 percent.
According to the Delta Society and other researchers, there is
not a significant social or economic difference between those These are some of the findings from the updated data
who do and those who do not have a pet that can explain the on the cost of individually purchased health insurance
differences in health outcomes between the two groups. plans released by eHealth, Inc., the parent company of
eHealthInsurance. This new data appears in The Cost of
Lawrence Norvell, president and CEO of Delta Society, said his
Individual and Family Health Insurance Plans 2009
group is excited to see more health care professionals embrac-
ing the fact that pets can be a cost-effective approach to
improving people’s health and enriching their lives. The analysis provides data on average and median pre-
miums paid for individual health insurance policies and
“At a time in which our society is looking for treatment alterna-
average deductibles for those policies. The research is
tives to complement Western medicine, research is consistently
based on a national sample of some 316,000 individual
demonstrating that pets can
and family major medical policies that were purchased
have a profound impact on
through eHealthInsurance and active in February 2009
people’s physical and emo-
…humans with and of more than 258,000 policies that were active in
tional health,” Norvell said.
February 2008. (Data for Maine, Massachusetts, and
Loran Hickton, NAPHIA a dog or cat Vermont were excluded from this report because
executive director, eHealthInsurance did not sell enough individual and
acknowledged that it may
family major medical plans in these states at the time
be difficult for people home…spend the data for this report was collected to provide an
without pets to understand, less on their accurate sample size.)
but many pet owners will
corroborate research that own health The Cost of Individual Plans
indicates having a pet care. In February 2008, the average monthly premium for
improves one’s health and individual policies was $159. That grew to $161 in
well-being. February 2009. Average premiums for individual poli-
“We know that the uncertain- cies increased 1.1 percent over that time.
ty of the current economy makes pet insurance critically In February 2008, the median monthly premium for
important for the financial well-being of all pet owners,” individual policies was $130. A year later, the median
Hickton said. “Many pet owners simply don’t have the dispos- monthly premium for individual policies was up to
able income to cover emergencies or even routine pet health $132, an increase of just 1.5 percent over that time.
care, and each day, pets face economic euthanasia.” The average deductible for individual policies in
Pet health insurance gives a financial safety net for pet owners February 2008 was $2,084. That jumped 11.6 percent
and often gives them the ability to provide a higher level of by February 2009 to $2,326
care to their ill or injured pets. When a pet owner has coverage The Cost of Family Plans
for his pet, he is usually spared the tough decision to withhold
medical care because of costs. In February 2008, the average monthly premium for
family policies was $369. That increased to $383 a year
During September, NAPHIA is sponsoring a contest to select later, for an average premium increase of 4 percent.
pet health insurance customers’ favorite veterinary practices
from over 20,000 in North America. Pet owners are posting pic- In February 2008, the median monthly premium for
tures of their pets, along with a story, at the NAPHIA Web site. family policies was $320. Twelve months later that rose
The contest highlights the care and recovery of pets for whom just 2.9 percent, to $329.
pet health insurance helped to provide needed care. NAPHIA The average deductible for family policies grew 13.3
will award prizes for the pet owner, an educational grant to the percent, however, from $2,760 in February 2008 to
veterinary care provider, and a donation to the pet shelter or $3,128 in February 2009.
rescue group of the winner’s choice. HSA-Eligible Plan Data
eHealth also released data about HSA-eligible policies.
s PLEASE SEE AVERAGE PREMIUM ON 12
CYBER INSURANCENEWS / INDUSTRY NEWS & TRENDS / 11
Consumer Confidence in Paying for Health Care Services Grows
C onsumer confidence may not be back at the level necessary to help pull the country out of its recession just yet, but Americans
have grown more confident about one crucial financial matter—their ability to pay for health care services.
The Thomson Reuters Healthcare IndexesTM: Consumer Confidence report says that consumer confidence related to health care
expenditures increased 12 percent between March and July.
The analysis is based on telephone surveys of 3,000 households each
month from March through July 2009, part of the Thomson Reuters
PULSE® Healthcare Survey. PULSE polls more than 100,000 U.S. house-
holds each year about their health care behaviors, attitudes, and
utilization. Consumers were asked about their ability to pay for medical
care and the likelihood that they would postpone or cancel care during the
next three months due to economic concerns.
This is what the survey found:
• In addition to an overall increase in consumer confidence, respon-
dents’ belief that they will be able to pay for their health care
expenses in the next three months rose 18 percent.
• Patients say they are less likely to postpone care. Their anticipated
ability to access routine care, urgent care, medical testing, elective surgery, and therapies all increased between 8 and 15 percent.
• Overall confidence levels and rate of improvement of confidence were both highest among seniors.
• Those without insurance coverage had overall confidence levels 80 percent lower than average in July.
“These findings are consistent with data we’ve been seeing for everything from hospital discharge trends to opinions about health
care reform,” said Gary Pickens, chief research officer for the Healthcare & Science business of Thomson Reuters and lead author of
However, Pickens warns, despite the increased optimism among many health care consumers, there also is a disparity in outlook
between those with higher income levels who have insurance coverage and those who are uninsured.
“This gap needs to be an area of focus for health care professionals and policymakers,” Pickens advised.
s AVERAGE PREMIUM FROM 11
In February 2008, 14.3 percent of individual policies were vidual market, however, with the exception of a few states,
HSA-eligible; a year later, 16 percent of individual policies plans are medically underwritten and applicants can be
were HSA-eligible. denied coverage.
In February 2008, the average monthly premium for HSA-eligi- • Tax Exemption. Health insurance premiums are not tax-
ble individual policies was $137. That grew to $143 by deductible for individuals or families purchasing coverage
February 2009, a 4.7 percent year to year. on their own, but they are tax-deductible for companies
The average monthly premium for HSA-eligible family policies that pay for health insurance coverage for employees.
was $309 in February 2008. That increased 7 percent, to $331, Premiums paid by employees are paid on a pre-tax basis.
by February 2009. • Benefits. Individual market plans offer comparable bene-
fits to employer plans: hospitalization, emergency room
Differences in Cost
coverage, lab X-ray, maternity care, OB/GYN coverage,
The cost of individual health insurance policies reported in the physician visits, pharmaceutical coverage, and preventa-
eHealth study differs from the cost of employer-sponsored health tive care. However, benefits in the individual market are
insurance coverage because of differences between the individual usually selected by the consumer based on individual
market and the employer-sponsored market. Many of these fac- needs.
tors could be affected by health care reform legislation.
• Deductibles. Individuals and families purchasing coverage
Some of these differences include: on their own tend to select plans with higher deductibles
• Guaranteed Issue. Every employee who applies for health and coinsurance costs in order to keep their premiums low.
insurance through their employer is accepted. In the indi-
12 / INDUSTRY NEWS & TRENDS / CYBER INSURANCENEWS
Story of Texas Nurse Exemplifies Employees Retirement
Importance of Vocational System of Texas Contracts
Rehabilitation Counseling with HumanaDental
T he story of Geri Huntsinger is sure to inspire the CIGNA employ-
ees who heard it during National Rehabilitation Week.
H umanaDental Insurance Company has land-
ed a big client in Texas.
The subsidiary of Humana has been chosen by
A motorcycle accident in April 2008 left Huntsinger, a Texas nurse, with
the Employees Retirement System of Texas
multiple injuries requiring several surgeries and months of physical
(ERS) to provide dental benefits for more than
half a million participants who are eligible for the
During her recovery time, she met a vocational rehabilitation counselor group-benefits program, including state and cer-
from CIGNA’s disability insurance unit, whom she calls her “light at the tain higher education employees, retirees, and
end of the tunnel.” their dependents.
“When I came home to recover, everything in my life was out of order. I Currently, there are 394,000 participants enrolled
felt like I was starting over,” Huntsinger said. “CIGNA was my lifeline in the two dental plans offered by HumanaDental.
to independence and kept my morale up.” The insurer began providing dental benefits to
Huntsinger spoke with the vocational ERS participants on September 1 under a four-
rehabilitation counselor at least once a year contract.
week for many months until she returned “HumanaDental is honored to provide benefit
to work in May 2009. When she was services to one of the nation’s largest and most
ready to begin return-to-work planning, innovative employee benefit plans,” Jerry
the vocational rehabilitation counselor Ganoni, president of HumanaDental, said of
worked directly with her employer, a hos- ERS. “We believe our plans offer affordable
pital outside of Dallas, to find a job that choices of benefits, with service levels that are
would fit Huntsinger’s physical limita- above industry standards.”
ERS participants can choose one of two dental
“I couldn’t perform all the responsibilities benefit plans: the HumanaDental Dental Health
of my old job and wasn’t sure what to Maintenance Organization (DHMO) or the State
expect,” Huntsinger explained. “CIGNA of Texas Dental Choice PlanSM.
worked with the hospital and sorted out all the details for a return.
With the DHMO, participants select a network
Together, they found a position that fit my skills and experience.”
dentist and have no deductibles, no yearly maxi-
Huntsinger’s story is one example of how CIGNA helps those who’ve mums, and varying levels of copayments for
suffered a disabling event to return to work. preventive, basic, and major services.
CIGNA Group Insurance, and its affiliate Intracorp, are the national Under the State of Texas Dental Choice Plan,
sponsors of National Rehabilitation Awareness Week, celebrated employees and retirees may choose any dentist;
September 20–26. That week, Huntsinger visited the disability claims however, increased benefits will be provided by
office in Dallas to tell her story to CIGNA employees. using dentists in the HumanaDental PPO net-
“It’s incredibly moving and rewarding to help people return to work work. Individual deductibles per calendar year
after a very difficult experience,” said Mark Marsters, senior vice presi- are $100, and there is a range of coinsurance
dent, CIGNA Group Insurance. “Getting back to work for many people depending on the type of service and who per-
restores balance in their lives and brings a sense of closure to the recov- forms it. The plan has a $1,500 maximum annual
ery process.” benefit and no cost for most preventive services
CIGNA’s vocational rehabilitation counselors help people on long-term when provided by a network dentist.
disability return to work. A counselor may help the employee’s company With its 3.8 million-plus members,
create alternate job arrangements or identify necessary workplace HumanaDental Insurance Company has grown
accommodations, such as ergonomic equipment. The counselor may into one of the nation’s 10 largest dental insur-
also help the employee find work in another career field if the employee ance carriers.
is unable to return to work at the previous position. All vocational reha-
bilitation counselors have a master’s degree and hold the credential of
Certified Rehabilitation Counselor.
CYBER INSURANCENEWS / REGIONS / 13
Thirteen States Win HHS Grants to Help the Uninsured
T hirteen states have been awarded grant money from the Department of Health
and Human Services (HHS) to help expand health coverage for their unin-
These grants…will help
The $70.9 million in grants are funded under the new State Health Access
Program (SHAP), an outgrowth of HHS’s State Planning Grant program, which more states provide
ran from 2000 to 2007. affordable insurance to
“These grants build on the success of the earlier program,” HHS Secretary specific uninsured
Kathleen Sebelius explained. “They will help more states provide affordable
insurance to specific uninsured groups, such as children and seniors. The funds groups.
will also assist states in implementing new initiatives for reaching the uninsured.”
The grants, to be made over five years, require a 20 percent match unless a state
demonstrates a financial hardship. In addition, states must show that they are able to keep the program running after federal funding
has expired. The results of state projects will be reported to Congress at the end of the grant period.
The 13 SHAP grant winners are:
Colorado Department of Health Care Policy and Financing $9,966,612
Kansas Health Policy Authority $1,930,490
State of Maine/Governor’s Office of Health Policy and Finance $8,500,000
Minnesota State Dept of Human Services $4,641,776
Nevada Department of Health and Human Services $4,000,000
Health Research Inc./ New York Dept. of Health $2,670,930
North Carolina Department of Health and Human Services $1,264,097
State of Oregon $9,978,200
Texas Health and Human Services Commission $9,513,413
Virginia State Department of Health $912,658
State of Washington $1,228,042
West Virginia Department of Health and Human Resources $6,343,900
Wisconsin Department of Health Services $9,995,188
UnitedHealthOne Debuts Portfolio of Health Insurance Plans
C onsumers in 19 states—including Arkansas, Missouri, Oklahoma, and Texas—and
Washington, D.C., now have the option to purchase new UnitedHealthOne health
UnitedHealthcare’s Golden Rule Insurance Company has launched an enhanced portfolio
of health insurance plans that include new coinsurance and deductible choices, an annual
deductible credit, and first dollar supplemental accident coverage up to $10,000. The
plans are marketed under the UnitedHealthOne brand, which encompasses the
UnitedHealthcare family of companies that offer personal health insurance coverage.
In addition to the states mentioned above, the product portfolio is available in Alabama,
Arizona, Iowa, Illinois, Indiana, Maryland, Michigan, Mississippi, Nebraska, Ohio,
Pennsylvania, South Carolina, Tennessee, Virginia and Wisconsin.
New dental care options have been introduced in Alaska, Arizona, Colorado, Iowa, South
Dakota, and Wyoming, and flexible, short-term plans are now available in North Carolina
and West Virginia.
14 / REGIONS / CYBER INSURANCENEWS
Americans Not Cutting Back on Their Personal
Life Insurance Coverage, Survey Finds
A mericans have been trimming costs wherever possible in
this recession, but one area where most have not cut back
is their personal life insurance coverage.
The survey results contrast with 2009’s downward trend in life
insurance sales. This year has seen the steepest six-month
decline in life insurance annualized premiums since 1942,
A First Command Financial according to LIMRA
Behaviors Index™ taken in International.
August shows that a mere four One area in the survey that
percent of Americans say they showed a decline was in
have made changes to their per- respondents’ comfort level
sonal life insurance coverage as a with their amount of insurance.
result of the economy. Of those In February 2008, 40 percent
who made changes, 42 percent said they were extremely or
increased their coverage, 29 per- very comfortable with their life
cent decreased it, and 17 percent insurance coverage. In this sur-
eliminated it. vey, just 34 percent of
“We are encouraged and relieved respondents said the same.
to see that middle-class con- Comfort levels were higher
sumers are not reacting to the among consumers who work
economic turmoil by sacrificing with a financial planner: 43
their life insurance coverage,” said percent who work with a
Scott Spiker, CEO of Fort Worth, TX-based First Command financial planner felt extremely or very comfortable with their
Financial Services, Inc. “Canceling policies to save money dur- life insurance coverage, compared with only 31 percent of
ing tough times is a move fraught with financial peril.” respondents not currently working with a financial planner.
The survey also revealed that just 3 percent of respondents “Life insurance helps consumers feel more confident in their
reported that their employer has made changes to their life financial future,” Spiker said. “Our research and experience
insurance coverage through work as a result of the economy. reveals that feelings of financial security increase when life
Of these, 70 percent say that their coverage has been decreased. insurance is sufficient to cover family debt and family income
State Farm Donates $1 Million to Teach For America
W ith a big financial boost from State Farm, Teach For America can recruit more college graduates to commit to teach for two
years in low-income communities.
State Farm has given $1 million to support Teach For America’s national operations and its teachers and alumni in Dallas, Los
Angeles, New York, Phoenix, and the Rio Grande Valley. The carrier is among Teach For America’s largest corporate donors in each
of these regions.
“Improving our educational system is a social and economic issue for our nation,” said Kathy Payne, State Farm’s director of educa-
tion leadership. “State Farm focuses on improving student achievement for all students so they are prepared for a successful life, can
contribute to society, and are prepared for our future workforce.”
This school year, Teach For America is placing its largest-ever recruitment class of teachers—7,300—in 35 urban and rural regions.
Nearly two-thirds of Teach For America’s 17,000 alumni remain in the field of education, starting schools, becoming principals and
district administrators, and earning honors as accomplished teachers.
Wendy Kopp, CEO and founder of Teach For America, said her organization is grateful for the support of State Farm and for its com-
mitment to educational equity.
“Their engagement in our work will help us grow in scale and impact, so that we can enlist still more of our nation’s future leaders in
working towards educational opportunity for all,” Kopp said.
CYBER INSURANCENEWS / REGIONS / 15
HHS Report Highlights Young Adults’ Need for Health Insurance
A new report from the Department of Health and Human Services (HHS) shows the unique needs of young adults when it comes
to health insurance.
HHS Secretary Kathleen Sebelius released Young Americans and Health Insurance Reform:
Giving Young Americans the Security and Stability They Need, which says that 30 percent of
young adults (those under 30) do not have health insurance. In contrast, just 17 percent of adults
age 30–64 lack coverage.
“More and more young adults wake up the day after their nineteenth birthday or on graduation
day and find themselves uninsured,” Sebelius said. “I’ve seen this problem firsthand. When my
son graduated, he faced the challenge of finding health insurance. Unfortunately, too many of
his peers are forced to go without the care they need.”
According to the report, young adults don’t have access to the same breadth of employer-spon-
sored health care that older adults do. Young adults are often less likely to work for employers
who offer health insurance benefits. That’s largely due to the fact that nearly 50 percent of
young people work part-time, and part-time workers are less likely to be offered coverage.
Young people are also more likely to work for smaller companies, which tend to offer less cov-
erage. Among young adults working in firms of fewer than 50 employees and who had coverage
in 2006, one in four lost that insurance in the following two years—more than twice the rate of
In addition, the report shows that 33 states allow insurance companies to charge unrestricted premiums based on age, health status,
and gender. In some states, for instance, a 22-year-old woman can be charged twice as much for her premium than a 22-year-old man.
Young people are more likely to skip health care because they can’t afford it, the report states. In a recent survey, two-thirds who had
gaps in health care coverage admitted to foregoing health care because of costs. This includes not getting recommended tests and
treatment and neglecting to fill a prescription.
Even with cost-saving measures, more than one-third of all young adults with coverage say they have problems paying their medical
Sebelius said that health insurance reform will assist young adults in getting access to affordable health care.
Securitization of Life Insurance Settlements Comes
with Risks, NAIC Says
I n recent testimony before Congress, an official from the National Association of Insurance Commissioners (NAIC) warned legisla-
tors about the risks to consumers associated with securitizing life insurance settlements.
Susan Voss, Iowa Insurance Commissioner and NAIC vice president, told the House Financial Services Subcommittee on Capital
Markets, Insurance, and Government Sponsored Enterprises, “Life insurance settlements are necessary transactions for some con-
sumers, but they require appropriate regulation, with a focus on disclosure and consumer protection.
Voss stressed that oversight is critical, especially since stranger-owned life insurance (STOLI) continues to grow.
Acknowledging that securitization is outside the jurisdiction of insurance regulators, Voss said that the NAIC is worried that securiti-
zation of life insurance settlements will prod potential STOLI investors to expand the marketplace in the same way that securitization
of mortgages helped expand that marketplace.
Voss also discussed the impact of securitization on policies that would otherwise lapse (leading to higher insurance premiums) and
about the importance of verifying that securitization of life insurance settlements does not compromise the original policyholder’s
rights and privacy.
16 / ISSUES / CYBER INSURANCENEWS
AIA Asks NAIC Not to Customer: Sure. Well, it feels like
things are getting better. The market is
s CONTRADICTORY CUSTOMER FROM 1
Develop Its Own Natural up; things have settled down, we’ve recouped most of our losses and,
hmmmmmmmm, not sure if it makes sense to make a change now.
Catastrophe Model You: Don’t want to miss out on the opportunity, I understand. It could be
A s the National Association of Insurance
Commissioners (NAIC) prepared to gather
for its fall national meeting in Maryland, the
a really good one.
• You don’t put up a defense but go down with customer’s road with
him. But you go further than he expects by saying that “it could be
American Insurance Association (AIA) recom- a good one”.
mended that it take into account the current Customer: Yeah, it could be good but I don’t think it will be that good.
strength of the personal lines insurance market
You: Oh, I’m surprised, I got the sense that you thought it would be
when discussing property-casualty insurance
nothing short of terrific.
issues—especially the notion of developing its
own natural catastrophe model. • You keep pushing towards the extreme of your customer’s thinking.
After all, the AIA points out, the market for per- Customer: Oh, I wouldn’t go that far. For all you know the market could
sonal lines insurance products remains strong, collapse!
despite the weak economy. You: That’s interesting. Could you tell me more about how you see it?
“Consumers and regulators can take comfort in • By taking the customer to the extreme of his thinking, further down
the fact that the market for personal lines insur- his own road than he originally wanted or could go by himself, he is
ance generally remains competitive,” said David brought into a sense of reality and begins to balance his own think-
Snyder, AIA vice president and associate general ing realistically. He feels no defense from you.
counsel. “This serves as strong evidence that Customer: Markets go up and down. You never really know. I think it’s
straightforward, risk-based pricing and effective going up but I could be wrong.
risk management is good for the marketplace and
• Finally, statements of reality. Your customer has done a good job—
leads to greater product availability.”
and so have you.
Earlier this year, the NAIC commissioned a feasi-
You: That’s very realistic thinking—good for you—most people get
bility study on the issue of creating its own
blinded by the upside potential.
natural catastrophe model. To date, the NAIC has
not sought industry input on this issue, according • You build ego for your customer but expand his visions by telling
to the AIA. The AIA believes that there would be him what most people would do.
multi-million dollar costs associated with the Customer: No, I’m not like that, not that foolish. That’s why I came to
NAIC developing and maintaining its own natural see you, just in case the market goes down so I can protect my assets.
catastrophe model. In addition, it would stifle You: Hmmmmm, I’m a little confused. Sounds like you want to protect
competition. your assets but since you believe that markets going up you don’t want
“The development of a politically motivated natu- to protect you assets and leave them where they are.
ral catastrophe model will not serve insurers or • You tell him the truth about your confusion and let him help you
the public well,” said Eric M. Goldberg, AIA out. No selling!
associate general counsel. “Modeling companies
Customer: Actually, now that I’m thinking about it, we should probably
give insurance departments regular briefings.
protect some of it, but I don’t want to take as much out of the market as
This transparency provides regulators with the
we originally talked about. Is that OK with you?
information necessary to review and approve pri-
vate sector models. A public model could merely • Now he is selling me on how much he wants to give me. I am a
become a de facto benchmark for private insurer happy man!
rates and inhibit innovation.” Conclusion
The NAIC also has been considering the removal Recognizing shifts and changes in your customer allows you to identify
of industry representatives from the SERFF the key landmines with which you must deal and diffuse. Your job is to let
(System for Electronic Rate and Form Filing) the system deal with those landmines by using the techniques I have been
Board, even though it has not officially provided teaching you. It is imperative that you don’t change when your customer
justification for this change, according to the AIA. changes—that you don’t recreate the system, go on the defense, start sell-
“The continuation of industry representation on ing again, etc. If you have a knee jerk reaction to your customer, they will
SERFF’s Board is necessary to guarantee that return the favor and have a knee jerk reaction to you. In my book I call this
appropriate checks and balances are maintained a “knee jerk party”—not a lot of fun and a sure road to selling failure.
to ensure the continuing success of this electronic Remember, you are the stability which your customer must feel if he or
filing system,” said Cate Paolino, AIA senior she is going to see the reality of their situation and act wisely—and that
counsel. is a true win-win situation no matter the result.
CYBER INSURANCENEWS / ISSUES / 17
Congress Urged to Include Above-the-Line Deduction
for LTC Insurance Premiums
T he National LTC Network has weighed in on the hot
topic of health care reform, specifically as it relates
to long-term care (LTC).
The alliance of LTC insurance distributors has two rec-
ommendations for Congress. The first is to include an
above-the-line deduction for LTC insurance premiums. A
version of the Senate Finance Committee bill allows
LTC insurance to be included in Section 125 plans
(“cafeteria plans”), but the National LTC Network would
“While we applaud this new tax incentive, we urge
Congress to offer an above-the-line deduction for LTC
insurance premiums,” said Terry Truesdell, National LTC
Network president and CEO.
Truesdell explained that many employees don’t have
Section 125 plans, and among those who do, many lose
them once they retire.
“I believe that an above-the-line deduction could open the floodgates, encouraging citizens to purchase this important insurance and
lessen the burden on government programs when they need care,” Truesdell added.
The second recommendation for Congress is to include a “black box” warning on program materials if a CLASS-type government
LTC insurance program is instituted. (The Community Living Assistance Services and Support bill, or CLASS, was introduced in
2007.) The National LTC Network even offered some suggested wording for the warning: “You are not eligible for any benefits for
the first five years after signup. Your premium will increase if the government decides that additional money is needed to pay current
and projected future claims.”
Even with a government program, Americans would need to pay for a large portion of their LTC costs, which are quite high. The
average cost of LTC nationally is $18.50 an hour for a licensed home health aide, $94 a day for an assisted living facility, and $183
per day for a semi-private nursing home.
“Since the decision of how to pay for future long-term care is so important, we want to make sure that citizens understand both the
pluses and minuses of any new government program,” Truesdell said.
Consumer Watchdog Questions Lobbying Efforts
of United Healthcare and Anthem/Wellpoint
C onsumer Watchdog wants answers. The consumer activist
group is asking America’s two largest insurers—United
Healthcare and Anthem/Wellpoint—to answer questions about
Consumer Watchdog claims that lobbying comes at the expense
of tending to customer claims and is paid for, ultimately, by
their use of employees to lobby Congress on company time. “Both companies strongly oppose a voluntary, Medicare-style
This request comes as the House Subcommittee on Domestic option to which Americans can turn if they can’t get insurance,
Policy reconvenes hearings on the “bureaucratic abuse” of or are dissatisfied with the insurance they have,” said Carmen
insured patients by insurance companies. Balber, director of Consumer Watchdog's Washington office.
“There is no question that insurance companies use bureaucrat- “Their employee lobbying, on company time and at customers’
ic maneuvers to delay and deny care to people who thought expense, is meant to prevent any competition that would force
they were insured,” said Jerry Flanagan, health policy director them to treat patients more fairly.”
of Consumer Watchdog. “Less visible is their waste and misuse The group also is urging California Attorney General Jerry
of customer’s premium dollars by using employees to lobby Brown to investigate employee programs by United Healthcare
Congress on company time, with the guidance of paid PR pro- and Anthem/Wellpoint on the grounds that they constitute ille-
fessionals.” gal political pressure.
18 / ISSUES / CYBER INSURANCENEWS
I.I.I.: State-Run Insurance Programs in Hurricane-Vulnerable States
on Shaky Grounds
T hey’ve grown like crazy over the last 20 years, but now,
state-run insurance programs in hurricane-vulnerable states
aren’t in very good shape.
years characterized by major hurricanes, including Andrew and
Katrina, that growth has accelerated.
Total policies in force, both residential and commercial, in the
According to a newly revised white paper from the Insurance nation’s FAIR, Beach, and Windstorm plans combined nearly
Information Institute (I.I.I.), Residual Market Property Plans: tripled, from 931,550 in 1990 to 2.6 million in 2008.
From Markets of Last Resort to Markets of First Choice, the Accordingly, total exposure to loss in the plans surged from
finances of a number of residual market prop- $54.7 billion in 1990 to $696.4 billion in 2008,
erty plans are on shaky ground. The reasons an astounding increase of 1,173 percent.
for this are all too familiar by now: the credit The I.I.I. found that in some states, govern-
crunch and prolonged economic downturn ment-run insurance plans have shifted away
have made it more difficult for states to bor- from their original purpose as predominantly
row funds. urban property insurers of last resort. They
“State-run insurers are putting themselves at have expanded into much larger providers, in
increased risk through greater dependence on some cases even becoming the largest proper-
bond markets even as credit markets struggle ty insurer in the state.
to recover from the current financial crisis,” In Florida, for example, Florida Citizens, a plan
wrote white paper coauthors Robert Hartwig, that accounts for 69 percent of the total FAIR
I.I.I. president and economist, and Claire Plans exposure to loss, saw its exposure more
Wilkinson, I.I.I. vice president for Global than double, from $210.6 billion in 2005 to
Issues. Disruptions to credit markets will likely $485.1 billion in 2007, reflecting the increase
make it more difficult and more expensive for in both coastal property values and building
some of these plans to issue debt to pay for and reconstruction costs. Florida Citizens’
hurricane losses.” exposure to loss declined to around $400 bil-
The authors point out that legislative action in lion by June 30 of this year.
the past also negatively impacted the state plans. The white paper notes that while state-run property plans play
“Ill-advised legislative steps over the course of several years have an important role for many policyholders who might not other-
also expanded the exposure base of a number of plans, such as wise get coverage, their growth over the last two decades has
Florida, yet at the same time curbed the rates they can charge,” significant implications for insurance carriers and insurance
they wrote. “Such moves put state finances under threat and buyers. In particular, there are a number of public policy con-
leave taxpayers and poli- siderations that will need to be addressed as insurers,
cyholders facing the regulators, and legislators look for the best way to manage and
potential for increased fund catastrophic risk. For example, when insurers are unable
…in some assessments in the years to charge a premium commensurate with the risk they assume
states, govern- to come.” in coastal areas, whether due to political or regulatory factors,
However, bills passed in this distorts the true cost of insurance coverage.
ment-run insur- “Rate and underwriting restrictions on property insurers can
some states this year
ance plans have have begun to address result in a situation where high-risk property owners actually pay
shifted away some of the problems of lower premiums, while low-risk property owners pay artificially
these plans. higher premiums,” the paper states. “This leads to unfair cross-
from their origi- Furthermore, there has subsidization among risk classes and discourages mitigation.”
nal purpose… been a reduction in the In the long run, the authors argue, policyholders in coastal and
number of policies and non-coastal areas pay the price of inadequate premiums in the
exposures in some parts form of additional payments, such as assessments and taxes fol-
of the residual property lowing federal/state bailouts. In fact, even policyholders of
market due largely to the real estate bust and the addition of new unrelated risks, such as auto and liability, have to pay assess-
insurance companies, whose financial strength has not been test- ments.
ed by a major catastrophe.
Over the last 40 years, state-run property insurers have experi-
enced explosive growth in terms of the number of policies
issued and the exposure value covered. From 1990 to 2008,
CYBER INSURANCENEWS / ISSUES / 19
AXA Equitable’s Participation in IRS Prototype Program
Will Help Clients Stay Compliant
A XA Equitable Life Insurance Company is participating in
the Internal Revenue Service’s 403(b) prototype program,
which will help its clients stay compliant.
Employers are encouraged to adopt their 403(b) plan now in
order to avoid an end-of-the-year concern as to whether the
operation of the plan was in accordance with its terms in 2009.
The prototype program was created to help employers in the K- AXA Equitable’s participation in the prototype program will
12 education market adopt a plan document that complies with help client employers create, adopt, and amend their programs
the written plan requirements of the Internal Revenue Code and as necessary.
applicable IRS regulations. The company created The Employer Plan Administration
James Mullery, senior vice president and head of the 403(b) Center (EPAC) to help employers manage and simplify the
market at AXA Equitable, said that adopting an approved pro- work associated with administering their retirement plans,. Plan
totype plan lessens the risks of plan disqualification for sponsors of 403(b) and 457(b) plans with active participants
employers. All 403(b) plans are required to have a written doc- owning the EQUI-VEST® variable annuity can review, monitor,
ument that describes the legal and regulatory requirements and transmit plan information through EPAC.
applicable to the plan and its other operating provisions, which “One of the many issues facing employers today is the ever-
may include the sharing of plan responsibilities among the changing landscape of regulations that affects the way
employer/issuer, employee, and any third-party administrators employers need to manage and administer their plans,” Mullery
involved with the plan. said. “AXA Equitable is acutely aware of employer needs, so as
“AXA Equitable has been providing service and support to regulations change, EPAC will too.”
clients to help them comply with the final 403(b) regulations Employers can access EPAC to upload contribution information;
since the requirements were first published,” Mullery said. track and update approved plan providers; manage third-party
“Offering IRS-approved prototype plan documents is a continua- administrator information; and view and download detailed plan
tion of these services, and will help AXA Equitable clients keep reports about participant information, loans and distributions,
their 403(b) programs compliant with the final regulations.” summary of investment assets at a plan level, and contributions
and transfers/exchanges/rollovers made by a participant.
PIA Objects to Attempts by Congress to Squeeze Out
T he National Association of Professional Insurance Agents (PIA) has a message for Congress: don’t use health care reform plans
to deny Americans access to agents.
“We find it incredible that any of the health care bills would attempt to ban the participation of licensed, professional, independent
insurance agents,” said PIA National President Kenneth R. Auerbach.
One initial proposal for health insurance exchanges would have barred the participation of all licensed insurance agents in favor of
unlicensed individuals or community groups with no expertise in health insurance.
“When the prohibition was included in one of the bills, it was suggested that unlicensed individuals with no training or expertise in
health insurance would better serve as so-called ‘navigators,’ helping people choose which health plan they participate in,” Auerbach
explained. “Professional, independent insurance agents already help their customers navigate the health insurance choices that are
currently available to them. The added complexity of a reformed system will make such assistance even more critical.”
However, an amendment was passed to America’s Affordable Health Choices Act of 2009 (H.R. 3200) that gives authority to insur-
ance agents to sell insurance in any exchange that the legislation may create.
The House amendment, sponsored by Democrats Reps. Charlie Melancon (D-La.), Mike Ross (D-Ark.), Baron Hill (D-Ind.), Jim
Matheson (D-Utah), Zack Space (D-Ohio), John Barrow (D-Ga.), and Bart Gordon (D-Tenn.), guarantees that agents and brokers can
participate in the process.
“We thank the ‘Blue Dog’ members of the House for ensuring that American consumers will not be denied the services of their own
independent insurance agents under health care reform,” said PIA National President-elect Jon D. Spalding. “We are especially grateful
to Rep. Melancon of Louisiana, who knows the importance of this issue because he is a former insurance agent and member of PIA.”
PIA will continue to monitor the language of health care reform bills so that any new legislation will allow consumers to keep using
the services of their professional insurance agents.
20 / ISSUES / CYBER INSURANCENEWS
Insurance Coalition Asks IASB to Reconsider Its Proposed
Accounting Standard for Insurance Contracts
T he International Accounting Standards Board (IASB) has recommended a new measurement approach for insurance contracts,
but it’s being met with resistance by the Group of North American Insurance Enterprises (GNAIE).
The GNAIE charges that IASB staff, in developing an international accounting standard for insurance con-
tracts, departed from the more appropriate Contract Fulfillment Value (CFV) approach, which the U.S.
Financial Accounting Standards Board (FASB) has tentatively agreed to. According to the GNAIE, the
CFV approach is based on settlement with the policyholder pursuant to the terms of the insurance con-
tract, including the service element of the contract. It is unlike a measurement approach based on
immediate settlement or transfer of insurance obligations, which almost never occurs.
The IASB was scheduled to deliberate the measurement basis for insurance contracts at its September 18
meeting. Prior to the meeting, GNAIE Executive Chairman Jerry de St. Paer sent a letter to IASB chair Sir
David Tweedie in which he stated, “The IASB could take a significant step toward convergence of interna-
tional accounting standards if it is able to reach the same conclusion that the FASB reaches for the
measurement approach for insurance contracts.”
Rather than supporting the preferred CFV approach, however, IASB staff is recommending a measurement
approach that remains under development in the IASB’s project to amend IAS 37.
GNAIE says that IASB staff has not addressed the basic flaws of the IAS 37 approach.
“GNAIE believes there are fundamental problems with attempting to measure insurance contracts using
the pending IAS 37 approach, and those problems cannot be addressed as well in such a measurement
approach as they could be in the CFV approach,” de St. Paer noted.
De St. Paer pointed out in his letter that IASB staff has acknowledged that the FASB is unlikely to change this position, at least in the
near future, and it may be necessary to include both measurement approaches in the exposure draft on an insurance contracts standard
if the IASB agrees with its staff recommendation.
“GNAIE respectfully asks the IASB to consider the issues that remain to be resolved in the IAS 37 project and the problems with
attempting to apply such an approach to insurance contracts,” said de. St. Paer. “GNAIE is optimistic that such consideration will
lead to conclusions similar to those reached by the FASB and will be a significant step toward convergence of international account-
Windstorm Mitigation Discounts in Florida Aren’t Working, NAMIC Contends
T he movement to “harden homes” in Florida through certain
mitigation discounts isn’t working, the National Association
of Mutual Insurance Companies (NAMIC) contends.
Floridians who have truly hardened their homes do not receive
the full benefit for their efforts.”
In her letter, Reynolds asked the committee to make sure that the
Liz Reynolds, NAMIC’s Southeast state affairs manager, oversight of home inspections is tightened. Anecdotal evidence
recently testified in front of the Windstorm Mitigation shows that the home inspection system is flawed, she wrote.
Committee of the Florida Commission on Hurricane Loss Furthermore, private inspections are inconsistent from one house
Projection Methodology. to the next, and “active” and “passive” fraud are rampant.
Prior to her testimony, Reynolds sent the committee a letter in In addition, Reynolds asked the committee to examine how
which she urged committee members to recommend that steps mandated discounts are being applied to the premium as they
be taken to ensure premium discounts for certain mitigation are currently applied to the entire wind portion of the premium,
features are adjusted to reflect true mitigation efforts. including expenses, other structures, and contents coverage
“The purpose of mitigation discounts is to incentivize the hard- provisions.
ening of homes. This effort cannot achieve full benefit when “The size of discounts in many areas of the state is enormous,
many people are receiving credits though they’ve done nothing often totaling more than 50 percent of the premium,” she
to mitigate their homes,” Reynolds wrote. “The resulting explained. “NAMIC members support risk-based incentives to
tragedy is that many homeowners are led to believe their homes encourage strengthening of homes. At the same time, it is cru-
are safer than they really are. It also means that those cial that the state’s enforcement of the wind mitigation program
results in overall premium levels sufficient to pay claims.”
CYBER INSURANCENEWS / ISSUES / 21
PIA Members Plead Their Positions in The Big “I” Endorses
Private Meetings with Congressmen MLIS Certification
T own hall attendees weren’t the only Americans clamoring for their
Congressmen’s attention this summer. Members of the National
Association of Professional Insurance Agents (PIA) completed a month-
long series of meetings with lawmakers focused on issues near and dear
“The involvement of our members was more critical this year than ever,”
said Kenneth R. Auerbach, PIA national president. “With Congress
poised to act on issues that are crucial to agents and their clients, our
continuing advocacy is imperative.”
Throughout August, PIA members met with U.S. Representatives and
Senators in their home districts. The agents gave their opinions on such
issues as health care reform, federal regulation of insurance, natural
V eteran insurance agents looking for an edge
in selling specialized lines might want to
consider obtaining the Management Liability
catastrophe legislation, flood insurance, and crop insurance. Insurance Specialist (MLIS™) certification, a
While town hall meetings on health care reform garnered much media continuing education program developed by
attention, PIA members held individual meetings with Congressmen and International Risk Management Institute, Inc.
their staffs. “We wanted to be sure that our views were heard fully, so we (IRMI).
opted for face-to-face, personal meetings with lawmakers,” Auerbach The MLIS certification recently received the sup-
said. port and recommendation of the Independent
Auerbach stressed that the PIA supports prudent health care reform. Insurance Agents & Brokers of America (the Big
“By prudent, we mean reform that provides our clients with better, cost-
effective care that makes America stronger,” he said. “In our August “We are constantly seeking new and innovative
meetings, we told lawmakers that we hope they will be guided by our educational opportunities for our members,” says
principles as they decide the merits of the various proposals.” Madelyn Flannagan, Big “I” vice president of
agent development, education, and research. “The
PIA believes that the private health insurance system should form the MLIS certification program is an excellent way
basis of any health care reform and that Congress should build on the for the more seasoned insurance professional to
private health care delivery system, not dismantle it. gain a competitive advantage when selling and
In addition to health care, PIA agents discussed their other priorities with servicing these specialized lines of coverage.”
their elected representatives: This online program is for agents and brokers
• Federal Regulation. Among proposals being debated in Congress who sell almost any type of professional or errors
are those that would federalize insurance regulation, which PIA and omissions (E&O) liability insurance. It
opposes. applies to “management liability” insurance or
• Natural Catastrophes. PIA supports legislation to encourage mitiga- “executive liability” insurance, such as employ-
tion efforts and is advising lawmakers against creating programs ment practices and directors and officers (D&O)
that will compete with the private market. liability insurance.
• Flood Insurance. The National Flood Insurance Program (NFIP) is According to Jack P. Gibson, IRMI president, the
once again set to expire. The House has passed a temporary exten- MLIS program can help retail insurance agents
sion, which the Senate has yet to do. The NFIP needs comprehen- and brokers reduce the possibility for errors when
sive reform, along with a multi-year renewal. selling specialized lines. In addition, the program
• Crop Insurance. Congress is deliberating on making additional, con- is conveniently tailored for the busy professional.
siderable cuts to the program, which would directly affect crop “We kept the courses relatively short and split the
insurance agents and the farmers they serve. PIA urges Congress program into two parts, one focusing on profes-
not to make unnecessary cuts. sional and E&O liability insurance fundamentals,
PIA capped off its month-long series of meetings with the release of the and the other part delving into the more complex
PIA Insurance Foundation’s major white paper on the future of insurance management or executive liability insurance
regulation, Future of the Business Disciplines, Regulation and Oversight issues,” Gibson said. “This allows participants to
of the U.S. Insurance Marketplace, by Mark Boozell, the former director choose just how deeply they wish to dive into the
of the Illinois Department of Insurance. The white paper was distributed subject matter.”
to every member of Congress. Big “I” members receive a 10 percent discount
off the course fees and continuing education fee
and can purchase courses directly at the MLIS
Web site. Those who complete the program can
display the MLIS certification.
22 / ISSUES / CYBER INSURANCENEWS
Insurers Increase Spending to Shape Health Care Reform Debate
H ealth insurers and their industry association are pouring money into a cause that’s crucial to their well-being—health care
In the first half of 2009, 14 health insurers invested $2.5 million per month to influence the health care reform debate, according to a
report by the nonpartisan group Public Campaign Action Fund. That’s an increase of 25 percent over previous years.
“These highly profitable corporations are spending millions every month to protect their bottom line by fighting health care reform in
Washington, D.C.,” said David Donnelly, national campaigns director of Public Campaign Action Fund. “To put it starkly, they have
invested heavily in insider lobbyists and politicians to maintain their bottom line, leaving Americans out in the cold and stuck with
our broken health care system.”
The study analyzed political spending—campaign contributions by company political action committees and employees, as well as
lobbying expenses—for the 14 insurance companies that were ranked in the largest 1,000 American corporations by Forbes Magazine
earlier this year. Lobbying expenses and employee campaign contributions from America’s Health Insurance Plans, the industry’s
trade group, were also included in the analysis. All of the data was compiled by reviewing records found at the Center for Responsive
Politics Web site and the Senate lobbying disclosure website.
The chart below lists the companies and their political spending in 2009 thus far:
Corporation/Association Contributions Lobbying Expenses
Aetna Inc. $11,200 $1,441,639
America’s Health Insurance Plans $3,514 $3,900,000
Amerigroup Corp $53,140 $215,000
Centene Corp $19,300 $230,000
Cigna Corp $57,365 $720,000
Coventry Health Care $19,100 $300,000
Health Net Inc. $11,300 $680,000
Healthspring $2,400 $90,000
Humana Inc. $170,556 $950,000
Medical Mutual of Ohio $3,000 $0
Molina Healthcare $72,507 $270,000
UnitedHealth Group $130,200 $2,500,000
Universal American Financial Corp $3,800 $865,000
WellCare Group $2,500 $200,000
Wellpoint $202,400 $2,420,000
Health Care Reform Necessary, NAIC Says
A s Americans debate the details of health care reform, the National Association of Insurance Commissioners (NAIC) reminds the
nation that virtually all Americans agree on one thing—change to the health care system is necessary.
“There is no serious dispute that our present system fails to cover millions of Americans and costs all of us too much,” said Roger
Sevigny, NAIC president and New Hampshire Insurance Commissioner. “These are the two core issues that we must address as we
move forward on the broad common ground that exists.”
Several critical issues are essential to an improved health care system. Sandy Praeger, Kansas Insurance Commissioner and chair of
the NAIC’s Health Insurance and Managed Care Committee, says that the efficient and affordable financing of health care through
insurance must include everyone in the system.
s PLEASE SEE REFORM NECESSARY ON 24
CYBER INSURANCENEWS / ISSUES / 23
Most Americans Agree on Need to Restrict Cell Phone Use While Driving
I t’s hard to find consensus among Americans today on many issues, but Nationwide Insurance has found one subject on which an
overwhelming number of citizens agree—restricting the use of cell phones while driving.
A new On Your Side® survey found that 80 percent of Americans surveyed in August say they would support a ban on texting and e-
mailing while driving, 67 percent would favor a ban on cell phone calls, and more than 50 percent would support a ban on cell phone
use altogether. Of those who support some type of cell phone usage restriction, nearly 75 percent believe the law should apply to all
drivers, not just specific groups.
The survey results were released as highway traffic safety advocates and officials gathered at the Governors Highway Safety
Association’s annual conference in Savannah, Ga., to discuss driving while distracted (DWD) and other highway safety issues. This
meeting took place prior to a presidential summit on DWD that is scheduled for Sept. 30 and Oct. 1 in Washington, D.C.
“In recent months, the debate about the dangers of DWD has intensified as more and more states consider taking legislative action,”
said Bill Windsor, Nationwide’s safety officer. “The survey results confirm that there is strong public support for banning texting
while driving. It also provides insight into support for additional restrictions policymakers may want to consider.”
While it’s not surprising that older generations are supportive of bans, even members of Generations X (ages 33–44) and Y (ages
21–32), who are more likely to use cell phones, are supportive of restrictive laws, particularly those banning text messaging and e-
mailing. Three-fourths of respondents from these generations favor these restrictions.
The solid support for legislation may be driven by increased public recognition of the dangers associated with DWD. According to the
survey, respondents say they are witnessing a growth in distracted driving behavior. More than half of respondents said they see more
drivers using cell phones while driving than they did a year ago, and nearly three-quarters say that when they drive, they always or
often see other drivers using cell phones.
Of course, some of these respondents may not acknowledge their own distracted driving habits. Almost half of drivers said a law
restricting use of cell phones would not change their behavior because they don’t use cell phones while driving. Yet, in Nationwide’s
2008 DWD survey, more than 80 percent of drivers admitted to talking on their cell phone while driving.
“The new information in this survey also indicates that many drivers are either in denial about their DWD habits or resistant to
changing their behavior,” Windsor noted. For example, 18 percent of respondents who admit to using their cell phones while driving
say they would continue to do so regardless of a change in law, with Generation Y most likely to resist the change (26 percent). “This
suggests that legislation may not be enough to eliminate distracted driving and highlights the need for a technological solution that
can prevent cell phone usage in moving vehicles while still allowing people to stay connected,” Windsor added.
Earlier this summer, Nationwide announced its support of the concept of a national ban on texting while driving to help reduce crash-
es and auto insurance claims.
“DWD impacts all of us in one form or another, and Nationwide will continue to raise public awareness about this important issue,”
s REFORM NECESSARY FROM 23
“The current proposals would prohibit health insurers from subsidies so that persons below designated income levels
denying someone insurance simply because he or she has been receive help in purchasing coverage. Without subsidies, the cost
treated for a pre-existing condition,” Praeger said. “Similarly, of coverage, even with everyone in the pool, is too high for
the proposals would prohibit insurers from using health status, millions of Americans.
gender, or occupation when setting premiums.” Not surprisingly, NAIC takes issue with any proposal that
One downside to universal coverage is that some will wait until would shift regulatory authority from the states to the federal
they become sick to purchase the coverage. A voluntary system government.
could lead to “adverse selection,” where those with higher costs “Congressional action along the lines outlined above is neces-
and likelihood of care participate in the system, and those with sary to address this national issue, but it should not diminish
lower costs and likelihood of care do not. This situation drives the regulatory role for the states going forward,” Sevigny said.
up the cost of insurance, further discouraging people from buy- “Our nation is too vast and too varied for one regulatory regime
ing it and employers from providing it. In turn, this could shift to fit all. Congress should allow states wide latitude to enforce
the burden of health care to an inefficient system of emergency their respective laws when those laws provide greater consumer
care and high-cost state programs. protections than those afforded by federal law.”
NAIC believes the only effective answer to these concerns is to NAIC believes that effective reform of the health care system—
require everyone to purchase health insurance, much as states one that will reign in costs—will require collaboration and
already require the purchase of auto insurance. Of course, get- compromise among the federal government, state governments,
ting everyone in the system will require adequate federal providers, and consumers.
24 / ISSUES / CYBER INSURANCENEWS
CIGNA Works to Raise Consumer’s Understanding of Health Care
A recent CIGNA survey discovered that American’s understanding of health care and specific health care plans is lower than their
understanding of other contracts they have such as mortgages, retirement plans and cell phones. Many spend less than thirty
minutes annually to review and choose their health care plan because
they find the process stressful.
To help consumers understand the various health plans and health care
issues, CIGNA has created a new educational program that is free to the
public. The program, found at www.cigna.com/learn4yourhealth, has
tools, games, and discounts for popular brands to help educate adults
about healthy lifestyle choices.
“learn4yourhealth is part of CIGNA’s service commitment,” explained
Benjamin Karsch, CIGNA’s chief marketing officer. “This is not simply
a static Web site or online ‘brochureware’ but a program that truly helps
to make the path to health easier while rewarding individuals for proac-
tively taking positive steps to improve their health. Our goal is to make
learning about health and health care more engaging and rewarding.”
Within the program is “Learn & Earn” where users are rewarded for
learning and sharing the program with others. When users take one of
the five-minute courses, they receive free coupons to popular entertain-
ment, food and retail shops. An improved version of the popular “Why Water” game is also included on the website which teaches
health care information as well as raising awareness of the need for safe drinking water around the world.
Part of CIGNA’s ongoing initiative to improve consumer’s understanding of healthcare, the program is an expansion of last year’s pilot
program and also teaches people how to save money on health care. CIGNA plans to introduce more courses in the coming months.
They also are working to co-brand and offer the program to several clients who wish to add the program to their employee Website.
“learn4yourhealth demonstrates innovation in health care education by adding incentives that drive learning, through which people
can stretch their budgets and enjoy discounts on brand-name products and services,” noted Matt Manders, senior vice president of
CIGNA’s health operations. “We’re pleased to be able to share this program with companies of all kinds as we support employers in
their ongoing quest to create a healthier workplace for their employees.”
Chubb Group Offers New IT Protection
T he complexities of information technology (IT) can leave
companies exposed to lawsuits for privacy violations, intel-
lectual property infringements or other financial injuries. To
and worldwide manager for Chubb's technology segment.
“Integrity+ is an enterprise-wide, integrated solution that
retains the key features of our existing E&O policy, augmented
help protect businesses from legal problems that may arise due by enhanced essential insurance protection such as media lia-
to IT issues, Chubb Group of Insurance Companies is offering bility and intellectual property infringement liability and
Integrity +, a solution that combines errors and omissions reimbursement of privacy remediation expenses.”
insurance (E&O) and emerging technology protection for tech- Integrity + has several insurance options that can be purchased
nology-related injuries and privacy exposure costs. separately or as a package. The new E&O liability insurance
“Technology companies are offering a wider array of products offers protection from lawsuits for financial injuries caused by
and services that may create new exposures. For instance, an defects in the insured products or services. The Technology-
employee at a software developer may infringe another compa- Related Injury option provides protection if the company
ny’s copyright-protected source code, or a flaw in electronic commits intellectual property infringement, violates a person’s
medical record software might enable a hacker to compromise right to privacy, causes a false arrest, or inadvertently causes
a hospital patient’s privacy. A traditional errors and omissions libel or slander. Privacy Remediation Expense insurance pro-
insurance policy may not offer the breadth of insurance needed vides coverage of expenses sustained when there is a customer
to help protect a technology firm from such evolving risks,” notification of a privacy breech in compliance with federal,
explained Veronica Somarriba, vice president, Chubb & Son, state or foreign laws.
CYBER INSURANCENEWS / INNOVATION & TECHNOLOGY / 25
New SubroShare Service Aims to CIGNA Takes Home
Reduce Health Care Costs the Gold
through Free Data Exchange T he Gartner Customer Relationship
Management Summit awarded CIGNA first
S tephen Ambrose, the founder of SubroShare®, says the free service
his new company provides is the rare “win-win” for both health
care providers and payers.
place for an exemplary customer strategy as well
as a customer experience excellence award.
CIGNA was presented the award by Gartner and
SubroShare, an online database, securely stores and exchanges patient 1to1 Media after being selected by a panel of
release of information (ROI) requests made upon a health plan policy- judges comprised of Gartner analysts and cus-
holder, typically from an tomer relation experts in business and academics.
attorney, where such a The awards are meant to highlight businesses that
request would indicate make an impact through their customer strategy
the presence of a first- and have achieved a superior level of distinction
or third-party injury in the customer experience.
claim. The exchanged “The Gartner & 1to1 Customer Awards honors
ROI data and transaction excellence among organizations that use cus-
does not require patient tomer-focused strategies to improve business
authorization, as it falls performance,” said editor-in-chief of 1to1 Media,
under the provision of Ginger Conlon. “The judges cited CIGNA’s com-
“payment” under prehensive enterprise-wide strategy, executive
HIPAA law. support, and results like increases in customer
“It’s based on capturing satisfaction, employee engagement, and first-con-
and exchanging a tact resolution as reasons for nominating the
unique piece of company as their top choice in the Customer
provider-submitted, non-billing patient data, whereby payers will find Strategy category.”
and subsequently recover many previously missed injury claim recov-
eries,” Ambrose explained. “The significant increase in payer revenue
will make the participating provider a more valuable asset to payers, Simply, put, CIGNA’s
who may be able to thereby pass on savings to policyholders.”
Ambrose said SubroShare aims to be an impartial “exchange media-
strategy is to make
tor” between payers—health insurers, TPAs, and self-funded plan the customer the cen-
sponsors—and the estimated 350,000 in-network health provider prac- ter of our universe…
tices residing within payer and PPO panels.
Three features define what makes SubroShare unique, Ambrose said:
1. It is the only data exchange to alert payers which of their policy-
“Simply put, CIGNA’s strategy is to make the
holders has filed an injury claim and gives the policyholder’s
customer the center of our universe,” noted Ingrid
attorney contact information.
Lindberg, CIGNA Customer Experience Officer.
2. It makes personal injury attorneys, who re-bill previously paid “It is a terrific honor for CIGNA to be recognized
health bills, accountable for their part in helping reduce health among the leaders in customer responsiveness. We
care costs. know that health care is complex, and CIGNA is
3. It helps payers contain rates for policyholders by not passing on determined to continually build understanding and
wasteful injury claim payments. help the people we serve by making every interac-
SubroShare, a Web-based service which is free for both payers and tion easier and more helpful.”
providers, is an add-on product for payer’s existing subrogation opera- Lindberg added, “This year alone CIGNA has
tions, so no major integration is required. Furthermore, the provider opened up our call centers 24/7/365 and revamped
transaction consists of a quarter-page form with a copied sheet, either our communications materials, which has led to a
faxed or securely uploaded to the secure exchange. more than 100 percent improvement in customer
understanding of their CIGNA health benefits—a
remarkable metric for any business, but especially
critical for a health service company.”
26 / INNOVATION & TECHNOLOGY / CYBER INSURANCENEWS
IFG Recommends Alternative Funding as Way for Small Businesses
to Offset Health Care Costs
O ne group of Americans can make
the case that they’ve been over-
looked in the ongoing debate over
factoring benefits businesses that do not
get paid for 30, 60, or even 90 days by
advancing up to 90 percent against
health care reform—small business invoices.
owners, who create at least 70 percent Accounts receivable factoring differs
of all new jobs in the country and from traditional bank loans in that bank
employ more than half of all private loans involve two parties, while factor-
sector employees. ing involves three parties. Banks base
“Congress hasn’t approached health care their decisions on a company’s credit
reform from a small business owner’s worthiness, whereas factoring is based
standpoint”, said Todd McCracken, the on the value of the receivables.
president of the National Small Business Factoring is not a loan; it is the pur-
Association (SBA). chase of financial assets, or receivables.
The cost and availability of health insur- “Many small business owners are afraid
ance is one of small business owner’s that their priorities are getting lost and
primary concerns, driven largely by that the government is taking too long
insurance premium and administrative In this weakened economy, additional to recognize their needs,” said George
costs. A 2007 Kaiser Family Foundation taxes would only add to a small busi- Shapiro, IFG’s chief executive officer.
study confirmed the connection between ness owner’s cash flow problem. Until “But other small businesses are finding
the size of a firm and whether it offers health care reform has been resolved, invoice factoring, useful to bridge the
health insurance, showing that about half the Interface Financial Group (IFG), an gap, resolving the current cash flow
of businesses with fewer than 10 workers alternative funding source for small problems due to the economy.”
offer health benefits to their employees. businesses, suggests that small business IFG looks at the creditworthiness of the
Proposed legislation in the House would owners consider the option of accounts client’s customers and can fund within
require businesses with payrolls as low receivable factoring to offset that prob- as little as 24 hours. There are no mini-
as $250,000 to pay a two percent tax if lem. mum or maximum sales volume
they didn’t provide health insurance for Single invoice factoring is a popular requirements, and fees charged for the
employees. The number rises to eight new tactic that allows companies to fac- funding can vary depending on the
percent with a payroll of $400,000. tor one invoice at a time. Invoice client’s circumstances.
Vertafore Reaches Transaction Milestone
S oftware and services provider, Vertafore, announced that TransactNOW® and PL Rating™
have assisted over 7.3 million transactions. The transactions were made from January to
June 2009 and represent an increase from the same period in 2008. Vertafore claims that the TransactNOW®
increase in transactions demonstrates the value of their agency-carrier solutions. Leading
software and services provider Vertafore offers solutions to over 15,000 insurance agents, and PL Rating™
brokers, carriers and reinsurers. have assisted
“Vertafore’s connectivity solutions have become even more valuable during the current econ- over 7.3 million
omy—they enable easier communications between agents and carriers, allowing them to
write more business in a shorter period of time,” said Vertafore vice president, connectivity transactions.
product management, Dave Acker. “This increase in transactions indicates the continued
enthusiasm from agencies and carriers for real-time connectivity solutions.”
TransactNOW supports the high amount of transactions that carriers face when trying to compare quotes and solutions from Vertafore
and other vendors. Transaction inquiries from billing, claims and policy view are easily managed through TransactNOW.
PL Rating processes multi-company transactions through a single-entry access to provide driver and vehicle data at the point of the
quote. This technology helps independent agents efficiently compete and create new business.
CYBER INSURANCENEWS / INNOVATION & TECHNOLOGY / 27
OneBeacon, Medversant Team Up Adding LiveChime Chat
to Make Credentialing Better for
Managed Care Customers
A new partnership between OneBeacon Professional Partners
and Medversant Technologies, LLC provides OneBeacon
customers access to AutoVerifi™, an electronic credentialing ver-
ification and management system. The AutoVerifi technology
works by continuously validating, storing and retrieving records
of medical providers. Information is stored in a single, electronic
warehouse and efficiency is created by updating and verifying
Typically, managed care companies conduct credentialing every
three years. By using this technology, however, the data can be
C HOICE Administrators® is teaming with
LiveChime, Inc. to provide insurance bro-
kers a powerful new Web chat. By connecting
constantly reviewed with immediate notifications of changes, with prospects and customers instantly using the
thus reducing costs to the company. new Web chat, insurance brokers can generate
“AutoVerifi is a unique solution to help our customers enhance leads, increase sales and increase client retention.
their business, save on administrative costs and improve their lia- “CHOICE Administrators is always looking for
bility risk,” said Susan Angelo, Senior Vice President for ways to make our nearly 14,000 current brokers’
OneBeacon Professional Partners’ managed care business. “By businesses easier and more profitable, and this is
enabling them to verify and update credentialing information con- just one more example of how we’re doing that,”
tinuously, customers know about potential problems immediately.” noted president of CHOICE Administrators, Ron
“OneBeacon Professional Partners understands the exposures Goldstein.
managed care organizations can face as a result of outdated or Tod C. Turner, chief executive officer for
inaccurate data,” added CEO of Medversant Matt Haddad. “Our LiveChime added, “The Word & Brown
alliance will improve these risks for their policyholders and help Companies and CHOICE Administrators are
them realize dramatic cost savings.” market leaders and share our vision of how the
industry needs to adapt to the changing trends
Benefit Express Honored for Innovation regarding how consumers research and purchase
professional products and services on the
by The Business Ledger Internet.”
T he Business Ledger has awarded their 2009 Entrepreneurial
Excellence Award (EAA) for Innovation to Chicago-based
Benefit Express. The official awards ceremony is scheduled for
The Internet has become a main source for con-
sumers to research insurance products and
services before purchasing. The use of an online
September 24 at the Danada chat to get immediate questions answered is
House in Wheaton. The becoming increasingly popular over other com-
Business Ledger will also fea- munication methods such as e-mail or telephone.
My Benefit ture Benefit Express in a spe- A recent Forrester Research report claims that
EXPRESS™, pro- cial section of their publication three out of four consumers abandoned a sale
on November 2nd. The awards because they wanted more information about the
vides…detailed highlight the accomplishments product. Those same consumers would not have
HR reporting. of suburban Chicago area indi- taken the time to call, but would have used a
viduals and organizations who “chat” if it was available.
demonstrate the core values of LiveChime can help prevent sale abandonment
entrepreneurship. because it works on any Web page without the
Benefit Express provides flexible administration solutions. Their need of additional applications. A link on the
self-service application, My Benefit Express™, provides custom page lets consumers “click-to-chat” with an avail-
content delivery, carrier billing reconciliation, enrollment assis- able broker without even leaving the current Web
tance, employee benefit education tools, transactional page. The broker can get the question from a
administrative processing/tracking, vendor data-links and detailed dashboard on a computer or even from their
HR reporting. Smartphone.
28 / INNOVATION & TECHNOLOGY / CYBER INSURANCENEWS
SBI-AXA Life Insurance Goes Live with Japan’s First Automated
Underwriting Engine for Life Insurance
Declan Bannon, Senior Industry Consultant, Product Strategy, Allfinanz
S BI-AXA Life Insurance Company Ltd. announced earlier
this month that it had launched a new processing system for
life insurance applications serving the Japanese market. The
house underwriters, such as when specific medical checks or
more detailed information are needed.
But in many situations, the responses and disclosures in a cus-
new system will allow faster applications and lead to a higher tomer application, using an expert underwriting engine, will be
acceptance rate, and is based on a software system from enough for an initial underwriting decision to be made—result-
Underwriting Automation specialist, Allfinanz. It is the first of ing in immediate acceptance, without the long delays and
its kind in the Japanese life insurance industry. significant costs involved with human intervention.
This move by SBI-AXA is part of a growing global trend The result—fewer errors, faster decisions, lower acquisition
towards simplified issue/rapid issue, and should be noted by costs and increased sales.
US and other carriers developing plans to address the mass “By introducing this system, we are now able to underwrite
affluent “middle market” by using “TeleApps” which do not more precisely and accept more applications” said Toshiaki
require the applicant to take a Suzuki, executive officer & gener-
physical, blood, or urine test. al manager customer service
These tests are typically department at SBI-AXA. “This
required in U.S. “fully under- will help our customers and our
written” life policy issue. own growth prospects.”
Allfinanz is a leading provider SBI-AXA is Japan’s first direct-to-
of technology solutions to the consumer life insurance carrier to
life insurance industry, with a use the internet to collect data
particular emphasis on new from applicants. It is also the first
business processing and under- carrier in Japan to use Allfinanz’
writing automation software URE to support the new business
solutions. These solutions help process. The company had been
make straight through process- seeking ways to improve the
ing (STP) and simplified acceptance rate of its application
issue/rapid issue a reality for process, and opted for the
many leading insurance carriers and banks around the world. Allfinanz system in January 2009, after a rigorous selection
What is Automated Underwriting? process. The implementation project began in February 2009,
Automated underwriting is a software solution which allows a taking just eight months from decision to launch.
life insurance carrier to use a comprehensive set of underwrit- “We are excited to have contributed to this dramatic develop-
ing rules to help make instant decisions on life insurance ment in the Japanese life insurance market” said Yoichi
applications. Hayashi, Allfinanz’ head of business development in Japan.
Underwriting is a complex process, with the wealth of expertise “With the most customizable solution available in the market
and experience every life insurance carrier is able to draw upon today, our clients have an enormous advantage in the competi-
having a very measurable impact on risk management and prof- tive field of life insurance. This product allows them to be
itability. faster and more efficient while maintaining excellent under-
writing risk management and maximum consistency”.
It’s important to point out that automated underwriting isn’t an
alternative to a carrier’s underwriters—it allows the underwrit- In SBI-AXA’s new system, users interact with the system using
ers to focus on complex cases. At the same time it improves the intuitive, easy to understand browser screens, which interactive-
accuracy of decisions—allowing the carrier to consistently ly lead them through a series of questions uniquely tailored to
apply its underwriting philosophy to every application. It also their personal circumstances and the relevant life insurance
gives the ability to draw upon the combined wisdom of the product. This leads to drill-down questions obtaining deeper
world’s most experienced and successful underwriters. disclosure data concerning the insurance applications. Thus,
SBI-AXA will now be able to decline fewer, and accept more,
Even in an automated environment, the decision of whether to life insurance applications. The move will also play a major
accept an application may still need input and actions from in- role in improving customer satisfaction.
s PLEASE SEE AUTOMATED UNDERWRITING ON 30
CYBER INSURANCENEWS / INNOVATION & TECHNOLOGY / 29
Allfinanz’ highly-evolved 4th generation Underwriting Rules Engine is extremely flexible, and s AUTOMATED UNDERWRITING FROM 29
able to help automate many new insurance applications.
Evolution of Automated Underwriting Software Systems
1st Generation: These are black box systems that were probably imposed on a carrier’s underwriting team to ensure consistency as
well as a bare minimum standard of underwriting decision making—for example through reassurers offering discounts where such
systems were deployed in a client’s underwriting process for new business. These systems are not typically controlled by the carrier,
nor does the carrier have the ability to adapt or change them. The sole benefit to the carrier seems to come through more favorable
reassurance terms. These systems are not easily adapted or enhanced to meet the changing needs of the life carrier.
2nd Generation: These are systems that are adaptable or changeable—in theory even by the carrier—they have open interfaces against
which carriers can program their underwriting logic. In practice, the level of expertise necessary to achieve this has meant that such
changes can generally only be safely made by the original developers of the systems (the vendors, typically reassurance companies)
with one or two notable exceptions where the carrier has, for example, hired staff with deep knowledge of the system who previously
worked for the vendor, or where over many years of dedicated effort, they have built
these skills in-house. These systems can be changed, but only by IT experts with
solid programming skills and deep knowledge of the product.
3rd Generation: These are systems where a graphical user interface, or some other
mechanism exists to enable a carrier whose underwriters have basic computer litera-
cy (basic here means the typical expertise in office and business software that
anyone who uses a PC on a daily basis should have) to extend the system to add new
business logic (Underwriting Rules), or change or adapt the existing logic without
the dependency on outside expertise such as programming know-how from the IT
department or an outside consultant or vendor support. This marks a dramatic leap
forward as this generation of system puts power in the hands of the underwriting
team for the first time, and removes the dependence on the vendor.
4th Generation: Once ease of use becomes a given, the frontier moves to delivering
actionable analysis. 4th Generation systems, in addition to a 3rd Generation User
Interface, also provide powerful reporting functionality, giving the underwriters (and
other stakeholders such as the VP of Insurance Operations or the Head of
Distribution) a deep understanding of the present and past behavior of their system.
The system deployed by SBI-AXA is based on Allfinanz’ Underwriting Rules
Engine (URE) and Rules Designer products and uses Munich Re’s Japanese under-
writing rules set.
Patrick Sallin, general manager of Munich Re Japan Services K.K., Life department comments: “The system’s underwriting rule set
was developed by Munich Re and has been fully customized for the Japanese market by Munich Re’s Life Department in Tokyo. The
rules have been adapted to the local Japanese practice, language and tailored to SBI-AXA’s specific risk acceptance philosophy. They
cover hundreds of impairments and thousands of different underwriting scenarios to increase the ability of decision making at point-
of-sale and therefore the acceptance rate”.
While the new system is still in the early stages of its use at SBI-AXA, similar systems have proven themselves at other Allfinanz
users. Some carriers using the system have demonstrated the ability to decision up to 80% of new business applications at the point
of sale across a range of distribution channels while reducing administrative costs by as much as 85%. Carriers have successfully
deployed the Allfinanz solution around the world for multiple products across the entire range of sales channels, including advisor
channels, call centers, bancassurance and direct web sales. The ultimate goal of many such systems is the help accelerate issuance.
In addition to demonstrating the ability to scale across multiple channels as the carrier’s business grows and develops, the system
uses industry-proven technologies such as J2EE and commonly-used enterprise Web Application Servers and Databases. By doing so,
the Allfinanz Underwriting Rules Engine can easily grow with a carrier’s business. Performance can be scaled rapidly by using clus-
tering and load balancing technologies.
Allfinanz is the number one provider of new business processing and underwriting automation software solutions world-wide, as
attested to by its blue-chip client base, track record of project success and the dominant provider position it occupies in the markets in
which it operates. The company was acquired as a wholly owned subsidiary by Munich Re in November 2007, and operates as a sep-
arate software company within the Munich Re Group. Allfinanz is headquartered in Dublin, Ireland and has a regional office in
Tokyo, Japan as well as offices in the UK, Germany, China and Australia. Customers include HSBC, Standard Life, Prudential,
Genworth, The Hartford and Metropolitan Life.
30 / INNOVATION & TECHNOLOGY / CYBER INSURANCENEWS
PCI Members Scale Back on IT Spending
J ust as Gartner predicted, the planned
information technology (IT) spending for
the property-casualty insurance industry did
with a tough economy, these companies are
still making some investment in the future,”
stated Eric Stegman, research director for
Obtaining meas- Gartner.
increase slightly from 2008 to 2009.
But the spending increase is not on par with
urable business Twenty-two PCI member companies partici-
the recent past. outcomes remains pated in the survey. Fifty-nine percent
reported that for 2008, IT spending was dedi-
According to the Property Casualty Insurers a key initiative… cated to “lights-on” support, while the
Association of America’s (PCI) fourth
annual joint IT spending survey, the remainder supported business growth and
planned IT spending increase from 2008 to transformation.
2009 is 1.6 percent, close to Gartner’s prediction of 1.9 percent Stephen Forte, a research director with Gartner’s Insurance
from last year. However, that represents a big decline from the Industry Advisory Service, said that data supports the wisdom
8.1 percent planned increase from 2007 to 2008. of insurers updating core legacy administration systems.
Don’t look for a boost in spending by 2010 either, which is pre- “With IT costs per policy and claim at $69 and $58 USD
dicted to be a paltry 0.2 percent. But any increase could be respectively, this validates the trend of property and casualty
considered good news, given that insurance companies expect an insurers replacing core legacy administration systems for
average decrease in revenue of 3.7 percent from 2008 to 2009. among numerous reasons, reducing costs,” Forte said.
“This pattern of holding steady from 2008 indicates that even “Obtaining measurable business outcomes remains a key initia-
tive even during the current economic malaise.”
North Carolina Reforms System of Insuring High-Risk Coastal Properties
T he Beach Plan in North Carolina
has been reformed, just in time for
hurricane season. Gov. Bev Perdue
auditor to the Beach Plan noted that
such deficits could threaten the plan’s
ability to pay claims, bankrupt small
• develop a post-storm solvency plan
for the state
• create incentives for making homes
signed into law House Bill 1305, which insurers, and force carriers out of the more hurricane-resistant
will protect homeowners and business state marketplace should a major storm
• take initial steps to return the
owners across the state through reform hit the coast.
Beach Plan to a market of last
of the Beach Plan—an informal name Sampson believes that passage of HB resort
for the North Carolina Insurance 1305, which was sponsored by Rep.
The bill also provides specific protec-
Underwriting Association, the state’s Hugh Holliman, will improve the prop-
tions for inland policyholders, who now
system for insuring high-risk coastal erty insurance market in North
cannot be assessed more than 10 per-
cent of premium annually to pay for
“Governor Perdue has taken an impor- “Lawmakers advanced HB 1305 this Beach Plan losses. The Milliman report
tant step today in securing the financial year through thoughtful deliberation to had estimated that such policyholders
stability of North Carolina following a prevent a state property insurance cri- could have faced up to 200 percent
hurricane or major storm,” said David sis,” Sampson said. “The General increases without this reform.
Sampson, president and CEO of the Assembly responsibly chose to solve the
HB 1305 is already beginning to deliver
Property Casualty Insurers Association problem before the storm instead of
its intended benefits of increasing con-
of America (PCI). after a devastating event.”
sumer options in North Carolina. In
Changes to the Beach Plan were long The legislation takes steps to: August, a subsidiary of AAA Carolinas
overdue. In 2008, PCI commissioned an • financially strengthen the Beach announced that it will begin writing
actuarial analysis by Milliman Inc. that Plan homeowners insurance throughout the
indicated the Beach Plan was seriously state in response to the passage of HB
• bring more consumer transparency
underfunded. In addition, an internal 1305.
to the Beach Plan’s operations
CYBER INSURANCENEWS / IN THE SPOTLIGHT / 31
Net Income of Property-Casualty Insurers WorkCompEdge
Drops Sharply in First Half of 2009 Slashes Cost of Agency
N et income-wise, the first half of 2009 was brutally unkind to pri-
vate U.S. property-casualty insurers. After-tax income fell a stun-
ning 59.3 percent to $5.8 billion in the first six months of 2009, plung-
ing from $14.1 billion in the first half of 2008, according to ISO and the
Property Casualty Insurers Association of America (PCI).
A price adjustment from WorkCompEdge
means insurance agencies can get a bargain
on the company’s Agency Plus license.
In addition, the overall profitability of these insurers as measured by WorkCompEdge.com, launched a year ago by
their annualized rate of return on average policyholders’ surplus (or Tennessee-based Specific Software Solutions,
statutory net worth) dropped to 2.5 percent during the same time, down specializes in helping employers and insurance
from 5.5 percent in the first six months of 2008. According to Michael agencies reduce
R. Murray, assistant vice president for financial analysis with ISO, that’s workers compen-
the second-lowest first-half rate of return since the start of ISO’s quarter- sation costs. It
ly data in 1986, and seven percentage points less than the 9.5 percent recently lowered
average first-half rate of return for the past 24 years. the cost of its
The rate of return would not have been as bad had it not been for the Agency Plus
rough mortgage insurance landscape. license to $1,000
“Results for mortgage and financial guaranty insurers were particularly annually, a tenth
poor, with ISO estimating that mortgage and financial guaranty insurers’ of the cost of the
annualized rate of return fell to negative 76.5 percent in first-half 2009 Web site’s origi-
from negative 67.4 percent in first-half 2008,” Murray explained. nal fee for
“Excluding mortgage and financial guaranty insurers, the insurance insurance agen-
industry’s annualized rate of return declined to 4.5 percent in first-half cies.
2009 from 7.7 percent in first-half 2008.” With the Agency
Insurers’ net investment gains (the sum of net investment income and Plus license, insurance agencies can access
realized capital gains or losses on investments) dropped 50.2 percent to WorkCompEdge.com for internal training and
$12.4 billion in the first half of 2009, down from $24.9 billion over the coordination of services in 15 areas that affect
corresponding six months of 2008. workers comp costs, such as hiring practices,
Not all figures were bad. For instance, net losses on underwriting fell to safety, and the premium audit.
$2.2 billion in first-half 2009, down from $5.6 billion in the first six Specific Software CEO Tim Coomer explained the
months of 2008. The combined ratio—a key measure of losses and other price adjustment came in response to how insur-
underwriting expenses per dollar of premium— improved to 100.9 per- ance agencies were using WorkCompEdge.com
cent in the first half of this year from 102 percent in the first half of since its debut last fall.
2008. “Our previous license options assumed that an
Furthermore, policyholders’ surplus (insurers’ net worth measured agency would use the site and also provide their
according to Statutory Accounting Principles) rose 1.2 percent to $463 clients with access to WorkCompEdge,” Coomer
billion by June 30, 2009, up from $457.3 billion at the end of 2008. said. “But we’ve listened and learned that many
Despite the rough start to 2009, David Sampson, PCI president and agencies weren’t willing or able to assume these
CEO, pointed out that the insurance industry is still a profitable one. more significant costs, especially in the current
market. We believe this new option will attract
“While insurers’ profits and profitability tumbled in first-half 2009, the
agencies who, at this price, can easily get into the
insurance industry remained profitable and policyholders’ surplus
site and take advantage of even one module to
increased,” he said. “Property-casualty insurers continue to be healthy
enrich their sales and service process.”
and competitive despite an extraordinarily difficult operating environ-
ment complicated by the worst recession in decades and the lingering Coomer noted that agencies who buy the license
effects of an unprecedented financial crisis that brought down many once will appear in the Web site’s Agent Finder tool,
iconic banks and Wall Street institutions.” so the price of the license could be considered a
marketing investment as well.
Sampson also noted that the industry is stable as well. “Insurers had just
over $1.2 trillion in funds available to cover losses and other contingen- Agencies can still add site access for their clients
cies. This stability is important to the industry’s ability to fulfill its on a per-user basis or subscribe to an exclusive
promise to consumers.” license ($850 per month), which includes custom
marketing support and access for all their clients.
Figures are consolidated estimates for all private property-casualty insur-
ers based on reports accounting for at least 96 percent of all business
written by private U.S. property-casualty insurers.
32 / IN THE SPOTLIGHT / CYBER INSURANCENEWS
Aon Releases New Quarterly Overview: Most Markets Remain Soft
s Aon Corporation has released its first U.S. Quarterly Market Overview for Property,
Casualty, and Directors’ and Officers’ Lines.
“The ever-changing market and economic conditions,the firm’sasmonthly reports in the ongoing effort to keeppeersclients abreast
U.S. Quarterly Market Overview complements
as well raise awareness of the practices of industry
tors,” said Lambros Lambrou, head of Aon Analytics, which generated the inaugural report.
The report shows the property market experienced a mild hardening during the first half of 2009 due to the global financial crisis and
previous heavy property losses from natural disasters. Property schedules with little or no natural catastrophic exposures remain com-
petitive. Insureds can expect renewed competition and modest downward pressure on rates into 2010.
The casualty market remains soft and competitive, with low rate decreases and thus lower premiums for many insureds. Primary auto-
mobile experienced an average increase of less than one percent in Q2 ‘09, the first rate increase on any casualty line in several years.
Soft market conditions are expected to continue into 2010. Competition and decreasing margins will make it a challenge for carriers
to sustain growth.
In the D&O market, the report states that the economic turmoil has worked itself through the banks, insurance companies, investment
management firms, and hedge funds. In the financial institutions market, rates are jumping, capacity is shrinking, and coverage terms
are tightening. However, the market for all other sectors continues to be extremely competitive, with decreasing rates, ample capacity,
and the broadest terms and conditions seen in years. Most insureds should expect to see continued stabilization of rates in the short
term, while rates for financial institutions are expected to continue to increase.
Aon’s financial services group also recently issued its Quarterly D&O Pricing Index, which delves into year over year trends. Pricing
increased 4.07 percent in 2Q ’09 compared with 2Q ’08. Current rates in the S&P financials sector are up 14.77 percent, while all
other S&P sectors were flat, marking the first time in more than three years that rates did not decrease. Because D&O policies are
typically written for a 12-month period, this year-over-year comparison is a close approximation of renewal pricing and results.
“The delicate balance between the forces holding D&O prices down and the need for rate increases could soon shift in the favor of
underwriters,” explained Michael D. Rice II, national practice leader of Aon’s financial services group. “Fortunately for Aon’s clients,
pricing in the D&O marketplace continues to remain at soft levels.”
Auto Insurance Shoppers Find Cheaper Rates This Summer
s The bottom line is driving car insurance shoppers.
A ccording to a recent study from Google and TNS Compete, about 90 percent of
shoppers for cheap car insurance say that obtaining lower insurance rates is
their main goal. Furthermore, 20 percent more consumers are looking for new rates …carriers can afford
this year than last year, the survey said. Lately, many have been finding cheaper
rates. the rate drop in car
While RateWatch claims that car insurance rates are 12 percent higher overall in insurance…because
2009 than in 2008, the trend lately has been a decline in rates. A comparison of auto they are raising rates
insurance rates in June 2009 with June 2008 shows that rates this June were at the
lowest points they had been during the twelve-month span, according to the organi- for other policies.
zation Cheap Auto Insurance. Furthermore, there was a 6 percent reduction in the
cost of insurance policies compared with the previous month just this summer.
Many states, such as Alabama, Mississippi, and Ohio, have seen a steep decline in
rates. In Massachusetts, consumers have enjoyed a rate drop of 8 percent in the last year. On the other hand, some states, like
Nebraska and Delaware, have absorbed slight increases in their rates.
Cheap Auto Insurance says that one reason carriers can afford the rate drop in car insurance is because they are raising rates for other
policies. For instance, Allstate and State Farm have already raised their rates for homeowners insurance by about 15 percent in the
past few months, which helps offset losses for issuing cheaper car insurance.
Industry insiders don’t expect that declines in car insurance rates will last, especially as the cost of claims payouts and cases of insur-
ance fraud increase.
CYBER INSURANCENEWS / IN THE SPOTLIGHT / 33
Technology Investments Can Help P&C Insurers Create Efficiencies, Save Money
T hose in the property and casualty (P&C) insurance field are looking for ways to increase efficiency and reduce costs. Many,
including consultants, independent research firms and authors, believe that the key to profitability for the P&C industry will be
found in the implementation of transformational technologies.
Stephen Forte, Research Director with Gartner wrote in a February 2009 report, “For commercial line P&C insurers, underwriting func-
tionality through legacy policy administration falls short of meeting strategic business goals such as underwriting profitability and
“P&C insurers need to react to market changes quickly and collaborate with their distribution channel, while improving fundamental
expenses and costs,” Forte added, “This means giving underwriters tools to more accurately understand and price risk, for better
cross-selling and up-selling and coordination of underwriting processes across the business. Underwriting workstations meet these
critical needs by automating processes and using rules and workflow that reduce errors, filter undesirable submissions and free under-
writers to collaborate with their agents and brokers. The ROI from automation, error reduction and focusing on strategic aspects of
the business is impressive.”
A separate July 2009 report by management consulting firm Robert E. Nolan Co. states, “Technological investments are required to
develop and constantly modify the predictive models, which will become the industry norm as increased integration of internal and
vendor supplied information becomes the source of rate plan competitive differentiations. Carriers with outdated core systems need to
plan now for a comprehensive redesign of underwriting processes and technology, incorporating expanded use of the Internet for dis-
tribution channels and customers.”
Beazley Group Creates Confidential Hotline Service
T here’s a new hotline help for law firms. Beazley Group has launched a confidential hotline service for its law firm clients with
primary professional liability coverage with the carrier. Clients who are dealing with ethical or risk management dilemmas will
have access to the hotline, which Beazley will subsidize.
The service will be provided by David Jargiello, a partner and general counsel at Virtual Law Partners LLP. Jargiello’s counsel will be
protected by attorney-client privilege, so all exchanges between Jargiello and law firms will remain confidential, even from Beazley.
As Lloyd Fielder, who runs Beazley’s lawyers’ professional liability team, explained, it is in the carrier’s best interest to help its
clients resolve matters that could turn into costly claims.
“A wide range of situations can generate thorny ethical and risk management dilemmas for law firms,” Fielder said. “If not resolved,
these matters have the potential to generate multi-million dollar insurance claims. It is clearly in our interests and those of our clients
to identify ways to ‘nip in the bud’ issues that could develop into claims.”
Jargiello has held senior positions in four law firms, including general counsel roles at three firms. He is one of the original founders
of Venture Law Group, a Silicon Valley law firm. He has advised law firms of all sizes and practice areas, as well as risk retention
groups and captives, on risk management issues.
“I am delighted that David will be offering this service to our clients,” Fielder added. “He is very familiar with the challenges and
difficult choices that law firms have to make, particularly in these trying economic times.”
Gagne Named Director of Sales for SUNZ
S UNZ Insurance Company has selected Christine L. Gagne
as the company’s new director of sales. The Florida carrier
specializes in providing workers’ comp to Professional
comprehend the magnitude of this growth initiative,” Lilak
said. “Her industry accolades and experience are a perfect
match for SUNZ.”
Employer Organizations (PEO) and staffing companies. Gagne served as the director of underwriting and marketing for
Gagne, who has placed property and casualty insurance Midwest Insurance Services (MIS), where she was responsible
accounts for more than two decades, comes to the St. for marketing and placement of large loss sensitive commercial
Petersburg firm with expertise in sales and marketing for multi- accounts. MIS handled the back office operations for the large
ple lines of insurance products, client services, and deductible workers’ comp program for Midwest Employers
management. Her recent focus has been on workers’ comp in Casualty Company, one of the largest excess carriers in the
the area of loss sensitive products. United States.
Douglas Lilak, CES of SUNZ, said that Gagne’s arrival at the She was also responsible for management of a PEO-owned
carriers comes at a period of growth for SUNZ in its niche Insurance Company Client. She was managing an estimated
within the insurance market. $43 million in total standard premium with this program.
“The team at SUNZ is proud to welcome Ms. Gagne as the Gagne has obtained her property and casualty license, surplus
new director of sales, and we know she is the right person to lines license, health license, and professional designation of
Certified Insurance Counselor (CIC).
34 / IN THE SPOTLIGHT / CYBER INSURANCENEWS