I’m concerned about the recent delay in setting rules for the medical loss ratio (MLR) provision of health reform. With the implementation set for January 1, 2011 there is not much time for health insurers to develop their plans for next year.

Under the health reform rules, insurers are required to spend 85 percent on medical care for every premium dollar received from group plans, and 80 percent for premiums received from small group and individual plans. HHS (US Department of Health and Human Services) is charged with managing the development of the rules and guidelines. It has asked NAIC (National Association of Insurance Commissioners) for their recommendations on how to calculate and implement the MLR requirement. They have missed their target of June 30, 2010 to have rules in place. In their defense, it is complicated.

Because of the delay, a political fight is developing over the issue. Senator Al Franken is calling for vigilance to make sure the insurance industry doesn’t define medical expense as everything that is not profit. He has cited the recent announcement by Wellpoint to reclassify $500 million in administrative expenses such as health and wellness, nurse hotline, smoking cessation and weight loss programs as medical.

I’ve noticed in Comperemedia a recent letter to Assurant producers notifying them that, because of the uncertainty of the MLR rules, Assurant will reserve the right to change commissions for next year and is placing a temporary limit on first year commissions. With this uncertainty stretching well into next year’s planning cycle, I’m wondering if it is more than simply constraining planning or if it is having a material affect? More importantly, has the concern about MLR’s impact on commissions caused policy sales to slow?

It doesn’t seem long ago that we were speculating about the return of annual fees, the disappearance of teaser rates and the watering down of rewards programs as card issuers attempted to maintain profits in the face of restrictive new regulations. As the dust settles on the CARD Act, we continue to see evidence that this isn’t happening.

Take Discover for example. Discover was one of the first to communicate CARD Act changes to existing customers. However, unlike other top issuers, Discover delayed changing the Schumer Box displayed in its acquisition mail to the newly mandated format, prompting speculation about the issuer’s post-CARD Act strategy.

That all changed this week when I received an offer in my own mailbox for a Discover More card, displaying the new Schumer Box with rates and fees shown separately. Far from being an offer for a card with an annual fee, no teaser pricing and a reduced rewards program, this Discover offer is loaded with benefits. These include:

- a 0% introductory APR on purchases and balance transfers
- a $100 cash reward for making $799 in purchases within 3 months
- 5% Cashback Bonus in certain categories
- 5-20% Cashback Bonus for making purchases through Discover’s online shopping mall
- automatic entry into a sweepstakes to win $1 million every time the card is used for cash or any purchase

The card’s APR of 10.99% to 17.99% and the balance transfer fee of 4% (5% for subsequent transfers) may be off-putting for those looking to carry a balance from month-to-month, but for those who usually pay in full this isn’t too bad.

Furthermore, despite the squeeze on profits, Discover reported strong results in 2nd quarter. In a press release, David Nelms, Chairman and CEO, said “our very strong results this quarter were driven by a significant improvement in the credit performance of our loyal customer base along with continued solid growth in cardmember spending.” He was also optimistic about long term growth.

I’m not suggesting that the CARD Act has left the industry unscathed. Offers are still, for the most part, only being received by households with excellent credit histories. From the consumer perspective, APRs for purchases are higher than in the past and fees for balance transfers have increased on many cards. For issuers, grappling with the new regulations is an on-going challenge that continues to suck up millions of dollars as they figure out how to replace lost revenue.

However, it does appear that the CARD Act is not restricting the industry as much as it was originally thought and consumers are beginning to reap the benefits.

Please join Mintel Comperemedia’s, Susan Menke, Ph. D and Economic Psychologist, on July 22, 2010 for a free webinar entitled “Beyond the New Normal: The Financial Services Consumer in Today’s Economy.” The webinar will start promptly at 2pm CT.

You can register HERE.

Over the last two years, the banking crisis and the “great recession” have caused a dramatic shift in consumer’s attitudes and behaviors. Consumers are now asking for different kinds of products and services from their financial services providers, and the most successful companies will listen to what they are saying and act accordingly.

A few of the questions to be discussed in this webinar include:

– How is the consumer mindset changing as they place more emphasis on asset accumulation and less on consumption?
– What are the similarities and differences in the ways Gen X, Gen Y and Baby Boomers have been affected?
– What specifically is driving the level of trust (or lack thereof) in the financial services industry? How instrumental are concerns about privacy and security?
– What is the current status of financial reform legislation, and what does the consumer think about it?
– What is currently driving consumer satisfaction with the financial services industry? How does this relate to the “emerging under-banked” trend that Mintel has been discussing for the last several years?
– How important will social media be to the future of the industry?

The webinar will last 45 minutes with 15 minutes of Q&A. All attendees will receive a copy of the presentation and the slides following the webinar. Also, you can check back here on the Comperemedia Blog to see answers to questions submitted during the webinar from July 23, 2010 on.

Want to learn more about Susan Menke, VP of Mintel Comperemedia? Read her bio or contact us_marketing@mintel.com to get in touch with her.

Thank you to everyone who attended my webinar yesterday on the impact social media is having on insurance marketing. If you missed the live webinar but you’d still like to download a copy of the slides and/or recording, click here.

Listeners asked a good number of thought-provoking, intelligent questions so I’ve answered them below. Please, if you think of any further questions, feel free to contact me at dhayes@mintel.com or visit www.comperemedia.com.

Where is Allstate in the flow of Social Media?

Allstate has developed its presence as well. I chose to focus on State Farm because they captured my attention with their focus on both the young and Spanish-speaking markets. Allstate actually has more followers than State Farm on their Facebook page. And Allstate is doing a good job of placing information on their page to keep followers informed about hurricane Alex.

Are social media comments posted by the public on insurer websites considered to be advertisements by insurance regulators? If the answer is yes, does it apply to all posted content or just the ones that the company might use in its advertisements?

Good question. Since social media is generally an open forum when someone says they think a product is great, it’s somewhat out of the control of the company. Yet these comments could be considered testimonials and should be restricted. I’m not aware of any rules on this. At this point I think most companies are being cautious by monitoring what is posted and may be taking down comments that are too specific.

How do companies define and manage the risks associated with SM? Most employees don’t attempt to do direct mail, for example, but many of us are on SM.

Companies are starting to develop guidelines for the use of social media. The basic rule of thumb right now is to “act professionally.” You are right, once an employee puts the company on their Facebook or Linkedin page, they will be viewed as a representative of the company and that could present problems. So they should be reminded that they should not do anything that they would not do in a presentation to clients.

Do you feel the Humana independent social media development is a good idea?

It’s a way for them to control who has access to their content. It could have the same familiarity as traditional social media tools. A drawback to limiting access is the loss of exposure to potential new clients.

Do you see social media connecting toward business offers just like direct mail does? Or avoiding “to much” of a business approach?

For now I recommend avoiding a direct sales pitch as the best approach on social media. The use of social media is still primarily entertainment and keeping connected with friends and family. But behaviors change. As the use of social media tools become more sophisticated, consumers may become more accepting of a sales message.

What tracking matrices do you see happening or being particularly effective?

The number of unique visitors, where they come from, how long they stay, and certainly if they request a quote are all important stats to capture.

How are SM efforts well suited to “going green” vs. DM?

Unless someone is printing all of the posts they write and receive, and assuming that people properly dispose of old devices, there is no doubt that social media lowers the carbon footprint of marketing.

How is State Farm leveraging Social Media at the agency level? How can they control the content from their exclusive agency force?

I see a lot of State Farm agents with their own URL listed on the direct mail piece. I’ve noticed that State Farm agents are often part of community boards and volunteer efforts. I think these same skills are easily transferred to social media behavior

How can an insurance company that markets through a business/association entity use social media?

You can help support the business/association by providing content to support their efforts to create a presence through social media tools. If the insurance company wants to maintain a behind the scenes role the best thing it can do is help make their representatives as relevant as possible. You should do all you can to help build up the social media reputation of your producers to get noticed on the internet. The best way to do this is to feed them fresh and interesting content for them to post on their site.

When do you expect Health Care reform to impact DM volumes? Early 2011 or yet this year?

I definitely think a change is going to happen this year. Medicare is going to change the mailing cycle around enrollment. But for individual health policies, I don’t think there is going to be a major change this year or next.

How costly is it to “develop your own tools”?

Developed tools can vary from an iPhone app to an entire new internet presence. The costs can range from what is required to customize a vendor’s standard product to ground up development. There is also the consideration of maintaining the new tools with current staff, additional staff or outsourcing.

Could anyone explain any best practices observed in types of direct mail (postcards, letters) and what would be a good way to using this channel in order to direct traffic to social media?

There is an easy first step. Put the fact that you have these tools available and how to get to them on the direct mail piece. I’m still surprised how seldom this information is printed on the mail piece. I think direct mail is going to remain very important, but it can also be used to drive consumers to a website and social media tools. Make the information in the mail interesting, something the recipient may want to hold onto. Not too much detail is needed. Let the details become something the consumer will be curious about and a reason they will want to visit your Facebook page or website. And if you can, incorporate some type of participation. If they can vote for a charity or personally get involved, they may spread it around to their friends.

How do you guys see companies best using Twitter?

This is why I liked the example of New York Life tweeting about the Big East Conference. This is a way of creating an event—something for people to participate in that gets them to associate your brand with an event they will remember.

Please join us for a webinar entitled “Insurance Marketing Mix: Social Media’s Effect on Direct Mail” with Daniel Hayes, Vice President of Insurance Services at Mintel Comperemedia.

June 30, 2010
2pm CDT / 3pm EDT
Register Here: http://bit.ly/bMwxY2

Mintel Comperemedia—which tracks direct mail, email, online and print advertising—has seen insurance companies and producers beginning to participate in social networking for business gain. Insurers are trying to catch their customers and potential customers in the right place, at the right time…and right now, they’re finding them on social media networks.

During this webinar, Daniel Hayes will examine the use of social media by insurance companies and the effect it will have on the role of direct mail as a trusted marketing tool. Expect to:

- Explore the way social media is changing insurance direct marketing as a whole
- Identify how insurance companies and producers are changing the way they communicate with customers
- See examples of how insurance companies are mixing direct mail, email, print and online advertising
- Examine marketing messages that are designed to strengthen brand value

Mintel Comperemedia’s PR team recently put out a press release about how insurance providers are inching their way into social media. Read that release here: http://bit.ly/bOJ209

To learn more about Daniel Hayes, please read his biography and some of his recent blog posts: http://www.comperemedia.com/blog/daniel-hayes/

There are rumors that Medicare is going to experience significant marketing changes.
According to a report from a CMS User Call, the Annual Enrollment Period (AEP) will remain unchanged this year, from November 15, 2010 to December 31, 2010, for enrollment effective January 1, 2011. However, next year this will be changed to October 15, 2011 to December 7, 2011, for 2012 enrollments.

There is no indication that the window for marketing to Medicare participants will change. Currently that window opens on October 1.

Additionally, the Optional Enrolment Period (OEP) is going to be replaced with an Annual Disenrollment Period (ADP). With this conversion, the consumer will only have the option to change or drop their Medicare Advantage program. If they drop, they may enroll in original Medicare and elect a qualified prescription drug plan (PDP). This begins on January 1, 2011, so,no longer will there be a need to market after the December 7th date.

What will all this mean for marketing efforts? It seems there is going to be a very short, intense recruitment period at the end of the year.

In the past several years, Mintel Comperemedia has tracked significant growth in what has been a six month, October to March, Medicare mail period during AEP and OEP. Last year continued a pattern of large mail volume increases by posting a 24 percent increase over the same period the year prior.

Have you made plans to adjust your marketing campaigns for Medicare, especially if the marketing period shrinks?

To learn more about Medicare marketing, contact www.comperemedia.com. We can use our database of direct mail, email, print and online advertising—combined with expert insight—to help you understand and anticipate marketing trends.

Thanks to all who listened in on my webinar with Nielsen’s Brian Schlessinger last Thursday (June 10). We experienced audio issues during Brian’s portion of the webinar, so I apologize for any inconvenience.

To make the recording better quality, we’ve re-recorded the webinar (minus the Q&A session). You can access the new recording and the slides here: http://tinyurl.com/2duguqf.

We did have many great questions asked during the webinar and I’ve responded to all of them below. Please contact me at ADavidson@Mintel.com or visit www.comperemedia.com if you have any questions.

Q. I’m curious as to how “Revolvers” were defined by Mintel.
A. Revolvers were defined as those who typically carry a balance from month to month on their primary credit card.

Q. What triggered consumer suspicion about a decrease in teaser rate offers and balance transfer offers? What was different in actual CARD Act that negated those concerns?
A. The new payment allocation rule in which payments, above the minimum due, are allocated to the highest APR balances first caused many to suggest that the industry would not be able to make money from teaser rates and we would see a reduction of teaser rate offers in the mail. This didn’t materialize and, in fact, most offers tracked by Comperemedia promote either a teaser rate for purchases or balance transfers. Issuers have navigated the payment allocation rule by increasing fees for balance transfers with many now charging 4% or 5% of the check amount. They have also increased APRs for purchases despite the low prime rate.

Q. Once these new regulations are fully digested, what do you see as new potential loopholes issuers may take advantage of?
A. In its relatively short history, the card industry has adapted to change successfully. We have already discussed the increase in go-to purchase APRs and BT fees. During the past two years, the industry as a whole scaled back to focus on only the most profitable customers. As competition increases, card issuers will need to continue to be creative to find new ways to promote their products while increasing revenues. Comperemedia will be assessing how they do this in direct mail, email, online and print advertising during the coming months. (Learn more: www.comperemedia.com.)

Q. What do consumers need to watch out for?
A. Consumers will start seeing more offers in the mail as the competition heats up. Terms are more transparent and it is easier to compare one offer with another due to the new Schumer Box format. If they are looking to transfer a balance, they should pay close attention to BT fees and not just the duration of the intro period. In a post-CARD Act world, the better the offer, the higher the BT fee.

Q. What has been the impact of the CARD Act on Small Business cardholders, considering those cards are exempt?
A. Small business cards are exempt and there was some speculation last year that issuers would redirect their efforts towards the small business market. This didn’t happen on a significant scale and volume levels remained comparatively low. Activity did start to pick up towards the end of the year although the pattern in business cards lags behind what we see in consumer. Capital One has been a key driver in recent months along with Chase and American Express. At some point we may expect legislation regarding small business cards.

Q. What forms of media would be best to get the positive PR about the CARD Act out to consumers?
A. Education needs to be on-going and some media are better at communicating on-going messages than others. More recently, financial institutions have turned to blogs to develop an on-going dialogue with consumers. Citi established a new blog (http://new.citi.com) to help rebuild its image in the wake of the financial crisis. Wells Fargo has been cautiously navigating the Wachovia integration through various tools including a dedicated blog (http://blog.wellsfargo.com/wachovia). A more traditional format is newsletters. Statement inserts should also play a key role. As a result of the CARD Act, more consumers are paying attention to their statements and this presents an opportunity for dialogue.

Q. What is the estimated financial loss to the credit card industry as a result of the CARD Act?
A. This will be difficult to calculate. The new regulations came at a time when the industry was already at a low point due to the recession. Signs indicate a return to profits for many industry players.

Q. Will mail volume continue to grow related to the CARD Act?
A. Yes. The recent increase in mail volume is being driven primarily by Chase. Some issuers, such as Bank of America and Discover, are still mailing at relatively low levels which means there is plenty of slack to be taken up. We anticipate acquisition mail volume reaching 3-4 billion this year, up from around 2 billion last year, but still much lower than the 7-8 billion seen during the boom years.

Hi everyone. Tomorrow, with the help of Brian Schlessinger, Vice President of Industry Solutions at Nielsen, Mintel Comperemedia will host a webinar:

“One Year Later: The Impact of the CARD Act”
Thursday, June 9, 2010
2:00-3:00pm CT

It’s been one year since Congress signed the CARD Act into law, forever changing the face of credit card lending in the US. Though many of the new regulations didn’t take effect until 2010, card issuers began communicating rate, fee and plan changes to customers as early as Summer 2009. Despite this communication, many consumers still worry about credit card rates and fees, and many feel underwhelmed by the benefits of the CARD Act.

This presentation will examine:

- How card issuers communicated CARD Act changes to their customers, including which issuers were most successful in getting their messages across
- New trends in credit card acquisition direct mail and email campaigns as a result of CARD Act regulations
- The influence of online buzz and its ability to drive opinions related to the CARD Act
- Consumer awareness and their latest opinions regarding the new rules

I hope you can join us! I’ll be posting the recording and slides here after the webinar, as well as answers to the Q&A. Register for the webinar with this link: http://bit.ly/bKV30m

The CARD Act mandates that consumers must be given the right to opt in for over limit fees. Until now we have not seen how the card industry will address the new rule within acquisition direct marketing. However in March, U.S. Bank made the first move by including an over limit opt in check box on application forms so that prospective cardholders can authorize future over limit transactions.

The U.S. Bank check box is shown on the application form under the heading “Overlimit transaction opt in right.” U.S. Bank (and Elan Financial Services) application forms are attached to the letter or, in some cases, included as a separate acceptance certificate. The fine print for the opt in states that “you will pay one fee per billing cycle even if you go over your credit limit multiple times.” It goes on to disclose that the bank “may still decline transactions that go over your Credit Limit, such as if you are past due or significantly over your Credit Limit.” The bank charges $39 for an over limit transaction.

U.S. Bank also communicated with customers during February and March regarding the opt in, presenting an option to sign up for “overlimit coverage.” Customers can sign up online or by calling Cardmember Service.

HSBC has been the only other issuer mentioning the opt in in its acquisition direct marketing efforts. In March, it outlined the requirement in its “Solicitation Disclosures” insert. Like the U.S. Bank communication, HSBC’s insert describes over limit “coverage,” but unlike U.S. Bank it does not provide applicants with the ability to physically opt in at the point of application. HSBC charges $19 on balances over limit but less than $250 and $30 for balances over $250.

U.S. Bank has taken the lead by adding a check box to its acquisition mail and we are now seeing the new language of “over limit coverage” from both U.S. Bank and HSBC. It is likely that others in the industry will follow as we continue to navigate the ongoing impact of the CARD Act.

Nothing annoys consumers more than paying for things that used to be free or feeling that they are being nickel and dimed. As the banking industry struggles with how to recoup money lost to overdraft fee income, they are wise to take some lessons from the airline industry.

The airline industry attempted to stem huge financial losses by charging a wide variety of fees. Flyers now pay to book the ticket, redeem frequent flyer miles, make a particular seat choice, change a ticket, check bags, obtain a pillow or blanket, and for food and drinks.

Unfortunately, added fees haven’t propelled the travel industry into profitability. AMR, parent of American Airlines, posted a $1.5 billion loss. US Air, Continental, United and Delta also posted losses. Combined, the industry lost $3.4 billion in 2009.

Southwest, however, was one airline to post a sizeable profit. The company heavily advertised “Bags Fly Free,” and that strategy may have paid off. The company’s Chairman and Chief Executive Gary Kelly attributes the success, in part, to the fees that its competitors are assessing. In a January conference call with Wall Street analysts, he was quoted as saying, “I hope they charge $100 a bag. That would be terrific. We’ll have 100 percent load factors.”

Going beyond the fee

With customer satisfaction, loyalty, and brand image on the decline over the past few years, banks can hardly afford to alienate customers. Rather than focusing on what fees to charge, the industry should focus instead on innovating services and products that give people confidence. It’s not that fees are never justified – it just might not be wise to assess fees on previously free services. In fact, a recent JD Power study indicates that high customer satisfaction rates are possible to maintain as long as consumers perceive that they are receiving sufficient value in exchange.

At the end of the day, customers know that it’s their deposits that fund the banks other, more profitable, activities. So while consumers need a place to bank, the banks need consumers just as much. Shouldn’t there be recognition of the mutual need from both parties?