THURSDAY, JULY 22, 2010  

                                                Big “I” Association News




On the Hill
President Signs Financial Services Regulatory Reform into Law
New law leaves day-to-day insurance regulation at the state level.

Yesterday, President Barack Obama signed the “Dodd-Frank Wall Street Reform and Consumer Protection Act” into law. The 2,300-page bill was drafted in response to the recent financial crisis and is the most sweeping piece of financial reform legislation since the Great Depression. It includes a number of provisions intended to prevent future bailouts of financial firms, monitor systemic risk and regulate products such as derivatives, mortgages and credit cards.

This effort has come a long way over the past year and ultimately included several major victories for the Big “I.” As previously reported in IN&V, the majority of this legislation does not apply to insurance and leaves the day-to-day regulation of insurance at the state level. Title V, the insurance title of the bill, includes surplus lines and reinsurance reform and creates a Federal Insurance Office (FIO), which will serve as a non-regulatory insurance informational office at the federal level. The office will also play a role in representing U.S. interests with international insurance agreements.

Throughout the legislative process, the Big “I” fought hard to ensure that the office would have limited authority and that insurance agents and brokers would not be subject to mandatory data requests from the FIO. These changes are reflected in the bill that was signed into law.

Members can click here for a detailed memo prepared by outside senior counsel Wes Bissett on the insurance provisions of the “Dodd-Frank Wall Street Reform and Consumer Protection Act.” (Members must be logged in to view this information.)

Lauren Cialone (lauren.cialone@iiaba.net) is Big “I” senior director of federal government affairs.





P-C Trends
Uninsured Motorist Exposure Rising Dramatically
Are your personal lines customers protected?

In January, the Insurance Research Council (IRC) reported that one in six drivers nationally were likely uninsured. In some states, the rate of uninsured drivers approaches one in three. The report noted a remarkable correlation between being unemployed and being uninsured, and it does an excellent job of highlighting the uninsured and underinsured motorist and that the exposure extends to hit and run pedestrian accidents (i.e., bicycles). Updated figures now available from the Insurance Information Institute (III) confirm that the trend is increasing. Your agency’s personal lines staff should make this point to clients and highlight the importance of adequate uninsured and underinsured motorist protection. This is a coverage where a few dollars could change someone’s life after an accident.

Robert Hartwig, president of III, provided an update on the situation during a presentation to the Insurance Council of Texas Insurance Symposium. With unemployment stubbornly high and fears that it could go higher, Hartwig’s presentation noted the average driver could now be commuting with one in five other drivers on the road uninsured. Drivers in areas hardest hit by the recession could be mixing with one in three uninsured drivers. The data from the Hartwig presentation below illustrates the unemployment versus uninsured motorist trend.



Source: Uninsured Motorists, 2008 Edition, Insurance Research Council; Blue Chip Economic Indicators (Unemployment data, including forecasts); Insurance Information Institute.

Bring this information to your clients’ attention. With the average American spending about one hour per day commuting in his or her car, the exposure threat is very real. Personal lines CSRs can use the graph to facilitate the discussion. While many states require minimum uninsured motorist coverage of typically $10,000-25,000 per person, and $30,000-$50,000 per accident including bodily injury, coverage over and above this is readily available (up to limits of liability on policy).

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

For more information on market options, go to www.bigimarkets.com. Big “I” endorsed provider of standalone personal umbrellas, RLI, is in the process of filing for availability of $1 million on uninsured and underinsured motorist.  Presently, RLI offers the coverage in seven states, and other states will go into effect as filings are approved with a target date of Jan. 1, 2011. Uninsured motorist coverage is also available via the personal umbrella alternative market.





Agency Management—Viewpoint
Do Your Customers Like Piña Coladas?
Sappy pop tune teaches the lesson of learning about client needs before it’s too late.

I recently heard an agent explaining with much chagrin that his longtime commercial client bought a large whole life insurance policy to provide liquidity for estate taxes and business succession planning. The client’s adult son had left his job as a CPA at a large firm to move back to their rural town to join the business and eventually take over for the client, which was the catalyst for the succession planning. The agent had no idea about the change. And what bothered the agent most was the client didn’t realize that his commercial insurance agent could have provided the same service through the agency’s life insurance producer. As painful as it is to hear these stories, virtually every agent has had a similar episode of losing an opportunity for a big sale because they learned about the need too late.

Agents would do well to remember the sage words of the (in) famous song of the late 70’s—“Escape,” later known as “Escape (The Piña Colada Song),” which went to No.1 for Rupert Holmes. So what invaluable lesson can agents learn from the song? The lyrics involve a guy who has grown bored with his relationship and takes out a personal ad listing the specific things he likes. He gets a response and goes to the rendezvous with high hopes, only to learn that the respondent was his own girlfriend.

The moral of the story (or perhaps the song) is that when agents spend time on a regular periodic basis with their customers, they learn about the changes going on in their customer’s lives—business, family, leisure, etc. Eventually those changes will require clients to revisit and adapt their financial plans. As all good marketers know, timing is everything. Agents should remember that technology is a tool to move data, promote the agency, communicate quickly with customers, facilitate transactions and perform other functions. However, it is not a replacement for personal contact and investing time with customers. So, learn from the wise Rupert Holmes that it is important to have meaningful conversations to learn about what is really important in someone’s life. People are so much more interesting when you take the time to find out.

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


On the Hill
Big “I” Agent Testifies Before Congress on Federal Crop Insurance Program
Iowa agent outlines opposition to RMA language.

Earlier today, John F. Dalton, a Big “I” crop insurance agent from Iowa, testified on behalf of the Big “I” before the U.S. House of Representatives Committee on Agriculture Subcommittee on General Farm Commodities and Risk Management in a hearing on the current state of the federal crop insurance program.

Dalton is president of Midwest Insurance Associates LLC and the Agri-Land Insurance Agency in Council Bluffs, Iowa, and a member of the Big “I” crop insurance task force.

Recently, the Obama administration released the Risk Management Agency’s (RMA) final version of the Standard Reinsurance Agreement (SRA), which determines the terms and conditions for the Administrative and Operating (A&O) reimbursements and underwriting gains for crop insurance companies.

“The Big ‘I’ strongly opposes the new SRA’s commission cap provisions,” said Dalton. “The current SRA represents the first time that RMA, or any federal agency, has attempted to regulate crop insurance commissions rather than allow the marketplace to determine the appropriate commission rate. This also represents the first time that the federal government has intervened in the agent-company relationship. For more than 20 years, insurance agents have worked side by side with crop insurance companies and the federal government to increase the use of crop insurance across America.”

The changes in the SRA are expected to impact agricultural communities in the Midwest the hardest.

“The A&O subsidy for 2010 in Iowa will be significantly down compared to 2009 because of lower commodity prices and lower commodity volatilities,” said Dalton. “The proposed changes to the delivery cost system concern us because these changes have a disproportionate effect on the Corn Belt states. Our large agriculture economy employs thousands of workers and creates thousands of sustainable jobs. The number of agents and companies writing in the Midwest make this program highly competitive.”

To read the full hearing statement, click here.

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


On the Hill
Family-Owned Small Businesses Face Estate Tax Uncertainty
Big “I” and 50 other business groups send letter to Senate in support of bipartisan effort.

This week, the Big “I” joined forces with 50 other business trade associations as part of the Family Business Estate Tax Coalition (FBETC) on a joint letter to every member of the United States Senate asking them to support a bipartisan effort that would enact permanent estate tax relief for small and family-owned businesses.

Senators Jon Kyl (R-Ariz.) and Blanche Lincoln (D-Ark.) recently filed an amendment to H.R. 5297, the “Small Business Lending Fund Act,” that would permanently set the estate tax rate at 35% with a $5 million exemption amount, phased in over 10 years and indexed for inflation. The amendment also provides an option for taxpayers inheriting assets in 2010 to either retain this year’s estate tax rate, which is zero percent, with “carry over basis,” or file under the provisions of the new bill.

The joint letter says, “Without a permanent solution, there are no assurances that these business and family farms will continue to operate in future generations.”

To read the entire letter and view the list of FBETC members, click here.

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