Tag Archives: insurance policy

What the U.K. Can Teach on Aggregators

In the last 10 years or so, the single biggest development we have seen in U.K. personal auto insurance distribution is the phenomenal rise of aggregators – known otherwise as “price comparison websites.” Top aggregators in the U.K. marketplace such as Confused.com, Moneysupermarket.com and Comparethemarket.com have grown, leveraging the high usage of Internet among U.K. households. According to the latest industry reports, aggregators accounted for around 56% of the new motor insurance policies sales in the U.K. in 2013.

The overall potential of aggregator share in the U.K. personal auto new business is capped at around 60%, which means aggregator growth is fast approaching stagnation. Though this is evidenced by the flattening growth we are seeing in recent years when compared with earlier periods (when market share rocketed from 25% in 2007 to 45% in 2009), aggregators are here to stay – purely because U.K. customers still see cheaper cost as the major preference in choosing auto insurance.

For insurers and brokers who operate in markets with a heavy aggregator presence, the options are pretty clear and simple — either to partner with aggregators or to compete with them. There are pros and cons in both these approaches.

The advantages brought about by aggregators to customers are too obvious – exposure to a larger variety of auto insurance products, competitively priced quotes and, most importantly, an efficient purchasing process. For insurers and brokers specifically, aggregators provide medium- and small-sized players (who don’t have the scale to compete with the biggies) the opportunity to generate business by advertising their products at a low marketing cost.  Also, through their online platforms, aggregators collect large quantities of customer data around customer website visits and browsing patterns. These can be gainfully used by the insurers/brokers to build a better picture of their customers’ profile and risks as well as put in necessary checks for improving fraud control.

See Also: Driver Safety Ratings Add Sophistication

Key risks are:

  • Too much emphasis on providing the most competitively priced quote based on a minimal set of questions results in quotes incorrectly priced and a below-par underwriting performance for the insurer
  • Consumers get the ability to make purchase decisions based on what-if scenarios (like inputting lower mileage or switching then main driver to see the resultant reduction in premiums), possibly inducing them to provide incorrect information and purchasing unsuitable cover
  • Reduced due diligence at the underwriting stage associated with online policy acceptance can result in increased risk of fraudulent claims – including instances of intentional fraud such as use of stolen credit card information, dead letter box addresses and identity fraud.

Some large insurers in the U.K. have withdrawn from partnerships with aggregators to compete directly in this space. Aviva, for example, offers a quotes comparison facility on its website, while DLG encourages its customers to go online to its site to avoid paying aggregators’ commissions.

A few major factors that influence large insurers and brokers to move away from aggregators are:

  • Having a product listed consistently lower in an aggregator’s rankings is perceived by insurers as hurting their brand
  • Insurers/brokers rely on opportunities to reward customer loyalty and retention at every possible point (through cross-selling/upselling discounts, etc.) to maximize their revenues, while aggregators thrive on customer churn, leading to a possible conflict in business models and weaker customer relationships

Still, none can deny that aggregators are a fixture in the personal auto insurance business for the foreseeable future. Some larger insurers that offer auto insurance online directly to customers also agree that it’s possible to build effective partnerships with aggregators. Some ways of ensuring success through aggregator channels for insurers and brokers are:

  • Collaborate more closely with aggregators to sell on brand rather than just on price – insurers/brokers will primarily own customer relationships and have profit-sharing agreements in place that provide incentives for aggregators to cross sell more of an insurer’s products apart from auto
  • Build systems to ensure that the wealth of data from aggregators is well-utilized for smarter and more frequent pricing of auto quotes (for example, daily rather than monthly or quarterly)
  • Design and segment customized auto policies specifically for aggregators, with underwriting models reflecting the questions set
  • Ensure that the aggregator online platform is updated on a periodical basis and that all components reflect the preferences of the insurers, brokers, customers etc.

An Open Letter to Federal Regulators

I welcome and applaud the federal government’s interest in the regulation of our nation’s insurance industries and markets. In response to the Federal Insurance Office’s request for comments on the “gaps” in state regulation, I appreciate this opportunity to present my views. Indeed, your request, Director McRaith, for comments upon such “gaps” seems to reveal what a keen, yet heretofore unpublicized, good sense of humor you must have.

To very briefly introduce myself, I am an economist, a CFA and a life insurance agent of more than 20 years who has worked with scores of life insurers. My views have been published by the Journal of Insurance Regulation, the American Council on Consumer Interests and various other industry trade publications. My positions are based on my extensive experiences with our nation’s profoundly problematic state-based insurance regulatory system, problems that those who have not been intimately involved with in the marketplace might find inconceivable.

State insurance regulators have never required the proper disclosure of cash value life insurance policies. Markets do not work properly without adequately informed consumers. While life insurance is, conceptually, a simple product, without the proper conceptual understanding of and the necessary relevant information, consumers cannot effectively search for good value. “The Life Insurance Buyer’s Guide,” published by regulators and mandatorily distributed with policies by insurers and their agents, is not just a little deficient—it is misleading, seriously incomplete and defective. And, it, in all of its various state editions, has been that way for almost 40 years.

Professor Joseph Belth has written about this national problem for more than 40 years. In 1979, the Federal Trade Commission issued a scathing report on the life insurance industry’s cash value products. Cash value policies are composed of insurance and savings components, and consumers need appropriate information about both. This specifically requires appropriate disclosure of these policies’ annual compounding rates on consumers’ savings element as well as annual costs regarding their insurance element. Both Professor Belth and I have separately developed very similar disclosure approaches. (More information about my approach and its comparative conceptual and marketplace tested-advantages is available on my website or upon request.)

The exceptional nature of this regulatory failure can be grasped by specifically contrasting the states’ regulatory track record on cash value policy disclosures with those of other financial regulators’ actions. Investment product disclosures have been mandated since the 1930s. Truth in Lending was enacted in 1969. And yet, while a consumer’s potential risks in making a poor life insurance purchase can arguably be shown to be greater than those in purchasing a poor investment or obtaining an unattractive loan, Truth in Insurance or Truth in Life Insurance legislation has never been promulgated by any state.

A second insightful perspective, and one with much more tangible consequences on its harmful impacts on consumers, can be grasped by reviewing a few basic facts about the current life insurance marketplace.

Three Facts

Fact No. 1: The life insurance marketplace is awash with misinformation; this should hardly be surprising. Life insurers actually run misleading advertisements and conduct training in deceptive sales practices. Evidence of such has been repeatedly submitted to state regulators. Moreover, given the industry’s commission-driven sales practices (commissions that can make those of mortgage brokers, now notorious for their own misrepresentations, look tiny), sales misconduct is pervasive. The harmful consequences of such agent misrepresentations are manifested every day, both directly and indirectly, in unwise purchases or other costly life insurance mistakes by American families. These misrepresentations go unrecognized because of consumers’ inadequate financial grasp of a product’s true conceptual framework, and these go unpunished because, as a past president of the national largest agent organization has written in widely quoted published articles, state laws prohibiting deceptive life insurance sales practices have virtually never been enforced.

Fact No. 2: Cash value life insurance policies that are sold to be lifelong products have extraordinary high lapse rates. Data shows that over an eight-year period, approximately 40% of all the cash value policies of many life insurers are discontinued. It is true there are many possible causes for consumers to discontinue coverage, but age-old evidence of consumer dissatisfaction has been a virtual five-alarm that state regulators have ignored for more than 40 years. Such lapses are especially financially painful to consumers, as the typically sold cash value policy has huge front-end sales loads (sales loads regarding which agents are trained to make misrepresentations).

It is very important that all readers fully understand that, contrary to pervasive misconceptions and misrepresentations, cash value policies do not avoid the increasing costs of annual mortality charges as a policyholder ages. The fundamental advantages of cash value life insurance products come from the product’s tax privileges. Tax privileges, however, are essentially a free, non-proprietary input. In a competitive marketplace, firms cannot charge consumers or extract value for a free, non-proprietary input. No one pays thousands of dollars in sales costs to set up an IRA. Cost disclosure will enable consumers to evaluate cash value policies by the policies’ price competitiveness and, as such, will drive the excessive sales loads out of cash value policies.

The heart of the battle over disclosure is that disclosure threatens to—and, in fact, will—undermine the industry’s traditional sales compensation practices. For example, over the past five years, Northwestern Mutual, the nation’s largest insurer, with $1.2 trillion of individual coverage in force, paid $4.5 billion in agent life insurance commissions and other agent compensation, while its mortality costs for its death claims were only $3.5 billion. (Northwestern paid more than $12 billion to policyholders surrendering their coverage during the same five years.)

Agents, naturally, do not like the idea of reduced compensation, but their arguments are not compelling. Insurers believe little life insurance would be sold without such agent compensation; that is, that the large and undisclosed agent compensation cash value policies typically provide is, 1) necessary to compensate agents for their sales efforts and yet, 2) could not be obtained from an informed consumer.

My position is that good disclosure on life insurance will drive the excessive and unjustified sales loads out of cash value policies, making them price competitive with pure-term policies, thereby enabling consumers to truly benefit from the product’s tax privileges. Also, product cost disclosure is an essential component of any fair business transaction (and, as all readers properly educated about life insurance know, a cash value policy’s premium and annual cost are different.)

Fact No. 3: It is undeniable that the sales approaches used today are not effective. Unbiased experts have, for decades, demonstrated that Americans have insufficient life insurance. In August 2010, the Wall Street Journal’s Leslie Scism reported that levels of coverage have plummeted to all-time lows. Contrast that with data showing consumers’ ever-increasing voluntary purchases of additional coverage via their employers’ group life insurance plans. Marketing research shows that fear making a mistake is the primary reason consumers avoid or postpone purchases and financial decisions. Inadequate disclosure on life insurance policies not only prevents consumers from being appropriately informed; it is also a main factor in their avoidance of the very product they so often need.

I predict publicity of appropriate disclosure will lead to: unprecedented sales growth, policyholder persistency, different levels of coverage, positive impacts on all other measurements of satisfaction regarding consumers’ future life insurance purchases and life insurance agents becoming trusted and esteemed professionals. Admittedly, appropriate disclosure could lead to litigation over agents’ and insurers’ prior misrepresentations.

As I think you may now understand, inadequate life insurance policy disclosure is a regulatory “gap” that is virtually the size and age of an intergalactic asteroid.

Other Gaps

As it is currently marketed, long-term care insurance (LTCI) constitutes another serious problem. While, theoretically, LTCI can make sense, the devil is in the details. Essentially, LTCI is a contingent deferred annuity, yet one where insurers retain an option to increase the premiums for entire “classes of insureds” and where consumers must confront post-purchase price risks without the information necessary to assess alternatives. Furthermore, consumers cannot transfer their coverage to a new insurer without forfeiting the value they’ve previously paid. Defective LTCI policies have let consumers be shot like fish in a barrel; in fact, the policies’ inherent unfairness makes loan sharks envious. Appropriate disclosure on LTCI would bring consumers drastically superior value and understanding.

Regulation of life insurance agent licensing is incredibly deficient. Agents should truly be financial doctors. However, states’ agent licensing requirements fail to make sure consumers are served by financially knowledgeable professionals; licensing exams are a joke. While there are many competent agents, it is quite possible that the overwhelming majority of agents—many of whom are new and inexperienced, as more than four out of five recruits fail in the commission-based environment within the first few years—do not possess the basic knowledge necessary to accurately assess a consumer’s needs or to properly evaluate different companies’ policies.

There is virtually no state regulation of fee-only advisers who charge for providing advice about life insurance industry products. Such individuals can cause harm to consumers in multiple ways: improperly assessing needs and evaluating policies and recommending policy terminations or other actions (beneficiary or ownership changes, inappropriate policy loans, etc.) that lead to policies being mismanaged. To my knowledge, the only state that actually requires licensing for fee-only advisers is New Hampshire. A cursory review of public records, however, reveals shocking omissions in New Hampshire’s enforcement of such rules. One of the state’s former insurance commissioners, who for years has operated a prominent website providing and charging for advice on life insurance, has never been licensed.

Agent continuing education (CE) requirements are problematic. Outdated courses are still deemed acceptable, similar courses can be submitted virtually indefinitely to fulfill bi-annual CE requirements, and many courses are so devoid of meaningful information that they are vacuous. While the potential merits of CE are undeniable, only serious testing and recordings provide the means of monitoring the true effectiveness of instruction and learning.

Another area for improved regulation concerns the insurer-agent relationship. This is not to suggest draconian involvement by the government, rather to recognize the legitimate public interests in properly structuring such relationships—just as is done in relationships between pilots and airlines, construction workers and contractors, nurses and hospitals. The contracts between insurers and agents show unequal bargaining power. Insurers have not only exercised their power unfairly but have—possibly illegally—prohibited certain agent conduct, while requiring other, on matters clearly outside the boundaries of the contract. Attorneys specializing in franchise law have stated that the typical agent’s contract is the most one-sided arrangement they have ever seen.

Over the past 20 years, I have written many articles and submitted extensive documentation of sales and managerial fraud in the life insurance marketplace, yet no one with any marketplace authority or power has ever taken any effective action. Nonetheless, my commitment to reform the life insurance industry and marketplace remains. In fact, while federal regulatory action and any other private assistance would be greatly appreciated, all that is needed for the transformation of the age-old, dysfunctional life insurance industry is the dissemination—the genuine and effective mass market dissemination—of the type of life insurance policy disclosure information that is available on my web site, BreadwinnersInsurance.com. [The full version of this letter is available on the site.]

Find Your Voice as an Insurance Agent

“If you talk about what you believe, you will attract those who believe what you believe.” Simon Sinek.

Recent data from the Bureau of Labor Statistics estimates that there are 374,700 active insurance agents in the U.S. alone.

How can you as an agent find a way to stand out in the highly competitive arena?

It starts with finding your voice.  Microphone

When I say finding your voice, I don’t necessarily mean your tone quality, pacing or vocabulary.

I’m talking about the language you speak to yourself, BEFORE you speak it to the world.

It begins with your inner voice.

How do you speak? Not just the words, but the voice you project.

Your voice is a statement and picture of your character, your poise and your persona. It is a statement of belief, confidence and personal power.

So how do you make your voice authentically yours?

  • When you do what you believe in
  • When you do what you are passionate about
  • When you work in your chosen field
  • When you find your calling
  • When you discover something you were born to do

The Myth of Chasing Success

I love talking with motivated insurance producers. They have big goals and dreams and work with fearless energy.

I often hear about chasing success.

As the late great Jim Rohn stated, “Success is not to be pursued, it is to be attracted by the person you become.”

The point is that chasing or pursuing success is a daunting task. Where do you even start?

It starts with becoming a better you and with your passion for personal growth.

When you grow personally by working on your skills and development, you will attract others by finding your unique voice.

As your belief system, confidence and passion develop, so does your internal and external voice.

If you want to stand out and be noticed in among the crowd of 374,700 other insurance agents, start by looking within.

Innovation Trends in 2016

For the past few years, the innovation rate in the global insurance industry has run at peak levels, in good part because of digitization, which continues to be a pervasive influence—if not as disruptive as early projections.

Initial expectations of a departure from traditional distribution channels turned out not to be the case. Clients preferred direct, personal contact when buying insurance products. While online channels have not generated major changes—for example, in the vehicle insurance sector in Italy (5% of premiums today are generated online, compared with 1% in 2012) —telematics has had a substantial impact. It represents 15% of all insurance policies today in Italy. (These policies did not exist in 2002.)

Digital transformation is, of course, leaving its mark in four macro areas.

First, consumer expectationsA Bain survey suggests that more than three out of four consumers expect to use a digital channel for insurance interactions.

Second, product flexibility: The traditional Japanese player, Tokio Marine, for example, started offering temporary insurance policies via mobile phone, e.g., travel insurance limited to the dates of travel and personal accident coverage for people playing sports.

Third, ecosystems: They are created when the insurance value proposition depends on collaboration with partners from other sectors. For example, when Mojio sells a dongle (at, say, a supermarket) that requires connection to an open-source platform to be installed in a car, third-party suppliers are able to extract driving data from that platform and create services based on it. Onsurance, for one, offers tailor-made insurance coverage based on the data collected.

Fourth, services: Insurers today are moving away from the traditional approach of covering risks to a more comprehensive insurance plan, which includes additional services.

Connected insurance: a telematics “observatory” to promote excellence 

The fact that the Italian insurance market represents the best of international automotive telematics practices gave rise to the idea of creating an “observatory” to help generate and promote innovation in the insurance sector. Bain, AniaAiba and more than 25 other insurance groups are among its current participants.

The observatory has three main objectives: to represent the cutting edge of global innovation; to offer a strategic vision for major innovation initiatives while reinforcing the Italian excellence paradigm; and to stimulate research and debate concerning emerging insurance issues such as privacy and cyber risk.

The Observatory on Telematics Connected Insurance & Innovation, will focus not only on vehicle insurance (where Italy has the highest penetration and the most advanced approach worldwide), but on additional important insurance markets related to home, health and industrial risk, which, I am convinced, represent the next innovation wave.

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Italy is currently the best practice leader in connected insurance. Italian expertise in vehicle telematics is finding applications in other insurance areas, particularly in home insurance—where Italy is the pioneer—and in the health sector, where we recently launched our first products.

InsurTech on the rise

Another sector that has seen an increased number of investments in 2016 is InsurTech. Until last year, attention focused on many types of financial service start-ups. Today there is significant growth in investments in insurance start-ups: almost $2.5 billion invested in the first nine months of 2015, compared with $0.7 billion in 2014 [according to CB Insight]. Many new firms are entering the sector, bringing innovation to various areas of the insurance value chain. The challenge for traditional insurers will be to identify firms worth investing in, and also to create the means for working with those new players.

The challenge is integration

Ultimately, the main challenge for insurers will be to find ways to integrate the start-ups into their value chains. The integration of user experience and data sources will be key to delivering an efficient value proposition: It is untenable to have dozens of specialized partners with different apps in addition to the insurer’s main policy. It will be necessary to manage the expansion and fragmentation of the new insurance value chain.

To come up with an answer to this problem, start-ups are generating innovative collaborative paradigms. One example is DigitalTech International, which offers companies a white-label platform that integrates various company apps and those of third-party suppliers into a single mobile front end, even as it offers a system for consolidating diverse client ecosystems (domotics, wearables, connected cars) into a single  data repository.

Integrating and managing complex emerging ecosystems will be one of the greatest challenges in dealing with the Internet of Things (IoT) for the insurance industry.

(A version of this article first appeared on Insurance Review.)

trends

13 Emerging Trends for Insurance in 2016

Where does the time go?  It seems as if we were just ringing in 2015, and now we’re well into 2016. As time goes by, life changes, and the insurance industry—sometimes at a glacial pace—does, indeed, change, as well. Here’s my outlook for 2016 on various insurance topics:

  1. Increased insurance literacy: Through initiatives like The Insurance Consumer Bill of Rights and increased resources, consumers and agents are both able to know their rights when it comes to insurance and can better manage their insurance portfolios.
  2. Interest rates: The federal funds target rate increase that was announced recently will have a yet-to-be determined impact on long-term interest rates. According to Fitch Ratings, further rate increases’ impact on credit fundamentals and the longer end of the yield curve has yet to be determined. Insurance companies are hoping for higher long-term rates as investment strategies are liability-driven. (Read more on the FitchRatings website here). Here is what this means: There will not necessarily be a positive impact for insurance policy-holders (at least in the near future). Insurance companies have, for a long period, been subsidizing guarantees on certain products or trying to minimize the impact of low interest rates on policy performance. In the interim, many insurance companies have changed their asset allocation strategies by mostly diversifying their portfolios beyond their traditional holdings—cash and investment-grade corporate bonds—by investing in illiquid assets to increase returns. The long-term impact on product pricing and features is unknown, and will depend on further increases in both short- and long-term interest rates and whether they continue to rise in predictable fashion or take an unexpected turn for which insurers are ill-prepared.
  3. Increased cost of insurance (COI) on universal life insurance policies: Several companies—including Voya Financial (formerly ING), AXA and Transamerica—are raising mortality costs on in-force universal life insurance policies. Some of the increases are substantial, but, so far, there has been an impact on a relatively small number of policyholders. That may change if we stay in a relatively low-interest-rate environment and more life insurance companies follow suit. Here is what this means: As companies have been subsidizing guaranteed interest rates (and dividend scales) that are higher than what the companies are currently (and have been) earning over the last few years, it is likely that this trend will continue.
  4. Increasing number of unexpected life insurance policy lapses and premium increases: For the most part, life insurance companies do not readily provide the impact of the two prior factors I listed when it regards cash value life insurance policies (whole life, universal life, indexed life, variable life, etc). In fact, this information is often hidden. And this information will soon be harder to get; Transamerica is moving to only provide in-force illustrations based on guarantees, rather than current projections. Here is what this means: It will become more challenging to see how a policy is performing in a current or projected environment. At some point, regulators or legislators will need to step in, but it may be too late. Monitor your policy, and download a free life insurance annual review guide from the Insurance Literacy Institute (here).
  5. Increased complexity: Insurance policies will continue to become more complex and will continue their movement away from being risk protection/leverage products to being complex financial products with a multitude of variables. This complexity is arising with products that combine long-term care insurance and life insurance (or annuities), with multiple riders on all lines of insurance coverage and with harder-to-define risks — even adding an indexed rider to a whole life policy (Guardian Life). Here is what this means: The more variables that are added to the mix, the greater the chance that there will be unexpected results and that these policies will be even more challenging to analyze.
  6. Pricing incentives: Life insurance and health insurance companies are offering discounts for employees who participate in wellness programs and for individuals who commit to tracking their activity through technology such as Fitbit. In auto insurance, there can be an increase in discounts for safe driving, low mileage, etc. Here is what this means: Insurance companies will continue to implement different technologies to provide more flexible pricing; the challenge will be in comparing policies. The best thing an insurance consumer can do is to increase her insurance literacy. Visit the resources section on our site to learn more.
  7. Health insurance and PPACA/Obamacare: The enrollment of individuals who were uninsured before the passage of Obamacare has been substantial and has resulted in significant changes, especially because everyone has the opportunity to get insurance—whether or not they have current health issues. And who, at some point, has not experienced a health issue? Here is what this means: Overall, PPACA is working, though it is clearly experiencing implementation issues, including the well-publicized technology snafus with enrollment through the federal exchange and the striking number of state insurance exchanges. And there will be continued challenges or efforts to overturn it in the House and the Senate. (The 62nd attempt to overturn PPACA was just rejected by President Obama.) The next election cycle may very well determine the permanency of PPACA. The efforts to overturn it are shameful and are a waste of time and money.
  8. Long-term care insurance: Rates for in-force policies have increased and will almost certainly face future increases—older policies are still priced lower than what a current policy would cost. This is because of many factors, including the prolonged low-interest-rate environment, lower-than-expected lapse ratios, higher-than-expected claims ratios and incredibly poor initial product designs (such as unlimited benefits on a product where there was minimal if any claims history). These are the “visible” rate increases. If you have a long-term care insurance policy with a mutual insurance company where the premium is subsidized by dividends, you may not have noticed or been informed of reduced dividends (a hidden rate increase). Here is what this means: Insurance companies, like any other business, need to be profitable to stay in business and to pay claims. In most states, increases in long-term care insurance premiums have to be approved by that state’s insurance commissioner. When faced with a rate increase, policyholders will need to consider if their benefit mix makes sense and fits within their budget. And, when faced with such a rate increase, there is the option to reduce the benefit period, reduce the benefit and oftentimes change the inflation rider or increase the waiting period. More companies are offering hybrid insurance policies, which I strongly recommend staying away from. If carriers cannot price the stand-alone product correctly, what leads us to believe they can price a combined product better?
  9. Sharing economy and services: These two are going to continue to pose challenges in the homeowners insurance and auto insurance marketplaces for the insurance companies and for policy owners. There is a question of when is there actually coverage in place and which policy it is under. There are some model regulations coming out from a few state insurance companies, however, they’re just getting started. Here is what this means: If you are using Uber, Lyft, Airbnb or a similar service on either side of the transaction, be sure to check your insurance policy to see when you are covered and what you are covered for. There are significant gaps in most current policies. Insurance companies have not caught up to the sharing economy, and it will take them some time to do so.
  10. Loyalty tax: Regulators are looking at banning auto and homeowners insurance companies from raising premiums for clients who maintain coverage with them for long periods. Here is what this means: Depending on your current auto and homeowners policies, you may see a reduction in premiums. It is recommended that, in any circumstance, you should review your coverage to ensure that it is competitive and meets your needs.
  11. Insurance fraud: This will continue, which increases premiums for the rest of us. The Coalition Against Insurance Fraud released its 2015 Hall of Shame (here). Insurance departments, multiple agencies and non-profits are investigating and taking action against those who commit elder financial abuse. Here is what this means: The more knowledgeable that consumers, professional agents and advisers become, the more we can protect our families and ourselves.
  12. Uncertain economic and regulatory conditions: Insurance companies are operating in an environment fraught with potential changes, such as in interest rates (discussed above); proposed tax code revisions; international regulators who are moving ahead with further development of Solvency II; and IFRS, NAIC and state insurance departments that are adjusting risk-based capital charges and will react to the first year of ORSA implementation. And then there is the Department of Labor’s evaluation of fiduciary responsibility rules that are expected to take effect this year. Here is what this means: There will be a myriad of potential outcomes, so be sure to continue to monitor your insurance policy portfolio and stay in touch with the Insurance Literacy Institute. Part of the DOL ruling would result in changes to the definition of “conflict of interest” and possibly compensation disclosure.
  13. Death master settlements: Multiple life insurance companies have reached settlements on this issue. Created by the Social Security Administration, the Death Master File database provides insurers with the names of deceased people with Social Security numbers. It is a useful tool for insurers to identify policyholders whose beneficiaries have not filed claims—most frequently because they were unaware the deceased had a policy naming them as a beneficiary. Until recently, most insurers only used the database to identify deceased annuity holders so they could stop making annuity payments, not to identify deceased policyholders so they can pay life insurance benefits. Life insurers that represent more than 73% of the market have agreed to reform their practices and search for deceased policyholders so they can pay benefits to their beneficiaries. A national investigation by state insurance commissioners led to life insurers returning more than $1 billion to beneficiaries nationwide. The National Association of Insurance Commissioners is currently drafting a model law  that would require all life insurers to use the Death Master File database to facilitate payment of benefits to their beneficiaries. To learn more, visit our resources section here. Here is what this means: Insurance companies will not be able to have their cake and eat it too.

What Can You Do?

The Insurance Consumer Bill of Rights directly addresses the issues discussed in this article.

Increase your insurance literacy by supporting the Insurance Literacy Institute and signing the Insurance Consumer Bill of Rights Petition. An updated and expanded version will be released shortly  that is designed to assist insurance policyholders, agents and third party advisers.

Sign the Insurance Consumer Bill of Rights Petition 

What’s on your mind for 2016? Let me know. And, if you have a tip to add to the coming Top 100 Insurance Tips, please share it with me.