Survival techniques: insurance trades are reassessing and sometimes reshaping their presence in the industry in order to stay alive.

Insurance trade associations have to operate like businesses as they fulfill the demands of members who respond to changing market conditions. If they don't evolve, they die--making them no different from the constituency they serve.

First and foremost, trade associations have to meet their members' advocacy needs, but making sure they remain alive financially is as important to them as it is to the insurers whose membership dues they compete for. Meeting both those objectives has forced some significant moves among today's associations. To achieve financial viability, some have joined in mergers, cut costs through staff and budget reductions or increased staff so more revenue can be generated with product and service offerings. To reap results from their lobbying efforts on Capitol Hill and in state capitals, and therefore keep the dues flowing, they've looked for the best approach and the clearest definition of their purpose.

One Loud Clear Voice

In advocacy, the life insurance industry says its needs are different from property/casualty insurers, and even within the life and property/casualty lobbies, there are niches. At the same time, there's a necessity for life insurers, and the industry as a whole, to lobby with a singular voice as they try to educate and influence lawmakers who don't know all insurers are not the same, but whose decisions affect industry livelihoods.

"One voice wins battles. Several voices lose," said Frank Keating, president and chief executive officer of the American Council of Life Insurers.

Having to speak with one voice has involved some change, as the chief executives of ACLI member companies have changed. Some 20 years ago, the heads of life companies had a traditional insurance background, having generally ascended within the industry. Now some of the biggest life insurance companies in the United States and the world are headed by people who come from banking, securities or other financial services industries.

By the dawn of the new century, ACLI had changed the "I" to "Insurers" from "Insurance."

A subtle change, but one reflecting how, unlike a generation ago, the life insurance business is no longer focused on just life insurance. An increasing amount of premium is received for pension products, long-term-care and disability insurance, for example, and not all life insurers sell all these products, or they sell different combinations of them.

Speaking with one voice was also the reason given by the American Association of Health Plans and the Health Insurance Association of America for their merger in 2003. The same call was sounded with the merger of the National Association of Independent Insurers and the Alliance of American Insurers at the start of this year.

The NAII-Alliance merger created the Property Casualty Insurers Association of America. The two groups had talked merger since the early 1990s. "We're a nonprofit organization, but it doesn't mean we don't have to operate like a business," said Joseph Annotti, PCI vice president, public affairs.

Now called America's Health Insurance Plans, AAHP and HIAA merger talks go back to 1999--a time when HIAA's members were mostly individual small-group insurers and AAHP members were mainly large managed-care companies. Historical differences in products and policy positions had largely disappeared over the years. As they investigated merger possibilities, they realized their missions were in sync and compatible. The merger increased AAHP's budget by about 40% and created the largest health insurance lobby on Capitol Hill.

In addition to establishing a unified lobbying voice, mergers affect finances. "Most associations are reluctant to raise dues," said Kevin Corcoran, executive vice president of the National Association of Health Underwriters. "But at the same time, their expenses are increasing, and this creates pressures. Larger organizations typically have economies of scale that smaller ones don't. This may contribute to some of the mergers we're seeing."

Industry consolidation played a key role in the NAII-Alliance and AAHP-HIAA mergers--whether it was companies or products merging. "If two big companies merge, that has a direct financial impact on an association," Annotti said.

"With company mergers and acquisitions, trades lost dues," said Scott Cipinko, executive director of the Life Insurers Council.

Separate but Together

Some insurance trade associations decided the best way to maintain a strong advocacy voice and remain financially viable was to keep their individual identity. The LIC works closely with the ACLI, but LIC members have different needs from ACLI members, said Cipinko, who described his members as niche companies that write small face amount policies ranging from $500 to $20,000.

Although "ACLI looks at the big companies on down, and we look at the small companies on up," the real difference is the issues they focus on, he said.

LIC looks at sub-issues that the ACLI may not, he said. For example, actuarial and accounting matters represent critically important costs for some of the smaller insurers. "You can't limit your advocacy focus to products. If you do, you leave a lot on the table where these small companies are concerned," Cipinko said.

Membership differences also may be determined by the debate over an optional federal charter for insurers, which is favored by ACLI.

Before merging with LOMA in 1997, LIC had been just a service organization, Cipinko said. "As the market changes and companies find they have to write different products and compliance costs go up, you have to be able to address those issues or you hurt your members. We really had to change our focus because members had to change their focus."

Merger talks with the National Alliance of Life Companies in 2002 "just didn't work out," said Cipinko, who'd spent more than eight years with NALC.

The National Association of Mutual Insurance Companies was invited to the NAII-Alliance merger talks more than once over the years, but always concluded the needs of mutual insurance companies were different. Though NAMIC has had a few stock companies as members since the 1970s, its board of directors, the ultimate decision-makers, remain mutual insurers, said Charles M. Chamness, NAMIC president.

For example, the federal Sarbanes-Oxley Act of 2002, which was designed to shine a bright light on corporate governance, punish corporate wrongdoers and protect investors, was not as important to mutual insurers as to publicly traded stock insurers, Chamness said.

"There are no investors in a mutual," he said, adding, mutuals already operate in a very heavily regulated world that's not the same as the corporate governance world of a Microsoft.

Strength in Numbers 

While the National Association of Health Underwriters was on the periphery as health insurers fought off the Clinton health-care package, that battle helped raise its profile and contributed to NAHU's recent growth, Corcoran said.

NAHU membership, primarily made up of producers, agents and brokers, has increased to about 18,000 from 11,000 over the past 10 years, he said. "Now we can address issues on the federal level with legislators and the administration, and on the state level with legislators and regulators," Corcoran said. "As we develop relationships, we've been able to meet new people and get involved in areas we hadn't before. We have a lot more resources than we had 10 years ago."

NAHU offers member services such as continuing education programs and a magazine, but the association is known for advocacy, and that's what its members are primarily interested in, Corcoran said. If the state or federal government runs health care, then there's no need for producers and agents.

"If legislative initiatives eliminate their jobs, our magazine doesn't matter much," Corcoran said. "If we lose the legislative battle, we're not going to be here anymore."

Numbers are important to the ACLI, too. In the year that Keating has been at the helm, the association has added about 13 member companies and at the same time cut expenses, including reducing staff by 20% and its budget by 10%, he said. "Results are important for our members. They want a honed, muscular association solely focused on advocacy."

Life-Saving Services

Member services also can be a key to association viability. For associations whose members are individuals, selling directors and officers, errors and omissions and health coverages to members, and negotiating with insurers to get agents products to sell during hard markets, are vital income-generating services.

The Independent Insurance Agents and Brokers of America offers advocacy along with a host of services, including a bank, designed to help its members run their businesses. "The 'Big I' is a very comprehensive trade association for our members," said IIABA Chief Executive Officer Robert A. Rusbuldt.

Industry gurus are available to educate independent agents about best practices, and a virtual university, used by some 60,000 independent agents around the world, allows them to further their education without having to leave their agency. Programs for young agents and another to further the cause of diversity are offered, he said.

IIABA has a tax-exempt foundation that offers curriculum for high school and community college students to prepare them for careers in insurance, "and to compete with the investment banking side to let students know there is a great career awaiting in the insurance industry," Rusbuldt said. This is just a sampling of the services IIABA offers members.

Services are no less important for trades with insurance company members. NAMIC, for instance, has its own insurance company, which offers professional liability for member companies and their agents, as well as a bank to serve the financial services needs of members. The bank is a federally chartered thrift, that's also open to the public, Chamness said.

But lobbying is still job one. "Trades are evolving much more rapidly than people understand," Rusbuldt said. "Members demand more representation and service, and there is a growing need for additional revenue to provide those services and advocacy. We advocate with Congress, regulatory agencies, legal systems and state legislatures. We advocate through the press. We coordinate all this. Advocacy is a very extensive function of this association."

Information Is Important, Too

Advocacy is also the No. 1 service PCI provides, but being an informational source is of great importance to members, whose demand for timely news and analysis of new laws, regulations and court decisions is enormous, Annotti said. "It's almost impossible to put a dollar value on that. You're dealing with 50 states, and they need to know changes in state regulation that may affect how they process claims or underwrite."

PCI produces more than 100 publications, but what's changed over the past 10 years is how the publications are delivered; the increased speed with which information is gathered, analyzed and put out, and the increased numbers of people demanding the information, Annotti said.

Prior to joining PCI, Annotti had worked 10 years for a state agents association, where 90% of its income came from dues. By the early 1990s, it was less than 25%, he said. "There's just no way those state groups could charge enough to do the advocacy they need to be effective," Annotti said.

Along with advocacy, the American Insurance Association provides databases members can use to track legislation, provides compliance information and offers a number of publications.

"We have local council retained in every state so member companies don't have to go out and hire the best law firm--they have access to them through us," said Julie Rochman, AIA senior vice president, public affairs. "The demands are greater on all trades because resources have shrunk through mergers and consolidations. Everyone in the business world is working harder and smarter. It applies to companies, and it applies to trades," Rochman said.

AIA members want the association to lead, but not lead them, she said. "They want us shaping the operating environment. That's why they come here. Our companies want someone who is wired. We're not just reactive. We're suppose to know the political and public policy world so they can focus on the insurance business without being surprised by public policy. Our companies expect us to do the work. When there's a hearing on Capitol Hill, we better be there shaping the argument."

State lobbying is no less important for AIA. "We have to keep regulators and trial lawyers off the backs of the companies. We have more personal lines companies than we used to, in the past three years. We are focusing more on compliance issues than we used to, and there's more we're trying to comply with," Rochman said.

Consumer-Driven Changes

Looking ahead is key to a trade association's survival, said IIABA's Rusbuldt. "Many trades only react to a current crisis or problem, and don't always look forward. The 'Big I' has always been very good about looking five to 10 years down the road."

It's an approach that's no different from insurance companies. "Any trade association that is static will eventually die," Rusbuldt said. "The marketplace is changing for members and insurers, and the market is driven by consumer demand. If we don't understand what consumers want and need now and in the future and what the companies will demand from us, then we're not doing our jobs."

RELATED ARTICLE: Insurance Trade Associations.

The following organizations are some of the major insurance trade associations.

America's Health Insurance Plans

President and Chief Executive Officer: Karen M. Ignagni

Purpose: AHIP's goal is to provide a unified voice for the health-care financing industry, to expand access to high-quality, cost-effective health care and to ensure financial security through robust insurance markets, product flexibility and innovation, and an abundance of consumer choice. AHIP is a result of the merger of the American Association of Health Plans and the Health Insurance Association of America.

Address:

601 Pennsylvania Ave., NW

South Building, Suite 500

Washington, D.C. 20004

Telephone: [phone]

Chief Administrative Officer: Daniel Leonard

E-mail: [e-mail]

Web Site: www.aahp.org

American Council of Life Insurers

President and CEO: Frank Keating

Purpose: ACLI represents legal reserve life insurance companies and fraternal benefit societies before federal and state policy makers, federal and state courts and insurance departments.

Address:

101 Constitution Ave., NW

Washington, DC 20001-2133

Phone: [phone]

Fax: [phone]

Web Site: www.acli.com

American Insurance Association

President: Robert E. Vagley

Purpose: AIA's mission is to advance the financial and business interests of its members in the public arena by providing representation before federal and state governmental bodies; facilitating solutions to company-specific issues; responding to a changing political environment; and generating communication and grassroots support. AIA members are property/casualty insurance companies.

Address:

1130 Connecticut Ave., NW

Suite 1000

Washington, D.C. 20036

Phone: [phone]

Fax: [phone]

Web Site: www.aiadc.org

The Council of Insurance Agents & Brokers

President: Ken A. Crerar

Purpose: CIAB represents the top 1% of all commercial insurance brokers. CIAB works in the best interests of its members, securing innovative solutions and creating new market opportunities at home and abroad.

Address:

701 Pennsylvania Ave., NW #750

Washington, D.C. 20004-2678

Telephone: [phone]

Fax: [phone]

Web Site: www.ciab.com

Independent Insurance Agents & Brokers of America Inc.

Chief Executive Officer: Robert A. Rusbuldt

Purpose: IIABA exists to support and protect the interests of insurance agents and brokers, as well as educate consumers on the importance of proper insurance coverage. IIABA agents offer all types of insurance and financial services products.

Address:

127 South Peyton St.

Alexandria, Va. 22314

Phone: [phone]

Fax: [phone]

E-mail: [e-mail]

Web Site: www.independentagent.com

Life Insurers Council

Chairman: Richard E. Bauer (until May 2004, when Vice Chairman Don Royster will become chairman)

Purpose: LIC is an association of insurance companies that serve the general public through promoting business standards in favor of policyholders; addressing legislative, regulatory and consumer issues; and stimulating communication to improve the public and the insurance industry. In 1997, LIC merged with LOMA.

Address:

2300 Windy Ridge Parkway

Suite 600

Atlanta, Ga. 30339

Phone: [phone]

Fax: [phone]

E-mail: [e-mail]

Web Site: www.loma.org/IndexPage-LIC.asp

National Association of Health Underwriters

President: Thomas G. Kaufman

Purpose: NAHU's goal is to improve its members' ability to meet the health, financial and retirement security needs of all Americans through education, advocacy and professional development.

Address:

2000 N. 14th St., Suite 450

Arlington, Va. 22201

Phone: [phone]

Fax: [phone]

E-mail: [e-mail]

Web Site: www.nahu.org

National Association of Insurance and Financial Advisors

CEO: David F. Woods

Purpose: The mission of NAIFA is to advocate for a positive legislative and regulatory environment, enhance business and professional skills and promote the ethical conduct of its members.

Address:

2901 Telestar Court

Falls Church, Va. 22042

Phone: [phone] (local)

(877) TO-NAIFA (toll free)

E-mail: [e-mail]

Web Site: www.naifa.org

National Association of Mutual Insurance Companies

President: Charles M. Chamness

Purpose: NAMIC provides services to help member companies improve their bottom line through government relations, public affairs, education and arbitration services and insurance and employee benefit programs.

Address:

3601 Vincennes Rd.

Indianapolis, Ind. 46268

Phone: [phone]

Fax: [phone]

Web Site: www.namic.org

Property Casualty Insurers Association of America

President: Jack Ramirez

Purpose: PCI advocates sound public policy positions to foster a competitive insurance marketplace and help make insurance more affordable for consumers. The association serves as the voice of the property/casualty insurance industry before state and federal policy makers and courts; key industry, government and business groups; the news media and the public. PCI was formed through the merging of the Alliance of American Insurers and the National Association of Independent Insurers.

Address:

2600 South River Rd.

Des Plaines, Ill. 60018

Phone: [phone]

Fax: [phone]

Web Site: www.pciaa.net

--Vanessa Morogiello