Volume 6, Issue 10 | April ObamaÕs 2013 budget...

Property-Casualty :: Page 7

Allstate agents see tax form errors

33

Pa. insurer liquidatedPennsylvania insur-ance regulators are liquidating First Seal-

ord Surety Insurance. Page 3

Enticements comingRetirement plan spon-

sors adding new features to entice more investing.

Page 5

Surprise auditsNew York insurance

regulators plan surprise audits on insurers and HMOs.

2

22

Industry execs ‘deeply concerned’ with new taxes on COLI, dividend-received deductions

By Jaime L. BrockwayA group of insurance

associations is concerned about the implications that new taxes included in Presi-dent Obama’s 2013 budget proposal, introduced Feb. 13, will have on the life insur-ance industry.

The federal budget pro-posal would revitalize two provisions initially proposed in the 2010 budget that were rejected by Congress: one concerning corporate-owned

life insurance (COLI) and one about life insurers dividends-received deduction (DRD).

“As an industry that helps 75 million Ameri-can families and thousands of businesses re-sponsibly plan for their financial futures, the life insurance industry is deeply concerned about provisions in the Administration’s proposed 2013 budget that amount to

Obama’s 2013 budget proposal could ice life insurance sales

Required reading for successful insurance and financial service professionals

Volume 6, Issue 10 | April 2012

Inside Bad-mouthing of agent costs insurance firm $3.25 million in rulingBroker alleges that Questar Capital made defamatory statements about him to clients

By Jaime L. BrockwayAn insurance broker won $3.25 million from

its former employer, Questar Capital Corp., after a financial arbitration panel found the firm guilty of defamation and breach of contract.

Thomas J. Gorter alleged that Questar made defamatory statements about him to his clients and made false reports to regulators regarding his employment, according to documents from the Financial Industry Regulatory Authority (FINRA) arbitration panel.

Questar, based in Minneapolis, Minn., is an independent broker-dealer

Matt Finn, Guardian’s top wholesaler for brokerage disability insurance in 2010!

888.513.2300www.DisabilityQuotes.com

Even with health exchanges, care for few sickest will come from wallets of healthiest ‘Substantial differences’ in health spending to continue after health reform changes take hold

By Bob GrahamEven with health reform, the sickest people using the U.S. health care system will continue to have their treatment and utilization paid by those who are healthy, a new report affirms.

To effectively curb health care costs, the re-port argues, the “substantial differences” in

spending and utilization between the privately insured under age 65 and Medicare age 65 and other populations must be considered.

The IMS Institute for Healthcare Informat-ics report found that the privately insured seg-ment, particularly those health plan members under age 65, will remain the “dominant part of the payment system” even as the health care landscape transforms with the implementation of the Patient Protection and

11

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PERMIT NO. 6438

Insurance & Financial Advisor P.O. Box 628Hunt Valley, MD 21030

DATED MATERIALPlease deliver between March 22-24, 2012

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// Pennsylvania insurer buys benefits marketing company

Aon Affinity buys a Texas-based discount benefits plan company, Access Plans, for $70.1 million. Page 4

See “Taxes” on p 18

See “Ruling” on p 6

See “PPACA” on p 12

Barack Obama

Pennsylvania

New Jersey

Delaware

Insurer wants to add 3,700 7

New York Life adding staff in all regions, looking to serve wide range of ethnic groups.

51%

Added full-time staff18%

Added part-time staff12%

5%

Reduced full-time staff

Reduced full-time staff

14%

None ofthe above

Majority of agencies keep staffing the same

Source:IFAwebnews.com poll, Jan. 15-31. 2012

Majority of agencies keep staffing the same

I have done the following at my insurance agency in the last year:

2 | Pennsylvania / New Jersey / Delaware Insurance & Financial Advisor | IFAwebnews.com April 2012

2Pennsylvania

IFAwebnews.com posted a blog from Kyle Scott, a professor at

Duke University, on workplace ethics. He discussed Robin Hood,

the hero who stole from the rich and gave to the poor. But what

about the agent who fudges numbers – or worse – and blames a

difficult economy, a decrease in sales or government intrusion for

his or her need to act unethically or even criminally?

Balderdash, says Scott. Even during good times unethical be-

havior rears its ugly head. In either case, it leads to often disastrous consequences, not

only professionally but also personally.

Take these cases, for example, which were recently posted in the “On The Record”

section of IFAwebnews.com and the pages of Insurance & Financial Advisor. They show

agents paying fines and in many cases spending years in jail:! Two Petersburg, Va., men — an agent and a minister — pleaded guilty in a

$400,000 insurance fraud scheme.! A Baltimore life and health agent was indicted in connection with an

alleged scheme to defraud clients of nearly $850,000.! A Scranton, Pa., agency owner pleaded no contest to felony theft for

stealing money from new clients to cover up money taken from earlier

clients. Another agency owner, from Berks County, was accused of

stealing $255,000 in premiums.! A Cherry Hill, N.J., agent was indicted for allegedly pocketing more than

$172,000 from clients and failing to remit premiums.! Three Ohio agents were accused of pilfering $405,000. Another Ohio agent

lost her license for failing to remit premiums and co-mingling funds.! A North Dakota agent will spend four years in prison for diverting

incoming premiums to others.! A Boston broker must pay $1.7 million for overcharging a client and

concealing fees and commissions.! A Florida agent charged homeowners for wind mitigation inspections not

required by law, and faces jail time.! A New York producer defrauded life insurers of $33 million, one year after

he was sent to prison for a similar scheme.

Some cases are not so criminal, but nonetheless sloppy and irresponsible, such as

a local agent who was placed on five years of license supervision and ordered to make

payments for not paying state corporation taxes for multiple years, or a registered rep

who was fined $5,000 for improperly handling applications, or another agent whose

license was revoked for forging signatures.

Unfortunately, the well from which we report these stories never runs dry.

Regardless of the state of the economy, the state of one’s business, or what others are

doing, Duke’s Scott says that the business, psychological and potentially legal ramifi-

cations of acting unethically are just not worth it. I concur.

That’s my take,

Exclusive insights only available online

//AgentSuccess

// Sales

8 tips for becoming an unconventional thinker that beats the competitionLeaders inspire people to do amazing things, the type of things that their followers would not do on their own. With leadership, a vision and competitive advantage becomes reality. The more change an organization is facing, the greater the need for leaders. IFAwebnews.com/link/268

// Agency Management

4 aces to make sure that hiring workers is no poker gameThese four aces will ensure that any new hire is the right hire because it sets the right stage in the interview for making a hiring selection.

IFAwebnews.com/link/269

//Top Online Stories

1| Obama’s 2013 budget will discourage people from buying life insurance IFAwebnews.com/link/271

2| Pa. insurance department liquidates First Sealord Surety Insurance IFAwebnews.com/link/265

3| Most, least expensive 2012 car models to insure announced IFAwebnews.com/link/266

“ It is no longer our elected politicians on Capitol Hill that are making the decisions affecting our lives. It is the bureaucrats who work for the U.S. Department of Health and Human Services (HHS).”

- Ross Schriftman blog post on federal health reform law IFAwebnews.com/link/267

Calendar of EventsUpcoming local events, seminars and other activities. Post your events.

IFAwebnews.com/Calendar

Blogs & OpinionsOur team digs deeper than the headlines for insights on what the news really means.

IFAwebnews.com/Blogs

Tony OndrusekPublisher

[email protected]

Bob GrahamExecutive Editor

[email protected]

Sharon SchaferAdvertising Sales [email protected]

Insurance & Financial Advisor

P.O. Box 628, Hunt Valley, MD 21030Phone: 877-IFA-5001 / 410-667-0864

Fax: [email protected] [email protected]

New Horizon Group, Inc. owns and publishes Insurance & Financial Advisor editions in Maryland/Washington, D.C., Virginia and Pennsylvania/New Jersey/Delaware. The papers are free for insurance and financial service professionals in these areas. All content is protected by U.S. copyright law and may not be reproduced, copied or transmitted in any form without permission of the publisher. Submissions may be edited or altered. All information supplied by columnists or contributors is the writer’s opinion only, and not a substitute for professional legal or technical advice.

The publisher assumes no liability for errors or omissions.

// Publisher’sNote

Desperate times call for more ethical behavior, not desperate

Tony Ondrusek Publisher

Pennsylvania / New Jersey / Delaware Insurance & Financial Advisor | IFAwebnews.com April 2012 | 3

3

April 2012

Learn More. Earn More. Act Now.Build healthier relationships with current clients and win new ones with BeneFIT, the broker-friendly employee wellness program from

Valley Preferred. Now available to employers throughout Eastern Pennsylvania. Respond now for more facts.

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By Jaime L. BrockwayThe Commonwealth

Court approved the Pennsylvania Insur-ance Department’s petition to liquidate a Villanova, Pa.-based bond and surety com-pany that experienced a “steep” drop in surplus.

First Sealord Surety Insurance began its operations in 1991 as a mono-line insur-ance company underwriting surety bonds. The firm insured construction general contractors and subcontractors against loss. Until recently, when it stopped writ-ing bonds, it offered coverage in 39 states.

“I petitioned Commonwealth Court for a liquidation order because First Sealord Surety is no longer able to meet its policy-holder obligations or pay its debts as they come due,” said Insurance Commissioner Michael Consedine in a statement. “The

court’s approval of our petition puts numer-ous policyholder safeguards in place and es-tablishes an orderly payment process.”

Under liquidation, the department will take over and secure the company, and marshal all available assets to pay policy-holder claims. The on-site liquidator will analyze the company’s most recent finan-cial data to understand the full scope of the company’s financial hole.

Policies (bonds) terminate within 30 business days of liquidation order.

Policyholders and bondholders are among the first priority of payments and will receive notice of that payment process “shortly,” according to Consedine.

Creditors also are paid in order of prior-ity and follow a proof of claims process.

After the liquidator distributes any sur-plus funds to the shareholders, the com-pany is then formally dissolved.

The department is now on-site at First Sealord, officials said. IFA

Commercial insurers, Medicare are paying 5.28% more for health servicesDeceleration of costs gives way to new increases, monthly analysis finds

Health care services covered by com-mercial insurance and Medicare pro-grams cost 5.28% more for the year ending Dec. 31, 2011, according to the S&P Indices.

The S&P Economic Healthcare Indices for the year ending December 2011 showed an increase compared to the 4.85% rise shown in the year ending Nov. 30, 2011. The indices report results comparing one-year periods ending each month.

Health costs covered by commercial insurance plans increased by 7.11% over the year ending December 2011, moving up from the 6.63% reported for Novem-ber 2011.

Growth rates in Medicare claim costs rose by 2.51%, as measured by the S&P Healthcare Economic Medicare Index, up from the 2.15% reported for November 2011.

“After November’s deceleration, health care costs annual growth rates bounced back in December,” said David M. Blitzer, chairman of the Index Committee at S&P Indices, in a statement. “Since the end of the summer we have generally seen in-creasing annual growth rates, particularly with healthcare costs covered by com-mercial plans. Last month’s data, which was through November 2011, showed a modest deceleration; however, Decem-ber’s data has returned to the accelerated pace and this time it affected all types of healthcare costs.” IFA

// PROPERTY-CASUALTY

Pa. insurance department liquidates First Sealord Surety Insurance

Michael Consedine

Insurance agents and financial service professionals may face additional threats from banks based on new research show-ing that financial institutions that al-low investment and insurance products create a stronger relationship with their members.

People who buy insurance and invest-ments from financial institutions are among the most profitable for the banks

and credit unions, according to the LPL Fi-nancial study.

Those who buy insurance and invest-ments from their banks are most apt to continue to work with that institution, said the study, drawn from the analysis of 1,500 affluent households by MicroMonitor.

Ffinancial institutions are “under-in-vesting” in their investment and insurance services businesses, the authors said. IFA

// TREND WATCH

Banks, credit unions fighting to lure insurance, investment clients


4Pennsylvania

// UPCOMING EVENT

Pittsburgh I Day slated for April 26 at Wyndham Grand Downtown


N.J., Mass., S.C. auto reforms showing ‘long-term positive effects’States that undertake regulatory rate re-form of their auto insurance markets appear to see “long-term positive effects,” according to an Insurance Research Council study.

The organization examined insurance markets in three states – South Carolina (reformed in 1999), New Jersey (2004) and Massachusetts (2008). The IRC is a division of the American Institute For Chartered Property Casualty Underwriters, provid-ing knowledge solutions for the risk man-agement and property-casualty sectors.

Researchers say they found that in each state insurance premium expenditures declined relative to previous trends and projections.

They also found that insurance availabil-ity increased or was maintained at previous levels as insurers were encouraged to write more business and enter markets for the first time and that insurer underwriting results were maintained or improved to be consis-tent with regional or national averages.

The study also suggests that in states that undertook reform, underlying claims rates decreased or remained at pre-reform levels.

“The results of this study show that regulatory reforms have led to a number of positive developments without leading to increases in insurance prices or reduc-tions in availability or service quality,” said Elizabeth A. Sprinkel of the IRC. IFA

The 86th Annual Pittsburgh I-Day Con-vention is scheduled for April 26 at The Wyndham Grand Pittsburgh Hotel Down-town in Pittsburgh, Pa.

The event includes a continental break-fast, a selection of continuing education courses, each of which provides two CE credits, and a vendor exhibition. The lun-cheon speaker will be Dan Skowronski,

senior vice president of MarshBerry.The event theme, Insurance: The Next

Generation, is built upon the emerging need for a new generation of insurance professionals, according to organizers.

For more information, contact Elaine Barnes at 412-594-7502 or Irene Barbara at 724-836-1510 ext. 590, or email the Insur-ance Club office at [email protected]. IFA

Aon Affinity buying benefit plan marketing company

// CRIMINAL CASE

N.J. woman accused of insurance fraud, forgery in obtaining drugs

// Access Plans Timeline

1998 Formed as Alliance HealthCard

2009 Renamed Access Plans

2011 Bought by Aon Affinity for $70.1 million

Pennsylvania company pays $70.1 million for discount program firm based in Texas

Aon Affinity is buying Access Plans, a marketing company that specializes in turnkey, private-label membership ben-efit plans that provide discount products and services, protection benefits and re-tail services to more than 1 million cus-tomers in the United States and Canada.

Aon Affinity, the Hatboro, Pa.-based consumer, association and group pro-gram business of Aon Risk Solutions, will pay about $70.1 million.

The carrier said the boards of directors of both companies approved an agree-ment under which Access Plans will merge with an Aon Affinity subsidiary.

The holders of a majority of the out-standing shares of common stock of Ac-cess Plans executed written consents

approving and adopting the merger agree-ment and the merger shortly after the exe-cution of the definitive merger agreement by the parties.

In December 2009, Alliance Health-Card, based in Texas, became known as

Access Plans to better identify its business activities as a developer and distributor of a whole range of membership plans, discount services, discount healthcare programs and insurance plans, accord-ing to the company’s website. IFA

By Jaime L. BrockwayA Barnegat, N.J., woman was indict-

ed on 21 counts for allegedly submitting fraudulent claims for payment and reim-bursement of “controlled, dangerous” pre-scriptions to her insurance company.

Dana Garrison, 31, allegedly made false and misleading statements of fact in at least five claims submitted to Horizon Blue Cross & Blue Shield between April 13, 2008, and May 21, 2010, according to the Barnegat-OceanAcresPatch.

Garrison also was charged with seven counts of uttering a forged instrument

for allegedly submitting forged prescrip-tion blanks to area pharmacies in efforts to obtain drugs, the newspaper reported. In six of those seven alleged crimes, the grand jury also found evidence to charge Garrison with obtaining a controlled, dangerous substance by fraud, as well as possession of a controlled, dangerous substance, the Barnegat-OceanAcres-Patch reported.

Garrison allegedly obtained by fraud alprazolam, hydrocodone and oxycodone from various pharmacies in Toms River, Barnegat and Brick, N.J. IFA

// TREND WATCH

Hardening of marina, boat dealer’s insurance rates seen The marina and boat dealer’s insurance market appears to be hardening after in-surers suffered increased losses in 2011, according to early indicators.

Due to the large losses carriers sus-tained during 2011’s storm season, carri-ers are increasing rates and deductibles across the entire class of business, ac-cording to a statement from Stuckey & Co., a specialty insurance provider based in Lake St. Louis, Mo., that has a network of 8,000 licensed insurance agents. Many carriers have “vanished” from market. IFA

// UPCOMING EVENT

NAIFA-PA slates Sales Symposium for April 19The National Association of Insurance and Financial Advisors of Pennsylvania (NAIFA-PA) scheduled its Central Re-gional Sales Symposium on April 19 at the Penn Grant Centre in Harrisburg, Pa., from 8 a.m.-3:30 p.m.

The event includes speakers on strong client referrals, professionalism in com-munication and regional economic out-look, among other topics.

For more information, contact Darrell Westby at 717-697-2031 or the NAIFA-PA office at 717-234-2523. IFA


5

April 2012

Driving independentagencies todistinction requires

protection.See protection in actionat iabgroup.com/protectionor scan the QR codewith your smart phone.

Retirement plan sponsors adding new featuresEmployers hoping to boost participants’ investment, planning for future expenses

By Bob GrahamNearly half (49%) of 401(k) plan spon-

sors are offering features to automati-cally increase participants’ contributions as they seek to improve their employees’ preparation for retirement, a new Deloitte study finds.

But the majority of plan sponsors (64%) say fewer than one-in-10 participants use the services, according to the poll of ex-ecutives responsible for their companies’ 401(k) plans.

Exactly 84% of the executives polled said they expect the majority of their em-ployees not to be ready to retire with their current plans, according to the 11th Annual 401(k) Benchmarking Survey conducted by Deloitte, the International Foundation of Employee Benefit Plans (IFEBP) and the In-ternational Society of Certified Employee Benefit Specialists (ISCEBS).

“From this survey we’ve learned that for the past several years Americans have not been saving and investing enough for retirement,” said Stacy Sandler, principal

of Deloitte Consulting. “Rising healthcare costs and dropping 401(k) balances have taken their toll on employees. Those factors, combined with record levels of personal debt, high unemploy-ment and low levels of personal savings con-tinue to paint a highly concerning picture of retirement readiness.”

Nearly two-thirds of respondents (64%) say their responsibility includes taking an in-terest in whether em-ployees are on track for a comfortable retirement.

In another effort to encourage plan par-ticipants to save more by becoming better informed about their benefits, the U.S. De-partment of Labor (DOL) issued regulations in 2010 that required regular disclosures to every 401(k) plan participant. Plan provid-ers and plan sponsors must deliver the first round of these disclosures this year. Just 39% of respondents say they are very in-formed and included in the design process when it comes to their ability to deliver the

disclosures beginning Jan. 1. More than half (56%) say they are somewhat informed.

The survey also found that 79% of plan sponsors indicated it is quite important

or very important to improve under-standing of (and potentially reduce) plan fees.

Most executives (83%) said they thought their plans were competitive.

The survey also found that only 15% of respondents sur-

veyed say less than half their employees participate in a 401(k) plan.

Compared to the 2010 survey, the aver-age participant account balance has been flat or slightly down.

Auto enrollment continues to grow; 56% of 401(k) plans include an automatic enroll-ment feature, up 7% from 2010.

Nearly three-quarters (71%) of plan sponsors rated the new fee disclosure requirements as quite important or very important. IFA

Pre-boomers participate mostThe majority of plan sponsors (70%) reported the average age range of participants is between 41 and 50 years old, representing a slight (4%) increase from the 2010 survey.Source: Deloitte 11th Annual 401(k) Benchmarking Survey

// IFA_FAST FACT

// DONE DEAL

Sagicor Life Insurance buying out PEMCO’s 10,000 term, whole life policies and 7,500 clientsSagicor Life Insurance Co. has an agree-ment to buy the policies and clients of PEMCO Life Insurance Co. from its parent company in Washington State as the latter firm leaves the life insurance market.

Tampa-based Sagicor is buying about 10,000 term and whole life policies, along with about 7,500 clients, from PEMCO Mutual Insurance Co., a Washington State-based company.

The transaction, for which financial terms were not disclosed, is subject to ap-proval by the Office of the Insurance Com-missioner of the State of Washington.

PEMCO decided to exit the life busi-ness to concentrate on its core business of personal lines and property-casualty insurance, Sagicor officials said in a statement announcing the deal.

Sagicor, a wholly owned subsidiary of Sagicor Financial Corp., has total as-sets of $870 million and is licensed in 44 states and Washington, D.C. The compa-ny markets primarily through indepen-dent agents and general agents. IFA


6Pennsylvania

NewProductsSpeciality insurer develops protection for multinationals

Beazley Group plc, based in New York, N.Y., introduced

Beazley Bridge, a solution designed to help brokers secure robust directors and officers (D&O) insurance coverage for U.S. multina-tional corporate clients to cover executives outside the United States.

The solution simplifies the process of obtain-ing coverage for international risks such as increased regulatory scrutiny, emboldened activist investors and the wider adoption of collective and class actions, by leveraging Lloyd’s global network of insurance licenses, which now extends to more than 65 coun-tries, company officials said.

Retirement program builds in guaranteed income stream

ING’s U.S. Retirement division introduced the ING

Lifetime Income Protection Program, a new asset allocation program to help 401(k) plan par-ticipants to convert their savings into a stream of guaranteed income lasting through retirement.

The Windsor, Conn.-based company’s program provides participants with a series of target date asset allocation models, or portfo-lios, that help build critical retirement savings followed by an income benefit for life, guaran-teed by multiple leading insurers.

Broker offers liability coverage for nonprofit directors, officers

Atlantic Specialty Lines, based in Richmond, Va., en-

hanced its Directors & Officers Liability cover-age for nonprofits at no additional premium.

These coverages are designed to protect the insured from unforeseen expenses from threats to information or their people. The coverages include data breach expense, identity theft expense, workplace violence expense and kidnapping expense. All are offered at a $50,000 sub-limit.

Wealth management firm updates producers, client sites

Emoney Advisor, based in Conshohocken, Pa.,

released Version 7.6 of eMoney 360 and 360 Pro, two wealth management solutions, including advanced planning and advisor site enhancements.

Version 7.6 client site enhancements include new budgeting tools, interactive investments with intraday pricing and a new interface. The

7.6 Version advisor site includes multi-genera-tional transfers reporting, estate calculators and expanded asset classes, among other things.

Mass.-based carrier amps up its customer service center

The Hanover Insurance Group, based in Worcester,

Mass., enhanced its Customer Service Center.

The new capabilities include extended service hours, annual personalized out-bound phone calls to every commercial customer, disaster-recovery services and calls answered by live licensed professionals, company officials said.

Life insurer adds death benefits to universal life product

Symetra Life Insurance Co., based in Bellevue, Wash.,

enhanced its cash value universal life (UL) insurance product, Symetra Classic UL.

The product now offers three death benefit options and a charitable giving benefit. One death benefit includes a return of the premi-ums paid, designed for individuals looking to maximize the amount of money passed on to their beneficiaries or for businesses that wish to cover key employees.

The charitable giving benefit allows custom-ers to pay an additional benefit of 1% of their policy’s face amount to a charity at no additional cost.

Symetra also expanded the age range for the product’s accelerated death benefit rider for limited activities of daily living and cognitive impairment, making it available for those age 20 to 85.

Discounted pharmaceuticals for underinsured offered

Transamerica Employee Benefits, based in Little

Rock, Ark., launched a voluntary pre-scription drug indemnity benefit provid-ing access to discounted prescription medications for employees without access to health care.

The benefit program provides access to discounted prescriptions, including Walmart’s $4 prescription program. Policyholders in the program also may receive the amount of excess benefit payment back in cash.

For more go to IFAwebnews.com/Products

Financial Services

Life Insurance

Life Insurance

HealthInsurance

Property-Casualty

Property-Casualty

Property-Casualty

The easiest way to submit products is online:IFAwebnews.com/submit-news/

Send your New Products!

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subsidiary of Allianz Life Insurance Co. of North America, a unit of Allianz SE.

In 2007, regulators learned during a routine branch examination by Ken-tucky’s securities division that Gorter, who held two types of state securities licenses, did not have the third one he needed to promote himself as an investment adviser representative. Gorter said in his claim that he relied on the company for compli-ance advice and thought he was properly licensed, according to Reuters.

Questar told Gorter his clients had to be transferred to a registered representative of an affiliated company. In the transfer, Questar found fault with changes Gorter

made to client documents that he says were authorized by those clients.

Gorter then submitted a letter of res-ignation, but the following day Questar terminated him “for cause,” the claim said. The claim also alleges that Questar reported that Gorter was terminated, not that he resigned, and that Gorter “forged documents” without client authority.

Questar allegedly contacted Gorter’s customers and told them he was fired for forging documents, was “never going to be in the business again” and was going to “lose his license.”

The FINRA panel found Questar liable and ordered it to pay Gorter $3.25 million in compensatory damages and $49,000 in costs, Reuters reported. IFA

Ruling: Brokerage must pay $3.25 millionFrom Page 1


7

April 2012

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Caine-Helwig wins 2012 President’s AwardThe Greater Harrisburg chapter of the National Association of Insurance and Financial Advisors (NAIFA) presented its 2012 President’s Award to M. Diana Caine-Helwig, a State Farm agent in Hershey, Pa., in recognition of her service to clients and the community. Her many years of community service include serving as the first female president of Sertoma International. She is pictured with NAIFA-Greater Harrisburg President David Punt.

Send photos of your company events and happenings: [email protected]

associationnews

Opportunities for agents exist with various ethnic markets, many locations in U.S.

By Jaime L. BrockwayNew York Life Insurance Co. plans to

hire 3,700 financial professionals, espe-cially women and those representing mi-norities, this year after hiring more than 3,600 insurance agents last year.

The company, based in New York, N.Y., said it wants to hire women and individu-als who serve ethnic markets, particularly African American, Asian Indian, Chinese, Korean, Hispanic and Vietnamese mar-kets, according to Rich Simonetti, vice president of U.S. Life & Agency Recruiting and Retention.

In 2011, 57% of the company’s hires in the field were women or in-dividuals who represent cultural markets.

New York Life said its recruitment also will focus on men and women moving to the workforce from the military.

Eagle Strategies, the registered invest-ment advisory and subsidiary of New York

Life, plans a 50% increase in the number of advisors in the network by 2015, or 500 new

advisors, to a total of 1,500.Simonetti told IFA that “there are op-

portunities everywhere.” New York Life has offices in all 50 states and is looking to hire across the entire United States.

The ideal candidate for hire as a finan-cial professional, according to Simonetti, has sales aptitude and experience, is com-munity minded, has a competitive spirit, possesses excellent communication skills and demonstrates outstanding character and integrity.

“The demand for financial profession-als is strong,” Simonetti said in a state-ment. “In fact, according to a recent sur-vey, 14% of Americans report they plan to seek professional help managing their finances in 2012.” IFA

New York Life to add 3,700, especially women, minorities

// Growing agency ranks

Growing agency ranks 2011 1,000 New York Life agents2015 1,500 New York Life agents

(planned)

Source: New York Life

// TAX TIME

Allstate alerts insurance agents of errors on 1099 forms it sent them By Jaime L. Brockway

Allstate Corp., based in Northbrook, Ill., informed its insurance agents about errors in their tax documents regarding two incentive programs.

The form 1099-MISC issued to agents that shows their income for the year re-ported incorrect income information re-lated to two incentive programs for some agency owners, according to the compa-ny. In some cases, it also processed some agency owners’ income information to the wrong agent identification numbers, offi-cials said.

About 5,400 agent locations managed by 4,700 agency owners (out of about 11,000) were affected, the Wall Street Jour-nal reported.

Allstate issued a corrected Form 1099-MISC to those agents. The company told agents they may have to file an amended tax return if they already paid their taxes, and promised to reimburse them for the cost of resubmitting their returns.

Allstate also said the reporting system

used to measure an agency owner’s annu-al performance incorrectly aggregated the underlying data for December 2011, there-by producing an inaccurate calculation of some agency owners’ annual bonus pay.

“This issue does not impact commis-sion,” Allstate said in a statement to IFA. “To resolve these issues, Allstate issued a corrected Form 1099-MISC to those agents impacted by this error on Feb. 10.”

The statement noted that Allstate agen-cy owners are independent contractors who own their own businesses.

The company expects to pay the bonus, which historically were distributed Feb. 14, on Feb. 23. Under the agents’ contracts, the bonuses must be paid by March 15, an All-state spokeswoman said.

The company said it identified the er-rors as part of its regular due diligence. IFA

Online CE.At your pace, at your desk.IFAwebnews.com/Career

Rick Simonetti

8 | Pennsylvania / New Jersey / Delaware Insurance & Financial Advisor | IFAwebnews.com April 2012Pennsylvania

LEGALBRIEFSNews from the federal and state courts.

N.Y. Supreme Court rebuffs Aon’s contempt claimsThe New York Supreme Court rejected Aon Corp.’s claim to hold Alliant Insur-ance Services in contempt for allegedly violating a preliminary injunction the

judge issued in December 2011.

Justice Bernard J. Fried affirmed that the December preliminary injunction significantly nar-rowed the scope of a previous temporary restraining order.

In his ruling, Justice Fried concluded that Aon’s broad interpretation of the preliminary injunc-tion was “clearly erroneous” and that “Aon has failed to establish by clear and convincing evidence that Alliant has disobeyed the Order, and thus, Alliant cannot be held in contempt.”

Last year, Chicago, Ill.-based Aon alleged that its former executives conspired with Newport Beach, Calif.-based Alliant to solicit at least 40 other employees of Aon’s construction services group to quit Aon and join Alliant in 2011.

In the December ruling, Judge Fried temporarily barred Alliant and some former Aon employ-ees who joined Alliant’s construction services group from soliciting business from Aon clients on whose accounts the former Aon employees had worked or served as producers.

New insurance law in Michigan sets off legal fireworksNew insurance requirements for retailers selling fireworks set off legal sparks in Michigan, as the companies have filed suit against the state.

A state law that took effect Jan. 1 requires the companies to obtain $10 million in liability insur-ance if they want to sell more powerful fireworks, including those that shoot in the air such as Roman candles and bottle rockets, according to a CBS Detroit report.

The suit, filed in U.S. District Court in Detroit, asks the court to reject the law, arguing that the new law is unconstitutional and puts smaller companies that cannot afford the coverage at a disadvantage. No trial date has been scheduled.

An official in the office of Gov. Rick Snyder told CBS Detroit that the new insurance requirement matched the increased safety concerns of the expanded line of fireworks available for sale.

Two agents allegedly stole $422K from family brokerageTwo insurance agents in Lakeland, Fla., were arrested Feb. 3 for allegedly stealing more than $422,000 from the brokerage for which they worked and

from where their mother retired.

Cynthia Applewhite and Sherryl Devine were promoted to licensed insurance agents at Jack’s Insurance when their mother, Maria Applewhite, one of the two active partners, retired in June 2007. Maria Applewhite is Devine’s mother and Cynthia Applewhite’s mother-in-law.

Between July 2007 and October 2010, Applewhite and Devine allegedly pocketed cash pay-ments for insurance premiums from customers intended for deposit into the Jack’s Insurance business account, according to the Polk County Sheriff’s Office. They also allegedly forged refund checks for customers to make deposits into their personal bank accounts, and allegedly paid themselves from the Jack’s Insurance business account by saying the payments were commissions and pay advances.

Devine paid several of her own bills from the Jack’s Insurance business account, including her mortgage, insurance, auto loan and car repairs.

Applewhite was freed on bond after being charged with felony counts of scheming to defraud and grand theft over $100,000. Devine was charged with the same offenses, but held on bond at the Polk County jail, officials said.

Former N.Y. senator admits fraud involving paymentsFormer New York Sen. Nicholas A. Spano (35th District) pleaded guilty in federal court in White Plains, N.Y., to one count of obstructing and impeding

the due administration of IRS laws.

From 2000 through 2008, Spano, 58, obstructed the administration of IRS laws by filing false federal income tax returns that falsely characterized income he received from an insurance com-pany and his real estate holding company, according to the Federal Bureau of Investigation.

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Royce asks NAIC to answer if it is regulatory or ‘private group’

Ed Royce

Congressman says state commissioners’ group puts ‘spin’ to its benefit in D.C.

By Bob GrahamA congressman from California is ask-

ing the organization representing state in-surance commissioners to explain what it meant last summer when it said it wanted to “to brand itself as a ‘standard-setting or-ganization.’”

Rep. Ed Royce, a Re-publican, asked in a Feb. 28 letter to Kevin McCarty, president of the National Associa-tion of Insurance Com-missioners (NAIC) and Florida insurance com-missioner, and Theresa Vaughn, the group’s executive director, that the group explain its intention.

“It appears, when it suits its purposes, the NAIC fends off questions about its ac-countability and transparency by arguing that it is ‘a private group’ that ‘does not have any regulatory authority,’ said Royce in the two-page letter. “This position is legally es-

sential since, under controlling law, no ‘pri-vate group or association [may] regulate in the field of interstate commerce.’”

“But it would now appear this ‘tradi-tional’ position is politically inconvenient given its attempts to posture itself in the new Dodd-Frank/FIO regime,” Royce wrote. “Present circumstances call for an opposite spin, emphasizing NAIC’s key role in ‘form[ing] the national system of state-based insurance regulation in the U.S.’”

Some Republicans and others sought over the last decade to eliminate state-based regulation of insurance, and Royce’s probing of the NAIC could be another thrust in that overall political desire. An effort to eliminate state-based insurance regulation, thus federalizing the regula-tion of insurance, has bubbled from time to time, but Congress has not managed to garner enough votes to make it happen.

Royce, in his letter, said his motivation is in “advancing positive regulatory reform to effect better insurance regulation for consumers.”

The NAIC is a nonprofit corporation representing all state insurance offices. IFA


9

April 2012

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10Pennsylvania

PeopleNewsCraig Lordigyan of The Lordigyan Insurance Agency, based in Blair-stown, N.J., completed the qualifications from The American College of a Chartered Healthcare Consultant. He is about the 45th broker in the United States to receive this designation.

Charles Maleski was appointed as vice president, regional group practice leader for employee benefits in the Greater Philadelphia marketplace for TD Insurance, a subsidiary of TD Bank. Maleski previously served at Bank of America as a senior vice president and team leader of the Philadelphia market.

Philadelphia, Pa.-based Lincoln Financial Dis-tributors announced two appointments: Richard Aneser as chief marketing officer; and Michael Hall as national sales manager for Institutional Retirement Solutions Distribution (IRSD). Aneser previously served as managing direc-tor and head of Advisory and Solutions Marketing and Wealth Management Americas for UBS; and Hall previously served as vice president of Institu-tional Sales for Chicago, Ill.-based Prudential Retirement.

Camille Mastronardi joined Avenel, N.J.-based Sterling & Sterling as senior vice presi-dent. Mastronardi previously worked for Willis.

Louis Stanasolovich, Diane Pearson and James Holtzman, all of Legend Financial Advisor in Pittsburgh, were selected by

Medical Economics magazine as 2011 Best Financial Advisors for Doctors in America.

Austin McCarren, a 10-year industry vet-eran, was named account executive at First National Insurance Agency.

Robert Ivey was appointed as Mid-Atlantic zone officer for CNA Financial Corp., based in Chicago, Ill. He will be responsible for branch operations, producer relationships and growth strategy in Delaware, Maryland, New Jersey, Pennsylvania, Virginia, West Virginia and Washington, D.C.

Barbara A. Kressler was promoted as vice president of Northumber-land, Pa.-based Keystone Insurers Group’s Risk Solutions Division.

Thomas Reisdorf Jr. was named vice president and relationship manager in the wealth management team at R.N.B. Wealth Management, where he will be responsible for estate planning, trust admin-istration and client services for clients in the Pittsburgh area.

Kathryn Glover, founder and CEO of PinkPowerLadies.com, a national insurance and financial professionals’ group dedicated to helping families deal with unforeseen ex-penses when critical illnesses strike, formed a local western Pennsylvania chapter.

Craig Lordigyan

Richard Aneser

Michael Hall

Barbara A. Kressler

// HEALTH INSURANCE

R.I. Blues insurer submits rate increase, issued rate decrease

// DONE DEAL

Life insurer approves NAA agents for selling its new life productBy Jaime L. Brockway

The Phoenix Cos., based in Hartford, Conn., entered a distribution agreement with National Agents Alliance (NAA) to al-low NAA agents to offer to clients a new life insurance product.

Phoenix Simplicity Index Life is a in-dexed universal life insurance product that provides universal life insurance pro-tection with an ability to build cash value, according to Phoenix. It also offers perma-nent death benefit protection and an in-

dexed feature, officials said.Phoenix said it will seek a limited num-

ber of additional distributors for Phoenix Simplicity Index Life throughout this year.

“We have been working with National Agents Alliance for the past year develop-ing this working relationship as well as redesigning the Phoenix Simplicity Index Life product,” said Biff Baker, national sales manager and life independent for Saybrus Partners, Phoenix’s distribution subsidiary, in a statement. IFA

Rhode Island’s insurance commission-er rejected Blue Cross and Blue Shield of Rhode Island’s (BCBSRI) request for a 2.4% rate increase on its Direct Pay products, and instead issued a 1.1% rate decrease.

The rate decreases go into effect for en-rollees renewing their coverage on or after April 1. The decreases remain effective for 18 months, until the implementation of the Patient Protection and Affordable Care Act (PPACA), the federal health reform.

BCBSRI originally requested a 4.4% in-

crease on its Direct Pay products, but agreed to reduce its request to a 2.4% increase.

Koller also ordered Blue Cross to de-velop an additional product with less cost sharing after finding that a set of Direct Pay products proposed by BCBSRI em-phasized high cost sharing products, and failed to offer subscribers adequate prod-uct choice with respect to cost sharing op-tions.

BCBSRI may accept Koller’s decision or appeal it in court. IFA

// EXPANSION

Mercury Insurance seeks agents, unveils auto insurance productMercury Insurance, a multi-line insur-ance organization operating in 13 states, is offering a new commercial auto insurance product it says uses technology to enable its independent agents to more easily rate, qualify and issue new business.

Brea, Calif.-based Mercury Insurance said the new product, which features stan-dard ISO coverage forms, is being rolled out to independent agents in the states where

it writes business. They include California, Florida, New Jersey, Texas, Arizona, New York, Georgia, Oklahoma, Illinois, Michi-gan, Nevada, Virginia and Pennsylvania.

The insurer said it is looking to appoint additional independent agents.

The 50-year-old company, which writes about $2.5 billion in premium a year, was founded by George Joseph, its chairman and a former insurance agent. IFA

Submit your news! The easiest way to submit news

& honors is online. It’s fast and free.

Phone: 877-IFA-5001 Fax: 410.667.7977Email: [email protected]

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11

April 2012

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Business Surety Auto Home

FocusOn Health ReformBy John Lobert

Obamacare: Closed government leads to open-ended results

U.S. Health and Human Services Secretary Kathleen Sebelius ignited the biggest flap between women’s rights advocates and religious leaders since abortion was invented. She did it by demonstrating one of the flaws in Obamacare: it is so open-ended that the government can make of it what it wants. I am talking, of course, about mandating that health insurance cover birth-control pills.

We all knew from the beginning that the Obama plan was not really about health-care reform. It was about health insur-ance reform. When we were told that 47 million Americans go without healthcare, we were really being told that the president was looking for a way to give them health

insurance. In fact, within weeks of his campaign to get a bill enacted, he started talking, instead, about health insurance, rather than care.

Access still problematicIt is rather sad that the provision of health

care was not addressed forthrightly in the legislation. In my native state of West Virgin-ia, there are communities that are small and isolated. If you gave every resident there a dozen free health insurance policies each, they still would not have health care readily available because they do not have doctors and hospitals readily available.

There was a time when Uncle Sam had a program under which medical students’ tuitions and expenses were paid if they would agree to go to backwoods America for a while and practice medicine in clinics that were set up (that program may still be up and running for all I know). It had some success, but it was only short-lived: as soon as the required time was up, off they went. No wonder. They really could not expect to make any real money in the boondocks. (That would have been a good name for them: “boon docs.”)

Getting back to the subject at hand, the real problem in the birth-control kerfuffle is that birth-control pills are not for the treating of a medical condition. Call me naïve, but I

thought that is what insurance is for. It pays medical care providers for rendering medical treatment. How is a pill that prevents preg-nancy a medical treatment? It is not.

How far goes prevention?One author said this mandate is a good

thing because it will save insurance com-panies money by avoiding pregnancies. Well, the author is forgetting that insurance companies do not pay for anything—poli-

cyholders do, and then only the ones with maternity coverage. If you do not have ma-ternity coverage and you are pregnant, you should have either signed up for maternity coverage or practiced safe sex, and the lat-ter is not a medical condition or treatment.

If we are talking about now having insur-ance to cover things that will save money, as the aforementioned author suggests, insurance should also cover toothpaste and toothbrushes, since they help prevent unwanted gingivitis and tooth decay. How about nice running shoes? We are told that running and walking are healthy. This list can go on and on, but you get the point.

If we ever hope to actually make afford-able health insurance available in this coun-try, then the real reform is the repeal of all the existing mandates, and the least that the Department of Health and Human Services can do is stop mandating more coverages.

About the author:

John Lobert is a legislative and regulatory affairs lawyer. His firm, Lobert Legislative & Regula-tory Consulting, provides public policy advice and planning to both the insurance and reinsurance industries. He can be reached at [email protected].

President shifted talk from health care to health coverage after PPACA passed.



Auto insurance premiums vary wildly from state to stateState-specific factors create a “wide fluctuation” of auto insurance premium rates across the country, making some states’ averages more than double the rates of other states.

In 2009, the average premium in Iowa for a policy with liability, collision and comprehensive coverage was $631, com-pared to $1,270 in Louisiana, the most expensive rate in the United States, ac-cording to Online Auto Insurance. The national average premium was $901.

In 2010, the theft-per-registered-vehicle rate in Washington, D.C., was about 7.5 times higher than the national average. IFA

// DONE DEAL

Pioneer General now part of American Contractors IndemnityHouston’s HCC Insurance Holdings said Pioneer General Insurance Co. will merge into American Contractors In-demnity Co., both of which are wholly owned subsidiaries of HCC.

The merger, which is part of HCC’s on-going effort to “rationalize its legal entity structure,” was effective Dec. 31, 2011.

All of Pioneer’s business as an under-writer of contractors’ performance and payment bonds, miscellaneous surety and commercial risks, has been shifted to the other company.

American Contractors Indemnity is domiciled in California as a surety com-pany operating on an admitted basis. IFA


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Affordable Care Act (PPACA), the federal health reform law passed in March 2010. The law is subject to a pending U.S. Su-preme Court challenge.

The report found that care setting and treatment use vary considerably between the two segments, resulting in a different distribution of costs across outpatient, in-patient and pharmacy services.

“As states look to define their essential health benefits packages, a deeper under-standing of actual utilization patterns, es-pecially for the small number of patients driving the lion’s share of costs, is critical,” said Murray Aitken, executive director of the IMS Institute for Healthcare Informat-ics, in a statement. The institute, based in Parsippany, N.J., provides insights into health care dynamics derived from granu-lar analysis of information.

“Further, effective benefits packages will need to fully consider services used by the three high-cost member segments -- those with cancer, chronic conditions, and those with auto-immune or other specialty

diseases,” he said.An additional 44 million Americans are

expected to have health insurance cover-age by 2020, including 25 million through insurance exchanges established under the PPACA.

The IMS Institute report uses compre-hensive, proprietary de-identified data consisting of more than 10 million pri-vately insured members under age 65 to examine the distinctions between IMS ag-gregated healthcare use and spending pat-terns and those commonly cited among health service researchers, including the Agency for Healthcare Research and Qual-ity, and Centers for Medicare and Medicaid Services.

Distribution of healthcare costs differs from commonly cited research. For the privately insured under age 65 segment, outpatient and inpatient services represent 59% and 20% of total spending, respective-ly. These figures compare with Medical Ex-penditure Panel Survey (MEPS) findings of 39% and 43%, respectively, for outpatient and inpatient services spending within the Medicare age 65 and over population. IFA

IFAwebnews.com/HealthReformIFAwebnews.com/HealthReformHealth Care ReformHealth Care Reform

PPACA: Law won’t change utilization trendFrom Page 1

Commissioner Lawsky says ‘spiraling health insurance costs’ caused action

By Jaime L. BrockwayThe New York Department of Financial

Services will use a recently acquired grant to analyze the administration systems of insurers and health maintenance organi-zations for cost efficiency.

The department said it will conduct on-site audits of health insurers and HMOs selling health insurance plans regulated by the state with the help of a private ac-counting firm.

The audits will review selected rate re-quests that already were filed. Data regard-ing claims, insurer administrative expens-es, premiums and claims reserves will be examined, the department reported.

Insurers will not know beforehand whether their proposals will be the subject of an audit.

“At a time when spiraling health insur-ance costs are an incredible burden for working people, it is essential that we en-sure that rate requests are based on fair, accurate information that has not been manipulated,” said Benjamin M. Lawsky, superintendent of financial services, in a statement. “These in-depth audits will al-

low us to drill down un-derneath the numbers to make sure they are accu-rate. For example, we can look at whether insurers are accurately allocating administrative costs and broker commissions.”

The audits are funded by a $4.4 million grant awarded by the U.S. Department of Health and Human Ser-vices (HHS) in September 2011. The grant is one of several issued to enhance premi-um rate review, improve public access and lend more transparency to the processes used to establish health insurance premi-ums, part of the Obama Administration’s use of the powers granted in the Patient Protection and Affordable Care Act.

Under a new law, health insurers must submit their proposals to increase their premiums to the department to be ap-proved, reduced or rejected in 60 days.

For contracts which started on or after Jan. 1, health insurers requested weighted average increases of 12.7%, but the de-partment granted increases of 8.2%. The lower increase will save consumers more than $400 million in 2012, the depart-ment reported. IFA

New York regulators intend to conduct surprise audits on insurers and HMOs

Benjamin M. Lawsky

// IN CONGRESS

Senate defeats Republican’s attempt to loosen birth control policyOnly Olympia Snowe defects from party to join Democrats killing controversial bill

The U.S. Senate managed to slimly uphold President Barack Obama’s controversial birth control policy, voting 51-48 to halt a Republican push to free employers and in-surers companies from having to provide coverage for contraceptives, despite their religious or moral objections.

The battle lines were drawn after the Obama Administration decided to apply the Patient Protection and Affordable Care Act, the federal health reform law passed in 2010 now subject to a U.S. Supreme Court challenge, to force health insurers to provide free contraceptives to women, even if employers objected to the provision on religious or moral grounds.

U.S. House Speaker John Boehner (R-Ohio) said Republicans are planning a different attack on the Obama policy, ac-cording to a New York Times report. “It’s im-

portant for us to win this issue,” Boehner said.

Within hours of its is-suance, the Obama Ad-ministration birth con-trol policy drew harsh criticism from Roman Catholic bishops and other religious groups whose organizations would have been forced to provide birth control to women.

To ease criticism in an election year, Obama responded last month by chang-ing the provision to say that health insur-ers will pay for the contraceptives, thus freeing the groups that objected.

Only Republican Sen. Olympia Snowe of Maine joined with the 48 Democrats and two independents voting against the plan.

Democrats Bob Casey of Pennsylvania, Joe Manchin III of West Virginia, Ben Nel-son of Nebraska and 45 Republicans voted for the bill. IFA

Olympia Snowe


13

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Guardian enhances, expands ProVider PlusProducers can help broader income-protection spectrum, company says

The Guardian Life Insurance Co. of America expanded its flagship ProVider Plus individual disability insurance port-folio to enable producers to reach more clients across the income protection spec-trum, the company said.

The new product series, including an enhanced ProVider Plus and a new ProVider Plus Limited, was designed to strengthen Guardian’s position in medical

markets while accommodating increased price sensitivity among certain segments within the medical field, as well as in other occupations, officials said in a statement.

Guardian’s new ProVider Plus Lim-ited provides basic income protection at a more affordable price, the company said, noting that optional riders enable policy-holders to customize coverage to fit their income-protection needs. Other features include a choice of true own-occupation or modified own-occupation definition of total disability; a basic residual disability

benefit rider; a waiver of the elimination period, built into the base policy; a ben-efit purchase rider, ProVider Plus Limited’s version of a future purchase option; and a presumptive total disability benefit.

The enhanced ProVider Plus offering includes a patent-pending lump-sum dis-ability benefit rider, an option, new in the marketplace, designed to provide ben-efits after the policy expires at age 65 (or 67), the company said. The new Guardian rider pays a lump-sum benefit equal to 35% of all disability benefits paid over the

lifetime of a policy. Owners of active poli-cies don’t need to even be disabled at the end of their contracts in order to qualify for this benefit.

Other ProVider Plus enhancements and features include a choice of true own-occupation or modified own-occupation definition of total disability; a residual dis-ability benefit rider that pays sooner and more than most other carriers’ policies; a waiver of the elimination period, built into the base policy; and future increase op-tions, officials said. IFA

// DONE DEAL

Chartis, All Risks partnering on new temporary staffing programNational insurer and brokerage expand their relationship to tailor new solution

Chartis and All Risks Ltd., a Hunt Valley, Md.-based independent wholesale broker-age, are expanding their relationship to include a program for temporary staffing agencies.

Chartis, a national property-casualty insurer, and All Risks will together pro-vide general liability, professional liability, employment practices liability and other coverages specifically tailored to the tem-porary staffing industry through the deal.

Financial terms of the partnership were not disclosed.

“This collaboration with All Risks brings to the table our combined experi-ence and knowledge, and allows us to pro-vide staffing organizations with tailored insurance solutions in one convenient program from one provider,” said Vincent

Pugliese, senior executive for the pro-grams division of Chartis, in a statement.

Pugliese said he was “excited” to ex-pand the relationship, saying it serves the needs of a sector that has led job growth in the U.S. for the last two years.

Chris McGovern, senior vice president of All Risks’ national programs, said the program can serve temporary staffing companies of all sizes.

“This program meets the needs of most temporary staffing companies nation-wide, from the largest to the very small,” said McGovern. “Together with Char-tis, we are fully prepared to address the unique and ever-changing exposures this industry faces.”

All Risks has 450 staff members in offices located in Maryland, Arizona, California, Florida, Georgia, Illinois, New York, North Carolina, Pennsylvania, Virginia and Wash-ington, as well as Washington, D.C. IFA

Policy tweaks respond to growing price sensitivity within medical, other fields.

// CRIMINAL CASE

Two former Ohio insurance agents indicted for alleged stop-loss schemeBy Jaime L. Brockway

Two former Ohio insurance agents and a resident agent were accused of misleading their stop-loss insurance clients and pilfer-ing more than $405,000 from them.

Van Workman of Greenwich, Ohio, presi-dent of Mansfield-based Employer Benefit Services (EBS), and Michelle Dinsmore, its CEO, were indicted by a grand jury on charges of money laundering, theft, passing bad checks and engaging in a pattern of cor-rupt activity, according to the Ohio Depart-ment of Insurance.

Through EBS, Van Workman and Ohio resident agent Matthew Workman alleg-edly failed to use due diligence in selecting appropriate stop-loss insurance for Omni

Manufacturing (St. Marys), Brown Pub-lishing Co. (Cincinnati) and the Delaware County Board of Developmental Disabili-ties. The coverage was secured through United Re Trust, which is not a licensed in-surance company in Ohio, officials said.

EBS and the Workmans engaged in a pat-tern of up rating premium costs of insur-ance products to multiple clients without their knowledge or consent, according to the Ohio Department of Insurance. They also allegedly did not disclose the cost of coverage and the insurer’s name, and ma-nipulated documentation to hide their commission amount.

The Workmans swindled more than $405,000 from clients, officials said. IFA


14Pennsylvania

By Bob GrahamCalifornia’s insurance regulators

are challenging two insurance companies for using “large deductible agreements” on workers’ compensation cases without their approval.

The California Department of Insurance, under Commissioner Dave Jones, took admin-istrative enforcement action against two insur-ers, Zurich American In-surance Co. and Zurich American Insurance Co. of Illinois, for using poli-cies that had not under-gone state review.

“Whatever the insurers’ motive, the ef-fect of evading the department’s review is that Zurich will not be permitted to enforce the agreements,” said the Adam Cole, the California Insurance Department’s general counsel, in a statement. “Workers’ compen-sation policies are critical to California em-ployers and employees, and the department will not permit insurers to issue policies or endorsements that we have not assured are

in compliance with California law.”The department’s action seeks an order

requiring the Zurich companies to immedi-ately cease issuing agreements that have not been filed for review.

If the Zurich companies violate such an order, they could be suspended or barred from transacting further business in Califor-nia. The action also seeks to force Zurich to disregard any large deductible agreements that it issued prior to any state review.

The unreviewed agreements have been the subject of litigation between the Zurich companies and employers because they include a requirement for arbitration of disputes in Illinois, where the Zurich com-panies are located, according to California regulators.

The California Insurance Code requires the submission of workers’ compensation insurance policy forms and endorsements to the department and to the Workers’ Com-pensation Insurance Rating Bureau of Cali-fornia for review to ensure they comply with California law.

Zurich officials could not be reached im-mediately for a comment. IFA

Done DealsMERGERS ACQUISIT IONS PARTNERSHIPS

Companies develop application system for life insurer

American General Life Cos. partnered with Ebix

and ExamOne to develop AG Quick Ticket, a web-based life insurance application that allows producers to complete and submit applications electronically to Houston, Texas-based American General.

Producers can access the online application through www.agquickticket.com or Ameri-can General’s eStation producer business resource center website, which provides access to product and client information. Once a producer submits an online ticket application, ExamOne will follow-up with the client to conduct the interview, complete health information and schedule the required paramedical exams.

George Lopez to partner with Mango Financial on promotion

Mango Financial, based in Austin, Texas, signed a

multi-year marketing partnership with George Lopez, entertainer and activist, to promote its suite of payment and savings products.

Mango offers customers an integrated suite of financial services ranging from prepaid cards that help users with everyday pur-chases to savings and investment products. The products have a competitive and simple fee structure and include free 24/7 customer service, officials said.

Beyond integrating Lopez into a series of brand marketing campaigns, Mango plans on collaborating with him on ways to promote fi-nancial education and new product initiatives focused on interactive media channels.

Crump automates marketing process with iPipeline

Crump Life Insurance Services selected iPipeline’s

products to offer automated marketing, sell-ing and processing.

The products, CRM for Insurance, Forms (content) and the iGO e-App, will allow Crump to offer its associates and 200,000 insurance agents and financial professionals additional tools to optimize their productivity.

The CRM for Insurance solution continually receives data from the firm’s agency manage-ment system, allowing immediate access to updated information and better support for the nationwide salesforce, company officials said.

Risks mitigated using Pa.-based company’s solution

Great American Insurance Group selected Comply On

Demand Enterprise (CODE), a product of Compliance Assurance Corp., to mitigate its regulatory risks.

Great American, based in Cincinnati, Ohio, will use CODE to manage the regulatory compliance requirements associated with its specialty property-casualty, annu-ity and supplemental health insurance businesses.

Conning partners with life insurance association

Conning, based in Hartford, Conn., entered a one-year

commitment as a strategic partner to the American Council of Life Insurers (ACLI), a trade association with more than 300 mem-ber companies.

Under the partnership, the global provider will offer resources and thought leadership to ACLI.

Conning key executives will participate as guest speakers and panelists at ACLI round-tables, webinars and conferences this year.

Marketing solutions providers partner to pool offerings

Distribion is partnering with Aplifi to bring its multi-chan-

nel distributed marketing automation solution to all levels of the distributed sales force for the insurance industry.

The partnership between Aplifi and Dis-tribion, based in Dallas, Texas, will deliver a multi-channel marketing automation solution designed to meet the needs of insurance car-riers, managing Brokerage General Agencies (BGAs) and producers.

The partnership is the perfect extension of the solutions each company has been offer-ing separately within the insurance industry, according to Edgar Rodriguez, executive vice president of sales and marketing at Distribion.

IIABA launches risk mgmt. website through Swiss Re

The Independent Agents & Brokers of America (IIABA)

Big I Professional Liability Program and Swiss Re Corporate Solutions launched a new risk management website, E&O Happens.

For the latest deals go to IFAwebnews.com

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Zurich’s ‘large deductible agreements’ probedCalifornia regulator says insurer’s workers’ comp. policy ‘evaded’ state laws

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15

April 2012

New Jersey Agent & Carrier ActionsThe following summaries are based on information obtained from the New Jersey Department of Banking and Insurance.

! Gracioso P. BalacuitJersey City, N.J.Action: Fined $2,000 Synopsis: Balacuit altered an annuity ap-plication to indicate that it was signed in New Jersey when it was signed in Texas.Consent Order #E12-03

! Bernard F. KuritWest Palm Beach, Fla.Action: Fined $250Synopsis: Kurit failed to report to NJ-DOBI administrative actions taken against him by three state insurance departments and improperly indicated on his renewal application that he had not been involved in any administrative proceedings regard-ing a professional or occupational license.Consent Order #E12-04

! Sebastian B. MonnierJersey City, N.J.Action: Paid a $2,500 fineSynopsis: Monnier solicited, negotiated or effectuated insurance prior to being licensed as an insurance producer.Consent Order #E12-02

! Raymond MorrisonMartinsville, N.J.Action: License suspended for three months, ordered to pay $5,000 fine and $5,450 in restitution, as well as $975 in costsSynopsis: Morrison failed to timely remit premium, backdated a premium check, de-posited premium into his personal account, commingled premium and other funds, failed to maintain a trust account and a record of monies received, deposited, dis-bursed or withdrawn, and failed to timely report a change of business address.Consent Order #E12-14

! Oxford Coverage Inc.Trenton, N.J.Action: Paid a $500 fine Synopsis: The company failed to report to NJDOBI action taken against it by another state insurance departments and improperly indicated on its renewal application that it had not been involved in any administrative proceedings regarding a professional or occupational license.Consent Order #E12-07

! Joseph A. Petrillo Greenbrook, N.J.Action: Paid a $1,000 fineSynopsis: Petrillo offered an inducement to purchase insurance.Consent Order #E12-13

Pennsylvania Agent & Carrier Actions The following summaries are based on information obtained from the Pennsylvania Insurance Department.

! Russel E. ArnoneWilkes Barre, Pa.Action: Surrendered licenseSynopsis: Arnone failed to report a 2010 conviction to the department, as required.Docket No. CO11-12-014

! Shannon HartIndianapolis, Ind.Action: Surrendered licenseSynopsis: Hart’s resident license from her home state of Indiana was revoked in December 2010. Hart also had six separate licensing actions from six dif-ferent states, including . None of these actions were reported, as required, to the department. Docket No. CO11-08-012

! Thomas F. LibrichGlenshaw, Pa.Action: Placed on five years of license supervision and paid a $5,000 fineSynopsis: Librich falsified applicant information and misrepresented surrender charges for an annuity.Docket No. CO11-12-005

! Luigi LeparuloKimberton, Pa.Action: Placed on five years of license supervision and ordered to comply with a state Deferred Payment PlanSynopsis: Leparulo failed to pay state cor-poration taxes for multiple years and failed to disclose tax liabilities on license renewal applications. He had liens placed against him in June 2009 for failing outstanding state corporation taxes owed for years 1997 through 2007 and separately a lien filed in August 2009 for failing to pay state corpora-tion taxes between 1984 and 1996.Docket No. CO11-12-004

! Justin Edward SlesserEtters, Pa.Action: Revoked license Synopsis: Slesser was arrested and convicted for forgery and attempting to illegally obtain prescription drugs. Docket No. CO12-01-001

FINRA ActionsThe following summaries are based on information obtained from FINRA.

! Daniel Bull Pittsburgh, Pa.Action: Barred from associating with any FINRA members in any capacity

Synopsis: Bull, a registered representa-tive, improperly used and converted over $491,000 from member firm customers and additional investors by making fraudulent misrepresentations to induce them to invest funds in a company that he and others established. Bull touted the success of his new company and provided potential investors with brochures, mak-ing numerous false statements and misrepresentations to gain the confidence of investors. Bull told investors that he was independently wealthy after selling several start-up companies for millions of dollars and had invented a strategy of buying and selling short-term municipal bonds to generate large returns. He also told the investors they were purchasing mutual funds and tax-free municipal bonds, but converted the funds for his own use, including repaying earlier inves-tors. To conceal the conversion and fraud, Bull provided investors with fictitious account statements showing a return on their investments. FINRA Case #2010022548401

For the Record

Online CE.Your pace, your desk.


16Pennsylvania

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// GOVERNMENT

Defense of Marriage Act ruling may affect insurance, pension, taxes

// Least expensive, most expensive 2012 auto models listed

The least expensive 2012 vehicles to insure per year, according to Insure.com, are:

1. Toyota Sienna LE: . . . . . . . . . . . $1,111 2. Toyota Sienna

4 cylinder: . . . . . . . . . . . . . . . . . $1,114 3. Jeep Patriot Sport: . . . . . . . . . . $1,116 4. Jeep Compass Sport: . . . . . . . $1,118 5. GMC Sierra K1500

Regular Cab: . . . . . . . . . . . . . . .$1,121 6. Chevrolet Silverado

1500 Regular Cab: . . . . . . . . . .$1,125 7. Dodge Grand

Caravan SXT: . . . . . . . . . . . . . . .$1,129 8. Ford Escape XLS: . . . . . . . . . . .$1,137 9. Toyota Sienna 6 cyl: . . . . . . . . .$1,139 10. Chevrolet Silverado . . . . . . . . . . . . . . .

1500 Extended Cab: . . . . . . . . $1,143

The most expensive 2012 vehicles to insure per year, according to Insure.com, are:

1. Audi R8 Spyder Quattro Convertible: . . . . . . . . $3,384

2. Mercedes CL600 BI-T Coupe: . . . . . . . . . . . . . . . $3,307

3. Mercedes S600 BI-T: . . . . . . . $2,948 4. Audi R8 4.2 Quattro Coupe: . . $2,903 5. Porsche Panamera Turbo: . . . $2,738 6. BMW 750i Hybrid: . . . . . . . . . $2,701 7. Porsche 911

Turbo Convertible: . . . . . . . . . . $2,674 8. Porsche 911

Turbo S Convertible: . . . . . . . . $2,674 9. Mercedes CL65

AMG Coupe: . . . . . . . . . . . . . . $2,669 10. BMW 750Li Hybrid: . . . . . . . . $2,641

Most, least expensive car models to insure announced2012 Audi convertible tops list, eclipsing Mercedes, Porsches

The Toyota Sienna LE is the least expen-sive 2012 car model to insure while the 2012 Audi R8 Spyder Quattro, a two-seat V10 convertible, costs the most to insure, according to a new study.

Insure.com’s annual study shows that Audis mean higher premiums for their owners than last year’s most expensive models, which were mostly Mercedes and Porsches.

The rankings were based on average car insurance rates for a representative driver. For the sample driver used in the study, it would cost $2,273 more per year to insure the Audi sports car than it would to insure the Sienna minivan, researchers said.

The study, performed by Quadrant In-formation Services, looked at auto insur-ance rates for more than 900 car models from six large carriers (Allstate, Farmers, GEICO, Nationwide, Progressive and State Farm) in 10 ZIP codes per state.

Averages are based on insurance for a single, 40-year-old male who commutes 12 miles to work each day, with policy limits of 100/300/50 ($100,000 for injury liabil-ity for one person, $300,000 for all injuries and $50,000 for property damage in an ac-cident) and a $500 deductible on collision and comprehensive coverage. The hypo-thetical driver has a clean record and good credit. The rate includes uninsured motor-ist coverage. Average rates are for compar-ative purposes. Actual rates will depend on individual driver factors. IFA

A federal judge ruled Congress’ Defense of Marriage Act (DOMA) unconstitution-al in a case over whether a government worker should be permitted to enroll her same-sex spouse in federal health insur-ance coverage.

U.S. District Judge Jeffrey White in San Francisco, an appointee of Republican President George W. Bush, ruled against the law, which prevents same-sex couples from sharing the same benefits as federal workers who are heterosexual and mar-ried, according to a Reuters report.

Congress passed the law in 1996 and it was signed into law by Presi-dent Bill Clinton.

Heterosexual couples who are married

have access to more than 1,000 federal benefits.

Rita Lina, a lawyer representing the plaintiff in the case, told Reuters the ruling could lead to changes in the handling of pension and tax ben-efits afforded to same-sex couples. “The reasoning of the opinion applies to anyone who has been discrimi-nated against under DOMA,” Lin said. IFA


Bill Clinton

// REBRANDING

Liberty Life Insurance renamed Athene Annuity & Life Assurance Liberty Life Insurance Co., which has a significant presence in Wilmington, Del., changed its name to Athene Annuity & Life Assurance Co., effective Feb. 1.

The name change better aligns the company with its parent firm, Bermuda-based Athene Holding, which offers fixed annuities and reinsurance for the U.S. re-tirement savings market. Athene bought Liberty Life from Royal Bank of Canada in April 2011.

“We purchased Liberty to provide a platform for the growth of our fixed annu-ity businesses in the United States,” said

James R. Belardi, CEO of Athene Holding. “Renaming the company underscores its strategic importance to our operations and strengthens the Athene brand.”

The company, with about $7 billion in assets and 80 employees, also said it is redesigning its agent web portal to pro-vide secure, convenient access to product information, marketing materials, forms and other resources. A timetable for the re-design was not provided.

Since its acquisition, Liberty Life opened a retail sales and marketing office in Wilmington, Del. IFA


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Medical Loss Ratio 101Most pre-Medicare age baby boomers do not understand their benefits for dental care (78%), hearing care (82%) and vision care (83%), all which are services typically not covered by Medicare.

Source: Bankers Life and Casualty

// IFA_FAST FACT

Baby boomers prolong retirement until they reach Medicare ageDelays occurring even though enrollees know little about government program

By Jaime L. BrockwayMany middle-income baby boomers

are waiting to retire until they are eligible for Medicare, yet more than half admit to knowing little or nothing about the pro-gram, a new study says.

More boomers under age 65 are taking Medi-care eligibility into con-sideration when deter-mining when to retire, according to the study. Exactly 45% of working boomers age 47 to 64 said they are waiting to retire until they are eli-gible for Medicare; 24% are still undecided.

Yet 56% of middle-income baby boom-ers admit to knowing little or almost noth-ing about the Medicare program; 13% falsely believe Medicare is free, according to a study by the Bankers Life and Casualty Co. Center for a Secure Retirement (CSR).

Most pre-Medicare age baby boomers do not understand their benefits for dental care (78%), hearing care (82%) and vision care (83%), all which are services typically not covered by Medicare.

Exactly 62% of boomers do not under-stand what their Medicare health insur-ance benefit will be for doctor visits and hospitalization. The study showed 27%

could not guess how much they would pay for health care under Medicare compared to without Medicare. About 72% of boom-ers did not know that most Americans on Medicare pay a monthly premium, co-pays and deductibles.

The decision to wait to retire until eligible for Medicare may be “financially sound”

since medical bills are one of the leading causes of bankruptcy among people age 65 and older, CSR reported. Exactly 12% of middle-income Ameri-cans on Medicare are liv-ing with medical debt.

“Minimize financial surprises by under-standing your retiree health insurance ben-efits well in advance,”

said Chris Campbell, vice president of strategic marketing and business develop-ment for Bankers Life and Casualty Co., in a statement. “Estimate what your financial responsibility is under Medicare, including premiums, co-pays, deductibles and un-covered expenses, in particular, long-term care. Earmark a portion of your savings or income for retirement and consider speak-ing to a professional advisor who is well-versed in Medicare for guidance.”

The CSR study was of 400 pre-Medi-care Boomers (age 47 to 64) and 400 older adults (age 65 to 75) with income between $25,000 and $75,000. IFA

// CRIMINAL CASE

Walgreen, Par sued for alleged violations of federal RICO lawsCompanies accused of overcharging insurers two to four times cost of drugs

By Jaime L. Brockway A health and pension fund sued Wal-

green Co. and Par Pharmaceutical Co. for allegedly overcharging for generic pre-scriptions, which in turn allegedly cost third-party payers two to four times more for the medications.

United Food and Commercial Workers Unions and Employers Midwest Health Benefits Fund, individually and on behalf of third-party payers such as insurance companies, self-insured employers and union health and welfare funds, filed in U.S. District Court in Illinois the class-ac-tion suit alleging several violations of the Racketeer Influenced and Corrupt Organi-zations (RICO) Act.

Walgreen and Par entered into a health resource partnership under which Par al-legedly manufactured and marketed ge-neric versions of the drugs Zantac and Pro-zac in dosage forms that were not subject to strict reimbursement limitations. Wal-green also allegedly made the Par capsules the only form of generics readily available to its retail customers, despite the fact that

it was dispensing a drug that was not le-gally substitutable for tablets, according to the suit.

Walgreen’s profits increased by alleg-edly “systematically and unlawfully” fill-ing customer’s prescriptions with the more expensive Par products instead of the in-expensive dosages that were prescribed, the suit accused. Using Par products al-lowed Walgreen to bring in $80 million per year instead of the $5 million that the prescribed tablets would have netted it, costing the third-party payers two to four times more, according to the suit. IFA

// UPCOMING EVENT

Reading I Day set for April 12The 51st annual Reading I Day is sched-

uled for April 12 at the Crowne Plaza Hotel in Wyomissing, Pa., starting at 8 a.m. Con-tinuing education and networking oppor-tunities among activities. Call 610-401-2624 or email [email protected]. IFA


// LOOKING FORWARD

P-C leaders say marketing hardening, financial crisis in rear windowDemand for personal, commercial lines will increase ‘modestly,’ study finds

By Bob GrahamNot only do property-casualty insurance industry leaders believe the financial crisis is behind them, but they also believe rates are hardening, a new study finds.

A soft market has been in place for several years, as insurers competed for limited busi-ness, especially in the commercial sector, by undercutting their competitors’ prices. A soft market hurts agent commissions.

Three-quarters of executives expect im-proved profits this year, according to the survey, conducted by the Insurance In-formation Institute (III), a nonprofit com-munications organization supported by

the insurance industry, at its 16th annual Property/Casualty Insurance Joint Indus-try Forum.

A slightly smaller percentage (72%) of respondents believe the industry is on the road to recovery.

“The consensus among forecasters is for growth of the U.S. economy in 2012 at a lit-tle over a 2% annual rate, net of inflation,” said Steven Weisbart, senior vice president and an III economist.

If that forecast is correct, then demand for personal and commercial lines’ cover-age will increase “modestly,” he said.

Exactly 63% of respondents said they believe personal auto insurance will in-crease, and 67% expect an improvement in homeowners coverage. IFA


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In Memorium! C. Richard Overberg, 73, of Erie, Pa.; former

financial adviser for Thrivent Financial for Lutherans and owner of C. Richard Overberg Insurance.

! Charles F. Case, 100, of Lansdale, Pa.; former financial-planning consultant for Borer, Denton & Associates.

! Edwin S. Overman, 89, of Wayne, Pa.; former president and CEO of Malvern nonprofits that advised insurance firms.

! Earl N. Benz, 92, of Wilkinsburg, Pa.; former insurance underwriter.

! Richard A. Sabatini, 78, of Dunmore, Pa.; former manager for the George Pegula Insur-ance Co.

! David P. Lemly, 67, of Wallingford, Pa.; former claims adjuster for his own insurance adjusting business and also for Harford Mutual.

! John Casimir Sienkiewicz, 78, formerly of Princeton, N.J.; former president, CEO and vice chairman of International Operations of Alexander & Alexander, which was acquired by Aon Risk Services.

! Edmund Dixon Burk, 83, of Hanover, Pa.; for-mer district manager for Home Beneficial Life.

new taxes on products that provide secu-rity and peace of mind,” according to a joint statement by the National Association of Insurance and Financial Advisors (NAIFA), the Association for Advanced Life Under-writing (AALU), the American Council of Life Insurers (ACLI), GAMA International, and the National Association of Indepen-dent Life Brokerage Agencies (NAILBA).

“Wisely, Congress has rejected similar proposals in past years. We urge the admin-istration to withdraw its proposals on COLI and DRD,” the statement said.

Life insurance has been seen by some in-

vestors as a safe harbor, far less threatening to assets than the up and downs of stock markets.

The COLI proposal would impose new taxes on life insurance used by small and large businesses. Many businesses use COLI to protect against financial or job loss stem-ming from the death of owners or key em-ployees; it also is used to ensure business continuation. COLI is often a funding mech-anism for employee and retiree benefits, the group of associations reported.

The proposal would repeal the exception from the pro rata interest expense disallow-ance rule for contracts covering employees, officers or directors, other than 20% owners of a business that is the owner or beneficiary

of the contracts.The budget proposal also would reduce

the DRD that life insurers use in accounts that fund variable life insurance and vari-able annuity contracts, which are key prod-ucts for financial and retirement security, according to the associations.

The proposal would allow the current reduced tax rate (15%) on qualified divi-dends to expire as scheduled for income that would be taxable in the 36% or 39.6% brackets. It would affect dividends received after Dec. 31.

The group also is concerned about new taxes proposed for contributions to retire-ment plans and Individual Retirement Ac-counts (IRAs). About 20% of American’s long-term savings is in life insurance and

Taxes: Obama’s COLI, DRD plans pannedFrom Page 1

annuities, the group reported.“At a time of low individual savings, it

makes no sense to propose taxing prod-ucts that help people build their nest eggs,” the joint statement read. “The Ad-ministration’s budget proposal would discourage people from turning to prod-ucts they want and need. Indeed, it does not make sense when you consider the importance of industry products in peo-ple’s lives.”

The $3.8 trillion budget proposal, which would take effect Oct. 1, projects a $1.33 trillion deficit for this year, the fourth consecutive year of a deficit ex-ceeding $1 trillion. The proposal projects that the deficit would fall to $901 billion by next year and $575 billion in 2018. IFA

// OFFICE MOVE

Aon moving headquarters to London for global strategy Aon Corp. said it will move its headquar-ters from Chicago to London as part of its global strategy.

The company, which employs about 6,000 employees in Chicago, said the move is “an important step in the firm’s global growth strategy,” Aon officials said in a statement. The move provides great-er access to emerging markets and takes better advantage of the strategic proxim-ity to Lloyd’s and the London market. IFA


19

April 2012

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41 senators urge leadership to vote on long-term NFIP extensionTemporary lapses, confusion damaging fragile housing market, senators say

By Bob GrahamA letter, signed by a coalition of Re-

publican and Democratic senators, asks Senate leadership to bring a long-term re-authorization of the National Flood Insur-ance Program to the floor for a vote as soon as possible.

The letter to Senate Ma-jority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Kent.) would extend the flood insurance program, which covers flood-prone properties for about 5.6 mil-lion property owners in the U.S., for five years.

For more than two years, Congress has extended the NFIP for brief periods.

Sens. Jon Tester (D-Mont.) and David Vitter (R-La.), who held a press conference to call attention to the let-ter and the need for the reauthorization, said short-term extensions of the NFIP are harming the program, noting 53 days of temporary laps-es in 2010 resulted in the delay or cancella-tion of more than 1,400 home closings per day, further damaging an already fragile housing market.

The NFIP’s funding ends May 31.But its long-term extension has been

hamstringed by Republican efforts to en-sure that any spending in Congress does not increase the federal deficit. The NFIP, some Republicans argue, is apt to cost more money, not less, as it battles a deficit from previous storm costs.

House already approved billThe U.S. House passed a five-year re-

authorization bill, with overwhelming bi-partisan support, in July, but the Senate’s approval stopped at the Banking Commit-tee’s approval last September.

“The Senate should take this opportuni-ty to capitalize on the bipartisan efforts by both the Senate Banking Committee and the House of Representatives thus far to make major improvements to this impor-tant program,” said the letter. “We sincere-ly believe that, with a concerted effort on

the part of Senate and Banking Commit-tee leadership, as well as interested sena-tors, the bill can be brought to the floor of the Senate, debated and passed as soon as possible in order to ensure this process is completed before the NFIP expires at the end of May.”

The bill before the Senate, which differs from the House bill, would reform the pro-gram in ways many environmental and

insurance groups support.Ryan Alexander, president of Taxpayers

for Common Sense, an advocacy group, said in a statement: “Flood insurance re-form would move the program toward rates commensurate with risk and give taxpayers greater assurance that their pocket wasn’t going to be picked to pay for someone else’s decisions.”

‘Big step forward’William Robert Irvin, president of

American Rivers, another advocacy group, said the bill will be “a big step forward to improve the way we communicate and manage flood risk.”

Charles M. Chamness, president and CEO of the National Association of Mutual Insurance Companies, said the flood in-surance program is vital since flooding is the most common natural disaster in the U.S. each year.

“A long-term extension will provide much needed certainty to the recover-ing economy by protecting homeowners and businesses while easing the burden on taxpayers,” Chamness said, adding the NFIP draws “rare but overwhelming bi-partisan support.”

Frank Nutter, president of the Reinsur-ance Association of America, said the pro-gram encourages “a public-private sector approach to financing flood risk.”

The NFIP is nearly $18 billion in debt, with more expected as a result of unprec-edented flooding in 2011, according to the latest estimates. The program has more than $1.25 trillion in exposure. IFA

Mitch McConnell

” Flood insurance reform would move the rogram toward rates commensurate with risk.”

Ryan Alexander Taxpayers for Common Sense

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Volume 6, Issue 10 | April ObamaÕs 2013 budget...

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