Archive for the “insurance regulation” Category
 Last week I had the pleasure of attending an independent agent seminar presented by Hales & Co. and hosted by National Underwriter and AA&B on “creating and enhancing shareholder value.”
Don’t let the Hales tag fool you: although M&A was a large part of the discussion, it was by no means the only topic. In fact, the all-day event pretty much ran the gamut of all the challenges independent agents face, from complying with the new healthcare reform law and other legislation to building a stronger brand.
The main message I came away with was this: Being an independent insurance agent is not for wimps. Not only are you stuck competing in the worst economic mess since the Great Depression, but you also have to worry about complying with state and federal regulations, finding new business, tracking your insurers’ financial stability, and on top of everything else, staying on top of Facebook, LinkedIn and Twitter.
And now, to add insult to injury, you’re also a target for professional wrestlers.
In a story that sounds like something from the Onion, last week the St. Petersburg Times reported that Hulk Hogan (real name: Terry Bollea) has sued his insurance broker, Wells Fargo Insurance Services, claiming the broker should have offered him an umbrella policy, which would have protected him from lawsuits when his son crashed his car, catastrophically injuring a passenger in 2007. Although he had a third-party auto liability policy with a $250,000 limit, Hulk recently paid a confidential settlement in the accident, which the broker lawsuit seeks to recover.
The case goes to the heart of the broker-as-consultant issue, which holds the profession to a higher standard of ethics and expertise than a mere policy-pusher. According to the Times article:
Didn’t Bollea have a personal responsibility to investigate on his own what he needed to do to protect his multimillion-dollar net worth?
“Not if you put your trust in your broker,” Florin (Hulk’s lawyer) said.
“This isn’t a personal responsibility case,” Florin said. “This is a professional responsibility case.”
Every agency consultant, including those at the Hales event, extols the virtues of independent agents and brokers differentiating themselves in a tough market by becoming more professional and consultative. Unfortunately, as the Hulk case demonstrates, that professionalism can be a double-edged sword. If you’ve cut corners to survive the soft market and the recession, that frugality could come back to haunt you if you’re not covering all the bases with your agency services.
As the industry continues to evolve in sophistication, don’t be surprised if you start seeing more of these types of cases.
And it would be really cool if they could be settled with a cage match.
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 Last week I had the privilege of seeing independent agents in action at the Big “I” annual legislative conference and convention in Washington, D.C. — an event that, unlike the recent RIMS conference, was well attended in spite of pinched travel budgets and the growing swine flu threat (yes, there were a few travelers in medical masks at O’Hare Airport).
Despite the pleasant weather, cherry trees in bloom, and the perennial chaperoned groups of middle-schoolers on class field trips, this D.C. meeting is no junket. Agents who take time away from their businesses to come to this event are committed to getting their POVs known and understood by their representatives in Washington.
I was graciously invited to tag along on some of the Hill visits by the boys (mostly) from Illinois, led by IIA of Illinois President-elect Luke Praxmarer of the Corkill Insurance agency in Elk Grove Village (you couldn’t miss his psychedelic tie).
Luke and his group weren’t there to see the cherry blossoms. Their schedule started at 10 a.m. in the offices of Illinois Congressman Timothy Johnson, and ended well after 6 p.m. with Illinois Sen. Roland Burris (Barack Obama’s replacement, who was appointed by erstwhile Illinois Gov. Rod Blagojevich). I went along for the last two appointments.
At the Hart Building offices of Sen. Dick Durbin, the Illinois contingent of more than 50 agents was so big that the staff couldn’t accommodate them in a conference room, so they met with Durbin’s legislative assistant in the hallway. (As a member of the press, I wasn’t allowed to eavesdrop.)
Later, at Burris’s offices in the venerable Russell Building, where we were told a young Sen. John Kennedy once had his digs, the dapper senator reverted to his political roots and “worked the crowd,” speaking with individual agents about their hometown alliances (I was allowed to sit in on this one).
 Ill. Sen. Roland Burris (seated at center) gets a briefing on insurance issues from members of the Illinois Big I. Over and over, Luke and Illinois agents Mike Wojcik, Tom Mollenhauer and others pounded home the independent agency position on three key issues: federal regulation, agent licensing and healthcare reform. They were both skillful and diplomatic, stressing their knowledge of the subject and how it affects both independent agents and consumers.
Between meetings, and later at the Big I exhibit hall, agents told me that legislator response to these issues could be uneven; some lawmakers were adamant that a form of federal regulation was imminent, while others denied it. Most agreed that Obama’s campaign promise of healthcare reform was a certain deliverable (the latest permutation would expand the federal Medicare program to include the uninsured), and NARAB II, which easily passed through the House last year, seemed to be a shoo-in.
On the whole, the Illinois agents and others at the convention said the politicians they spoke with are playing their cards pretty close to the vest — and it’s understandable why. Their constituents have been burned hard by the Wall Street debacle and are leery about any proposals that might smack of supporting big business. The Illinois agents at our Capitol Hill meetings made it clear that they’re not AIG asking for a bailout: they and their customers are in fact the Main Street America that legislators otherwise know as voters.
The last time I went lobbying with insurance agents was during the palmy days of the early 1990s, back before banks were even allowed to own insurers. Although a lot has changed since then, the need for an informed agency force to communicate their needs to their elected officials is more important than ever. After all, it’s your democratic right — exercise it!
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Boy, I asked for it.
AA&B posted a recent poll on our Web site (www.agentandbroker.com), asking our readers whether the insurance industry should be federally regulated.
Not that I didn’t suspect, but your overwhelming response was a resounding NO, with 86% voting no, 5% voting yes, and 9% saying they’d favor some joint form of federal/state regulation.
My favorite part of any poll is the free-form comments. Here’s a sampling:
“Not NO, but ‘Hell NO’!”
“The government couldn’t run the Mustang Ranch in NV selling prostitution and booze — they pushed it into bankruptcy. How can they help the insurance industry?”
“The Feds have done a terrible job at regulating banks adn securities dealers, while insurance companies have done well under state regulation. AIG is an unusual situation and did not get into trouble because of the insurance operations. Insurance companies should remain under state regulation, but be limited to what other activities they can undertake.”
“Insurance is written in response to laws passed by states. Difficult for federal control to respond to multiple variations of assorted laws.”
However, there were a few lonely supporters of some sort of federal oversight:
“State regulation is antiquated and imperfect and regulation should take the shape of creating regulatory efficiencies versus more red tape.”
“My agency’s biggest problem is the ‘multistate’ licensing issues. I don’t need a non-resident drivers license to travel across state lines!”
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Posted by ltoops@sbmedia.com in Farmers, NAIC, PCI, Uncategorized, Zurich, insurance regulation, insurers, lobbying, politics, property-casualty insurance, tags: Farmers, lobbying, PCI, Zurich
As if it isn’t easy enough to read the signposts that have been cropping up in the news media, the latest announcement coming out of the NAIC makes things pretty clear: At an industry tele-press conference yesterday, incoming President Terry Vaughan announced that the association was moving its headquarters from Kansas City to Washington, D.C.
The move comes in direct response to demands from Congress during what Vaughan called “a historic time for regulation” of property-casualty insurance and financial services regulation.
The move will essentially create a Center for Insurance Information operating out of the NAIC’s 16-person D.C. office. The association will maintain its staff of 377 in K.C. and 48 in New York.
Although Vaughan declined to comment specifically on the recent findings of the GAO report — which implied that Congressional consideration of an optional federal charter could impact the current state regulatory system — she did say it was a “balanced report that made some good comments and identified issues.”
The NAIC’s strategy reflects the reality that Capitol Hill will continue to scrutinize our industry this year and beyond. Other signs of the times: PCI contracting with D.C. government relations firm Quinn Gillespie to advance its issues in Congress, and Zurich/Farmers beefing up its clout with the addition of former AIG government affairs director Rich Merski to its federal affairs team.
Not a moment too late, evidently. This from NUP:
An influential senator said today that federal lawmakers need to consider U.S. regulation of the insurance industry, which now has only state oversight.
Sen. Richard Shelby, R-Ala., made his comments during a Senate Banking Committee hearing citing the debacle at American International Group, which has required billions in government bailout money as a reason to consider federal regulation of the sector.
It’s happening, folks, whether we want it or not. The smart players are the ones positioning themselves to help craft an agreeable solution instead of those who close their eyes and let themselves be steamrolled by the results.
Want to take a poll about insurance regulation? Visit our Web site.
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If the “official” (read: “press release”) reaction from insurance industry trade groups about the Fed’s $85 billion-dollar bailout of AIG is any indication, the controversial move is quite simply a Very Good Thing. They point to the fact that there are safeguards — AIG has 24 months to pay off the loan with interest, most likely by selling off substantial portions of its business to who knows what investors. They say it will stabilize the markets and will not lead to the domino effect of more bailouts.
Then why am I so bothered by the principle of the thing?
We all work within the insurance industry, and we all want it to do well. But above and beyond our connection to insurance, we’re also consumers and taxpayers. And this latest financial fiasco should infuriate anyone who pays taxes, has a 401(k) and is watching their investments go down the crapper.
And the price tag is a lot more than $85 billion. According to blogger Hale Stewart:
Between the $29 billion the Fed pledged to swing the Bear Stearns sale to JPMorgan in March, $100 billion apiece to rescue mortgage finance firms Fannie Mae and Freddie Mac, up to $300 billion for the Federal Housing Authority, Tuesday’s $85 billion loan to insurer AIG and various other rescue deals and loans, taxpayers are potentially on the hook for more than $900 billion.
Make no mistake, the suckers footing the bill for all of this are you, your children and your grandchildren.
We’ve been hearing for years about how free trade, unfettered business dealings and minimal regulation can only benefit the economy — and in turn, you. Big businesses have hammered the doctrine into our heads that too much government is bad. In the political arena, these same opponents of big government are also fond of the term “personal responsibility,” at least when it comes to welfare mothers, broke homeowners defaulting on their mortgages, and underinsured property owners who get hit with a disaster. (After Katrina, some of the comments made anonymously on insurance forums about hurricane victims by so-called ”professionals” made my blood run cold.) It’s funny how these same opponents of “handouts” for ordinary citizens don’t mind heading to the dwindling government trough when they’re in trouble themselves.
The big brains at AIG, who make a living specializing in risk, should have had an inkling that adequately insuring something as risky as mortgage-backed securities might be a problem. Even former AIG helmsman Hank Greenberg has blamed management’s failure to practice sound risk management as the reason for the meltdown.
At this point, the big question is, who’s next? The pundits are saying that AIG’s loss will be its competitors’ gain. Unfortunately, the bottom-line losers in all this fiscal sleight-of-hand are the insurance buyers, who end up with fewer markets and more uncertainty. Oh, and the insurance agents and brokers who have to explain it all to them.
Want to take a survey on the AIG meltdown? Click here:
http://www.agentandbroker.com/ME2/dirsect.asp?sid=E2D3EF32475B4172A42FEE249B241FD4&nm=%3Cb%3E%3Cfont+color%3D%22%23c00000%22%3E+%3E%3C%2Ffont%3E+Take+the+%3Cfont+color%3D%22%23c00000%22%3ESurvey%3C%2Ffont%3E%3C%2Fb%3E
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I just spent a fascinating morning at the Center for Research Libraries on the University of Chicago campus. I never even knew this place existed, but it’s such a comprehensive resource that the Library of Congress comes calling when it’s stumped for material.
What brought me to the South Side was a quest for rare back issues of Local Agent — the predecessor of American Agent & Broker magazine. In recognition of our upcoming 80th anniversary, we’re compiling material from the past for a special issue we’re developing for next year. The Center was able to fill in the gap for issues from 1930 to 1947, which we don’t have at our St. Louis offices.
While it’s not on par with digging up a crystal skull somewhere in Peru, there is a certain excitement in leafing through ancient publications — at least for history buffs. It’s interesting to see how our publication evolved from a black-and-white monthly of about 26 pages to its current ambitious format. (And I confess to finding guilty pleasure in the ads for mostly defunct insurers, some of which feature such cringe-inducing images as caricatured American Indians, Pullman train porters, dizzy dames, and, for some reason, one insurer whose mascot was a French poodle. Guess the “Mad Men” who thought that one up had one too many pre-lunch martinis that day.)
What was especially resonant about this stroll down memory lane, though, was seeing how many things have remained the same in our industry. The earliest issues, dating from June 1930, are replete with articles by agents who look like Guy Kibbee, dispensing sage advice on how to combat bad economic conditions (complete with NRA logo on the masthead).
Other evergreen issues include getting the biggest bang for your advertising buck, cross-selling unique coverages (did you know there was once something called “silverware insurance”?), improving collections (a big issue during the Depression), the need for agents act as consultants to their customers, direct-mail programs, and coverage of the National Association of Insurance Agents meetings (some things never change!).
These earliest issues of Local Agent also give us a hint of how long it took for the concept of state insurance regulation and limited antitrust exemption (in the form of the 1945 McCarran-Ferguson Act) to gain traction in the industry. You can see from the magazine’s contents and editorial commentary how bad economic conditions gradually gave rise to legislative intervention — starting in 1933 with the Glass-Steagall Act and the creation of the FDIC, and the National Industrial Recovery Act, which established fair practice codes for specific industries, including insurance (although the NRA was struck down two years later by the Supreme Court).
Once again we find ourselves in tough times, and it’s interesting to speculate on whether economic conditions, pressure from the media and political posturing will result in more legislation designed to mitigate our current woes.
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