Superstorm Sandy Remembrance, Midland Beach, Staten Island; One Year Later

By Mark E. Ruquet

We gathered near the beach at the war memorial along Fr. Capodanno Blvd. to remember the neighbors lost a year ago, Oct. 29, 2012, to Superstorm Sandy. Taken that day were:

Patricia Bevan – 638 Hunter Ave.

Charlotte Breaers  – 1025 Olympia Blvd.

Eugene Contrabis – 162 Kiswick St.

David Hagley – 1025 Olympia Blvd.

David Maxwell – 110 Mapleton Ave.

Jack Paterno – 787 Nugent Ave.

Anastasia Rispoli – 158 Grimsby St.

Beatrice Spagnaolo – 164 Grimsby St.

“A year later, we are not where we want to be,” Staten Island Councilman James Oddo told about 100 residents gathered for the candlelight vigil last night. “People can talk about building and FEMA, Build it Back, sand dunes—this is about people. And to individual Staten Islanders, those of us in office, and the community, [we] have not forgotten that this is about people. And while we are not where we want to be, we’re going to get there and we’re going to work together and that’s our solemn vow to you.”  

After Sandy, More Hopeful Signs of Progress

By Mark E. Ruquet

Midland Beach, Oct. 30, Lincoln Ave. from Fr. Capodanno
Blvd. (Photo: Mark E. Ruquet)

Today, Oct. 29, is the one-year anniversary of Superstorm Sandy. The local TV networks are doing their special coverage focusing on how far we’ve come since that hellish night. This evening, the Midland Beach Civic Association will hold a candlelight vigil in memory of the people lost in those desperate hours after the floodwaters changed so many lives forever.

Frankly, I’ve grown weary of reliving that day and the days after. I’ll leave the reminiscing to others. There are enough voices out there to do that. Even the BBC is taking notice. Today, we’ll feel sadness and hope for a better future where we don’t need to worry about our lives once more being profoundly altered by storm surge. Some good engineering and getting some lucky breaks for decades in the future would help. Many of us continue to struggle not only with the financial burdens the storm brought, but also with the emotional anxiety whenever there is talk of another storm coming up along the East coast that brings heavy rainfall and warnings of local flooding.

On this anniversary though, the greatest challenge we face is not rebuilding our homes or developing storm

Midland Ave. on Oct. 30, an empty container sits in
the middle of the street. (Photo: Mark E. Ruquet)

management systems to prevent, or at the least, lessen the impact of a tremendous storm like Sandy. No, for individual homeowners the major challenge today has less to do with nature and everything to do with paying for the recovery after this disaster. This is a challenge not only for those of us affected by Sandy, but those of us facing the crippling cost of flood insurance.

At least on this front, the good news is that legislators are getting an earful from their constituents and doing something about rates. According to some reports, a bipartisan deal  was crafted between members of the House and Senate to put a freeze on the increases until a new plan is put in place to make the Flood Insurance program solvent, but not put the entire burden of solvency on those who can least afford it.

Among those in Congress who have been pushing for this change is Congressman Michael Grimm (R-N.Y.) who has spent the past week in Staten Island keeping people informed of progress on Capitol Hill while doing his bit to keep this issue front and center in the mind of the public.

It has been a long road for many of us—and there is still a long way to go until this journey of recovery ends. On this anniversary, there is hope that at least one burden is lifted from our shoulders.

Flood Insurance: Rate Increase Relief Coming

Rep. Michael G. Grimm (R-NY) spoke to Midland Beach
residents last addressing their concerns about recovery.
(Photo: Mark E. Ruquet)  

By Mark E. Ruquet

Staten Island Congressman Michael G. Grimm (R-NY) says he is hopeful that homeowners facing crushing increases from their flood insurance renewal premiums will get relief by the end of the year if a bi-partisan effort is successful at getting a bill on the president’s desk.

Grimm spoke to residents in Midland Beach, Staten Island, N.Y., last night to explain why homeowners, a year after struggling to recover from the devastation inflicted upon them from Superstorm Sandy, now face staggering premium renewal rates for flood insurance and what some members of Congress are doing to address the issue.

“Some of the increases are so astronomical that you could never afford them,” Grimm said, adding, “It is happening all over the country.”

To combat the increases, Grimm said he is reaching across the aisle to Democrats to work-up a bill that will suspend the increases for two to three years. In the interim, the Federal Emergency Management Agency will need to complete an affordability study to determine rates that will not bankrupt homeowners or force them to walk away from their homes. The delay would also give homeowners time to determine their options and perform necessary remediation work aimed at lowering flood insurance rate increases.

“People will walk away and that will create all types of problems,” said Grimm echoing resident’s arguments that if flood insurance becomes unaffordable it will ruin neighborhoods and potentially create pockets of decay where homes are abandoned because the increases made it impossible to live there or to sell the house.

Under the Biggert-Waters Flood Insurance Reform Act, flood insurance premiums are to rise to reflect actual insurance market rates. Congress felt the government should no longer subsidize the program and property owners should pay the close to $24 billion deficit in the program primarily caused by losses from Hurricane Katrina, Rita and Wilma in 2005 and Sandy last year.

Grimm said that before the rate increases were to go into effect FEMA was to perform an affordability study and finalize the flood maps—which it has not done.

FEMA Director Craig Fugate testified before the Senate Committee on Banking in September and told members that the law has him boxed in and he can do nothing about the increases without the help of Congress.

Despite the rancor and partisan divisions in Congress, Grimm sounded optimistic that Congress will pass a bill by December and he was confident President Barack Obama would sign it into law. He emphasized that he is willing to work with anyone from any party to defend the interests of his constituents—noting his willingness to buck his party when he angered the House leadership by chastising members for delaying aid for Sandy victims.

While he works on the bill, Grimm urged those homeowners who do receive premium increases “not to push the panic button” and contact his office. He made no promises about what his staff would do, but he said, “We have been able to move mountains.”

Grimm also touched on funding of New York City’s Build it Back program, saying there are ongoing discussions between him, city officials and Department of Housing and Urban Development Secretary Shaun Donovan over who will have priority to receive funding. Grimm said he is pushing for the money to go initially to those still waiting for permanent housing, while the city wants to distribute the money by income level.  

“We are trying to adjust some of their priorities,” said Grimm.

The disaster relief has also uncovered what Grimm feels is serious dysfunction at the Small Business Administration that he feels has been less than helpful to recovery efforts. He said the department is “the most broken” piece of the recovery system and the government “needs to redo the whole department.” That effort will have to wait.

“It is bigger than me right now,” said Grimm.

Grimm said he is pledging to see the recovery through to the end, whether voters send him back to Congress or not, saying he will work “to the best of my abilities to get this done.”

P&C Premiums on the Rise; But Where Does Trouble Lie

P&C Industry results find underwriting profits,
but what problems lurk below the surface? 

By Mark E. Ruquet

What do the early quarterly results this week tell us about the financial performance of the property and casualty insurance industry? Essentially, nothing new, except that companies can have a good quarter when there are no substantial catastrophe losses and premiums continue to rise.

W.R. Berkley reported third quarter net income up 39 percent to $137 million. Travelers’ third quarter results come in flat at $864 million, but earnings per share was up 9 cents based on “higher underwriting gain and share repurchase.” ACE beat earnings estimates by 26 cents a share as net income rose 43 percent to $916 million. Even BB&T Insurance Services, the insurance brokerage arm of BB&T bank, reported some increase in its net income in its insurance division, despite the fact the overall results were down.

On a quarter-to-quarter basis, BB&T said insurance services net income decreased $44 million to $22 million. The bank blamed the drop on seasonality in the P&C business and a refund of reinsurance premiums of $13 million. The firm underwrites a limited amount of P&C business. Comparing the performance to the same period a year ago, net income increased $6 million thanks to organic growth of $23 million in wholesale and retail P&C operations. BB&T also credited the performance with improved market conditions as an improving economy increases exposure units, and premium pricing continuing to firm.

The results correlate with the findings of a Towers Watson survey of Chief Financial Officers. In its fifth annual North American Property & Casualty CFO Survey, 23 P&C insurance company CFOs weighed in on the direction of premium pricing. Of those surveyed, 75 percent said the property market is hardening or at the top of the cycle and 65 percent said the casualty market is hardening or at the top of the cycle. Towers Watson said the CFO’s opinion that P&C insurance rates are on the risk is 30 percent higher than last year for property and 52 percent higher on for casualty. Those who see the casualty market hardening believe the duration of the increases will be longer than on the property side. Few believe lines are softening.

“The impact of the softer market the past several years, combined with low interest rates, has hurt insurers’ profitability,” said Bruce Fell, a managing director in Towers Watson’s Risk Consulting and Software business. “The state of today’s market should give insurers some breathing room and an opportunity to increase their bottom–line.”

In a report from Aon Benfield, the reinsurance broker examined rating agencies’ outlook and trends of the P&C industry and said the consensus view is more favorable, noting, “...the excellent level of capital adequacy and an improved aggregate combined ratio indicate the industry is moving in the right direction.”

In its report, United States Evolving Criteria, Aon Benfield observed that over the past 12 months the four global rating agencies have grown closer to consensus on the industry’s outlook as A.M. Best, S&P, Fitch and Moody’s rating personal lines and reinsurance companies stable. Turning to commercial lines, A.M. Best is alone rating commercial lines negative while the other three give the other three a stable rating, which is an upgrade from negative for S&P.

There are concerns with the sufficiency of rate increases, reserve redundancies and catastrophe losses, said Aon Benfield. However, the industry aggregate combined ratio of 98 through June of this year, a four-point improvement over last year, has the rating agencies coming to near consensus.

The bottom line is that the P&C industry still needs price increases to get back to an underwriting profit equal to almost a decade ago, said William R. Berkley, Chairman and CEO of W.R. Berkley Corp. Insurers that pursued volume during the soft market are now paying the price with bad results today, he said. Some are dealing with their mistakes and taking action by withdrawing from markets they should not have gotten into or re-capitalizing while “others are going in the wrong direction.”

He mentioned three—Tower Group, Medowbrook Insurance Group and Torrus—that are taking action to right their ship. Fitch downgraded Tower after the company said it would take $364 million in adverse reserve development. Medowbrook said it is working to strengthen its balance sheet and terminated a quota-share agreement with Swiss Re. Torrus received a shot of investment capital in July when Enstar Group purchased 60 percent ownership in the company. 

Berkley said the question for many insurers that thought they entered greener pastures and “will discover it was Astroturf,” is whether they will admit they made a mistake and find a solution “or be like the ostrich and keep their head in the ground and behave as if a problem does not exist until there is a crisis.”

Getting Back to Reality

Congress ends the shutdown, but have
legislators learned anything? 

By Mark E. Ruquet

So, 16 days and $24 billion later the government is open for business, economic catastrophe was averted and a number of Washington pols have egg on their face. What did we get out of this? A lot of stress; a lot of waste in time and money; and maybe— just maybe—a little closer to getting a budget in place.

Insurance industry executives have to be feeling a combination of relief and stress with the end of the shutdown. On one hand, the credit and good faith of the American economic system took a hit, but didn’t fall off the cliff, saving their investments and unforeseen triggers to financial insurance instruments the carriers may not be aware of—a repeat of recent history when the mortgage backed securities market blew-up for AIG and bond insurers. On the other hand, this event has to concern carriers with the prospect of getting at least one industry issue resolved in their favor.

The conservative movement remains firmly entrenched and an obstacle to any legislation that smacks of government involvement in the private sector or smells of corporate welfare. The Terrorism Risk Insurance Act is case in point. We can hope Congress is no longer preoccupied with its fiscal kamikaze act, but one House faction’s steadfast opposition to increased spending and obsession with ditching what they dub wasteful government programs puts TRIA in their crosshairs.

Insurance associations and regulators have already come out swinging, attempting to catch legislator’s attention by underscoring TRIA’s importance not only to the industry, but also for the nation to keep commerce moving. However, the shutdown demonstrates one thing—legislators are in no hurry to get things done—unless it is urgent.

Many insurance association leaders are familiar with this road, and are under no illusion about where this ride will take them. Just don’t expect anything early, and if the latest fiasco is any indicator, one can expect any resolution to the extension of TRIA to come after its expiration—when it becomes urgent.

For many homeowners across the nation what has become urgent is the fight against astronomical rate increases for flood insurance that threaten to send many to the poorhouse if a dose of reality does not temper the current premium trajectory.

A recent letter from the National Association of Mutual Insurance Companies indicates the fissure between Washington and homeowners struggling with flood insurance increases. In it, Jimi Grande, senior vice president, Federal and Political Affairs, said its 1,400 member insurance companies, of which 25 percent are participate in the National Flood Insurance Program’s ‘Write-Your-Own’ program (they administer the program on behalf of NFIP, but assume none of the risk) “strongly oppose any efforts to delay implementation of these much-needed reforms.”

The reasoning is that the program is “billions of dollars in debt to the taxpayers” and rates need to “reflect the true cost of providing flood insurance coverage” putting the program “on a more fiscally responsible and sustainable course…” He adds, “...the government should not continue to mask the risks of living in a flood-prone area by delaying these much-needed reforms.”

In a bow to the criticism driving calls for the rollback of the Biggert-Waters Act, NAMIC says it supports “providing assistance on a means-tested basis for those who truly cannot afford the increased rates.”

Out here in the real world—no one is talking to middle-class homeowners about giving any help with paying for insurance. If the past is any guide, the “means-test” will be set so low that it will leave many homeowners in the same position they were before, unable to afford coverage and face economic ruin—or abandon their home. Fortunately, New York’s Sen. Charles Schumer and other representatives who are listening to their constituents on this matter understand these rate increases are unsustainable. However, homeowners should be under no illusion that the supporters of Biggert-Waters will use NAMIC’s letter as evidence of overwhelming support for the increases. 

Washington needs reminding that what looks great on an actuarial table will leave most homeowner’s tables empty. Some folks in Washington don’t get it. One only needs to look at the shutdown for proof.

No Let-up In Broker Demand for Healthcare Guidance

By Mark E. Ruquet

Brown & Brown CEO
J. Powell Brown

Brown & Brown’s President and Chief Executive Officer J. Powell Brown continues to be bullish about the opportunities healthcare reform offers insurance brokers, saying that clients need their services as the Patient Protection and Affordable Care Act takes hold over the nation.

The public exchanges continue to be difficult to access and offer less to clients in terms of the number of doctors participating in those insurance plans in return for lower cost, said Brown. However, the system is still evolving and the bottom line for business owners is they want to take of their workers.

“Our clients are very interested in providing quality healthcare to their employees,” said Brown. “We continue to deliver that across the board.”

The options in the marketplace are growing, ranging from defined contribution plans where employers give a fixed amount to employees and the employee allocates the dollars, to the traditional plans where the employer chooses a program for employees and pays a portion of the premium.

Brown said there continues to be interest in private exchanges and Brown & Brown has 13 clients in a private exchange representing 1,300 lives. Company sizes range from 27 to 400 employees, he said.

Whatever the direction an employer takes, brokers will remain indispensable, noted Chief Financial Officer Cory Walker, saying, “At the grass roots, it is talking one-on-one.”   

The only certitude around health insurance, Brown said, is “it is expensive, utilized and confusing and we think it is an opportunity.”

During today’s conference call discussing the broker’s results, Walker said the firm’s earnings miss occurred because of acquisition costs related to a major target they did not win. Brown and Walker explained that the acquisition expense was a one-time, non-recurring expenditure that was unique because it involved attorneys and other parties not normally involved in its traditional acquisition targets. Brown said there is a non-disclosure agreement preventing release of additional details.

The acquisition of Beecher Carlson also had an impact on earnings because of "transition issues" that affected the company's writing new business. They wrote "a lot of new business," but the production was slow by their standards, said Walker.

Brown & Brown Net Income Up 15%; Misses 3Q Earnings Target by 1 Cent

By Mark E. Ruquet

Brown & Brown 3Q net income Rises 15%,
but Beecher Carlson acquisition costs
earnings by 1 cent a share 

When a company increases its net income by almost 15 percent one would think there would be celebration. Instead, the first note I see is that Daytona Beach, Fla.-based insurance broker Brown & Brown missed the consensus-earning target by 1 cent.

Is there something wrong with this picture? The NYSE will make its judgment by the end of today, but in the meantime, a net income of close to $58 million for the third quarter sounds pretty good, translated to 39 cents a share, up 4 cents from the same period last year. Revenues jumped more than 18 percent, or $55.5 million to more than $359 million.

J. Powell Brown, President and Chief Executive Officer said one-time, non-recurring acquisition-related expenses accounted for 1 cent per share.  In a statement, he went on to say “all four of our business divisions enjoyed strong quarterly organic revenue growth rates, most notably our wholesale brokerage division," which grew by 16 percent.

Net income for the nine months $167 million, up close to 20 percent to $1.16  share, an increase of 19 cents a share. Total revenue for the nine months was $1.02 billion, up $123 million or almost 14 percent.

Brown & Brown is one of a few brokerage firms with an aggressive growth strategy that involves the acquisition of agencies with revenues ranging from $2-$10 million. However, out of character, the broker made a major acquisition in May buying Beecher Carlson Holdings Inc. for $336.5 million from a private equity firm. Brown called it an opportunity that it could not pass up, allowing Brown & Brown greater access to the niche large account business.

$1 Leads to Oklahoma-based Insurer's Survival

Lisa G. Bays, President and CEO of BancInsure

By Mark E. Ruquet

Property and casualty insurance leaders proudly boast that the industry came through the financial meltdown in 2008 unscathed except for a few. While American International Group received the bulk of the attention among P&C carriers, every now and then a forgotten victim of the collapse comes back to remind us of how devastating it was.

Recently, Oklahoma City-based BancInsure says it is making a come back after the Oklahoma Insurance Department declared the company insolvent and threatened to place it under receivership.

The Oklahoman reports BancInsure was purchased by New York-based private equity firm Foster Jennings Inc. in February for $1. The company received a cash infusion of $30 million from the firm and plans to direct its business strategy at short to medium tail insurance products with low limits.

BancInsure, which insured community banks and other financial institutions, was declared insolvent by the insurance department earlier this year. However, with the investment, BancInsure, under the leadership of President and CEO Lisa Bays, is now re-entering the insurance market, prompting the insurance department to withdraw a legal request for receivership.

On its website, BancInsure said it will take minimum risk positions of 10-25 percent "on profitable niche oriented programs controlled by professional program administrators and using strong 'A rated' reinsurers to protect its balance sheet." The company said it will focus on property, surety and general liability business that will include non-standard auto, low limit surety bonds such as bail bonds and contractors licensing bonds, low value dwellings in non-catastrophe prone areas, marinas, retail general liability, and small niche public and private transportation classes. The company is non-rated and admitted in 48 states.

September Storms Costly, But Not for Insurers

Aon Benfiled's Impact Forecasting says worldwide
catastrophes cost $15b, but insurers paid-out far less. 

By Mark E. Ruquet

Natural disasters around the world cost around $15 billion in economic loss during the month of September, but insurers covered a fraction of that, underscoring the lack of global insurance penetration, according to a recent catastrophe report.

Insurers paid out approximately $1.08 billion for insured losses in the United States, Mexico and New Zealand from storm damage and wildfires as the world suffered through an onslaught of heavy storm activity, according to a report from Impact Forecasting, the catastrophe modeler for Aon Benfield, the reinsurance broker and capital advisor for global insurance broker Aon plc.

“As our September catastrophe recap report highlights, tropical cyclone and flood events can simultaneously affect many countries around the world,” said Steve Jakubowski, president of Impact Forecasting. “Due to varying degrees of insurance penetration, a large strain is place on governments in certain regions to provide sufficient disaster relief funding and resources.”

Suffering the worst losses in a single country last month was Mexico as Hurricanes Manuel and Ingrid struck the East and West coasts within 24 hours, resulting in extensive damage and close to 200 dead or missing. Ingrid, which struck the shores of the Gulf Coast of Mexico on Sept. 13, took 23 lives and damaged or destroyed at least 10,000 homes. Official put the economic loss at more than $1.5 billion and insured losses at $230 million.

Manuel, striking the Pacific coast Sept. 13 through the 20, was more costly in terms of lives and losses. Officials said at least 169 died or went missing and 35,000 homes damaged or destroyed. Disaster areas were declared in more than 300 municipalities from torrential rainfall that caused massive flooding. Estimates put economic loss at $4.2 billion with insurers anticipating losses of around $685 million.

Here in the United States, flooding in Colorado and New Mexico from record rainfall from Sept. 9 to 16 killed nine people. The storm damaged or destroyed 20,000 homes and thousands of businesses, as well as substantial damage to infrastructure, with economic loss at around $2 billion, possibly more. The report notes losses to private insurers at about $150 million, but that figure does not include losses to the National Flood Insurance Program. However, officials have said many homeowners lacked flood insurance.

Aside from the flooding, the month saw a major wildfire in California and severe storms in Washington state and Oregon causing more than $10 million in economic damage.

Elsewhere, insurers in New Zealand expect to payout more than $12.5 million from damage caused by hurricane-force winds and flooding rains that swept across the islands. No injuries or fatalities were reported.

If insurance penetration had been more significant throughout Asia, global insurers would probably be looking at significant losses last month. Monsoon rains, tropical storms and earthquakes cost more than $4.5 billion in economic damage. The most significant event was Super Typhoon Usagi that hit China on Sept. 22 causing total economic loss of $3.8 billion, said the report. Capping off a wild month in storm activity in the region, Japan suffered several rare tornadoes between Sept. 2 and 4. The worst of six confirmed tornadoes was an F2 north of Tokyo between the cities of Saitama and Noda damaging or destroying hundreds of homes. Flooding from heavy rains affected close to 1,300 homes. Total economic loss was in the millions of dollars.

Mother Nature Allows P&C Insurers a Profit

First-half 2013 P&C Insurance results
point to strong performance.

By Mark E. Ruquet

Rates are increasing, profits are heading upward and losses are down considerably, all of which points to a very profitable year for the property and casualty insurance industry. Of course, the results are primarily driven by loss experience, meaning Mother Nature still has her say.

Last week’s report on the P&C insurance industry's performance said net income after taxes increased $24.5 billion for the period up from $17.2 billion for the first half of 2012. Investors should have smiled a little with annualized rate of return at an average 8.2 percent, up from 6.1 percent—still a far cry from other industries where rate of return is in the double digits.

According to ISO, a Verisk Analytics Co. and the Property Casualty Insurers of America, sponsors of the report, the industry managed an underwriting profit of 97.9, a four point improvement from last year.

Michael R. Murray, ISO’s assistant vice president for financial analysis said this was the first time since 2007 that insurers posted underwriting gains for the first six months, but the overall rate of return “remained sub-par compared with long-term historical norms.” The average rate of return for 54 years from when ISO began keeping the data is 8.9 percent. To reach the long term average this year the industry needs to improve its combined ratio another 1.2 percentage points.

Robert Hartwig, president of the Insurance Information Institute, said economic growth has helped fuel the increase as customers insure more assets and the workforce grows, aiding increases in workers compensation premiums. However, rate activity is “the most important determinant” to the development in auto, home and major commercial lines that are all trending positively. He adds that “overall industry growth could outpace overall economic growth in 2013, as was the case in 2012.”

“Premium growth, while still modest, is now experiencing its longest sustained period of gains in a decade,” notes Hartwig.

Robert Gordon, PCI’s senior vice president policy development and research, observed that the industry’s performance is still subject to the whims of the weather. The industry’s capacity is strong with record-high policyholder surplus of $614 billion making the P&C industry “strong, well capitalized and well prepared to pay future claims.” However, hurricane predictions for the second half of this year called for another very active season, one that has not yet materialized.

“We have been very lucky so far,” said Gordon, noting that last year’s Superstorm Sandy occurred during the last days of October and that there have been 15 catastrophic fourth-quarter hurricanes since 1950, with three of those occurring in the second half of November.

If there is one positive prospect for the industry in the coming days, it is that the government shutdown should not affect the industry, said Hartwig. 

“Property & casualty insurers are well positioned to ride out increased financial market volatility attributable to the shutdown as well as the looming debt ceiling debate in mid-October,” Hartwig said.

No Surprise: Price Drives Insurance Purchase

By Mark E. Ruquet

J.D. Power & Associates releases consumer studies
on primary driver of insurance purchase.

It appears no matter how insurers cut it, price remains the primary driver of insurance purchase and satisfaction in the personal lines space, according to two J.D. Power & Associates surveys.

In the past two weeks, the consumer satisfaction research firm released its Auto Insurance Shopping study and Household Insurance and Bundling studies, indicating how much the cost of insurance influences buying and satisfaction.

In a study of 5,500 auto insurance shoppers, J.D. Power found rate increases drove more buyers to shop for auto insurance while price satisfaction took a hit, dropping 13 points to 808 on a 1,000-point satisfaction scale. Price satisfaction is the lead driver of overall new-buyer satisfaction, some indication that mature buyers are seeking more from their insurer.

Customer retention averaged 97 percent—good news for carriers and agents—but 8 percent shopped for a better rate. Those that did switch insurers saved about $387 annually, about where it stood the previous year.

The survey also noted the importance of a carrier developing a user-friendly website for buyers as 20 percent of new buyers purchased auto insurance online.

Jeremy Bowler, senior director of the global insurance practice at J.D. Power, recommends that, “communicating new offerings and allowing customers to tailor their policies helps demonstrate the value of the policy and improve customer satisfaction.”

Turning to homeowners insurance coverage, in a study of more than 21,000 respondents, purchasers of renters insurance are more satisfied with their insurer than homeowners insurance customers and the main driver of that satisfaction: price.

In its customer satisfaction index, carriers scored an average of 809 from renter insurance customers, while

coming in with an average score of 787 on homeowners. J.D. Power said price satisfaction is 45 points higher among renters than homeowners.

Due to a younger customer base, the online experience is more important for renters than homeowners, said the research firm. Among renters, 22 percent said the carrier’s website mattered while 11 percent said assisted online interaction was important.

Insurance agents not writing renters insurance are missing an opportunity not just in current sales, but attracting future customers who one day will mature into homeowners, observed J.D. Power. Twenty-five percent of consumers rent, but 46 percent are uninsured, says the study, indicating the potential for growth.

Bowler called agents that concentrate on selling only high-dollar products for higher commissions “shortsighted because agents who satisfy the large renter population today are more likely to retain and service their growing household insurance needs over time.”

Insurance agents should also note that bundling policies is an effective way of keeping their renter insurance customers. The study found that retention rates were 91 percent for those with bundled polices compared to 67 percent for those not bundled.

As far as carrier rankings for homeowners insurance, Amica Mutual comes out on top with a satisfaction ranking of 842, and State Farm was next in line at 813. For renters, while State Farm has the largest share of the market at 26 percent, followed by Allstate at 12 percent, Nationwide had the highest satisfaction rating at 823. State Farm ranked fourth with a rating of 811 and Allstate was just behind at 807.

Of all the insurers, USAA ranked highest for both renters and homeowners, but was not part of the overall ranking because it is only open to U.S. military personnel and their families. The company scored 901 for renters and 894 for homeowners.

Glitches in Healthcare Insurance Enrollment a Good Sign

Logo for the federal website to access affordable healthcare.
The site suffered some glitches yesterday as close to 3 million
tried signing up. 

By Mark E. Ruquet

There were computer glitches and failure of service notices at the launch of enrollment for health insurance on government exchanges under the Patient Protection and Affordable Care Act. That was a good thing.

Why you may ask? One simple reason: demand outstripped capacity.

Federal officials said close to 3 million people went online at HealthCare.gov, the federal exchange, yesterday. Many received error messages and were probably frustrated. Some people spent up to three hours trying to access the system, but got nowhere.

So does that make it a failure as some pundits predict? A great federal boondoggle? Another sign of government incompetence? Nope. This is a journey on a road the United States has failed to travel, and the rest of the developed world as long since eclipsed, to provide medical coverage to all its citizens. There is great demand for affordable healthcare coverage, and the private market model has failed to fulfill that mandate.

In this information technology age, we are well aware that the launch of any new service comes with glitches. As the President pointed out in his address yesterday, Apple experienced glitches in its launch of its newest software and that did not make front-page news. We are not surprised when there are problems. We know developing technology has issues—as infuriating as that may be at times. However, that does not diminish the reality that we have a healthcare crisis in this country and this is a step in the right direction.

PPACA may not be perfect, but those in opposition have not proposed a reasonable alternative, except gutting the program. That is not an answer. When the president came out yesterday to speak he was flanked by U.S. Secretary of Health and Human Services Kathleen Sebelius and surrounded by individuals who would benefit from PPACA. Too bad the White House could not have sent a more powerful image by having the Secretary and the CEOs of health insurance companies there instead.