REGULATION
New York regulator compels
brokers and agents to reveal all
Go deeper with GlobalData
The New York State Insurance Department
has acted to enhance consumer protection with the introduction of a
rule compelling brokers and agents to describe to consumers their
role in the transaction and how they get paid. The rule takes
effect 1 January 2011.
Consumers contemplating buying an insurance
policy will have the right to request and receive in writing all
details of brokers’ and agents’ remuneration.
This can encompass a base commission as well as
certain year-end payments based on the volume and profitability of
the policies an agent or broker places with an insurer.
In addition, some agents or brokers receive
other forms of non-cash compensation, including advertising
support, office rent, training and trips or other prizes based on
production.
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By GlobalDataBirny Birnbaum of the Center for Economic
Justice, a non-profit consumer organisation which advocates on
behalf of insurance consumers, praised the insurance department’s
promulgation of a rule in what he termed, “the face of stiff
insurance industry opposition”.
That opposition has not ended entirely, with
the industry body the Independent Insurance Agents & Brokers of
New York announcing that it is to take legal action to stop the
insurance department from carrying out further new regulation.
COMPANIES
More reshuffling at the top of
The Hartford
US insurer The Hartford Financial
Services Group has announced yet another major change in its senior
executive team, this time its chief financial officer (CFO).
On 1 March, the position was assumed by
Christopher J Swift, who relinquished his position as American Life
Insurance Company’s (ALICO) vice-chairman and CFO to join The
Hartford.
In his position at ALICO, a unit of American
International Group (AIG), Swift oversaw the insurer’s global
financial operations encompassing $89bn in assets and operations in
54 countries.
In the AIG group, he also served as CFO of
AIG’s Global Life Insurance and Retirement Services, CFO of AIG
American General Life Companies and head of annuity operations.
Swift, 49, began his career as an auditor at
professional service firm KPMG where he became a partner by age
32.
After a spell as executive vice-president of
Conning Asset Management, Swift returned to KPMG and was eventually
appointed head of global insurance industry practice for the
firm.
Swift reports directly to The Hartford’s
chairman and CEO Liam E McGee, who was appointed to the position in
September 2009 following the resignation of former chairman and CEO
Ramani Ayer.
Swift replaces Lizabeth Zlatkus who has assumed
the position of chief risk officer.
REGULATION
Nationwide settles with states
for VA mis-selling
Joining a growing number of US life
insurers to run foul of regulations governing sales of variable
annuities (VA), two units of Nationwide Corporation, Nationwide
Life and Nationwide Life and Annuity, have agreed to pay a total of
$2.1m in penalties to regulators in the states of Minnesota,
Kansas, California, Missouri and Wisconsin.
Though the violations leading to the settlement
related to the sale of Nationwide Life VAs by a financial advisory
firm Waddell & Reed, regulators from the five states asserted
that Nationwide Life and Nationwide Life and Annuity did not take
the required steps to ensure that Waddell’s supervision and control
were adequate.
According to a statement released by the
Missouri Department of Insurance, the biggest concern for
regulators was Waddell & Reed’s encouraging of clients to move
their investments from one annuity to another that may have been
less suitable and had a lower death benefit.
In addition, the clients paid about $10m in
fees for these transactions.
A 2004 settlement between regulators and
Waddell & Reed called for a refund of many of those fees.
In addition to the settlement with the state
regulators, Nationwide will offer to reimburse relevant
policyholders for any surrender charge they may have incurred by
exchanging policies and to increase death benefits.
INDUSTRY TRENDS
Americans going online for life
insurance
The internet has become a part of the
day to day activities of millions of Americans and also an
increasingly important source of information relating to life
insurance, highlights a study published in February by internet
research firm comScore.
“As more Americans utilise the Internet to
research life insurance policies for themselves or family members,
it is increasingly important for insurers to have a strong brand
presence online,” said comScore director Susan Engleson.
“The web gives insurers another touch point to
engage with consumers on various levels. Whether it’s providing
information on coverage options or fulfilling a quote request, the
internet often represents a critical decision-making phase in the
life insurance purchase funnel.”
Indicative of the increasing significance of
the internet, comScore’s study reveals that in 2009 online searches
containing the term “life insurance” grew by 15.3% compared with
2008 – from 14.4m to 16.6m – while the total number of consumers
requesting online quotes for life insurance reached 2m.
These two measures of activity demonstrate
consumers’ increased comfort and reliance on the internet when
shopping for complex financial services, believes comScore.
REGULATION
Oklahoma fines phony health
insurer
There appears no end to the ingenuity
of individuals intent on unscrupulous behaviour, including the
establishment of phony health insurance companies.
This is experience of Kim Holland,
insurance commissioner in the US state of Oklahoma, who has just
fined a Tennessee company and two of its affiliates $25,000 each
for violating a cease and desist order she issued in November
2009.
Holland explained that the company in question,
the American Trade Association (ATA), and its various affiliated
organisations, are under investigation in at least twenty other
states for selling insurance products without a license and for
failing to pay claims.
She added that the ATA and its unlicensed
third-party-administrator, Smart Data Solutions, fax unsolicited
advertisements and use unlicensed agents and the internet to market
their unlicensed products to potential customers throughout the US,
while also falsely claiming affiliations with licensed insurance
companies.
ATA is not an isolated incident of phony health
insurers taking advantage of hard-pressed consumers.
For example, in Missouri the state’s Department
of Insurance revealed in January 2010 that it is investigating 13
unlicensed companies suspected of operating as health insurers.
BANCASSURANCE
Deal boosts Axa’s reach in
Italian banking market
Consolidating an alliance dating back
to 2007, French insurer Axa and Italy’s third-largest bank Banca
Monte dei Paschi di Siena (BMPS) have extended their bancassurance
agreement in Italy to the branches of Banca Antonveneta, a unit of
BMPS acquired in March 2008.
Extension of the agreement for which BMPS will
receive €240m ($326m) from Axa will increase the French insurer’s
distribution reach from 2,000 to 3,000 branches serving.
The deal adds a total of 1.6m potential
additional bancassurance customers to Axa’s existing total of about
3m.
The deal between BMPS and Axa followed the
termination of the exclusive bancassurance agreement between Banca
Antonveneta and its historical partner in June 2009.
Axa’s relationship with BMPS was first
initiated in March 2007, when Axa acquired 50% stakes from the bank
in its life insurance subsidiary, MPS Vita, general insurance unit,
MPS Danni, and its open pension funds business. Total cash
consideration paid by Axa was €1.15bn.
The partnership has an initial duration of 10
years, automatically renewable for an additional 10 years.
COMPANIES
Gen Re enters Japanese life and
health market
General Reinsurance Corporation (Gen
Re) has expanded its presence in the Asia-Pacific region with the
establishment of a branch office for life and health reinsurance
business in Tokyo.
Commenting on the development, Wolfgang Droste,
head of Gen Re’s life and health business in the Asia Pacific
region, said that the reinsurer sees significant development
potential for its life business in Japan, driven in particular by
what he termed Japan’s “demographic challenges.”
He continued that competition among life
insurers in Japan has increased the pressure to develop new product
ideas, in particular in the field of living assurance products,
such as long-term health-related products.
Gen Re, a unit of US investment company
Berkshire Hathaway, has existing operations in the region in India,
Hong Kong, China, Singapore, Taiwan and Korea.
COMPANIES
MetLife restructures two JVs in
China
US life insurer MetLife has been given
preliminary approval by the China Insurance Regulatory Commission
to restructure the equity control structure of Sino-US MetLife
Insurance Company (SMIC), one of its two Chinese joint ventures
(JV).
Under the proposed change, one of
MetLife’s current Chinese JV partners, Capital Airports Holding
Company, will transfer its equity stake in SMIC to a new JV partner
– Shanghai Alliance Investment Limited (SAIL).
At present, MetLife and SAIL, a state-owned
investment company, each hold a 50% stake in United MetLife
Insurance, MetLife’s other China-based JV.
Following the close of the equity transfer
process SAIL will also have a 50% stake in SMIC which the partners
propose to integrate with United MetLife.
Founded in 2004, SMIC markets individual and
group life, health and accident insurance products in Beijing,
Chongqing, Guangdong, Shenzhen, Liaoning and Dalian.
United MetLife, founded in late-2005, markets
life, health and accident insurance products to individuals in
Shanghai, Jiangsu, Zhejiang and Ningbo.
Both companies market through career agency,
bancassurance, direct marketing and group channels.
PENSIONS
Retirement disaster awaits
Australians
Australians face a “retirement savings
disaster,” warns the Investment & Financial Services
Association (IFSA) in a release marking publication of a study
undertaken on its behalf by Rice Warner Actuaries.
“The retirement savings gap has blown out from
A$452bn [$405bn] in 2004 to A$695bn, an increase of $26,000 per
person to $73,000 per Australian,” said John Brogden, the IFSA’s
CEO.
He explained that almost all of those entering
the workforce today and working to the age of 67 will need to
contribute more than the current 9% of their salaries to a
superannuation fund if they are to maintain their lifestyles in
retirement.
He added that contributions should be increased
to 12% as a first step.
Brogden called on the Australian federal
government to consider other incentives to encourage investment in
superannuation.
“Alternatively, much of the shortfall is going
to have to somehow be funded out of future government revenue,” he
concluded.
COMPANIES
Aegon bids farewell to its
roots
Turning its back on what could be
considered its origins, Aegon has sold its funeral insurance
business in the Netherlands to Dutch investment firm Egeria for
€212m ($290m).
The Dutch insurer noted that the sale is part
of an ongoing review of its businesses around the world which began
in June 2008.
According to Aegon, its Dutch funeral insurance
business – which is one of the largest in the Netherlands –
generated gross written premium income of €70m in 2009.
Aegon can trace its origins back to the burial
funds that began to emerge in the Netherlands in the mid-nineteenth
century.
The oldest of was the Algemene Friesche, which
was created by two civil servants in the northern part of the
Netherlands in 1844.
In 1968, Algemene Friesche was one of three
insurers that merged to create Ago, the forerunner of Aegon. The
present incarnation of the company was established in 1983,
following a merger with Dutch insurer Ennia.
REGULATION
Australian insurers face tougher
regulation
Australian life and general insurers
will come under increased scrutiny by the Australian Prudential
Regulatory Authority (APRA) if a bill proposing a number of
amendments to acts including the Insurance Act 1973 and the Life
Insurance Act 1995 becomes law. The bill is currently open for
comment.
Among amendments proposed is granting of powers
to APRA to issue recapitalisation directions, enabling the
regulator to require an insurer to increase its capital to a level
specified in the direction.
This amendment, believe the bill’s promoters,
could greatly assist APRA in preventing insurer collapses.
Another key amendment would give APRA power to
appoint a statutory manager to facilitate takeovers and transfers
of an insurer’s assets and liabilities where necessary.
Sarath Seethamraju and Greg Moss partners at
Sydney law firm Gadens Lawyers commented that in many respects the
changes are welcome to the extent that they strengthen prudential
regulation.
However they cautioned: “Creeping expansion of
APRA’s powers calls for them to exercise such powers
reasonably.”
