April 24, 2014 AGENTS DESCEND ON CAPITOL HILL Several IIAI members recently visited our Nation’s Capital, joining over 1,000 agents from across the nation for the Annual Big “I” National Legislative Conference. Up for discussion at congressional visits are national issues impacting the insurance industry, agents and their clients, including: • • •
The need for Congress to approve an extension to the current terrorism insurance program Support for non-resident producer licensing reform through the National Association of Registered Agents & Brokers (NARAB II) Opposition to any additional efforts to raise taxes on individuals and small businesses
BIG “I” RELEASES WHITE PAPER ON ACA CHALLENGES AND OPPORTUNITIES The Big “I” released a white paper titled “The Affordable Care Act: Challenges and Opportunities for Employers and Advisers” by Dr. Adam Beck, The American College assistant professor of health insurance. To download the full document, http://www.independentagent.com/Education/VU/Insuranc e/Life-And-Health/Health/ACA-white-paper.aspx?sid=1 you must be logged in to the Big “I” website. This is an internal document. Please do not share outside the association.
Go to: http://www.ambest.com/v.asp?v=bigi414, to see A.M. Best coverage of the Big “I” Legislative Conference. There is great footage of the conference and speakers, along with interviews.
The white paper was commissioned by the Big “I” as part of this ongoing effort. The association is also actively involved with numerous legislative efforts on Capitol Hill that address the needs of independent agents, brokers, their clients and insurance consumers. The paper addresses the following important topics, as well as their relevance and impact:
FEMA RESPONDS TO FLOOD REFORM LAW
Impacts of the Homeowner Flood Insurance Affordability Act are becoming clearer. FEMA released Bulletin W14011, http://www.nfipiservice.com/Stakeholder/pdf/bulletin/w14011.pdf to share its next steps and provide an overview of the law, which triggers retroactive changes and the establishment of new programs, processes and procedures.
The memo also encourages policyholders who were impacted by subsidy phase-outs in the Biggert-Waters Flood Insurance Reform Act of 2012 to maintain their current flood insurance policies. The agency will provide instruction in the coming months on how refunds should be issued.
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Implications for the individual, small group and large group markets Medical Loss Ratio (MLR) and its effect on agent commissions New federal taxes and fees Self-funding as an avenue Considerations in serving employer clients Employer mandate requirements for agents to navigate
“The Affordable Care Act has permanently altered the health insurance industry and is a topic of tremendous importance to agents and brokers in all areas of insurance and financial advising,” says Professor Beck in his executive summary. “For many brokers, there are substantial changes to the marketplace that necessitate considerations of changing business models, including adding consulting services and supplemental insurance
products.” HEALTH INSURANCE – OUTSIDE OPEN ENROLLMENT Open enrollment in the Marketplace is over. Many agents have questioned what products are available to sell in the individual market and what constitutes a qualifying event. Examples of a qualifying event, with a 60-day enrollment period, include: getting married, having a baby, moving to a new area, or losing other health coverage. There are also complex cases that may allow your client to enroll in the Marketplace through www.healthcare.gov. These include: • • • •
A serious medical condition or natural disaster that kept your client from enrolling – like an unexpected hospitalization or temporary cognitive disability; A natural disaster – such as an earthquake, massive flooding or hurricane; A planned Marketplace system outage; Misconduct by a non-Marketplace enrollment assister that resulted in not getting enrolled in a plan, being enrolled in the wrong plan, or not getting the premium tax credit or cost-sharing reduction; An application that was rejected by the insurance company's system because of errors in reading the data, or some of the data was missing or inaccurate or an error in the processing of applications or system caused an incorrect immigration eligibility result when trying to apply for coverage; and Incorrect plan data, such as benefit or cost-sharing information that could qualify for a special enrollment window in the Marketplace.
NEWLY INSURED IN 2014 REPRESENT ABOUT 4% OF U.S. ADULTS According to Gallup polls four percent of Americans are newly insured this year, reporting that they have health insurance now but did not last year. A little more than half of that group, or 2.1% of the U.S. population, got their new insurance through health exchanges. The rest got it using some other mechanism.
These findings are based on interviewing with more than 20,000 U.S. adults, aged 18 and older, conducted as part of Gallup Daily tracking from March 4-April 14. Gallup asked those who have health insurance if their policy is new for 2014, and if so, whether they had insurance last year and if they got their new insurance through a federal or state health exchange. Overall, 11.8% of U.S. adults say they got a new health insurance policy in 2014. One-third of this group, or 4% nationally, say they did not have insurance in 2013. Another 7.5% got a new policy this year that replaced a previous policy. The rest either did not respond or were uncertain about their previous insurance status. The key figure is the 4% who are newly insured in 2014, which most likely represents Americans' response to the individual mandate requirement the Affordable Care Act (ACA). This estimate of the newly insured broadly aligns with the reduction Gallup has seen in the national uninsured rate from 2013 to the first days of April 2014. However, the calculation of the newly insured does not take into account those who may have been insured in 2013 but not in 2014. The ACA envisioned that the new healthcare exchanges would be the main place where uninsured Americans would get their insurance this year, but it appears that a sizable segment of the newly insured Americans used another mechanism. These sources presumably include employee policies, Medicaid, and other private policies not arranged through exchanges. Newly Insured Younger Than the General Population The newly insured are, on average, much younger than the overall population, with most younger than age 65. Within the 18 to 64 age range, the newly insured are slightly more overrepresented in the 18 to 29 age category than in the 30 to 49 and 50 to 64 age categories. These data suggest that the ACA's efforts to add previously uninsured young people to the ranks of the insured have been modestly successful. The newly insured who signed up outside of the exchanges are substantially younger than those who signed up through the exchanges.
TRUSTED CHOICE® LAUNCHES THE FREEDOM AD CAMPAIGN 2014 Trusted Choice® launched a new national advertising campaign which highlights the strengths of independent agents: Choice, Customization and Advocacy. The campaign uses humor to draw attention to this startling realization and celebrates the advantage of the independent agent. Trusted Choice® agents can find examples of the new advertising materials (print, online, direct and radio) on the new Trusted Choice® Agent Portal. To access the ad materials, go to the Trusted Choice® Agent Portal and log in with your IIABA username and password, then look for the "Freedom Campaign 14" content at the top of the page. In addition to the new advertising materials, the elements of the campaign will also be featured on the Trusted Choice® Facebook page. About the New Trusted Choice® Agency Resource Site The new agent’s resources site is a collaborative online portal available only to Trusted Choice® members. On the site agents will find articles they can use to share with consumers, advertising materials including the new Trusted Choice® Freedom Campaign 2014 materials, information about the Marketing Reimbursement Program, helpful videos, a discussion forum and an online file cabinet where agents can share materials and photos. All of the materials on the site are available for your use. Trusted Choice® Marketing Reimbursement Program The Trusted Choice® Marketing Reimbursement Program is available for all Trusted Choice® agents to help offset your marketing and advertising efforts – including investing in the new "Freedom Campaign." View the 2014 Trusted Choice® Marketing Reimbursement Program guidelines to learn how you can get reimbursed up to $1,600 on marketing and advertising expenses. For more information about the "Freedom Campaign" and the Marketing Reimbursement Program, contact IIABA's Kevin Brandt, firstname.lastname@example.org. TRUSTEDCHOICE.COM RATING CAPABILITY NOW AVAILABLE FOR IOWA Consumers are looking for Independent Agents online... will they find your agency? Yes, the rumors about the new TrustedChoice.com are true; site traffic is up over 700% since the launch last July. And the leads are coming in, more and more every month. The rating capability is NOW LIVE for the state of
Iowa! TrustedChoice.com was built to connect insurance professionals like you with online consumers seeking a new agent or coverage. The addition of rating makes it possible for online consumers to receive quotes, select a carrier, AND choose the independent agent they wish to work with. The site was designed specifically to help YOU generate quality leads and compete online with the direct writers. At this time only two carriers, Safeco and State Auto, are participating in the quoting option…but more carriers hopefully will soon join-up with Trusted Choice® giving Iowa agents the competitive boost to have a strong internet presence in our state. But you need to be a subscriber on TrustedChoice.com in order to be considered for rating by a prospect. All IIAI members have a basic FREE listing on TrustedChoice.com as a member benefit, but only those who have purchased an Advantage Subscription are eligible for online rating and receive priority listing at the top of search results with enhanced agency info. IIAI has invested in thousands of digital ads specifically targeting Iowans…to encourage them to go find you on the Trusted Choice® website. To learn more about project CAP, go to: https://iw.trustedchoice.com/programs-consumerportals/. QUESTION OF THE WEEK Question – Could you tell us where we could find the rules on charging agency fees? We currently charge agency fees on just a few Commercial Lines accounts. We are wondering if it's acceptable to charge agency fees for Personal Lines as well as Employee Benefits. If allowed, are there minimums/maximums? Can an agent in Iowa charge an additional fee to a client they when are writing the insurance? IIAI Answer - This is a complicated subject and one that impacts more than the bottom line. First the answer, an agent cannot charge fees for services that are customarily associated with the sale, solicitation, negotiation, and servicing of an insurance policy. But, an agent can charge a fee for assigned risk placement and/or commercial polices as long as they fully disclose all fees and charges (the regulation does not set a limit). Two things an agent needs to keep in mind, first a potential legal exposure is created when you move to a fee base status versus commission. You would be well advised to visit with an Attorney who specializes in Insurance law before ever implementing a fee based service in your agency; frankly, the potential legal exposure may make this idea not worth pursuing. You may want to give a disclaimer with the fee notice indicating that you are acting as an insurance agent and not a consultant for the fee. Also keep in mind that any fees or charges must be fully
disclosed, commission, profit share, etc. The following is a copy of the Iowa Administrative rule: 10.14(4) An insurer or a producer may not charge an additional fee for services that are customarily associated with the sale, solicitation, negotiation and servicing of an insurance policy. This prohibition does not apply to assigned risk and commercial property/casualty policies. Any fees or other charges that are assessed to an insurance consumer must be fully disclosed.
insurers’ pretax operating income, net income after taxes, and overall rate of return, with insurers’ $15.5 billion in net gains on underwriting in 2013 constituting a $30.9 billion swing from their $15.4 billion in net losses on underwriting in 2012. The combined ratio — a key measure of losses and other underwriting expenses per dollar of premium — improved to 96.1 percent for 2013 from 102.9 percent for 2012, according to ISO, a Verisk Analytics company (Nasdaq:VRSK), and the Property Casualty Insurers Association of America (PCI).
SECOND QUESTION OF THE WEEK Question: Can a person get an insurance license just so they can collect the commission on their own account or share in the commission? IIAI Answer: No, the law specifically prohibits this practice. Here is what 522B.11.r of the Iowa code states: LICENSE DENIAL, NONRENEWAL, OR REVOCATION. 1. The commissioner may place on probation, suspend, revoke, or refuse to issue or renew an insurance producer's license or may levy a civil penalty as provided in section 522B.17 for any one or more of the following causes…
The swing to net gains on underwriting is attributable to premium growth and a drop in net losses and loss adjustment expenses (LLAE). Net written premiums climbed 4.6 percent in 2013 to $477.7 billion, and net earned premiums grew 4.2 percent to $467.9 billion. Conversely, net LLAE fell 5.5 percent in 2013 to $315.0 billion. Those positive developments were partially offset by increases in underwriting expenses and dividends to policyholders, which both rose last year. Insurers’ overall results for 2013 also benefited from a $4.6 billion increase in net investment gains — the sum of net investment income and realized capital gains (or losses) on investments — which rose to $58.8 billion in 2013 from $54.2 billion in 2012.
r. Using an insurance producer’s license for the principal purpose of procuring, receiving, or forwarding applications for insurance of any kind, or placing, or effecting such insurance directly or indirectly upon or in connection with the property of the licensee or the property of a relative, employer, or employee of the licensee, or upon or in connection with property for which the licensee or a relative, employer, or employee of the licensee is an agent, custodian, vendor, bailee, trustee, or payee.
Partially offsetting the improvement in underwriting and investment results, insurers’ miscellaneous other income fell $0.9 billion to $1.5 billion in 2013 from $2.4 billion in 2012, and their federal and foreign income taxes rose $5.8 billion to $12.0 billion from $6.1 billion.
P/C INSURERS’ 2013 PROFITS AND PROFITABILITY REFLECT FIRST NET GAINS ON UNDERWRITING SINCE 2007
The figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.
Private U.S. property/casualty insurers’ net income after taxes grew to $63.8 billion in 2013 from $35.1 billion in 2012, with insurers’ overall profitability as measured by their rate of return on average policyholders’ surplus climbing to 10.3 percent from 6.1 percent. At 10.3 percent, insurers’ overall rate of return had risen to its highest level since the 12.4 percent for 2007. Insurers’ pretax operating income — the sum of net gains or losses on underwriting, net investment income, and miscellaneous other income — rose to $64.3 billion in 2013 from $35.0 billion in 2012. Improvement in underwriting results drove the increases in
Policyholders’ surplus — insurers’ net worth measured according to Statutory Accounting Principles — grew $66.3 billion to a record $653.3 billion at year-end 2013 from $587.1 billion at year-end 2012, largely as a result of insurers’ $63.8 billion in net income after taxes.
OUR CONDOLENCES We have learned that Ronald Douglas, 67, of Orchard, Iowa, passed away Wednesday, April 2, 2014 of cancer. Ron was a partner in Osage Insurance Services, a member of IIAI. Ron was an active member of his church and the community and served on many boards. We extend our condolences to Ron’s wife, Elizabeth, his family and friends.