One of the core activities regularly performed by insurers-its telemarketing efforts is about to undergo modifications now that the federal Do Not Call (DNC) list has been given the green light for national enforcement.In October, a federal appeals court ruled that the Do Not Call registry-a list that currently includes about 50 million phone numbers-was within the legal boundaries of the Federal Trade Commission (FTC) and Federal Communications Commission (FCC).
Following on the heels of that ruling, Congress in early October passed a bill to overwhelmingly make clear that the FTC did have such authority to implement the DNC list.
Prior to the appeals court ruling, the future of the DNC list had been uncertain. Slated to have gone into effect Oct. 1, implementation was delayed when federal judges in Colorado and Oklahoma ruled the registry was in violation of a telemarketer's First Amendment rights. The judges acted on motions that had been filed by telemarketing firms and trade associations.
A law that had been two years in the making, DNC had already been enforced by various states, whose mission was to block calls from telemarketers selling goods and services over the phone to those registered for the list.
All told, the formulation of the national effort will block an estimated 80% of telemarketer solicitations, with the exception being calls from charities and political affiliations.
Insurers' responsibilities
The implication of DNC on the insurance industry is that carriers indeed must comply with the new law. If they fail, they face penalties that could amount to $11,000 per day.
Originally, there had been speculation that insurers might wriggle free of compliance-at least in the short term-based on language written within the McCarran-Ferguson Act.
While the Act expressly states that the FTC lacks jurisdiction over insurance, the same does not apply to the FCC, which would be able to force insurers to comply.
That's because McCarran-Ferguson, a 50-year-old law that delegates insurance regulations to individual states, only regulates the actual business of insurance, while the FCC contends that it regulates the use of telephones.
As a result, the FCC would hold authority to regulate any business that uses phones within its selling strategy.
Industry experts questions whether insurers are prepared to avoid calling people on the registry.
Some insurers might be in for a rude awakening. A study released in October by Boston-based Celent Communications Inc. reports that financial service companies have not done the internal heavy lifting necessary to satisfy the law's requirements.
Celent analyst Craig Weber says, "it's clear that many financial institutions are ill-prepared. Most firms will need to redesign some processes, implement new systems and communicate their DNC policies to sales agents and call center staff very carefully. Those things are not going to happen overnight."
Weber suggests that centralized automation initiatives are a key component to swift and accurate compliance to DNC. "For example, firms can build their own interface, access their data, update it regularly and store it in their own customer databases," he says.
"The other choice is a packaged solution that sits between your call center reps and the customers they're calling, or between agents and the customers they're calling."
To date, Celent found that 70% of respondents to its study already have an internal DNC list in place, and at least 40% said they have opt-out lists for privacy, e-mail and regular mail.
Omaha, Neb.-based Mutual of Omaha is among those insurers that planned ahead for DNC enforcement.
"We conduct business in 30 states, and over the past couple years we've had to adhere to DNC on a state-by-state basis," says John Glantz, first vice president, direct-to-consumer marketing at Mutual of Omaha. "With this plan in place, we believe we have a jump-start on federal compliance."
In its outbound telemarketing efforts, Mutual of Omaha markets insurance products to both existing and prospective customers-products that include supplemental life and health, term insurance and supplemental medicare coverage.
In formulating both state-level and national DNC plans, Mutual of Omaha was able to avoid internal operational costs mainly because the company outsources its telemarketing efforts.
"Our third-party partner directly incurred these expenses to comply with DNC, and then passed some of those costs on to us through a rate increase," says Glantz, who could not specify the costs. The provider's outsourcing partner, whom Glantz would not identify, has about 100 sales agents that market Mutual of Omaha products.
Planning ahead
Specifically, Mutual of Omaha's telemarketing provider over the years has formulated "suppression lists," which consist of phone numbers registered for state-sponsored DNC programs.
Glantz says the provider now has to merge existing state suppression lists with the new federal registry. Glantz says the company has been working on this effort since April, and the project took about 30-45 days to complete.
While Mutual of Omaha is not expecting to feel the pinch of DNC via internal projects, it will feel a pinch with selling opportunities. Glantz says the company will have to get creative to meet its new-business acquisition goals.
"About 10% to 15% of our business is conducted via telemarketing," Glantz says. "Next year, it was projected to increase to as high as 25%. We will lose premium volume. However, we have identified other means to sell these products and will redirect to these other channels." Mutual of Omaha's Web site has been identified as one way to fill the gap, while direct mail is another.
In the meantime, some large insurers are unaffected by the new law, simply because they do not have an outbound telemarketing program.
For example, Mayfield Village, Ohio-based Progressive Insurance Co. is proceeding business as usual. "We make no outbound calls at all," says Leslie Kolleta, a spokeswoman for Progressive. The company relies on its Web site, direct mail, TV, print ads and word of mouth to sell new policies.
