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Regulation and Compliance > State Regulation

Year-End Potpourri

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As the year unfolds, questions on a variety of subjects arise, opportunities are uncovered (and sometimes missed) and issues start to work their way to the surface. But more often than not, there is not enough material about which I am familiar enough to write a full column. Therefore, I would like to use the last column I wrote in 2004 to briefly lift up a few such items.

A good case in point is the controversy surrounding the actions of New York Attorney General Eliot Spitzer and a couple of state insurance commissioners. I am not very familiar with the property and casualty business and its nuances and do not know how you go about “rigging” a bid in a very competitive market, so I will not comment on that aspect of the issue until I learn more. However, two questions regarding this affair do come to mind. First, the targets of the alleged misdeeds are major corporations. These are professional buyers, many with risk managers skilled in designing coverage and analyzing bids. It is hard to believe this kind of buyer of insurance could so easily have been duped or disadvantaged.

Given the track record of one of the commissioners and the buzz regarding Spitzers political ambitions, one has to ask: Is there really an important issue here or is it primarily about politics? It strikes me as sad when political ambitions have to use straw men to advance their cause.

But like it or not, we are a favorite “whipping boy” for people advancing all kinds of causes. I recall an instance some years ago when I was invited to be on a conference call with a Los Angeles radio talk show host. The host bombarded the other participant and me with the most outrageous questions imaginableanswers to which were either impossible or subject to misinterpretation. During an ad break, we complained about the ludicrous nature of her questions, to which she just laughed and said, “If you cant bash insurance, who can you bash? Defend yourself if you can.” I hung up and dont know whether the other participant continued.

In the department of missed opportunities, I would rank among the highest the failure of agents to utilize the National Quality Award in forging stronger ties to their clientele. The NQA is awarded by the National Association of Insurance and Financial Advisors and LIMRA to agents whose business enjoys a high degree of persistency. NAIFA makes available announcements of an agents qualifying for the NQA, which can be mailed to clients and policyholders.

In my own experience and of others I have known, no announcement of achievement evokes more positive feedback from policyholders than that of the NQA. All other awards and symbols attest to ones prowess as a salesperson, and there is nothing wrong with that. But the NQA attests to the “quality” of an agents business. In this instance, the “quality” is the policyholder and customers of all stripes like to think of themselves as quality. The NQA award says, in effect, my policyholders are a touch of class. One of our local agents, now deceased, used to send his NQA announcement and his picture to our local paper every year and they always printed it. Other awards were ignored for the most part. Try ityou will like it.

One of the reasons I have advocated regulation of our business by the states rather than the federal government is that the 50 states each provide a laboratory for experimentation and innovation. Over the years a number of initiatives taken by various states have not lived up to expectation and were abandoned. A network of state regulations requiring companies to rise to the strongest part of each is, I still believe, stronger than a single strand of regulation emanating from Washington.

Tennessee provides a case in point. Ten years ago Tennessee embarked upon an ambitious health care program for its citizens patterned somewhat after federal proposals being discussed at the time. From published reports that I have read, “TennCare” has been a big disappointment, if not a disaster. The program has been rife with lawsuits and far more costly than anticipated. It has deprived other state agencies of needed funds and is generally regarded as being in worse shape today than a decade ago. It is far better that we learn such lessons in a single state than in the country as a whole.

According to an article in the Wall Street Journal, the AFLAC duck is being somewhat muzzled for the time being. While the loud-mouthed duck has done a superb job of becoming a recognizable ad icon and lifting recognition of its sponsoring companys brand to 90% from 12%, the result has not translated into increased sales. Name recognition is important in advertisingand cutesy symbols like Budweiser frogs and Texacos noisy black birds are good at achieving it. But at some point, the consumer wants to know “whats in it for me?”

About 25 years ago when the International Association for Financial Planning (now the Financial Planning Association) was the new kid on the block, it tried to do by fiat what it couldnt do in the marketplace. To put it briefly, it pushed legislation that would have made it difficult for anyone but its members to sell financial products. It didnt work. Last September, a new initiative along the same lines was launched. It is one thing to tout your own virtuesbut quite another to do so while demeaning others. This will bear watching.

Happy New Year!

Reproduced from National Underwriter Edition, January 6, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.