cyberinsurance news october09

How to Handle the “Contradictory Customer” by Steve Lewit, CEO and Founder,Wealth Financial Group

H ave you noticed a shift in the customers you’reseeing 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 whobelieve in investing in the market, the recent rise in themarket has caused a new ‘market euphoria’ with dazzlingselling consequences. The customer that was very willingto reposition assets just four or five months ago is now notsure what to do and sitting tight.

If you recognize this shift in behavior, what are you doingabout 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 thatI’ve identified which can blow up a sale. I call it theContradictory Customer—the customer who tells you one

thing this week and another thing the next. When customers shift their behavior, they are actingcontradictory than the way they acted in the past. Usually these clients also bring with them twoother 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.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-tionality is fear—either the fear of losing something they might get in the future or somethingthey have now. Interestingly enough, the fear of loss or something a person could have in thefuture, missing out on an opportunity, is often more threatening than losing something that isalready possessed. Now, it’s not just about the money. The fear of missing an opportunity in an upmarket is compounded by numerous other fears which have great impact on your customer—thefear of not being able to keep up with friends when they talk about their great market successes;the fear of feeling stupid; the fear of being criticized by a spouse without having a good defensefor not staying in the market (when everyone is losing in the market there is an irrational comfortand explanation for the loss); the fear of missing out on plans and dreams. The compoundingeffect of these numerous fears makes the fear of loss of future gain a very potent block to a cus-tomer’s willingness to change.

Now, your priority as a selling professional is to be aware of this shift in your customers and toallow your selling system to deal with it (I am assuming here that you have a system and that itdeals with these landmines). Our system deals with these landmines by bringing the customer intothe reality of what they are doing and the decisions they are making. It is only when your cus-tomer experiences that reality is there any possibility of short circuiting the false hope in whichthey believe.

Let’s see how this works:

Customer: Well, we’ve changed our minds and are going to sit tight—not sure what’s going onout there but have a feeling things are getting better.

You: Interesting. That’s quite a shift from where we were when we started working together.Could you tell me more about that?

• You always begin by using the sequence of mind mapping questions.

IN THIS ISSUE

SBI-AXA LifeInsurance GoesLive with Japan’sFirst AutomatedUnderwritingEngine for LifeInsurance (place inInnovation andTechnology) p. 29

TechnologyInvestments CanHelp P&C InsurersCreate Efficiencies,Save Money p. 34

Annuities BoostRetirementConfidence ofMiddle-ClassAmericans p. 5

VOL. 2, ISSUE 10 – OCTOBER 2009

■ PLEASE SEE CONTRADICTORY CUSTOMER ON 17

CYBER INSURANCENEWS / CONTENTS / 3

contents

Cyber InsuranceNewssm

industry news & trendsSales of Individual Life Insurance Improve Slightly inSecond Quarter p. 9

Average Premium for Individually Purchased HealthPolicies Grows Modestly p. 11

regionsThirteen States Win HHS Grants to Help theUninsured p. 14

State Farm Donates $1 Million to Teach ForAmerica p. 15

issuesHHS Report Highlights Young Adults’ Need forHealth Insurance p. 16

AXA Equitable’s Participation in IRS PrototypeProgram Will Help Clients Stay Compliant p. 20

innovation & technologyChubb Group Offers New IT Protection p. 25

CIGNA Takes Home the Gold p. 26

in the spotlightAon Releases New Quarterly Overview: MostMarkets Remain Soft p. 33

Beazley Group Creates Confidential Hotline Servicep. 34

Vol. 2, Issue No. 10, October 2009

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Executives 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 InsuranceIndustry Conference in Brooklyn, N.Y., last month, said they expect their company to performahead of expectations in 2010. This contrasts with KPMG’s 2008 survey, when only 22 percentsaw performance in 2009 being better than expected. Another 36 percent in this year’s surveysaid 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 companiesfor the next few years. In fact, 64 percent see only a moderate ability to increase underwritingprofit, while 27 percent said the chance of increased profit as “weak.”

“While our survey shows some optimism related to future performance, executives have clearlyindicated that the industry still faces many risks and the uncertain economic and regulatory environment poses many obstacles togrowth 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 toaccess 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 theyexpect 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 optionalchange 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 changeand say increased regulation is not needed in the industry.

2010 Will Be Better for Insurance Industry, Executives Predict

4 / INDUSTRY NEWS & TRENDS / CYBER INSURANCENEWS

Mutual of Omaha wants to know what Americans’ favorite“aha moments” are.

The insurer, who sponsors life’s aha momentsSM, has started anonline survey encouraging people to vote for their favorite suchmoments of the year. The top 10 vote getters will become Mutualof Omaha’s 2010 national broadcast advertising campaign.

The first round of voting runs October 1–15. It features 75 ahamoments recorded during the company’s recent five-monthnational tour. Mutual of Omaha selected three inspirationalmoments from each of the 25 markets the tour visited.

“We set out on the Aha Moment Tour hoping to capture

extraordinary aha moments, real stories from real people, andwe ended up with more than 1,000 uplifting stories,” explainedJohn Hildenbiddle, senior vice president of brand managementand public relations at Mutual of Omaha.

Following the first round of voting, the top vote getter from eachof the 25 cities will move into the final round of voting, whichends on October 31. The results of the second phase will deter-mine the top 10 favorites, which will become the company’snewest television ads.

Mutual of Omaha kicked off its sponsorship of life’s ahamoments in February 2009 with a national advertising campaign,a Web site devoted to aha moments, and a Facebook page.

Favorite “Aha Moments” Will Become Mutual of Omaha’s 2010 Advertising Campaign

Annuities BoostRetirement Confidence ofMiddle-Class Americans

Americans feel good about their annuities. Anew survey shows that owning non-qualified

annuities boosts the confidence that middle-classAmericans have about their retirement, and thosewho own annuities have great confidence in theirfinancial future, despite the recent recession andsluggish markets. More than half of annuity own-ers (55 percent) believe that they have enough ormore than enough money to cover their financialneeds in retirement.

Conducted by the Gallup Organization (Gallup)and Mathew Greenwald & Associates (Greenwald)in conjunction with the Committee of AnnuityInsurers (CAI), the survey of 1003 annuity ownersreveals who purchases non-qualified annuities andwhy. For instance, eight out of 10 non-qualifiedannuity owners have annual household incomesbelow $100,000, so the majority are middle-class.In fact, 42 percent have annual household incomesbelow $50,000. Only 4 percent have annualincomes greater than $200,000.

Annuity owners believe they have done a “verygood job of saving for retirement.” More than 90percent say that statement describes them well,and they believe their annuities have contributedto that condition. Almost 80 percent think thatannuities are an important source of retirementsecurity and make them feel more comfortable intimes of financial uncertainty. More than 8 in 10intend to use their annuities to provide a financialcushion in case they or their spouses live beyondtheir life expectancy, and about the same numberintend to use their annuities to avoid being afinancial burden on their children.

The survey also revealed that non-qualified annu-ity owners are most likely to be older, retiredwomen. The majority are female (58 percent),and 69 percent are retired, up from 58 percent in2005. The average age of owners also increasedfrom 66 to 70 between 2005 and 2009.

Annuity owners told the pollsters they are happywith their purchase. Owners demonstrate a strongloyalty and commitment to their annuity purchas-es, with 93 percent reporting that they still owntheir first annuity.

“This survey demonstrates that these Americansconsider their annuities the answer to both sidesof the fundamental retirement challenge, amethod to accumulate retirement savings, and avehicle to turn their savings into a steady retire-ment income stream that cannot be outlived,” saidDeborah Winston of the CAI.

CYBER INSURANCENEWS / INDUSTRY NEWS & TRENDS / 5

Jansen, LaFontaine Add Star Power toING Marathon and Run For Something

Better Program

Acouple of famous skaters are lacing up their running shoes for the2009 ING New York City Marathon.

Olympic gold medalist speed skater Dan Jansen and former NationalHockey League player Pat LaFontaine will participate in the 40th run-ning of the marathon on November 1. Both are serving as ambassadorsfor the ING Run For Something Better, which promotes youth fitnessand provides grants and funding to school-based running programsacross America.

As they run, Jansen and LaFontaine will wear a pair of ING’s signatureorange shoelaces, which are given to those who make a charitabledonation of $10 or more to Run For Something Better. They also willraise money for the program through fundraising Web sites.

Both athletes under-stand the necessityfor kids to learn goodfitness habits andstay physically active.By running in themarathon and partici-pating in the INGRun For SomethingBetter program, theyhope to encouragekids to get fit andstay fit.

“As an elite speed skater, it was necessary for me to develop good fit-ness habits early in life,” Jansen said. “Starting off on the right foot asa child makes it much easier to lead a healthy lifestyle as an adult.”

LaFontaine added, “Not every child is going to become a professionalathlete, but they can take the right steps toward leading a healthy life.”

LaFontaine, who played for the New York Islanders, Buffalo Sabres,and New York Rangers, said his parents helped him focus on properexercise, training, and nutrition, which became the foundation for hissuccessful, 15-year career in the NHL.

“Today, these things are still very important to me,” he said. “I’mexcited to be partnering with ING and supporting the ING Run ForSomething Better so that other kids can learn these same values.”

Since 2003, more than 50,000 children have participated in ING RunFor Something Better programs across the country. Children in theseprograms have run more than 1.5 million miles collectively. Nationally,ING has committed more than $2.5 million to fund grants and school-based running programs through the ING Run For Something Better.

“The ING Run For Something Better program is all about teaching ourchildren the benefits of being healthy and fit, and the dedication ittakes to setting and achieving goals in life,” said Rhonda Mims, presi-dent of the ING Foundation and senior vice president, Office ofCorporate Responsibility and Multicultural Affairs. “The support weget from Dan and Pat will help us continue spreading this positivemessage.”


Humana Sponsors Walk It Tee to GreenProgram at PGA Tour

Events

Golfers who don’t ride carts get in alot more exercise than they realize

during a round of golf. So do specta-tors.

And Kentucky-based Humana Inc., theofficial health benefits company of thePGA Tour, can prove it.

During the weekend of September11–13, Humana provided spectators atthe Nationwide Tour’s UtahChampionship in Sandy, Utah, with freepedometers to chart the number of stepsthey took around the Willow CreekCountry Club. Participants in the WalkIt Tee to GreenSM promotion who walkedat least 7,000 steps were entered to winan iPod nano, and anyone who walked10,000 steps or more were entered intoa drawing for an iPod touch.

Participants picked up their freepedometers when they registered at theHumana booth. They were able toreturn to the booth throughout the dayto check the steps “leaderboard.”

This wasn’t the first event in the Walk ItTee to Green program. Earlier this year,Humana brought the program to threePGA Tour stops: the Valero Texas Openin San Antonio, the HP Byron NelsonChampionship in Dallas, and theStanford St. Jude Championship inMemphis. Combined, participants atthese events took nearly 9 million steps,or about 4,621 miles. Walkers alsoburned 406,732 calories.

“The Walk It Tee to Green is a nice com-plement to a number of initiatives we’redoing in Utah, including one to get kidsactive,” said Earl Hurst, Humana’s Utahmarket president. “The nice thing aboutgolf, in particular, is that it’s the onlysport that you can actually get exercisewhile you’re watching it.”

Edwards Drives Special Car in AtlantaRace to Support Aflac Cancer Center

NASCAR driver Carl Edwards sported a new look in the Pep Boys Auto500 at the Atlanta Motor Speedway on September 6.

The No. 99 Aflac Ford Fusion car was decked out in a colorful designinspired by a 13-year-old patient at the Aflac Cancer Center (ACC) inAtlanta, Georgia. Aflac had invited children at the Aflac Cancer Center andBlood Disorders Service to “Color Carl’s Car” for the race as part of Aflac’seffort to generate awareness for Childhood Cancer Awareness Month.

The selected scheme, submitted by Jody Lawrence of Greensboro, Georgia,was chosen from among 54 other entries. All of the children’s drawings werefeatured on the pit wall banner for the No. 99 race team, and Edwards wore amatching fire suit and a white helmet signed by children at the ACC.

“Aflac is combining our passion for fighting childhood cancer with ourNASCAR sponsorship of Carl Edwards to raise money and awareness for agreat cause,” said Paul Amos II, Aflac president and COO. “By showcasing

Jody’s compellingstory, we hope toinspire NASCARfans to help raisefunds and supportthe research andtreatment that takesplace every day atthe Aflac CancerCenter.”

Americans can jointhe fight againstpediatric cancer bydonating to the ACCthrough the ACC

causes page, which can be accessed on Facebook or through the Aflac Website. Aflac will contribute one dollar for anyone who joins the ACC causespage, matching donations up to $1 million.

Aflac Chairman and CEO Dan Amos kicked off the campaign by making apersonal donation of $100,000 and challenged others to contribute to thefight. Edwards announced on Facebook that he will donate his portion($132,706) of the winnings from Sunday’s race to the ACC.

“This is a wonderful campaign and a great example of how Aflac continuesto support childhood cancer treatment and research,” Edwards said. “I amproud to be a part of this effort.”

Aflac is also encouraging NASCAR fans to join the fight against childhoodcancer through a text donation program, which runs throughout September.Fans can text “GoCarl” to 90999 using any carrier. The NASCAR Foundationwill match texted donations up to $10,000.


When 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 theissue of age rating regulations, which affect whether or notyoung people buy health insurance, according to the BlueCross and Blue Shield Association (BCBSA).

Currently, 42 states permit health plans to vary premiums basedon age by 5 to 1 or more. The primary benefit of this ratio isthat premiums are kept affordable for younger individuals,which in turn encourages broad participation. However, if morerestrictive age ratings were implemented, younger people wouldopt out of purchasing coverage.

A new data analysis prepared for the BCBSA by OliverWyman’s Actuarial and Health and Life Sciences practiceshows that a 2 to 1 age rating ratio would increase premiumsfor the youngest and healthiest Americans in the individualmarket in many states by nearly 50 percent in the first year, rel-ative to a 5 to 1 age rating ratio. Over a five-year period, morethan 1 million younger members would leave the market,

resulting in a 10 percent premium increase overall for individu-als in some parts of the country.

“An affordable, sustainable insurance market requires broadparticipation across all age groups to maintain more affordablepremiums,” said Scott P. Serota, president and CEO of BCBSA.“As this analysis shows, overly restrictive age rating regulationswould hurt a large portion of those with individual coverage,making coverage less affordable and undermining the key goalsof health care reform.”

The analysis also finds that restricting age rating ratios to 3 to1 would increase premiums in many states by as much as 30percent for younger people, relative to a 5 to 1 ratio.

Serota said that the BCBSA supports a 5 to 1 age rating.

“Younger individuals are much more sensitive to the costs ofhealth insurance compared to older individuals,” Serota said.“The bottom line is that if premiums are too high, young andhealthy individuals simply will not purchase insurance and theirneeded cross-subsidies for older, sicker people will be lost,increasing the cost of health care for everyone.”

BCBSA Supports 5 to 1 Age Rating Ratio for Health Insurance Premiums

Medical Plan Costs Will Continue to Soar in 2010, Segal Survey Says

Health care plan sponsors can’t wait for politicians to figureout 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 inmedical plan costs will continue to be more than four times greaterthan the annual increase in average hourly earnings and in sharpcontrast 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 plansponsors, who are not waiting for health care reform,” said EdwardKaplan, senior vice president and National Health Practice Leader.“They are accelerating their efforts to control health care coststhrough renewed wellness and disease management programs,changes to value-based plan designs, eligibility audits, seekingmore competitive vendor terms through bids, and other innovativestrategies.”

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 10.8percent

• 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 ahigh 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 1percent 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, managedcare organizations, pharmacy benefit managers, and third-party administrators to determine the trend factors they will be applying toactual medical claims to predict expected claims for 2010.

Changes are coming for defined benefit retirement plansthat are intended to mitigate risks for employers and

employees alike.

A recent survey from CFO Research Servicesand Prudential Financial, Inc., shows thatnearly half of senior finance executives saidthat their companies are very or somewhatlikely to freeze or end their defined benefit(DB) retirement plans within the next twoyears. Seventeen percent have closed theirDB plans to new entrants, and 27 percent saythat they are very likely to do so in the nexttwo years.

More than two-thirds of the executives, how-ever, said that they would like to change theirdefined contribution (DC) plans so theywould more closely resemble DB plans. Theywould do this through the addition of guaran-teed income during retirement.

The survey of 140 financial executives atcompanies sponsoring DB and other retire-ment benefits plans examined how financeexecutives are managing retirement benefit programs and relat-ed risks within the recession.

“Finance executives are spending more time than ever on man-aging their companies’ retirement benefit programs,” saidBernard Winograd, executive vice president and chief operatingofficer of Prudential’s U.S. Businesses. “Importantly, we foundthat executives are focused on reducing benefit risks through arange of measures, including the implementation of liability-

driven investment strategies in DB plans, and the addition ofnew risk management features to DC plans.”

Reducing the volatility of their plans’ fund-ing status is a high priority for 57 percent ofsurvey participants, and 45 percent saidtheir pension plan performance had a sub-stantial impact on their company’s financialperformance in the past year. As a result, 74percent said their companies are very likelyto conduct or have already conducted a for-mal risk assessment of those plans.Sixty-four percent said they have adopted orwere very likely to adopt a liability-driveninvestment strategy to help lessen risk.

DC account values have plummeted and putmany employees’ near-term plans to retirein jeopardy, the executives acknowledged.More than 60 percent of respondents saidthey are more concerned than they were ayear ago about employees who are finan-cially unable to retire and would therefore“retire on the job.” Executives are preparingto take steps to help participants avoid

future bear markets, with 44 percent saying they are very likelyto add investment products that protect against market declinesto their DC plans.

To address short-term benefit obligations, 60 percent of respon-dents said they have already increased, or are very likely toincrease, contributions to their DB plans.


Companies Look to Change or End Defined Benefit Retirement Plans

Most Employees Plan to Keep or Increase Benefit Levels,MetLife Survey Shows

The fall “open enrollment” period is just around the corner, and the overwhelming majority of U.S. workers plan to keep orincrease their benefits.

According to MetLife’s 2009 Open Enrollment Poll, almost 80 percent of employees say they will maintain or increase the number ofbenefits 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 benefitsduring 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 employeesare feeling the economic pinch,” said Dr. Ronald Leopold, vice president for MetLife’s U.S. Business and author of The Benefits Edgeand 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, regardingtheir ability to evaluate their options and choose the right benefits, 89 percent said they are somewhat or very confident. Thus, 76percent plan to spend approximately the same amount of time this year as last in selecting their benefits. Only 13 percent of employ-

■ PLEASE SEE MOST EMPLOYEES ON 9


ees plan to spend more time during this year’s open enrollment period. Among them, 64percent cite current economic events/financial security, and 31 percent credit a major lifeevent 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 beencommunicating 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. Only43 percent of employers provide such statements, according to the Seventh Annual MetLife Study of Employee BenefitsTrends.

2. Steer employees to decision-support tools, such as Web-based calculators. These can help workers select benefits and propercoverage levels.

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 atwork, 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 morefrequently than once a year. One solution is an off-cycle enrollment period with a focused enrollment on a single benefit. Thiscould result in higher enrollment rates, greater employee benefits satisfaction, and higher confidence in open enrollment deci-sions.

To prepare for the open enrollment period, the public can visit MetLife’s Employee Benefits Simplifier, a free tool for consumersavailable at the MetLife Web site.

So far, 2009 has seen individual life insurance annualizedpremium take a nosedive, a plunge that has affected all

product lines.

The bit of good news in this is that the declinefor the second quarter—20 percent—wasn’t assharp as the 26 percent drop in the first quarter,according to LIMRA’s U.S. Individual LifeInsurance Sales report. Overall, premium saleshave fallen 23 percent for the year so far.

Ashley Durham, a senior analyst with LIMRA,said the second quarter performance gives theindustry reason for hope. “Forty percent of com-panies were able to increase their totalindividual life sales over the second quarter of2008,” Durham said, compared to less than 30 percent in thefirst quarter.

Fittingly, variable sales, which have the strongest ties to thestock market, continue to suffer the most, down about 50 per-cent for the second quarter and 55 percent for the year so far.

Universal life (UL) sales were down 29 percent for the quarterand 27 percent for the first six months. This is the fourth con-secutive quarter of double-digit declines for UL sales. One

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 annualizedpremium sales in 2008.

Whole life and term insurance continue to farethe best. Whole life fell three percent in the sec-ond quarter and four percent for the year, whileterm slipped only three percent for both the quar-ter and year to date. Both products havemaintained their 28 percent market share of newpremiums issued.

Overall, the number of policies continued todrop, down four percent in the second quarter

and six percent for the year. Every product exceptUL, which increased eight percent, experienced declines in thesecond quarter.

On average, companies sold slightly smaller policies during thefirst half of 2009 than they did in the first half of 2008. Theaverage amount of coverage purchased for most productsremained steady; however, new UL policies tended to be small-er, 18 percent lower than those purchased during the equivalentmonths of 2008.

Sales of Individual Life Insurance Improve Slightly in Second Quarter

■ MOST EMPLOYEES FROM 8

Whole lifeand terminsurancecontinue tofare the best.

Majority of Americans Give Passing Grade to Current Health Care System, CIGNA Survey Shows

The current health care system gets a passing grade from a majority of Americans, but many would rather not suffer the stress ofthinking 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 thecurrent system an “A,” “B” or “C”—including 22 percent who assign an “A” to the current system. Furthermore, 62 percent of singlehouseholds give the current system an “A” or “B,” while 49 percent of two-person households and 48 percent of households withthree or more do the same.

Significantly, 62 percent of Americans say they get their health care insurancefrom their employer.

“People with employer-sponsored health coverage tend to be satisfied with theplans from their companies,” said Matt Manders, senior vice president ofCIGNA’s health care operations. “We believe this system, while not perfect, isthe bedrock of improving national health and wellness and that we should buildon it.”

But while most insured Americans say the current health care system works forthem, they also acknowledge that they don’t understand their health care plansthat well and they spend less than half an hour reviewing and choosing theirhealth plans.

When asked to rank their understanding of their health insurance plan withcommon household contracts, such as mortgages, cell phones, cable TV, retirement plans, and car warranties, Americans ranked theirunderstanding 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 50percent among Americans with children at home, just over 50 percent among 18- to 34-year-olds, and more than 70 percent amongHispanics.

“Survey results overall are encouraging in that most Americans say the current system works for them. But for some people, healthcare 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 thatthey 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 makeinformed, confident decisions about their health care.

Pet Insurance Advocacy Group Touts Benefits of Pets to Human Health

One aspect of improving health care that you probably won’t hear from lawmakers isthe role that pets play in the health of humans.

So the North American Pet Health Insurance Association (NAPHIA) is raising awarenessof the value of pets—and pet health insurance—by designating September as National PetHealth 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 theDelta Society shows that humans with a dog or cat in their home enjoy better health andspend less on their own health care than those without pets For instance, pet owners have a


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reduced risk of cardiovasculardisease, higher survival ratesfrom heart attacks, significantly lower use of general practition-er services, and reduced risk of asthma and allergic rhinitis inchildren exposed to pet allergens during the first year of theirlife. Furthermore, seniors with pets enjoy a better physical andpsychological well-being.

According to the Delta Society and other researchers, there isnot a significant social or economic difference between thosewho do and those who do not have a pet that can explain thedifferences in health outcomes between the two groups.

Lawrence Norvell, president and CEO of Delta Society, said hisgroup is excited to see more health care professionals embrac-ing the fact that pets can be a cost-effective approach toimproving people’s health and enriching their lives.

“At a time in which our society is looking for treatment alterna-tives to complement Western medicine, research is consistentlydemonstrating that pets canhave a profound impact onpeople’s physical and emo-tional health,” Norvell said.

Loran Hickton, NAPHIAexecutive director,acknowledged that it maybe difficult for peoplewithout pets to understand,but many pet owners willcorroborate research thatindicates having a petimproves one’s health andwell-being.

“We know that the uncertain-ty of the current economy makes pet insurance criticallyimportant for the financial well-being of all pet owners,”Hickton said. “Many pet owners simply don’t have the dispos-able income to cover emergencies or even routine pet healthcare, and each day, pets face economic euthanasia.”

Pet health insurance gives a financial safety net for pet ownersand often gives them the ability to provide a higher level ofcare to their ill or injured pets. When a pet owner has coveragefor his pet, he is usually spared the tough decision to withholdmedical care because of costs.

During September, NAPHIA is sponsoring a contest to selectpet health insurance customers’ favorite veterinary practicesfrom over 20,000 in North America. Pet owners are posting pic-tures of their pets, along with a story, at the NAPHIA Web site.The contest highlights the care and recovery of pets for whompet health insurance helped to provide needed care. NAPHIAwill award prizes for the pet owner, an educational grant to theveterinary care provider, and a donation to the pet shelter orrescue group of the winner’s choice.

Average Premium forIndividually Purchased Health

Policies Grows Modestly

The average monthly premium for individual healthinsurance policies grew about 1 percent from 2008

to 2009, but the average deductible for those policiesincreased by more than 11 percent.

These are some of the findings from the updated dataon the cost of individually purchased health insuranceplans released by eHealth, Inc., the parent company ofeHealthInsurance. This new data appears in The Cost ofIndividual and Family Health Insurance Plans 2009Update.

The analysis provides data on average and median pre-miums paid for individual health insurance policies andaverage deductibles for those policies. The research isbased on a national sample of some 316,000 individualand family major medical policies that were purchasedthrough eHealthInsurance and active in February 2009and of more than 258,000 policies that were active inFebruary 2008. (Data for Maine, Massachusetts, andVermont were excluded from this report becauseeHealthInsurance did not sell enough individual andfamily major medical plans in these states at the timethe data for this report was collected to provide anaccurate sample size.)

The Cost of Individual Plans

In February 2008, the average monthly premium forindividual policies was $159. That grew to $161 inFebruary 2009. Average premiums for individual poli-cies increased 1.1 percent over that time.

In February 2008, the median monthly premium forindividual policies was $130. A year later, the medianmonthly premium for individual policies was up to$132, an increase of just 1.5 percent over that time.

The average deductible for individual policies inFebruary 2008 was $2,084. That jumped 11.6 percentby February 2009 to $2,326

The Cost of Family Plans

In February 2008, the average monthly premium forfamily policies was $369. That increased to $383 a yearlater, for an average premium increase of 4 percent.

In February 2008, the median monthly premium forfamily policies was $320. Twelve months later that rosejust 2.9 percent, to $329.

The average deductible for family policies grew 13.3percent, however, from $2,760 in February 2008 to$3,128 in February 2009.

HSA-Eligible Plan Data

eHealth also released data about HSA-eligible policies.


■ PET INSURANCE FROM 10

…humans witha dog or catin theirhome…spendless on theirown healthcare.

■ PLEASE SEE AVERAGE PREMIUM ON 12

In February 2008, 14.3 percent of individual policies wereHSA-eligible; a year later, 16 percent of individual policieswere HSA-eligible.

In February 2008, the average monthly premium for HSA-eligi-ble individual policies was $137. That grew to $143 byFebruary 2009, a 4.7 percent year to year.

The average monthly premium for HSA-eligible family policieswas $309 in February 2008. That increased 7 percent, to $331,by February 2009.

Differences in Cost

The cost of individual health insurance policies reported in theeHealth study differs from the cost of employer-sponsored healthinsurance coverage because of differences between the individualmarket and the employer-sponsored market. Many of these fac-tors could be affected by health care reform legislation.

Some of these differences include:

• Guaranteed Issue. Every employee who applies for healthinsurance through their employer is accepted. In the indi-

vidual market, however, with the exception of a few states,plans are medically underwritten and applicants can bedenied coverage.

• Tax Exemption. Health insurance premiums are not tax-deductible for individuals or families purchasing coverageon their own, but they are tax-deductible for companiesthat pay for health insurance coverage for employees.Premiums paid by employees are paid on a pre-tax basis.

• Benefits. Individual market plans offer comparable bene-fits to employer plans: hospitalization, emergency roomcoverage, lab X-ray, maternity care, OB/GYN coverage,physician visits, pharmaceutical coverage, and preventa-tive care. However, benefits in the individual market areusually selected by the consumer based on individualneeds.

• Deductibles. Individuals and families purchasing coverageon their own tend to select plans with higher deductiblesand coinsurance costs in order to keep their premiums low.

Consumer Confidence in Paying for Health Care Services Grows

Consumer confidence may not be back at the level necessary to help pull the country out of its recession just yet, but Americanshave 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 careexpenditures increased 12 percent between March and July.

The analysis is based on telephone surveys of 3,000 households eachmonth from March through July 2009, part of the Thomson ReutersPULSE® Healthcare Survey. PULSE polls more than 100,000 U.S. house-holds each year about their health care behaviors, attitudes, andutilization. Consumers were asked about their ability to pay for medicalcare and the likelihood that they would postpone or cancel care during thenext 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 careexpenses in the next three months rose 18 percent.

• Patients say they are less likely to postpone care. Their anticipatedability 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 healthcare reform,” said Gary Pickens, chief research officer for the Healthcare & Science business of Thomson Reuters and lead author ofthe study.

However, Pickens warns, despite the increased optimism among many health care consumers, there also is a disparity in outlookbetween 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.


■ AVERAGE PREMIUM FROM 11

CYBER INSURANCENEWS / REGIONS / 13

Story of Texas Nurse ExemplifiesImportance of VocationalRehabilitation Counseling

The story of Geri Huntsinger is sure to inspire the CIGNA employ-ees who heard it during National Rehabilitation Week.

A motorcycle accident in April 2008 left Huntsinger, a Texas nurse, withmultiple injuries requiring several surgeries and months of physicaltherapy.

During her recovery time, she met a vocational rehabilitation counselorfrom CIGNA’s disability insurance unit, whom she calls her “light at theend of the tunnel.”

“When I came home to recover, everything in my life was out of order. Ifelt like I was starting over,” Huntsinger said. “CIGNA was my lifelineto independence and kept my morale up.”

Huntsinger spoke with the vocationalrehabilitation counselor at least once aweek for many months until she returnedto work in May 2009. When she wasready to begin return-to-work planning,the vocational rehabilitation counselorworked directly with her employer, a hos-pital outside of Dallas, to find a job thatwould fit Huntsinger’s physical limita-tions.

“I couldn’t perform all the responsibilitiesof my old job and wasn’t sure what toexpect,” Huntsinger explained. “CIGNAworked with the hospital and sorted out all the details for a return.Together, they found a position that fit my skills and experience.”

Huntsinger’s story is one example of how CIGNA helps those who’vesuffered a disabling event to return to work.

CIGNA Group Insurance, and its affiliate Intracorp, are the nationalsponsors of National Rehabilitation Awareness Week, celebratedSeptember 20–26. That week, Huntsinger visited the disability claimsoffice in Dallas to tell her story to CIGNA employees.

“It’s incredibly moving and rewarding to help people return to workafter a very difficult experience,” said Mark Marsters, senior vice presi-dent, CIGNA Group Insurance. “Getting back to work for many peoplerestores balance in their lives and brings a sense of closure to the recov-ery process.”

CIGNA’s vocational rehabilitation counselors help people on long-termdisability return to work. A counselor may help the employee’s companycreate alternate job arrangements or identify necessary workplaceaccommodations, such as ergonomic equipment. The counselor mayalso help the employee find work in another career field if the employeeis unable to return to work at the previous position. All vocational reha-bilitation counselors have a master’s degree and hold the credential ofCertified Rehabilitation Counselor.

Employees RetirementSystem of Texas Contracts

with HumanaDental

HumanaDental Insurance Company has land-ed a big client in Texas.

The subsidiary of Humana has been chosen bythe Employees Retirement System of Texas(ERS) to provide dental benefits for more thanhalf a million participants who are eligible for thegroup-benefits program, including state and cer-tain higher education employees, retirees, andtheir dependents.

Currently, there are 394,000 participants enrolledin the two dental plans offered by HumanaDental.The insurer began providing dental benefits toERS participants on September 1 under a four-year contract.

“HumanaDental is honored to provide benefitservices to one of the nation’s largest and mostinnovative employee benefit plans,” JerryGanoni, president of HumanaDental, said ofERS. “We believe our plans offer affordablechoices of benefits, with service levels that areabove industry standards.”

ERS participants can choose one of two dentalbenefit plans: the HumanaDental Dental HealthMaintenance Organization (DHMO) or the Stateof Texas Dental Choice PlanSM.

With the DHMO, participants select a networkdentist and have no deductibles, no yearly maxi-mums, and varying levels of copayments forpreventive, basic, and major services.

Under the State of Texas Dental Choice Plan,employees and retirees may choose any dentist;however, increased benefits will be provided byusing dentists in the HumanaDental PPO net-work. Individual deductibles per calendar yearare $100, and there is a range of coinsurancedepending on the type of service and who per-forms it. The plan has a $1,500 maximum annualbenefit and no cost for most preventive serviceswhen provided by a network dentist.

With its 3.8 million-plus members,HumanaDental Insurance Company has growninto one of the nation’s 10 largest dental insur-ance carriers.

14 / REGIONS / CYBER INSURANCENEWS

Thirteen States Win HHS Grants to Help the Uninsured

Thirteen states have been awarded grant money from the Department of Healthand Human Services (HHS) to help expand health coverage for their unin-

sured.

The $70.9 million in grants are funded under the new State Health AccessProgram (SHAP), an outgrowth of HHS’s State Planning Grant program, whichran from 2000 to 2007.

“These grants build on the success of the earlier program,” HHS SecretaryKathleen Sebelius explained. “They will help more states provide affordableinsurance to specific uninsured groups, such as children and seniors. The fundswill 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 statedemonstrates a financial hardship. In addition, states must show that they are able to keep the program running after federal fundinghas 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

Consumers in 19 states—including Arkansas, Missouri, Oklahoma, and Texas—andWashington, D.C., now have the option to purchase new UnitedHealthOne health

insurance plans.

UnitedHealthcare’s Golden Rule Insurance Company has launched an enhanced portfolioof health insurance plans that include new coinsurance and deductible choices, an annualdeductible credit, and first dollar supplemental accident coverage up to $10,000. Theplans are marketed under the UnitedHealthOne brand, which encompasses theUnitedHealthcare 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, SouthDakota, and Wyoming, and flexible, short-term plans are now available in North Carolinaand West Virginia.

These grants…will helpmore states provideaffordable insurance tospecific uninsuredgroups.

State Farm Donates $1 Million to Teach For America

With a big financial boost from State Farm, Teach For America can recruit more college graduates to commit to teach for twoyears 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, LosAngeles, New York, Phoenix, and the Rio Grande Valley. The carrier is among Teach For America’s largest corporate donors in eachof 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, cancontribute 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 anddistrict 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 inworking towards educational opportunity for all,” Kopp said.

Americans Not Cutting Back on Their Personal Life Insurance Coverage, Survey Finds

Americans have been trimming costs wherever possible inthis recession, but one area where most have not cut back

is their personal life insurance coverage.

A First Command FinancialBehaviors Index™ taken inAugust shows that a mere fourpercent of Americans say theyhave made changes to their per-sonal life insurance coverage as aresult of the economy. Of thosewho made changes, 42 percentincreased their coverage, 29 per-cent decreased it, and 17 percenteliminated it.

“We are encouraged and relievedto see that middle-class con-sumers are not reacting to theeconomic turmoil by sacrificingtheir life insurance coverage,” saidScott Spiker, CEO of Fort Worth, TX-based First CommandFinancial Services, Inc. “Canceling policies to save money dur-ing tough times is a move fraught with financial peril.”

The survey also revealed that just 3 percent of respondentsreported that their employer has made changes to their lifeinsurance coverage through work as a result of the economy.Of these, 70 percent say that their coverage has been decreased.

The survey results contrast with 2009’s downward trend in lifeinsurance sales. This year has seen the steepest six-monthdecline in life insurance annualized premiums since 1942,

according to LIMRAInternational.

One area in the survey thatshowed a decline was inrespondents’ comfort levelwith their amount of insurance.In February 2008, 40 percentsaid they were extremely orvery comfortable with their lifeinsurance coverage. In this sur-vey, just 34 percent ofrespondents said the same.Comfort levels were higheramong consumers who workwith a financial planner: 43percent who work with a

financial planner felt extremely or very comfortable with theirlife insurance coverage, compared with only 31 percent ofrespondents not currently working with a financial planner.

“Life insurance helps consumers feel more confident in theirfinancial future,” Spiker said. “Our research and experiencereveals that feelings of financial security increase when lifeinsurance is sufficient to cover family debt and family incomeuntil retirement.”

CYBER INSURANCENEWS / REGIONS / 15

16 / ISSUES / CYBER INSURANCENEWS

Anew report from the Department of Health and Human Services (HHS) shows the unique needs of young adults when it comesto 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 ofyoung adults (those under 30) do not have health insurance. In contrast, just 17 percent of adultsage 30–64 lack coverage.

“More and more young adults wake up the day after their nineteenth birthday or on graduationday and find themselves uninsured,” Sebelius said. “I’ve seen this problem firsthand. When myson graduated, he faced the challenge of finding health insurance. Unfortunately, too many ofhis 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 employerswho offer health insurance benefits. That’s largely due to the fact that nearly 50 percent ofyoung 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 coveragein 2006, one in four lost that insurance in the following two years—more than twice the rate ofolder adults.

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 hadgaps in health care coverage admitted to foregoing health care because of costs. This includes not getting recommended tests andtreatment 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 medicalbills.

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

In 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 CapitalMarkets, 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 securitizationof mortgages helped expand that marketplace.

Voss also discussed the impact of securitization on policies that would otherwise lapse (leading to higher insurance premiums) andabout the importance of verifying that securitization of life insurance settlements does not compromise the original policyholder’srights and privacy.

HHS Report Highlights Young Adults’ Need for Health Insurance

AIA Asks NAIC Not toDevelop Its Own Natural

Catastrophe Model

As the National Association of InsuranceCommissioners (NAIC) prepared to gather

for its fall national meeting in Maryland, theAmerican Insurance Association (AIA) recom-mended that it take into account the currentstrength of the personal lines insurance marketwhen discussing property-casualty insuranceissues—especially the notion of developing itsown natural catastrophe model.

After all, the AIA points out, the market for per-sonal lines insurance products remains strong,despite the weak economy.

“Consumers and regulators can take comfort inthe fact that the market for personal lines insur-ance generally remains competitive,” said DavidSnyder, AIA vice president and associate generalcounsel. “This serves as strong evidence thatstraightforward, risk-based pricing and effectiverisk management is good for the marketplace andleads to greater product availability.”

Earlier this year, the NAIC commissioned a feasi-bility study on the issue of creating its ownnatural catastrophe model. To date, the NAIC hasnot sought industry input on this issue, accordingto the AIA. The AIA believes that there would bemulti-million dollar costs associated with theNAIC developing and maintaining its own naturalcatastrophe model. In addition, it would stiflecompetition.

“The development of a politically motivated natu-ral catastrophe model will not serve insurers orthe public well,” said Eric M. Goldberg, AIAassociate general counsel. “Modeling companiesgive insurance departments regular briefings.This transparency provides regulators with theinformation necessary to review and approve pri-vate sector models. A public model could merelybecome a de facto benchmark for private insurerrates and inhibit innovation.”

The NAIC also has been considering the removalof industry representatives from the SERFF(System for Electronic Rate and Form Filing)Board, even though it has not officially providedjustification for this change, according to the AIA.

“The continuation of industry representation onSERFF’s Board is necessary to guarantee thatappropriate checks and balances are maintainedto ensure the continuing success of this electronicfiling system,” said Cate Paolino, AIA seniorcounsel.

Customer: Sure. Well, it feels likethings are getting better. The market isup; things have settled down, we’ve recouped most of our losses and,hmmmmmmmm, not sure if it makes sense to make a change now.

You: Don’t want to miss out on the opportunity, I understand. It could bea really good one.

• You don’t put up a defense but go down with customer’s road withhim. But you go further than he expects by saying that “it could bea good one”.

Customer: Yeah, it could be good but I don’t think it will be that good.

You: Oh, I’m surprised, I got the sense that you thought it would benothing short of terrific.

• You keep pushing towards the extreme of your customer’s thinking.

Customer: Oh, I wouldn’t go that far. For all you know the market couldcollapse!

You: That’s interesting. Could you tell me more about how you see it?

• By taking the customer to the extreme of his thinking, further downhis own road than he originally wanted or could go by himself, he isbrought into a sense of reality and begins to balance his own think-ing realistically. He feels no defense from you.

Customer: Markets go up and down. You never really know. I think it’sgoing up but I could be wrong.

• Finally, statements of reality. Your customer has done a good job—and so have you.

You: That’s very realistic thinking—good for you—most people getblinded by the upside potential.

• You build ego for your customer but expand his visions by tellinghim what most people would do.

Customer: No, I’m not like that, not that foolish. That’s why I came tosee you, just in case the market goes down so I can protect my assets.

You: Hmmmmm, I’m a little confused. Sounds like you want to protectyour assets but since you believe that markets going up you don’t wantto protect you assets and leave them where they are.

• You tell him the truth about your confusion and let him help youout. No selling!

Customer: Actually, now that I’m thinking about it, we should probablyprotect some of it, but I don’t want to take as much out of the market aswe originally talked about. Is that OK with you?

• Now he is selling me on how much he wants to give me. I am ahappy man!

Conclusion

Recognizing shifts and changes in your customer allows you to identifythe key landmines with which you must deal and diffuse. Your job is to letthe system deal with those landmines by using the techniques I have beenteaching you. It is imperative that you don’t change when your customerchanges—that you don’t recreate the system, go on the defense, start sell-ing again, etc. If you have a knee jerk reaction to your customer, they willreturn the favor and have a knee jerk reaction to you. In my book I call thisa “knee jerk party”—not a lot of fun and a sure road to selling failure.

Remember, you are the stability which your customer must feel if he orshe is going to see the reality of their situation and act wisely—and thatis a true win-win situation no matter the result.

CYBER INSURANCENEWS / ISSUES / 17

■ CONTRADICTORY CUSTOMER FROM 1


Congress Urged to Include Above-the-Line Deduction for LTC Insurance Premiums

The National LTC Network has weighed in on the hottopic 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 anabove-the-line deduction for LTC insurance premiums. Aversion of the Senate Finance Committee bill allowsLTC insurance to be included in Section 125 plans(“cafeteria plans”), but the National LTC Network wouldlike more.

“While we applaud this new tax incentive, we urgeCongress to offer an above-the-line deduction for LTCinsurance premiums,” said Terry Truesdell, National LTCNetwork president and CEO.

Truesdell explained that many employees don’t haveSection 125 plans, and among those who do, many losethem once they retire.

“I believe that an above-the-line deduction could open the floodgates, encouraging citizens to purchase this important insurance andlessen 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 governmentLTC insurance program is instituted. (The Community Living Assistance Services and Support bill, or CLASS, was introduced in2007.) The National LTC Network even offered some suggested wording for the warning: “You are not eligible for any benefits forthe first five years after signup. Your premium will increase if the government decides that additional money is needed to pay currentand 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. Theaverage cost of LTC nationally is $18.50 an hour for a licensed home health aide, $94 a day for an assisted living facility, and $183per 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 thepluses and minuses of any new government program,” Truesdell said.

Consumer Watchdog wants answers. The consumer activistgroup is asking America’s two largest insurers—United

Healthcare and Anthem/Wellpoint—to answer questions abouttheir use of employees to lobby Congress on company time.

This request comes as the House Subcommittee on DomesticPolicy reconvenes hearings on the “bureaucratic abuse” ofinsured patients by insurance companies.

“There is no question that insurance companies use bureaucrat-ic maneuvers to delay and deny care to people who thoughtthey were insured,” said Jerry Flanagan, health policy directorof Consumer Watchdog. “Less visible is their waste and misuseof customer’s premium dollars by using employees to lobbyCongress on company time, with the guidance of paid PR pro-fessionals.”

Consumer Watchdog claims that lobbying comes at the expenseof tending to customer claims and is paid for, ultimately, bycustomers.

“Both companies strongly oppose a voluntary, Medicare-styleoption to which Americans can turn if they can’t get insurance,or are dissatisfied with the insurance they have,” said CarmenBalber, director of Consumer Watchdog's Washington office.“Their employee lobbying, on company time and at customers’expense, is meant to prevent any competition that would forcethem to treat patients more fairly.”

The group also is urging California Attorney General JerryBrown to investigate employee programs by United Healthcareand Anthem/Wellpoint on the grounds that they constitute ille-gal political pressure.

Consumer Watchdog Questions Lobbying Efforts of United Healthcare and Anthem/Wellpoint

They’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.

According to a newly revised white paper from the InsuranceInformation Institute (I.I.I.), Residual Market Property Plans:From Markets of Last Resort to Markets of First Choice, thefinances of a number of residual market prop-erty plans are on shaky ground. The reasonsfor this are all too familiar by now: the creditcrunch and prolonged economic downturnhave made it more difficult for states to bor-row funds.

“State-run insurers are putting themselves atincreased risk through greater dependence onbond markets even as credit markets struggleto recover from the current financial crisis,”wrote white paper coauthors Robert Hartwig,I.I.I. president and economist, and ClaireWilkinson, I.I.I. vice president for GlobalIssues. Disruptions to credit markets will likelymake it more difficult and more expensive forsome of these plans to issue debt to pay forhurricane losses.”

The authors point out that legislative action inthe past also negatively impacted the state plans.

“Ill-advised legislative steps over the course of several years havealso expanded the exposure base of a number of plans, such asFlorida, yet at the same time curbed the rates they can charge,”they wrote. “Such moves put state finances under threat and

leave taxpayers and poli-cyholders facing thepotential for increasedassessments in the yearsto come.”

However, bills passed insome states this yearhave begun to addresssome of the problems ofthese plans.Furthermore, there hasbeen a reduction in thenumber of policies andexposures in some parts

of the residual propertymarket due largely to the real estate bust and the addition of newinsurance companies, whose financial strength has not been test-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 policiesissued and the exposure value covered. From 1990 to 2008,

years characterized by major hurricanes, including Andrew andKatrina, that growth has accelerated.

Total policies in force, both residential and commercial, in thenation’s FAIR, Beach, and Windstorm plans combined nearlytripled, from 931,550 in 1990 to 2.6 million in 2008.Accordingly, total exposure to loss in the plans surged from

$54.7 billion in 1990 to $696.4 billion in 2008,an astounding increase of 1,173 percent.

The I.I.I. found that in some states, govern-ment-run insurance plans have shifted awayfrom their original purpose as predominantlyurban property insurers of last resort. Theyhave expanded into much larger providers, insome cases even becoming the largest proper-ty insurer in the state.

In Florida, for example, Florida Citizens, a planthat accounts for 69 percent of the total FAIRPlans exposure to loss, saw its exposure morethan double, from $210.6 billion in 2005 to$485.1 billion in 2007, reflecting the increasein both coastal property values and buildingand reconstruction costs. Florida Citizens’exposure to loss declined to around $400 bil-lion by June 30 of this year.

The white paper notes that while state-run property plans playan important role for many policyholders who might not other-wise get coverage, their growth over the last two decades hassignificant implications for insurance carriers and insurancebuyers. In particular, there are a number of public policy con-siderations that will need to be addressed as insurers,regulators, and legislators look for the best way to manage andfund catastrophic risk. For example, when insurers are unableto charge a premium commensurate with the risk they assumein coastal areas, whether due to political or regulatory factors,this distorts the true cost of insurance coverage.

“Rate and underwriting restrictions on property insurers canresult in a situation where high-risk property owners actually paylower premiums, while low-risk property owners pay artificiallyhigher premiums,” the paper states. “This leads to unfair cross-subsidization among risk classes and discourages mitigation.”

In the long run, the authors argue, policyholders in coastal andnon-coastal areas pay the price of inadequate premiums in theform of additional payments, such as assessments and taxes fol-lowing federal/state bailouts. In fact, even policyholders ofunrelated risks, such as auto and liability, have to pay assess-ments.

I.I.I.: State-Run Insurance Programs in Hurricane-Vulnerable Stateson Shaky Grounds


…in somestates, govern-ment-run insur-ance plans haveshifted awayfrom their origi-nal purpose…

AXA Equitable’s Participation in IRS Prototype Program Will Help Clients Stay Compliant

AXA Equitable Life Insurance Company is participating inthe Internal Revenue Service’s 403(b) prototype program,

which will help its clients stay compliant.

The prototype program was created to help employers in the K-12 education market adopt a plan document that complies withthe written plan requirements of the Internal Revenue Code andapplicable IRS regulations.

James Mullery, senior vice president and head of the 403(b)market at AXA Equitable, said that adopting an approved pro-totype plan lessens the risks of plan disqualification foremployers. All 403(b) plans are required to have a written doc-ument that describes the legal and regulatory requirementsapplicable to the plan and its other operating provisions, whichmay include the sharing of plan responsibilities among theemployer/issuer, employee, and any third-party administratorsinvolved with the plan.

“AXA Equitable has been providing service and support toclients to help them comply with the final 403(b) regulationssince the requirements were first published,” Mullery said.“Offering IRS-approved prototype plan documents is a continua-tion of these services, and will help AXA Equitable clients keeptheir 403(b) programs compliant with the final regulations.”

Employers are encouraged to adopt their 403(b) plan now inorder to avoid an end-of-the-year concern as to whether theoperation of the plan was in accordance with its terms in 2009.AXA Equitable’s participation in the prototype program willhelp client employers create, adopt, and amend their programsas necessary.

The company created The Employer Plan AdministrationCenter (EPAC) to help employers manage and simplify thework associated with administering their retirement plans,. Plansponsors of 403(b) and 457(b) plans with active participantsowning the EQUI-VEST® variable annuity can review, monitor,and transmit plan information through EPAC.

“One of the many issues facing employers today is the ever-changing landscape of regulations that affects the wayemployers need to manage and administer their plans,” Mullerysaid. “AXA Equitable is acutely aware of employer needs, so asregulations change, EPAC will too.”

Employers can access EPAC to upload contribution information;track and update approved plan providers; manage third-partyadministrator information; and view and download detailed planreports about participant information, loans and distributions,summary of investment assets at a plan level, and contributionsand transfers/exchanges/rollovers made by a participant.

PIA Objects to Attempts by Congress to Squeeze Out Independent Agents

The National Association of Professional Insurance Agents (PIA) has a message for Congress: don’t use health care reform plansto 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, independentinsurance 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 ofunlicensed 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 inhealth insurance would better serve as so-called ‘navigators,’ helping people choose which health plan they participate in,” Auerbachexplained. “Professional, independent insurance agents already help their customers navigate the health insurance choices that arecurrently 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.), JimMatheson (D-Utah), Zack Space (D-Ohio), John Barrow (D-Ga.), and Bart Gordon (D-Tenn.), guarantees that agents and brokers canparticipate 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 ownindependent insurance agents under health care reform,” said PIA National President-elect Jon D. Spalding. “We are especially gratefulto 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 usingthe services of their professional insurance agents.


Insurance Coalition Asks IASB to Reconsider Its ProposedAccounting Standard for Insurance Contracts

The 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, theCFV 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 onimmediate 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 18meeting. Prior to the meeting, GNAIE Executive Chairman Jerry de St. Paer sent a letter to IASB chair SirDavid 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 themeasurement approach for insurance contracts.”

Rather than supporting the preferred CFV approach, however, IASB staff is recommending a measurementapproach 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 usingthe pending IAS 37 approach, and those problems cannot be addressed as well in such a measurementapproach 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 thenear future, and it may be necessary to include both measurement approaches in the exposure draft on an insurance contracts standardif 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 withattempting to apply such an approach to insurance contracts,” said de. St. Paer. “GNAIE is optimistic that such consideration willlead to conclusions similar to those reached by the FASB and will be a significant step toward convergence of international account-ing standards.”

The movement to “harden homes” in Florida through certainmitigation discounts isn’t working, the National Association

of Mutual Insurance Companies (NAMIC) contends.

Liz Reynolds, NAMIC’s Southeast state affairs manager,recently testified in front of the Windstorm MitigationCommittee of the Florida Commission on Hurricane LossProjection Methodology.

Prior to her testimony, Reynolds sent the committee a letter inwhich she urged committee members to recommend that stepsbe taken to ensure premium discounts for certain mitigationfeatures are adjusted to reflect true mitigation efforts.

“The purpose of mitigation discounts is to incentivize the hard-ening of homes. This effort cannot achieve full benefit whenmany people are receiving credits though they’ve done nothingto mitigate their homes,” Reynolds wrote. “The resultingtragedy is that many homeowners are led to believe their homesare safer than they really are. It also means that those

Floridians who have truly hardened their homes do not receivethe full benefit for their efforts.”

In her letter, Reynolds asked the committee to make sure that theoversight of home inspections is tightened. Anecdotal evidenceshows that the home inspection system is flawed, she wrote.Furthermore, private inspections are inconsistent from one houseto the next, and “active” and “passive” fraud are rampant.

In addition, Reynolds asked the committee to examine howmandated discounts are being applied to the premium as theyare currently applied to the entire wind portion of the premium,including expenses, other structures, and contents coverageprovisions.

“The size of discounts in many areas of the state is enormous,often totaling more than 50 percent of the premium,” sheexplained. “NAMIC members support risk-based incentives toencourage strengthening of homes. At the same time, it is cru-cial that the state’s enforcement of the wind mitigation programresults in overall premium levels sufficient to pay claims.”

Windstorm Mitigation Discounts in Florida Aren’t Working, NAMIC Contends


PIA Members Plead Their Positions inPrivate Meetings with Congressmen

Town hall attendees weren’t the only Americans clamoring for theirCongressmen’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 dearto them.

“The involvement of our members was more critical this year than ever,”said Kenneth R. Auerbach, PIA national president. “With Congresspoised to act on issues that are crucial to agents and their clients, ourcontinuing advocacy is imperative.”

Throughout August, PIA members met with U.S. Representatives andSenators in their home districts. The agents gave their opinions on suchissues as health care reform, federal regulation of insurance, naturalcatastrophe legislation, flood insurance, and crop insurance.

While town hall meetings on health care reform garnered much mediaattention, PIA members held individual meetings with Congressmen andtheir staffs. “We wanted to be sure that our views were heard fully, so weopted for face-to-face, personal meetings with lawmakers,” Auerbachsaid.

Auerbach stressed that the PIA supports prudent health care reform.

“By prudent, we mean reform that provides our clients with better, cost-effective care that makes America stronger,” he said. “In our Augustmeetings, we told lawmakers that we hope they will be guided by ourprinciples as they decide the merits of the various proposals.”

PIA believes that the private health insurance system should form thebasis of any health care reform and that Congress should build on theprivate health care delivery system, not dismantle it.

In addition to health care, PIA agents discussed their other priorities withtheir elected representatives:

• Federal Regulation. Among proposals being debated in Congressare those that would federalize insurance regulation, which PIAopposes.

• Natural Catastrophes. PIA supports legislation to encourage mitiga-tion efforts and is advising lawmakers against creating programsthat will compete with the private market.

• Flood Insurance. The National Flood Insurance Program (NFIP) isonce again set to expire. The House has passed a temporary exten-sion, which the Senate has yet to do. The NFIP needs comprehen-sive reform, along with a multi-year renewal.

• Crop Insurance. Congress is deliberating on making additional, con-siderable cuts to the program, which would directly affect cropinsurance agents and the farmers they serve. PIA urges Congressnot to make unnecessary cuts.

PIA capped off its month-long series of meetings with the release of thePIA Insurance Foundation’s major white paper on the future of insuranceregulation, Future of the Business Disciplines, Regulation and Oversightof the U.S. Insurance Marketplace, by Mark Boozell, the former directorof the Illinois Department of Insurance. The white paper was distributedto every member of Congress.

The Big “I” EndorsesMLIS Certification

Veteran insurance agents looking for an edgein selling specialized lines might want to

consider obtaining the Management LiabilityInsurance Specialist (MLIS™) certification, acontinuing education program developed byInternational Risk Management Institute, Inc.(IRMI).

The MLIS certification recently received the sup-port and recommendation of the IndependentInsurance Agents & Brokers of America (the Big“I”).

“We are constantly seeking new and innovativeeducational opportunities for our members,” saysMadelyn Flannagan, Big “I” vice president ofagent development, education, and research. “TheMLIS certification program is an excellent wayfor the more seasoned insurance professional togain a competitive advantage when selling andservicing these specialized lines of coverage.”

This online program is for agents and brokerswho sell almost any type of professional or errorsand omissions (E&O) liability insurance. Itapplies to “management liability” insurance or“executive liability” insurance, such as employ-ment practices and directors and officers (D&O)liability insurance.

According to Jack P. Gibson, IRMI president, theMLIS program can help retail insurance agentsand brokers reduce the possibility for errors whenselling specialized lines. In addition, the programis conveniently tailored for the busy professional.

“We kept the courses relatively short and split theprogram into two parts, one focusing on profes-sional and E&O liability insurance fundamentals,and the other part delving into the more complexmanagement or executive liability insuranceissues,” Gibson said. “This allows participants tochoose just how deeply they wish to dive into thesubject matter.”

Big “I” members receive a 10 percent discountoff the course fees and continuing education feeand can purchase courses directly at the MLISWeb site. Those who complete the program candisplay the MLIS certification.


Insurers Increase Spending to Shape Health Care Reform Debate

Health insurers and their industry association are pouring money into a cause that’s crucial to their well-being—health carereform.

In the first half of 2009, 14 health insurers invested $2.5 million per month to influence the health care reform debate, according to areport 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 inWashington, D.C.,” said David Donnelly, national campaigns director of Public Campaign Action Fund. “To put it starkly, they haveinvested heavily in insider lobbyists and politicians to maintain their bottom line, leaving Americans out in the cold and stuck withour broken health care system.”

The study analyzed political spending—campaign contributions by company political action committees and employees, as well aslobbying expenses—for the 14 insurance companies that were ranked in the largest 1,000 American corporations by Forbes Magazineearlier this year. Lobbying expenses and employee campaign contributions from America’s Health Insurance Plans, the industry’strade group, were also included in the analysis. All of the data was compiled by reviewing records found at the Center for ResponsivePolitics 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

As Americans debate the details of health care reform, the National Association of Insurance Commissioners (NAIC) reminds thenation 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 RogerSevigny, NAIC president and New Hampshire Insurance Commissioner. “These are the two core issues that we must address as wemove 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 ofthe NAIC’s Health Insurance and Managed Care Committee, says that the efficient and affordable financing of health care throughinsurance must include everyone in the system.


■ PLEASE SEE REFORM NECESSARY ON 24

“The current proposals would prohibit health insurers fromdenying someone insurance simply because he or she has beentreated for a pre-existing condition,” Praeger said. “Similarly,the proposals would prohibit insurers from using health status,gender, or occupation when setting premiums.”

One downside to universal coverage is that some will wait untilthey become sick to purchase the coverage. A voluntary systemcould lead to “adverse selection,” where those with higher costsand likelihood of care participate in the system, and those withlower costs and likelihood of care do not. This situation drivesup the cost of insurance, further discouraging people from buy-ing it and employers from providing it. In turn, this could shiftthe burden of health care to an inefficient system of emergencycare and high-cost state programs.

NAIC believes the only effective answer to these concerns is torequire everyone to purchase health insurance, much as statesalready require the purchase of auto insurance. Of course, get-ting everyone in the system will require adequate federal

subsidies so that persons below designated income levelsreceive help in purchasing coverage. Without subsidies, the costof coverage, even with everyone in the pool, is too high formillions of Americans.

Not surprisingly, NAIC takes issue with any proposal thatwould shift regulatory authority from the states to the federalgovernment.

“Congressional action along the lines outlined above is neces-sary to address this national issue, but it should not diminishthe regulatory role for the states going forward,” Sevigny said.“Our nation is too vast and too varied for one regulatory regimeto fit all. Congress should allow states wide latitude to enforcetheir respective laws when those laws provide greater consumerprotections than those afforded by federal law.”

NAIC believes that effective reform of the health care system—one that will reign in costs—will require collaboration andcompromise among the federal government, state governments,providers, and consumers.

Most Americans Agree on Need to Restrict Cell Phone Use While Driving

It’s hard to find consensus among Americans today on many issues, but Nationwide Insurance has found one subject on which anoverwhelming 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 phoneuse altogether. Of those who support some type of cell phone usage restriction, nearly 75 percent believe the law should apply to alldrivers, not just specific groups.

The survey results were released as highway traffic safety advocates and officials gathered at the Governors Highway SafetyAssociation’s annual conference in Savannah, Ga., to discuss driving while distracted (DWD) and other highway safety issues. Thismeeting 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 textingwhile 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 (ages21–32), 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 thesurvey, respondents say they are witnessing a growth in distracted driving behavior. More than half of respondents said they see moredrivers using cell phones while driving than they did a year ago, and nearly three-quarters say that when they drive, they always oroften 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 lawrestricting use of cell phones would not change their behavior because they don’t use cell phones while driving. Yet, in Nationwide’s2008 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 tochanging their behavior,” Windsor noted. For example, 18 percent of respondents who admit to using their cell phones while drivingsay they would continue to do so regardless of a change in law, with Generation Y most likely to resist the change (26 percent). “Thissuggests that legislation may not be enough to eliminate distracted driving and highlights the need for a technological solution thatcan 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,”Windsor said.


■ REFORM NECESSARY FROM 23

CYBER INSURANCENEWS / INNOVATION & TECHNOLOGY / 25

CIGNA Works to Raise Consumer’s Understanding of Health Care

Arecent CIGNA survey discovered that American’s understanding of health care and specific health care plans is lower than theirunderstanding 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 becausethey find the process stressful.

To help consumers understand the various health plans and health careissues, CIGNA has created a new educational program that is free to thepublic. The program, found at www.cigna.com/learn4yourhealth, hastools, games, and discounts for popular brands to help educate adultsabout healthy lifestyle choices.

“learn4yourhealth is part of CIGNA’s service commitment,” explainedBenjamin Karsch, CIGNA’s chief marketing officer. “This is not simplya static Web site or online ‘brochureware’ but a program that truly helpsto make the path to health easier while rewarding individuals for proac-tively taking positive steps to improve their health. Our goal is to makelearning about health and health care more engaging and rewarding.”

Within the program is “Learn & Earn” where users are rewarded forlearning and sharing the program with others. When users take one ofthe 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 teacheshealth 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 pilotprogram 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 peoplecan stretch their budgets and enjoy discounts on brand-name products and services,” noted Matt Manders, senior vice president ofCIGNA’s health operations. “We’re pleased to be able to share this program with companies of all kinds as we support employers intheir ongoing quest to create a healthier workplace for their employees.”

The complexities of information technology (IT) can leavecompanies exposed to lawsuits for privacy violations, intel-

lectual property infringements or other financial injuries. Tohelp protect businesses from legal problems that may arise dueto IT issues, Chubb Group of Insurance Companies is offeringIntegrity +, a solution that combines errors and omissionsinsurance (E&O) and emerging technology protection for tech-nology-related injuries and privacy exposure costs.

“Technology companies are offering a wider array of productsand services that may create new exposures. For instance, anemployee at a software developer may infringe another compa-ny’s copyright-protected source code, or a flaw in electronicmedical record software might enable a hacker to compromisea hospital patient’s privacy. A traditional errors and omissionsinsurance policy may not offer the breadth of insurance neededto help protect a technology firm from such evolving risks,”explained Veronica Somarriba, vice president, Chubb & Son,

and worldwide manager for Chubb's technology segment.“Integrity+ is an enterprise-wide, integrated solution thatretains the key features of our existing E&O policy, augmentedby enhanced essential insurance protection such as media lia-bility and intellectual property infringement liability andreimbursement of privacy remediation expenses.”

Integrity + has several insurance options that can be purchasedseparately or as a package. The new E&O liability insuranceoffers protection from lawsuits for financial injuries caused bydefects in the insured products or services. The Technology-Related Injury option provides protection if the companycommits intellectual property infringement, violates a person’sright to privacy, causes a false arrest, or inadvertently causeslibel or slander. Privacy Remediation Expense insurance pro-vides coverage of expenses sustained when there is a customernotification of a privacy breech in compliance with federal,state or foreign laws.

Chubb Group Offers New IT Protection

26 / INNOVATION & TECHNOLOGY / CYBER INSURANCENEWS

New SubroShare Service Aims toReduce Health Care Costs

through Free Data Exchange

Stephen Ambrose, the founder of SubroShare®, says the free servicehis new company provides is the rare “win-win” for both health

care providers and payers.

SubroShare, an online database, securely stores and exchanges patientrelease of information (ROI) requests made upon a health plan policy-holder, typically from anattorney, where such arequest would indicatethe presence of a first-or third-party injuryclaim. The exchangedROI data and transactiondoes not require patientauthorization, as it fallsunder the provision of“payment” underHIPAA law.

“It’s based on capturingand exchanging aunique piece ofprovider-submitted, non-billing patient data, whereby payers will findand subsequently recover many previously missed injury claim recov-eries,” Ambrose explained. “The significant increase in payer revenuewill make the participating provider a more valuable asset to payers,who may be able to thereby pass on savings to policyholders.”

Ambrose said SubroShare aims to be an impartial “exchange media-tor” between payers—health insurers, TPAs, and self-funded plansponsors—and the estimated 350,000 in-network health provider prac-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-holders has filed an injury claim and gives the policyholder’sattorney contact information.

2. It makes personal injury attorneys, who re-bill previously paidhealth bills, accountable for their part in helping reduce healthcare costs.

3. It helps payers contain rates for policyholders by not passing onwasteful injury claim payments.

SubroShare, a Web-based service which is free for both payers andproviders, is an add-on product for payer’s existing subrogation opera-tions, so no major integration is required. Furthermore, the providertransaction consists of a quarter-page form with a copied sheet, eitherfaxed or securely uploaded to the secure exchange.

CIGNA Takes Home the Gold

The Gartner Customer RelationshipManagement Summit awarded CIGNA first

place for an exemplary customer strategy as wellas a customer experience excellence award.CIGNA was presented the award by Gartner and1to1 Media after being selected by a panel ofjudges comprised of Gartner analysts and cus-tomer relation experts in business and academics.The awards are meant to highlight businesses thatmake an impact through their customer strategyand have achieved a superior level of distinctionin the customer experience.

“The Gartner & 1to1 Customer Awards honorsexcellence among organizations that use cus-tomer-focused strategies to improve businessperformance,” said editor-in-chief of 1to1 Media,Ginger Conlon. “The judges cited CIGNA’s com-prehensive enterprise-wide strategy, executivesupport, and results like increases in customersatisfaction, employee engagement, and first-con-tact resolution as reasons for nominating thecompany as their top choice in the CustomerStrategy category.”

“Simply put, CIGNA’s strategy is to make thecustomer the center of our universe,” noted IngridLindberg, CIGNA Customer Experience Officer.“It is a terrific honor for CIGNA to be recognizedamong the leaders in customer responsiveness. Weknow that health care is complex, and CIGNA isdetermined to continually build understanding andhelp the people we serve by making every interac-tion easier and more helpful.”

Lindberg added, “This year alone CIGNA hasopened up our call centers 24/7/365 and revampedour communications materials, which has led to amore than 100 percent improvement in customerunderstanding of their CIGNA health benefits—aremarkable metric for any business, but especiallycritical for a health service company.”

Simply, put, CIGNA’sstrategy is to makethe customer the cen-ter of our universe…


Vertafore Reaches Transaction Milestone

Software 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 theincrease in transactions demonstrates the value of their agency-carrier solutions. Leadingsoftware and services provider Vertafore offers solutions to over 15,000 insurance agents,brokers, carriers and reinsurers.

“Vertafore’s connectivity solutions have become even more valuable during the current econ-omy—they enable easier communications between agents and carriers, allowing them towrite more business in a shorter period of time,” said Vertafore vice president, connectivityproduct management, Dave Acker. “This increase in transactions indicates the continuedenthusiasm 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 Vertaforeand 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 thequote. This technology helps independent agents efficiently compete and create new business.

One group of Americans can makethe case that they’ve been over-

looked in the ongoing debate overhealth care reform—small businessowners, who create at least 70 percentof all new jobs in the country andemploy more than half of all privatesector employees.

“Congress hasn’t approached health carereform from a small business owner’sstandpoint”, said Todd McCracken, thepresident of the National Small BusinessAssociation (SBA).

The cost and availability of health insur-ance is one of small business owner’sprimary concerns, driven largely byinsurance premium and administrativecosts. A 2007 Kaiser Family Foundationstudy confirmed the connection betweenthe size of a firm and whether it offershealth insurance, showing that about halfof businesses with fewer than 10 workersoffer health benefits to their employees.

Proposed legislation in the House wouldrequire businesses with payrolls as lowas $250,000 to pay a two percent tax ifthey didn’t provide health insurance foremployees. The number rises to eightpercent with a payroll of $400,000.

In this weakened economy, additionaltaxes would only add to a small busi-ness owner’s cash flow problem. Untilhealth care reform has been resolved,the Interface Financial Group (IFG), analternative funding source for smallbusinesses, suggests that small businessowners consider the option of accountsreceivable factoring to offset that prob-lem.

Single invoice factoring is a popularnew tactic that allows companies to fac-tor one invoice at a time. Invoice

factoring benefits businesses that do notget paid for 30, 60, or even 90 days byadvancing up to 90 percent againstinvoices.

Accounts receivable factoring differsfrom traditional bank loans in that bankloans involve two parties, while factor-ing involves three parties. Banks basetheir decisions on a company’s creditworthiness, whereas factoring is basedon the value of the receivables.Factoring is not a loan; it is the pur-chase of financial assets, or receivables.

“Many small business owners are afraidthat their priorities are getting lost andthat the government is taking too longto recognize their needs,” said GeorgeShapiro, IFG’s chief executive officer.“But other small businesses are findinginvoice factoring, useful to bridge thegap, resolving the current cash flowproblems due to the economy.”

IFG looks at the creditworthiness of theclient’s customers and can fund withinas little as 24 hours. There are no mini-mum or maximum sales volumerequirements, and fees charged for thefunding can vary depending on theclient’s circumstances.

IFG Recommends Alternative Funding as Way for Small Businesses to Offset Health Care Costs

TransactNOW®

and PL Rating™have assistedover 7.3 milliontransactions.


CHOICE AdministratorsAdding LiveChime Chat

CHOICE Administrators® is teaming withLiveChime, Inc. to provide insurance bro-

kers a powerful new Web chat. By connectingwith prospects and customers instantly using thenew Web chat, insurance brokers can generateleads, increase sales and increase client retention.

“CHOICE Administrators is always looking forways to make our nearly 14,000 current brokers’businesses easier and more profitable, and this isjust one more example of how we’re doing that,”noted president of CHOICE Administrators, RonGoldstein.

Tod C. Turner, chief executive officer forLiveChime added, “The Word & BrownCompanies and CHOICE Administrators aremarket leaders and share our vision of how theindustry needs to adapt to the changing trendsregarding how consumers research and purchaseprofessional products and services on theInternet.”

The Internet has become a main source for con-sumers to research insurance products andservices before purchasing. The use of an onlinechat to get immediate questions answered isbecoming increasingly popular over other com-munication methods such as e-mail or telephone.A recent Forrester Research report claims thatthree out of four consumers abandoned a salebecause they wanted more information about theproduct. Those same consumers would not havetaken the time to call, but would have used a“chat” if it was available.

LiveChime can help prevent sale abandonmentbecause it works on any Web page without theneed of additional applications. A link on thepage lets consumers “click-to-chat” with an avail-able broker without even leaving the current Webpage. The broker can get the question from adashboard on a computer or even from theirSmartphone.

OneBeacon, Medversant Team Upto Make Credentialing Better for

Managed Care Customers

Anew partnership between OneBeacon Professional Partnersand Medversant Technologies, LLC provides OneBeacon

customers access to AutoVerifi™, an electronic credentialing ver-ification and management system. The AutoVerifi technologyworks by continuously validating, storing and retrieving recordsof medical providers. Information is stored in a single, electronicwarehouse and efficiency is created by updating and verifyinginformation continually.

Typically, managed care companies conduct credentialing everythree years. By using this technology, however, the data can beconstantly reviewed with immediate notifications of changes,thus reducing costs to the company.

“AutoVerifi is a unique solution to help our customers enhancetheir business, save on administrative costs and improve their lia-bility risk,” said Susan Angelo, Senior Vice President forOneBeacon Professional Partners’ managed care business. “Byenabling them to verify and update credentialing information con-tinuously, customers know about potential problems immediately.”

“OneBeacon Professional Partners understands the exposuresmanaged care organizations can face as a result of outdated orinaccurate data,” added CEO of Medversant Matt Haddad. “Ouralliance will improve these risks for their policyholders and helpthem realize dramatic cost savings.”

Benefit Express Honored for Innovationby The Business Ledger

The Business Ledger has awarded their 2009 EntrepreneurialExcellence Award (EAA) for Innovation to Chicago-based

Benefit Express. The official awards ceremony is scheduled forSeptember 24 at the DanadaHouse in Wheaton. TheBusiness Ledger will also fea-ture Benefit Express in a spe-cial section of their publicationon November 2nd. The awardshighlight the accomplishmentsof suburban Chicago area indi-viduals and organizations whodemonstrate the core values of

entrepreneurship.

Benefit Express provides flexible administration solutions. Theirself-service application, My Benefit Express™, provides customcontent delivery, carrier billing reconciliation, enrollment assis-tance, employee benefit education tools, transactionaladministrative processing/tracking, vendor data-links and detailedHR reporting.

My BenefitEXPRESS™, pro-vides…detailedHR reporting.

SBI-AXA Life Insurance Company Ltd. announced earlierthis month that it had launched a new processing system for

life insurance applications serving the Japanese market. Thenew system will allow faster applications and lead to a higheracceptance rate, and is based on a software system fromUnderwriting Automation specialist, Allfinanz. It is the first ofits kind in the Japanese life insurance industry.

This move by SBI-AXA is part of a growing global trendtowards simplified issue/rapid issue, and should be noted byUS and other carriers developing plans to address the massaffluent “middle market” by using “TeleApps” which do notrequire the applicant to take aphysical, blood, or urine test.These tests are typicallyrequired in U.S. “fully under-written” life policy issue.

Allfinanz is a leading providerof technology solutions to thelife insurance industry, with aparticular emphasis on newbusiness processing and under-writing automation softwaresolutions. These solutions helpmake straight through process-ing (STP) and simplifiedissue/rapid issue a reality formany leading insurance carriers and banks around the world.

What is Automated Underwriting?

Automated underwriting is a software solution which allows alife insurance carrier to use a comprehensive set of underwrit-ing rules to help make instant decisions on life insuranceapplications.

Underwriting is a complex process, with the wealth of expertiseand experience every life insurance carrier is able to draw uponhaving a very measurable impact on risk management and prof-itability.

It’s important to point out that automated underwriting isn’t analternative to a carrier’s underwriters—it allows the underwrit-ers to focus on complex cases. At the same time it improves theaccuracy of decisions—allowing the carrier to consistentlyapply its underwriting philosophy to every application. It alsogives the ability to draw upon the combined wisdom of theworld’s most experienced and successful underwriters.

Even in an automated environment, the decision of whether toaccept an application may still need input and actions from in-

house underwriters, such as when specific medical checks ormore detailed information are needed.

But in many situations, the responses and disclosures in a cus-tomer application, using an expert underwriting engine, will beenough for an initial underwriting decision to be made—result-ing in immediate acceptance, without the long delays andsignificant costs involved with human intervention.

The result—fewer errors, faster decisions, lower acquisitioncosts and increased sales.

“By introducing this system, we are now able to underwritemore precisely and accept more applications” said Toshiaki

Suzuki, executive officer & gener-al manager customer servicedepartment at SBI-AXA. “Thiswill help our customers and ourown growth prospects.”

SBI-AXA is Japan’s first direct-to-consumer life insurance carrier touse the internet to collect datafrom applicants. It is also the firstcarrier in Japan to use Allfinanz’URE to support the new businessprocess. The company had beenseeking ways to improve theacceptance rate of its applicationprocess, and opted for the

Allfinanz system in January 2009, after a rigorous selectionprocess. The implementation project began in February 2009,taking just eight months from decision to launch.

“We are excited to have contributed to this dramatic develop-ment in the Japanese life insurance market” said YoichiHayashi, Allfinanz’ head of business development in Japan.“With the most customizable solution available in the markettoday, our clients have an enormous advantage in the competi-tive field of life insurance. This product allows them to befaster and more efficient while maintaining excellent under-writing risk management and maximum consistency”.

In SBI-AXA’s new system, users interact with the system usingintuitive, easy to understand browser screens, which interactive-ly lead them through a series of questions uniquely tailored totheir personal circumstances and the relevant life insuranceproduct. This leads to drill-down questions obtaining deeperdisclosure data concerning the insurance applications. Thus,SBI-AXA will now be able to decline fewer, and accept more,life insurance applications. The move will also play a majorrole in improving customer satisfaction.


SBI-AXA Life Insurance Goes Live with Japan’s First AutomatedUnderwriting Engine for Life Insurance

Declan Bannon, Senior Industry Consultant, Product Strategy,Allfinanz

■ PLEASE SEE AUTOMATED UNDERWRITING ON 30


Allfinanz’ highly-evolved 4th generation Underwriting Rules Engine is extremely flexible, andable 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 aswell as a bare minimum standard of underwriting decision making—for example through reassurers offering discounts where suchsystems 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 favorablereassurance 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 againstwhich carriers can program their underwriting logic. In practice, the level of expertise necessary to achieve this has meant that suchchanges 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 previouslyworked for the vendor, or where over many years of dedicated effort, they have builtthese skills in-house. These systems can be changed, but only by IT experts withsolid programming skills and deep knowledge of the product.

3rd Generation: These are systems where a graphical user interface, or some othermechanism exists to enable a carrier whose underwriters have basic computer litera-cy (basic here means the typical expertise in office and business software thatanyone who uses a PC on a daily basis should have) to extend the system to add newbusiness logic (Underwriting Rules), or change or adapt the existing logic withoutthe dependency on outside expertise such as programming know-how from the ITdepartment or an outside consultant or vendor support. This marks a dramatic leapforward as this generation of system puts power in the hands of the underwritingteam for the first time, and removes the dependence on the vendor.

4th Generation: Once ease of use becomes a given, the frontier moves to deliveringactionable analysis. 4th Generation systems, in addition to a 3rd Generation UserInterface, also provide powerful reporting functionality, giving the underwriters (andother stakeholders such as the VP of Insurance Operations or the Head ofDistribution) a deep understanding of the present and past behavior of their system.

The system deployed by SBI-AXA is based on Allfinanz’ Underwriting RulesEngine (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 setwas developed by Munich Re and has been fully customized for the Japanese market by Munich Re’s Life Department in Tokyo. Therules have been adapted to the local Japanese practice, language and tailored to SBI-AXA’s specific risk acceptance philosophy. Theycover 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 Allfinanzusers. Some carriers using the system have demonstrated the ability to decision up to 80% of new business applications at the pointof sale across a range of distribution channels while reducing administrative costs by as much as 85%. Carriers have successfullydeployed the Allfinanz solution around the world for multiple products across the entire range of sales channels, including advisorchannels, 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 systemuses 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, asattested to by its blue-chip client base, track record of project success and the dominant provider position it occupies in the markets inwhich 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 inTokyo, Japan as well as offices in the UK, Germany, China and Australia. Customers include HSBC, Standard Life, Prudential,Genworth, The Hartford and Metropolitan Life.

■ AUTOMATED UNDERWRITING FROM 29

CYBER INSURANCENEWS / IN THE SPOTLIGHT / 31

The Beach Plan in North Carolinahas been reformed, just in time for

hurricane season. Gov. Bev Perduesigned into law House Bill 1305, whichwill protect homeowners and businessowners across the state through reformof the Beach Plan—an informal namefor the North Carolina InsuranceUnderwriting Association, the state’ssystem for insuring high-risk coastalproperties.

“Governor Perdue has taken an impor-tant step today in securing the financialstability of North Carolina following ahurricane or major storm,” said DavidSampson, president and CEO of theProperty Casualty Insurers Associationof America (PCI).

Changes to the Beach Plan were longoverdue. In 2008, PCI commissioned anactuarial analysis by Milliman Inc. thatindicated the Beach Plan was seriouslyunderfunded. In addition, an internal

auditor to the Beach Plan noted thatsuch deficits could threaten the plan’sability to pay claims, bankrupt smallinsurers, and force carriers out of thestate marketplace should a major stormhit the coast.

Sampson believes that passage of HB1305, which was sponsored by Rep.Hugh Holliman, will improve the prop-erty insurance market in NorthCarolina.

“Lawmakers advanced HB 1305 thisyear through thoughtful deliberation toprevent a state property insurance cri-sis,” Sampson said. “The GeneralAssembly responsibly chose to solve theproblem before the storm instead ofafter a devastating event.”

The legislation takes steps to:

• financially strengthen the BeachPlan

• bring more consumer transparencyto the Beach Plan’s operations

• develop a post-storm solvency planfor the state

• create incentives for making homesmore hurricane-resistant

• take initial steps to return theBeach Plan to a market of lastresort

The bill also provides specific protec-tions for inland policyholders, who nowcannot be assessed more than 10 per-cent of premium annually to pay forBeach Plan losses. The Milliman reporthad estimated that such policyholderscould have faced up to 200 percentincreases without this reform.

HB 1305 is already beginning to deliverits intended benefits of increasing con-sumer options in North Carolina. InAugust, a subsidiary of AAA Carolinasannounced that it will begin writinghomeowners insurance throughout thestate in response to the passage of HB1305.

North Carolina Reforms System of Insuring High-Risk Coastal Properties

Just as Gartner predicted, the plannedinformation technology (IT) spending for

the property-casualty insurance industry didincrease slightly from 2008 to 2009.

But the spending increase is not on par withthe recent past.

According to the Property Casualty InsurersAssociation of America’s (PCI) fourthannual joint IT spending survey, theplanned IT spending increase from 2008 to2009 is 1.6 percent, close to Gartner’s prediction of 1.9 percentfrom last year. However, that represents a big decline from the8.1 percent planned increase from 2007 to 2008.

Don’t look for a boost in spending by 2010 either, which is pre-dicted to be a paltry 0.2 percent. But any increase could beconsidered good news, given that insurance companies expect anaverage decrease in revenue of 3.7 percent from 2008 to 2009.

“This pattern of holding steady from 2008 indicates that even

with a tough economy, these companies arestill making some investment in the future,”stated Eric Stegman, research director forGartner.

Twenty-two PCI member companies partici-pated in the survey. Fifty-nine percentreported that for 2008, IT spending was dedi-cated to “lights-on” support, while theremainder supported business growth andtransformation.

Stephen Forte, a research director with Gartner’s InsuranceIndustry Advisory Service, said that data supports the wisdomof insurers updating core legacy administration systems.

“With IT costs per policy and claim at $69 and $58 USDrespectively, this validates the trend of property and casualtyinsurers replacing core legacy administration systems foramong numerous reasons, reducing costs,” Forte said.“Obtaining measurable business outcomes remains a key initia-tive even during the current economic malaise.”

PCI Members Scale Back on IT Spending

Obtaining meas-urable businessoutcomes remainsa key initiative…

Net Income of Property-Casualty InsurersDrops Sharply in First Half of 2009

Net 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 theProperty Casualty Insurers Association of America (PCI).

In addition, the overall profitability of these insurers as measured bytheir annualized rate of return on average policyholders’ surplus (orstatutory net worth) dropped to 2.5 percent during the same time, downfrom 5.5 percent in the first six months of 2008. According to MichaelR. Murray, assistant vice president for financial analysis with ISO, that’sthe second-lowest first-half rate of return since the start of ISO’s quarter-ly data in 1986, and seven percentage points less than the 9.5 percentaverage first-half rate of return for the past 24 years.

The rate of return would not have been as bad had it not been for therough mortgage insurance landscape.

“Results for mortgage and financial guaranty insurers were particularlypoor, with ISO estimating that mortgage and financial guaranty insurers’annualized rate of return fell to negative 76.5 percent in first-half 2009from negative 67.4 percent in first-half 2008,” Murray explained.“Excluding mortgage and financial guaranty insurers, the insuranceindustry’s annualized rate of return declined to 4.5 percent in first-half2009 from 7.7 percent in first-half 2008.”

Insurers’ net investment gains (the sum of net investment income andrealized capital gains or losses on investments) dropped 50.2 percent to$12.4 billion in the first half of 2009, down from $24.9 billion over thecorresponding six months of 2008.

Not all figures were bad. For instance, net losses on underwriting fell to$2.2 billion in first-half 2009, down from $5.6 billion in the first sixmonths of 2008. The combined ratio—a key measure of losses and otherunderwriting expenses per dollar of premium— improved to 100.9 per-cent in the first half of this year from 102 percent in the first half of2008.

Furthermore, policyholders’ surplus (insurers’ net worth measuredaccording to Statutory Accounting Principles) rose 1.2 percent to $463billion by June 30, 2009, up from $457.3 billion at the end of 2008.

Despite the rough start to 2009, David Sampson, PCI president andCEO, pointed out that the insurance industry is still a profitable one.

“While insurers’ profits and profitability tumbled in first-half 2009, theinsurance industry remained profitable and policyholders’ surplusincreased,” he said. “Property-casualty insurers continue to be healthyand competitive despite an extraordinarily difficult operating environ-ment complicated by the worst recession in decades and the lingeringeffects of an unprecedented financial crisis that brought down many onceiconic banks and Wall Street institutions.”

Sampson also noted that the industry is stable as well. “Insurers had justover $1.2 trillion in funds available to cover losses and other contingen-cies. This stability is important to the industry’s ability to fulfill itspromise to consumers.”

Figures are consolidated estimates for all private property-casualty insur-ers based on reports accounting for at least 96 percent of all businesswritten by private U.S. property-casualty insurers.

WorkCompEdgeSlashes Cost of Agency

Plus License

Aprice adjustment from WorkCompEdgemeans insurance agencies can get a bargain

on the company’s Agency Plus license.

WorkCompEdge.com, launched a year ago byTennessee-based Specific Software Solutions,specializes in helping employers and insuranceagencies reduceworkers compen-sation costs. Itrecently loweredthe cost of itsAgency Pluslicense to $1,000annually, a tenthof the cost of theWeb site’s origi-nal fee forinsurance agen-cies.

With the AgencyPlus license, insurance agencies can accessWorkCompEdge.com for internal training andcoordination of services in 15 areas that affectworkers comp costs, such as hiring practices,safety, and the premium audit.

Specific Software CEO Tim Coomer explained theprice adjustment came in response to how insur-ance agencies were using WorkCompEdge.comsince its debut last fall.

“Our previous license options assumed that anagency would use the site and also provide theirclients with access to WorkCompEdge,” Coomersaid. “But we’ve listened and learned that manyagencies weren’t willing or able to assume thesemore significant costs, especially in the currentmarket. We believe this new option will attractagencies who, at this price, can easily get into thesite and take advantage of even one module toenrich their sales and service process.”

Coomer noted that agencies who buy the licensewill appear in the Web site’s Agent Finder tool,so the price of the license could be considered amarketing investment as well.

Agencies can still add site access for their clientson a per-user basis or subscribe to an exclusivelicense ($850 per month), which includes custommarketing support and access for all their clients.

32 / IN THE SPOTLIGHT / CYBER INSURANCENEWS

Aon Releases New Quarterly Overview: Most Markets Remain Soft■ Aon Corporation has released its first U.S. Quarterly Market Overview for Property,

Casualty, and Directors’ and Officers’ Lines.

“The U.S. Quarterly Market Overview complements the firm’s monthly reports in the ongoing effort to keep our clients abreastof ever-changing market and economic conditions, as well as raise awareness of the practices of industry peers and competi-

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 andprevious 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 carriersto sustain growth.

In the D&O market, the report states that the economic turmoil has worked itself through the banks, insurance companies, investmentmanagement firms, and hedge funds. In the financial institutions market, rates are jumping, capacity is shrinking, and coverage termsare 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 shortterm, 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. Pricingincreased 4.07 percent in 2Q ’09 compared with 2Q ’08. Current rates in the S&P financials sector are up 14.77 percent, while allother S&P sectors were flat, marking the first time in more than three years that rates did not decrease. Because D&O policies aretypically 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 ofunderwriters,” 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■ The bottom line is driving car insurance shoppers.

According to a recent study from Google and TNS Compete, about 90 percent ofshoppers for cheap car insurance say that obtaining lower insurance rates is

their main goal. Furthermore, 20 percent more consumers are looking for new ratesthis year than last year, the survey said. Lately, many have been finding cheaperrates.

While RateWatch claims that car insurance rates are 12 percent higher overall in2009 than in 2008, the trend lately has been a decline in rates. A comparison of autoinsurance rates in June 2009 with June 2008 shows that rates this June were at thelowest points they had been during the twelve-month span, according to the organi-zation Cheap Auto Insurance. Furthermore, there was a 6 percent reduction in thecost of insurance policies compared with the previous month just this summer.

Many states, such as Alabama, Mississippi, and Ohio, have seen a steep decline inrates. In Massachusetts, consumers have enjoyed a rate drop of 8 percent in the last year. On the other hand, some states, likeNebraska 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 otherpolicies. For instance, Allstate and State Farm have already raised their rates for homeowners insurance by about 15 percent in thepast 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

…carriers can affordthe rate drop in carinsurance…becausethey are raising ratesfor other policies.

Technology Investments Can Help P&C Insurers Create Efficiencies, Save Money

Those 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 andpricing/risk accuracy.”

“P&C insurers need to react to market changes quickly and collaborate with their distribution channel, while improving fundamentalexpenses and costs,” Forte added, “This means giving underwriters tools to more accurately understand and price risk, for bettercross-selling and up-selling and coordination of underwriting processes across the business. Underwriting workstations meet thesecritical 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 ofthe business is impressive.”

A separate July 2009 report by management consulting firm Robert E. Nolan Co. states, “Technological investments are required todevelop and constantly modify the predictive models, which will become the industry norm as increased integration of internal andvendor supplied information becomes the source of rate plan competitive differentiations. Carriers with outdated core systems need toplan 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

There’s a new hotline help for law firms. Beazley Group has launched a confidential hotline service for its law firm clients withprimary 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 beprotected 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 itsclients 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 clientsto 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 foundersof Venture Law Group, a Silicon Valley law firm. He has advised law firms of all sizes and practice areas, as well as risk retentiongroups 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 anddifficult choices that law firms have to make, particularly in these trying economic times.”

Gagne Named Director of Sales for SUNZ

SUNZ Insurance Company has selected Christine L. Gagneas the company’s new director of sales. The Florida carrier

specializes in providing workers’ comp to ProfessionalEmployer Organizations (PEO) and staffing companies.

Gagne, who has placed property and casualty insuranceaccounts for more than two decades, comes to the St.Petersburg firm with expertise in sales and marketing for multi-ple lines of insurance products, client services, andmanagement. Her recent focus has been on workers’ comp inthe area of loss sensitive products.

Douglas Lilak, CES of SUNZ, said that Gagne’s arrival at thecarriers comes at a period of growth for SUNZ in its nichewithin the insurance market.

“The team at SUNZ is proud to welcome Ms. Gagne as thenew director of sales, and we know she is the right person to

comprehend the magnitude of this growth initiative,” Lilaksaid. “Her industry accolades and experience are a perfectmatch for SUNZ.”

Gagne served as the director of underwriting and marketing forMidwest Insurance Services (MIS), where she was responsiblefor marketing and placement of large loss sensitive commercialaccounts. MIS handled the back office operations for the largedeductible workers’ comp program for Midwest EmployersCasualty Company, one of the largest excess carriers in theUnited States.

She was also responsible for management of a PEO-ownedInsurance Company Client. She was managing an estimated$43 million in total standard premium with this program.

Gagne has obtained her property and casualty license, surpluslines license, health license, and professional designation ofCertified Insurance Counselor (CIC).

34 / IN THE SPOTLIGHT / CYBER INSURANCENEWS

cyberinsurance news october09

Business

fear of loss

lifethe fear

customerthe underwriting

selling system

suite d lincoln

new market euphoria

health insurance

cus technology