RiskTutor, Inc. 
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Interactive Underwriting Solutions
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PREDICTION NOW 14% INCREASE – We have reported predictions of higher medical costs for the last several months, but the 2002 Towers Perrin Health Care Cost Survey predicts a whopping 14% on average increase for 2002 -- the highest year-over-year percentage increase since Towers Perrin began conducting the survey more than a decade ago. This marks the third consecutive year employers will face a double-digit increase in their health care costs.  The survey says the average cost of medical coverage for all types of health plans is $228 per month for employee-only coverage; $466 per month for employee-plus-dependent and $661 per month for family coverage.

WE LOVE NY – Kudos to The Hartford Financial Services Group, whose New York City regional offices at 7 World Trade Center were destroyed in the September 11th terrorist attack. They just moved into a new permanent office space at 2 Park Avenue in New York's midtown.

INDEPENDENT DISTRIBUTORS VS. CAPTIVE AGENTS – Captive insurance agents, long the key distribution channel for the vast majority of traditional life insurance policies, now account for less than half the premiums paid. But the big winner in the distribution sweepstakes has not been the Internet. It has been independent producers, and their control over life distribution looks like it will continue to grow enormously in the foreseeable future. This is the finding of a new Conning & Company strategic study on the distribution of life insurance. The Conning study, "Life Distribution Goes Independent: Succeeding in the Post-GLBA Environment," is available from Conning & Company for $575 at www.conning.com. 

NAILBA XX – The National Association of Independent Life Brokerage Agencies (NAILBA) is holding its 20th annual conference this week.  Confirming the article above, NAILBA has seen tremendous growth during its relatively brief history. Just as we recommend the LIMRA Annual Meeting as a "must" for all marketing executives, we see the NAILBA meeting as a "must" for all management folks in the brokerage and independent producer arena. Hope to see you there!
 

S&P RATING MOVES – Standard & Poor's believes some insurers may face insolvency if claims from the September 11 attacks exceed $50 billion. As reported previously, experts have predicted the bill could be as high as $70 billion. S&P has already cut the ratings of five companies and put 20 others on "CreditWatch." One thing is for certain...the industry would be very hard pressed to sustain another attack of similar proportions.  In addition, commercial insurers face a difficult situation if, on the one hand, the federal government fails to implement a "terrorism cushion" for insurers and, on the other hand, state insurance regulators do not allow terrorism exclusions from commercial policies.  The choice is then between continuing to offer terrorism coverage or withdrawing completely from commercial risks.

TERRORISM EXCLUSION – AIG boss Hank Greenberg predicts reinsurers will begin excluding terror-related coverage starting January 1. Commenting on the global effects of this decision, Greenberg said, "We have been notified by reinsurers that come January 1 they will not include terrorism. Yes it's true, business will go on but it will be different."

NAIC ON TERRORISM COVERAGE – The National Association of Insurance Commissioners (NAIC) urges federal action to help stabilize the marketplace. Key points in the NAIC's testimony before Congress are: federal action is needed; the solution should be limited in scope and duration; and the solution should maximize private market forces. A complete copy of the testimony is available on the NAIC Web site at www.naic.org. 

UNIVERSAL AMERICAN TAKEOVER TARGET – Business Week says Universal American's financial profile indicates it will benefit from the aging American population. That, and it's relatively small size (assets of about $1.1 billion), make it a likely takeover target in a consolidating insurance industry.

MENTAL HEALTH PARITY – The U.S. Senate added an amendment to the $407 billion fiscal 2002 spending bill requiring "parity" between health insurance benefits for mental health and other ailments. The measure replaces a more limited parity law passed in 1996 that expired in September. Point: "It's a matter of discrimination. It's a matter of basic civil rights." Counterpoint: "We're about to decide what kind of health insurance people should have. What about the workers who would rather have the wages than the benefits we have told them they ought to have?" 

OUTSIDE DIRECTORS GET BIG RAISE – What is this about? A Towers Perrin survey of non-employee corporate director compensation indicates that median annual compensation has risen to $118,337 in cash and stock in 2001, up from $100,807 in 2000. Most of the increase is in the form of stock-based compensation - especially stock options. It may be hard for investors to follow the reasoning of an 18% pay increase for directors when most companies they "direct" have had negative growth in stock value.
 
SET ME FREE – Suspended Louisiana Insurance Commissioner Jim Brown has filed an appeal for his conviction of making false statements to an FBI agent. Brown claims that, "The notes (taken by the agent) were dramatically different than what the agent testified to at the trial."
 

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ECONOMIC STIMULUS BILL – Partisan bickering continues to slow passage of an economic stimulus package.  The nation's governors are now speaking out against provisions offering enhanced federal tax deductions for business.  It seems that in 44 states, the state corporate income tax code is linked to the federal code and additional federal business tax deductions would result in reduced state business income taxes.  Rather than deductions, the governors are urging Congress to provide businesses with tax credits, which wouldn't impact the calculation of state business income taxes.

HUGE SPAM INCREASE – In the last several weeks, we have noticed a remarkable increase in unsolicited e-mail in both the general sector and in the insurance industry sector. Before trying this, you might consider the long-term effects of this marketing approach. First, it angers the "spamees." Many people may not only send nasty letters to you, but may also send them to their state insurance commissioner.  Second, since the financial threshold for sending e-mail is so low, more and more marketers will begin seeing it as a marketing Nirvana. The more spam your prospects get, the madder they will get...to the point where we predict unsolicited e-mail will not be even marginally successful. In fact, it may well become a real liability to a company's reputation.

LTD = PEACE OF MIND – An HIAA survey reports over 98% of employees purchasing long-term care through their employers say the policies make them feel more secure about their future. The Health Insurance Association of America's "Who Buys Long-Term Care Insurance in the Workplace" also reveals the following as important reasons for buying long-term care coverage: protecting assets; leaving an estate; preserving financial independence; guaranteeing the affordability of needed services; and tax incentives. For more information, click here.  

VA OFFERS FAMILY COVERAGE – The families of most American active-duty service members and reservists have gained new life insurance coverage under a Department of Veterans Affairs (VA) program. The government has offered a variety of life insurance programs to military members since World War I, and nearly all of today's new recruits accept policy coverage through pay deductions. The change widens the program to cover the life of their spouse and the lives of any dependent children. The new Servicemembers' Group Life Insurance (SGLI) program allows spousal coverage up to $100,000 plus $10,000 per child.  Details at: http://www.insurance.va.gov. 

ABCs OF CONSISTENT CONTACT – We all know that staying in touch with your clients is important. Many of us do so on birthdays, but here is a novel approach by guru Bill Bishop (http://www.bill-bishop.com). There are 52 weeks in the year. By fortunate coincidence, we have 26 letters in the alphabet, and 26 divides into 52 exactly two times.  So, the first week of the year you contact all your clients whose last name starts with the letter A.  The second week of the year, you contact all the Bs.  The third week you contact the Cs, and so on until you're contacting the Zs the last week in June. The first week in July, you contact the As again.  Keep working through the alphabet one week at a time until the last week of the year has you contacting the Zs again. Fortunately, you probably don't have many clients whose last name begins with X, Y, or Z. Great!  Plan your vacation for the last half of June and then enjoy the Christmas holidays!
 

CUSTOMER SEGMENTATION – A new survey by KPMG and the ACLI reveals that affluent singles, both young and old, and empty nesters in their 50s and 60s offer the most promise for life insurers selling non-traditional products.

CALLABLE CDs – Callable CDs are a relatively new variation of CD which offer higher interest rates than traditional CDs, are FDIC insured and mature over a long time period (generally 10 to 30 years).  The issuing bank agrees not to redeem, or "call," the CD for a set period of generally one to two years.  If interest rates have fallen, the issuer generally calls, or forces, the investor to cash in the CD after the lock-up period is over.  On the other hand, the investor doesn't have an option of redeeming the CD early; the only option is to resell it.  Since there is no public market for callable CDs, investors who need liquidity are often forced to sell the CDs back to the issuer for a substantial loss.  There is nothing illegal about callable CDs, but state regulators are expressing concern that many consumers don't fully understand the long maturity period and lack of liquidity associated with these financial instruments. 

BISYS ACQUIRES ANOTHER ONE – BISYS has widened its lead in the insurance brokerage field by acquiring the Life Brokerage Corporation with its more than 2,500 retail producers. This acquisition marks BISYS' 10th insurance services-related acquisition since 1996.

SAVER'S CREDIT – The IRS is reminding qualifying employees to begin making plans now to benefit from the new Saver's Credit, which will become available in 2002.  This tax credit, which will be available from 2002 through 2006, will help offset the cost of the first $2,000 contributed to IRAs, 401(k)s and certain other retirement plans.  The Saver's Credit is available to individuals with incomes up to $25,000 and married couples with incomes up to $50,000.  The available credit ranges from 10% to 50% of the contribution amount, depending on income.  Participants in 401(k) plans may want to set up their deferral elections prior to January in order to spread their contributions throughout the year. 

USAA/FORTIS – USAA and Fortis Health formed a partnership making Fortis Health the exclusive provider of individual medical insurance for USAA members. Through the agreement, USAA Life will refer its members looking for Individual Medical, Student Select and Short Term Medical insurance plans to Fortis Health. 

FINANCIAL DEPARTMENT STORE – Federated Department Stories has launched iTrust, its version of "a comprehensive online department store of financial products and services to help consumers take more control of their financial lives."  Check it out at http://www.itrust.com. 

AVON CALLING? – Or is it MONY calling? Avon and MONY launched a retirement savings program that will enable Avon's 500,000 independent sales representatives to save a portion of their earnings in a tax-deferred retirement plan. Structured as a 401(a) retirement savings plan, Avon believes it is the first direct selling company to offer a retirement savings plan to its independent sales representatives.