Daily sales & marketing tips for insurance professionals

As September,  and therefore 2009’s third quarter, draws to an end, all of our thoughts will inevitably turn to the economy.  Without a doubt, this has been one of the most chaotic years in US economic history – a veritable roller coaster – and if you’re still in the game as an insurance agent, then you’re one tough cookie!  As I speak to insurance agents on the phone every day, one question will stubbornly come up every now and then: is anyone out there actually buying insurance, or are they all just rate shopping?  I could tell you the answer is a resounding yes, even offer up the testimonies of agents that I work with that purchase leads and say that this year, purchasing leads has helped them to make this their best year yet… but don’t take my word for it, take the people’s:

 According to a new survey released by the nonprofit LIFE Foundation (and found through Insurance News Net), 56% of Americans believe that it is more important to have life insurance now than it was a just year ago.  Even though there were 33% of Americans that have lost coverage this year – due to a job loss or a job change, an even higher 39% increased their existing coverage and 28% of consumers went out and bought life insurance for the very first time.  So what are these numbers saying?  To me, and to LIFE Foundation, they’re saying that even during times of economic crisis or hardship, or perhaps even because of it, people value security for their family.   People are still buying and maintaining insurance coverage. 

 Again though, don’t take my word for it.   According to Insurance Networking News, New York Life Insurance Co. sponsored another survey that shows that 83% of Americans age 30 and older agree that economic hardship has increased their desire to provide financial protection for their family.  So the silver lining in the hail cloud of economic woes is that consumers aren’t just shopping; they’re purchasing.

Insurance scoring—insurers loooove it, and they think everyone else should heart it too. They insist that prices stay low because insurance scores (which include but are not limited to a person’s credit score) have an impressive knack for predicting risk.

But the public and state regulators need regular convincing, with fairness their primary concern. The NAIC recently convened a public hearing on insurance scoring, and industry representatives were forced, once again, to defend the practice, largely against a 2004 study conducted by the Missouri DOI.

The Missouri study revealed that the strongest predictors in a consumer’s insurance score were race and income, a fact which—rather understandably—created some hostility among the public and nervousness among policymakers.

The Insurance Information Institute (III) criticized the report when it came out in 2004, pointing out methodological errors that they said were the result of a pre-existing bias against the practice. Further, the III said, the Missouri department of insurance failed to acknowledge the benefits bestowed by insurance scoring: “The study’s opinions imply that the MDOI is prepared to eliminate the credit-related discounts currently offered by insurers to thousands of minority families living in Missouri as well as to homeowners and drivers throughout the state.”

Most states allow credit-based insurance scores, which is a fact commonly touted by insurance industry groups. (They’re less excited about mentioning that 48 states have laws putting certain restrictions on the practice.)

The faltering economy and tightening credit markets have sparked new criticism of insurance scoring. Critics predicted that the poor (whose ranks are swelling and whose credit scores have suffered) would be dealt another blow with worsening insurance scores and thus higher premiums.

“If insurance prices started to rise for no good reason, at a time when the public was least able to pay more, it would be a political, regulatory, and public relations disaster,” said Brian’s Sullivan’s May 18 Auto Insurance Report (print only, subscription required). “Insurers would be headed for a fierce beating, and worse, it would be well-deserved.”

Sullivan reports that while insurance scores are indeed dropping, they have not dropped as steeply nor been as volatile as credit scores, and that is good news for the insurance industry, because it means that insurance scores are calibrated well enough that they don’t simply mimic credit scores. (Many people falsely equate the two.)

Ultimately, though, the insurance scoring debate will probably stick around for a long time to come, with neither side landing a fatal blow against the other. Part of the reason is that the two sides approach the issue from radically different places. The insurance industry’s arguments, which center around efficacy, accuracy and low prices, don’t hold sway with opponents, who think that there is some larger issue of fairness at stake.

Writing for the New Yorker, economist James Surowiecki notes that the FIRE economy–which stands for finance, insurance, and real estate–shrank for the first time in 16 years. “Since 1980, this sector’s share of the economy has grown by almost half. Now, apparently, the worm has turned,” says Surowiecki.

Looking at credit default swaps and mortgage-backed securities, it’s easy to understand how and why the finance and real estate markets are shrinking. And the insurance industry, of course, is so interconnected with those two that it was only a matter of time before it started to feel the pain as well, even if it wasn’t as reckless as its siblings in the banking and property sectors.

Surowiecki looks back at the last 10-20 year period as the “financialization” of our domestic economy, when Wall Street became an economic driver in its own right, as opposed to a follower. And that’s where things went wrong.

“Wall Street needs to recognize that its proper role is, as it has been in the past, to follow the real economy, rather than trying to drive it,” says Surowiecki. ” During the housing bubble, the financial sector essentially tried to create reality. Now’s the time for it to respond to reality instead.”

Illinois insurance director Michael T. McRaith takes Allstate’s Tom Wilson to task in today’s Insurance Journal (”We’re in Good Hands With State Regulators“).

Writing in response to Wilson’s recent op-ed in the Times, McRaith minces no words: “the myth-laden pleas of an otherwise prudent Tom Wilson, CEO of Allstate, in search of federal regulatory relief should be viewed cynically.”

Apparently I wasn’t the only one who thought Wilson’s rationale for ditching state-based insurance was disingenuous.  Here’s a recap: earlier this week, Wilson argued that the current chaos in the financial markets (which is largely the result of ineffectual federal oversight) is evidence that we need to ditch state-based insurance regulation and replace it with–get ready for it–federal oversight.

Such a move would constitute a de facto deregulation of  insurance markets, says McRaith.

By remaining local, state insurance regulation evolves without caving to the whimsical profit fantasies that drove AIG and others to taxpayer support. Federal bailouts and loans painfully reveal the costly outcome of failing to put consumers first. Mr. Wilson’s industry deregulation ideal is not viable.

McRaith’s best case for state regulation lies in the fact that the only parts of the AIG behemoth that have managed to stay afloat throughout this crisis–the 71 US-based insurers–are the ones that were under the watchful gaze of state regulators.

Tom Wilson, the chief executive of Allstate, does a clever sleight of hand in yesterday’s New York Times.

Wilson uses the current mess on Wall Street to make the case for ditching state-based insurance regulation. While he appears to be arguing for greater federal oversight of the financial markets, he’s really just pursuing the narrow interests of conventional insurers, who have long bristled at tough state regulations.

Wilson correctly yet disingenuously notes that it was a sort of insurance product [credit default swaps] that got us into this fine mess, and it was an insurer, AIG, who issued them. “Unlike banks or investment houses, insurance companies are not regulated by the federal government,” says Wilson. “Instead, they are regulated by individual states, which lack the expertise to properly oversee rapid innovation or systemic risks.”

To sum up: a branch of AIG’s financial services division [which, mind you, is separate from their insurance division, a distinction Wilson fails to point out] wrecked the economy by creating a quasi insurance product, and state insurance regulators weren’t sophisticated enough to see the risk, and therefore, we should regulate insurance on a federal level. Never mind that credit default swaps had nothing to do with AIG’s insurance division and therefore nothing to do with state regulators …

I’m skeptical. There may be a lot of merits to federal oversight of insurance, and lord knows we need more oversight of the financial markets, but I think Wilson is being a bit opportunistic here.

Judging by this web page, Progressive has bravely ventured into the gay marriage debate—not exactly natural terrain for an insurer.

Here’s what the page says:

Being ahead of your time is never easy. As a community, you understand the importance of being progressive. It’s not just a word. It’s how you live your life. And as an insurance company, we work hard to live up to that name. It’s how we think, and how we treat our customers. So while you’re here, check out how far we’ve come, and more importantly, where we’re heading.

Most companies steer clear of the cultural battlefield. The issue of gay marriage is far from ’safe’ in political terms. Typically, if a private company offers a public opinion on something, it’s not on a hot-button issue;  it’s usually on something everyone can agree on—like, say, the cuteness of puppies or the deliciousness of  ice cream.

This one’s for the independent agents out there: How satisfied are you with the insurance companies you represent?

J.D. Power recently issued a report that measured agent satisfaction and identified the things that influence it.

Surveying 1,589 independent producers, they discovered an interesting and perhaps surprising trend: the majority of agents value a good working relationship with insurers more than anything else—even compensation.

Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, summed up the results this way:

Although it may seem that compensation would be the primary driver of agent satisfaction, in fact, elements that are related to agent support and products are the key differentiators. Insurers that provide helpful and knowledgeable business contacts and provide a variety of policy offerings help to better meet the needs of consumers, which leads to greater levels of satisfaction among agents.

Here’s the breakdown of factors, in order of importance to agents.

• key carrier contacts (32%)
• policy offering (23%)
• claims (16%)
• technology (13%)
• price (10%)
• compensation (5%)

The study also found that “agent satisfaction typically increases the more often agents interact with the business contact from their insurance company. Agents prefer to receive business contacts via phone or e-mail at least once or twice a month.”

My question, which is rhetorical, is this: What makes you think consumers are any different than agents?

Contact from insurance carriers makes you feel appreciated, valued, taken care of. The same holds for consumers. Let them know you’re thinking about them. Call them. Ask them if there’s anything you can do. Their satisfaction will rise too.

Via Terms and Conditions

For so long the arguments never changed in the health care debate. Each constituency—insurers, doctors, political parties—had its position, and you could count on its immutability.

So it was strange and somewhat disorienting (in a good way) when, last week, the health insurance industry told Congress that they were open to the idea of abandoning their policy of rejecting people with preexisting conditions—but only if the federal government instituted a universal mandate to buy insurance.

A subsequent article in the Times described the pleasant surprise of many Democratic congressmen, who have been clamoring for just such an scenario for years.

“It was a significant step for them to take,” said Rep. Jeff Bingaman (D-N.M.) in an interview with the Times. “That’s certainly not been their position in previous years. I hope it moves us closer to something that we could label a consensus.”

Rewind to 10 years ago: it was unthinkable then to consider the idea of a universal mandate becoming a consensus. If you predicted such a thing a decade ago, you would’ve gotten derisive snorts.

But times have changed, and despite a long history of health-care-reform failure, it seems the stars are aligning in favor of change. So what has changed?

The way I see it, we Americans are increasingly uncomfortable with the idea of leaving our sick people to face crushing medical costs and bankruptcy. We’re putting more pressure on our elected officials to remedy the situation. Insurers, seeing the writing on the wall, know that a universal mandate may be the only way to soften the blow of impending government regulation.

If you ever want a readable and accurate description of any aspect of the financial crisis, check if Joe Nocera has written anything about it.

Nocera writes the Talking Business column for the NY Times, and his latest description of AIG’s outsized role in our current morass is a veritable must-read. It will help you get a better idea of what a ‘credit-default swap’ is and, more importantly, why they were (and still are) so destructive.

Nocera’s article will raise your hackles when you learn just how irresponsible AIG was, and how despite (and because of) that irresponsibility, they are currently the largest benefactor of U.S. government bailout funds—$150 billion since September. In essence, AIG thought it could get away with collecting insurance premiums (in this case, fees from issuing credit default swaps) without paying out any claims. (The lesson: bad things happen when insurance isn’t regulated.) But enough preamble. Read the article.

Nina Zagat, publisher of those ubiquitous maroon restaurant guides, is branching into the health care industry. (“Noted Rater of Restaurants Brings Its Touch to Medicine,” New York Times, Feb. 15, 2009.)

Zagat is asking WellPoint Blue Cross members—who number in the millions—to rate doctors on trust, communication and availability, among other things.

What to make of this trend?

“It is curious that they would go to a company that had no experience in health care to try to find out how good a doctor is,” a doctor told the Times. “It certainly is very subjective.”

Most of the health care professionals quoted in the Times article were hostile to the idea. It’s easy to see why—this would make them more accountable. Which is why I welcome the development and hope that it catches on with more insurers.