UIPI News and Information Who we are     What's New W News Releases and Articles      Awards and Compliments     Newsletters      UIPI in the News

Federal Reserve Bank of Chicago to Study How Consumers Use Insurance to Build Assets

Chicago...New research may yield more detailed information on how consumers use insurance to build and protect their wealth, and show insurers how to tap this new information for better marketing and underwriting, according to the Urban Insurance Partners Institute (UIPI), a nonprofit insurance industry organization.

“We expect to achieve a better understanding of how moderate-income consumers use insurance and whether, for example, insurance is another way to access the mainstream financial system,” noted Robin Newberger, business economist for the Federal Reserve Bank of Chicago, which is conducting a groundbreaking study. “Through other research, we know that many of these consumers have assets or are interested in building their assets, but we know very little about their experiences with, and attitudes about, insurance.”

The bank is conducting a broad study, including consumers who already own homes, autos or life insurance, as well as those in similar family income brackets but who do not have insurance. The study’s goal is to determine their level of insurance knowledge, the points at which they consider learning more about insurance or purchasing insurance coverage, the kinds of assets they seek to protect, and the ways in which they use the insurance distribution system.

“The study’s results can be used by programs and organizations that are already helping moderate income consumers build assets and wealth,” added Newberger.

Additionally, UIPI is sponsoring a separate study on how consumers, especially the growing multicultural, immigrant and urban consumer market, can be underwritten more accurately with new data. This data, some of which is newly available from the banking industry and can be used in quoting rates, allows insurers to offer more competitive rates.

“In particular, this data can help insurers fill in the profiles on consumers who have thin or different credit files,” added Jim Rink, UIPI chairman and director of the Rural Insurance, and Farm/Crop Marketing Program at Indiana Farm Bureau Insurance Company. “This population is estimated to include up to 70 million people.”

“Dependable and accurate information is an important component of underwriting,” added Todd Rissel, chairman and CEO, e2value, a home valuation service. “These studies should be of particular interest to anyone who wants to do business in a broader marketplace.”

The two studies, according to UIPI President Suzanne Reade, may have a significant impact on how the financial services industry understands and serves moderate-income consumers.

For more information, please contact Suzanne Reade, Urban Insurance Partners Institute, at 773-880-8780.

Regulators Comment on New Underwriting Methodologies

CHICAGO ... Regulators want to make sure that insurers are serving the urban market appropriately, according to Illinois Insurance Director Michael T. McRaith, who spoke at a recent workshop sponsored by the Urban Insurance Partners Institute (UIPI), a nonprofit insurance industry organization.

The workshop focused on a UIPI underwriting study that will test a wide array of both traditional and new sources of data, together with predictive modeling.  UIPI believes this study may lead to an underwriting approach that is more accurate.

"Insurers should support the UIPI underwriting study with data and funding," McRaith added.  "The fact that you have three state regulators at today’s workshop shows the level of interest that regulators have in urban markets.  This study may be able to help you expand your business in urban markets, and the Illinois division looks forward to seeing it completed."

McRaith explained that in Illinois the insurance division does not receive or review the actuarial justification for rates.  However, the rates themselves, rules for applying the rates, and tiering guidelines must be filed with the division, and are considered public.

The study offers insurers a private analysis of their policy data, using new data sources that have just recently become available for underwriting and that have proven to be predictive in preliminary tests, along with other traditional data.  The study also offers participating insurers confidential results, as well as a transparent computer model that insurers could file with insurance departments.  

Texas Insurance Commissioner Mike Geeslin and Pennsylvania Insurance Commissioner Diane Koken also spoke at the workshop.  All three regulators emphasized that any insurers which are considering adopting new approaches, such as data mining or predictive modeling, should keep their insurance departments fully informed, and carefully consider the impact of any changes on consumers.

Other speakers addressed the data and information needs of urban markets insurers.  "Although we were ultimately successful," said Ross Miller, president of Hanover Fire & Casualty Insurance Company, "we found there were significant differences in the marketing and underwriting approaches we had to take in different urban areas.  Insurers can benefit from any information that offers them a more detailed understanding of urban areas."

At the Nov. 9 workshop, attendees also heard from the Federal Reserve Bank of Chicago that national immigration is at its highest level since 1930, constituting 12 percent of the U.S. population.  Two-thirds of immigrants live in just six states -- California, Texas, New York, Florida, Illinois and New Jersey.  However, recent arrivals also favor Arizona, Nevada, North Carolina, Georgia and Colorado, the Federal Reserve Bank of Chicago noted. 

According to Suzanne Reade, UIPI president, the growing number of foreign-born suburban residents means that even in traditional markets, insurers must find new underwriting tools that will help them successfully underwrite diverse markets.  For example, in suburban areas of Chicago, 81 percent of new homeowners between 2000 and 2005 were immigrants.

Workshop speakers detailed how this growing population uses financial services differently, and how new data sources, such as those used in the UIPI study, can help underwriters better understand this population’s risk characteristics.

For more information, contact Suzanne Reade at (773) 880-8780 or visit www.uipi.org.

 

Regulators Consider New Underwriting Approach

Chicago ... New underwriting data that insurers are expected to start using in 2007, along with new computer modeling techniques, will be presented at a national workshop on urban and multicultural markets Nov. 9 in Chicago. Texas Insurance Commissioner Mike Geeslin, Pennsylvania Insurance Commissioner M. Diane Koken, and Illinois Insurance Director Michael T. McRaith will comment on new underwriting trends at the sixth annual Urban Insurance Advantage workshop, sponsored by the Urban Insurance Partners Institute (UIPI), a nonprofit educational resource for the insurance industry.

"We are seeing more interest from insurers in new types of data and predictive modeling," notes Pennsylvania Commissioner Diane Koken. "Regulators want to know if this approach will enable insurers to underwrite more accurately and help expand their underwriting capabilities, and how it will impact consumers."

The UIPI workshop will feature presentations on the new predictive modeling technique, and additional data sources to be used in an underwriting study now underway. The study offers personal lines companies a confidential analysis, using newly available underwriting data that was first developed by the banking industry. The study also applies an array of non-financial data that could offer insurers more detailed risk profiles for traditional markets consumers and, in particular, urban and multicultural consumers. According to UIPI, some of this data already has proven to be predictive in preliminary tests, and insurers are expected to start using the information in 2007 underwriting.

Robin Newberger, business economist at the Federal Reserve Bank of Chicago, also will present research the bank recently co-authored with The Brookings Institution. Newberger notes that immigrants are just as likely to live in suburbs as in cities. Mainstream financial services companies are adapting, according to Newberger, with new products and services for this growing and increasingly affluent market. She will outline key developments that are likely to transform both traditional suburban markets and urban markets.

"We appreciate the willingness of regulators to participate in these discussions," says Meg Rosthal, assistant vice president and associate general counsel for Erie Insurance Group. "This workshop is an important step in promoting innovation, and we hope it will foster a more vibrant insurance market."

Several other topics and speakers will be featured at the one-day workshop, which has been awarded five CPCU continuing professional development credits. For more information on the study, or the Urban Insurance Advantage workshop and registration, please visit www.uipi.org or call Suzanne Reade at (773) 880-8780.

GROUNDBREAKING INSURANCE STUDY CLEARS ANOTHER HURDLE
New Underwriting Approach Could Transform Industry
March 23, 2006

Chicago … The Urban Insurance Partners Institute (UIPI) has passed another milestone in its pioneering study to develop a new underwriting methodology for assessing risk in the rapidly growing underbanked and multicultural markets. The study will also seek to develop new and better ways of differentiating and understanding the many customer groups contained within this broadly defined, underserved segment.
The groundbreaking study, subsidized in part by a challenge grant from The Center for Financial Services Innovation (CFSI), has almost completed its fundraising phase, and has several insurance companies designing the study. Said Suzanne Reade, UIPI’s president, “There is much they can learn from participating. It would take considerable time and expense to accomplish even a small part of this study on their own.”

Commented Jennifer Tescher, CFSI’s director, “One of the greatest obstacles to underbanked consumers obtaining high quality financial services is the lack of meaningful, reliable risk assessment. UIPI’s study has the potential to provide the insurance industry with a useful framework that will help them to better serve urban and emerging markets.”

“We look forward to hearing how well UIPI’s approach works,“ said Illinois Director of Insurance Michael McRaith. “Illinois encourages companies to try new approaches that benefit consumers. We are interested in learning about any tools that can help insurers serve urban residents.”

“While many companies are either using or considering data mining, we initiated and are facilitating this study to see whether this new approach, combined with the use of nontraditional data, can complete a more accurate risk analysis,” said Reade. “This new underwriting method could give companies a higher confidence level in urban and emerging markets, where there is a wider dispersion of risks and where more customers have thin or different credit files.”

Pattern Recognition Systems (PRS), which provides data mining services for financial services companies, and RW Ventures, an urban markets consulting firm, were brought together by UIPI to conduct the test. An opportunity will be offered to insurance companies to install pilot platforms to further refine the new underwriting models. PRS, known for its transparent approach, is willing to show models and variables to regulators upon request once they are developed.

Using traditional underwriting tools can be difficult in urban emerging markets where there is a wider variation among risks and a lack of standard underwriting information. While a typical insurance company underwriting analysis might look at 20 variables, PRS is equipped to test 500 variables with millions of combinations. PRS can also examine a wide range of nontraditional data. The objective of the analysis is to determine which variables perform best, and in which combinations, within customer segments, thereby enabling insurers to put customers into risk classifications that better reflect the individual customer’s true risk characteristics.

“We currently analyze over three million records a day in the financial services industry,” stated PRS President Canh Tran. “We have a track record of providing robust predictive systems that are more accurate than current methodologies. The potential market benefit of more accurate models in the insurance industry is enormous.” The UIPI study will examine how to apply these methodologies to the underserved, underbanked, emerging urban markets.

UIPI has retained Lord, Bissell & Brook and Skadden, Arps, Slate, Meagher & Flom, LLP to provide legal advice on the test design. UIPI anticipates announcing the results of the study later this year at its sixth annual Urban Insurance Advantage workshop on November 9, 2006. UIPI is a nonprofit educational organization resource for insurers on urban, emerging markets. For more information, please contact Suzanne Reade at (773) 880-8780.

Growing Need for Urban Agents Spawns National Program
June 22, 2005

Chicago … A growing need for agents who can serve the rapidly evolving urban market is leading companies and agents to explore new programs aimed at improving local distribution networks, according to Suzanne Reade, president of the Urban Insurance Partners Institute (UIPI).

“Companies ask us where they can find good agents,” says Reade. “Through our annual national workshop discussions, it became clear agents and companies are still struggling with the same issues.”

UIPI, the insurance industry’s main resource on urban and emerging markets, has joined forces with Donald Lewis, president and CEO of The Insurance Cooperative, to develop an ongoing program for both carriers and agents. The first forum will be conducted in Philadelphia, as part of the program, with others to follow in various cities across the country.

“Through experience, we learned how to develop cost-effective programs that enhance the producers’ capacity and capability,” emphasized Mr. Lewis. “The new partnerships we will create through this forum will not only help us take this expertise to the next level locally, but also help us develop top level programs in other cities as well.”

“Urban areas are different from suburban markets,” comments Robert Thomas, chief operating officer and chief financial officer, Rutgers Insurance Companies, “and this program promises to help us develop a very necessary, specialized relationship with urban agents.”

One of the main challenges in urban markets, according to UIPI, is elevating the performance level of agents. Carriers often have premium volume and loss ratio targets many urban agents cannot yet meet. Therefore, a significant program priority will be ongoing performance training and coaching that will help more agents succeed.

“As in any other market, agent training is a key part of any company’s success,” commented Helen Kasper, vice president, regional distribution, Citizens & Hanover Insurance. “However, while companies tend to focus their resources on their own specific needs, this program provides urban agents with valuable training that will help them to address needs specific to their markets, to manage their own agencies better, and to deliver solid overall performance."

Another challenge confronting insurers in urban markets is the higher cost of doing business, notes UIPI. Underwriting, marketing and customer service expenses can all be higher in urban areas.

William Wares, president of Creative Insurance Services, added “We are looking forward to identifying cost-effective outsourcing opportunities for urban agencies and carriers, so they can spend less time on their back room operations and more time with customers.”

Final forum program priorities and direction will be drafted at a July 14 meeting in Philadelphia. “The support we have received so far is very encouraging,” says Reade. "We hope to launch this agent-company emerging markets initiative at our fall national workshop.”

More information on this program, and the September 13, 2005 Urban Insurance Advantage workshop, can be obtained at www.uipi.org, or by calling UIPI at (773) 880-8780.

Growing Financial Services Offer Opportunities for Multicultural Insurance Marketers
August 9, 2005

Chicago…Stored value cards are increasingly popular among multicultural consumer segments, according to the Urban Insurance Partners Institute (UIPI), and insurers can tap into this rapidly evolving trend to increase their customer base. Insurers will learn more about this growing opportunity at the fifth national Urban Insurance Advantage workshop on September 13 in Chicago.

According to Elizabeth (Liz) Handlin, director of Strategic Initiatives at NetSpend Corporation, the largest marketer and processor of stored value cards in the nation, many urban consumers prefer using stored value cards to pay bills and build a solid payment history. NetSpend recently added several new features to their cards, such as direct deposit for payroll checks and a savings program. NetSpend also tracks bill payments, thereby building a payment history for its customers.

“We believe insurers could encourage customers to pay their periodic insurance payments with the stored value card,” said Ms. Handlin, who will be speaking at the workshop. “This could lower the processing cost for agents and companies, while enabling customers to build a strong payment history with the company.”

Prepaid stored value cards appeal to many consumers but are especially appealing to the unbanked and underbanked market. One of the reasons the cards are in demand by under-banked consumers is that the card provides many of the conveniences of a bank account, bundled with the universal acceptance of credit cards.

“We know our customers want to be part of the financial mainstream,” added Handlin. “However, while these consumers have financial capabilities, they prefer some non-traditional ways of doing business. If financial services companies want to serve this market, they have to be creative.”

Ms. Handlin adds that NetSpend has formed partnerships with retailers, check cashers, micro-credit organizations, and credit card companies, and is interested in developing partnerships with insurance carriers.

”We look forward to learning about how this new trend can help urban marketing companies extend their reach into the urban marketplace,” noted Gary Wright, senior vice president, Indiana Farm Bureau. “We are an active urban marketing company in Indiana, and we know first hand that insurers have to stay on top of these trends.”

“We look forward to learning how this emerging financial tool helps emerging market consumers, who often have different preferences,” added Ross Miller, president of Hanover Fire & Casualty Insurance Company.

The Urban Insurance Partners Institute is a nonprofit educational organization dedicated to helping insurers succeed in urban markets. In addition to the presentation on new financial services trends, the workshop will also present information on a new agent company forum, a new urban underwriting approach, and regulatory issues. For more information on the institute or the workshop, visit www.uipi.org or call 773-880-8780.

Urban Insurance Partners Institute Announces New Urban Underwriting Approach
July 27, 2005

Chicago … A new urban insurance underwriting methodology that uses sophisticated data mining technology and new sources of information may help insurers better analyze risk in urban areas, according to the Urban Insurance Partners Institute (UIPI), a nonprofit organization dedicated to helping insurers succeed in urban markets. The new platform will be presented at the fifth national UIPI Urban Insurance Advantage workshop Sept. 13 by Pattern Recognition Systems (PRS), a national database consulting and modeling firm, and RW Ventures, an urban marketing consulting company.

“Urban markets present unique challenges for even the best underwriting models,” according to Robert Weissbourd, president of RW Ventures. “The use of credit has proven to be a highly effective underwriting tool. Alternative data can help refine market segments which more frequently have thin or no credit files.”

Advanced data mining technology, combined with nontraditional sources of data, can be an effective approach in addressing instances where standard underwriting tools are also challenged by the fact that the urban population is more diverse than traditional suburban markets, points out Canh Tran, president of Pattern Recognition Systems.

The new platform applies a more sophisticated segmentation analysis to millions of records in a way that allows PRS to recognize patterns, categorize, and profile a wider array of risk, thereby increasing underwriting accuracy, according to Tran. PRS also enhances the data analysis by including credit information from a wide array of sources, including nontraditional sources, that help fill in credit information gaps. Tran believes the technology-based platform will offer insurers a safer way to enter additional markets and write more personal lines and small commercial business.

UIPI is working with PRS and RW Ventures to conduct a proof of concept test on the new method. Once funding is obtained, UIPI supporters would be eligible to participate in the test, thereby learning firsthand how the new methodology works against their current system.

“As the industry’s leading resource on urban markets, we must continue to bring forward advancements and new ideas,” says Gwendolyn Jones, UIPI chairman, and director of emerging market development at American Family Insurance. “UIPI therefore looks forward to learning more about this new approach.”

“The (proof of concept) proposal is exciting because it has the potential to improve the process of ‘competitive risk classification’ in ways that will benefit both insurers and residents of underserved urban markets,” notes Robert Detlefsen, public policy director for the National Association of Mutual Insurance Companies (NAMIC).

“Farmers is always looking for any new tool or resource that can help it better serve the urban market,” adds Illinois Farmers Insurance Company President Bill Matlock. “If this new approach helps companies better evaluate risk, it will further improve competition in urban markets.”

To market its products effectively, an insurer must utilize a risk classification system that will allow the company to offer insurance to as many potential customers as possible, emphasizes NAMIC’s Detlefsen. “Increased market penetration provides economies of scale, and competitive risk classification therefore serves to increase the availability of insurance, even for high-risk individuals. Insurers can also benefit, because an insurer that discovers and adopts a superior underwriting method will outperform other insurers.”

Pattern Recognition Systems, which specializes in forecasting and segmentation models, has developed successful systems for finance, credit card, and insurance companies that reduce fraud, manage risk, and predict consumer behavior that have become industry standards.

Regulators to Discuss Current Regulatory Issues
October 21, 2004

CHICAGO––The urban market holds more promise than ever before for insurance profitability, finds the Urban Insurance Partners Institute (UIPI). However, companies considering an urban presence must first understand how rules and regulations are likely to be applied in their target markets, cautions the institute, an urban and emerging markets resource.

Bruce Foudree, attorney, Lord, Bissell & Brook, and former National Association of Insurance Commissioners (NAIC) president, will speak Wednesday at a UIPI workshop about the legal developments affecting insurance marketing in urban areas, as well as the recent contingent insurance commissions and bid-rigging suits.

State insurance regulators are looking at how best to encourage competition in urban and emerging markets, according to the UIPI, and often welcome the opportunity to talk with insurers about any new product or service ideas that might benefit consumers.

“We believe that open competition encourages companies to try new products and services,” said Deirdre Manna, acting director, Illinois Division of Insurance, “and it makes the urban market less risky for insurers. Flexible regulation can help create more choices for urban consumers.”

Massachusetts Insurance Commissioner Julianne M. Bowler emphasizes, “Companies and regulators can work together to improve the insurance market. Regulators are interested in promoting a strong urban insurance environment.”

The two insurance commissioners and Foudree will discuss the topics at the fourth national Urban Insurance Advantage workshop here Wednesday.

"We look forward to learning more about where urban markets regulation is headed," added Marie Ward, regional vice president, Liberty Mutual.

The workshop, for insurers and reinsurers, will focus on proven strategies to deliver strong results in emerging urban markets. Topics will also include up-and-coming challenges, the impact of national issues on urban insurers, and how to overcome urban loss control problems, among other items. For more information and to register, go to www.uipi.org, or call UIPI President Suzanne Reade at (773) 880-8780.
Back to list

Emerging Risk Evaluation Critical to Urban Insurers
October 20, 2004

CHICAGO––Insurers doing business in urban areas should adopt a loss prevention program that looks at emerging risks and new risk management techniques, recommends the Urban Insurance Partners Institute (UIPI), an urban and emerging markets resource.

Indoor air quality, which includes mold, insulation fibers, tobacco smoke and other contaminants, is a growing issue, according to UIPI.

“The mold litigation educated consumers about air quality,” said Troy E. Johnson, executive director of the Environmental Education Foundation (EEF).

“In an effort to protect the public and gain a wider adoption from the insurance and lending communities, the Environmental Protection Agency (EPA) has contracted with the EEF to build a coalition of the major players in this industry to promulgate new ‘Industry Best Practices’ governing indoor air quality, including the use of the EPA's
I-BEAM software,” continued Johnson. “EEF is working with insurers, builders, and lenders to advise the agency.”

“These best practices, if adopted, are likely to raise standards and expectations for residential and commercial buildings,” said UIPI President Suzanne Reade. “Insurers should take a look at how these proposed rules might affect construction, as well as insurance coverage, for older buildings in urban areas.”

EEF believes the best practices for loss prevention and mitigation are already developed. “Insurers can readily implement a low cost control plan that helps them cope with this evolving arena,” emphasized Johnson.

Meanwhile, the Illinois F.A.I.R. Plan finds insurers are developing effective new techniques for identifying risk profiles of homeowners. “Home maintenance is a good predictor of future losses, and consumer education makes a critical difference,” commented Douglas Jensen, general manager of the Illinois F.A.I.R. Plan.

Johnson and Jensen will address risk management and loss control issues at the Oct. 27, 2004, Urban Insurance Advantage workshop in Chicago, organized by UIPI. Other speakers include Illinois Acting Director, Deirdre Manna, and Massachusetts Commissioner, Julianne M. Bowler. The workshop will focus on proven strategies to deliver strong results in emerging urban markets. More information on the one day event can be found on the UIPI website at www.uipi.org or the EEF’s website at www.enviro-ed.org.
Back to list

Terrorism Act extension uncertain, insurers advised to prepare
October 13, 2004

CHICAGO––Insurers doing business in urban areas need to examine their business plans to make sure they understand how both the federal Terrorism Risk Insurance Act (TRIA) and unfair discrimination law could affect their business, according to the Urban Insurance Partners Institute (UIPI).

“We advise companies to create an ongoing compliance team that reviews policies and endorsements,“ said Mike Trier, partner at Lord, Bissell & Brook, a Chicago-based law firm. “Since the reauthorization of TRIA for periods after Dec. 31, 2005, is still uncertain, it is important to prepare now for both a hard and soft landing when TRIA terminates.” Trier will tell companies how to get ready for either eventuality during the UIPI national Urban Insurance Advantage workshop Oct. 27 here.

“TRIA was meant to be a temporary solution, and we understand that TRIA's congressional backers are reluctant to extend the program beyond 2007,” said UIPI President Suzanne Reade. “Companies should make sure that in an effort to limit their long-term exposure, they don’t take any legal missteps in the urban arena.”

Many corporations are backing extension of the Terrorism Act. “Insurers and the business community, particularly those in urban areas, have strongly encouraged Congress to extend TRIA while other alternatives to protecting businesses and the economy are examined,” said Donald Griffin, vice president of commercial insurance for the Property Casualty Insurers Association of America. Griffin, along with Trier, will review the current status of TRIA and its impact on urban insurance coverage at the UIPI workshop.

In addition to legal and regulatory speakers, the RAND Corporation’s Center for Terrorism Risk Management Policy will present its work in establishing a new framework for national terrorism risk management. The RAND Corporation is working with insurers and commercial policyholders on terrorism modeling, and using this research to develop risk management options.

“We are looking at a broad range of issues and questions, including to what extent risks should be pooled; to what extent losses should be pre-funded or post-funded; and whether terrorism insurance should be mandatory or voluntary,” said Robert Reville, co-director, Rand Corporation Center for Terrorism Risk Management Policy.
Back to list

Corporate Emerging Markets Executives Share Success Strategies

Chicago...While emerging markets are gaining national attention as the new frontier of financial services marketing, they pose special challenges to corporate managers, according to the Urban Insurance Partners Institute (UIPI), a nonprofit emerging markets resource.

“Insurers are trying different models for managing this opportunity,” said UIPI President Suzanne Reade, “and the model is evolving in response to a changing marketplace.”

At the fourth national Urban Insurance Advantage workshop, organized by UIPI, top corporate managers will discuss the changing emerging marketplace and how corporate managers can best manage this opportunity. Speakers will include Gwendolyn Jones, director, emerging market development, American Family Insurance Company, Don Davis, director, PL emerging markets, Travelers, and Danna Stimson-Gomez, vice president, FACT-Farmers Group.

“This is not a monolithic market, and within market segments, there are distinct differences in how customers understand insurance,” added Jones. “Language is emerging as a substantial issue, and it affects how customers understand insurance. Loyalty can be found in the ethnic market, but they expect the insurance company to treat them well.”

“Fortunately, when Farmers Group decided to enter the urban market, the senior corporate managers realized we needed a separate organization with the latitude to develop our own marketing, underwriting and distribution decisions,” said Danna Stimson-Gomez, vice president, FACT-Farmers Group. “No marketing plan is perfect right from the start, and one of the reasons we are successful is because we have the flexibility to adapt.”

“When Travelers made a commitment to seek growth opportunities in urban areas, we felt it was important to set clear and measurable goals pertaining to the market segment; be able to match underwriting to the available customer base; have agents that can grow in or near the community; and get involved with community partnerships that can provide programs and education to support a healthy insurance climate,” said Don Davis, director, PL emerging markets, Travelers.

“What is often called multicultural, diversity, or emerging markets has a set of nuances that include language, immigration status, and cultural bias,“ added Davis. “These challenges vary across the country. They influence buying habits and attitudes toward insurance. To be successful, they must be factored into the market strategy. Because our independent agency partners do business in these communities, they have a working understanding of the needs of their community.”

At the Oct. 27, 2004 UIPI workshop in Chicago, insurers will also hear from Illinois Acting Director Deirdre Manna, Massachusetts Commissioner Julianne M. Bowler, regulatory attorneys, corporate managers, and risk management experts. More information on UIPI and the workshop, which is for insurance and reinsurance companies, can be found at www.uipi.org.
Back to list

Urban marketing succeeds using different product development

CHICAGO … Companies that succeed in urban markets are most likely to have a different product development and delivery process, according to marketing experts.

Urban or emerging markets customers and agents have different needs, and companies must do careful research and analysis. If they simply rely on their current product development and distribution models, they may fail.

“In this market, companies must take a close look at the customer first, and not what the company wants to sell,” said Werner Kruck, president of Kruck Consulting, a Cincinnati- based insurance marketing firm. “Many companies will start out with their standard policy and think of how they can market the policy to an urban customer, without thinking through whether the customer wants the product. This leads to missed opportunities or worse.”

Insurers are not alone is making this mistake. Banks assumed that urban customers wanted all the same banking services as their other customers, and failed to realize that among some market segments, customers needed money transfer services. As a result, banks missed out on a highly profitable money transfer business, and are now retooling to accommodate that need.

“Don’t make the mistake of limiting your ideas,” continued Kruck. “Start with customer needs and involve your whole company in the process. Remember that your product is the sum total of the customer’s experience with your company.”

“It is also important to realize that your company’s brand value means different things to different people, and their perception is influenced by their cultural background,” added Daniel Sullivan, president, DJS Sullivan and Associates, a Chicago-based marketing firm. “For some groups, financial stability may be important, whereas for others, how long your company has been in business counts more.”

This evaluation process extends to agent recruitment and development, where companies may need to rethink how they work with urban agents.

“Agent training, beyond continuing education courses, is key,” said Donald Lewis, president of Insurance Cooperative, a Philadelphia-based agency network. “There are some agents that use the ‘take all comers’ approach, and those that are already using standard carriers’ underwriting.”

“There is also a middle group of agents who can move into the standard carriers’ criteria if they receive some additional training,” continued Lewis. “But many of them are afraid to ask. This is similar to the student in class who doesn’t ask a question because he is afraid he will be considered ignorant, but in fact, many other students also want to know the answer.”

“The good news is that companies which execute a solid urban markets strategy can and do succeed,” said Michael Yeager, president and chief executive officer of Lehigh Mutual Insurance Company. “We instituted an urban markets strategy, and it is a profitable book of business.”

These experts will be speaking at the third national Urban Insurance Advantage workshop, which will provide life, personal lines, and commercial lines insurers with the tools they need to compete successfully in the urban marketplace. Pennsylvania Commissioner Diane Koken, New Jersey Commissioner Holly C. Bakke and Illinois Director Anthony Clark will also be speakers.

“Don’t limit yourself to ideas you think will fit into the existing regulatory framework,” added Kruck. “Regulators want the market to be served, and if you have a new product idea, talk with them about why you think it will benefit the customer.”
Back to list

Consumer group supports nation-wide, multilingual education on the insurance industry’s use of credit reports

CHICAGO … Consumers would benefit from more information on insurance, including how insurers use credit, according to Ken McEldowney, executive director of Consumer Action. Consumer Action is a nationwide consumer education and advocacy organization that works with over 7,000 local civic, consumer and community organizations. Consumer Action annually distributes over 2 million educational brochures in English, Spanish, and Asian languages.

“Consumers are becoming increasingly aware of how financial services can be used to improve their lives, and they are becoming better educated about important topics such as credit,” said McEldowney. “We therefore encourage the insurance industry to develop nationwide, multilingual education programs so consumers will understand the role credit and credit reports play in decisions made by insurance companies that affect them.”

McEldowney will speak at the October 28-29, 2003 Urban Insurance Advantage workshop, organized by the Urban Insurance Partners Institute (UIPI), where he will also talk about Consumer Action’s recent partnership with Capital One, a financial services company. This program has thus far produced over one million consumer brochures covering topics such as the importance of credit, basic banking, budgeting and how to improve your credit score.

“Consumer education has long been a UIPI priority,” said Sue Johnson, vice president, GeneralCologne Re and UIPI chairman. “We are interested in learning how our industry can reach a broader audience.”

“We are opening a dialogue to see if there are ways in which insurers can work constructively with Consumer Action,” added Suzanne Reade, UIPI president.

The third national Urban Insurance Advantage workshop will provide life, personal lines and commercial lines insurers with the tools they need to compete successfully in the urban marketplace. Urban markets specialists will cover current topics in marketing research, product development, performance measurement and building a corporate team. Pennsylvania Commissioner Diane Koken, New Jersey Commissioner Holly Bakke, and Illinois Director Anthony Clark will speak on regulatory issues.
Back to list

Illinois Insurance Director Clark to Encourage Insurers to Reexamine Urban Markets

CHICAGO … Illinois urban markets present good business opportunities, according to Illinois Department of Insurance Director Anthony Clark.

“Community development leaders have succeeded in improving many neighborhoods,” said Clark. “We encourage companies to look at some of the new market research.”

Director Clark will be speaking at the Urban Insurance Advantage workshop on October 28 and 29, 2003 in Chicago. The workshop is organized by the Urban Insurance Partners Institute. Other regulators scheduled to speak include Pennsylvania Commissioner Diane Koken, and Holly C. Bakke, Commissioner of the New Jersey Department of Banking and Insurance.

According to a recent study by Social Compact, an urban market research organization based in Bethesda, Maryland, census data consistently underestimates the economic strength of city neighborhoods. For example, census information indicated a $40,582 average household income for four Chicago neighborhoods in 2000, but Social Compact found that the real figure is $53,443. In addition, the census counted 88,000 households in the same area, but Social Compact’s more extensive study showed 108,000 households. Taken together, these figures show there are often more households, with greater spending power, than many companies realize. Social Compact has found similar disparities in other cities.

“We look forward to hearing Director Clark’s comments on urban markets,” said Kevin Martin, executive director of the Illinois Insurance Association.

The third national Urban Insurance Advantage workshop is designed to provide life, personal lines, and commercial lines insurers with the tools they need to compete successfully in the urban marketplace. Urban markets leaders will cover current topics in marketing research, product and agent development, performance measurement and building a corporate team; and state regulators will discuss current urban market regulatory issues.
Back to list

Insurers have inaccurate data for urban markets

CHICAGO … According to a recent analysis by MetroEdge, a Chicago-based market research and consulting division of ShoreBank, insurers are missing billions of dollars in urban business because they lack accurate database tools. MetroEdge is completing a gap analysis that will be presented at an October 28-29, 2003 workshop on urban marketing in Chicago.

“Traditional segmentation tools that attempt to size the market and identify distinct customer preferences have limited use in urban markets,” said Darice Wright, director of financial services for MetroEdge. “Most database services will have three to four market segments for urban markets, whereas companies really need at least a dozen segmentations to market efficiently.”

Moreover, traditional databases used by many financial services companies typically underestimate the market, partly due to underreported income that traditional database companies do not take into account.

“ To adequately size this market you must ask the right questions in the right context,” explained Wright. A recent MetroEdge analysis of low, middle and high income market segments showed that each segment makes about the same amount of annual consumer expenditures—about $1 trillion each.

MetroEdge is focused on providing specialized market intelligence on customer segmentation, product mix and delivery strategies for urban marketing initiatives. MetroEdge’s clients include national retail companies, financial institutions and various city and local governments.

The third national Urban Insurance Advantage workshop, organized by the Urban Insurance Partners Institute (UIPI) is designed to provide life, personal lines, and commercial lines insurers with the tools they need to compete successfully in the urban marketplace. Urban markets leaders will cover current topics in marketing research, product and agent development, performance measurement and building a corporate team; and state regulators will discuss current urban market regulations.
Back to list

Effective multicultural initiatives yield big results

CHICAGO … Insurers that launch an articulate emerging markets strategy can realistically expect agent productivity increases of over 50 percent, and dramatically better results than their “normal” business, according to Andrew Nuttney, a principal in the New York-based Research and Advisory Group. The firm specializes in urban marketing, and counts among its clients a number of large financial services companies.

“However,” emphasizes Nuttney, “the problem is that only a few of the many diversity strategies now in place can be described as articulate, or to be blunt, successful.”

Nuttney will be a speaker at the October 28-29, 2003 Urban Insurance Advantage workshop, which is organized annually by the Urban Insurance Partners Institute (UIPI), a nonprofit insurance industry group. He will discuss the results of his firm’s recent research on emerging markets strategies and results.

“Despite these shortcomings, many of the firms surveyed report dramatically better results than in their regular business, “ continued Nuttney. “Based on our research, we expect that absolute returns from multicultural initiatives in financial services should yield between 15 percent and 100 percent greater profitability, after incremental investment, relative to regular business. This is partly due to the pent up demand for a variety of insurance products.”

Nuttney will discuss analytic frameworks at the workshop, which will help company managers set clear metrics and transparent objectives. “One key element that we often find lacking is a clear understanding of ROI standards and objectives,” concluded Nuttney.

“This research offers tremendous value to urban markets professionals,” notes Gwendolyn Jones, director of emerging markets for American Family Insurance and chairman of the Urban Insurance Advantage workshop.

The third national Urban Insurance Advantage workshop, held in Chicago, will provide life, personal lines, and commercial lines insurers with the tools they need to compete successfully in the urban marketplace. In addition to the urban markets performance session, urban markets specialists will cover current topics in marketing research, product development, agent development, and building a corporate team.

Pennyslvania Commissioner Diane Koken will join Holly C. Bakke, Commissioner of the New Jersey Department of Banking and Insurance, in a regulatory affairs panel. The panel will be moderated by former NAIC president Bruce Foudree, now an attorney at Lord, Bissell & Brook.
Back to list

Mexico pushes nationwide insurance education for U.S. immigrants

CHICAGO … Mexican immigrants are able to utilize insurance and other financial services to acquire security and build wealth, according to Mexico Consul General Carlos Sada. He will discuss Mexico’s new national initiative, aimed at helping Mexican immigrants make better use of financial services, at the Urban Insurance Partners Institute (UIPI) national workshop, to be held October 28-29, 2003 in Chicago.

“Research shows that our immigrants work hard and save money, but they are not fully utilizing their opportunities to build financial security,” says Sada. “We therefore launched a national initiative, in conjunction with the Federal Deposit Insurance Corporation (FDIC), to help our U.S. immigrants move into the financial mainstream. We appreciate the opportunity to open a dialogue with UIPI at the workshop, to explain how this initiative will benefit both insurers and Mexican consumers.”

Banks already are attracting a new wave of Mexican customers. A recent survey of 11 Midwestern banks showed 20,000 new bank accounts from Mexican immigrants, with $70 million in new deposits. In the Midwest alone, Mexicans represent a $20 billion economy, and their buying power is expected to double by 2007. Nationwide, the Hispanic market is estimated at $653 billion. Many of these immigrants live in urban areas.

Several new developments are fueling this growth. The joint initiative by Mexico and the FDIC is promoting access to a variety of financial services, including mortgages, small business loans and credit cards. In addition, Mexico is promoting use of the Matricula, an identification card, which is increasingly accepted by banks and government agencies.

“We are very interested in learning more about Mexico’s initiative,” said Gwen Jones, Emerging Market Development Director, American Family Insurance Company, and UIPI workshop chairman. “UIPI already has homeowners and small commercial insurance education programs that can help immigrants better understand insurance.”

“Mexico’s leadership has important implications for all lines of insurance,” notes UIPI President Suzanne Reade. According to a recent Milken Institute report, ethnic-owned firms grew more than twice as fast as all firms in the nineties, but these entrepreneurs still do not access the same range of financial services as larger businesses.

“There is tremendous room for growth in commercial, as well as life and personal lines insurance, within this market,” added Reade.

The third national Urban Insurance Advantage workshop is designed to provide life, personal lines, and commercial lines insurers with the tools they need to compete successfully in the urban marketplace. In addition to Mexico’s financial services initiative, urban markets leaders will cover current topics in marketing research, product and agent development, and building a corporate team; and state regulators will discuss current urban market regulatory issues.
Back to list

Commissioner Holly Bakke to address insurers on urban markets issues

CHICAGO … Companies seeking to do business in urban markets must take the long view, according to Holly C. Bakke, Commissioner of the New Jersey Department of Banking and Insurance.

“There is good business in urban markets such as New Jersey,” said Bakke. “However, it is a diverse market, and we encourage companies to tailor products and services to serve a variety of market segments. Companies may need to adapt their business models in order to be successful.”

Bakke will be a speaker at the October 28-29, 2003 Urban Insurance Advantage workshop, which is organized annually by the Urban Insurance Partners Institute (UIPI). The regulatory session will be moderated by Bruce Foudree, who is a former president of the National Association of Insurance Commissioners. He is currently an attorney at Lord, Bissell & Brook.

“New Jersey is a large market,” noted UIPI President Suzanne Reade, “and we look forward to hearing Commissioner Bakke’s views on current issues.”

“We recently joined UIPI because it educates companies about doing business successfully in urban markets, and we encourage companies to take this opportunity to learn more about urban markets regulation,” said Magdalena Padilla, Vice President, Government Affairs & Counsel of the Insurance Council of New Jersey (ICNJ). The ICNJ is a nonprofit, insurance research, information and advocacy organization sponsored by 30 New Jersey licensed property/casualty organizations.

The third national Urban Insurance Advantage workshop will provide life, personal lines, and commercial lines insurers with the tools they need to compete successfully in the urban marketplace. In addition to the regulatory affairs session, urban markets specialists will cover current topics in marketing research, product development, performance measurement and building a corporate team.
Back to list

Pennsylvania Commissioner Diane Koken urges insurers to look at growing urban markets

CHICAGO … Urban areas that have long been considered risky markets are now seeing an influx of new growth and investment, according to Pennsylvania Commissioner Diane Koken.

“Governments and the private sector are working together to rebuild vibrant cities such as Philadelphia, “ said Koken. “Insurers should take a closer look at urban markets. Life, personal lines and commercial lines companies can all find opportunities.”

Koken will speak at the October 28-29, 2003 Urban Insurance Advantage workshop, organized by the Urban Insurance Partners Institute (UIPI), where she will also discuss current Pennsylvania urban market regulatory issues. The discussion will be moderated by Bruce Foudree, who is a former president of the National Association of Insurance Commissioners. He is currently an attorney at Lord, Bissell & Brook.

“The Urban Insurance Advantage workshop affords insurers an opportunity to learn more about urban marketing, including current regulatory issues,” continued Koken.

“We look forward to hearing Commissioner Koken’s perspective on urban insurance regulation,” noted Christina Webber, president and CEO of The Philadelphia Contributionship Companies and UIPI secretary.

“Commissioner Koken is an experienced regulator who presides over an important urban market,” added UIPI President Suzanne Reade.

The third national Urban Insurance Advantage workshop will provide life, personal lines and commercial lines insurers with the tools they need to compete successfully in the urban marketplace. Urban markets specialists will cover current topics in marketing research, product development, performance measurement and building a corporate team.

UIPI is a nonprofit educational organization supported by the insurance industry. UIPI conducts annual workshops for insurers, and it promotes consumer education on homeowners and commercial education. For more information on the institute, the workshop and its programs, see www.uipi.org.
Back to list

Tools necessary to succeed in urban markets

An interview with two founding UIPI board members.

The Urban Insurance Partners Institute is dedicated to providing insurers with the tools necessary to succeed in urban markets. Two founding UIPI board members share ideas on how to do well in urban areas, and explain the benefits of UIPI.

Michael Yeager is immediate past chairman of the institute, and president and CEO of Lehigh Mutual Insurance Company in Pennsylvania. Chuck Chamness is executive vice president of the National Association of Mutual Insurance Companies (NAMIC).

Michael Yeager
What ingredients are necessary for companies to do well in the urban marketplace?
Companies need to have a physical presence and partnerships with local entities.

What kind of knowledge is needed to pursue urban business?
Insurers should understand that each risk is unique. They should also possess the ability to underwrite each risk on an individual basis.

How do you define an urban area?
An urban area is any densely populated spot combining commercial residential and industrial risks. Urban does not mean a large city--the term could fit some pockets of any size city.

Was your company always an urban marketer?
No. Historically, we were predominately a farm writer, but needed to adapt to our changing environment.

How can companies benefit by participating in UIPI?
The institute helps companies become educated about opportunities in urban areas, and apprised of resources within these markets to more effectively do business. UIPI also provides several opportunities for CEOS and other executives to meet with their peers and stay abreast of current urban market developments.

How can other companies like yours get involved?
Companies can become engaged in UIPI by joining the institute, participating in frank discussions with peers, and allowing oneself to become aware of business opportunities with partners. Membership dues are extremely reasonable, and are based on the size of the company.

Are farm bureau companies exempt from urban concerns?
Urban areas are not just in states’ largest cities. There is enormous opportunity to do business in underserved cities of all sizes throughout the country by becoming aware of these urban pockets.

Chuck Chamness

Why is it important for all segments of the insurance industry to be involved in UIPI?
Since the property casualty insurance industry as a whole will be called to account for any availability problems in urban areas, it's important that all segments of the industry be engaged in proactive solutions through UIPI. For six years UIPI has helped prospective homeowners learn about insurance, provided tools for neighborhood improvement and helped companies market to urban areas.

What issues are particularly important for insurers to watch in regard to urban business?
There are some useful and fascinating new data products that analyze urban market opportunities by neighborhood, even block-by-block. Specifically, two presenters at the UIPI 2002 Workshop (Datamonitor and MetroEdge) did a great job of describing market opportunities that would not be apparent using traditional census and economic data.

How does what UIPI is doing differ from what other insurance associations are doing on urban markets?
UIPI addresses company needs and best practices in urban areas, and they focus particularly effectively on the marketing side of the urban strategy.

Why should insurance trade associations and others support UIPI?
To help identify good practices and partners in urban markets, and to tell the industry, policymakers and others about the urban market renaissance taking place in America.

How important is it to educate policyholders about credit based insurance scoring, an issue discussed at the UIPI workshop?
Education is extremely important. Consumers need to understand how this information is used by insurers, mortgage bankers and other financial services providers, and to discover that most insurance consumers benefit from its use. Recent objective studies show that insurance scoring is both fair and effective.
Back to list

Significant opportunities for insurers in urban areas
The challenge lies in learning how to develop and market products to this diverse market.

Enormous untapped potential exists for insurance companies in urban areas, agree data experts.

The vast majority of U.S. insurers are letting billions of dollars in business slip away by failing to market and underwrite effectively to large segments of the urban market, according to Andrew Nuttney, managing director of Datamonitor, who spoke at the workshop. The Urban Marketing Update was sponsored by The Philadelphia Contributionship Companies, with Ross Miller, vice president and general counsel of Hanover Fire and Casualty Insurance Company, serving as moderator.

“There is clear and significant opportunity in urban area after area,“ Nuttney revealed. “Most urban areas have dramatically increased their share of wealth, but not their share of insurance.”

The challenge for insurers lies in learning how to develop and market products to this tremendously diverse market. Experts suggest segmenting ethnic groups into more categories, such as Puerto Rican, Mexican, Cuban, Filipino, Vietnamese, Korean, Taiwanese and Indian, to better identify potential needs.

Nuttney sees a three-to-four year window of opportunity for insurers to launch efforts to capture this “phenomenally open” market. He believes small and regional companies are in the best position to quickly capitalize on the potential. “The ones that go in late will get the least out of their investment,” he said. Nuttney is now head of The Research & Advisory Group, a diversity and urban markets consulting firm.

Access to and proper use of quality data is essential to doing well in urban markets. But, there are voids in credible data available for urban areas, reported the American Association of Insurance Services (AAIS), a statistical agent and advisory organization for property casualty insurers. “There is a lot of data out there,” said Paul Baiocchi, president of AAIS. “The challenge is to isolate the data that is most helpful to companies striving to successfully write business in urban areas.”

Companies should look at published loss costs, in addition to their own data. Statistics are collected by four organizations at the national level, including AAIS, ISO, NAII and NISS. Insurers also should be creative in using external information, available on the Internet and from other carriers. However, statistical records don’t capture emerging issues well, such as mold.

Some insurance companies have benefited from innovative data collection techniques that reveal figures not readily apparent from traditional methods, relayed Shelly Herman, president of MetroEdge, during the workshop session. “There are many hidden facts about urban areas that when tapped bring a whole new picture to light,” commented Herman. “It is this hidden potential that becomes important when looking at urban markets.”

Income is not a good indicator of spending power available, finds MetroEdge, a business of Shorebank Corporation. Urban areas have a much higher population density per square mile than suburban communities, and a large legal cash economy. Immigrants make up the vast majority of new population in cities. Many urban residents are going outside their communities to shop because desired products are not available, which experts call “leakage” or “float.”

Urban markets are different around the country, requiring compilation of extensive local information for success. Records can be obtained from sources such as building permits, utilities, school enrollment growth, and companies specializing in data collection.

A coherent and cohesive strategy needs to be adopted to obtain a favorable return on investment n urban areas, experts emphasize. Upfront costs can be significantly higher than for other markets.
Back to list

Urban insurance lawsuits enter new phase
Insurers must understand current legal environment to operate successfully in urban areas.

Litigation is entering a third phase for insurers that operate in urban areas. Private class action lawsuits and filings by state attorneys general are on the upswing, adding to previous activity by fair housing groups and the Department of Housing and Urban Development (HUD).

“Litigation is creating laws insurers must follow,” emphasizes Benjamin Klubes, partner at Washington, D.C.-based Skadden, Arps, Slate, Meagher & Flom. “The laws are not principally being driven by regulatory authorities, but by litigation about insurance policies and underwriting guidelines.”

The latest legal trends were explored by top legal experts, regulators and national trade association representatives during the Legal Issues segment of the workshop, sponsored by Lord, Bissell and Brook, and Liberty Mutual Group. The session was moderated by Bruce Foudree, former president of the National Association of Insurance Commissioners (NAIC), and now of Lord, Bissell and Brook. “Companies can expect increasing regulatory scrutiny of insurers’ marketing and underwriting activities in urban markets,” Foudree said.

Panelists included Klubes; Phillip Stano, partner at Jorden Burt LLP; Madelynne Brown, assistant director of the Illinois Department of Insurance; and Chuck Chamness, executive vice president of the National Association of Mutual Insurance Companies (NAMIC).

The panelists agreed insurers must understand the current legal environment to operate successfully in urban areas. Smaller regional insurers are being sued as well as large companies on the use of certain underwriting criteria, and more litigation is expected on a host of emerging issues.

Housing advocacy groups currently are testing insurers by having minority and non-minority “applicants” get insurance quotes for similar properties in majority white neighborhoods. Allegations of discriminatory underwriting and intentional discrimination have resulted from this “fundamentally flawed” survey method, panelists reported.

Advocacy groups are beginning to shift their views of who fits into the category of minorities. Accessiblity to insurance, despite language barriers, is foreseen as an up and coming issue. “I can see requirements down the road for policy language, in terms of having policies readily available in different languages,” remarked Stano. “It could happen sooner than anyone thinks.” Stano noted minority markets present an opportunity for insurers.

Credit based insurance scoring is another issue expected to get “bigger and bigger” in the urban marketplace. The statistical connection between insurance scores and insurance claims has been important to legal cases argued prior to the workshop. “In none of the cases did insurers agree to not use insurance scoring,” Klubes said.

Legislative activity is expected in at least 40 states this year on insurance scoring, summarized Chamness. The National Conference of Insurance Legislators (NCOIL) worked with insurance companies, associations and agencies to come up with a proactive model bill on this issue, for introduction in 2003. “Companies and insurance trades need to continue to educate policymakers and consumers about the use of credit based insurance scores,“ Chamness stated. NAMIC provided a national overview of legislative and regulatory trends on insurance scoring at the workshop.

The National Association of Insurance Commissioners is another organization that has spent considerable time studying the insurance scoring issue. “People definitely don’t understand it (insurance scoring),” emphasized Brown, a member of the NAIC Credit Scoring Working Group. “That’s the framework the insurance industry is dealing with.” Brown reported the NAIC committee was working on draft regulatory options, in addition to a consumer brochure on insurance scoring. She left the Illinois insurance department earlier this year after the new governor took office.
Back to list

Public perception problem on insurance scoring
Michigan insurance commissioner expects issue to gain legislative ground this year.

A spate of litigation is bound to occur on the use of credit based insurance scores, predicted Frank Fitzgerald, commissioner of the Michigan Office of Financial and Insurance Services during a keynote address at the UIPI workshop.

“The litigation phase is going to come,” Fitzgerald warned. “It has come on everything else.” Fitzgerald spoke to the group just a few weeks before releasing a long-awaited report on insurance scoring, as part of a luncheon sponsored by Nationwide Insurance. He was introduced by Galen Stover, an associate vice president at Nationwide.

Public perception is one of the main problems facing insurance companies on this issue, Fitzgerald said. Insurers should seize every opportunity available to communicate with consumers in an understandable way about the topic, he suggested. One large stumbling block Fitzgerald noted is the lack of agent support for insurance scoring.

“Sometimes the insurance industry is one of its own worst enemies when it comes to public perception,” Fitzgerald claimed. “If the industry wants to make use of insurance scoring, a better job has to be done. Regulators will not come in and bail you out on this one.”

Companies are advised to use frequent repetition when detailing why insurance scoring works. Fitzgerald believes the insurance industry has a lot of good points to share, many of which were detailed during the morning Legal Issues workshop segment, which he attended.

“I commend all of you for being here, and for UIPI,” Fitzgerald commented. “I truly believe the urban markets issues we have are significant.”

Fitzgerald suggested insurers learn a lesson from banks, and formulate an effective industry response to this issue. “One of the toughest things the property/casualty industry has an aversion to is national state based regulatory action,” he said.

Fitzgerald expects the insurance scoring issue will gain ground over the next few years due to a changing political landscape. However, he pointed out insurance scoring is a bipartisan issue, which the legislature gets “absolutely no positive feedback on.” Fitzgerald anticipated a high level of legislative activity across the country on the issue in 2003.

In mid-February, Fitzgerald issued a bulletin requiring companies to provide consumers with more information about the use of credit to calculate insurance scores. Insurers also will have to recalculate scores annually or when a consumer corrects their credit history. Fitzgerald resigned his post Feb. 21, shortly after Gov. Jennifer Granholm took office. He was appointed commissioner in 1999 by then Governor John Engler.
Back to list

Credit-Based Insurance Scoring
Information for Consumers

For additional points on credit-based insurance scoring, see www.uipi.org, 2002 workshop. Information provided by NAMIC.
Back to list

Demand large for new urban investment tool
New Markets Tax Credit enables urban marketing strategy that provides investment return.

The demand is huge for a new tax break that companies can use to invest in urban businesses. The New Markets Tax Credit enables insurers to pursue an urban marketing strategy that provides a return on investment.

The U.S. Treasury Department received requests for $25 billion in New Markets Tax Credits in 2002, while only $2.5 billion was available. The Internal Revenue Service (IRS) is currently sorting out applications and will likely decide on allocations this December, according to Joseph Hagan, president and CEO of the National Equity Fund, who updated workshop participants on the investment opportunity.

A total of $15 billion in tax credits are available through 2007. “It is enough of a tax credit to provide capital in areas where we haven’t typically seen capital,” commented Hagan. He noted appreciation in urban real estate values has outpaced that of suburban areas in many parts of the country.

New Markets Tax Credits Available
$1.5 billion 2003
$2 billion 2004
$2 billion 2005
$3.5 billion 2006
$3.5 billion 2007

The New Markets Tax Credit is claimed over a seven year period, providing a present value of 30 percent in tax credits and an aggregate of 39 percent. Investments are made with approved Community Development Entities (organizations with a primary mission of community development), instead of specific projects.

“Be very careful who you pick,” warned Hagan. “Economic development is inherently risky. Invest only in deals that make sense.” Hagan expects significant investment will be channeled through Local Initiatives Support Corporation (LISC), with which National Equity Fund is affiliated.

Hagan also spoke about a Homeownership Tax Credit being considered in Congress that would provide $4.2 billion in tax incentives for construction and rehabilitation of homes in low income neighborhoods. “This could have a huge impact for all of us here,” he enthused. The credit would be another tool to revitalize cities, working in concert with the New Markets Tax Credit and the Low Income Housing Tax Credit.
Back to list

Commercial insurance education program unveiled
Small business urban growth and affects of Sept. 11 lead to new UIPI program.

The increased growth of small businesses in urban areas, combined with the commercial insurance affects of Sept. 11, has led to a new program designed to educate business owners about insurance.

The UIPI commercial insurance education program helps small business owners better manage their risk by providing basic information about coverage. The educational presentation was unveiled during the institute’s national workshop in a session moderated by Irene Sewer of Grange Insurance and Linda Goff of Kentucky Farm Bureau Mutual Insurance Company.

“There has never been a more important time for small business owners to be informed about insurance,” remarked Lawrence Mirel, commissioner of the District of Columbia Department of Insurance and Securities Regulation in a news statement. “I credit UIPI with creating a significant program to help small business owners with a critical, but often overlooked segment of their business plan.” Mirel is the nation’s only insurance commissioner with a totally urban territory.

The institute’s program was created at the request of regulators, community development organizations and insurers. Development of the small business owners education program began following UIPI’s first national workshop, where the idea was presented.

“We’re seeing a lot of small business growth in many urban areas,” notes Sue Johnson, UIPI chairman and a vice president with GeneralCologne Re. “Community groups have emphasized that insurance plays an especially critical role in helping business owners expand their operations.” The program is being introduced in a number of cities.

The institute also has created a successful homeowners insurance education program, which enables insurance companies to give agents and executives a higher profile in urban communities. The course was highlighted at the workshop to inform insurers about additional opportunities available to increase company visibility and success. The homeowners program teaches first time homebuyers how to better protect their homes and families, by providing basic insurance information.

Both presentations are available in Power Point form to UIPI supporters. The programs can be viewed at www.uipi.org.
Back to list

Regulatory oversight warning given
Congress is taking an increasingly close look at insurance company operations, tells the Illinois insurance director.
Regulatory oversight is changing at the federal level and insurance companies should take note, suggested Illinois Insurance Director Nathaniel Shapo at the UIPI workshop.

“Congressional interest will not ebb and flow anymore, but will involve continual oversight,” Shapo related during a luncheon address sponsored by American Family Mutual Insurance Company. Gwen Jones, director of emerging markets at American Family and chairman of the UIPI Workshop Committee, provided the introduction.

Shapo shared an experience where he was asked to give a brief update to a congressional committee on recent developments in connection with a pending bill. The session surprisingly turned into a detailed questioning on many different topics.

Shapo believes Congress will monitor insurance and financial services much more closely now that financial modernization laws are in effect. The implications for urban markets are increased oversight.

Shapo foresees the credit based insurance scoring issue will grow. He recommends insurance companies work more closely with agents to secure a favorable outcome. “The use of credit sparks a visceral reaction from some policymakers,” he conveyed. “Many times legislatures step in for social considerations.”

He compared the struggles between HMOs and doctors to what could happen with insurance companies and agents. “If you don’t believe me on the merits, look at the political side.”

Shapo sees a clear benefit to insurers being involved in the Urban Insurance Partners Institute. “Insurance has been called the glue that holds our economy together,” he stated. “The very future of urban neighborhoods is thus inextricably linked to the availability of insurance coverage. That’s why I’m pleased to work with UIPI.”

Shapo served as Illinois insurance director from 1999 until early 2003, having been appointed by former Republican Governor George Ryan. He expects insurance related bills that weren’t taken seriously in the past to be given a second look by the new Democratic administration. Shapo is now a partner in the law firm Sonnenschein, based out of the Chicago office.
Back to list

Insurance and community partnerships aid urban residents
Working with reputable nonprofits helps insurers reach new and existing urban homeowners and business owners.

One of the nation’s largest cities, Indianapolis, has opened the door for thousands of urban residents to become homeowners, partnering with insurers to teach homeowners about insurance. The Indianapolis Neighborhood Housing Partnership (INHP) is among the organizations the institute works with in many cities to teach first time homebuyers about insurance.

Partnerships with reputable nonprofit community groups are among the best ways for insurance companies to reach new and existing homeowners and business owners in urban markets. The institute has both homeowners and commercial insurance programs for use by UIPI members. Each presentation is designed to be used in partnership with community groups.

“If your company is thinking of working with local community organizations, we invite you to take note of the quality of work INHP does, and look for that same type of commitment and leadership from groups you consider in each community you strive to do business,” emphasized Sue Johnson, chairman of UIPI and a vice president at GeneralCologne Re. Her comments came during the Model Program session of the workshop featuring INHP, which was sponsored by GeneralCologne Re.

INHP uses a combination of programs, including housing finance, education and investments in community development to strengthen the city for current and future generations. Many of the institute’s supporting companies are involved in teaching homeowners insurance education classes in partnership with INHP.

“Our programs are very focused on how we enable people to access resources and how we allow investment in resources to be made available to citizens,“ described Moira Carlstedt, INHP president. She noted the typical INHP customer has an average household income of $25,000-$35,000 and a FICO credit score below 580. Approximately two-thirds are minorities, with an equal percentage female. The organization is conducting a study on whether INHP customers’ credit scores improve after a home purchase.

Todd Sears, INHP executive vice president, spoke about the special lending opportunities available to consumers through INHP, including three loan pools which offer attractive terms to qualified buyers Entities similar to INHP are available at the national, regional and local levels. Partnership opportunities can be found through Neighbor Works (www.nw.org), Local Initiatives Support Corporation (www.liscnet.org), Housing Partnership Network (www.nahp.net), and state housing finance agencies (www.ncsha.org).
Back to list

Enormous untapped potential in urban areas,finds newly reelected Urban Insurance Partners Institute chairman
Contact: Tammy L. Rader
(317) 580-2599
April 22, 2003