The Battle of the Bar Begins a “War” for Insurance E-buyer Protections
The surprising first person account of independent agent Ed Higgins’ growing campaign to protect auto insurance consumers from online “savings” traps
This following personal account of an independent agent’s experience spans more than a two-year period and is presented here following many months of correspondence, voice mail messages, e-mail messages, industry trade publication articles, and even a sworn affidavit. The writer’s experience bears reflection, as it leads, we believe, to a concern for consumer protection, an equal playing field and, generally, a more collegial environment, once addressed. Any opinions stated by the writer are not those of the Insurance Advocate. This publication, in our Foreword, invites replies from all parties and pledges to present them, unaltered, with the same editorial treatment and emphasis this account has received. S.A.
My story begins back in 2010 when I first learned that the Independent Agents of America (IIABA) intended to create a web presence for independent agents called the Consumer Agent Portal (CAP) to regain market share in personal lines that had eroded from 35% to 30% largely in favor of direct response carriers. At that time, my concern was that a mere electronic presence would not be an adequate means, alone, for agents to regain lost personal lines market share. My premise was that independent agents are unique in providing value added to the insurance product and transaction and that premise would need to be incorporated into any electronic environment endeavor. I wrote an article in The Anderson Agency Report (TAAR) in August of 2010 citing those concerns and encouraging agents to focus on providing added value to the consumer. A core message from that article was: Your clients are receiving a steady dose of “Flo” and the “gecko” and other advertising, to convince them that price is what personal insurance is all about. If we don’t have a counter message, their messages will prevail. Shannon Gorman, Education Director of the Maine Independent Agents Association (MIAA), read my article with interest and invited me to be a speaker at their state agent’s convention in April 2011. The program I delivered was entitled “Agents under Siege: Take Back the Terrain.” To set the stage for the valueadded message to agents in Maine, I realized it would be important to understand the marketing techniques of direct writing carriers on the Internet.
In final preparation for that presentation, I went to the Internet on March 5, 2011 and obtained sample quotations from GEICO and Progressive Insurance Company.
I was interested to find that GEICO sold less coverage limits than were input as current coverage limits and did not offer an alternative of a combined single limit for liability or uninsured motorist coverage. GEICO only offered the option of input for liability limits and delivered a quotation for basic New York No-Fault coverage.
Progressive did much the same, not offering the same coverages that were input for current coverage as their initial alternative quotation. My current coverage was a combined single limit of liability of $500,000, which neither carrier offered for their first offering. During the course of this story’s unfolding, Progressive changed its model to provide an initial quotation of the same liability coverage limits that are input at the coverage inventory section. I then proceeded to explore the operation of the Name Your Price® tool advertised by Progressive. I moved the price bar to the lowest possible price and was delivered an alternative quotation for minimum required liability limits in my state, which I expected as an outcome. However, as I moved the price bar tool to successively higher premium amounts I was very surprised at the coverage combination changes. At several points along the continuum the program automatically reduced liability coverage and other coverages in exchange for a different mix of coverage. The purpose of these two rating examples was to identify those characteristics that made these two direct response carriers successful in their marketing techniques and to understand how they did that.
In my presentation, delivered on April 4, 2011, I made it clear that independent agents need to recognize that we are clearly engaged in a market share “war” with direct writers and that the demise of the independent agency system is a possible outcome of the failure to win this war. In any “war,” it is important to understand who the enemy is and then to understand their tactics. This was a lesson that was carefully taught to me during my tour of duty in Vietnam as a field artillery combat soldier. It is essential to survival.
I proceeded to describe and explain the two on-line quotation experiences of both GEICO and Progressive. The GEICO site made it difficult to capture individual screens for the PowerPoint presentation and the Progressive Name Your Price® tool provided surprising results. I provided additional slides to offer marketing examples for about 10 minutes of a three-hour program, primarily devoted to showing independent agents the variety of ways that we can add unique value added services to the insurance product and better serve the insurance consumer.
The audience of approximately 100 agents included representatives of Progressive among other carriers’ staff members. I was aware of their presence. During the program I invited anyone who took exception to the premium quotation examples that were represented or to any of the other points I made during the program, to raise their question or make their observation during the program. I indicated that I would remain available at the cocktail party following the program to answer any questions or objections anyone might have as to the comments made during the three-hour program. There were no takers during the program itself and no one approached me during the cocktail hour to indicate any objection to anything that was stated in the program. At the end of the program, there was strong applause indicating to me, acceptance by the audience of the premise that independent agents must develop a program and profile of value-added service to win back consumers.
Feedback from Shannon Gorman, the Education Director of the Maine Independent Agents Association, included the note that Progressive’s representatives communicated that they did not believe the Name Your Price® tool operated the way I demonstrated it. They were invited to submit in follow- up any specific objections that they had to the presentation.
They made no further comments to the Maine Independent Agents Association (MIAA) in the future weeks. On April 14, 2011 upon returning from a trip, I received a voicemail message from Dave Evans, a representative of the Independent Insurance Agents and Brokers of America (IIABA). Dave asked that I call him back because the “top brass” at Progressive had learned of my presentation in Maine and indicated they were upset that I had allegedly declared “war” by independent agents upon Progressive. When I returned his call I made it very clear that as a long-term volunteer of both the state and national associations, I understood the implications of any antitrust statements that might be made during a presentation and I had made no such statements. My focus was on all direct writers of personal lines policies, using two principal examples.
The program was largely and primarily a program to tout the value of independent agents and how they needed to create a value profile in their engagements with every consumer every time that they engage them, in order to win back market share that was lost over the past several years to direct writer carriers.
I followed by sending Mr. Evans a copy of the actual PowerPoint slide presentation that I delivered in Maine April 4, 2011. Mr. Evans told me that he communicated to Progressive that I was “an upright guy” and if I had said anything to offend Progressive I would certainly apologize to them for that. I indicated to him I had no intention of apologizing because I said nothing wrong except to advocate on behalf of independent insurance agents and the value- added they bring to the marketplace. I further indicated I was angry that it was apparently a response that was based upon inaccurate information transferred to my national agents’ association. I also indicated that I was angry the national association (IIABA) had responded to what would appear to be incorrect, second hand information transmitted from the representatives who were present the program. I reiterated that I had offered anyone who had any objections at that time to step forward and that no one had done so.
Progressive held that it was unfairly highlighted in the program as the sole direct writer carrier in the program and objected because they also sell through independent agents.
The first objection is totally inaccurate and false. They failed to recognize my point that any carrier who sells in a direct marketing channel is a competitor against the independent agency distribution channel while engaged in activities of direct sales to the consumer. Indeed their representatives at the program in question were representatives within the independent agency distribution channel of Progressive participating as sponsors of an independent agency association convention event. One would presume that representatives of the independent agency distribution channel would be pleased to see agents receiving education on how to add value in their interaction with consumers.
On April 22, 2011, I contacted Shannon Gorman of the Maine Independent Insurance Agents (MIAA) and she confirmed to me that they had been approached Progressive staff at the national legislative convention in Washington DC, who expressed objections to the program. The Maine Independent Agents Association (MIAA) stood by the program as an educational tool for advocacy of independent insurance agents to become better professional insurance agents.
On April 25, 2011, I learned that Mr. Jack Cannon, Marketing Representative in New York State for Progressive Insurance company had made contact with Mr. David MacLachlan the president of the 3-S group, to which our agency belongs and Mr. Cannon indicated he wished to have a meeting with Mr. MacLachlan to discuss the program that I gave in Maine. He asked that I not be made aware of the meeting and that I not be in attendance at the meeting. An inference here could well be that Progressive had a problem with one of its agents and it needed to be addressed.
During that same conversation requesting the meeting, Mr. Cannon held that I did not construct the program but it had instead been constructed by a firm named Chenango Brokers and that I was hired as a motivational speaker to deliver the program architected by someone else to the Maine Independent Insurance Agents Association.
Mr. MacLachlan declined to accept the meeting on those terms and indicated that he would be willing to meet if I were present and fully aware of the meeting in advance. With that response, Mr. Cannon advised that he would instead contact me directly, but request that I not be informed of his contact to MacLachlan. Mr. MacLachlan indicated that he would not honor that request and would inform Ed Higgins of the contact. Mr. Cannon requested that, before informing Mr. Higgins of the contact, that he be given an opportunity to first check with his own boss, Jim Link. Mr. MacLachlan advised, that he could go ahead and check with him but that he would informing me of the contact.
By now, the Maine Independent agents Association (MIAA), Independent Insurance Agents and Brokers of America (IIABA), and my cluster group president had all been engaged.
On April 26, 2011, Mr. Jack Cannon, marketing representative handling the 3- S Group, left a voicemail message on my personal voicemail saying that he and his boss, Jim Link, who was out of Buffalo, would like to talk to me about the “Big I presentation.” His message further stated, “It appears we have some differences about what Progressive is all about. You probably haven’t talked to anybody in a while and we’d really like to have an opportunity to sit down and talk.”
Fair enough, I thought.
This contact was made to our agency as a member of the 3-S insurance agency cluster. Mr. Brendan Higgins, my son, is the formal representative to our 3-S group by our agency and, therefore, Brendan Higgins made the return contact because the contact was specifically made to our agency as a member of the cluster. We had also learned in the interim that an independent reporter of the insurance community for a publication called “The Standard,” had been in attendance at the program on April 4, 2011 and wrote a comprehensive front-page article on their issue dated April 15, 2011. That article document accurately presented the program’s advocacy message for independent agents to develop value-added models for interacting with consumers, to successfully gain back market share. It also clearly identified the relative context of the success of direct writer response carriers as being only the introduction to the program. The article also made clear identification of the references to both GEICO and Progressive: “He mentioned Flo from Progressive and the GEICO Gecko as popular direct writer marketing campaigns used to attract consumers by making insurance personable.”
During the telephone conversation that took place between Mr. Jack Cannon and Mr. Brendan Higgins on April 28, 2011, it became clear that Mr. Cannon did not have firsthand knowledge of the presentation, did not have a copy of the presentation and did not have a copy the article from the publication. Brendan Higgins demanded that Progressive retrace its steps and apologize to each of the parties to whom they had communicated about the program’s content and its architect. Mr. Cannon stated that, in the presentation, Progressive was the only direct carrier identified and it was unfair to Progressive to portray them as the enemy of the independent agents. Mr. Cannon apparently did not know that GEICO was mentioned to the same degree of reference as Progressive in the 10-minute introductory section of the program, although there was more Progressive on-line screen shot slides used as examples.
Brendan’s specific statement to Mr. Cannon was, “As an independent agent of Progressive, any of our efforts to compete against direct writers should not be suppressed, limited, or used against us in the course of our relationship with Progressive as a company we utilize when trying to compete as independent agents.” Brendan Higgins indicated that he was disappointed that Mr. Cannon was not given better information before being asked to contact him regarding a program that was purely an advocacy educational program to which Progressive should have had no objection, if they were indeed a supporter of the independent agency distribution channel.
Brendan Higgins has had 10 years of prior experience as an employee of a highly reputable national insurance carrier and, in his management experience in the past, he had never been asked to make such a contact without first having been provided clear confirmation of factually correct information. The requested meeting was now “off ” and Mr. Cannon would extend an apology on behalf of Progressive to our agency and to me personally. To this date, more than a year later, there has been no re-tracing of steps, retractions of misstatements by Progressive representatives to the various parties, nor any approach to me. There was also no further pursuit of the originally requested meeting.
We realized that, in that context, we were potentially vulnerable to direct or indirect retaliatory action by Progressive. We therefore retained legal counsel and reviewed the entire course of events with him and had them write a cease-and-desist letter to Progressive Insurance company and a request to retract the erroneous statements made by their staff. That formal request was made on September 7, 2011. Although Progressive responded to that cease-and-desist letter with objections, they alleged that they have not attempted to make any retaliation directly against us as of that date. They have also not complied with the request to retract erroneous statements nor apologize to me.
In good conscience, however, with concern about implications for all agents, we contacted the Independent Insurance Agents and Brokers of New York (IIABNY) specifically our State National Director (SND) John Costello and the CEO Mr. Richard Poppa. They recognized the possible implications of my experience for independent insurance agents and we made a formal presentation of the events to the IIABNY board of directors on August 17, 2011, in Syracuse, NY to provide insight into the behavior and actions we had experienced during the previous four months. The leadership indicated that they would pursue the matter from the perspective of concern for all independent agents, but only after first making a full, comprehensive confirmation of all the details that I had provided starting back in April 2011. The purpose was to be certain that they were dealing with first-hand information from various participants over the past four months.
Their action was not on behalf of me as an individual but rather on behalf of all independent agents who might be exposed to retaliation by national insurance carriers in the future for educational programs aimed at strong advocacy of independent agency distribution channel and effective contrasts with marketing techniques that could be harmful to consumers. Following their comprehensive confirmation of the trail of facts that had occurred in the past, Independent Insurance Agents and Brokers of New York (IIABNY) leadership invited Progressive to a meeting to express their concerns about their conduct and to request that changes be made to the Name Your Price® tool to better serve the consumer. Progressive insisted they had taken no retaliation against me for the program that was provided in Maine. The Association leadership disagreed. After several exchanges and further deliberations over a two-month period Progressive, decided it would make no changes to the Name Your Price® tool bar. They did pledge not to take any retaliatory action against any independent agent in the future.
From that point forward, we conducted our own action against Progressive Insurance Company by filing a complaint with the New York State Insurance Department (now, the Department of Financial Services) on August 24, 2011. That complaint alleged that the consumer was disserved by the Name Your Price® tool because, at various points along the price continuum, the consumer had coverage changes made that were not in their best interest and they were not prepared to understand as lay insurance purchasers.
The complaint included 17 screen shots of various Progressive price continuum points indicating a variety of coverage changes with specific notation that, at several points along the continuum, liability coverage was significantly reduced. In one instance, the coverage was reduced from split limits of 250/500/100 to minimum state liability limits of 25/50/10 limits while the next added coverage was physical damage coverage for a 10-year-old car. This combination of coverage advancement at a higher price continuum is clearly contradictory to most accepted professional standards of risk management and asset protection.
Progressive’s first response to the Department of Financial Services (DFS) was made on October 7, 2011. That response states, in part, “Mr. Higgins also takes issue with the operation of the Name Your Price® tool in that, when moving the slider toward the right, more expensive coverage packages can result in lower liability limits. This can occur when the consumer moves from a package without comprehensive and collision coverage to one that includes it. Mr. Higgins claims that, ‘any customer would anticipate that a higher price would result in increased coverage,‘ suggesting that lesser coverage is offered at a higher price. This is not the case. While less liability coverage is offered, the Name Your Price® tool never displays anything lower than the state minimum limits and the total package of insurance coverage is increased since Comprehensive and Collision coverage is added to the vehicle. Again all changes are highlighted in blue shading on the user’s screen for ease of reference…. In summary, all coverage packages shown by the Name Your Price® tool follow our filed rates and are clearly explained and illustrated on each page of the tool. Consumers are provided a convenient means to obtain a quote that matches their existing coverage or, alternatively, they may manipulate coverage packages and see changes in real time by moving the Name Your Price® slider. Each change is highlighted in blue, and any reduction in liability limits is clearly and accurately described and never reduced below the state minimum limits. The Name Your Price® tool offers robust help text and a variety of ways to reach a licensed agent for assistance with the quote. Every coverage package displayed is clearly explained, and live help from a licensed agent is available 24 hours a day.” Upon receiving the above response that was forwarded to me by the Department of Financial Services, I went to the Internet and checked to confirm the blue highlighting of coverage changes. I found the blue highlighting lasts exactly 2 seconds and that the coverage changes were displayed over a space of two screens that had to be scrolled down by the user to see all the data. It is obvious that it would be very difficult for a lay consumer to evaluate multiple coverage changes in a 2 second interval that occur over a two screen landscape. I wrote the Department in response advising them of the specific nature of the blue highlighting for only 2 seconds. There is no notification to the Internet site user of the meaning of bolding those coverages that change in blue. Indeed, it is easy to completely overlook the bolding process, which I personally experienced.
I subsequently received a final disposition letter from the New York State Department of Financial Services dated November 1, 2011. That response indicated that, “The company disputes the fact that their Name Your Price® tool is misleading to the consumer. However we are referring the matter on to our Property Bureau for possible additional action.” My above response regarding the blue bolding was also forwarded to the Property Bureau for inclusion in the complaint filed their department. I contacted the DSF by telephone upon receipt of the no action letter and stated that I was amazed that the DFS was taking no action whatsoever. I was told that this is a gray area and there is no clear violation of insurance law, but that the matter was referred to the Property Bureau in New York City. I pursued representatives at the Property Bureau in New York City to identify why they would be looking at the complaint, which was forwarded from the Consumer Affairs Bureau. They indicated that their office was more focused on the technical nature of complaints and were looking at the complaint further for possible additional action.
Progressive responded to the Property Bureau on November 30, 2011. That response stated, in part, “As we explained in our initial response, while less liability coverage is occasionally presented, the Name Your Price® tool never displays anything lower than the state minimum limits and the total package of insurance coverage is increased since comprehensive and collision coverage is added to the vehicle. The Name Your Price® slider merely presents a continuum of the various insurance packages available at varying price levels and all changes illustrated by the name your tool for follow Progressive’s filed rates consumers are free to make coverage selections on their own or, as explained previously, those who desire assistance in selecting appropriate coverage for their situation are offered a variety of ways to consult with a licensed insurance professional. To make the Name Your Price® tool work as Mr. Higgins would personally like, we would have to forgo displaying coverage limit choices that many consumers would like to have and that are available under our filed rate plans. Moreover, given that insurance rates are actuarially determined, we do not agree with Mr. Higgins assertion that premium spent to increase liability l i m it s always provides more value to the policyholder that an equal amount of premium spent to purchase or increase comprehensive and collision coverage.” Their consistent premise is that all coverages are actuarially rated and approved by the Department of Financial Services. Therefore, any combination of coverage that result in an aggregate total higher premium price is, in fact, higher coverage than the next prior lower price point. (SPECIAL NOTE: If one follows that logic to its ultimate extension, one ton of coal equals a one-carat diamond). Progressive also points to the fact that all coverage changes are clearly highlighted in blue on their website when someone obtains a quotation of changing coverage. What their response fails to recognize is that all the coverage is not available on a single screen on the Internet site and requires the user to scroll through two screens of data. The highlighting of the coverages changes last for only 2 seconds.
Even a well-informed consumer who clearly understood insurance coverage would not be able to identify all the blue bolding on two screens of data in two seconds and digest the implications of those changes.
After several months of deliberation by the New York Department of Financial Services Property Bureau, I received a response, on March 27, 2012 informing me there had been several committee meetings with superiors, and the Department was notifying me that they chose to take no further action. Their reason for not taking action was, “We have reviewed your concerns and Progressive’s responses, and did not find that the company’s price quotation system on the Internet page referenced is in violation of any statute or regulation. It is noted that the department market conduct unit does monitor company websites periodically. Thank you for bringing this matter to Department’s attention. Based upon the above we are hereby closing our file on this matter.” Upon that decision I immediately contacted the Property Bureau and indicated it was incomprehensible to me that the Department would not take action at this time after an exhaustive investigative process that seemed destined for positive action based upon interim conversations with his department. The DSF indicated that they appreciated my frustration but there was nothing to be done.
I advised that I had first pursued this with the Department of Financial Services as I had been counseled to do by my insurance association and, I was not willing to let this die at this point. I stated that I intended to refile the complaint with the New York State Attorney General. I pointed out that it would be very embarrassing to the Department if the Attorney General took further action on this complaint.
On April 2, 2012, I re-filed the complaint in its entirety to the Hon. Eric T. Schneiderman, Office the Attorney General, The Capital, Albany, New York. I pointed out that I believed the consumer was disserved by the operation of the “Flo/ Name Your Price® tool.”
Just eight days later in a letter dated April 8, 2012, I received a response from the Office of the Attorney General stating that, “We have carefully reviewed your correspondence. You have correctly written to another agency with jurisdiction and expertise in this matter. We respectfully defer to that agency.
If you have not already done so, you may wish to discuss this matter with a private attorney. In the event you need a referral, we suggest you call your County Bar Association with the New York State Bar Association’s lawyer referral service at 1-800-342-3661 for assistance. Typically, initial consultations are relatively inexpensive and do not commit you to further representation. Our office cannot represent consumers in court or get individual legal advice Thank you for bringing this matter to our attention. We will keep your correspondence on file for future reference.”
Obviously with substantial previous investment of time and energy in pursuit of providing better business practice for the insuring public, and ending with no positive result I found myself in a very frustrating position.
I returned, by e-mail contact to my first contact with the New York State Department Financial Services and informed that person that after all this frustration; my intent was to educate the public of this situation. I suggested, once more, that the department identify whether or not there was any possibility of a positive outcome by a further review. I was advised that there was previously no property and casualty insurance regulation on the books to cover the allegations against Progressive and the new regulation labeled #34B was currently promulgated and was resting at the Office of General Counsel for public comment and potential further approval.
It was indicated that their regulation will be a clear and direct response to my complaint but no one knew how long will it take for that regulation to be passed and implemented.
It became clear that the only hope of gaining results on behalf of the consuming public in regard to this matter was to present my story, as I am doing here and will continue to do.
No agent fears competition; we live with it every day. The strength of competitors’ advertising and call centers and the rest cannot outdo us when the playing field is level – a condition for which we look to our regulators. The public may be entertained and engaged by clever ads, but buying complex coverages with multiple options, with flashes of information that change value and tilt the field – should not stand.
I am disappointed that regulatory authorities were unable to take action that would seem logical based upon the circumstances and I do urge readers to be sensitive and aware of all of this. My e-mail address is ed@edhiggins.com.
Edgar Higgins, CPCU.
