Reasons for staying the course

The Employee Benefit Research Institute has released a new study showing that investors who were able to weather the storm of the financial crisis and continue their 401(k) positions have been rewarded with positive returns. According to the report, the average 401(k) account balance for participants consistently participating in their 401(k) plans for the four years from 2007 through 2011 was up 23.5 percent at year-end 2011 compared with year-end 2007, despite the sharp decline caused by the bear market in 2008. The full report can be accessed here.

Remembering the financial crisis

Via the links for today at Yves Smith's Naked Capitalism blog, there is a link to Investor Home that opens a treasure trove of resources pertaining to the economic crisis. In particular, there is a comprehensive listing of books. Well worth checking out!

Life Insurance Awareness Month

September is Life Insurance Awareness Month. Most producers in the life insurance field are aware of this, but not all bother to fully leverage the resources made available to them -- many of which are free -- by the event's sponsor, the Life and Health Insurance Foundation for Education (LIFE). If it has been awhile since you have visited their website, you should take the time to do so today. Be sure to check out their Industry Resources tab, from which you can access sales tips, social media tools, and marketing products.

While the best known, Life Insurance Awareness Month is not the only awareness campaign supported by the Foundation. Be sure to also investigate the tools they offer for Disability Awareness Month (May) and the ongoing Insure Your Love and Life Happens campaigns. Each offers free and for purchase materials that are of very high quality.

Resources for understanding the Affordable Care Act

As the ACA continues to unfold, the full complexity of the law and its impacts can seem daunting. This sense of being overwhelmed can be as true for insurance producers and benefits providers as it is for small business owners.

There are, fortunately, a host of information resources available online. The Michigan Business and Professional Association offers its Small Business Health Care Reform Guide and Employer Checklist: What the Affordable Care Act Means for Michigan Small Businesses through the Health Reform Connect(TM) section of its website. The Detroit Regional Chamber of Commerce hosts MI Health Answers, and the Department of Financial and Insurance Services offers the Health Insurance Consumer Assistance Program.

In addition to these, webinars are available as well. The Small Business Administration and Small Business Majority conduct the free Affordable Care Act 101 webinar series on a weekly basis.  In this series, SBA reps go through the key pieces of the law, focusing on concerns of small business owners.

For a "big picture" overview that focuses on state policy initiatives, the National Academy for State Health Policy conducts webinars on an ongoing basis. Of particular interest as we approach the October 1st roll-out for exchanges is All Hands on Deck: State Plans for Consumer Assistance. This webinar, offered on September 11th from 1:30 to 3:00 pm EDT, will highlight the key features of consumer assistance strategies being employed by exchanges.

September is National Preparedness Month

September is National Preparedness Month, and FEMA invites members of the public to join the National Preparedness Community along with more than 32,000 people and collaborate on emergency preparedness.

From their website you can download the 2013 National Preparedness Month Toolkit. The Toolkit has a wide range of resources, and a section dedicated to prepardness questions for small business owners. The ideas within can be used for one's own business, and shared with colleagues and clients. Along with providing important information, the concepts within are a great way to discuss different risk exposures and coverage gaps.

The lonely status of Morgan Stanley

From today's online Fortune we read that five years after the Lehman bankruptcy, Morgan Stanley is the lone big bank that has not paid a federal fine relaying to the crisis. What is more, neither the firm nor any of its bankers currently face any federal accusations!

The article makes it clear that a federal action could still occur, but notes -- in a stand-alone sentence that seems to frown with disappointment -- it is possible the firm "didn't do anything wrong in the run up to the financial crisis." This statement is immediately followed by a brief overview of private lawsuits from investors who would "seem to disagree."

At the SEC website there is a list of big banks that have paid fines for "activities" relating to the financial crisis. Morgan Stanley's name is conspicuously absent from this list, and while that should be noted and applauded while it stands, one has to wonder about the lack of vigor shown by Washington and the SEC to take action on this issue. To date, the SEC has charged 161 firms or individuals, and garnered $2.7 billion in fines. Isolated from the overall context of the issue, this may seem impressive. However, consider this: the Dallas Fed estimates that the total cost of the financial crisis to range from $6 trillion to $14 trillion. The hoary details can be accessed from a pdf download of the full report available here. In light of the sheer scale of the crisis, $2.7 billion sounds...well, meager.

Like oil and water: fracking, residential mortgages and insurance

Fracking is the colloquial term for the hydrofracturing and subsequent extraction of oil and gas-bearing shales. The "fracturing" part of the process breaks up shale rock deep underground through the application of water and chemicals under extremely high pressure. While fracking has created jobs and delivered energy resources, it does not come without a host of negative consequences.

The negative effects of fracking most often reported in the media and by environmental groups relate primarily its potential to damage and pollute the soil, water, and air. Yet along with these known risks, writes Roger Drouin in a Grist article titled Fracking boom could lead to housing bust, another set of risks looms large:  its doleful effects on the residential property market.

In his article, Drouin cites the Mineral, Oil and Gas Rights rider in loan paperwork from Sovereign Bank says the mortgage will be automatically recalled if the property owner transfers any oil or gas rights or allows any surface drilling activity. It also specifies that owners must “take affirmative steps to prevent the renewal or expansion” of a current gas lease.

None of this should be surprising, really. It was reported in a 2012 article in the New York Times that the Department of Agriculture was considering requiring an extensive environmental review before issuing mortgages under its Rural Housing Service program to people who have leased their land for oil and gas drilling. The Federal Housing Administration’s lending guidelines prohibit financing for homes within 300 feet of a property with “an active or planned drilling site.” Fannie Mae and Freddie Mac also prohibit property owners from signing a gas lease.  The result of all this is that many owners are now in “technical default” under the terms of their mortgage if they signed a gas lease without first getting consent from their lender.

Insurance is another issue. Drouin notes that real estate experts see a trend in homeowners insurance policies not covering residential properties with a gas lease or gas well. This directly impacts any property transactions, as mortgage companies require homeowners insurance from their borrowers.

It is easy to see why fracking does not mix with homeowners insurance. As reported in the Catskill Mountainkeeper, gas companies can sell a gas lease to anyone they choose without telling the homeowner. Subsequently, the homeowner has lost control over who comes onto their property to drill and the quality of work they perform. In addition, neither homeowner’s insurance nor the gas lease covers risks from accidents, such as methane leaks, chemical spills, and blowouts that can come with gas drilling, and it is hard to envision a carrier being enthusiastic about underwriting coverage for those perils.

Title insurance may also be adversely affected, as a gas lease may void title insurance should the policy not cover commercial ventures. The Catskill Mountainkeeper notes that "[t]he fine print in most title insurance policies in New York State contains specific exclusions that have the potential to void title insurance coverage for any commercial venture, including any of the common activities of commercial drilling, storage, or transmission of gas that occur on a residential property" and that "it’s likely that even if someone were able to buy a property with a gas lease, they would be unable to get title insurance."

To learn more, read Elizabeth N. Radow's article, Homeowners and Gas Drilling Leases: Boom or Bust? from the November/December 2011 issue of the NYSBA Journal. 

Affordable Care Act Guidebook available from Congressman John Dingell

A longtime supporter of health insurance reform, Michigan Rep. John Dingell, D-District 12, recently announced the release of a new guidebook to help Michigan residents better understand and take advantage of the various facets of the Affordable Care Act. During a press conference at Oakwood Hospital & Medical Center in Dearborn, Dingell said the guidebook "explains what the Affordable Care Act means to individuals," noting also that "it will explain tax credits to small businesses, and it will tell you how to navigate the system and select a healthcare plan that is best tailored to your needs." The book, titled The ABC's of Navigating the Affordable Care Act: A Resource Guide to Understanding Your Rights, Responsibilities, and Choices can be viewed and downloaded at the Congressman's website, dingell.house.gov.

Some welcome news on industry employment numbers

The August 12, 2013 edition of PropertyCasualty360 reports that the PC industry added 1,500 new agent and broker jobs in June. This growth follows the trend of other insurance subsectors, and is a welcome reversal of the past six months of declining numbers.

Michigan has experienced this uptick in hiring within the insurance industry, and this matches the expected trend. At the Michigan Labor Market Information website, annual average openings are expected to be 429, and the state's overall level of insurance industry employment is thought to grow to 13,200, an increase of 14.1% from 2010's figures.

Meeting the new Annuity Suitability training requirement

Background

In March of 2010, the National Association of Insurance Commissioners (NAIC) finalized its Suitability in Annuities Regulation, which requires anyone selling annuity products receive mandatory suitability and product training.

This action was taken to protect consumers. The intention of the regulation is this: by establishing standards to ensure all annuity producers are trained in the new suitability requirements, annuity products will be represented accurately.

Not a New Continuing Education Requirement 

Annuity suitability training is not a new continuing education requirement and – this is important – it is the insurance carriers, not the state insurance departments, who must validate the compliance of their producers.

But the Individual States are Still Involved

Although the regulation puts the burden of compliance on the carriers and producers, states retain the right to decide the specific details of the training requirement upon implementation. This means that, while all training courses will follow the NAIC’s template (e.g. courses must be 4 hours in length), each state will address specific aspects within the broader context of the regulation, and one can expect some variation in content from state-to-state.

And the Education Providers Still Play a Role

In addition, even though the regulation requires carriers to develop standards for product training and must validate that its brokers and producers are in compliance, the suitability training must be taken through a state-authorized continuing education (CE) provider. With CE providers offering the training, it is expected that the courses will be approved for CE credit, and can be applied to the producer’s record in order to meet the resident state’s mandatory requirement.

Because CE credit is optional, however, there are some things producers should watch for. First, they should make sure the training course has been submitted and approved for CE. In addition, producers need to keep in mind that while they typically receive reciprocal credit from non-resident states for meeting license requirements in their resident states, reciprocal credit is granted for meeting another state's similar training requirement. It is impossible to meet a requirement that has not yet been implemented in one’s resident state, so completing a course prior to the effective date is not valid for reciprocal credit from another state in which the requirement is already effective.

Completing a course should result in the issuance of a Certificate of Completion that indicates the following: date of course completion, state for which the training was approved, course name and course number. A certificate that does not include this information is not proof of compliance! A certificate with this information needs to be issued regardless of whether CE credits were earned.

Confused about insurance licensing? View our video!

Getting an insurance license can be a frustrating process, even for someone who has previously been through the process and is adding another qualification or attempting to mentor a recruit. We have set up a YouTube channel to help with the process. This first video focuses on Michigan producers.