DEMUTUALIZATION PURPOSE - The latest trend in the insurance industry may not be accomplishing much. According to David Schiff, editor of Schiff's Insurance Observer, demutualization rarely creates a more competitive company, so it is unclear what benefits are derived. We'd suggest greater access to capital.and perhaps the availability of executive stock options (see below). Hancock and Manulife are the latest, with IPOs expected to be in excess of $2 billion each. MetLife has announced that it plans to go public near the end of the first quarter of 2000.

DEMUTUALIZATION AND COMPENSATION - A Philadelphia judge has ruled that officers of Provident Mutual failed to provide the company's policyholders with complete and correct information regarding its conversion into a mutual holding company. While 89% of Provident's policyholders voted in favor of the restructuring plan, eight have sued the company for not providing adequate information about the change. They believe that, with a mutual holding company structure, Provident management would have access to the compensation of a publicly-traded company without the control of the shareholders. Another vote, with more information provided, will be required.

JEFFERSON-PILOT TO BUY GUARANTEE LIFE - In a cash and stock deal valued at approximately $411 million, Jeff-Pilot plans to acquire Guarantee Life. In addition to cost savings, Jeff-Pilot hopes to build-up its group life and disability insurance operations.

FIRMS STRUGGLING - Ernst & Young's Eighth Annual Special Report on Technology in Financial Services concludes that the financial services industry is "increasing spending on initiatives aimed at managing customer relationships even though most firms lack a clear vision and business case for these relationships." Even as overall technology spending slowed to a 7% annual increase, spending on customer relationship management (CRM) increased by 31%, and yet the survey shows that this increased spending "is being carried out in an environment in which 63% of the respondents don't know whether their CRM strategies are increasing or decreasing profitability, 60% don't know if CRM expenditures are helpful in cross selling and only 25% segment their customers by profitability."

THE CAMEL'S NOSE - Sixteen state insurance regulators have signed complaint-sharing agreements with the Office of the Comptroller of the Currency (OCC). The regulators will allow the exchange of complaints related to insurance sold by a national bank. The National Association of Insurance Commissioners approved the model contract.

NALU TO NAIFA - The last conference of the National Association of Life Underwriters was held this week and it was an upbeat one. Next year, the group will meet under the name of the National Association of Insurance and Financial Advisors (NAIFA). Among many announcements made was a new initiative with LUTC and the Virtual Sales Assistant. Now all NALU/NAIFA members can purchase the VSA service at a 20% discount. See their homepage at http://www.nalu.org for details.

INSURANCE COMPANY GUIDE - Insure.com (http://www.insure.com) is offering an online Insurance Company Guide that enables consumers to search extensive Standard & Poor's insurance company information in a variety of ways. The site also offers to send e-mail notices of any recent changes in a company's financial condition.

NEW YORK LIFE CUTS - New York Life will cut 9% of its workforce (about 800 positions) over the next three years. Most of the layoffs will be in the New York offices and will save the company about $172 million.

LATE TAPE - The organization that operates the NYSE ticker tape will extend its hours of operation to 6:35 p.m. from the current 5:15 p.m. Eastern time. The change follows a similar move by the Nasdaq stock market, meaning that the closing price for most stocks will effectively be pushed back by one hour and 20 minutes. The extension is largely in response to "after-hours" trading taking place at some regional exchanges and on electronic networks. It is unknown at this point the impact this change will have on mutual funds, newspapers and other organizations that publish closing stock prices.

ZOMBIE INSURANCE - This from the September Forbes. Fake life insurance claims are on the rise, yet there are few convictions for fraud. Insurance companies prefer to refuse to pay suspicious claims and hope the claim is abandoned, as opposed to the expense of pursuing the guilty parties. It's reported that immigrants commit much of the fraud. "Death kits" can be purchased in Nigeria and Haiti for $100.they may include a death certificate, photographs, police reports, and even a video of the funeral.

UNDER ATTACK - The Nasdaq and Amex Web sites were infiltrated and vandalized by a group calling itself "United Loan Gunmen." The same group also claimed responsibility for defacing the site of Matt Drudge (the Internet gossip columnist) and for electronic attacks against C-Span and ABC. All of these Web sites use Microsoft's Internet Information Server software, which has suffered some serious security problems.

"HAIR-BRAINED SCHEMES" - That's how industry great Oscar Newton described some of the insurance industry's latest alternate distribution plans. We agree.especially when it comes to selling life insurance on the Net. More insurance shopping services seem to be starting every day, yet many companies don't seem to understand that the Net is the ultimate shopping tool. If this shopping attitude is taken to the extreme, it could force every company to compete on price.and that won't work in the long haul.

A SIMPLER WAY TO CROSS SELL - "Cross-selling life insurance, retirement products and other financial services can be profitable for agents who sell property/casualty products," according to an article in the September issue of Best's Review. Now that is an understatement. If you are a P&C agent and want a simple system for cross-selling financial products, may we suggest you subscribe to the Virtual Sales Assistant (http://www.lutc.com) and check out the "Multiline Corner." It is the very best (and simplest!) system we have seen. Since the first 30 days are free, you can try it out before you pay.

WAKE-UP CALL? - Beginning this week, the Social Security Administration will begin mailing annual statements to 125 million working Americans. For the first time, many people will see how much they've paid into the system and what they can expect in the way of benefits.a hoped-for wake-up call for many. The reports will be mailed in batches of 500,000 a day, timed to arrive about three months before the worker's birthday.

QUIET COMPANY JOINS INSWEB - Adding Northwestern Mutual to the fold, InsWeb now offers insurance company-sponsored quotes for coverage from 15 "leading term life companies," including Met Life, John Hancock and CNA. We are not sure exactly how the relationship will involve agents, but InsWeb will offer Northwestern Mutual's 10 and 20 year and renewable term products. (Do these companies really want to be "leading term life companies"?)

DEATH OF TAXES - Despite President Clinton's veto of the Republican tax bill, the elimination of the federal estate tax has support from both conservatives and liberals in Congress. Opponents claim that "death taxes" only amount to 1.4 percent of federal revenue. Proponents believe it is a vital source of revenue for the government. There are probably more than a few estate planning agents and companies focusing on the "upscale market" who would not like to see the "pennies on the dollar" concept of using life insurance to pay the estate taxes disappear. It is, however, unlikely that Congress will create a separate bill for estate taxes, so sleep a little better.for now. Meanwhile, the IRS has notified Congress that any tax law changes for the 2000 tax filing season need to be on the President's desk by October 7 in order to allow time to print tax forms. Of particular interest/concern are the research and development tax credit and the AMT exclusion for child and education tax credits, both of which will expire without Congressional action.

HEATING UP - The backlash against "cash-balance" pension plans continues to grow. As we reported in the 9/15 E-News, the IRS has halted automatic approvals of these plans. The EEOC is conducting an age discrimination investigation and several bills to regulate the plans are pending in Congress. Bending to complaints from its older workers, IBM announced that it would give an additional 35,000 employees the option of staying in its defined benefit plan.

SENIOR SELLING - While only 13% of the U.S. population is 65 or older, they control half of the nation's wealth.obviously a good market. There is a great article in the September Life Association News about how to reach them. Some tips: focus on life stages (seniors who are 65 and just entering retirement are obviously very different from those who have been retired for 20 years); seniors prefer dealing on a one- on-one trust basis; be patient, speak slowly, enunciate clearly; always send an appointment reminder; focus on comfort, security, safety, and convenience.

401(k) IN COURT - Pensions & Investments reports that a federal lawsuit brought by participants in First Union's 401(k) plan is expected to define a plan sponsor's fiduciary responsibility in regard to the funds it offers to 401(k) participants. The suit alleges that First Union steered participants' 401(k) contributions into its own mutual funds.

FLAT FUND RESULTS - The Investment Company Institute reports that combined mutual fund assets remained essentially flat in August at $6.032 trillion, with stock mutual fund assets falling by $23.63 billion. For the year, cash flow to stock funds is about 15% below the first eight months of 1998.

ELECTRONIC APPLICATIONS - American General Life and Accident has been a leader in the development of electronically submitted new business. Their SmartPad, which allows agents take applications with signatures, was first introduced to the field in 1995. Some members of the National Association of Insurance Commissioners are concerned that consumers will not have a hard copy until after they sign the document, but the AGLA system has a mini-printer and other features that appear to be winning over the NAIC. The company expects to electronically process millions of apps and service forms annually once SmartPad is fully implemented.

ADDING INSULT TO INJURY - The IRS recently ruled that IRA owners who were defrauded by their investment advisor in the course of an IRA rollover are liable for taxes on the amount of the stolen IRA assets. In addition, any of the IRA owners under age 59-1/2 are also liable for the 10% premature distribution tax.