Fired insurance agents allege discrimination
OAKLAND — Seven former Bay Area insurance agents for the California State Automobile Association — some with more than 30 years on the job — have filed formal complaints against the company, saying they were wrongfully fired and discriminated against because they are all bilingual and serve a predominantly minority clientele.
As a prelude to a lawsuit, the complaints were filed Monday with the Equal Employment Opportunity Commission and the Department of Fair Employment and Housing, attorney Debra DeCarli said.
“The firing of these agents has had a huge impact on the customers they serve, who now don’t have a person they’ve developed a relationship with who speaks their language,” DeCarli said Tuesday at a news conference in the Oakland offices of Gwilliam, Ivary, Chiosso, Cavalli & Brewer.”If all of us spoke only English and not a second language, we would still have our jobs,” said longtime agent Barney Fong, 41, of Castro Valley. “That put us on the radar. Apparently they want us to force clients to speak English.”
In a statement issued Tues-day, CSAA spokeswoman Jenny Mack said the company was taking the complaint seriously but didn’t address specifics.
“We take these allegations seriously and we believe our record of honoring the diversity of our employees speaks for itself,” the statement reads. “CSAA is proud of our commitment to serving the needs of our diverse membership and we are committed to making our services accessible and convenient for all of our members.” All seven agents — who say they were some of the company’s top producers — were fired on the same day, Dec. 3. The reason given for termination was “misrepresentation,” the agents said.
“CSAA was saying we lowered mileage figures on two or three policies out of our thousands of clients without the insured per- son authorizing the change,” said Grady Miles, 62, of Oakland.
“But a reduction in mileage creates a reduction in premium, which also lowers our commission structure,” Miles said. “Why would we do that to ourselves? To say we did this arbitrarily to help out a particular client was false.”
Instead, the former agents believe there was another motive.
“CSAA encourages their sales representatives to solicit insurance and memberships in languages other than English, particularly Spanish and Chinese,” said Connie Chan, 35, of Alameda. “But when it comes to servicing existing policy holders … CSAA requires all sales representatives to refer 80 percent of their transactions to an 800 call-center number staffed by unlicensed insurance service associates who primarily speak English.
“I believe I was singled out because I am Chinese-American and because of who my customers are,” Chan said.
The CSAA statement from Mack on Tuesday states that the company has been a trusted provider of auto insurance for more than 90 years.
“We are confident our business practices meet the highest industry standards and serve the best interest of our members.”
Insurance commissioner suspends Arizona agent
Insurance Commissioner Carroll Fisher has ordered an Arizona insurance agent to stop doing business in Oklahoma. The agent, Diana Greene, sold bonds over the Internet, primarily to used-car dealers.
Under state law, used-car dealers are required to post surety bonds in order to operate. At least three dealers were alleged to have purchased bonds from Greene that they later learned were bogus, according to Fisher.
In two cases, Greene is accused of providing false documents after the dealers paid for what they thought were legitimate bonds. In one case, she is accused of accepting money but failing to remit the full amount to the insurance company that wrote the bond.
Greene refunded money to the auto dealer in one case, but in the other two she did not, according to documents filed in the case.
Greene was licensed as a nonresident agent.
Greene can request a hearing before Fisher on the matter, but in the meantime, she has been prohibited from conducting business in any capacity, Fisher said.
Insurance indemnity to assist tour agents
The introduction of a professional indemnity insurance for tour operators is being planned by the National Association of Travel Agents Singapore (Natas) to give the Singapore tourism industry a boost.
Natas chief executive officer Mr Renton de Alwis said the insurance concept would give Singapore a regional advantage because European tour operators would prefer to partner Singapore-covered operators. They would then “co-share” the risks of consumer law suits.
For example, a European consumer might sue his European travel agent for a travel package which fell short of what was promised. If the fault arose from the Singapore partner who co-arranged it, the latter’s insurance company would take care of compensation. If the regional partner did not have this insurance, the European side would have to pick up the full tab.
Japan is believed to be the only Asian country with such a scheme currently operating.
The development was prompted by a European Commission directive in 1995, which allows consumers in member countries to sue tour vendors who fail to deliver advertised packages.
Mr de Alwis said under the scheme “foreign operators would have an incentive to partner Singapore-covered agents as they can be more assured of quality, as well as compensation if this falls short”.
Local operators could benefit from this advantage by arranging more tours to the region, he said.
Professional indemnity insurance is available in Singapore for lawyers and doctors.
However, the tourism industry proposal is a first for that sector. About half of Singapore’s 600-odd travel agents are leisure tour operators.i
Council of Insurance Agents & Brokers
The Council of Insurance Agents & Brokers has announced that MIKE PASCHKE has been named the new chairman of the Council of Employee Benefits Executives, a committee responsible for association services for member firms with employee-benefits operations. Paschke currently is executive vice president of Brown & Brown Inc., where he began his insurance career in 1989 selling employee-benefits insurance.
The Council of Insurance Agents and Brokers
Businesses are not buying terrorism coverage because it is too expensive and they do not consider themselves targets of terrorism, according to a new insurance survey conducted by The Council of Insurance Agents and Brokers. Nearly 60 percent of brokers said less than 10 percent of their small commercial property/casualty accounts and fewer than 20 percent of medium-sized accounts have purchased terrorism insurance.
Of the brokers handling large accounts, 48 percent said fewer than one in five large customers have bought terrorism coverage.
Consumer group, independent insurance agents form alliance
As a key lawmaker molds legislation to let banks, brokerages and insurers get into each other’s businesses, a consumer group and independent insurance agents have forged an unusual alliance to demand consumer protection.
The push for a banking overhaul bill entered a crucial phase Monday as Rep. Jim Leach, R-Iowa, chairman of the House Banking Committee, began to decide on the shape of the measure to end Depression-era restrictions. The bill incorporates a Clinton administration proposal.
Some lawmakers are concerned that legislative prospects could be dimming for what would be the most significant rewriting of the nation’s financial laws in 60 years. But the Consumers Union and the Independent Insurance Agents of America — whose members compete with banks — are concerned that changes would be made and consumers wouldn’t be properly educated. The groups released a survey showing that people are confused about whether insurance sold by banks is federally guaranteed. “Consumers are easy prey for misleading and predatory practices by banks,” said Mary Griffin, an attorney for Consumers Union, which publishes Consumer Reports magazine. “Until consumer protections dealing with bank sales activities are enacted, Congress should not give banks more powers in the area of insurance and investments.” Griffin was joined at a news conference by Robert Rusbuldt, vice president for federal affairs of the Independent Insurance Agents. Rusbuldt called the administration’s proposal “a disaster for consumers … would leave the buyer bewildered.” Rusbuldt said, however, he did not believe the groups’ opposition was enough “to take down the bill.” Paul Elliott, a spokesman for Treasury Secretary Robert Rubin — the administration’s point man on the proposal — said Rubin and his staff needed more time to review the issues raised by the two groups. The major insurance companies have not taken a position on the consumer protection issue. Patricia Cinelli, a spokeswoman for the American Bankers Association, had no comment on the matter. The group’s chief lobbyist was quoted as saying last week that the industry’s fervor for the overhaul legislation has waned because regulators already have been allowing banks to get into other financial businesses. The lobbyist, Edward Yingling, later said that was a “misleading impression” of his group’s position. Griffin and Rusbuldt released a survey of 1,000 people nationwide, commissioned by the insurance agents’ group, showing that: * Consumers are confused about whether insurance, mutual funds, annuities and other financial products sold by banks are backed by the federal government, as deposits are. Only 27 percent of those surveyed knew that such products are not federally guaranteed. Rubin has said the administration’s proposal includes a requirement that consumers be told in plain terms whether or not financial products are federally insured. * Consumers are vulnerable to pressure to buy insurance, notably credit life insurance, when they apply for loans. Of the respondents, 58.5 percent said they believed that buying insurance from a bank would very likely or somewhat likely improve their chances of getting a loan approved by that bank. * Fifty-five percent of respondents said they were very concerned or somewhat concerned about banks violating the privacy of the personal financial information they provide. The two groups said they were seeking consumer protections in the bill such as anti-coercion rules to prevent banks from using their role as lenders to force consumers to buy their financial products. They also include privacy protections and disclosure and advertising safeguards to inform consumers when financial products are not federally guaranteed. David Runkel, a spokesman for the House Banking Committee, said, “There will be some consumer protections” in the measure that Leach will put forward for a drafting session by lawmakers next week. The survey, conducted by International Communications Research of Media, Pa., was based on telephone interviews last month of 500 men and 500 women aged 18 and older, at a variety of income levels. The margin of error was plus or minus 3 percentage points.
INDEPENDENT INSURERS SHOULD POOL FUNDS TO PROMOTE AGENTS
A growing list of independent companies has adopted a direct auto marketing strategy. I completely understand their need to aggressively explore and introduce business models to capture, or in some cases recapture, the market share being cannibalized by captive and direct writers. However, I must confess that what does surprise me is the approach independent companies are taking to compete in the market place.
The argument that most carriers give to explain their recent shift away from independent agents is that they are focusing only on those consumers wishing to purchase auto insurance via the Internet. What they aren’t mentioning here is price. Perhaps it is because they have argued for years that agents should not sell insurance based on price. I agree. Agents have too long sold on price. Perhaps now it’s come home to haunt them.
But price is a factor for the consumer they are trying to reach via the Internet. What we hear from insurance company advertising, some of which feature talking reptiles, is one constant statement: “We can save you between 10% and 15% on your auto insurance.” It doesn’t take an Einstein to figure out the source of that 10% to 15% in savings is what the independent insurance agent earns as a commission.
I would be very interested to know if an actual study has ever been conducted to determine whether a direct sales program, via a multiple lines independent company, is more profitable than the apparent loss of revenue realized when removing an agent with the ability to cross-sell additional coverages.
If the goal of direct programs truly is to go after the auto-only customer, we must conclude one of two things. The company is trying to create a nonstandard book of business or is in the process of building a stand-alone auto company.
But that’s probably not what’s really happening. A true multi-line independent company adopting a direct writing program is doing so to broaden its direct model. This is to compete with other multi-line, non-direct independent or captive companies using agents to sell and service their product. Does this new direct program then become the conduit for the “independent” carrier to cross-sell its other personal lines products without the use of the agent?
Several PIA Western Alliance member agents recently conducted a very informal comparative quote campaign. They wanted to acquire a sense of actual price differential. When they gave me their results, I did my own comparisons. Three of the most popular direct and captive companies could not compete with my current auto premium. Please note that I did ask for PIP, UIM and higher limits, as my real auto insurance exposures relative to my assets need to be properly considered and underwritten. This is a service apparently not offered over the phone by captive or direct writers and the omission flows into my next point-risk analysis.
I told the companies about my family vehicles. I drive a 2001 Ford F-350, my wife has a 2003 Chevy Suburban and my son drives a 1996 VW Passat. At no time was I asked about related exposures such as:
Do I pull a boat? Do I have a camper? Do I own a home? Do I own a business?
Since the salespersons did not ask those questions, they were not in the position to recommend higher limits or an umbrella, etc. The level of identifying my actual insurance needs was limited to providing me with a “competitive” auto quote. The only underwriting advice I received was when I informed them their price was higher than my current policy. They recommended that I purchase a higher deductible thus lowering my annual premium.
If my insurance needs were greater than they could provide, then they should have told me that I needed to use an agent or a company that offers multiple coverages. The salespersons were not concerned at all about my entire risk portfolio, and that leads me back to cross-selling.
Consumers benefit when independent agents ask questions that those direct writers should have asked about my vehicles, businesses and so on. Their exposure is less when dealing face to face with agents who know and understand why it is important for their clients to purchase additional coverages.
Geico, the fourth largest auto writer in the nation, is a direct writer. The head of that company recently stated that they spent $502 million on advertising last year and that he can’t wait to spend more.
Is our industry-at the carrier level-so small that we cannot collectively raise the money for a national advertising campaign to counter the effects of the talking reptile? It would not be difficult for the members of the American Insurance Association (AIA), the Property Casualty Insurers Association of America (PCI) and others, to create and put forth a collective media campaign designed to promote the independent agency system and educate the insurance-buying public about the hidden cost of the low price. We need to find a way to show consumers that a trained and licensed professional agent evaluating their insurance needs and exposure is worth the 10% to 15% they might seem to save on insurance.
The money that independent agency companies might spend on a national program aimed at educating and persuading consumers to contact an independent agent when shopping for their insurance would be less than the millions they might spend on the development of a direct program. I would add, however, that in order for such a campaign to be truly successful it should not use any major independent agent trade association logos. There are many other ways to assist the consumer in identifying and using the independent agent.
As independent insurance agents-and as part of the system that made these companies very successful-we need to make this type of demand on our companies.
When you consider the high cost of being underinsured, that should be an easy sell.
It’s easy to imagine the campaign. A warm nurturing voice says something like, “Yes, with a direct writer you might be able to save some money on your insurance. But why risk having your own risks not properly evaluated? When it conies to protecting your assets, the best person to talk to is not a telephone sales clerk-it’s an independent, professional insurance agent who is trained and knowledgeable in one of the most important decisions you’ll make relative to protecting your assets. They are the agents who offer more choices. You will know them by all the independent company names on their door.” And so on.
This is just one way to fight back. There must be others. We must do something. To remain inactive means we all lose: the company, the agent and, most of all, the consumer.
OCEAN MARINE INSURANCE
The beginning of ocean marine coverage is the beginning of insurance. Traders discovered that placing all of their goods on a single vessel meant that everything could be lost if the vessel overturned or was taken captive. They found that transporting their goods via several ships reduced their likelihood of experiencing a total loss. This simple concept of spreading the risk is the basis for all property and casualty insurance. Formal insurance contracts protecting cargoes and hulls were the first to be developed since the risks were so great. Coverage has expanded as significant losses occurred and underwriters were able to establish a rate for accepting a risk.
Ocean marine insurance is divided into three parts:
Ocean Marine Hull Coverage: This provides the physical damage coverage for the vessel and property that is a part ofthat vessel. In addition to ocean-going vessels, Hull coverage is written on many different kinds of commercial craft that operate in rivers, harbors and other inland waterways. Such vessels include: tugs, lighters, various types of work vessels used to load or unload ships, river towboats, barges and miscellaneous classes of floating equipment used in and around coastal or inland ports. Offshore oil rigs and similar type fixed property in the ocean are also eligible for hull insurance.
Ocean Marine Cargo Coverage: This provides coverage for the physical damage to the cargo on the vessel. All goods that are waterborne during any part of their shipment may be insured under an ocean marine cargo policy-even when the cargo is on dry land. The most common cargo policy is the Open Cargo policy, which covers all shipments made by the insured continuously until canceled by the insurance company or the insured.
Ocean Marine Liability Coverage: This is called P&I or Protection and Indemnity coverage. It covers bodily injury and property damage to the general public and to the master and crew. This also covers the legal liability for the cargo of others being carried. Pollution exclusion clauses may be attached to the basic policy, depending on the P&I Society writing the coverage and their analysis of the loss potential.
Lloyd’s of London is one of the largest writers of ocean marine coverage, and because insurance for oceangoing vessels is heavily reinsured and Lloyd’s is a primary provider of reinsurance, it’s highly probable that Lloyd’s is involved in most contracts protecting ocean-going vessels.
In the United States, the American Institute of Marine Underwriters plays a major role in the ocean marine market. The organization reviews coverage clauses and also addresses important issues. In addition, it sponsors forums where its members meet and discuss industry concerns. This group is not involved in developing rates. However, it is an important research source.
The Classification Societies are unique to ocean marine. They are the loss prevention arm of the industry. Their sole job is to determine the seaworthiness of a vessel. Since this is a marine engineering type service, exacting standards must be met, and non-compliance will result in a change in classification. There are a number of societies, and those societies are monitored by the United States Coast Guard to determine which are most accurate in setting seaworthiness. An important warranty in the hull coverage is that the vessel cannot change classification. If a society changes a vessel’s classification, the underwriter must be notified and allowed to decide whether or not to continue providing coverage. If the underwriter is not notified, coverage can be voided.
Another important group in the ocean marine industry is the surveyors. Just as the classification societies are the loss control part of the industry, the surveyors are the claims side. They are independent firms that review damage and make recommendations to the insurance company. Because they are independent firms, actions can be taken only when the insurance carrier approves the recommendations.
Ocean marine is a highly specialized line of coverage. A number of excellent brokers work with agents to provide placement service. Please refer to The Insurance Marketplace for the most current listing of brokers available for marine cargo, marine hull, and P&I.
Insurance insights: new products available for home-based businesses
MTNA, through the Robert H. Clarkson Insurance Agency, now has available a variety of new insurance products geared toward home-based businesses.
Home-based businesses, including music studios, are at risk for significant losses associated with accidental damage, theft, natural disasters, automobile accidents and liability if an employee or business guest is hurt while visiting the home-based business. Many people may not be aware of gaps in their current coverage. For instance, someone using a personal automobile to drop off the mail at the post office on the way to their music studio has an accident. Is this covered under a personal automobile insurance policy or the studio’s business policy?
There are many other similar examples of gaps in insurance coverage. The IIABA recommends the following:
* Check your homeowner’s and automobile policies; homeowner’s insurance is not meant to cover your business exposure and, in most cases, excludes it specifically.
* Check your business insurance policy options: there are several choices to consider, and many can be tailored to suit your specific needs.
* Protect yourself: this is your full-time occupation and, as a business owner, your life, health, disability and worker’s compensation insurance play a vital role in overall protection.
Insurance coverage provides protection for the income and business regardless of the size of the home-based business. Also, the coverage gives the business owner the security and peace of mind as the business grows and produces more income.
Customized insurance policies are a way to ensure the best possible coverage under all circumstances. Business liability protection will provide coverage for damages in the event of a legal claim for bodily injury, property damage, personal injury or advertising injury. Adding loss of income and extra expenses coverage provides protection should the business be forced to suspend operations due to property damage, while receiving ongoing operating expenses incurred during the restoration of the business. Business personal property, valuable papers and records and equipment breakdown are other coverages available. And the best news–home-based business insurance premiums in most cases are fully tax-deductible as a business expense. Business owner’s insurance also is available to businesses that have leased studios or office space.
Don’t settle for a one-size-fits-all solution. Because most business owners want to close the gaps as soon as they are aware of them, the Robert H. Clarkson Insurance Agency will work with members to expedite this coverage. RHC will work diligently to secure the proper coverage, tailored for each member’s personal needs.
Each MTNA member will receive RHC’s undivided attention to determine specific insurance needs. The customized policies for music professionals are provided to ensure the appropriate coverage is received by all MTNA members.
Insurance Software focusus on non-traditional channels
Sun Distribution Channel Portal solution enables insurers to reach customers through distribution channels such as banks, supermarkets, post offices, kiosks, telephones and PDAs. Features include servers, storage, services, and software. Solution offers Straight Through Processing (STP), internet access, single customer view, coverage of all insurance products in any language or currency, First Notice of Loss, and real-time agent performance monitoring.
Acord Loma Insurance Systems Forum — Sun Microsystems, Inc. (NASDAQ:SUNW) today introduced the Sun Distribution Channel Portal solution to help the insurance industry open up new markets and better serve new and existing customers by making it easier to develop new product distribution channels.
The solution includes Sun servers, storage, services and software to help insurers quickly and cost-efficiently reach new customers through non-traditional channels such as banks, supermarkets, post offices, kiosks, telephones and PDAs. At the same time as increasing top-line growth, the Sun solution also helps insurers reduce bottom-line costs associated with traditional distribution channels and offers ways to improve customer service.
The Distribution Channel Portal solution has Straight Through Processing (STP) capability to bring the back office systems through to the front office. This means insurers can rapidly sell existing insurance products-and create, launch and manage new products-without adding IT processes that could delay the sales cycle. Operating 24/7 and accessible via an Internet browser, the portal presents a single customer view and covers all insurance products in any language and in any currency, through unlimited channels. It also delivers real-time performance monitoring of agents, products and channels, and offers First Notice of Loss (FNOL) to improve claims handling.
“In today’s insurance industry, the product is no longer a competitive differentiator. What is most important today is how insurers find and serve their customers,” said Larry Scott, vice president, global financial services industry for Sun Microsystems. “Our new solution enables insurers around the globe to discover and implement new distribution channels in order to serve new markets - without increasing expense ratios.”
The Sun Distribution Channel Portal solution prevents the addition of new processes and operational risk through its integration with Java(TM) Composite Application Platform Suite (CAPS) technology. This lets insurers pull information from the back office to the point of sale (POS) without requiring any IT involvement at the front end.
Sun’s Distribution Channel Portal combines best-of-breed solutions from three different vendors.
The customer sales and service piece is handled by G2X Agility Software, known for its Internet-based CRM solutions. This software centralizes relationship history including policy and claims information in a centralized portal and provides a single view of the customer at all times. It drives more revenue by identifying cross and upsell opportunities and retaining customers through improved service, as well as reduces event time for the sales and services process.
A core application from UniRisX allows insurers to create new products and new distribution channels in a few clicks with real-time risk management and control. This application offers full end-to-end policy administration from quoting and issuance to documentation production and mid-term adjustments, hence, it offers a much faster go-to-market model than traditional systems while retaining full visibility of product and distribution channel performance. UniRisX migrated the Global Insurance Distribution Service–their core Java(TM) Platform, Enterprise Edition (Java EE) application–to the Sun Java System Application Server 9 using the NetBeans 5.5 Integrated Development Environment (IDE).
Sun will also be featuring their Integrated Claims solution with edge IPK at the Acord Loma show. The solution can provide a single integrated management solution for the quick and efficient handling of non-life insurance claims.