INSIDE Insurance & the SIFI Designation: Changes on Tap? » 7 The High Cost of Regulation & Not Just Insurance » 15 Online Security: It’s Getting Worse » 20 Crash Dummies & Real Life » 28 Cover Image: Kelly DeLay Windmill at Sunset - Valentine Nebraska
February 2017 | Published Monthly
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Did you know that PIA’s company council, The PIA Partnership, has conducted nationwide research about the insurance buying preferences of small business owners? The research is encouraging because it found that small business owners strongly prefer independent insurance agents as they make choices in today’s online world. However, the results also serve as a wake-up call that agents must take steps to continue to demonstrate their value and also be more engaged online. PIA and the companies belonging to The PIA Partnership have created a public website that helps agents understand PIA’s findings. PIA members also have access to a private website containing a series of strategies and tools to help them stay ahead of online competition in commercial lines. To access the newest PIA Partnership project, Small Business Insurance & The Internet — The Voice of the Commercial Lines Customer, visit us at www.pianet.com/voiceoftheclcustomer. If you are not a PIA member and want to access all of the tools available through this program, contact us for a membership application or visit us online at www.pianet.com/joinpia.
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Top Stories
Insurance & the SIFI Designation: Changes on Tap? | 7 Ted Nickel is Wisconsin’s insurance commissioner and the new president of the National Association of Insurance Commissioners (NAIC). Top Lobbyists & the 113th Congress: Insurance in Top 10 | 10 For years, many of individuals and organizations and politicians have been complaining about lobbyists influencing government. Dodd-Frank & FIO & Trump & PIA | 13 President Trump has ordered that two regulations must be eliminated for every new one put into place. The High Cost of Regulation & Not Just Insurance | 15 Most insurers and a great many independent insurance agents will tell you — while admitting some are necessary — there are too many insurance regulations. No Surprise: 2016 Record Data Breach Year | 18 Risk Based Security published a report on data breaches for 2016. Insurers 2016 Underwriting Loss & Direct Writing Increase | 19 A.M. Best thinks the property and casualty insurers — overall — will see a small underwriting loss for 2016.
Online Security: It’s Getting Worse | 20 Pew Research just released the results of a frightening online survey. Modernizing Flood Insurance | 22 For years PIA National has advocated for changes in the National Flood Insurance Program (NFIP). Special Report: Taxes | 24 Tax reform is a high priority of President Trump and the Republican-controlled Congress. Crash Dummies & Real Life | 28 You’ve seen them. The auto manufacturer does a test on the safety of its vehicle or maybe it’s an independent scientist.
PIA NE IA Events Upcoming Events Calendar 2017 | 30
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Top Stories
Insurance & the SIFI Designation
Changes on Tap? Ted Nickel is Wisconsin’s insurance commissioner and the new president of the National Association of Insurance Commissioners (NAIC). He spoke at the recent Insurance Information Institute (I.I.I.) 23rd Annual Joint Industry Forum and made the case for radical changes in the direction the Financial Stability Oversight Council’s (FSOC) has been taking. Nickel said the FSOC and its liberal use of the SIFI (systemically important financial institution) and how it arrives at decisions about who should or should not be SIFI designated, is misguided. “We’re going to be advocating for a repeal of the FSOC designation process,” Nickel said. And if the FSOC should survive, Nickel said the NAIC wants “a vote on that board, particularly when they’re voting on matters of financial significance to insurers.” The current insurance commissioner position on the council has no vote. Today it’s Peter Hartt who directs New Jersey’s insurance division. “I think monitoring solvency of insurance companies is best done at the state level. I don’t think the federal labeling of insurance companies [as systematically important] through the FSOC process has been particularly helpful given the fact that there’s no off ramp,” Nickel said.
Ted Nickel
That said, Nickel told the group that not everything about the FSOC is negative. “Its best purpose would really be to gather on a regular basis and talk about and identify areas of systemic importance to the financial system of the U.S,” he noted. And it in those conversations — Nickel said — where positive change will occur. “I think that’s one of the two jobs that they have that — my understanding is — they don’t spend a lot of time doing. My understanding is they spend a lot of time on the designation process. And if they would spend more of their time on gathering information on trends in the economy or trends globally that could wash up on our shores and result in financial peril, I think it would be beneficial to everybody. If they refocus their efforts, that would provide a lot of value,” Nickel concluded. The new NAIC president and Ian Adams of the R Street Institute and The Wall Street Journal
February 2017 | Main Street Industry News |www.pianeia.com| 7
Top Stories Editor Leslie Scism also talked about the fate of the Federal Insurance Office (FIO) under a Trump administration bent on limiting the power of the Dodd-Frank Act. Scism thinks a rollback of Dodd-Frank will happen and will likely be in one of three ways. “One way is to do this legislatively. Another might be through the FSOC process as Trump’s appointees…populate the FSOC,” she said. The editor pointed out that the Democrats never did make the case for Dodd-Frank being able to put enough roadblocks in place to prevent another Great Recession or an economic collapse. “From what my colleagues in Washington have picked up, there’s a lot less enthusiasm — maybe there’s no enthusiasm to have insurers designated as systemically important. The case hasn’t been made that Dodd-Frank will prevent a collapse. There just aren’t the signs that these insurers are putting the financial system at risk. That hasn’t been presented in materials made public,” she added.
think much about Dodd-Frank or think a change will let AIG off the hook. “To date, designation as a SIFI has not hindered us in pursuing our true north of maximizing intrinsic value, returning capital and optimizing our business in a way that makes sense. There’s a modest cost for complying with SIFI regulation over and above what we are already investing in controls,” he said. And what if Dodd-Frank and its regulations are changed by President Trump and Congress? Hancock said, “For us, it just simply isn’t a binding constraint on our capital returns and our objectives …. We’re focused very much on managing our capital prudently, being compliant with whatever regime exists. And even if FSOC’s SIFI designation authority were to change, AIG would still have FSB [Financial Stability Board] and G-SIFI to worry about — and 200 other regulators.”
& Technology
Looking at AIG, Scism said the big problem that led to its collapse and the danger to the world’s economy is that it was not overseen by state insurance officials but by the federal Office of Thrift Supervision. “I think a lot of what the states have done since the collapse is to recognize that they have to take into consideration other parts of a big financial conglomerate that aren’t regulated by the states and have a handle on those other parts,” she said.
Nickel got in the last word and said, “I don’t have any problem with a gazillion-dollar company. If they’re handling themselves, if they’re working [through] problems. If they’re collecting premiums, paying claims, doing their investments. I don’t care how big [the insurers] are. It shouldn’t be the size of the company that just automatically puts them in the crosshairs of a third party, in this case, FSOC, and in many cases on the European front [with] some of the designations that FSB makes. The role of the regulator shouldn’t be to strong arm and … threaten companies to get smaller or else. That’s just not a good way to regulate,” Nickel said. And the bottom-line?
Nickel agreed. “If an insurance regulator start[s] doing an analysis of a very large company, we don’t have to have a special designation. We just, we get in there and we take care it. We take care of the financial issues as they arise at varying levels of increasing oversight,” he said.
“I regulate, and my folks regulate based on risk. Too big is not a risk to me. A risk is doing dumb things and not having yourself positioned accordingly, not thinking about future areas that might be of concern and addressing those upfront” he said.
Peter Hancock — who is AIG’s CEO — doesn’t
Source: Insurance Journal
February 2017 | Main Street Industry News | www.pianeia.com | 8
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PIA of Nebraska & Iowa (402) 392-1611 www.pianeia.com February 2017 | Main Street Industry News |www.pianeia.com| 9
Top Stories
Top Lobbyists & The 113th Congress
Insurance in Top 10 For years, many of individuals and organizations and politicians have been complaining about lobbyists influencing government. Democrats and former President Obama spent a lot of the last eight years pushing for reforms.
was spent on 168 clients and was spent by 857 different lobbyists representing several companies.
No surprise — considering the amount of money involved — that no legislation was introduced to curb lobbyist spending or reform government involvement by lobbyists.
Insurance Top 10 Lobbying Spenders
The top 50 contributors lobbying for their causes in the just finished 113th Congress totaled $100 million shy of $1 billion at $900,616,000. Over half of that is from the top 10 contributors who gave $447,524,000. Insurance — in bold in the chart — ranks sixth with $37.17 million going to political causes. Of that, 66% went to Republicans and the top recipient of that money was House Speaker and Wisconsin Republican Rep. Paul Ryan. That’s lobbying to Congress. For all lobbying, the industry spent $146,662,996. That money
It’s down from $157,810,809 spent on 173 clients in 2015.
• Blue Cross / Blue Shield: $13.84 million • Prudential Financial: $9.4 million • America’s Health Insurance Plans: $6.96 million • MetLife: $5.11 million • Northwestern Mutual: $4.7 million • American Council of Life Insurers: $4.5 million • Cigna: $4.5 million • USAA: $4.5 million • New York Life Insurance: $4.26 million • Property Casualty Insurers Association of America : $4.2 million
February 2017 | Main Street Industry News | www.pianeia.com | 10
Top Stories The chart below looks at the top 10 contributors who — again — gave over half of the over $900 million contributed to the 113th Congress. Rank Interest Group
Total
Democrat %
Republican %
Top Recipient
1
Retired
$94.38 million
27%
73%
Republican Sen. Ted Cruz
2
Lawyers / Law firms
$56.76 million
56%
44%
Democrat Rep. Chris Van Hollen
3
Securities / investment
$55.05 million
35%
65%
Republican Sen. Marco Rubio
4
Real estate
$49.48 million
37%
63%
Republican Sen. Marco Rubio
5
Health Professionals
$42.68 million
39%%
61%
Democratic Sen. Bernie Sanders
6
Insurance
$38.17 million
34%
66%
Republican Rep. Paul Ryan
7
Leadership / PACs
$33.24 million
24%
76%
Democratic Sen. Rob Portman
8
Democrat / Liberal
$30.81 million
99%
1%
Democratic Sen. Bernie Sanders
9
Oil & gas
$24.26 million
10%
90%
Republican Sen. Ted Cruz
10
Pharmaceutical / health products
$22.71 million
38%
62%
Republican Sen. Richard Burr
Rounding out the Top 20 (giving high double-digit figures with most going to Republicans)
• Miscellaneous finance — top recipient: Sen. Marco Rubio (R-Florida)
• Lobbyists — top recipient: Rep. Chris Van Hollen (D-Maryland)
• Manufacturing/distributing — top recipient: Sen. Ted Cruz (R-Texas)
• Commercial banks — top recipient: Sen. Pat Toomey (R-Pennsylvania) • Conservative Republicans — top recipient: Sen. Ted Cruz (R-Texas) • Education — top recipient: Sen. Bernie Sanders (D-Vermont)
• Electric utlities — top recipient: Sen. Lisa Murkowski (R-Alaska)
• Business services — top recipient: Sen. Bernie Sanders (D-Vermont) • Electronics — top recipient: Sen. Bernie Sanders (D-Vermont) • Crop production — top recipient: Sen. Ted Cruz (R-Texas)
February 2017 | Main Street Industry News |www.pianeia.com| 11
Top Stories In the top 10 contributors Sen. Ted Cruz (R-Texas), Sen. Marco Rubio (R-Florida) and Sen. Bernie Sanders (D-Vermont) were each top recipient twice. And Sanders knocked it out of the park with lobbyists with 18 of the top 50 contributors making him the top recipient.
The list is the top 50 and except for these contributors, a usually much higher dollar amount goes to Republicans than Democrats. The percentage of lobbyists pushing money to Democrats is just 20% of the list. • Lawyers — 56% to 44% • Democrat/liberal — 99% to 1% • Education — 73% to 27% • Electronics — 52% to 48% • TV & Movies — 62% to 38%
What’s most odd about that figure? Of the 18, a whopping 11 of them gave a higher percentage of their lobbyist dollars to Republicans. Cruz was second at 7 times as the top recipient and Rubio had 5.
Donations predominantly to Democrats in single digit millions. • Public sector unions — 86% to 14% • Transportation unions — 66% to 34% • Building trade unions — 78% to 22% • Civil servants — 65% to 35% • Industrial unions — number 50 on the chart — 92% to 7%
Of the PIA Western Alliance state members of Congress just two were top recipients and both are Republicans. Alaska Sen. Lisa Murkowski: Number 16 — Electric utilities Oregon Rep. Greg Walden: Number 31 — Telecom Services Sources: Center for Responsive Politics
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Top Stories
Dodd-Frank FIO Trump PIA President Trump has ordered that two regulations must be eliminated for every new one put into place. Whether that’s going to happen is anybody’s guess. What isn’t a guess is what Trump wants to do with regulation. He thinks there is too much federal regulation and it’s slowing down business. Anything that slows down business must go. And that’s anything like in the Dodd-Frank Act. Trump, sees it as a heavy burden — in some cases — for banks and other financial institutions like insurance. Via an executive order, the president has ordered the Treasury Secretary to review Dodd-Frank and report on what changes are needed. And Trump has made it no secret — as in this comment to small business leaders early last week — he’s not a fan of the law. “Dodd-Frank is a disaster. We’re going to be doing a big number on Dodd-Frank. It’s almost impossible now to start a small business and it’s virtually impossible to expand your existing business,” Trump said.
Congress got into the act as well and repealed a regulation that requires oil and gas companies to disclose payments made to U.S. or foreign governments for commercial development. Trump is expected to sign it into law. The president has also signed a presidential memorandum that orders the labor department to not implement President Obama’s rule requiring financial professionals who charge commissions to put their clients’ best interests first when giving advice on retirement investments. The idea behind the rule is to prevent these advisors from moving their clients toward higher fee and commission investments and thus eating away at potential retirement dollars. Criticism was quick. Massachusetts Sen. Elizabeth Warren said, “The DOL rule protects consumers and creates a level playing field in the market for financial advisors who want to do right by their clients. Instead of doing favors for the big bank CEOs he invited to the West Wing
February 2017 | Main Street Industry News |www.pianeia.com| 13
Top Stories this morning, President Trump should stand with working families by protecting this critical rule.” While no one is certain how much of DoddFrank will survive, what many insurance agent associations — like PIA — hope is that the DoddFrank created Federal Insurance Office (FIO) does not. Housed in the U.S. Treasury, the FIO was supposed to give Congress advice on insurance. It didn’t turn out that way. The FIO never hit it off with insurers or with state regulators, both of whom feel insurance is best regulated by the states and who see the FIO as a federal intrusion into that regulation. PIA National — and other agent and insurance associations — were critical of the FIO when it was discussed as Dodd-Frank was being formed. In an article written for National Underwriter and its online publication PropertyCasualty360.com, PIA National Vice President of Government Operations Jon Gentile wrote, “For more than 150 years the state-based system of insurance regulation has worked, successfully protecting consumers and creating a competitive and diverse U.S. insurance market. In fact, a report issued by the Government Accountability Office (GAO) in June 2013 found the state-based system of insurance regulation helped to mitigate the negative effects of the 2007-2009 financial crisis on the insurance industry.” So PIA — and others — want the FIO gone because insurance does not require the level of government interference put into the office. And recent FIO actions — Gentile wrote — prove it needs to be eliminated. “In November 2016, it issued a report recommending that Congress consider prescribing a uniform national standard for state guaranty association coverage limits. This report only validates our concerns that the FIO’s ultimate aim is to federalize or itself become a federal regulator of insurance,” he said.
PIA is also concerned about the Financial CHOICE Act which was just introduced in the new Congress. It creates an Office of the Independent Insurance Advocate to also be housed in the U.S. Treasury. “The proposed Independent Advocate office would have the power to have its own budget, hire staff and engage attorneys. It is expected to coordinate federal efforts on international insurance matters, including at the International Association of Insurance Supervisors (IAIS), and assist in negotiating covered agreements, monitor the insurance industry, recommend insurance companies to be designated for heightened prudential standards and supervision and administer the Terrorism Risk Insurance Program. This office would have the potential to morph into an FIO on steroids,” Gentile wrote. But PIA says neither the FIO or an insurance advocate are needed. Gentile said, “If the goal of the new Congress is to eliminate unnecessary federal regulation, getting rid of the FIO makes solid sense. Doing so would reaffirm that regulation of insurance should continue to be the responsibility of the states.” Jimi Grande is the senior vice president of federal affairs for the National Association of Mutual Insurance Companies. He agrees with the PIA. “The office as it exists should be eliminated. We believe that any financial reform should take a long and hard look at whether or not we can remove redundancies and streamline the way our businesses operate. Not having a Federal Insurance Office located within the Department of Treasury is something that should be considered in any new legislation,” Grande said. He said anything the FIO does for Congress could also be found in the Treasury or provided by the nation’s state regulators. Sources: PropertyCasualty360.com, Carrier Management, OregonLive.com
February 2017 | Main Street Industry News | www.pianeia.com | 14
Top Stories
The High Cost of Regulation and Not Just Insurance
Most insurers and a great many independent insurance agents will tell you — while admitting some are necessary — there are too many insurance regulations. Other businesses feel the same way about regulation. As a society, we are faced with increasing regulations and the urge of government to use them is happening at an alarming rate. It’s a fact not lost on President Trump who has promised to start doing away with regulations and rules on a wholesale basis. How bad is it? Take the case of federal regulation. When Donald Trump was sworn in several weeks ago, the Federal Register had a record 89,535 pages of regulations. Add to that the number of state, county and local government regulations and the number of pages is staggering.
So, Trump — who has promised to cut federal regulations by 75% — has issued an executive order saying for every one regulation introduced, two will be eliminated. Trump said, “If you have a regulation you want, number one, we’re not gonna approve it because it’s already been approved probably in 17 different forms. But if we do, the only way you have a chance is we must knock out two regulations for every new regulation. So, if there’s a new regulation, they have to knock out two.” Second, Trump said, “This will be the biggest such act that our country has ever seen. There will be regulation, there will be control, but it will be a normalized control where you can open your business and expand your business very easily. And that’s what our country has been all about.” Third, the president said this is really more about small business. “We’re cutting regulations massively for small business — and for large business. But they’re different. But for small
February 2017 | Main Street Industry News |www.pianeia.com| 15
Top Stories business, and that’s what this is about today. And we’ll be reducing them big league and their damaging effects on our small businesses, our economy, our entrepreneurial spirit. And it’s been very badly damaged. The American dream is back.” And Trump emphasized that the decision is not a knock-on President Obama though — he said — “it got particularly bad in the last eight years.” So how much do regulations cost business? Tons says the Office of Management and Budget (OMB). It estimates the cost at between $68.5 billion and $101.8 billion for salaries and somewhere between $261.7 billion and $1,042 billion for benefits. The National Association of Manufacturers says the OMB’s numbers are too conservative. It estimates the cost of complying with regulations at $2.028 trillion or 12% of the gross domestic product. As the president and a lot of Republicans — and even some Democrats — say, many regulations are outdated and some duplicate what other rules say or contradict what other rules say. Competitive Enterprise Institute spokesman Clyde Wayne Crews said in 2015 there were 81,611 pages published. That’s much higher than 2014’s 77,687 and higher than 2010’s old record of 81,405 pages but not close to 2016’s 89,535 pages. Trump’s proposed cuts — says Amit Narang of the left of center group Public Citizen — will not happen. “There is no way for President Donald Trump to slash regulations by 75 percent without cutting into bedrock public protections that hold Wall Street accountable, keep our water and children safe from lead poisoning, and contain food contamination outbreaks,” he said.
Narang said all Trump is going to accomplish is to “permit corporations to rip off consumers, poison our environment, [and] cheat and mistreat workers.” Other than to specify the percentage, the president has not offered many specifics about what he wants to do and when. But House Republicans have gone there. Leadership in the House is looking at passing the Searching for and Cutting Regulations that are Unnecessarily Burdensome (SCRUB) Act. Its purpose is to put a commission in place to wade through the regulations and introduce legislation to eliminate or update them. Sources: The Hill, National Association of Manufacturers, Congressional Research Service, USA TODAY, Politico, Yahoo
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Top Stories
No
2016 Record Data Breach Year
Surprise! Risk Based Security published a report on data breaches for 2016. The year set records and saw more major businesses — like Yahoo — successfully attacked. u Data breaches exposed 4.3 billion records u That’s up from the old record of 1 billion in 2013 u Yahoo’s breach alone saw 1.5 billion records compromised Inga Goddijn is the executive vice president of Risk Based Security. She said, “We have been tracking breach activity since 2005, and the
number of breaches this year was not really higher or lower than prior years, but the severity was off the charts.” u The average data breach in 2016 involved 101 to 1,000 records u In 2015 that number was 1 to 100 records u The number of breaches topping 1 million records or more hit 94 in 2016 u That’s up from 60 in 2015 and 34 in 2014 u Hackers got email addresses, passwords and names from most u Hacking accounted for 93% of all exposures
February 2017 | Main Street Industry News | www.pianeia.com | 18
Top Stories u The rest were misconfigured websites and leaks The report said business services, retail and technology accounted for 30% of the breaches. A report from the Identify Theft Resource Center took a different angle: u It found 1,093 data breaches in 2016 u A 40% hike from 2015 Yahoo, Wendy’s and the Democrat National Committee — and depending on who you ask, maybe even the Republican National Committee — grabbed the hacking headlines. Spending on hardware to secure servers and websites jumped from $68.2 billion in 2015 to $73.7 billion last year. Estimates from experts say we’ll see that figure at $90 billion by 2018. Eva Casey Velasquez is the CEO of Identity Theft Resource Center. She said, “We are extremely confident that breaches are undiscovered and under-reported, and we don’t know the full scope. This isn’t the worst-case scenario we are looking at; this is the best-case scenario.” Like Risk Based Security, the Identity Theft Resource Center said the target of hackers is names and passwords and Social Security numbers. By the way, a huge percentage — 56% — of breaches are from phishing when an employee gets an email they are tricked into opening. That’s up from 38% in 2015.
Insurers 2016 Underwriting Loss & Direct Writing Increase A.M. Best thinks the property and casualty insurers — overall — will see a small underwriting loss for 2016. The report is titled Profitability Slides, Surplus Growth Slows and Competition Intensifies for Property/Casualty Insurers and it says insurance will see the first loss after three years of underwriting profits. Quoting information generated from the ISO and the Property Casualty Insurers Association of America (PCI), Best said January through September saw a net loss of $1.7 billion. Many reasons are pegged in the report: “The primary drivers are the increase in losses due to catastrophes and weather; the deterioration in personal auto liability, and continuing challenges in commercial auto liability from … distracted driving, increased miles driven and vehicles on the road due to lower gasoline prices, higher repair costs, and increased severity of liability claims. Intensifying competitive conditions in commercial lines … have pushed premiums down and driven loss ratios up,” the report said. A.M. Best predicts a 100.7 combined ratio for 2016 and a 100.3 combined ratio for 2017. That’s down from the terrific rations from 2013 to 2015 of 96.4, 97.4 and 98.3. On the positive, A.M. Best said the poor underwriting performance will be balanced by a solid capital base and investment income improvement. This is especially the case as rates start to increase moderately and invested assets start growing.
“When we look at these massive numbers of records and percentages, it’s very easy to forget that each of these data points is a person, and there’s someone behind this who is being very adversely affected,” Velasquez said.
The ratings firm also says:
Sources: eWeek, PropertyCasualty360.com
Sources: Carrier Management, Insurance Journal
• Net written premiums will go up 2.7% for 2016 • We’ll see them jump 2.5% this year • That compares to 4.4%, 4.3% and 3.3% in 2013, 2014, 2015
February 2017 | Main Street Industry News |www.pianeia.com| 19
Top Stories
Online Security It’s Getting Worse
Pew Research just released the results of a frightening online survey. It found that we — Americans — are not only worried about cybercriminal threats but also by unauthorized surveillance by corporations and by our own government.
You’d think what Pew Research found would cause us to slow down and take a new look at how we use our information. Nope. Not the case. We’re making even greater use of the Internet these days and are connected or connecting to all kinds of Internet connected devices.
The report clearly shows that Americans believe their personal data has become less secure in the last few years. On top of that, they don’t believe those responsible for keeping it secure can actually get the job done.
Two things drive it. The first is our own convenience and the second is we must keep up or be left behind. The Internet is ubiquitous and we have to stay connected for business and personal reasons.
February 2017 | Main Street Industry News | www.pianeia.com | 20
Top Stories Here’s what Pew found: • 64% of us have been personally been victims of a data breach or breaches • 41% have had fraudulent charges on our credit cards • 35% have received notices of some type that our sensitive information has been compromised • 16% say someone has hacked into and taken over their email account or accounts • 13% say someone has hacked into and taken over a social media account • 15% say they’ve received notice that their Social Security number has been compromised • 14% say someone has tried to take out loans or a line of credit in their name • 6% say someone has impersonated them to file a fraudulent tax return The cure — or at least a strong deterrent — to cyber attacks is encrypting important information that needs protected. Not doing so makes your company — or you as an individual — vulnerable. Osterman Research did a study on email encryption for a firm called Echoworx. It’s titled Enterprise Encryption and Authentication Usage: A Survey Report and it asked 165 IT managers about encryption. Each manages 14,000 email users or more. The study found 53% said that encryption is critical or at the very least, very important. Yet just 40% said they make extensive use of encryption in emails, file sharing and confidential records. The good news is — up 10% from 2015 — 53% consider encryption to be a priority. Echoworx senior director Jacob Ginsberg said the reason cited by most for not encrypting is
asking too much of email recipients. “Despite the necessity of encryption and the benefits it offers, there is still the common misconception that the technology is suited for only the technically savvy,” he said. Ginsberg — however — cautions that business needs to get on top of this and soon, and he doesn’t think it will be that hard if we all concentrate on the task at hand. “The challenge in the security industry today is that, despite the ever more complex threat vector, solutions must remain dead simple to use. Human nature is to look for the easiest path to accomplish a task, and that path also must be the most secure. Creating more efficient, easyto-use, cloud-based encryption systems will help drive adoption forward,” he said. The problem is very few of us — including IT people — understand the nuts and bolts of cybersecurity. Or worse, don’t care. “Data breaches are inevitable, and companies will continue to be hacked. The worry is that many organizations remain reactive to cyber security, waiting until their reputation is questioned or legislation forces them to act. Encryption reduces vulnerabilities and allows individuals to stay one step ahead if a security lapse occurs,” Ginsberg said. One last growing problem is the newest — and growing in popularity — cyber attack scheme. It’s ransomware. That’s where someone takes control of your computer or smartphone or even your entire computer system and will not give up that control until you pay a ransom. Beazley is a specialty insurer and it predicts ransomware instances are going to double in 2017. The prediction is based on the 1,943 breaches its breach response unit handled in 2016. It was up from 1,247 in 2015. Sources: Telecompetitor, Insurance Business America, Health Data Management
February 2017 | Main Street Industry News |www.pianeia.com| 21
Top Stories
Modernizing Flood Insurance For years PIA National has advocated for changes in the National Flood Insurance Program (NFIP). Your organization — recognizing that the NFIP is, pun intended, drowning in billions in debt — says reforms should include allowing more private insurer participation in the flood insurance, changes in pricing and changes in how flood zones are characterized. A group called SmarterSafer.org is also pushing for reforms and it wants to start with how flood zones are defined. Among others, the group includes Chubb Ltd. and Swiss Re AG, Reinsurance Association of America, National Taxpayers Union, Union of Concerned Scientists and National Wildlife Federation. SmarterSafer has introduced a plan to require the NFIP to use cutting-edge technology to make flood zones more precise which will lead to the pricing of premiums equal to the risk. The group is also urging incentives for communities to take steps to restore natural flood buffers like wetlands and forests. SmarterSafer — like PIA — is urging the federal government to let more private insurers into the game. As the NFIP’s September renewal date approaches, the group noted why changes are needed. The NFIP owes the U.S. Treasury $24.6 billion. Most of that comes from claims from Hurricane Katrina in 2005 and Superstorm Sandy in 2012. PIA National — in its position paper said — “NFIP has been subjected to many financial challenges in recent years that have necessitated reforms, such as the Biggert-Waters Reform Act of 2012 and Homeowners Flood Insurance Affordability Act of 2014. PIA participated actively in both
2012 and 2014 reform efforts for the NFIP and continues to work actively to support strategies for ensuring a stable flood insurance market for property owners.” Here is what PIA National is doing: n Working with members of Congress to support legislative solutions to create sensible options for growing the private flood insurance market, promoting flood risk management policies, transitioning to risk-based rates and reforming the NFIP. n Working with the Federal Emergency Management Agency (FEMA) to support solutions for eliminating the NFIP’s debt and putting the program on a path to fiscal stability ahead of September 30, 2017, when the program is up for reauthorization. n Participating in the Flood Insurance Producers National Committee (FIPNC), an advisory committee to the federal government on issues concerning the NFIP. Meanwhile, as changes are made, PIA National will make sure independent agents play a strong role in the delivery of flood insurance to homeowners and businesses needing that insurance and that means changes to the NFIP. Sources: PIA National, Insurance Journal
February 2017 | Main Street Industry News | www.pianeia.com | 22
Andy Kraus, CPCU | Vice President of Agencies | 800.742.7433 | akraus@fmne.com
fmne.com
Top Stories
Special Report – Taxes – Tax reform is a high priority of President Trump and the Republican-controlled Congress. How the reforms pan out is anybody’s guess at this point. And you can expect a huge battle from Democrats over any proposals — which Trump’s top-tier reduction proposal of 39.6% to 33% possess — that cuts taxes for the rich. That’s a 6.6% drop. Money Talks looked at what’s being proposed and asked some accounting firms to do an analysis. They noted that the president wants to go from seven tax brackets to a simpler three: 12%, 25% and 33%.
Ordinary Rate
Capital Gains Rate
Single Filers
Married Joint Filers
12%
0%
$0 to $37,500
$0 to $75,000
25%
15%
$37,501 to $112,500
$75,000 to $225,000
33%
20%
$112,501 +
$225,000 +
Two groups will see negative changes: • Those in the upper 28% bracket will be forced into Trump’s 33% bracket • Those in the 10% bracket will move to the 12% Trump bracket The Tax Foundation — which leans right — said: • The Trump tax plan will cut taxes on average by at least 0.8% for every quintile. • Higher income earners will — however — benefit most and will raise the income of those earners by 10.2% to 16%.
• The estate tax only applies to about 1% and ending it gives them a great concentration of wealth. The Tax Foundation also says the Trump tax plan will reduce income to the federal coffers between $4.4 trillion to $5.9 trillion in the next 10 years. When it comes to deductions, Trump’s proposal caps them at $100,000 for individuals and $200,000 for married couples. He also wants to raise the minimum standard deduction to $30,000 from the current $12,600 for couples and move it to $15,000 for single payers.
February 2017 | Main Street Industry News | www.pianeia.com | 24
Top Stories President-elect Trump proposes leaving itemized deductions in place but capping the deductions you can claim at $100,000 for individuals and $200,000 for married couples. He wants to raise the standard deduction to $30,000, instead of the current $12,600 for couples and allow $15,000 for single payers. The whole article is fascinating and you can find a link to it at the end of this story. We are a tax burdened people for sure. Or at least most of us think so and for sure so does The Tax Foundation. It ranks its definition of tax burden on income, property and sales tax as well as on special taxes like real estate transfer, personal property taxes and special tax district fees.
income): 4.60% Highest tax bracket: $250,000 Rate at highest tax bracket: 6.70% Per Capita Income: $60,287 47. California State and local tax burden: 11.40% Effective state tax rate ($50,000 taxable income): 4.34% Highest tax bracket: $1,000,000 Rate at highest tax bracket: 13.30% Per Capita Income: $45,254 46. Wisconsin
Recently Forbes looked at the data and determined the states with the highest tax burdens and those with the lowest.
State and local tax burden: 11.00% Effective state tax rate ($50,000 taxable income): 5.68% Highest tax bracket: $240,190 Rate at highest tax bracket: 7.65% Per Capita Income: $40,741
Worst 10
45. Minnesota
50. New York State and local tax burden: 12.60% Effective state tax rate ($50,000 taxable income): 5.46% Highest tax bracket: $1,115,850 Rate at highest tax bracket: 8.82% Per Capita Income: $52,417 49. New Jersey State and local tax burden: 12.30% Effective state tax rate ($50,000 taxable income): 2.54% Highest tax bracket: $500,000 Rate at highest tax bracket: 8.97% Per Capita Income: $54,422 48. Connecticut State and local tax burden: 11.90% Effective state tax rate ($50,000 taxable
State and local tax burden: 10.70% Effective state tax rate ($50,000 taxable income): 6.20% Highest tax bracket: $154,950 Rate at highest tax bracket: 9.85% Per Capita Income: $45,552 44. Maryland State and local tax burden: 10.60% Effective state tax rate ($50,000 taxable income): 4.65% Highest tax bracket: $250,000 Rate at highest tax bracket: 5.75% Per Capita Income: $52,805 43. Rhode Island State and local tax burden: 10.50% Effective state tax rate ($50,000 taxable income): 3.75% Highest tax bracket: $137,650
February 2017 | Main Street Industry News |www.pianeia.com| 25
Top Stories Rate at highest tax bracket: 5.99% Per Capita Income: $44,367
Rate at highest tax bracket: 0.00% Per Capita Income: $43,212
42. Vermont
4. Texas
State and local tax burden: 10.50% Effective state tax rate ($50,000 taxable income): 4.40% Highest tax bracket: $405,100 Rate at highest tax bracket: 8.95% Per Capita Income: $41,634
State and local tax burden: 7.50% Effective state tax rate ($50,000 taxable income): 0.00% Highest tax bracket: None Rate at highest tax bracket: 0.00% Per Capita Income: $41,269
41. Pennsylvania
5. Louisiana
State and local tax burden: 10.30% Effective state tax rate ($50,000 taxable income): 3.07% Highest tax bracket: Flat Rate at highest tax bracket: 3.07% Per Capita Income: $42,268
State and local tax burden: 7.60% Effective state tax rate ($50,000 taxable income): 3.50% Highest tax bracket: $50,000 Rate at highest tax bracket: 6.00% Per Capita Income: $37,889
The Top 10
6. Tennessee
1. Wyoming State and local tax burden: 6.90% Effective state tax rate ($50,000 taxable income): 0.00% Highest tax bracket: None Rate at highest tax bracket: 0.00% Per Capita Income: $50,805
State and local tax burden: 7.60% Effective state tax rate ($50,000 taxable income): 6.00% on DIVIDEND and INTEREST income only Highest tax bracket: Flat Rate at highest tax bracket: 6.00% (on dividends and income only) Per Capita Income: $36,525
2. Alaska
7. New Hampshire
State and local tax burden: 7.00% Effective state tax rate ($50,000 taxable income): 0.00% Highest tax bracket: None Rate at highest tax bracket: 0.00% Per Capita Income: $47,354
State and local tax burden: 8.00% Effective state tax rate ($50,000 taxable income): Flat 5% on interest and dividend income only. Highest tax bracket: Flat Rate at highest tax bracket: Flat 5% on interest and dividend income only. Per Capita Income: $47,349
3. South Dakota State and local tax burden: 7.10% Effective state tax rate ($50,000 taxable income): 0.00% Highest tax bracket: None
8. Nevada State and local tax burden: 8.10% Effective state tax rate ($50,000 taxable
February 2017 | Main Street Industry News | www.pianeia.com | 26
Top Stories income): 0.00% Highest tax bracket: None Rate at highest tax bracket: 0.00% Per Capita Income: $39,947 9. South Carolina State and local tax burden: 8.30% Effective state tax rate ($50,000 taxable income): 6.02% Highest tax bracket: $14,400 Rate at highest tax bracket: 7.00% Per Capita Income: $33,603 10. Alabama State and local tax burden: 8.30% Effective state tax rate ($50,000 taxable income): 4.92% Highest tax bracket: $3,000 Rate at highest tax bracket: 5.00% Per Capita Income: $34,763
Where did Nebraska & Iowa Fall? No. 22: Iowa State and local tax burden: 9.30% Effective state tax rate ($50,000 taxable income): 5.70% Highest tax bracket: $69,255 Rate at highest tax bracket: 8.98% Per Capita Income: $40,147 No. 26: Nebraska State and local tax burden: 9.40% Effective state tax rate ($50,000 taxable income): 5.18% Highest tax bracket: $29,000 Rate at highest tax bracket: 6.84% Per Capita Income: $42,281 Sources: Money Talks, Forbes
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Top Stories
Crash Dummies & Real Life You’ve seen them. The auto manufacturer does a test on the safety of its vehicle or maybe it’s an independent scientist. They buckle in a male or female or child dummy into the front seat and let ‘err rip. Those dummies and height-weight proportionate and look pretty buff. The typical American person — these days — is anything but buff. Humanetics makes crash dummies. It recently started making them to be more like real life. For example, a 273-pound obese dummy is 106 pounds heavier than the traditional dummy. They also did a prototype of a 70-year-old woman who is also obese. This change came about years after Dr. Stewart Wang — a trauma surgeon from Michigan — complained that crash dummies look very little like his patients. He works with the International Center for Automotive Medicine and said, “You can’t talk about injuries without talking about the person — it’s individuals who are hurt. The condition, size and shape of an individual is hugely important in how severe their injuries are in any given crash.” How a person is built very often determines whether a person is injured in a crash and how those injuries — if
they occur — will harm the person in the crash. And, bluntly put, “The typical patient today is overweight or obese — they’re the rule rather than the exception,” Wang said. Source: Insurance Journal
February 2017 | Main Street Industry News | www.pianeia.com | 28
PIA NE IA Events
Upcoming Events Calendar 2016 For information and to register Click Here or call (402) 392-1611. Date
Class/Webinar
Where
When
February 7, 2017
Personal Lines Complications: Because Simple is just too darn Easy
NE
Webinar: 12:00PM - 3:00PM
February 9, 2017
CISR: Personal Lines Miscellaneous
Des Moines
Hilton Garden Inn Des Moines/Urbandale
February 13, 2017
Certificates and Additional Insureds: Navigating the Maze
NE/IA
Webinar: 12:00PM - 3:00PM
February 15, 2017
How to be the Agent Advocate at Claim Time
NE/IA
Webinar: 12:00PM - 3:00PM
February 22, 2017
E&O Loss Prevention
NE/IA
Webinar: 8:00AM - 11:00AM
February 22-24, 2017
CIC: Agency Management Institute
West Des Moines
Holiday Inn Hotel & Suites
February 23, 2017
CISR: Commercial Casualty 1
Davenport
Saint Ambrose University
February 23, 2017
CPIA 1: Position for Success
Des Moines
Hilton Garden Inn Des Moines/Urbandale
February 24, 2017
And the CHAOS Continues
NE/IA
Webinar: 8:00AM - 11:00AM
February 24, 2017
And the CHAOS Continues
NE/IA
Webinar: 8:00AM - 11:00AM
February 27, 2017
FLOOD INSURANCE
NE/IA
Webinar: 1:00PM - 4:00PM
February 28, 2017
CPSR: Commercial Property
York
Hampton Inn - York
March 1, 2017
Additional Insureds: The Quandry
NE/IA
Webinar: 12:00PM - 3:00PM
March 7, 2017
Man Vs. Machine
NE/IA
Webinar: 8:00AM - 11:00AM
March 9, 2017
Regarding Ethics
NE/IA
Webinar: 1:00PM - 4:00PM
March 9, 2017
Regarding Ethics
NE
Webinar: 1:00PM - 4:00PM
March 9, 2017
CISR: Insuring Personal Residential Property
Hiawatha
Kirkwood Linn Regional Center
March 14, 2017
Executive & Management Liability
NE/IA
Webinar: 8:00AM - 11:00AM
March 14, 2017
CPIA 1: Position for Success
Omaha
Hilton Garden Inn- Omaha
March 14, 2017
Executive & Management Liability
NE/IA
Webinar: 8:00AM - 11:00AM
March 15-17, 2017
CIC: Commercial Property Institute
Omaha
Hilton Double Tree Omaha SouthWest
February 2017 | Main Street Industry News | www.pianeia.com | 30
PIA NE IA Events
March 22, 2017
Top 12 Coverage Countdown
NE/IA
Webinar: 12:00PM - 3:00PM
March 22, 2017
CISR: Elements of Risk Management
Des Moines
Hilton Garden Inn Des Moines/Urbandale
March 24, 2017
**LAST TIME**Words Mean Things & Insurance is a Foreign Language
Nebraska
Webinar: 8:00AM - 11:00AM
March 28, 2017
Commercial Property Claims that Cause Problems
NE/IA
Webinar: 12:00PM - 3:00PM
March 29, 2017
Commercial Liability Endorsements To Watch Out For
NE/IA
Webinar: 12:00PM - 3:00PM
April 12, 2017
Street Level Ethics
NE/IA
Webinar: 12:00PM - 3:00PM
April 5, 2017
CISR: Insuring Personal Auto Exposures
Davenport
Saint Ambrose University
April 12, 2017
CISR: Insuring Commercial Property
Hiawatha
Kirkwood Linn Regional Center
April 19, 2017
CISR: Commercial Casualty 2
Des Moines
Hilton Garden Inn Des Moines/Urbandale
April 20, 2017
E&O Loss Prevention
NE/IA
Webinar: 12:00PM - 3:00PM
April 27, 2017
Cyber Liability - the 21st Century Peril
NE/IA
Webinar: 12:00PM - 3:00PM
April 27, 2017
Tricks to Fix: Closing Coverage Gaps in Home, Work and Auto
NE/IA
Webinar: 8:00AM - 11:00AM
April 28, 2017
Construction Defects: Property Damage and the ISO CGL
NE/IA
Webinar: 8:00AM - 11:00AM
April 19-21, 2017
CIC: Commercial Property Institute
Cedar Rapids
Cedar Rapids Marriott
April 25-26, 2017
Ruble: Graduate Seminar
Omaha
Embassy Suites Omaha La Vista
April 5-8, 2017
Federal Legislative Summit & Governance Meetings
Washington DC
Crystal City Marriott, Arlington, VA
May 3, 2017
CPSR: Personal Auto
Columbus
Holiday Inn Express Columbus
May 4, 2017
And the CHAOS Continues
NE/IA
Webinar: 12:00PM - 3:00PM
May 9, 2017
Leases & Contracts Vs. The Insurance Policy
NE/IA
Webinar: 8:00AM - 11:00AM
May 10, 2017
Certificates and Additional Insureds: Navigating the Maze
NE/IA
Webinar: 12:00PM - 3:00PM
May 11, 2017
CISR: Insuring Personal Residential Property
Des Moines
Hilton Garden Inn Des Moines/Urbandale
May 15, 2017
Regarding Ethics
NE/IA
Webinar: 12:00PM - 3:00PM
May 19, 2017
FLOOD INSURANCE (IA)
NE/IA
Webinar: 8:00AM - 11:00AM
February 2017 | Main Street Industry News |www.pianeia.com| 31
PIA NE IA Events
May 23, 2017
Commercial Property Claims that Cause Problems
NE/IA
Webinar: 12:00PM - 3:00PM
May 24, 2017
CISR: Personal Lines Miscellaneous
Hiawatha
Kirkwood Linn Regional Center
May 25, 2017
How to be the Agent Advocate at Claim Time
NE/IA
Webinar: 12:00PM - 3:00PM
May 17-19, 2017
CIC: Agency Management Institute
Lincoln
Marriott Courtyard/ Haymarket
June 14, 2017
Executive & Management Liability
NE/IA
Webinar: 12:00PM - 3:00PM
June 13, 2017
CISR: Insuring Commercial Property
Davenport
Saint Ambrose University
June 14, 2017
E&O Loss Prevention
NE/IA
Webinar: 8:00AM - 11:00AM
June 15, 2017
Additional Insureds: The Quandry
NE/IA
Webinar: 12:00PM - 3:00PM
June 21, 2017
Top 12 Coverage Countdown
NE/IA
Webinar: 12:00PM - 3:00PM
June 22, 2017
Commercial Liability Endorsements To Watch Out For
NE/IA
Webinar: 12:00PM - 3:00PM
June 22, 2017
CISR: Commercial Casualty 1
Des Moines
Hilton Garden Inn Des Moines/Urbandale
June 27, 2017
Man Vs. Machine
NE/IA
Webinar: 1:00PM - 4:00PM
June 28, 2017
Street Level Ethics (NE)
Nebraska
Webinar: 12:00PM - 3:00PM
June 28, 2017
Street Level Ethics
NE/IA
Webinar: 12:00PM - 3:00PM
June 28, 2017
Tricks to Fix: Closing Coverage Gaps in Home, Work and Auto
NE/IA
Webinar: 8:00AM - 11:00AM
June 14-16, 2017
CIC: Commercial Multi Line Institute
West Des Moines
Holiday Inn Hotel & Suites
June 6-7, 2017
PIA Annual Convention
Nebraska City, NE
Lied Lodge, Nebraska City
July 11, 2017
CISR: Commercial Casualty 1
Hiawatha
Kirkwood Linn Regional Center
July 18, 2017
CISR: William T. Hold: Advanced Learning Seminar
Des Moines
Hilton Garden Inn Des Moines/Urbandale
July 19-21, 2017
CIC: Commercial Casualty Institute
Omaha
Hilton Double Tree Omaha SouthWest
July 25-26, 2017
Ruble: Graduate Seminar
West Des Moines
Holiday Inn Hotel & Suites
August 8, 2017
CISR: Insuring Personal Auto Exposures
Des Moines
Hilton Garden Inn Des Moines/Urbandale
August 22, 2017
CISR: Insuring Personal Residential Property
Davenport
Saint Ambrose University
August 23-25, 2017
CIC: Personal Lines Institute
Cedar Rapids
Cedar Rapids Marriott
February 2017 | Main Street Industry News | www.pianeia.com | 32
PIA NE IA Events August 24, 2017
Greater Omaha Committee Scholarship Golf Outing
Ashland
Iron Horse Golf Club
September 13, 2017
CISR: Agency Operations
Hiawatha
Kirkwood Linn Regional Center
September 13-16, 2017
Fall Governance Meetings
Minneapolis, Marquette Hotel, MN Minneapolis, MN
September 19, 2017
CISR: Dynamics of Service
Des Moines
Hilton Garden Inn Des Moines/Urbandale
September 20-22, 2017
CIC: Commercial Multi Line Institute
Lincoln
Marriott Courtyard/ Haymarket
October 11-13, 2017
CIC: Commercial Casualty Institute
West Des Moines
Holiday Inn Hotel & Suites
October 18, 2017
CISR: Agency Operations
Des Moines
Hilton Garden Inn Des Moines/Urbandale
October 26, 2017
CISR: Personal Lines Miscellaneous
Davenport
Saint Ambrose University
November 9, 2017
CISR: Commercial Casualty 2
Hiawatha
Kirkwood Linn Regional Center
November 14, 2017
CISR: Insuring Commercial Property
Des Moines
Hilton Garden Inn Des Moines/Urbandale
November 15-17, 2017
CIC: Life & Health Institute
Omaha
Hilton Double Tree Omaha SouthWest
2016 National Outstanding CSR of the Year Winner Kelly D. McGowan, CISR Elite
NOMINATE: Nominations are now being accepted for the 2017 Outstanding Customer Service Representative of the Year® award. Nominate yourself or a deserving colleague. ENTER: Write a 1,000-word essay on the 2017 customer service topic specified on the Nomination Form. Entries are due no later than May 1, 2017. WIN: The national winner receives a 2,000 cash award; national finalists win $ 500; nominate the national winner, and receive $1,000! $
For more information about the award and to download forms, visit: TheNationalAlliance/CSR_Award
Get the recognition you deserve. Get the glory for your agency. Show your customers you care enough to be the very best.
PIA of Nebraska & Iowa Insert contact information in this area. (402) 392-1611 • www.pianeia.com © 2017. The National Alliance for Insurance Education & Research.
3053-0117
February 2017 | Main Street Industry News |www.pianeia.com| 33
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