New MDRT Study Shows Families That Seem Financially Stable May Be At Risk

A new study by the Million Dollar Round Table, in conjunction with Harris Poll, finds that many people in the United States, even those considered financially successful, do not account for unexpected risks during financial planning.  In fact, about one half of Americans (47%) say that, if they were to lose their primary source of income tomorrow, they only could maintain their current lifestyle for three months or less.

Most Americans (61%) say that their family would assume debt if they passed away tomorrow, with 38% of U.S. adults saying that the debt would be $10,000 or more.  Additionally, only one half of Americans have life insurance.  Of those who have dependents, 47% say those dependents would run out of money without their personal income in two years or less if they should pass away tomorrow.

"While these families with a stead source of income may seem prepared, they are jeopardizing it all by not having the right protection to ensure future financial security for themselves and their families, " said Mark J. Hanna, CLU, ChFC, MDRT President.

On average, Americans say their household has two sources of income, with 40% having income of $74,000 a year or more.

"It's not just lower income Americans who are vulnerable to financial strain in the event of a life-altering incident; families considered financially successful are also at risk," Mr. Hanna said.  "A financial professional can help identify potential risks and work with you to set up a plan that protects your family from these pitfalls."

MDRT Study Shows Key Differences Between Advised Financial Clients and "Do-It-Yourselfers"

In late March, the Million Dollar Round Table (MDRT) announced the results of a new study, commissioned by the MDRT and conducted online by Harris Poll.  In it, they found that 79% of Americans have never hired a financial planner, 38% of whom say it’s because they are capable of managing their finances alone. Many Americans who have hired a financial professional, however, report feeling confident at the sight of relatively complex financial terminology such as long-term care insurance (41%), Roth IRA (69%), and annuities (49%).

While roughly one half of Americans who have never hired a financial professional feel confident with traditional terms such as “life insurance” (51%) and “401(k)” (52%), the proportion of those who feel confident seems to drops when it comes to more complex areas such as “long-term care insurance” (31%), “Roth IRA” (42%), and “annuities”(28%).

“These results further emphasize the importance of planning for a healthy financial future,” said Mark J. Hanna, CLU, ChFC, MDRT president. “Consider working with an advisor like hiring a professional builder to renovate your home. While you may be able to paint the walls on your own, your overall knowledge wouldn’t enable you to replace your pipes or build new cabinets in your kitchen.”

Of the Americans who have never hired a professional, less than one half (46%) have a retirement plan or emergency fund, 19% have a long-term financial plan for the future, and 46% own life insurance. This is in contrast to the 21% who have hired a financial planner, in which 77% have a retirement plan or emergency fund, one half have a long-term financial plan for the future, and 63% own life insurance. Among those who have never hired a financial professional, when asked why:

·       44% say they don’t have enough assets or money to need one.

·       38% say they are capable of managing their own finances.

·       36% say it would cost too much money.

“Working with a financial professional gives you a resource for deeper understanding of financial terminology and planning capabilities, ensuring you protect yourself and your family with a well-rounded plan,” said Hanna.

Thirty-six percent of employed millennials (ages 18-34) whose company offers a 401(k) or pension plan are not participating in it, despite a 2016 MDRT survey findings that the average millennial expects to retire at a younger age than other generations.

This survey was conducted online within the United States by Harris Poll on behalf of MDRT from February 6 to 8, 2017, among 2,202 U.S. adults ages 18 and older, among whom 490 have hired a financial planner and 1,712 have not. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables, please contact Emily Bunce at ebunce@gscommunications.com.

ID Federation Announces Vertafore's Certification to Offer SignOn Once to Agents

Independent insurance agencies will reduce login and password issues and connect securely to carrier partners through a leading agency management system, following the certification of Vertafore Inc. to use the SignOn Once trusted framework.

Developed by ID Federation Inc., a broad, nonprofit coalition of partners from throughout the insurance industry, SignOn Once is an initiative to enable multiple business partners to connect with a single, secure sign-on process, which is commonly called a "federated" handshake or transaction. SignOn Once is a process, not a product.

SignOn Once offers agents and insurance companies a fast and secure way to connect electronically, improve agents' access to insurance products and services, and reduce transaction costs. Agents and carriers consistently rank password management as their number-one pain point in daily operations.

"This is a breakthrough moment for the independent agency system," said Steve Aronson, president of Aronson Insurance and an ID Federation director. "It is common for small and midsize agency employees to have to remember dozens of user IDs and passwords for business partners. From a technology administration standpoint, that translates into hundreds of access credentials -- for each employee -- which is time-consuming and resource-intensive. SignOn Once eliminates all that by providing a reliable and secure platform for identity management in trusted transactions with many different insurance partners."

Further, Mr. Aronson said, "ID Federation is excited to name Vertafore as the first agency management system certified to offer SignOn Once, and we look forward to certifying additional partners soon."

"Vertafore is psyched about bringing SignOn Once to our portfolio of insurance industry technology tools," said Bruce Winterburn, Vertafore's vice president, industry relations. "This is a game-changer for both insurance agencies as well as carriers. It makes trusted transactions easier and faster, and ultimately it enhances the insurance industry's ability to serve customers' needs."

House Republicans Introduce Plan to Replace ACA

Republicans in the United States House of Representatives have put forth what they describe as “fiscally responsible legislation to deliver relief from Obamacare’s taxes and mandates and lay the groundwork for a 21st century health care system.”

More specifically, the primary Committees with jurisdiction over health care – the Ways and Means and Energy and Commerce -- have released proposed legislation that not only repeals the law, but replaces it with reforms President Trump laid out.

In summary, here’s what the combined proposed legislation will do:

Deliver Relief:  Dismantles the Obamacare taxes that the Republicans believe have hurt job creators, increased premium costs, and limited options for patients and health care providers -- including taxes on prescription drugs, over-the-counter medications, health-insurance premiums, and medical devices.

Eliminates the individual and employer mandate penalties, which forced millions of workers, families, and job creators into Obamacare plans that they don’t want and cannot afford.

Preserve Patient Protections:  Prohibits health insurers from denying coverage or charging more money to patients based on pre-existing conditions.

Helps young adults access health insurance and stabilize the marketplace by allowing dependents to continue on their parents’ plan until they are 26.

Advance 21st Century Reforms:  Establishes a Patient and State Stability Fund, which provides states with $100 billion to design programs to meet the needs of their patient populations and help low-income Americans afford health care.

Modernize and strengthen Medicaid by transitioning to a “per capita allotment” so states can better serve the patients most in need.

Empower individuals and families to spend their health care dollars the way they want and need by enhancing and expanding Health Savings Accounts (HSAs) -- nearly doubling the amount of money people can contribute and broadening how people can use it.

Help Americans access affordable, high-quality health care by providing a monthly tax credit -- between $2,000 and $14,000 a year -- for low- and middle-income persons and families who don’t receive insurance through work or a government program.

Ramifications of the Relationship Between NAILBA and AALU

On September 14, 2016, a press release issued jointly by the National Association of Independent Life Brokerage Agencies (NAILBA) and the Association for Advanced Life Underwriting (AALU) announced the two-year anniversary of the strategic partnership between the two organizations.  Not really knowing about the two-year-old relationship, I was intrigued.

The reasons stated in the release for the partnership between these two fine organizations is straight-forward and clear.  Kay Dempsey, AALU’s Government Affairs Committee Chair and former NAILBA Board member, was quoted as saying, “Both the AALU and NAILBA Boards have always anticipated the future challenges and opportunities.”

Likewise, Chip Van Dusen, NAILBA 2016 chairman and active AALU member said, “We’re in a challenging environment, and real leadership stems from focusing on the things we can control – that’s exactly what we’re trying to do.”

A good summary of the initial thought behind the organizations coming together was presented in the piece:  “Both organizations recognize that, during these challenging times, associations representing distribution need to come together to drive more value, more efficiently.”

All that makes good sense. 

The intriguing language of this release lies in its discussion of the steps moving forward.  The release states, “During the next year, NAILBA will utilize outside resources to evaluate how it can most effectively represent its core constituency – including whether a stronger, more integrated relationship with AALU will help accomplish that mission.

“Part of AALU’s core strategy for the next 12 months is to become a more inclusive organization in order to strengthen its ability to grow, promote, and advocate for the life insurance distribution community.

“Both AALU and NAILBA leadership believe that a more unified effort between the two organizations will lead to better outcomes for their respective memberships, the industry, and most importantly, the American families and businesses who depend on life insurance products.”

That language raises all sorts of questions in my mind.  What outside resources?  What does a more integrated relationship mean?  Is there perhaps a merger in the works? What does it mean to become a more inclusive organization? Why does AALU the brokerage distribution system so crucial to its success?

These two organizations are significant players in the life insurance business, particularly on the distribution side of the equation, and the answers to these kinds of questions are important.  As 2017 progresses, we’ll be watching with interest as to how this relationship grow and develops and how the partnership answers these questions.

Brokers Bullish on Organic Growth in 2017

Reagan Consulting, a management consulting firm providing strategic consulting, valuation, and merger-and-acquisition (M&A) services to the independent insurance distribution system, has released a report that states that organic revenue growth among agencies and brokerage firms fell in 2016 to 4.2%.  This is the lowest annual rate since 2011. The year ended on a positive note, however, as fourth-quarter organic growth outpaced the 3.6% recorded in the third quarter.

"The fourth-quarter uptick was among several factors that are making brokers optimistic that better days are ahead," said Kevin Stipe, president of Reagan Consulting.  "In fact, brokers participating in Reagan Consulting's Organic Growth and Profitability (OGP) Survey are projecting 6.0% organic growth in 2017."

Broker optimism for 2017 seems to be driven, in part, by the new administration, which is widely perceived to be business-friendly and intent on driving faster economic growth. With property and casualty prices expected to remain soft for at least another year, faster economic growth will likely be necessary for brokers to achieve their expectations, Stipe said.

"Since 2013, broker organic growth has been levitating above weak GDP growth and declining p-c pricing," Stipe commented. "Organic revenue growth can't continue to defy gravity, so GDP will need to increase if brokers are going to achieve their growth goals."

A look at trends by line of business shows a divergence -- with group benefits once again outpacing commercial p-c. Group benefits growth accelerated to 6.8%, versus 5.5% in 2015. On the other hand, commercial p-c declined again, falling to 3.3% from 5.3% the year before.

 Agency profit margins, as measured by earnings before interest, taxes, depreciation and amortization (EBITDA) experienced virtually no change in 2016, at 20%. Operating margins, which have continued a three-year decline, fell to 12.2% in 2016. Unlike EBITDA, operating margins do not include contingent income, which represents a growing percentage of revenue for many agencies and brokerage firms. Stipe cautioned that profit margins could shrink if contingent income returns to historical levels in the 7%-7.5% range. In 2016, contingent income reported by participants in the survey was 8.5% of revenue.

Connecticut Governor Malloy Announces Proposal to Support Local Insurance Industry

In a recent press release, Governor Dannel P. Malloy announced that the Connecticut budget proposal he will release next week will include a reduction in the tax rate on insurance premiums – dropping from the current rate of 1.75% down to 1.5% The Governor explained that lowering this tax rate will continue his state’s efforts to improve the business climate for insurers located across Connecticut, which account for more than 58,000 jobs in Connecticut.

“There are simple and relatively inexpensive ways we can improve the business climate by making state government more predictable and sustainable,” Governor Malloy said. “The insurance industry has a long and storied history in Connecticut, and we must ensure that we maintain our competitive edge so that they continue to thrive and grow in our state. Restructuring and lowering the premium tax will substantially improve market conditions for Connecticut-based insurance companies. This change will save them millions in taxes paid to other states across the country.”

A total of 49 states and Washington, D.C. have some form of the premium tax, with rates ranging from 0.5% to 4.35%. Insurers pay the higher of the two premium tax rates to the state where they are conducting business. By lowering the insurance premium tax rate to 1.5% in Connecticut, the liability for Connecticut-based insurers conducting business in states with lower tax rates will be significantly reduced. Under the Governor’s proposal, the costs of lowering the tax rate – $22 million – will be covered by limiting use of tax credits that companies may apply against premiums tax liability.

This proposal makes Connecticut a more competitive state for the insurance industry, Governor Malloy’s office said, by moving to match the lower rates in some other states. If an out-of-state insurer is writing a policy in Connecticut and the insurer’s home state has a higher premium tax rate, however, then that insurer will continue to pay the higher premium tax rate to the State of Connecticut.

Governor Malloy will present his full FY18-19 state budget proposal on February 8 during an address to a joint convention of the Connecticut General Assembly.

Critical Illness and Accident/Personal Injury Coverage Lead Growth Products

In a recent report, voluntary critical illness insurance and accident/personal injury accident insurance both tied for first in terms of growth products for carriers over the next two to three years. Hospital indemnity/supplemental medical, universal life/whole life, and term life rounded out the top five. Hospital indemnity/supplemental medical products are new to this particular list in 2016, while universal life/whole life jumped ahead of term life in this year’s survey. Short-term disability fell out of the top five for the first time in four years.

In terms of growth products for the voluntary/worksite industry overall, critical illness again took the top spot, with hospital indemnity/supplemental medical taking over second place, moving accident to third.

Term life insurance is the most frequently offered voluntary product among the carriers responding to the survey. This was followed by critical illness and short-term disability and term, which tied for third. Very few of the participating carriers rated any voluntary product as “very profitable.” AD&D, accident/personal injury, and term life, however, were listed most frequently. The majority of carriers rated their products as having “average profitability,” which is similar to the 2012 and 2014 surveys. Cancer and long-term care coverage were the only products rated as “not profitable or financially attractive” by any of the respondents.

Voluntary Product Trends is an Eastbridge Frontline™ Report. Eastbridge Information Partners as well as survey participants receive the Frontline™ Reports free of charge. For more information regarding the Information Partner program or about Eastbridge reports, email the company at info@eastbridge.com or visit the website at www.eastbridge.com.

Pan-American Life Insurance Group and Mutual Trust Financial Group Announce the Merger of Their Mutual Holding Companies

NEW ORLEANS, LA and OAK BROOK, IL – Pan-American Life Insurance Group and Mutual Trust Financial Group, today jointly announced a definitive merger agreement to combine Pan-American Life Mutual Holding Company (Pan-American Life) and Mutual Trust Holding Company (Mutual Trust), both mutual insurance holding companies. The merger will strengthen the combined company’s position as a premier life, accident and health insurance provider in the Americas. Upon closing, the combined company will continue to operate as a mutual insurance holding company with approximately $1 billion in revenues, $5.5 billion in total assets, 1.5 million covered lives, and 1,650 employees. The combined company also will have about $1 billion in total capital, enhancing its financial strength.

The company says that the addition of Mutual Trust’s business complements and further solidifies Pan-American Life’s presence across its three high-growth businesses: International Group, International Life, and Domestic Group. MTL Insurance Company’s (MTL) meaningful presence in the U.S. life market and expertise in the mass affluent market is expected to provide a new source of U.S.-focused growth, along with a leading technology platform to drive operational efficiencies in the combined domestic life business.

“This merger brings together each company’s 100-plus year history and culture to create a company with enhanced growth opportunities, diversification and financial strength,” said José S. Suquet, chairman of the board, president and chief executive officer of Pan-American Life Insurance Group. “Our shared vision, complementary geographic footprints and the opportunity to provide increased penetration of the U.S. Hispanic market for both companies’ core products make this merger attractive for both organizations and our distribution partners.”

“The merger of Pan-American Life and Mutual Trust combines two leading organizations with significant financial strength, complementary businesses, and strong operations in their respective markets,” said Stephen Batza, chairman, president and chief executive officer of Mutual Trust Financial Group. “Together, we will have accelerated growth prospects, superior financial flexibility, and an enhanced ability to serve the needs of our policyholders and distribution partners.”

Pan-American Life's proven financial strength, strong record of profitable growth and focus on Latin America and the Caribbean, combined with Mutual Trust’s unique product expertise and established market position creates an attractive insurance platform well-positioned to continue to meet the needs of policyholders.  As a result of the merger, the combined company will achieve greater balance between its international and domestic businesses. Given the complementary nature of the business, Pan-American Life and Mutual Trust expect a seamless and quick integration.

“We believe this merger allows us to continue growing profitably by establishing a dedicated U.S. individual life business with the enhanced ability to bring value to our customers, distributors, employees and the communities we serve. We will work closely with Mutual Trust to ensure the smoothest possible transition for employees and uninterrupted service for customers. This merger is strategically compelling for both companies and we expect it to result in enhanced growth prospects and new opportunities for employees and distributors,” said Mr. Suquet.

Upon completion of the merger, MTL will operate as a wholly owned subsidiary of Pan-American Life and complement Pan-American Life’s existing U.S. life business by combining it with MTL’s well-established U.S. platform for individual life insurance into one Domestic Life business unit. The merger will have no impact to current MTL policyholder terms, and the existing process by which policyholder dividends are determined will remain in place as part of the dividend protection plan included in the merger agreement. 

As part of Pan-American Life, MTL will continue to execute its current strategy and operate under the MTL brand name.  In addition, there are not expected to be any significant changes to MTL’s current distribution channels or management team.  Stephen Batza will lead Pan-American Life’s re-launched Domestic Life business from MTL’s current headquarters in Oak Brook, Illinois. Both companies will look to share best practices and collaborate on product development and technology. The combined organization will have its global headquarters in New Orleans, Louisiana, and will be led by José S. Suquet.

The merger has been approved by the boards of directors of both Mutual Trust and Pan-American Life, and is expected to close in the second half of 2015, subject to policyholder and regulatory approvals and customary closing conditions. Upon closing, Pan-American Life’s current nine-person board will be expanded to 12 members, including Stephen Batza and two additional current board members of Mutual Trust.

Aartrijk Opens Registration for Brand Camp 2015: Interactive Insurance Marketing Conference, Booked for May 17-19 in St. Louis, MO

Insurance content-marketing firm Aartrijk opened registration for its Brand Camp 2015 event for insurance brand decision-makers, to be held May 17 to 19 in St. Louis, Missouri.

This conference is designed for insurance marketing leaders with carriers, agents and brokers, trade associations, and service providers. Registration is available via the event website: www.Aartrijk.com/BrandCamp2015.

Aartrijk invites insurance professionals who work in management or marketing to attend Brand Camp 2015 for an interactive, hands-on experience of learning and exchanging ideas.

At Brand Camp, subject matter experts provide the content foundation to spark conversation that engages participants, according to program chair Rick Morgan, senior vice president of Aartrijk. "We see constructive interaction and idea exchange on key issues, giving rise to shared discovery and learning," Mr. Morgan said. "The participation among attendees sets Brand Camp apart and makes the sessions both motivational and actionable."

The campsite for Brand Camp 2015 is the Magnolia Hotel St. Louis, which is on the National Register of Historic Places. The event will take place in the same location as the meetings of the Agents Council for Technology (ACT) and ACORD User Groups Information Exchange (AUGIE), which will begin after the conclusion of Brand Camp on Tuesday, May 19.

This is the fifth Brand Camp to be held since the late Aartrijk principal Maureen Wall Bentley conceived the event in 2008. At this event, insurance professionals uncover new marketing approaches and refresh their outlook on effective strategies and tactics.

Topics have included video, social networking, blogging, mobile applications, publicity, editorial, design, brand identity and logos, brand alignment, employee engagement, brand valuation, websites, trade advertising and demographics -- all from the perspective of how insurance firms can leverage them.

According to Mr. Morgan, "Brand Camp always features fresh conversations about the relationship of the business with the brand, the importance of strong design and content, brand messaging, and effective use of technologies.”

Attendees help determine each Brand Camp topic discussion. Please direct questions or content ideas to Rick Morgan at rick@Aartrijk.com or via the Aartrijk Google+ page at plus.google.com/+Aartrijk99.