• Privacy concerns will now spur state legislation. The reform legislation allows consumers to prohibit the sale of information about themselves to unaffiliated companies only. Don't be surprised to see many states enact stricter standards for the sharing of confidential information among affiliated companies. The end result could be a substantial cost to financial services companies in order to comply with a variety of different state regulations.
• M&A activity is expected to increase. Two giants rumored to be potential takeover targets are Bank One Corp. and Allstate.
• New York may be forced to pass mutual holding company legislation or risk seeing companies like New York Life and Met use the reform legislation's redomestication provision to relocate to a state that permits reorganization into a mutual holding company.

AETNA CUTS BROKER COMMISSIONS - In what could be a serious blow to the nation's health insurance brokers, Aetna U.S. Healthcare is cutting commissions by 20% to 50% to independent brokers who write group health with the company. Fears are that other carriers will follow suit (just ask travel agents how this works). Aetna, with nearly 40% of its business currently written through agents, is taking a chance, but apparently feels the Internet will be the purchasing vehicle of choice in the future. Good, bad or indifferent, the market will always dictate.

MAJOR CHANGES AT ALLSTATE - On the P&C front, the "good hands" people appear to be moving rapidly towards becoming the "well-wired" people. In its recently announced new business strategy, Allstate's sales force of more than 15,200 captive agents will "be integrated with its telephone and Internet sales channels to sell Allstate policies at 'uniform' rates." Additionally, 6,500 of its captive agents will no longer be employees, but will join the company's "single exclusive independent agency contractor program." According to Allstate, this will effectively make these agents freelance contractors. Just how "freelance" will depend upon the definition of "exclusive independent agency"...at first glance it appears to be a "captive agent without benefits." Allstate will also cut 4,000 non-agent jobs as well. State Farm, meanwhile, announced that it doesn't plan to deviate from its sales strategy of face-to- face contact with customers.

A LIFE OF ITS OWN - The massive Prudential class action settlement seems to have taken on a life of its own. The company has paid $2.6 billion to some 250,000 policyholders, but three claims examiners in Pru's Minneapolis Alternative Dispute Resolution (ADR) unit have now filed lawsuits in federal court claiming "rampant violations" of the court- ordered ADR process. In other Prudential news, the company's unionized agents overwhelmingly rejected Pru's "last and final" contract offer. Bones of contention include the company's insistence that agents have at least $8,500 in yearly life insurance commissions or face termination and a proposed switch to a cash balance pension plan from the current defined benefit plan.

THE 21^ST CENTURY - Not wanting to live in the past, 20^th Century Insurance Company will change its name to 21^st Century Insurance Group on January 1, 2000, with the new name first appearing on a float in the Tournament of Roses Parade.

MUTUAL HOLDING COMPANY PLAN WITHDRAWN - Provident Mutual has withdrawn its mutual holding company plan. Delayed by an injunction won by a group of dissident policyholders, the company is unable to complete all of the required steps prior to the plan's December 31, 1999 deadline.

WELCOME - Our newest sponsor in the Financial Services Journal Online (http://fsc.fsonline.com/fsj) is Prudential Select Brokerage. Be sure to check out the new monthly feature, Rx Corner by Dr. Betty (Gazda-Smith), one of Pru's best underwriting executives. Dr. Betty's article this month is of special interest if you have a client with hypertension problems.

INDEPENDENT PRODUCERS - LIMRA estimates that over 50% of the insurance sold in the U.S. is sold via independent producers, and as much as two-thirds of that is sold through NAILBA-affiliated brokerage agencies.

MORE GENERAL AMERICANS? - Martin Weiss of Weiss Ratings, Inc. says that five insurers are in a similar situation to General American, which was recently purchased by Met in order to prevent a "meltdown." The companies have large amounts of guaranteed investment contracts (GICs). Since these GICs can be cashed before their maturity dates, a change in a company's rating or an increase in interest rates can spark a "run." No...he didn't name the companies.

CASH IN LIEU OF STOCK - Previous conversions by mutual insurers to publicly-held companies have made stock, not cash, the dominant form of compensation to policyholders. Bucking this trend, John Hancock wants to compensate its least profitable policyholders with cash when it reorganizes. Hancock is requiring that policyholders who want stock must specify their preference in writing before the end of the month; otherwise they will automatically receive cash. Don't be surprised if consumer advocates and regulators have something to say about the Hancock plan.

BROKERS EXEMPT - The SEC is proposing to exempt from the investment adviser registration requirement brokers who do not have discretion over client accounts, regardless of the advisory services performed and how they are paid. The recent marketing campaigns of major firms toward advisory services and fee-based offerings have brought the issue to a head. We bet real Registered Investment Advisers won't like this proposed solution.

NAILBA REPORT - The 18th annual NAILBA convention was a huge success, with over 1,200 attendees and more than 100 vendors in attendance. A few "nuggets" we picked up appear below; for detailed coverage, visit Broker News (http://www.brokernews-online.com).

• Solution to the "Big Bang"?...The "Big Bang" we refer to is the sound of an under-funded and/or under-performing universal life product when it collapses. A life settlement for your older clients might provide a solution - just sell the policy to a life settlement company. Check out http://www.coventryfinancial.com for details.
• Simple LTC...We've also been concerned about the design of LTC products (in our last edition we reported premiums spiraling through the roof). Now comes LifeUSA with a new and simpler product. Essentially it is a disability income policy for folks over age 65. If you can't perform two or more of the six activities of daily living, you don't need to be in a nursing home to collect. We predict a great demand for this product; not only is it simple, it allows for the dignity of stay-at-home care. It will be sold through LifeUSA/Allianz subsidiary LTCAmerica.
• First Female CEO?...Zurich Kemper Life announced its replacement for long-time CEO John Scott. Prior to joining Zurich Kemper, Gale Caruso was president and CEO of another Zurich Financial subsidiary, Scudder Canada Investor Services. We believe Ms. Caruso is the first CEO and president of a major U.S. life insurance company.

ONLINE QUOTES - Quotesmith, with over 300 companies in its shopping database, announced that it processed a record 16,600 quotes in a day. Their average for 1999 has been 5,100 quotes per day. See above.

LAST TRAIN OUT - That's how lawmakers are viewing the bankruptcy bill and, as a result, are trying to load it with issues as unrelated as the minimum wage, tax cuts, drug control and East Timor. While there is bipartisan support for bankruptcy reform, it remains to be seen whether this "last train" out of the current legislative session will become law.

HEALTH INSURANCE AND THE NET - SimplyHealth.com is planning to enter the fray, joining companies attempting to sell health insurance via the Net. Not to be outdone, HealthAxis.com, another online insurance marketer, was named "Best Insurance Site" at the 1999 eHealthcare World Awards.

TRIPLE X - There still seems to be a lot of mystery as to the impact of this new regulation. It will have the greatest impact on guaranteed level term and universal life. GE Financial (First Colony, et al) is somewhat concerned about carriers attempting to circumvent the regs, but promises its producers a "responsible product."

IF IT AIN'T BROKE REVISITED - "Normal people believe that if it ain't broke, don't fix it. Software engineers believe that if it ain't broke, it doesn't have enough features yet."...Scott Adams, The Dilbert Principle

FINANCIAL PORTALS - FSO's financial portal (http://www.fsonline.com) is designed to provide financial advisors with information you can use and put you within "two clicks" (no, this is not a military site!) of any useful Web site. Microsoft and the research firm, DALBAR, have put together a first-class consumer financial portal. Check it out at http://www.moneycentral.com and be sure to review the Advisor Finder...it is populated with CPAs who hold the Personal Financial Specialist (PFS) designation.

ADVISOR WEBSITES - Check out the reasons why a financial advisor needs a Web site in Ed Morrow's article in the current Financial Services Journal (http://fsc.fsonline.com/fsj) and then go to http://www.profiles.com/fsonline to get your site up as quickly and effortlessly as possible. The price is right too!

CHUTZPAH TRUSTS REVISITED - In the 10/15/99 E-News, we reported that the IRS was reviewing so-called "son of accelerated" CRTs or "Chutzpah" trusts. The Service has now issued proposed regulations (Proposed Reg. 116125-99) to limit use of this new breed of accelerated CRTs, which most reputable planners and charitable organizations regard as a tax shelter and not a charitable planning technique.

INTERNET MEDICAL BILL AUDIT - HealthAllies.com provides consumers with a free "bill checker" to determine the appropriateness of any medical bill. If the consumer determines that there is an opportunity to save money, HealthAllies will take over and work directly with the provider to get the charges reduced...for a commission, of course.