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The National Highway Safety Administration reports that the cost of crashes in the US is about $230.6 billion a year ($820 per person), including $61 billion in lost work place productivity, $59 billion in property damage, $32.6 billion in medical costs and $25.6 billion in delays of trips. The insurance industry pays about 50% of these costs, crash victims about 26%, third parties such as health-care providers and charities about 14%, and taxpayers about 9%. (Car & Travel, September, 2002) Avg. Auto Insurance Premium Year US Ohio Ohio Ranking 1995 $ 762 $ 594 40th lowest 1996 785 617 38th lowest 1997 803 637 39th lowest 1998 802 648 40th lowest 1999 783 646 41st lowest 2000 786 646 45th lowest Auto Insurance Estimates† US Ohio 2001 $833 $676 2002 912 694 2003 999 760
†Basis for Avg. Premium Increases US Ohio 2001 6.0% 4.6%* 2002 9.5% 2.7%* 2003 9.5% 9.5% *Reported by Ohio’s top 6 writers with a 59% market share Source for 1995–2000 data: National Association of Insurance Commissioners, 1997-2002 studies, “State Average Expenditures and Premiums for Personal Automobile Insurance.” Average auto insurance premium is the combined average premium, which includes the total of liability, collision and comprehensive premiums. †US percentage increase estimates 2001-2003 provided by the Insurance Information Institute.
According to the insurance information institute
(iii), auto in- Auto insurance premium increases are part of the national landscape. According to the Florida Department of Insurance, several of the state’s largest automobile insurance companies received approval for 2002 rate increases as high as 18%. By mid-May, Connecticut regulators had approved auto insurance rate hikes for 2002 that range from 7.2–25%. New York’s largest auto insurer raised its 2002 auto insurance premiums an average of 10.5 %. Since January 2002, the New York Insurance Department has approved the auto insurance rate requests of 54 insurers. Why auto insurance premiums are rising Vehicle owners understand that their personal driving record, the type of vehicle they drive and how much they drive influence the cost of auto insurance. Yet rising medical costs, higher vehicle repair costs and soaring jury awards in vehicular liability cases are some of the principle causes for higher auto insurance rates today. • Medical costs affect what insurers pay in claims. The $15–$20 billion that auto insurers pay in medical claims each year is a very significant component of auto insurance costs and its upward trend. Injuries occur in about two million crashes each year. Many include multiple injured. Typical costs for treating an auto crash victim range from $6,000 to $9,000 but can easily run into the tens of thousands of dollars. The cost of auto injury claims is rising by as much as 30% in some states. Costs related to physician services rose 13% between 1995–1999, according to the US Department of Labor, Bureau of Labor Statistics. Ohio’s average per diem hospital costs rose 12.9% in the same five-year period, according to the American Hospital Association ($1,061.20 to $1,198.44). • Higher repair costs significantly affect premiums. A recent court decision essentially forced many insurers to suspend use of non-original equipment manufacturer (non-OEM or aftermarket) crash parts in automobile repairs, giving manufacturers of name-brand parts a virtual monopoly in this multi-billion dollar market. The effective prohibition on the use of aftermarket parts—which are of like kind and quality to name brand parts—in the repair of damaged vehicles is a factor that could ultimately add $4 to $5 billion annually to the cost of auto insurance. Name brand parts can cost 30% to 70% more than their non-OEM equivalent. The Insurance Services Office, Inc. reports that the average property damage claim increased nearly 42% between 1991–2000, from $1,684 to $2,388. The cost of vehicle repair in the US rose 12.7% between 1997–2001, according to body work repair costs from US Department of Labor, Bureau of Labor Statistics. Ohio’s average hourly repair rate rose nearly 18% between 1997–2001, from $30.13 to $35.41. Average hourly repair rates by Ohio city follow.
1997
Avg. 2001 Avg. Akron $30.25 $35.27 16.6% Canton $30.00 $35.27 17.6% Cincinnati $30.50 $35.78 17.3% Cleveland $30.25 $35.71 18.0% Columbus $30.25 $36.14 19.5% Dayton $30.00 $35.76 19.2% Toledo $29.75 $34.37 15.5% Youngstown $30.00 $35.00 16.7% Ohio Avg. $30.13 $35.41 17.5% • Sharply higher jury awards in vehicular liability cases are putting additional upward pressure on auto insurance rates. The average jury award in auto liability cases rose from $187,000 in 1994 to $269,000 in 2000—an increase of 44%. Auto liability issues are much more important than people realize. About 60% of auto premiums paid in 2000—nearly $70 billion—were for liability coverages. • Court judgments: State law requires that auto insurance premiums be adequate to cover anticipated losses, many of which insurers are able to calculate; some however cannot. The unpredictable nature of Ohio court rulings can affect what we pay for insurance and the terms and conditions of the policy. Two prominent Ohio Supreme Court Cases, Scott-Pontzer v. Liberty Mutual Fire Insurance Co. (June 1999) and Linko v. Indemnity Insurance Co. of North America (December 2000) are expected to cost Ohio insurers at least $1.5 billion in additional claims for which no premiums were assessed or collected. According to a study released in July 2002 by the National Association of Insurance Commissioners (NAIC), Ohio’s average liability premium decreased by .16% while nationally liability premiums decreased 9.4% between 1996–2000. Liability insurance provides protection against at-fault injuries to others, damage to their vehicles and other property, and lawsuits commonly associated with personal injury attorneys. • Auto theft and fraud: According to the III, theft payments account for about 25% of all comprehensive insurance claims. Fraud and abuse are major problems in some states such as Florida, New York and Massachusetts. Loopholes in New York’s no-fault insurance statute, for example, are costing state drivers nearly $2 million a day. Although Ohio’s experience is not as dramatic when it comes to fraudulent activity, the Ohio Insurance Institute (OII) reports an upward trend in vehicle theft. Ohio auto thefts took a double-digit leap for the first time since 1990 according to survey results released in July 2002 by the OII. The Institute estimates that statewide auto thefts increased 10.8% between 2000–2001. The FBI reports that the average value per vehicle stolen in 2000 was $6,682, up 9.5% from the 1999 average of $6,104. The value of unrecovered vehicles in 2001 exceeded $109.2 million, according to OII estimates. What kind of increases can consumers expect? According to the Insurance Information Institute, the average auto insurance premium was expected to rise about 9–10% nationally in 2002. In 2003, it’s estimated to increase by about the same. The chart on the following page shows that between 1995–2000 the combined average auto insurance premium rose 3.2% in the US and 8.8% in Ohio, according to studies by the National Association of Insurance Commissioners. The combined average premium is the average cost of an insurance policy that includes liability, collision and comprehensive coverages. Also provided are US and Ohio auto insurance premium estimates for 2001–2003. Based on Ohio’s top six auto insurance writers representing 59% of the market, auto insurance premiums in Ohio remain fairly stable with increases below the US average. According to the Ohio Department of Insurance, the six major writers implemented an increase of 2.7% in 2002 through September. The same writers averaged a 4.6% increase in 2001 and 1.3% in 2000. The Insurance Information Institute reports a 6% increase for 2001, and 9.5% for 2002 and 2003. Based on the NAIC figures, the average US auto insurance premium increase was less than 1% for 2000 and remained unchanged in Ohio. Why Ohio’s auto insurance rates tend to remain favorable: The July 2002 National Association of Insurance Commissioners study that compared the 2000 auto insurance premiums of all 50 states and District of Columbia shows that Ohioans were paying $140 less for auto insurance than the US average. Ohio’s average premium for 2000 is lower than all but six states. It’s important to point out that Ohioans continue to get a good return on their auto insurance premium dollar. According to the 2002 NAIC study, most of the states with lower average premiums are less populated and urbanized, including North and South Dakota, Idaho, Maine and Iowa. The Buckeye state is in the top five or six states in the nation when it comes to total vehicle miles driven, the number of vehicles owned by our residents and the licensed drivers in the state. Ohio has an extremely competitive auto insurance market with hundreds of companies vying for the auto insurance consumer. A.M. Best reports that 628 companies were writing auto insurance in the Buckeye state in 2000. Only Illinois has more auto insurance writers than Ohio. And because of Ohio’s competitive market, insurers look for ways to increase market share. These include competitive pricing and special programs such as providing discounts to current policyholders who remain accident-free for a stated period of time or by offering their best rates to policyholders with one minor traffic violation. The regulatory environment also allows for premiums to remain affordable. The Ohio Department of Insurance provides insurance companies with the stability to compete among themselves, with lower premiums playing a key role in the competition. Fair market value helps to keep the cost of most lines of property/casualty insurance below the US average. Ohio has a strong voluntary market, whereby insurance is available to most Ohio drivers through companies at competitive rates. A number of companies also offer insurance to higher risk drivers, so that very few need to be assigned coverage through the Ohio Automobile Insurance Plan. The Ohio Auto Plan provides liability coverage for those who have difficulty finding insurance through insurance companies. Only five private passenger vehicles registered in Ohio in 2000 were provided insurance through the Plan. There were 15 commercial assignments in the auto plan in 2000. We’re seeing safer highways, safer cars and safer driving habits as factors that help keep Ohio’s insurance rates in check. n This article was provided by the Ohio Insurance Institute, the insurance company P/C company association. For more information on the OII, please visit www.ohioinsurance.org. ODI WEBSITE RECEIVES The Ohio Department of Insurance Website received further recognition late in 2002 when it earned an “A” rating from Bobby, a comprehensive Website accessibility software tool designed to expose barriers to accessibility and encourage compliance with existing accessibility guidelines. This recognition follows a Standard of Excellence Award from the Web Marketing Association for the department’s design, innovation, content, technology, interactivity and navigation standards. In 2000, the ODI Website was awarded an “A” rating by the Consumer Federation of America. DEPARTMENT ORDERS The Ohio Department of Insurance ordered a rate reduction of 7.5 percent, effective on or before April 1, 2003, for credit life insurance products. Credit disability rates remain unchanged. Under Ohio law, companies selling credit insurance are required to submit data on an annual basis to the department, to ensure that the profit on such policies does not exceed the regulatory limit. The department then reviews credit insurance rates yearly and sets rates for credit life insurance on an industry-wide basis to maintain a 50 percent loss ratio and for credit disability a 60 percent loss ratio. The credit life rate reduction is estimated to save consumers $7 million annually after the new rates are implemented. SETTLEMENT WITH
METLIFE A settlement negotiated by the New York Department of Insurance on a lawsuit alleging racial discrimination in the sale of Metropolitan Life Insurance Company (MetLife) policies between 1901 and 1972 will impact nearly 98,000 Ohio consumers. The settlement involves all policyholders and certain beneficiaries who were non-Caucasians: “Industrial” policies sold door-to-door between 1901 and 1964 with face amounts of less than $1,000; “Ordinary” policies sold from 1901 to 1972 with less-than-standard risk classifications; and, Metropolitan Series policies issued from 1960-1972 with face amounts between $4,500 and $5,000. Ohioans who currently carry life insurance coverage under these policies will receive increased insurance benefits or may request a cash settlement in a lesser amount than the increased insurance benefit. Ohioans whose policies have already paid a death or maturity benefit will receive a cash settlement. Most policyholders whose policies terminated for other reasons will receive five years of free death benefit coverage, and some of them will get cash. An estimated 1.8 million policyholders or beneficiaries across the country are eligible to receive benefits with a total estimated settlement cost of between $140-160 million and projections for Ohio policyholders of $8.6 million. Ohio was one of five states with the greatest number of affected parties, along with New York, Pennsylvania, Illinois, and New Jersey. According to the agreement, MetLife will be initiating a $6 million outreach initiative including mail, radio, television and print outlets to notify all affected parties. In addition, the company has agreed to make a $5 million donation to the United Negro College Fund. For more information on the settlement, consumers may call 1-800-960-2381 or 1-866-863-9528 (TDD/TTY) or visit www.lifesettle.com on the Internet. DEPARTMENT MOVES TO REVOKE PEOPLE’S HEALTH PLAN LICENSE Canton-based Peoples Health Plan of Ohio, Inc. was notified that the Department intends to revoke the plan’s license to conduct business in Ohio. A hearing has been scheduled to allow the plan to respond to eleven alleged violations of state law. Peoples was placed into Supervision in March of 2002 by the department after it was determined that the company did not meet minimum net worth requirements to conduct business as an HMO in the state. After an investigation of the company’s operations and financial condition, the Department determined the plan is not suitable to hold a certificate of authority to conduct business in Ohio. ODI MOVES TO REVOKE AGENT LICENSES OVER INVESTMENT SCAMS Powell securities dealer Vernon W. Shiflett and his associate Paul L. Edwards, a Marion insurance agent, have been notified by the Department of Insurance of intent to revoke their licenses on charges related to the alleged sale of fraudulent investments. The two have been accused of running fraudulent promissory note and partnership schemes through 22 Columbus-based investment companies and of bilking investors nationwide out of $29 million. Action against the two is pending as are additional legal actions. The Department is also investigating additional agents in Ohio who may have been involved with the two.
SECURIAN PAYS $15,000 FINE A consent order was signed between the department and Securian Financial Network, Inc., fining the Saint Paul, Minnesota-based agency $15,000 for engaging in insurance activity without an agency license. Securian Financial Network agreed to the order alleging that the agency was actively selling insurance in Ohio without a license between January 19, 1999 and March 9, 2000. Sometime around March 9, 2000, the agency, formerly known as HomePlus Insurance Agency, obtained the required license from Ohio. During the period of time the agency was unlicensed and operating as HomePlus Insurance Agency, it contacted 6,480 Ohio customers, quoting 4,778 that did not purchase insurance while quoting and placing policies in force for 824 consumers. RENAISSANCE HEALTH PLAN ORDERED INTO LIQUIDATION Cleveland-base Renaissance Health Plan, formerly known as Emerald HMO, was ordered into liquidation as insolvent by the Franklin County Court of Common Pleas. The company had been placed into rehabilitation in August by the department. Renaissance was one of seven health maintenance organizations serving Medicaid patients across Ohio. It served Medicaid enrollees in Cuya-hoga, Lorain, and Summit counties. The company’s Medicaid business was fund-ed by monthly payments from the Ohio Department of Job and Family Services (ODJFS). In March 2002, the company reported a 2001 year-end net worth of $891,953. However, in audited financial statements filed with the Department in July 2002, the company’s independent auditors reported a sizeable deficit at the end of 2001. The company’s second quarter 2002 financial statement, filed with the Department in mid-August, reported a significantly higher deficit. n UM DECLINATION REVISITED In the December 31st FACTS newsletter, we reported on Kemper, et al., v. Michigan Millers Insurance Company, et al., which seemed to reinstate the requirements of the 2000 Linko decision creating specfic requirements for a UM/UIM rejection form to be valid in Ohio. Specifically, the Supreme Court was asked about the requirements of Linko between the enactment of Ohio House Bill 261 in 1997 and Ohio Senate Bill 97 in 2001. Further review of the Kemper case indicates that this decision is applicable only to the time period between HB261 and SB97 (1997 – 2001) but not following enactment of SB97. During the indicated time period, a valid UM/UIM rejection form must: 1. Inform the insured of the availability of UM/UIM coverage; 2. Set forth the premium for UM/UIM coverage; 3. Include a brief description of the coverage; 4. Expressly state the UM/UIM coverage limits to be included in the policy. HIGH COURT REINSTATES INSURANCE ABITRATION RULING The Ohio Supreme Court reinstated a ruling of arbitrators who ordered State Automobile Mutual Insurance Company to pay 10 percent annual prejudgment interest to the parents of a child severely injured when struck by a car in 1996, with payments calculated from the date of the accident. The interest payment award in the case had been overturned by a common pleas court; the 12th District Court of Appeals held that the total amount of damages awarded plus interest may not exceed an insured’s policy limits. Justice Douglas, writing for the majority, held that an arbitration panel has the authority to award prejudgment interest. STATE APPEALS DECISION ASSIGNING STATUS The Ohio Department of Insurance has appealed a case from the 10th Court of Appeals that said state law assigns claims under reinsurance contracts to the same higher priority status enjoyed by direct policyholders rather than to a lower priority status of general creditors. In the first case of 2003 before the newly seated court, reinsurance policyholder UMC-UMC. Limited contended it was entitled to Class 2 priority in the liquidation proceedings of Ohio General Insurance Company in 1990. The common pleas court disagreed but the appeals court reversed, holding that UMC was entitled to the higher status for its reinsurance contract claims. The department is arguing to the Supreme Court that the appeals court mistakenly assigned claims under reinsurance contracts to a higher status as “claims under policies for losses incurred” rather than to a lower status as “claims of general creditors.” MULTIPLE PAYMENTS TO POLICYHOLDERS UPHELD In another four-to-three decision, the Ohio Supreme Court held that claimants who pay separate premiums for different types of coverage are entitled to collect twice, subrogation provisions notwithstanding. At issue was whether an insurer’s payment of underinsured motorist benefits entitled the company to money the injured insured collected from the at-fault driver for medical expenses. The plaintiff received the at-fault driver’s limits of $12,500 for his medical expenses along with $6,000 from his own policy with State Farm from underinsured motorist coverage. State Farm also paid the policyholder $6,300 for medical expenses, bur asked for that to be returned under the policy’s subrogation clause. The trial court ruled that State Farm was entitled to the money and the 10th Court of Appeals agreed, prior to the Supreme Court’s decision in favor of the plaintiff. SUBROGATION CLAUSE CONDITIONALLY UPHELD In a case questioning whether an injured party forfeited his claim to benefits because he had signed away an insurance company’s subrogation interests that turned out to be worthless anyway, Justices ruled that when a company’s denial of underinsured motorist coverage was based on the policyholder’s breach of a subrogation provision, the insurer does not have to provide coverage if it was prejudiced by the failure to protect its subrogation rights. If the insurer is not prejudiced from the insured’s breach, then payments cannot be denied. In the case, the policyholder settled with the at-fault driver’s insurance company and then filed a claim with his own carrier for underinsured benefits. The policy-holder’s carrier denied payment because it had not been notified prior to the claimant releasing the at-fault party from liability. The trial court ordered the company to pay, but the 11th Ohio Court of Appeals reversed, sending the case to the Supreme Court. n Ohio Ranked Number 1
in 2002 – Ohio Supreme Court candidates and their supporters and opponents combined to spend between $5.6 and $8.3 million in the fall 2002 elections. Whatever the actual final amount, it is more than the combined total spent in the eight other states with television advertisements for Supreme Court races. Ohioans were subject to 29 commercials that aired more than 13,000 times, compared with eight ads that aired less than 3,600 times in Alabama, where the second-highest amount of money for ads was spent. A silver lining in the figures is that total spending in 2002 still falls short of the estimated record $10 million spent in the 2000 races. 7-Eleven Enters Insurance Business Through Kiosks 7-Eleven, Inc., the world’s largest convenience retailer, announced a five-year strategic alliance with Public Access Insurance to offer a variety of auto insurance services through7-Eleven stores’ Vcom electronic kiosks. Vcom is 7-Eleven’s integrated financial kiosk that merges ATM functions with American Express, Western Union and other financial entities to provide 24-hour touch-screen payment, checking and cash services. Under the new agreement, Public Access will be the exclusive retailer of Instant Auto Agency auto insurance products and services offered at Vcom kiosks. Public Access, a subsidiary of Instant Insurance Holdings, Inc., will provide access through the kiosks to a centralized service center to obtain quotes, purchase a policy, pay a bill or talk to a customer service representative. 7-Eleven’s Vcom is currently operating in stores in Texas, Florida, Colorado and Virginia and the auto insurance service is expected to be available on the machines in the second quarter of 2003.
Ohio Ranks 2nd in
Nation For the second quarter of 2002, the latest figures available, Ohio’s rate of home loans in foreclosure was 2.15 percent, slightly behind Indiana’s leading 2.22 percent and nearly double the national rate of 1.23 percent, according to statistics from the Mortgage Bankers Association of America. The national rate is an all-time high in the thirty-plus years the group has tracked such stats. In Ohio, there were 43,419 foreclosure filings, up 155 percent from seven years earlier and 23 percent from 2001. Various representatives of the mortgage bankers laid the blame for the increase in foreclosures on a slumping economy, lenders willing to assume more risk to increase home ownership and predatory lenders. D&O Insurance Rate Hikes While much has been made of the rise in homeowners’ (HO) insurance premiums, businesses are experiencing a sharp increase in directors and officers (D&O) insurance. While HO premium increases have been fueled by the hard market and stock market slump, the D&O rate increases are driven by the bear market in combination with ballooning losses and corporate scandals. Increased litigation contributes to the spike in premiums as the likelihood of a public company being sued has risen 58 percent since 1995 and the cost to companies of the average settlement since 1995 has risen to $31.7 million. In 2002, public companies renewing D&O policies were paying premiums that were an average 70 percent higher, according to Marsh USA, Inc. Since July of 2002, premium increases have averaged 84 percent. Large public companies valued at more than $5 billion were seeing premium increases averaging 145 percent before July 15 and 226 percent since then. Even good-risk companies – those not in high-risk industries, have no claims and healthy balance sheets – are paying 40-60 percent more for this coverage. Overall, the insurance industry is expected to collect $6 billion in D&O premium this year versus $2 billion in 2001. Workers Comp Annual Safety Congress Set For April 1-3 The 73rd Annual Ohio Safety Congress and Expo, put on by the Ohio Bureau of Workers Compensation, is set for April 1-3 at the Greater Columbus Convention Center. Featuring 150 hours of free educational sessions and 250 exhibitors, this conference is one of the largest national gatherings of employers and workplace safety experts with nationally recognized speakers and practical workplace safety sessions and exhibitors. For more information or to register for this free event, call 1-800-OHIOBWC and press 2, 2 and 3 or visit the BWC Website at www.ohiobwc.com. Dangerous Intersections in Ohio Each year, the Ohio Department of Transportation rates crash sites to determine the riskiest spots involving state and federal highways and interstates. Here are the agency’s 25 highest-priority intersections in Ohio, based on analysis of crash data for 1999-2001, traffic volume, the severity of accidents and other factors. The top 100 dangerous intersections all appear on the state’s overall list of the 200 high-priority crash locations, which also include specific stretches of roadway. Interstate locations are ranked separately. Rank County/Intersection
1 Hamilton /
2 Lucas / 3 Summit / U.S. 224 & Rt. 91 4 Clermont / Rt. 132 & Rt. 749
5 Hamilton /
6 Ashtabula / 7 Butler / Rt. 73 & Rt. 177
8 Portage / 9 Pickaway / Rt. 56 & Rt. 104
10 Mahoning /
11 Franklin / 12 Lake / U.S. 20 & County Rd. 123 13 Geauga / Rt. 88 & County Rd. 6
14 Montgomery / 15 Brown / U.S. 62 & Rt. 32 16 Mahoning / Rt. 7 & Rt. 626 17 Warren / U.S. 22 & Rt. 48 18 Lucas / U.S. 20 & Rt. 120 19 Warren / Rt. 122 & Rt. 123 20 Franklin / Rt. 3 & County Rd. 17 21 Mahoning / U.S. 224 & Tiffany
22 Hamilton /
23 Hamilton / 24 Hamilton / Rt. 264 & Westbourne 25 Stark / U.S. 62 & Rt. 173 Insurance Industry Year-end Review and Forecast For 2003 Each year the Insurance Information Institute (I.I.I.) invites a panel of Wall Street stock analysts and industry professionals to review the past year and gaze into the crystal ball for the coming one. 2002 was predictably viewed as a tough year for the insurance industry with underwriting and profit problems likely to continue past 2003. Predictions were mixed on industry growth, with some seeing accelerated growth and others slowing or stable growth. The hard market is expected to continue into 2004 to enable the industry to regain reasonable rates of return. The average forecast calls for an increase in net written premiums of 12.3 percent in 2003, mainly from increased prices and, to some extent, higher demand. While high by historical standards, the increase is a deceleration from the 13.6 percent average gain estimated for 2002, the first deceleration since 1998. The combined ratio for 2003 is projected at 103.3, down from 2002’s estimated 106.3 and the terrorism-induced 115.7 result in 2001. The caveat thrown into all the predictions is the performance of the American and world economies and the stock market. The $72,000 Minivan The Alliance of American Insurers has conducted studies for 21 years on the cost of crash parts using a variety of automobile models, to illustrate the high cost of car company parts. The 2002 study focused on a 2002 Dodge Grand Caravan Sport with a retail price of $24,815. When totaled out and rebuilt entirely from car company parts, the cost was $71,631, excluding paint and labor. In a related development, the Certified Automotive Parts Association (CAPA) announced that between 1999 and 2002, it had put 1,907 “genuine” car company parts through an extensive vehicle test fit and found that 50 percent of the parts did not meet CAPA standards for fit, finish and appearance. On average, car company parts cost 60 percent more than generic parts supplied by independent manufacturers. According to the Alliance, the cost of repairing damaged automobiles accounts for between 40 and 50 percent of the insurance premium for consumers. n ASSOCIATION PRODUCTS AND SERVICES GUIDE Independent Insurance Agents of Ohio/
Independent Insurance Agents PO Box 758, Columbus, Ohio 43216 • www.ohiobigi.com 1-800-282-4424 The Ohio and National Big “I” have a shared mission in providing services, products and representation independent agents need. Following is a listing of services and products offered through our state and national offices (when you join the Ohio Big “I”, membership in the National Association is automatically included!). For more information on any of these products or services, visit our Website at www.ohiobigi.com or call us at 1-800-282-4424. We appreciate the support of our membership and look forward to meeting the needs of the independent agent for another 100 years! INSURANCE PRODUCTS Errors and Omissions Insurance For over 25 years, the Ohio Big ‘I’ and Employers Reinsurance Corporation have been the leaders in agents E&O protection. No other program offers more stable coverage, pricing, and protection. The Ohio Big ‘I’ Risk Purchasing Group rewards agencies with significant savings and enhances the broadest coverage available. Employer Liability Insurance The Big “I” and Employers Reinsurance Corp. offers the Employment Practices Liability Insurance policy (EPLI), a ready means of defense against covered wrongful employment practices and employment related acts of discrimination, with liability options of $100,000, $500,000, and $1 million; deductible options of $2,500, $5,000, and $10,000; and defense coverage within limits. Group Health, Life and Disability Underwritten by Medical Mutual of Ohio and Medical Life Insurance Co., the Ohio Big “I” group health/life and disability insurance program provides broad, stable health care coverage at attractive prices to members, agency staff and their families. The Big “I”/Medical Mutual program provides comprehensive coverage at a lower cost, and improved limits for life, AD&D, STD and LTD coverage at low rates. One-person groups are acceptable. RLI In-home Business Policy With more people operating small, home-based businesses, RLI’s In-Home Business Policy offers comprehensive coverage for business personal property, along with up to $1 million in business general liability protection. Loss of business income coverage and medical payments are also included. Eligible businesses must be operated from the residence home and occupy less than 50 percent of the available residence and can employ no more than 3 employees. RLI Personal Umbrella Policy The RLI Personal Umbrella is a stand-alone umbrella liability policy providing $1, $2 or $3 million of coverage. The insured is not required to carry the underlying policies with RLI and policy features include: coverage for up to 6 vehicles, 6 residential properties, 3 watercraft and 4 youthful drivers, and many more features, as well as agent commission of 10 percent and a self-underwriting application so you know immediately whether coverage can be placed. Select Flood Insurance With free rating software, online processing and inquiry, free flood-zone determinations, and tiered commissions up to and over 20 percent, the Big “I” National Flood program, through Selective Insurance, offers a competitive and rewarding approach to writing through the National Flood Insurance Program. This program can also accommodate rollover of existing business. AgentSecure Agents can access small commercial coverage through more than 1200 business classes from highly rated national carriers and middle market commercial coverage (Commercial Package Policies) with more than 200 business classes. AgentSecure, an easy-to-use Web-based on-line service designed specifically for smaller and rural agents, provides significant market access with no carrier premium volume commitments as well as competitive commissions. Big “I” Markets Easy market access is just one of the many benefits of Big “I” Markets, with on-line access to underwriting, coverage information, and sales and marketing resources for a variety of specialty markets. Big “I” members have access to specialty markets such as the Affluent Personal Lines Program, Short and Long-term Event Liability, Corporate Fiduciary Liability and many more, with competitive commission and no volume requirements. Group Workers Compensation Plan Your agency and commercial clients can enjoy impressive savings of over 90 percent by joining the Big “I” group rating plan. Our group plans are designed to earn your customers and you the highest savings available and are fee-based, allowing the agent to determine how much to earn. Big “I” group rating plans also allow agencies to bundle workers compensation, unemployment compensation and managed care for total account service to commercial customers.
Association Products and Services
COMMUNICATIONS Ohio Insurance Magazine The Ohio Insurance magazine is the only trade magazine written and produced exclusively in Ohio, providing in-depth interviews with industry and government leaders in combination with feature stories and regular departments sharing the latest industry, business and political insights. FACTS Newsletter Delivered by e-mail, broadcast fax or traditional mail, the Ohio Big “I” newsletter focuses on legislative and industry news. FACTS is written in a concise manner for quick reading and is delivered in a timely fashion so that members have all the pertinent information on emerging issues impacting their agencies. Independent Agent Magazine The award-winning monthly Independent Agent Magazine, produced by the Independent Insurance Agents and Brokers of America (IIABA) features articles from The Virtual University and The Agents Council on Technology as well as sales, legislative, and industry trends with regular columns from some of the most-respected names in the business. The IIAO and IIABA Websites Looking for immediate information on the state or national Big “I” or more detail on a particular program or maybe for back issues of a newsletter or magazine or a link to another organization? Whatever information or help you may be looking for, chances are it is just a click away at www.ohiobigi.com or www.inde-pendentagent.com. The IIAO Members Only Website One of the most recent additions to the Ohio Big “I” gallery is the Members Only Section, featuring ready to use client newsletter articles, technical papers, sample privacy notices, and much more – all accessible to Big “I” members through their User ID and password.
Government, Media and Did you know the IIABA is regularly recognized as one of the Top 25 lobbying associations in the nation’s capitol? Whether in the legislative arena, through media calls, Trusted Choice or other programs, the Big “I” is The Voice of the Agent – to legislators, reporters and anyone looking for information on independent agents.
EDUCATION AND CONTINUUM The CONTINUUM program attracts thousands of agents each year to hundreds of locally-held and cost–conscious continuing education courses. Programs range from two-hour entry level courses to four-hour highly complex technical and management-oriented seminars. Registration is offered on-line, where agents can search classes by date, time, and title. Strategic Leadership Exchange The annual one-day Strategic Leadership Exchange features insurance company CEO’s and association leadership in a lively and informative discussion of top insurance topics. Attendees hear from public officials along with industry leaders, partake in the yearly awards presentations to association stalwarts and the annual business meeting–all while earning CE credit. Ohio Big “I” District Meetings While the genesis of the district meetings was to conduct official business of the association in each of the districts around the state, these annual gatherings have become a must-attend local event for Big “I” members. The yearly statewide meetings feature updates on the state of the association with a wide-ranging review and discussion of timely topics such as credit scoring, UM/UIM legislation and other CE-accredited topics.
AGENCY OPERATIONS Motor Vehicle Reports The Ohio Big ‘I’ Instant MVR service is the only agent association direct link to the Ohio Bureau of Motor Vehicles and provides immediate, on-line turnaround of Ohio reports. No duplicate handling and no waiting for true cost efficiency. The Big ‘I’ MVR service is fast, accurate and affordable, offering MVR batches several times a day in on-line, telephone-to-computer and FAX-back options. Office Supplies Offered through Association Members Only by the Ohio Big “I”, members and associate members can earn substantial savings on office supplies. Average savings are 49 percent off list price while receiving a four percent cash rebate on every dollar spent. Orders can be placed on-line, by phone or fax and are shipped overnight free of charge with no minimum orders or delivery charges. Mines Press Choose from an extensive selection of office supplies, business forms, stationery and other business communication tools, each designed to be customized with the agency name, logo, and address and contact information. Also available from Mines Press are On-line Agency Newsletters and a variety of Website templates designed exclusively for the insurance industry. Big “I” and Agency Logo Merchandise Utilize the power of the Big “I” logo with distinctive gifts and accessories featuring the Big “I” logo. Items ranges from shirts to mugs to decals and lapel pins and tote bags and hats and can be ordered for staff, associates, clients – whomever you want to show off their affiliation with an independent agent and Big “I” member. Caliper Personality Assessments The Caliper Profile and Service Profile are personality assessment tests designed to help employers learn more about an individual’s personality traits and occupational motivations. By matching an individual’s personality strengths with the requirements of a particular job, this test can help reduce costly hiring mistakes and employee turnover. Big “I” members received a discount price for both the Caliper Profile and the Caliper Service Profile. Trusted Choice Trusted ChoiceSM is dramatically increasing consumer awareness of the benefits independent agents and brokers offer: choice, customization and advocacy —the benefits research has shown consumers want most. Through national advertising, public relations, local agency marketing and an innovative Web site, the Big “I” is the defining voice for agents and brokers nationwide. Benefits for member agencies include marketing brand and collateral materials, advertising and public relations material and exposure, and qualified leads through the Agency Locator, as well as the Trusted ChoiceSM Web site, including free use of WebSite Factory. Virtual University Whether it is a summary of the Terrorism Risk Insurance Act, input on ISO forms or agency management questions, the Virtual University website is a comprehensive resource center to assist agents with technical and other issues. Agents Council on Technology Agent technology and workflow business tools are available at the Agents Council on Technology Website. Agency technology articles and case studies along with in-depth publications are available as well as direct help. Best Practices Agency financial and benchmarking information are hallmarks of this landmark service that annually surveys the top agencies around the country as well as carriers for comprehensive breakdowns of the Best Practices of the leaders of our industry. Big “I” Logo Nationally recognized as a symbol of excellence, the Big I” logo is available for exclusive use to all members. The Big “I” logo adds instant recognition and credibility to your agency with tie-in advertising materials available. Research has shown that the Big “I” logo is recognized by nearly 80 percent of the insurance-buying public, assuring the public of your commitment to professionalism and your clients. n
Real-time SEMCI Becomes Reality By Jeff Yates, ACT Executive Director
A major step forward for our distri- Applied and its partners in this initiative deserve a great deal of credit for creating the critical mass necessary to get the real-time SEMCI ball rolling. Applied’s user group, ASCnet, has earned special “kudos” because it has been a steadfast champion for SEMCI, and it drives Applied’s development priorities. It is now incumbent upon all independent agents to use these innovative interfaces as they are developed, to support the companies that have made the necessary investments, and to press additional companies and vendors to implement these improved interfaces and to extend the functions which are covered. To initiate the “Light ‘Em Up Campaign”, Applied pre-configured all of its agencies with IVANS Transformation Station for real-time interface with the companies they represent. The eight initial companies agreed to install their particular real-time functionality with all of the Applied agencies representing them. Applied then created the “wizard” to permit an agency to turn on the functionality on an automated basis so that approximately 15,000 agent-company interfaces could be activated in relatively short order. The eight companies chose the following functions for their initial real-time interfaces available to all Applied agents. The Hartford and Ohio Casualty activated Billing Inquiry for personal and commercial lines. Progressive activated Billing Inquiry for personal lines. ACUITY and Kemper Auto and Home chose Auto/Home/Package Quote for personal lines; and Encompass chose an Auto/Home Quote Bridge. The St. Paul activated 1st Notice of Loss Reporting for commercial lines which permits the agent to get back the client’s claim number instantly. Travelers chose commercial lines Loss Run Inquiry which allows the agent to get immediate loss runs. The company also has implemented quoting and issue for small commercial lines, but this application is available when requested by agents and requires some agent training. ASCnet and Applied singled out Travelers for special recognition at ASCnet’s recent conference because of its early commitment and investments to pave the way for real-time SEMCI. Travelers plans to continue its leadership role with the roll-out of several additional real-time applications over the next nine months. Look for these initial companies to broaden the functions covered by their real-time interfaces in the future and for additional companies to go active. The AMS Users Group is also aggressively pushing for real-time interfaces. They have had an enthusiastic response from their members to their online SEMCI Reform Petition. AMS Services is committed to building real-time interfaces with companies. For example, it is working on small commercial lines quoting with Travelers through IVANS Transformation Station and has developed a link for Progressive that navigates from the policyholder file on the agency management system to that policyholder on the company’s web site. The major payback from real-time SEMCI interfaces early on will come from e-services that newly permit agents to provide their customers with immediate service. These are services such as billing inquiry, claims inquiry, online policy viewing, loss runs, and first notice of loss reporting. These services have the potential to achieve dramatic new efficiencies for both agencies and companies. Let’s take billing inquiries as an example and assume that the typical agency makes 3 billing inquiries a day (a very conservative number). When you multiply that number by the 40,000 independent agencies in our distribution system, you get 120,000 inquiries a day. Brian Bartosh, a Michigan independent agent using Applied, found that his staff has been able to cut the length of time to make a billing inquiry from an average of 12 minutes (when making the inquiry by phone to the company or by accessing the company web site) to 15 seconds through his agency system to the company and back in real-time. Extrapolating that number across the entire distribution system amounts to 1.4 million minutes a day or approximately 6 million hours a year— time that can now be dedicated by agency employees to value added customer service, cross selling, or new sales. And this number represents the potential savings on just the agency side from this one new real-time application! The companies save big, too. Progressive has reported that the company saves $3.00 every time an agent makes a billing inquiry through the agency management system using IVANS Transformation Station (15 cents per inquiry) rather than by calling the company. New technologies and real-time SEMCI interface offer us an unprecedented opportunity to streamline our distribution system and to position ourselves competitively for the longer term. Independent agents need to keep pushing for more effective interfaces, from more companies, covering more functions. We need to be unrelenting advocates for this cause on a sustained basis both individually—at company advisory council meetings, in convention exhibit halls, and in our one on one discussions with company CEOs and senior executives—and collectively through ACT, the agents associations, and the user groups. If we make this cause a priority, and become savvy users of technology and improved workflow, I am confident we will finally make substantial progress with SEMCI. We also need to commend those companies and vendors which take the steps and commit to the investments that make our future more efficient and profitable and provide these partners with our support and our business. n
Flood Insurance:
by Judy Marvel,
NFIP Bureau
A prospective
client approaches your As an insurance professional, you have already got the basic knowledge you need to underwrite and quote a flood insurance policy. Although flood insurance is not exactly like other lines of insurance, it’s close enough that the underwriting and calculation elements can be easy to figure out. If you are unsure about the process, the NFIP is ready and eager to help you every step of the way. Asking the Right Questions What should you ask a prospective insured? The topics you need to discuss with your client to help you prepare a flood quote are similar to those you would explore when preparing any property insurance quote. Take a look at the following basic questions and see how they relate to flood insurance. Where is the property located? How often have you heard the term “underwriting the risk”? Literally, this means determining the likelihood of loss. When underwriting a dwelling or homeowners policy, the first step in assessing the chance of loss occurring is to identify the property’s location. For example, if the property is situated on the coast, a homeowners insurance carrier concerned about the risk of wind damage might apply a higher wind deductible. Or, if the property is miles from a fire department or water source such as a hydrant, the risk of severe fire damage is greater than if the building is located within 300 feet of a fire hydrant or within 5 miles of a fire department. Homeowners insurance rates are determined accordingly. It is no different for flood insurance. Ocean- or river-front buildings have a significantly higher chance of being severely damaged by a flood than buildings located in the middle of town with no major body of water within hundreds of miles! All properties are at risk of being flooded. The likelihood of a flood loss and the severity of damage are delineated on Flood Insurance Rate Maps (FIRMs) as shaded flood zones identified by alphabetic and numeric names (such as “V Zone” or “A-1 Zone”). Brochures and other information are available through the NFIP to help you learn how to read a FIRM and establish what the correct flood zone is. See our web site (www.fema.gov/nfip/fmapinfo.htm) for examples of these materials or call the general information number listed on the tear-off flap at the back of this newsletter. Flood insurance is not available everywhere, just as other forms of coverage through the standard market are not available everywhere. For example, some carriers may not offer homeowners insurance in areas subject to high winds or in areas with high theft and fire exposures. The NFIP does not offer flood insurance for properties located in com- munities that do not
participate in the NFIP; nor is coverage available for properties
located in an environmentally delicate Coastal Barrier Resources System
(CBRS) areas. When underwriting a flood risk, refer to the Community
Status Book (available on-line at
www.fema. How is the building constructed? A building’s construction is a critical factor in determining how severely the structure may be damaged by fire, wind, or floodwaters. Is the build-ing’s construction frame or masonry? Or is the property owner seeking coverage for a mobile home? Mobile homes are insurable under the NFIP. However, they must meet certain criteria such as being secured in an approved fashion that prevents floatation. When a mobile home floats, not only does it end up in the neighbor’s yard, but also it twists and buckles. More often than not, floating mobile homes result in total losses. Certain types of construction can lower the property owner’s premium. Just as homeowners insurance rates drop when smoke detectors and theft alarms are installed in buildings, construction methods that lessen the likelihood or severity of loss and actions taken by property owners to mitigate flood losses often are rewarded with lower flood insurance rates. Two examples of these types of precautions are elevating a building’s lowest floor to or above the expected water depth of a flood, and constructing enclosures below an elevated floor in such a way that they do not threaten the integrity of the primary structure. In addition, commercial buildings may be flood-proofed. Other questions There is an all-important underwriting question that sets flood insurance apart from other lines of insurance. In areas at high risk of flooding, insurance rates are based not only on the location, construction, age, and loss experience of the building, but also on where the lowest floor is located in relation to the projected depth of a flood. For this reason, agents must be able to interpret the elevation information found on the NFIP’s Elevation Certificate. NFIP representatives at
your nearest NFIP Regional Office (telephone numbers are available
on-line at www.fema. Getting More Help It is important for you, as
the agent, to be familiar with the NFIP’s rules and regulations as they
have a profound effect on how you rate flood insurance policies. There
is an abundance of detailed material available to help you become
thoroughly familiar with the program.
Check out the information on
our web site (www.fema.gov/nfip), refer to the
Flood Insurance Manual
and the Standard
Flood Insurance Policy, call the NFIP (800-427-4661), or take NFIP-sponsored
courses. The Independent Insurance Agents of Ohio have scheduled three
sponsored NFIP courses to be conducted in April 2003. Courses are slated
for Columbus (April 22), Mansfield (April 23) and Toledo (April 24).
These seminars are approved for 4 CE credit hours in Ohio. For
registration information, please contact the IIAO at Judy Marvel has worked with the NFIP for 27 years, first as an insurance agent in coastal Delaware, and for the last 5 years as the Senior Training Specialist with the NFIP’s Bureau and Statistical Agent. This article was reprinted with the permission of the National Flood Insurance Program. Documenting Your File Considering the toll litigation takes in terms of time, money and reputation, you need to establish procedures for avoiding claims. In general, most claims arise out of communication problems and misunderstandings. Accordingly, the major key to preventing or minimizing claims is proper documentation of the transactional file. While a well-documented file will not prevent lawsuits or disputes from arising, it is a great tool in defending claims. Without written documentation, telephone calls are often not recorded and valuable information is lost. Misunderstandings can be clarified and corrected if letters reflecting each party’s understanding are exchanged and studied prior to the transaction. In general, the more written documentation available, the easier it is to defend the agent. Consider the case of an agent who sold health insurance to a national company with franchise groups throughout the U.S. From conversations with the carrier’s underwriters (an insurer the agent had never placed coverage with before), the agent understood that the carrier had agreed to write the franchise group on a guaranteed-issue basis. However, the agent did not document those conversations, and he was too busy to write to the carrier to confirm the conversation. In time, the agent realized the carrier was requiring evidence of insurability for each participant. As a result, individual employees within the various franchises were left without medical insurance or with uninsured conditions. The insurer denied oral conversations confirming coverage would be written on a guaranteed-issue basis, and the agent was left without any documentation to help in his defense. Good file documentation includes the following: (1) client needs and exposures; (2) all coverages offered or quoted; (3) responses to questions or inquiries; (4) representations about coverage; (5) all telephone conversations with clients; (6) any recommendations you make to clients; and (7) the client’s refusal to follow recommendations. To assist you in keeping such documentation, the following is recommended: • Keep a telephone conversation log; be consistent in using it. • Use a log with lined pages, with no empty lines between entries. • Make records contemporaneously with calls or conversations. • Sign or initial and date each entry. • Include enough details so that the entry speaks for itself and someone not a party to the transaction could review and understand the log. • Consider sending letters to confirm important conversations. Remember that in litigation the plaintiff’s attorney will have full access to all documents relating to the transaction, so your file should be neat, organized and understandable. Without proper documentation, you may not be able to recall what actually happened and what was discussed. Your file should be complete enough to enable someone a year or two from now to recreate the transaction from the documents contained therein. This becomes especially critical when any of the individuals involved have moved away or died. Memories fade over time. In a credibility dispute between you and another party, your position will be stronger if you have a written record regarding the transaction. In fact, lack of proper documentation is the leading cause of paid losses. Without documentation concerning the transaction, cases boil down to a “credibility match,” in which the insurance professional usually loses. E & O Loss Control Seminars February 19:...... Columbus March 6:............ Dayton March 19:........... Hudson April 10:.......... Findlay May 16:......... Youngstown Approved for Westport E&O policyholder loss control credits as well as four hours of continuing education credit, these seminars utilize in-class instruction with professionally produced video to walk participants through operational pitfalls that can cost your agency thousands of dollars in preventable lawsuits. Breakout sessions allow attendees to analyze their own agency operations and apply class material back at the office to help successfully minimize your agency risks. Contact association offices at 1-800-282-4424 or log onto www.ohiobigi.com to register. Additional class schedules and descriptions for the first part of 2003 are also available at the Ohio Big “I” Website. “Members Only” can register on-line and receive member price discounts automatically. n 14 Tips for Selling Many people in the P&C industry, particularly agency CSRs and a number of producers have not yet had the pleasure of experiencing a hard market. It has been about 15 years since we last had a significant hardening of prices. A hard market presents a number of selling problems. On the other hand, it also presents opportunities. Below are 14 tips that might improve your sales results in the hard (or any) market. By Bill Wilson, CPCU, ARM, AIM, AAM Director, IIABA Virtual University What is a Hard Market? Historically, a hard market is part of the cyclical nature of the insurance industry. At one time, these cycles occurred fairly consistently at about seven year intervals. However, the last significant hard market was in the mid-80’s. A hard market is characterized by increasing rates and/or reduced industry capacity which leads to affordability and/or availability problems. In addition, both underwriting and claims adjusting usually become more stringent. In the current marketplace, these conditions are exacerbated by increased uncertainty about loss exposures such as terrorism, mold, etc., and by a reinsurance market significantly strained by the events of September 11. Looking specifically at the E&O marketplace, we can expect increasing rates/premiums and more stringent underwriting. This presents problems and opportunities. The bad news is that competition could lead to lost accounts. The good news is that competition could lead to lost accounts! That is, it is probably not desirable to retain all existing accounts...more on this later. And there is more potentially good news...since many carriers are in the same boat, the hard market could lead to new business. In addition, increased premiums means increased commissions (until or unless carriers start reducing them again)...you can use this increased revenue to improve and expand services in a way that differentiates you from the competition. So, let us take a look at 14 tips you can use to improve your sales performance during the hard market.... Sales Tip #1: Know your buyer Whether you are selling BOPs or Tupperware, you can only sell three things: (1) price, (2) product, and (3) relationship. When it comes to insurance, about 50% of customers are relationship buyers, 25% are price buyers, and 25% buy on the basis of product (10%) or value (15%). If you know where your prospect/insured falls, you can tailor your proposal to them. Sales Tip #2: Really know your buyer • Develop a client profile/rating sheet...include everything you know about that buyer down to their favorite TV show. •
Identify the real decision makers... • Learn all you can about the buyer...talk to employees, business associates and others to learn what makes that person “tick.” • Stay in frequent contact...com-municate with VIP, at-risk, and high potential customers frequently and rarely should the contact concern their insurance account. • Pay attention to the little things...Joe Girard, listed by the Guinness Book of World Records as the best car salesman in the world, said his secret was greeting cards...sending birthday, holiday and other greetings. So, keep in contact and do little things throughout the year for clients (e.g., send a magazine article on a subject you know they’re interested in) and do something really memorable shortly before renewal time that’s unr | |