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Chris Zagorski Posts Tagged ‘legislation’
Q&A from “Insurance Communication: Moving Into Tomorrow”
Thank you to everyone who attended my webinar on February 25, 2010 about the future of insurance communication and marketing. I hope you found the information useful and relevant to your business, and please don’t hesitate to reach out to me with any questions or comments.
If you missed the live webinar but would like to view the slides or a recorded version of the presentation, click here.
We received many interesting and thought-provoking questions, which I’d like to answer here for you:
Do you think advertising iPhone apps in direct mail would be useful?
Absolutely! I think advertising apps in direct mail, in print ads, on websites and on TV is the best way to market them. The key is to get people connected. Why build an app and just hope people will find it? Make them find it. Then, after people check out an app once, marketers should give them reasons to check back. Use online events, announcements, advice, anything that you can to grow the bond between your market, your brand and your customers.
How should a company respond to criticisms of its products or service that it finds on a social media website?
First, don’t be defensive. Find a positive way to frame the situation. Accept what is being said, then start to manage the issue. Most customer complaints come from the frustration of a customer feeling he or she is not being heard. A response directly to the customer is often a surprise, going above expectations. This can mellow a situation quickly and often favorably change the customer’s opinion.
You mentioned high unemployment rate leading to consumers seeking their own insurance. Which companies are targeting consumers best? Aetna?
Aetna is a good company. So are the Blues, United Healthcare, Wellpoint, Humana and Kaiser Permanente, to name just the ones that come immediately to mind. It is difficult to target the unemployed. Most companies use aggregators who email people comparisons of health insurance rates. Insurers are also putting more information on their websites to educate consumers on how to make a choice.
Why do you think auto insurance mailings were down? Are other channels more attractive?
I don’t think this was a trade-off from one channel to another. With the economy weighing down on marketing budgets, cost control could have played a role in the slight decrease in direct mail. Given that life and health insurance mail increased, I feel confident insurers will continue to use direct mail as a primary marketing medium.
Can you shed some light pertaining to health insurance. What are the recent trends? Are consumer driven products here to stay?
With healthcare reform still up in the air, it’s difficult to determine where individual health policies are going. For instance, I’ve heard health savings accounts discussed as nearly extinct, but I’ve also heard them talked about as an integral part of healthcare reform. The future is still unclear.
What is happening now is that health insurers are finding more individuals looking for policies for the first time. These are people who don’t know how to shop for health insurance, so they need to be educated about their choices and how to evaluate their own needs. This is an opportunity for companies to become trusted advisors.
How would you recommend companies start using social media to communicate? Which network is most important if you only have the resource to do one?
If I had to choose one, it would be Facebook, because it is the largest. And I would not be afraid of the size. Social media is still a developing environment, it is better to get in and learn how it works and its advantages now with everyone else. Otherwise, you’ll find yourself behind the curve trying to catch up.
Direct mail was still important in 2009, but what do you see looking 5 years out?
Direct mail will be important for how insurers market products for a long time. Life and health insurance direct mail has increased since 2008. While there was a small decrease in P&C, auto and homeowners mail in 2009, this was more likely due to budget constraints than to a long-term change in strategy.
What I would like to see is an increased use of mail to build a brand, to become more integrated with other marketing channels. It can be so much more than price promotions.
Card Issuers Adapt to New Fed Rule on Floor Rates
On January 12th, the Federal Reserve Board approved a final rule amending Regulation Z (Truth in Lending) to “protect consumers who use credit cards from a number of costly practices.” The majority of the final rule, implementing the CARD Act of 2009, becomes effective February 22, 2010.
One provision of the rule prohibits credit card issuers from increasing rates on new charges and existing balances. However, variable rate cards are excluded from this rule which means the APR on variable rate cards, such as those linked to the Prime rate, will be permitted to increase when the Prime rate increases.
Some of the details regarding this exception for variable rate cards have been known for sometime and, as a result, the majority of direct mail offers for new credit cards now promote variable go-to purchase APRs tied to the Prime rate.
The final rule has surprised a number of issuers by adding a requirement that variable rate APRs must be allowed to decrease as well as increase. This impacts those issuers promoting variable rate plans with a “floor” or minimum rate whereby an APR can fluctuate, based on Prime, but can’t be reduced any lower than a specified rate.
Only a handful of issuers utilize a floor rate pricing strategy. Some of the larger proponents of floor rate pricing in 2009 included U.S. Bank, via its Elan Financial Services unit, HSBC, GE, USAA and Wells Fargo/Wachovia.
Each of these issuers promote a variable go-to purchase APR that varies with the Prime rate. In each case, the minimum rate matches the promoted go-to APR. The most frequently mailed offer in 2009 was for HSBC’s Platinum MasterCard promoting a “Variable Customary APR” that matched the “Minimum Customary APR.”
Issuers with floor rate strategies are likely to have their CARD Act compliance plans in place ahead of the February 22nd deadline. They will now have to adapt those plans to accommodate the new rule. The most likely outcome is that the change will drive further increases to go-to purchase APRs as issuers look cover any risk associated with dropping the minimum rate.