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 Big “I” National News

On the Hill
Big “I” Legislative Conference & Convention Rapidly Approaching
Capitol Hill Day may be the most important of the year for the Big “I.”

The 111th Congress and the Obama administration are clamoring to hash out the details of a major restructuring of financial services regulation that will impact the independent agency system. The next few months are critical and the Big “I” needs all hands on deck  to protect our industry. 

This year, it’s more important than ever that each state has a strong presence at the Big "I" Legislative Conference & Convention, April 29-May 1, in Washington, D.C.

On April 30, hundreds of agents will head to Capitol Hill for a highly anticipated lobbying day with members of the House, Senate and their staffs. Through this event, Big “I” members reiterate to the nation’s decision makers that independent agents are in every state and district, and that they participate in the legislative process. The legislative conference is the industry’s best-attended, most effective legislative event. Top issues to be addressed this year include: the state of the economy,  economic challenges facing insurance agents and the industry, the TARP program, insurance regulatory reform, health insurance and other challenges and opportunities facing the independent agency system.

At the top of the agenda is the threat of federal insurance regulation, including an optional federal charter (OFC). As the Obama administration and Congress deliberate a restructuring of the financial services regulatory system, the Big “I” continues to guard against OFC and other legislative efforts that could harm independent insurance agents and brokers. The Big “I” also advocates for sound legislation that would benefit agents and consumers, such as agent licensing reform. An agent meeting with his or her congressional representative could make the difference in how that member of Congress votes.

With more than 300,000 members and an experienced, bipartisan government affairs staff in the nation’s capital, the Big “I” is well-positioned to advocate for independent agents, but it takes everyone’s participation. This year, the goal is for Big “I” agents to meet with every member of Congress. With so many pressing issues on the table, now more than ever, it is important for agents from every state and congressional district to attend.

Additional highlights of the Big “I” Legislative Conference include in-depth issues briefing sessions, speeches by congressional leaders, a panel discussion with top insurance carrier CEOs, a state of the association address by Big “I” chairman Brett Nilsson, a speech by Freakonomics author Stephen Dubner and appearances by numerous high-profile industry speakers.

If you register by Feb. 20 and use the code EARLY09, you will save 10% on registration fees. For registration and hotel information, go to www.independentagent.com and select the “Events and Conferences” link.

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


 


P&C Trends
Pinching Pennies: Evaluating Education Costs
Agents and educators are finding ways to spend less on necessary training.

As independent agencies scour their budgets for ways to cut costs, saving on education expenses presents a unique challenge. Large-scale cuts are generally not an option due to continuing education (CE) requirements, and most agencies consider education both an investment and a priority. As a result, both agents and educators are finding creative ways to pinch their education pennies.

“Education is the last area we’re looking to cut,” says Arturo Hoyo, president of Coastal Insurance Group, Inc. in Miami. “Still, we are looking at how to bring down expenses, so we’re making sure we wait for courses to be offered locally so our staff doesn’t have to travel.”

Because Hoyo’s main concern is lost productivity when staff must leave the office to take a course, his agency is also considering bringing instructors in-house to teach the entire staff but is unsure whether it will be cost effective. Online courses are an option, but Hoyo says his staff strongly prefers the experience of a live, interactive course. Hoyo hopes webinars, which offer both the interaction of a live course and the convenience of remote learning, will soon be available for CE credit in his state.

Sam Rogers has been able to save money through in-house instruction, since his agency has a sizeable staff of 48. According to Rogers, president of Rogers, Gunter, Vaughn Insurance, Inc. in Tallahassee, Fla., 12 or more people have to attend an in-house CE course for it to be cost effective. Rogers’ agency has occasionally partnered with other agencies so the maximum number of people can benefit from in-house CE instruction at a fixed, shared cost.

Agencies in Virginia, where webinars are accepted for CE credit, are also stretching funds by educating entire offices at once. According to Diane Mattis, vice president of education at the Independent Insurance Agents and Brokers of Virginia, paying just one phone connection for a staff webinar is the most cost-effective way to meet CE requirements.

“We think of CE webinars as a virtual classroom, and every webinar location is registered for audits,” says Mattis. “We recently did our state’s three-year flood education requirement via webinar, and we had hundreds of people listening in across the state.”

In addition, Virginia offers a “Lunch-n-Learn” program, which regularly brings CE courses to five major cities across the state. Agents earn their CE credits in short, three-hour sessions over lunch, allowing them to work at the office before and after.

There are many ways for cost-conscious agents to continue their education beyond CE requirements. Independent Insurance Agents and Brokers of New York, Inc. (IIABNY) offers free podcasts to agents addressing a variety of insurance law and coverage topics (click here for an example), while Independent Insurance Agents of Texas (IIAT) provides free video webcasts on topics of interest to independent agencies. Finally, the American Institute for CPCU (AICPCU) allows agents to earn a CPCU designation while simultaneously earning CE credits.

Sharon Koches, regional sales executive at the AICPCU, advises all agencies to make an education plan, just as they make a budget and business plan each year.

“Agencies need to do an assessment of employees’ strengths and weaknesses to get the best use of time and money,” Koches says. “That way, they can establish where they’ll gain the most benefit from education.”

Editor’s note: This article is the first in a series entitled “Pinching Pennies,” which explores cost-saving measures for independent agencies. For more cost-saving tips, read “Recession-Proof Your Agency” in this month’s IA magazine.

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


 


P&C Trends
A Close-Up of State Loss Ratios
The lowest three ratios may surprise you.

In a time of bad numbers and bad news, it’s refreshing to look for something positive amidst all the doom and gloom. A great opportunity to do this is by looking at property-casualty industry loss ratios on a state-by-state basis. However, rather than examining which state has the highest ratio, we will focus on which states have the lowest loss ratios.

Each year, Insurance News and Views obtains the loss ratios for the 50 states and the District of Columbia from A.M. Best. The three states with the lowest average loss ratio for 1997 to 2008 are Hawaii, the District of Columbia and Maine. The average loss ratio on all p-c lines for the period is 65.3% and in all but one year the three states were below the average for the entire country. Hawaii was at least 10 percentage points below the national average every year. Of course, the below-average loss ratio states are balanced out by states with higher incidences of catastrophes, and individual states typically have both good and bad years. However, Hawaii, Washington, D.C. and Maine have generally been the exceptions to that rule in the last 10 years.

States with loss ratios below 60% for the 10 years before 2008 were Hawaii( 43.8%), District of Columbia (47.2%), Maine (53.8%), Wyoming (56.1%), Alaska (56.1%), Utah (56.3%), Rhode Island (56.9%), Massachusetts (57.6%), New Hampshire (57.9%), New Mexico (58.0%), Idaho (58.3%), Iowa (59.0%), California (59.4%), Connecticut (59.6%), and Vermont (59.6%).

Paul Buse (paul.buse@iiaba.net) is president of Big I Advantage^SM and a licensed p-c agent.


L&H Trends
Eliminating the 401(k) Match
Should an organization consider freezing its contribution to employee retirement plans?

With each coming week, the nation’s economic woes continue to affect all sectors of the economy. The most recent unemployment statistics indicate that the unemployment rate has increased to 7.6%, which is the highest rate since the early 1990s. A majority of economists are now predicting that the unemployment rate will hit the double-digit mark by year’s end. While there are positive signs that some sectors of the economy are improving, most experts expect the economy to remain weak through the entire year, despite the passage of an economic stimulus package.

Against this backdrop, businesses large and small are trying to cut every available expense, including payroll, often by establishing wage freezes or salary reductions. 

A recent study indicated that one of every four organizations has shed jobs as a direct result of the current recession, and another 20% are considering make job reductions in the coming months. 

Another area of expense is employee benefit programs. Since 401(k) plans have become the most prevalent type of retirement plans provided by private sector employers, a number of employers have focused on ceasing or eliminating their contribution. At this point in time, about one in five employers have taken such action.

If an independent agent is asked by a client whether this action makes sense, the client must consider several factors.  First, employers should realize that employees will interpret this action as more bad news. This can impact productivity and may cause talented employees to consider joining a competitor they believe is in better financial condition. Such action could also cause concern on the part of current and potential customers. 

At the same time, if it is well understood and communicated to employees that this is a temporary measure and that the employer matching contribution will be restored as soon as possible, then suspending the employee match may be a legitimate avenue to consider. If the 401(k) plan has a profit-sharing component, employers can offer an additional contribution to make up for the shortfall once profitability is restored. It is important to convey to employees that they should continue contributing to their 401(k) plan, since ceasing the employee match may result in employees stopping contributions.

Employers must also examine whether they can suspend contributions to a 401(k). If they have a profit-sharing plan or discretionary matching contribution, they can choose not to contribute for any given year as long as they have not already promised to contribute. Employers with a Safe Harbor 401(k) plan may freeze or amend contributions mid-year through a version which provides a Safe Harbor matching contribution (basic or enhanced) formula. However, an employer may not freeze or amend a Safe Harbor 401(k) plan mid-year if it uses the Safe Harbor non-elective contribution formula (i.e. 3% of pay). The only way to eliminate the Safe Harbor non-elective contribution mid-year is to terminate the plan.

In order to freeze or amend a Safe Harbor 401(k) plan mid-year, the employer must:

1. Provide a notice of the plan change to the employees at least 30 days before the effective date of the amendment to reduce or eliminate the match;

2. Provide the employees a reasonable opportunity to change their deferral election;

3. Adopt an amendment to reduce or eliminate the matching contribution formula, effective at least 30 days after the amendment’s adoption date;

4. Fund the match through the date of the amendment; and

5. Apply current-year testing for the entire year for both the ADP and ACP tests.

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


Tech Updates
Survey Finds Most Agents Using Real Time Functionality
Firms save hours daily on transactions across employee base.

Increasing numbers of agents and brokers are tapping real-time technology tools to handle policy rating and sales, manage customer inquiries and deliver service, according to a recent survey developed by the Real Time/Download Campaign and promoted by management system user groups, carriers, software vendors, state associations, ACORD User Groups Information Exchange (AUGIE) and the Big “I” Agents Council for Technology (ACT).

Real Time is the ability to click on a button from a client file in the agency management system or comparative rater for immediate access to carrier information on that client. This approach provides a single workflow for servicing or quoting. According to a poll of 3,200 agency staff members, more than half of agency management system users tap a real-time tool to start an inquiry or service transaction (54% for inquiries and 55% for personal lines endorsements). In addition, 43% of agents are doing personal lines real-time rating through the agency management system or comparative rater and 18% are doing commercial lines real-time rating.

Survey responses came from every state in the country. Agency and brokerage staff were asked to complete the survey, regardless of how “automated” they believe their agency to be. Slightly more than 90% of respondents said they use an agency management system in their office.

“As Real Time continues to gain momentum, it’s important to understand what’s been achieved,” says Campaign Co-Chair Cyndy Smith, vice president and director of technology at Haylor, Freyer & Coon, Inc., in Syracuse, N.Y., and industry affairs committee chair of the AMS users’ group. “By benchmarking where we are we’re better able to track future progress in implementation and adoption of this important workflow enhancement.”

Benefits & Challenges
Use of real-time tools is saving agents and brokers a significant amount of time each day. Nearly half of those using Real Time (47%) find time savings of as much as 30 minutes per employee per day (45% in personal lines and 50% in commercial.) An additional 28% (35% in personal lines and 19% in commercial) peg the savings at 31 minutes to an hour per employee each day.

Current non-users of Real Time gave  two main reasons for their lack of usage: 29% said they did not know the functionality existed within their system, and 14% said they don’t have time for implementation and training.

“We’ve worked hard to educate people on the value of Real Time and Download,” says Smith. “Agents need to understand that real-time functionality already exists in most management systems; it’s a matter of turning it on and making sure employees understand its value. Workflows driven by Real Time and Download help agencies deliver better customer service and retain business without adding more staff.”

Inquiries, Endorsements and Rating
The most frequently used real-time inquiry functions are personal lines billing inquiry (selected by 87% of inquiry users) and personal lines policy inquiry (82%), followed by commercial lines billing inquiry (75%), personal lines claims inquiry (70%) and commercial lines policy inquiry (69%).

Some 55% of those with management systems do personal lines endorsement processing and 34% do commercial lines endorsement processing. Forty-three percent of agents use a real-time tool to rate personal lines policies and 18% use such a tool for commercial lines rating.

The difference in usage percentages between personal and commercial lines is driven, in part, by the number of carriers that have implemented the workflow.

Carrier Adoption
Agents have an increasing number of carriers offering real-time functionality in their offices. About 60% of agencies doing personal lines real-time inquiries or service transactions say they have it available with four or more of their carriers (42% have four or more carriers providing this functionality in commercial lines). Six of 10 agents doing personal lines real-time rating use the technology with four or more carriers. For commercial lines, just 32% of agents say four or more carriers provide real-time rating, but the number of carriers offering this functionality is expected to grow steadily in the coming year.

 “Today, more than 90 insurance organizations—representing some 140 distinct carriers—offer independent agents and brokers the ability to complete some kind of transaction in Real Time, through their management system or rater,” says campaign co-chair Lisa Parry Becker, vice president of sales and marketing at William B. Parry Agency in Langhorne, Pa. “The number of carriers offering real-time service and inquiry capabilities is up about 17% since the campaign started. For real-time rating and quoting, it’s up 36%.”

“But it’s not enough. More carriers need to implement real-time functionality and promote it to their agents, and agents need to use the transactions that are available from their carriers,” adds Parry Becker, who is also a national director of ASCnet, the Applied Systems user group. “Agents and brokers can help speed the process by getting carriers engaged in discussions and educating them on the benefits and ease of offering Real Time.”

For more information on Real Time webinars and in-person sessions at association and user group meetings, and to download the Real Time Implementation Guide, visit www.getrealtime.org.

Jeff Yates (jeff.yates@iiaba.net) is executive director of the Agents Council for Technology (ACT), part of the Independent Insurance Agents & Brokers of America.