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Massachusetts’ The Hanover Eliminating Approximately 160 Positions

The Hanover Insurance Group Inc., a Worcester, Mass.-based holding company for several property and casualty insurance companies, reported in its second quarter results that it has initiated expense actions to eliminate approximately 160 positions.

This move is part of the company’s overall expense management strategy and is expected to contribute to annualized pre-tax expense savings of approximately $30 million in personnel-related costs, the company outlined in its second quarter release. A spokesperson for The Hanover told Insurance Journal in an emailed statement regarding the position eliminations that “the vast majorities of actions have already been taken.”

“Part of our margin expansion strategy was to be more disciplined on expense management, which would create significant fixed cost leverage and fund strategic growth initiatives,” said Hanover President and CEO Joseph Zubretsky in prepared remarks during The Hanover’s earnings conference call held Thursday. “Through the course of a thorough analysis, we have identified expense reduction opportunities beyond what we had previously anticipated.”

Joseph Zubretsky

The personnel-related cost reductions, combined with other non-personnel cost savings of $20 million and continued growth of the company’s revenue base, are expected to provide additional earnings momentum in the last half of this year and into 2018, enabling The Hanover to reinvest in its business, Zubretsky added during the call.

“Rather than merely allowing expense leverage to occur over time, the opportunity to react more extensively and more quickly was compelling,” he said.

Zubretsky explained in the earnings conference call that these expense actions do not impact the company’s ability to serve its partners and customers, adding that the aim of this strategy is to position the company to better achieve its strategic growth objectives.

“Going forward, rigorous expense management will be an integral part of our regular operating model,” he said.

The Hanover spokesperson said that the company is intently focused on driving a global growth agenda across its portfolio of businesses, working in collaboration with its agent partners.

“These savings enable us to achieve expense leverage that will be invested in our business growth initiatives, benefiting our agents and customers,” the spokesperson said. “Additionally, the savings enable us to consistently achieve our stated financial targets.”

The company expects to realize a non-operating charge of approximately $10 million in 2017, with $1.8 million recognized in the second quarter, the press release stated.

The company delivered a 95.6% combined ratio in the second quarter, an improvement over the prior-year quarter on comparable catastrophe losses. The Hanover also demonstrated mid-single digit growth in most of its segments, and 10.6 percent operating return on equity, according to the release.

This quarter, The Hanover placed an additional focus on advancing its Hanover 2021 strategy by realigning its leadership team, expanding Chaucer’s capabilities globally and accelerating its margin expansion strategy, Zubretsky stated in the release.

“Overall, I am very pleased with our results in the quarter and year to date as they are consistent with the strategic plan we outlined for you at our investor day,” he said in the call. “We are confident we can continue to deliver superior value to our shareholders.”


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Q&A: Michael Consedine, NAIC

Former Pennsylvania Insurance Commissioner Michael Consedine took over as CEO of the National Association of Insurance Commissioners in early 2017 and immediately turned his attention toward helping his former commissioner counterparts manage critical issues such as the uncertainty surrounding President Barack Obama’s signature health care law. He is also overseeing the organization as it moves toward adoption on a cyber security model law and engages with federal officials on issues such as reauthorization of the National Flood Insurance Program and the covered agreement between the United States and the European Union. He discussed those issues with Business Insurance Deputy Editor Gloria Gonzalez on the sidelines of the NAIC’s summer meeting in Philadelphia on Saturday.

Q: What are the priorities for this NAIC meeting?

A: My priorities are my members’ priorities. Obviously, health care is a huge issue in many of our states. Our cyber security model will be up for discussion. That has come a long way through multiple evolutions and I think is in a really good place right now. We’ve had some recent breaches even as late as this week at insurance companies, which I think illustrates the need to have these kinds of mechanisms in place to ensure that companies are putting in appropriate security measures and then taking appropriate action when there are breaches and that state regulators have to be involved in that process. The model has evolved. It mirrors in many respects the New York regulation, which I think is a great result and allows for some consistency and uniformity in approach, which I know is a big issue for the marketplace. And we have the benefit of having already gone through the process in New York and learning from their experience.

Q: How do you achieve consensus on a cyber security model law?

A: It’s a challenge, and this body is very consensus-driven. I don’t think any one of our members doubts this is a major issue that states need to address. And if we don’t, the risks are you have individual states that will take their own specific actions and therefore create this mismatch and possible patchwork of regulations, which is not in the market’s interest or consumers’ interest, or you have the federal government stepping into the space, and obviously we have concerns about that.

Q: What are your thoughts on how the NFIP reauthorization is going, especially given the fact that there is a pending expiration of the program?

A: With health insurance demanding a lot of congressional attention, that’s unfortunately sort of been pushed to the side, and we think it needs to come back to center stage. We’ve gone through (reauthorization and pending expiration) before and seen the damage it does to consumers and marketplaces. We have been a vocal advocate for reauthorization and for also expanding the ability of the private sector to offer flood products and the ability of insurance regulators at the state level to be involved in the regulation of that. We know the markets. We know the products. We know how insurance works, and we think we can be a good partner in the expansion of flood insurance into more of a private-sector alternative. Nothing is going to replace the current federal program, but you can certainly supplement it, make it more competitive, potentially introduce better consumer services in some areas. We think this is one where there is at least bipartisan recognition for the need for reauthorization. There may be some differences of opinions on some of the nuances, but clearly, it’s something that needs to be done. The clock is ticking, and we think the market would be best served by a long-term reauthorization, but we’re quickly going to get to the point where we just need something to happen to keep the program alive.

Q: During NFIP hearings on the Hill, there’s often been concerns about private insurers “cherry picking” the best risks. How can NAIC address that concern?

A: We are there to create a fair and level playing field. There will be some amount of targeted engagement by private-sector companies, but that may not be a bad thing to the extent that they’re introducing enhancements to the technology to allow for better underwriting (and) rating. A rising tide lifts all boats, and the entire marketplace would benefit from that kind of innovation. We have not seen a lot of that. We can encourage that, monitor it and ensure consumers are being well served by the private-sector alternatives that might emerge.

Q: Now that there’s been a decision to move forward on the U.S.-EU covered agreement, what would you like to see in the implementation to address NAIC’s concerns?

A: We are all awaiting the final agreement and, more importantly, this policy statement that is going to accompany it. We’re thankful for the outreach from the current Treasury administration designed to address some of the concerns of state regulators about the ambiguities of the current agreement. We understand that this policy statement will not only address that, but will also emphasize the primacy of state regulation and the leadership of the states and the recognition of our development of our group capital calculation tool as something that meets the terms of this agreement. We remain cautiously optimistic that we can end up in a good place under this covered agreement. That’s not to say we embrace the mechanism of a covered agreement. Frankly, I hope this is the last covered agreement we’ll ever have to deal with.

Once we have it in hand, then we’ll begin the process of figuring out how best to move forward with any implementation. That’s something that the membership will drive the decision-making around, but to me you can go a very surgical route and just try to do a bare-bones implementation that addresses the specifics of this agreement with regard to the EU or you could take a broader approach and implement it in a way that addresses it for similarly situated jurisdictions and negate the need for future covered agreements for those countries: Bermuda, Switzerland, Japan and potentially even the U.K. down the road. We’ll start to have that discussion once we have the final agreement. And we’ll have time. The agreement itself calls for about a five-year implementation timeline. We will need all of those five years, and we’ll have to work very closely with our state legislator colleagues in getting changes to our current model made if we go that direction. It’s going to be a pretty significant effort, which made the engagement of Treasury in addressing our concerns all the more important and we appreciate where they ended up.



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Understanding and Improving Customer Lifetime Value Through Insurance Analytics


A look into the evolution of CLTV and analytics programs with insights from Zurich Insurance Group,HCC Service Company and CSAA Insurance Group

Insurance companies, large and small are turning to analytics to better understand the behaviors, preferences, mentalities and risks of their customers. Carriers (now more than ever) see the value in measuring customer lifetime value because the insurance industry is rapidly commoditizing and more recently, threatened by third-party digital powerhouses.

If insurers don’t make an effort to put their customers at the center of their business, they risk losing them to their competitors – who are more than ready to offer them quite competitive, personalized offers. After all, it’s well known that acquiring new customers is more costly than retain existing ones.

We’ve interviewed three experts in the field to share their successes, thoughts and experiences in developing a best practice solution for CLTV. Hear from:

  • Partha Srinivasa, Senior Vice President & CIO, HCC Service Company
  • Maroun Mourad, former CEO & Chairman, Middle East, Zurich Insurance Group& Author, The Insurance Management Playbook
  • Munish Arora, Senior Manager, Insurance Analysis, CSAA Insurance Group

This whitepaper explores the challenges and solutions from C-suite buy-in for analytics programs all the way to understanding a single customer’s view. Also uncover:

  • How to set proper and realistic organizational expectations and goals
  • The steps in making a business case, developing the right talent and overcoming biases
  • The importance of utilizing customer data in the right way (and the right amount) while focused on cross/up-sell opportunities
  • How to increase and improve customer touch points while using analytics to suit the customer’s preferences
  • Exploring social media, new external data and future hurdles to prepare foR


Categories: Uncategorized

Travel insurance companies are legally allowed to discriminate against disabled people – isn’t it about time someone challenged them?

Disability need not, and should not, be an impediment to travelling safely, and if the insurance industry won’t change its practices then it’s time for the Government or the Financial Conduct Authority, or both, to enforce change

Discrimination against disabled people is, in theory, banned in law, even if it’s depressingly common in practice.

Unless, that is, you happen to be selling, say, travel insurance. Then the law says, go right ahead. Feel free to put the boot in. If that means people can’t travel, well that’s just their bad luck.

What’s that I hear you say? Of course insurers have to be able to discriminate! My son was just quoted more than a grand for a third party policy on his car, even though it’s got an engine so small it would struggle to get up a steep hill. You pay according to the risk you pose to the insurer of having to pay out, and that’s the way it has always been.

Well, up to a point. I didn’t hear too many blokes complaining when the EU banned motor insurers from discriminating on the grounds of gender in 2012, despite the fact that male drivers were held to pose more of a risk to their insurers.

But let’s park that for now, because there’s an important caveat to the law regarding disabled people we need to discuss first. It doesn’t grant insurers a free pass.

According to Scope, the disability charity, some 26 per cent of disabled adults feel they are charged more for insurance, or simply denied it, on account of their conditions.

While insurers can legally do this if, in theory, they are more likely to have to claim because of their disabilities they are, crucially, supposed to prove that this is the case through conducting risk assessments that are based upon information from reliable and relevant sources.

Scope questions whether this happens in all, or even in many, cases.

Increasingly, insurers are standardising and automating their underwriting because it’s cheaper to do it that way. As a result of this, however, those considered to be non-standard risks are often quoted extremely high prices, if they can get cover at all.

Full disclosure – I’m one of the disabled adults that gets charged more, although I haven’t yet been asked to pay quite as much as the appalling £500 that Samantha Renke, a 31-year-old actress and disability campaigner, was quoted for a two-week trip to Mexico.

She has osteogenesis imperfecta, or brittle bones. However, she has had her spine straightened with rods. This should significantly reduce her risk of having to claim as a result of her disability, but the insurers she has tried appear to be completely unwilling to take this into account.

She also reports that, in the course of trying to obtain travel cover, she has endured intrusive 30-40 minute interviews with people who aren’t medical professionals, including their prying into details that have little or no relevance to her condition. For example, are you suicidal? That one had me spluttering into my coffee.

Again, while I’ve never experienced anything quite that bad, it tallies with my past experience, and even if you get to speak to a medical professional it doesn’t always help.

I was once denied cover by a nurse because of a modest change to one of my medications. When I told my experienced GP what had happened to me, they were outraged, pointing out that the change would actually reduce the risk to the insurer of my becoming ill.

As Scope says: “It is unclear whether the data insurers are using – and the interpretation of this information – is sufficient to build up a comprehensive picture of disabled people’s lives, particularly in instances where care, support or other interventions may mitigate potential risks.”

This was an incidence where an intervention was mitigating the risk I posed, yet I was denied cover because of it.

Faced with challenges like these, a lot of people are choosing to roll the dice by travelling without cover, despite this being against Government advice, and even though the risk they pose is, in reality, little different to that posed by the average able-bodied person.

That sort of discrimination is not only unjustified, it’s illegal.

Disability need not, and should not, be an impediment to travelling safely, and if the insurance industry won’t change its practices by heeding Scope’s call for transparency to be brought to the process, and more support to be offered to disabled people, then it’s time for the Government or the Financial Conduct Authority, or both,to enforce change.

Back to the point about blokes and cars. If you’re a man and change your name to its female equivalent (say Jane in my case) before feeding your details into a price comparison website, you’re very unlikely today to be offered a lower price, all things being equal.

But men, however, often still end up paying more. Why? It’s because they tend to drive bigger, more costly cars, drive more miles, and hold more high risk jobs.

Faced with the EU’s law banning gender discrimination, insurers became smarter, and sought more data before pricing up cover to accurately assess the individualised risk posed by a motorist. You can’t charge someone more for being a man. But you can charge the driver of a souped-up BMW putting in 50,000 miles a year more than you charge someone who drives 10,000 miles in a mid-range Renault Clio.

If you can accurately assess the risk posed by those two, you can surely assess the risk posed by me or Samantha Renke based upon our respective conditions.

Scope’s research would indicate that the industry’s inertia is what is preventing this from happening and that disabled people are often simply quoted ridiculous prices to make them go away because insurers see them as too much trouble.

As such, they need either a kick in a painful place. Or a thump, from those of us with bad legs.


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Cigna CEO: Obamacare marketplace remains ‘challenging’ for 2017, 2018

  • Cigna’s stock reached an all-time high on Friday, on the heels of an earnings beat.
  • Cigna has raised its profit outlook for the full year, but uncertainty about spending by insurance members has prevented the company from lowering its 2017 cost expectations, management told analysts and investors.
  • Cigna hasn’t decided if it will participate in the Obamacare exchanges in 2018.
Cigna CEO: Obamacare marketplace remains ‘challenging’ for 2017 and 2018  

Will Cigna participate in the Obamacare health exchanges next year? It depends.

CEO David Cordani told CNBC’s “Squawk on the Street” Friday that the company is waiting for a final verdict from the Trump administration about whether it will continue to make cost-sharing reduction subsidy payments.

“We will make a decision based on that,” Cordani said.

These crucial payments compensate insurers for offering low- and moderate-income Obamacare customers reduced charges for out-of-pocket health costs, such as co-payments and deductibles. Millions of people who buy their health coverage on and other government-run insurance marketplaces qualify for the subsidies.

Lately, there has been increased debate about continuing these payments. In 2014, the GOP-led House of Representatives sued the Obama administration over the reimbursements, saying Congress hadn’t appropriated money for the payments. Republicans in Congress, opposed to Obamacare, refused to vote for such spending.

A federal judge in 2016 sided with the House but agreed to let the payments continue as the Obama administration appealed the decision. But once Donald Trump took office, he was free to drop the appeal. So far, he hasn’t.

Recently, however, Trump renewed his threat to cut the payments. In a message on Twitter, Trump said that bailouts for insurance companies and members of Congress “will end very soon” if a new health-care bill isn’t approved swiftly.

This leaves insurers wondering if the government will continue at all to fund the subsidies.

For now, Cigna says it will offer individual coverage in 2017 under Obamacare but it is waiting for a final answer by the government before saying anything about 2018, Cordani told CNBC. The company has until late September to make a final decision.

“It is a challenging market as we look at 2017 and as we look to 2018. … We haven’t provided 2018 guidance,” Cordani said.

Cigna entered the Obamacare market in 2014, to try to find a “solution” that worked. Now, only about 4 percent of Cigna’s revenue is made on the exchanges, Cordani said. And the company offers insurance on exchanges in seven states.

“We are losing money. … We expected to lose money,” he said.

Some providers have already fled the program. Health insurer Aetnasaid Thursday that it will completely withdraw from the Obamacare exchanges in 2018, having watched earnings soar after trimming its participation throughout this year.

Aetna’s CEO has taken a vocal stance on the issue. “The ACA cannot be repealed, period, end of sentence,” Mark Bertolini told CNBC on Thursday. Congress needs to move on from repealing the Affordable Care Act, he said.

“What we should do is fix it,” Bertolini added. “So either everyone gets their heads together over in the Senate and the House and does the job that the American people needs them to do, and fix what we already have, or they should move on to something else.”

Meanwhile, Cordani said Cigna will focus on the “bright spots” of the individual-marketplace model, and apply those to other markets going forward.

On Friday, Cigna reported a better-than-expected quarterly profit, driven higher by a stronger commercial business, the company said. Cigna also raised its profit outlook for the full year, sending its stock to an all-time high in early trading.

Net income came in at $813 million, or $3.15 per share, in the second quarter, up from $510 million, or $1.97 per share, a year ago. Cigna earned $2.91 a share, adjusted, topping analysts’ forecast for earnings per share of $2.48, according to a Thomson Reuters consensus estimate.

But uncertainty about spending by insurance members throughout the remainder of the year has prevented Cigna from lowering its 2017 cost expectations, management said during a call with analysts and investors.

Cigna expects 2017 adjusted earnings to fall within $9.75 to $10.05 per share, higher than its previous forecast of $9.35 to $9.85 apiece. “It’s all based on our diverse business,” Cordani told CNBC about the upbeat outlook.

Cigna’s stock has climbed more than 35 percent over the past 12 months and is up about 17 percent over the past six months. Shares were recently falling a little less than 1 percent Friday morning.



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