Texas 2006 Homeowners Rates Drop 4.9%; Auto Drops 4.4%

By Tom Di Martini
BestWeek

The average statewide cost for a homeowners policy in Texas in 2006 dropped 4.9%, while liability and physical automobile premiums dropped 4.4%, according to a report from the Insurance Council of Texas.

The average cost for a homeowners policy was $1,038, and the cost of automobile premiums averaged $1,054, the council said.

Robert Hartwig, president of the Insurance Information Institute, said the drop is notable, because for many years, Texas had the highest rates in the United States. ?Historically, Texas has had extraordinary catastrophic exposure, not just from hurricanes, but they are the most vulnerable state in terms of tornadoes and hail--especially inland," he said.

Hartwig added that Texas' high costs abated in 2003 following the much-publicized mold crisis, with $2 billion in losses incurred from Hurricane Rita in 2005 weighing in as the state's lone catastrophic event.

The Texas homeowners market was thrown into turmoil in the early part of the decade because of skyrocketing mold claims. In 2000, 2001 and 2002, Texas insurers paid out a total of more than $4 billion in mold claims (BestWire, May 21, 2003).

Mark Hanna, a spokesman for the Insurance Council of Texas, said in a statement decreasing rates should increase competition among the state's insurers. "When you see premiums falling, it means insurance companies are fighting for your business," he said.

Homeowners rates have been a bone of contention in other catastrophe-prone states in recent months. Florida lawmakers reached a deal earlier this month on an insurance reform plan that would give policyholders a double-digit decrease in homeowners insurance rates by expanding the Florida Hurricane Catastrophe Fund. The deal, reached during a special Florida legislative session, will eventually give homeowners an estimated 10% to 35% reduction in rates (BestWire, Jan. 22, 2007).

In 2005, the top five Florida homeowners multiperil insurers, according to A.M. Best Co. state/line product information, were: State Farm Group, with 21.5%; Citizens Property Insurance Corp., with 9.4%; Allstate Insurance Group, with 9.1%; Tower Hill Group, with 5.2%; and Nationwide Group, with 5%.

In 2005, the top five Texas homeowners multiperil insurers, according to A.M. Best Co. state/line product information, were: State Farm Group, with 29%; Allstate Insurance Group, with 17.2%; Farmers Insurance Group, with 11.1%; USAA Group, with 7%; and St. Paul Travelers Group, with 5.4%.

Source: A.M. Best Company (www.ambest.com)

From: Insurance News Net (www.insurancenewsnet.com)

Republicans Propose Alternative to Schwarzenegger Health Plan

By Kathy Robertson
Silicon Valley / San Jose Business News

Senate Republicans released a health care reform proposal Tuesday that seeks to make health care coverage more accessible and affordable for all Californians without raising fees or taxes.
Dubbed "Cal CARE," the plan offers tax incentives for individuals and businesses who buy health insurance instead of requiring individuals to buy it and businesses to provide it or pay into a state pool that does. Both are cornerstones of the plan proposed by Gov. Arnold Schwarzenegger and Senate Democrats.

The Republican plan reallocates existing funds to pay for new health initiatives and calls on the federal government to pick up the tab for care provided to illegal immigrants. In order to improve access to care, the plan would increase provider rates paid by Medi-Cal, the state health care program for the poor, to equal those paid by Medicare, the government program for seniors, over a period of eight years.

The plan would use a significant portion of the $2 billion currently allocated annually to hospitals that care for a disproportionate number of poor patients to build more primary-care clinics to care for this population before it gets sick.

It would also allow nurse practitioners and other qualified providers to run primary-care clinics in underserved rural and urban areas.

"The Republican plan recognizes the fact that taxpayers cannot afford insurance for everyone, but we can certainly provide access to everyone in need," Republican State Sen. Sam Aanestad from Grass Valley said in a prepared statement.

The plan puts particular emphasis on expanding health care coverage for children.

Backers will ask the Legislature to place a measure on the next statewide elections ballot to redirect current tobacco tax funds to pay for children's health care initiatives.

From: Silicon Valley / San Jose Business News (www.bizjournals.com)

Calif. Workers' Comp Reforms Reducing Physical Therapy, Chiropractic Utilization

Workers' compensation reform legislation has helped to reduce physical therapy and chiropracting manipulation in California, according to the California Workers' Compensation Institute.

CWCI recently completed a study analyzing changes in medical utilization and payments for outpatient services in California workers' compensation following the adoption of Medical Fee Schedule revisions that occurred in 2002-2004. According to the analysis, there have been post-reform reduction in the average number of visits and average amounts paid for most outpatient medical services at 3, 6 and 9 months post injury.

The sharpest reductions were in physical therapy and chiropractic manipulation, "two areas where state lawmakers tried to control over utilization by implementing 24-visit caps, as well as utilization review," CWCI said in a statement. Workers' comp claims involving physical therapy treatments fell from about 40 percent prior to the reforms, to less than one-third of the claims in 2005. The drop in chronic manipulation was measured in about one in nine claims prior to reform, but dropped to about one in 25 claims after the reforms took effect, the study indicated.
For most treatment categories, levels of utilization declined after the reforms took effect.

For more information, visit www.cwci.org.

Source: CWCI (www.cwci.org)

From: Insurance Journal (www.insurancejournal.com)

Safeco Reports Fourth Quarter Net Income of $216.4 Million

Seattle-based Safeco hosted a conference call on its fourth quarter and year-end results today, noting it had fourth-quarter net income of $216,4 million, or $1.96 per diluted share. Net income for the same period the previous fiscal year was $190.7 million.

For the full year ended 2006, the company reported net income of $880 million, compared with $691.1 million the previous year. Operating earnings were $207.3 million in the fourth quarter, compared with $184.3 million in the same quarter in 2005. The overall property/casualty combined ration was 87.2 for the fourth quarter, versus 89.1 the previous year. The combined ratio for the year was 87.3, compared with 91.1 one year ago.

Pretax catastrophe losses for the fourth quarter were 36.1 million, primarily due to estimated losses from the Pacific Northweat windstorm in Dec. 2006. Pretax catastrophe losseswere $51.4 million in the prior-year period, stemming largely from Hurricane Wilma. After reinsurance, pretax catastrophe losses were $155.3 million for the year, compared with $267.4 million in 2005, primarily from Hurricanes Katrina and Rita.

"The fourth-quarter and full-year results are tangible evidence that when Safeco commits to a direction, it will deliver," said Paula Rosput Reynolds, president and CEO.

Safeco recorded $3 million in restructuring and asset impairment charges associated with the actions taken in the fourth quarter. For the full year, these charges totaled $25.7 million. For 2007, the company is targeting an additional $50 million to $75 million reduction in its annualized expense run rate by year-end. These projected savings are consistent with Safeco's previously announced strategy to achieve greater competitiveness, the company said.

Source: Safeco (www.safeco.com)

From: Insurance Journal (www.insurancejournal.com)

Unum Says Long Term Care Buyers Are Getting Younger, Selecting Home Care Option

Buyers of group long term care insurance are getting younger, and more customers are selecting coverage for care in the home, says leading employee benefit provider Unum.

More than 52 percent of purchasers are under 45, and sales of the home health care option have risen to 92 percent of policies sold, up from 88 percent in 2003.

“The sales growth in this market is based on two things: Better information available to employees on the need for long term care; and simplified and more affordable policies from carriers,” said John Noble, director of long term care products. “The younger you buy, the lower the premium cost. And features like the home care option address our desires to ‘age in place.’”

Unum added nearly 1,000 new businesses to its group long term care customer base in 2006, an increase of more than 15 percent from 2005 sales. The company now holds 75 percent of the group long term care insurance policies in the United States, covering about 600,000 working-age employees.

From its position of leadership in the group market, Unum also notes a significant increase in the number of employers who are willing to help pay for this benefit. Ninety-two percent of cases in 2006 had some level of premium contribution from the employer. This is a dramatic shift from the 100-percent employee-paid coverage that represented most of the market in earlier years.

According to the U.S. Senate Special Committee on Aging, Long-term care costs are expected to double by the year 2025 and nearly quadruple by 2050. As a result, Unum expects to see growth in popularity of policies that include protection against inflation. This option basically raises the benefit amount by a certain percentage each year to compensate for the rising cost of care.

“A year in a nursing home can vary greatly from $40,000 in some states up to $100,000 in others,” said Noble. “Inflation protection is a great option to help keep the benefit payout in line with market costs.”

In addition to its group business, Unum holds about 200,000 individual long term care policies. The company processed more than 3,000 group and individual long term care claims in 2005 and 4,000 in 2006.

Find more information about long term care at www.LTC-101.com.

Source: Unum (www.unum.com)

From: Business Wire (www.businesswire.com)

Banc Of America Insurance Group Announces New Syndicate With Lloyd's Of London

BA InternationalUnderwriters Ltd, a wholly-owned subsidiary of Banc of America Insurance Group, in conjunction with Lloyd's of London, has established the Pembrace Casualty Insurance Syndicate to expand Bank of America's ability to offer specialty liability, casualty and reinsurance services.

Pembrace will be capitalized by Banc of America Insurance Group with an initial stamp capacity of 33 million Pounds Sterling. Managed through Spectrum Syndicate Management, Pembrace is authorized to write specialty liability and other U.S.-based casualty insurance and reinsurance business to complement Banc of America Insurance Group's existing U.S.-based insurance operations. Banc of America Insurance Group and its affiliates have more than 50 years of insurance operations experience and currently underwrite commercial property casualty and life insurance coverages within the Bank of America enterprise.

"The launch of Pembrace pairs the financial strength of Bank of America with the marketplace presence of Lloyd's of London to expand and enhance our global insurance strategy," said Keith Pellerin, president of Banc ofAmerica Insurance Group. "Banc of America Insurance Group has a long history of expertise in underwriting and insurance operations in the United States. Pembrace will provide a highly scalable platform to enable future expansion in the insurance markets."

"The fact that such a leading financial institution has chosen to setup a syndicate at Lloyd's is further testament to the strength and attractiveness of the market. We look forward to working with Bank ofAmerica," said Rolf Tolle, Lloyd's Franchise Performance Director.

Source: Bank of America (www.bankofamerica.com)

From: PR Newswire (www.prnewswire.com)

Arrowhead Names Its New Chief Information Officer

San Diego-based Arrowhead General Insurance Agency, Inc. today announced Stephen Boyd has been promoted to chief information officer, effective immediately. Boyd was previously senior vice president of information systems and under his leadership Arrowhead emerged as an industry leader in point-of-sale technologies for the company's independent producers and brokers. As CIO, Boyd will oversee Arrowhead's 75+ technology professionals and be responsible for setting the overall technology direction for the organization.

Boyd joined Arrowhead in 1995 and has worked in many different roles throughout the company including underwriting, marketing and technology. Transitioning to the CIO role, Boyd will provide strategic and profit enhancing business planning to senior management and operations to ensure technology is used as a competitive tool in the insurance market.

"One reason for Arrowhead's success is because it continues to push the envelope in technology which provides for a compelling differentiator in the marketplace," Boyd said.

As a frequent spokesman in insurance trade publications and on industry panels for a number of technology-related topics, Boyd will continue to maintain the company's high-profile technology objectives to streamline and increase the company's day-to-day operations and its business grow."Steve is an extremely talented and driven professional," said Frank Ruyak, chief executive officer. "He has the work ethic, vision and leadership skills to keep Arrowhead on the leading edge of technology for the insurance sector and we are delighted to announce his promotion to CIO."

Arrowhead General Insurance Agency, Inc., headquartered in San Diego, is an independent national program manager for commercial, personal and specialty lines and is one of the largest privately held general agencies in the United States. Arrowhead's partnerships with strong insurance carriers provide stability and capacity for its vast distribution network. The foundation for success at Arrowhead is entrepreneurial spirit, which encourages opportunity, innovation and growth.

Source: Arrowhead General Insurance Agency (www.ArrowheadGrp.com)

From: Insurance Journal (www.insurancejournal.com)

Kingsway Announces the Acquisition of Mendota Insurance Company

Kingsway Financial Services Inc. ("Kingsway") today announced it has reached a definitive agreement to acquire Mendota Insurance Company ("Mendota"). Mendota is a wholly owned subsidiary of The St. Paul Travelers Companies, Inc. The transaction includes Mendota's wholly owned subsidiaries, Mendakota Insurance Company and Mendota Insurance Agency, Inc. The transaction is scheduled to be completed following receipt of regulatory approvals. Terms of the transaction were not disclosed. It is anticipated that the purchase price will be funded through internal sources, a portion of which may include Kingsway's existing undrawn credit facilities.
Mendota is the dedicated non-standard automobile insurance operation of St. Paul Travelers.

The company is licensed in 43 states and currently writes business in 20 states through a network of about 6,000 independent agency locations. Mendota is headquartered in St. Paul, Minnesota and in calendar year 2006 wrote approximately $175 million of non-standard automobile premiums.

"We are extremely pleased with the acquisition of Mendota," said Bill Star, President and Chief Executive Officer of Kingsway. "This transaction is consistent with our strategy to become a dominant player in the non-standard automobile market in the United States as evidenced by this acquisition and our existing subsidiaries devoted to this line of business. Mendota is a well-run organization and we look forward to the company's continued success and contribution post-
closing to the profitability of Kingsway."

About the Company

Kingsway Financial Services Inc. is one of the largest truck insurers and non-standard automobile insurers in North America based on A.M. Best data that we have compiled. Kingsway's primary business is trucking insurance and the insuring of automobile risks for drivers who do not meet the criteria for coverage by standard automobile insurers. The Company currently operates through eleven wholly-owned insurance subsidiaries in Canada and the U.S.. Canadian subsidiaries include Kingsway General Insurance Company, York Fire & Casualty Insurance Company and Jevco Insurance Company. U.S. subsidiaries include Universal Casualty Company, American Service Insurance Company, Southern United Fire Insurance Company, Lincoln General Insurance Company, U.S. Security Insurance Company, American Country Insurance Company, Zephyr Insurance Company and Avalon Risk Management, Inc. The Company also operates reinsurance subsidiaries in Barbados and Bermuda.

Lincoln General Insurance Company, Universal Casualty Insurance Company, American Service Insurance Company, Southern United Fire Insurance Company, Jevco Insurance Company, Kingsway Reinsurance Corporation, Barbados and Kingsway Reinsurance (Bermuda) Ltd. are all rated "A-" (Excellent) by A.M. Best. Kingsway General and York Fire are rated "B++" (Very Good) and American Country and U.S. Security are rated "B+" (Very Good) by A.M. Best. The Company's senior debt is rated investment grade "BBB-"(stable) by Standard and Poor's and A.M. Best and "BBB" (stable) by Dominion Bond Rating Services. The common shares of Kingsway Financial Services Inc. are listed on the Toronto Stock Exchange and the New York Stock Exchange, under the trading symbol "KFS".

From: Kingsway Financial Services (www.kingsway-financial.com)

Contractor Insurance Gets a Bit Less Difficult

By Robert Celaschi
San Francisco Businesss Times

Building contractors and subcontractors renewing their liability insurance are breathing a little easier this year. Rates are coming down, and availability is going up.

After the triple-digit increases of only a few years ago, it's a welcome change.

But the situation is still not back to where it was before rates started rising to astronomical heights.

"Yes, it has stabilized, but at a very high price," said Michael Strech, vice president of member services for the California Building Industry Association.

"We have seen some relief, starting at about 18 months ago. There have been carriers that have returned to the California market, which is good news because it means competitive premiums," he said.

"But I would say it has not returned to the traditional market of 10 years ago or eight years ago. Carriers are very cautious and are employing what I call 'protective underwriting.' "

What makes the current market look good by comparison is the market of 2003. That was the year contractors and subcontractors saw rate increases of 300 percent, 400 percent and even 500 percent, on the heels of slightly lower increases in the previous couple of years.
At the time, several culprits were often cited, such as aggressive lawsuits over mold and construction defects, plus a lower level of tolerance among homebuyers as prices for new homes shot past the $300,000 mark.

In the wake of the Sept. 11, 2001, terrorist attacks, insurance companies found it tougher to get reinsurance coverage for themselves.

Subcontractors can't get jobs without liability coverage, so those carriers who remained in the California market could charge plenty more.

It takes a lot of cutting to chop rates down from such heights.

"We just renewed at the first of the year, and (rates) were 16 percent less than they were last year," said Robert Lindsey, general manager of Signature Drywall and past president of the Northern California chapter of California Professional Association of Specialty Contractors.

Signature is still getting less coverage than it had a few years ago, it has a higher deductible, and a change in the structure of the policy exposes Signature to paying it out sooner. Technically it's not even a deductible anymore; it's a "self-insured retention." The difference, said Lindsey, is that previously a company didn't have to cough up the deductible until the end of a claims process. A SIR has to be paid at the start.

"With my old insurance policy, I used to have a $5,000 deductible. Now I have a $25,000 SIR," he said. "Some of the larger framers, their SIR is $150,000. In essence, they are self-insured."
While that setup might work when the economy is good and contractors have a lot of business, during a slump it could prove difficult to pay the SIR on a claim from a policy written during the prior boom.

"I think it is going to drive a lot of these people out of business," Lindsey said of his fellow contractors.

From: San Fransisco Business Times (www.bizjournals.com)

Future Unsure for FL Insurance Industry

By Rachel Witkowski
Jacksonville Business Journal

The property insurance reform legislation that state legislators just passed could help Florida homeowners now, but predicting its long-term effects on policyholders and insurance companies is about as easy as forecasting storms during hurricane season.

Homeowners could save an average of 22 percent in premiums this year through changes to policies and incentives for insurance companies, including for the state-run Citizens Property Insurance Corp. But many representatives and senators are concerned that the fight to bring stability to the property insurance market is not over.

Several legislators wanted to give more attention to small businesses and tightening
requirements for "pup" companies, wholly owned subsidiaries of insurance companies, during the regular session beginning March 6.

Others were concerned about property insurance relief for nursing homes, condominium associations and manufactured homes.

The bill provides guidelines for local governments, hospital groups and alli-ances of community associations to borrow state funds for self-insurance. Some representatives worry that not all associations have enough assets to self-insure.

The bill also requires insurers to give policyholders the option to exclude wind storm coverage under certain documentation approval. But representatives said they are still working with the banking industry on windstorm coverage requirements for mortgages and liens.

Sen. Jim King, R-Jacksonville, said though there are some items that need to be addressed, the bill will be very positive for Northeast Florida.

Jacksonville will bene-fit from a requirement in which insurance companies cannot use a home's age as the reason for rejecting an applicant, said King, whose insurance policy was recently canceled. The bill also allows homeowners to insure their second home, which is important for many area residents.

Restructuring Citizens' business operations and rate methodology was one of the main changes in the bill and will bring up to an 18.7 percent average saving for policyholders in Citizens, legislators said.

"I will vote for this bill because it repeals the other bill [S.B. 1980]," said Rep. Susan Bucher, D-West Palm Beach. "But it doesn't do very much more than that."

Senate Bill 1980, signed by former Gov. Jeb Bush in May 2006, included increasing Citizens' rates by March 1. Citizens, the largest insurer in Florida, would have increased rates by an average of 55.8 percent for homeowners and 615 percent for commercial policyholders. The new bill eliminates the March 1 increases and rolls back the Jan. 1 increase of a statewide average of about 22 percent.

The new bill was awaiting Gov. Charlie Crist's signature at press time. If he were to sign it, Citizens expects to lose $350 million in premiums in 2007, said Rocky Scott, a spokesman for the insurer.

Jacksonville homeowners who have windstorm policies with Citizens had a 40 percent increase Jan. 1 and would have had an additional 118.2 percent hike on March 1. Under Bill 1980, Citizens was to set rates based on what it would cost to purchase reinsurance in the private market for high-risk accounts at a probable maximum loss in a one-in-70-year hurricane and its commercial lines at a one-in-100-year storm for 2007. The new bill eliminates that requirement and the requirement for Citizens' rates to be no lower than those of the 20 largest private insurers.

Rates would be based on actuarially sound rates approved by regulators on an annual basis beginning Jan. 1, 2008.

All homeowners pay a 2 percent Citizens assessment for the 2004 and 2005 hurricane season damages and the assessment should decrease to 1.5 percent June 1, depending on the Office of Insurance Regulation's approval.

Scott said Citizens has not yet deter-mined how much will be paid back to policyholders whose renewal dates came on or after Jan. 1. Commercial account policyholders will pay less, but the amount depends on how much extra reinsurance is available through the Florida Hurricane Catastrophe Fund changes in the new bill.

Two temporary insurance coverage options were set up within the Cat Fund. Both programs offer state reinsurance because of the private market reinsurance crisis last year. The lack of affordable and available reinsurance in 2006 was part of the reason for higher premiums.
One program increases the Cat Fund's claims-paying capacity up to $12 billion and allows the state to increase it by an additional $4 billion during the next three hurricane seasons.

The second program is to help insurance companies seek state-provided relief based on industry retention levels of $3 billion, $4 billion or $5 billion for the 2007, 2008 and 2009 hurricane seasons.

The Insurance Capital Build-up Incentive Program that was established last year will be extended through May 31, 2008. It provides up to an additional $10 million in reimbursement for insurers who met approval in 2006 or 2007. Premium charges must be 50 percent of the additional reimbursement and the insurer must retain 30 percent of its surplus as of Dec. 31.
Some insurers are wondering how to set rates, said Jeff Grady, president and CEO of the Florida Association of Insurance Agents. "A lot of companies are scratching their heads right now wondering how they're going to insure in Florida."

Though lowering rates is going to improve the situation, Grady said, insurance companies worry about competing with Citizens and a requirement that makes automobile insurers now write homeowners policies if they do so in other states.

"They're rearranging deck chairs on the Titanic," he said. "There's a large liability looming out there someday."

From: Jacksonville Business Journal (www.bizjournals.com)

AIG Looks to Acquire Outstanding Shares of Auto Insurer 21st Century

American International Group, Inc. (AIG) has submitted a letter to the board of directors of 21st Century Insurance Group proposing to acquire the outstanding 38.1 percent publicly held shares of 21st Century for $19.75 per share in cash.

AIG and its subsidiaries own approximately 61.9 percent of the outstanding shares of 21st Century. The aggregate cash consideration payable would be approximately $690 million. Following the transaction, 21st Century would become a wholly owned subsidiary of AIG.

Founded in 1958, 21st Century is a direct-to-consumer provider of personal auto insurance. With $1.4 billion of revenue in 2005, the company insures 1.5 million vehicles in 17 states (Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Minnesota, Missouri, Nevada, New Jersey, Ohio, Oregon, Pennsylvania, Texas, Washington and Wisconsin).

The proposed per share price represents a 19.0 percent premium to yesterday's closing price and a 25.5 percent premium to the average closing price during the last 12 months. The proposed per share price also represents a multiple of 19.6x the consensus estimates of 21st Century's 2007 earnings per share (based on a current First Call estimate of $1.01 per share).

"Our proposal represents an excellent opportunity for 21st Century's shareholders to monetize their investment at a full and fair value for their shares. For AIG, this is an opportunity to make a substantial additional investment in a business we know well," said Martin J. Sullivan, president and chief executive officer of AIG.

AIG contemplates that the transaction would be implemented through a merger agreement which would be negotiated and approved by a special committee comprised of directors of 21st Century who are independent of AIG. This proposal is subject to AIG's satisfactory completion of due diligence and satisfaction of regulatory requirements.

AIG has advised 21st Century that AIG's sole interest is in acquiring the remaining shares of 21st Century held by the public shareholders and that it has no interest in a disposition of its controlling equity stake in 21st Century.

Source: American International Group, Inc. (www.aig.com)

From: Insurance JOurnal (www.insurancejournal.com)

Fla. Gov. Crist Signs Property Insurance Bill

Three days after a Florida special legislative session on insurance rates for homeowners, Gov. Charlie Crist signed legislation that promises to provide insurance reform, including rate reductions and an expansion of Citizens Property Insurance Corp.'s offerings.

The bill also includes provisions that require insurers to pay claims within 90 days and disallow the dropping of policyholders during hurricane season.

"Today, we have a message for the people of Florida: 'Help is on the way!' We have heard the calls for help from Floridians suffering from high insurance rates," said Crist. "With this legislation, the powerless have become the powerful, and the credit goes to the people of Florida for letting their voices be heard."

"This legislation is an important step in the right direction for Florida's homeowners," said Lt. Governor Jeff Kottkamp. "Thanks to Governor Crist's tireless leadership on this issue, property insurance is more affordable for Floridians."

Crist praised House Speaker Marco Rubio and Senate President Ken Pruitt, as well as Senate Minority Leader Steve Geller and House Minority Leader Dan Gelber, for the bipartisan partnership that brought about the legislation.

In summary, House Bill 1A now signed into law provides the following changes to Florida's insurance law:

The bill expands the Florida Hurricane Catastrophe Fund that allows insurers to purchase less expensive reinsurance and pass those savings on to consumers.

Allows Citizens Property Insurance Corp. to compete with private insurers. The bill freezes rates, repeals all 2007 rate increases and provides refunds for consumers who have already paid those increases

Prevents insurance companies from raising rates without state approval, from dropping policyholders during hurricane season and from delaying payment of claims. Insurers are required to allow coverage options and installment payments for premiums. The Insurance Consumer Advocate is to provide a consumer rating for each insurance company for Floridians' consideration when choosing an insurance company.

Eliminates regional exemptions to the Uniform Building Code, with the goal of reducing the number of buildings damaged or destroyed by storms, and requires insurers to take into account hardening of homes when establishing rates.

Provides the first step in eliminating a practice where insurance companies can sell only automobile insurance and notproperty insurance in the state.

Source: Office of Florida Gov. Charlie Crist (www.myflorida.com)

From: Claims Guides (www.claimsguides.com)

Ohio Nationwide Insurance Members' Data Taken in Theft from Vendor

Computer records containing medical claim information, health data and Social Security numbers of 28,279 Nationwide insurance customers were stolen from the office of a vendor in Massachusetts, the company said.

A lockbox that contained computer backup tapes was taken during a break-in Oct. 26 at Concentra Preferred Systems in Weymouth, Mass., Nationwide Mutual Insurance Co. said Tuesday.

A break-in of Concentra's office in Dayton happened the same day, with someone stealing a lockbox with backup tapes of medical claim data of about 130,000 Aetna Inc. health insurance members, Aetna said. Hartford, Conn.-based Aetna reported that break-in last month.

A message seeking comment on the thefts was left Wednesday at Naperville, Ill.-based Concentra.

When Aetna reported the break-in at Concentra, the vendor said accessing information from the backup tapes would require commercial equipment and special software packages. The company said the backup tapes could not be used on a standard personal computer.

Cash, DVD players and other items also were stolen in Dayton, making it unlikely the culprits were trying to obtain information needed to commit identity theft, authorities said.

Columbus-based Nationwide, informed of the theft two weeks after it happened, mailed letters last week to customers, most of whom live in central Ohio. The company delayed customer notification while it determined the risk of identity theft, which it believes is low, spokesman Mike Switzer said.

Nationwide said it would offer affected customers a free year of credit monitoring and identity theft insurance. Aetna said last month that it would make a similar offer.

Source: Associated Press (www.ap.org)

From: Claims Guides (www.claimsguides.com)

Mass. Auto Insurance Fraud Crackdown Paying Off for Drivers

High-profile crackdowns on auto insurance fraud have resulted in dramatic savings for drivers in some Massachusetts communities.

The statewide average premium is scheduled to drop by nearly 12 percent on April 1, but drivers in some communities where antifraud task forces have been operating will see even greater savings, with premiums falling 24 percent in Lawrence and more than 15 percent in some Boston neighborhoods.

Drivers in Lawrence, the first Massachusetts community to target insurance fraud in 2003 following a case in which a grandmother died in what police called a staged accident, will see the average annual premium drop to $1,379 from $1,815.

In Boston's Dorchester section, drivers will see the average premium fall to $1,670 from $2,033, a reduction of almost 18 percent.

The new rates apply to what insurance companies call experienced drivers, who represent the most common category of insured driver.

The industry's calculations are based on a driver with six or more years of experience, a vehicle that is a couple of years old, an average driving record, and comprehensive and collision coverage with a deductible of $500.

"We've said that if we could take fraud out of the system, rates would come down,'' said Daniel Johnston, president of the Automobile Insurers Bureau of Massachusetts. "Now we finally have proof.''

The antifraud campaign has led to charges against or the arrest of 528 people, including lawyers and chiropractors, Johnston said.

Reduced fraud has also led to a reduction in claims filed with insurers, which allows regulators to cut premiums.

In communities where fraud is less of a problem, and where the average premiums are lower, the percentage reduction coming on April 1 is also less. For example, experienced drivers in Newton will see their average premium drop 8.6 percent.

"This is exactly how the system should work, and we can lower premiums even more in the future if we apply a similar approach to reducing accidents,'' said Stephen D'Amato, a consultant to the Center for Insurance Research in Cambridge.

Massachusetts is the only state where auto insurance rates are set by state regulators.

Some insurers say rates would drop even further if regulation was reduced and companies were allowed to compete for drivers' business.

Source: Associated Press (www.ap.org)

From: Claims Guides (www.claimsguides.com)

Insurer State Farm Agrees To Multimillion Settlement Of Katrina Lawsuits

State Farm Fire & Casualty Co. agreed to settle hundreds of lawsuits by policyholders and reopen thousands of other disputed claims, a deal potentially worth hundreds of millions of homeowners devastated by Hurricane Katrina, a company spokesman said.

State Farm spokesman Phil Supple said Tuesday the company will reopen and review claims for policyholders on Mississippi's Gulf Coast whose claims were denied but haven't sued the company.

That part of the settlement could be worth hundreds of millions of dollars for roughly 35,000 policyholders, a person with direct knowledge of the settlement said.

"The agreement greatly reduces the time, the risk and the expense of defending multiple claims in individual litigation," Supple said.

State Farm's agreement with Mississippi Attorney General Jim Hood and lawyers for more than 600 policyholders resolves a civil lawsuit that Hood filed against the company for refusing to cover damage from Katrina's storm surge nearly 17 months ago.

The money for the settlement will come from State Farm's assets, Supple said.

The accord also resolves Hood's criminal probe of allegations that the Bloomington, Illinois-based insurer fraudulently denied claims after the August 2005 storm.

"I hope that this settlement with State Farm will encourage other insurers to join the settlement, so that we can get a quick flow of capital into our coastal counties at this critical time," Hood said in a statement.

The settlement calls for State Farm to pay about $80 million (euro61.5 million) to 639 policyholders, including U.S. Sen. Trent Lott, whose claims were denied after Katrina, according to the person with knowledge of the settlement. These policyholders _ all represented by a legal team led by high-profile attorney Richard "Dickie" Scruggs _ will receive an average of about $125,000 (euro95,859).

Mississippi's mass settlement _ the first of its kind since Katrina spawned hundreds of lawsuits against State Farm and other major insurers _ does not involve any claims in other states.
U.S. District Judge L.T. Senter Jr. was presented Tuesday with the portion of the agreement that benefits the thousands of policyholders who did not sue State Farm. He hasn't been asked to sign off on the deal with Scruggs' clients.

Supple said State Farm will review claims filed by policyholders in Mississippi's three coastal counties whose claims were denied but did not sue the company. They can have their claims "reevaluated, and, if they choose, have their claims resolved by binding arbitration," he added.
The settlement comes less than two weeks after a federal jury in Gulfport awarded $2.5 million (euro1.9 million) in punitive damages to a couple who sued State Farm for denying their claim after Katrina. A judge took part of that case out of jurors' hands, ruling that State Farm is liable for $223,292 (euro171,236) in storm damage to the Biloxi home of Norman and Genevieve Broussard.

Scruggs, a Gulf Coast native whose own home in Pascagoula was destroyed by Katrina, rose to national prominence when he helped negotiate a multibillion dollar settlement with tobacco companies in the mid-1990s.

In addition, Hood has investigated allegations that State Farm and other insurers have fraudulently denied claims after Katrina. Last week, a grand jury in Pascagoula began hearing testimony on those allegations.

State Farm attorneys say a federal grand jury has been probing similar allegations.

Scruggs and other attorneys have accused State Farm of pressuring its engineers to alter reports and change their conclusions on whether Katrina's wind or water was responsible for damage to homes.

Source: Associated Press (www.ap.org)

From: Insurance News Net (www.insurancenewsnet.com)

Golden Eagle, Colorado Casualty, Take Billing Online

Golden Eagle Insurance and Colorado Casualty, both members of Liberty Mutual Group, are now providing Online Billing Service Centers to allow customers to make online payments and view their account summaries and payment histories.

Golden Eagle's service is for commercial clients, while Colorado Casualty's service is for personal lines customers.

Customers can now use electronic fund transfer (EFT) to make online payments on demand at www.goldeneagle-ins.com/billing or www.coloradocasualty-ins.com/billing.

Golden Eagle Insurance, based in San Diego, offers commercial property and casualty products in California through appointed independent agents. Colorado Casualty, based in Englewood, Colo., offers property and casualty products, including and commercial coverage, through appointed independent agents.

From: Insurance Journal (www.insurancejournal.com)

Producer School Returns to Sacramento in March

The Ultimate Producer School presented by Agency Management Resource Group, starts in March in Sacramento, Calif. The school is especially designed for the recently licensed producer or those transitioning into commercial sales to provide sales training with commercial coverage information. The school meets fof 15 days one week a month for three consecutive months starting in March and ending in May.

The Accredited Adviser in Insurance (AAI) curriculum is delivered and students have the option of testing for five of the nine modules toward the designation. Even if the exams are not passed, students will earn more than 50 continuing education credits toward their license renewal.

As an optional part of the program, students are asked to identify a mentor that will assist in their development within the agency. The mentor is invited to attend a free sales workshop to learn what the student is being taught and how best to develop them to the next level.
Tuition is $3,600 which includes textbooks, exams, CE filing, daily continental breakfast and afternoon snacks. Travel and lodging are not included.

Agency Management Resource Group (AMRG) is an approved provider of continuing education in Arizona, California, Colorado, Connecticut, Georgia, Hawaii, Maryland, Massachusetts, Mississippi, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Washington, Virginia and West Virginia. Other states please inquire.

To register for the school or for more information, please contact Jackie Abeyta, director of marketing and events at 800-601-6711, jackie@agencymanagement.com or www.agencymanagement.com.

From: Insurance Journal (www.insurancejournal.com)

California Mortgage Defaults at 8-year High

The number of mortgage default notices filed against California homeowners jumped last quarter to the highest level in more than eight years, a real estate information service reported.
Lending institutions sent homeowners 37,273 default notices during the October-to-December period. That was up by 36.9 percent from 27,218 the previous quarter, and up 145.3 percent from 15,196 for fourth-quarter 2005, according to DataQuick Information Systems.

Last quarter's foreclosure activity was the highest since 38,053 default notices were recorded statewide in third-quarter 1998. Defaults peaked in first quarter 1996 at 61,541. An average of 33,615 notices of default have been filed quarterly since 1992, when DataQuick's statistics begin.

"Several factors are at play here. The numbers last year and the year before were very low because of strong sales and appreciation. Also, most defaults occur a year or two after the loan was made, so we're in a period where the loan pool is at risk. And then there are those inventive loans that have been made the last few years, where qualifying involves assuming more risk. We're in the midst of an adjusting market right now, and we won't know until spring or summer if this is ominous or not," said Marshall Prentice, DataQuick's president.

Most of the loans that went into default last quarter were originated between January 2005 and February 2006. The median age was 15 months.

On a loan-by-loan basis, mortgages were least likely to go into default in Marin, San Francisco and Santa Clara counties. The likelihood was highest in Merced, Riverside and Tulare counties.

From: Silicon Valley / San Jose Business Journal (www.bizjournals.com)

Unitrin Direct Launches a New, User-Friendly Website

In keeping with its commitment to simplify auto insurance, Unitrin Direct has redesigned UnitrinDirect.com with added features and a streamlined new look to make it even faster and easier for consumers to get an online car insurance quote or examine thecompany's coverage options.

"This is a great resource for people who are looking for affordable auto insurance from a company they can trust but don't want to spend hours doing tedious research," said Unitrin Direct President Scott Carter. "By using our new website, you can find the right coverage at the right price in a matter of minutes."

Among UnitrinDirect.com's many notable features is a convenient "Get A Quote" box on the home page, where, by simply typing in their zip code and answering a few questions, auto insurance shoppers can receive a quote at four popular levels of coverage: minimal, budget, select and elite. From there, all it takes is a few clicks to modify the quote to fit the customer's specific needs.

"Creating a faster quote process was a big part of why we redesigned the website," said Tom Mercer, Unitrin Direct vice president, marketing. "We know people don't want to wait around when they're looking for a car insurance rate. Our objective was to make it as routine as checking e-mail, and we've accomplished that."

Other highlights of the website are the new "Help Center," where customers can get answers to frequently asked questions about their quote, and the "Click to Talk" box, where you can get a return call from a licensed agent with one touch of the mouse.

Along with its emphasis on delivering quicker information to shoppers seeking an online auto insurance quote, Unitrin Direct has also refined the website to better serve customers after they purchase a policy. Now at http://www.UnitrinDirect.com, it's easier and faster than ever to electronically sign policy documents, sign up for automatic bill payment or make online coverage changes.

Since some people still prefer to talk with a licensed agent, UnitrinDirect offers the choice of calling (800) 642-5254 to get an affordable car insurance quote. Existing customers can also choose to manage their policy on the phone directly with an experienced agent.

Staying on the cutting edge of technology is a big part of UnitrinDirect's dedication to offering consumers a low car insurance rate while still providing outstanding coverage and the highest quality of customer support.

Unitrin Direct's goal is to save new customers money on their car insurance. "Our direct business model allows us to streamline the insurance process and reduce overhead," Carter said. "That means we can pass the savings on to customers and still give them first-class service."

Source: Unitrin Direct (www.unitrindirect.com)

From: PR Newswire (www.prnewswire.com)

AIG American General Launches Bilingual Customer Service Call Center Dedicated to Hispanic Individual Life Insurance Policyowners

American General Life Insurance Company (American General Life) and The United States Life Insurance Company in the City of New York (United States Life), member companies of American International Group, Inc. (AIG), have launched a bilingual customer service call center specifically for Hispanic individual life insurance policyowners. Callers who dial the call center’s dedicated toll-free number, 1-800-835-6458, have access to bilingual (Spanish- and English-speaking) customer service representatives, Monday through Friday, 9 a.m. to 6 p.m. (Eastern Time), to answer questions and assist with service requests on in-force individual life insurance – including universal life, term life and whole life – and individual supplemental health insurance policies issued by American General Life and United States Life, which are branded as “AIG American General,” the marketing name for the insurance companies and affiliates of AIG that comprise its domestic life insurance operations.

“The new call center represents just one example of AIG American General’s continued commitment to providing customer care to policyholders,” said Dan Trudan, Executive Vice President of Operations, Independent Distribution, AIG American General.

Callers to the Houston bilingual call center will have access to information on: policy features, coverages and provisions; billing inquiries and changes; value quotes and disbursements; claims and in-force reprojections; and changes in coverages or title.

“AIG American General has a holistic approach to multicultural marketing,” said Rick Niu, Vice President, Corporate Multicultural Marketing, AIG American General. “A core of our approach is policyowner service. The bilingual call center and our other efforts are born out of a strategy to offer a comprehensive and compelling value proposition to the multicultural communities in the U.S. through customer care that benefits policy owners and confirms AIG American General’s commitment to the insurance professionals who serve them.”

For more information on AIG American General’s bilingual call center and other multicultural support, contact multicultural@aigag.com.

Source: AIG (www.aigag.com)

From: Business Wire (www.businesswire.com)

Senate Bill Aims to Repeal 'Real ID' Law

By Lisa Friedman
LA Daily News

Faced with having to pay $500 million for federally mandated driver's licenses aimed at identifying illegal immigrants, California officials are looking to the new Democratic Congress for financial relief.

And they may find it in a Senate bill that essentially would repeal the so-called "Real ID" law, condemning it as an "unrealistic and unfunded burden on state governments."

Introduced by Sens. Daniel Akaka, D-Hawaii, and John Sununu, R-N.H., the bill would eliminate a cascade of federal driver's license standards that Congress passed last year and states must implement by May 2008.

In its place, the senators would set up a process that lets states and the federal government jointly create license standards.

"There is nothing realistic about `Real ID,"' Akaka said in a floor speech before the Senate adjourned last year.

"Real ID" was championed by Rep. David Dreier, R-Glendora, as a means of protecting America from terrorists.

Aimed at preventing states from issuing driver's licenses to undocumented immigrants, it requires states to verify the legal status of all applicants or risk having the state's licenses banned for federal uses like boarding an airplane.

It passed when Rep. James Sensenbrenner, the Wisconsin Republican who formerly chaired the House Judiciary Committee, attached it to an emergency measure granting funding to tsunami victims.

Since then, California and other states have been on a rampage against the measure. According to the National Conference of State Legislatures, Real ID is expected to cost states about $11 billion over the next five years.

So far, Congress has appropriated $40 million.

"The costs associated with it are out of reach for California," state Assembly Speaker Fabian Nunez said during a recent trip to Washington to lobby for federal funding. "My hope is that Congress will roll it back."

Nunez and others estimate the state will have to spend at least $500 million to prepare for an estimated 15 million Californians who will have to get a new license from the Department of Motor Vehicles.

"Every individual who currently has a driver's license will have to come in and re-enroll as if they were a brand-new applicant," said Jeremy Meadows, senior policy director for the National Conference of State Legislatures.

He also noted that because DMV clerks would have to inspect birth certificates and other documents for authenticity, all of the technological innovations developed over the past few years - such as online registration - would be unusable.

"We view this as largely a federal mandate and the federal government needs to at least ante up for the cost of this requirement," Meadows said.

But conservatives and others concerned about illegal immigration called the effort to repeal the law a threat to national security.

"Anything that we do to backpedal on securing the nation against terrorist attacks is a step in the wrong direction," said Rep. Elton Gallegly, R-Thousand Oaks.

"Remember, the Democrats campaigned on implementing all of the 9-11 Commission recommendations immediately. `Real ID' came out of a 9-11 recommendation," added Sensenbrenner spokesman Jeff Lungren.

For Democrats to repeal the bill, he charged, would be "hypocritical and shocking."

"Everyone has a responsibility as it relates to costs," Gallegly said. "We can discuss that as we move through this and find out what the actual costs are."

The Department of Homeland Security has not yet issued required regulations for the standards.

Some activists like Meadows warn that the federal government won't put anything into effect before June, when many state legislatures will already be out of session and unable to set funding levels.

For now, all eyes are on the Department of Homeland Security.

Akaka vowed that he would review the regulations before pursuing action on his bill.
No action has been proposed in the House and for now, California's U.S. senators also remain noncommittal.

In the meantime, California DMV spokesman Mike Marando said the state is not waiting for the possibility of new congressional action.

"We're dealing in California as if it's going to be a go, and we're preparing accordingly," Marando said.

From: LA Daily News (www.dailynews.com)

CA Insurance Commissioner Steve Poizner Takes Next Step in Bringing Low Cost Auto Insurance Program to Tulare County

Looking to help Tulare County's low-income motorists, the state's new Insurance Commissioner Steve Poizner spoke with county residents at the Tulare County Board of Supervisors meeting today to assess the automobile insurance needs of the county.

The Department of Insurance has preliminarily determined that California's Low Cost Automobile Insurance Program should be expanded to include six additional counties: Tulare, Merced, Monterey, Sonoma, Santa Barbara and Ventura. Town meetings were held in Monterey, Sonoma, Santa Barbara and Ventura counties, and residents in those counties have requested the Low Cost Automobile Insurance program be made available. Tuesday, Commissioner Poizner sought the input of local residents as to the need for the program in Tulare and Merced counties. Following Tuesday's meetings, the Commissioner will make a final determination on launching the program in each of the six counties.

The program provides eligible low income, good drivers with state-required liability coverage for under $400 a year. More than 15 percent of Tulare County's drivers are uninsured.

"State law requires that all drivers be insured, but more than 34,000 motorists in Tulare County are traveling the roadways without insurance," said Commissioner Poizner. "This is a crisis. Many Tulare drivers simply cannot afford insurance, but they are placing themselves and fellow residents at risk when they drive. This program may allow them to be on the road safely."

Commissioner Poizner also highlighted the importance of having auto insurance by reminding motorists that without insurance their vehicle registrations can be suspended as part of SB 1500, a law designed to reduce the risk of economic losses sustained as the result of collisions involving uninsured motorists.

Initially begun in 1999 as a pilot program in Los Angeles and San Francisco, the California Low Cost Automobile Insurance Program (CLCA) is currently available in 16 counties. SB 20, (Escutia), expanded the program to Alameda, Fresno, Orange, Riverside, San Bernardino and San Diego counties and authorized the Insurance Commissioner to launch the program throughout the state upon his determination of need in each county. With the further addition of Tulare and five more counties, low cost auto insurance would be available in 22 California counties.

From: California Department of Insurance (www.insurance.ca.gov)

State Farm Settles a Miss. Katrina Lawsuit Before Trial

By Michael Kunzelman
Associated Press

State Farm Fire & Casualty Co. settled out of court last Friday with a Mississippi policyholder whose lawsuit over Hurricane Katrina damage was scheduled to be tried next week in federal court.

State Farm settled with Richard Tejedor of Long Beach only eight days after jurors awarded $2.5 million in punitive damages to a different policyholder ? a couple who sued the Bloomington, Ill.-based insurer for denying their claim after the Aug. 29, 2005, storm.

Terms of the settlement in the Tejedor case will not be disclosed, said State Farm spokesman Fraser Engerman. "We are pleased that we were able to resolve this issue before it went to (trial),'' Engerman said.

Jack Denton, one of Tejedor's attorneys, confirmed that the case has been settled but declined further comment.

Tejedor was one of hundreds of homeowners on Mississippi's Gulf Coast who sued their insurers for refusing to cover billions of dollars in damage from Katrina's storm surge.

Katrina destroyed his home, leaving nothing but a slab. A federal flood insurance policy paid him the maximum $200,000 for the home and $80,000 for its contents. Tejedor, however, said State Farm refused to pay for an additional $263,190 in damage to his home and its contents.
State Farm and other insurers say their homeowner policies cover damage from wind but not from water, and that the policies exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm's rising water.

State Farm invoked that policy language to deny a claim filed by Norman and Genevieve Broussard of Biloxi, whose lawsuit was tried last week in a federal court in Gulfport.
U.S. District Judge L.T. Senter Jr. took part of that case out of jurors' hands, ruling that State Farm is liable for $223,292 in storm damage to the Broussards' home. Jurors awarded the Broussards an additional $2.5 million in punitive damages.

The trial for Tejedor's lawsuit was scheduled to start today. Jan. 22. State Farm attorneys had asked for the trial to be postponed, but Senter refused.

State Farm attorneys argued in court papers that a "barrage of publicity'' about last week's multimillion dollar verdict may have tainted the jury for Tejedor's case. Senter, however, said postponing the trial would needlessly disrupt the court's schedule.

State Farm also is the defendant in the next four Katrina insurance cases set for trial in Gulfport. The first is scheduled to start March 12.

Source: Associated Press (www.ap.org)

From: Insurance Journal (www.insurancejournal.com)

Florida Lawmakers Near Agreement; Vote Expected on Insurance Plan

By Stephen Majors
Associated Press

Florida lawmakers tentatively agreed Saturday on a comprehensive proposal aimed at lowering Floridians' skyrocketing property insurance rates, saying they'd finalize the plan with a vote on the package on Monday.

The proposal hits at high rates for wind coverage in several ways, including making more state backup coverage available to insurance companies at discount prices and calling for a direct rate rollback for the state's largest insurer, state-created Citizens Property Insurance. It was on track to be voted on Monday and sent to Gov. Charlie Crist for his signature.

Lawmakers said making cheaper reinsurance from the state available for private insurance companies would lower rates for customers in the private market, although the amount of savings is still unknown.

"We have a deal,'' said Sen. Steve Geller, D-Cooper City, as he presented the plan to House and Senate negotiators.

Lawmakers increased the amount of reinsurance the state provides, and lowered the cost at which it is available to private insurance companies. They also will force private companies who access the state's cheaper reinsurance pool to pass the savings on to customers. Lawmakers said that will produce rate cuts of at least 20 percent in the private market.

Lawmakers also agreed on proposals to help Citizens customers, although the amount of rate reduction there was also unclear. Lawmakers agreed to waive Citizens from its obligation to pay into the catastrophe fund for an undetermined amount of time and were working out a few other remaining details, said Rep. Dan Gelber, D-Miami Beach.

The catastrophe fund question and the Citizens waiver were the two major stumbling blocks in negotiations up until late Saturday.

Lawmakers agreed earlier that Citizens should get to write other policies along with wind for its most vulnerable coastal customers, potentially reducing premiums.

Citizens, which is the state's largest insurer and covers $407 billion in property, will be able to write multiperil policies in its high-risk accounts along the state's coastline. The thinking is that enabling Citizens to offer a comprehensive policy that includes coverage such as fire would expand Citizens' risk pool and lower its rates.

Now, it gets stuck with wind coverage in the high-risk areas while private companies write the rest of a homeowner's policy.

Citizens spokesman Rocky Scott likened it to "putting all the 16-year-old drivers into one risk pool.''

Lawmakers agreed to the idea of expanding Citizens Saturday, but only under the conditions that the insurer create a business plan that the Legislature would approve. They also stipulated that the plan include a requirement that it produce at least a 10-percent rate reduction.
House members had been opposing the expansion, expressing frustration that the company kept changing the projected rate cuts the legislation might produce.

"We're making policy like we're feeling around in the dark,'' said Rep. Jack Seiler, D-Pompano Beach, on Friday.

Gelber echoed the concerns of other House members Saturday, but backed the idea to let the company expand its coverage.

"This gives the hope of a rate reduction, even though I'm not a fan of how Citizens manages itself,'' Gelber said.

Not letting Citizens write other policies would have meant that its customers likely would have only seen a temporary freeze in their rates at 2006 levels ? an unacceptable outcome to many lawmakers, who emphasized repeatedly that they wanted cuts.

Rep. Ray Sansom, R-Destin, the House's lead negotiator, said Saturday that the Citizens issue was "one of the main reasons we are here.''

Still, even with the ability to write other policies in the high-risk area, Citizens could not tell lawmakers exactly how much it could expect to cut rates. That question depends on how many customers Citizens can attract away from private insurers. If lawmakers eliminate a requirement that Citizens charge rates no lower than large private insurers, Scott said, Citizens can compete in the high-risk areas, gain customers, and then lower rates because the risk is spread more widely.

Enabling Citizens to compete more with private companies gave many lawmakers heartburn, but the pressure to lower rates has trumped other concerns.

"We came up here to reduce rates,'' Seiler said.

Source: Associated Press (www.ap.org)

From: Insurance JOurnal (www.insurancejournal.com)

Mass. Gov. Patrick Derails Romney's High Risk Pool Changes

By David Weber
Associated Press

Massachusetts Gov. Deval Patrick said he will comprehensively review the state auto insurance system after the acting insurance commissioner on Friday suspended rules changes made in the system during the final weeks of the Romney administration.

On Dec. 13, then Insurance Commissioner Julianne Bowler approved a new method for assigning high-risk drivers to automobile insurers that aligned Massachusetts with most other states. The change was opposed by some of Massachusetts' domestic insurers including the largest one but embraced by a coalition of rivals. The decision capped a four-year-long process that was slowed after Webster-based Commerce Insurance Co. filed a court challenge in January 2005 when Bowler initially approved the plan.

On Friday, Acting Insurance Commissioner Joseph G. Murphy suspended the changes made by Bowler, which were to have taken effect in April.

"I have taken this action in order to consider the impact of the Dec. 13, 2006, order and both the short- and long-term implications of those rules on the Massachusetts private passenger automobile market with the least disruption to consumers and the insurance industry,'' Murphy said in a brief statement.

Patrick applauded the move.

"The governor wants the opportunity to take a look not just at this initiative, but at the entire automobile insurance system in Massachusetts,'' Patrick spokesman Kyle Sullivan said. "Next week the governor will be putting together a study group to investigate this issue and provide advice to us within the next 60 days.''

State law requires Murphy to act on the rule suspension within 90 days. A public hearing is set for Feb. 15.

Bowler had said the so-called assigned risk plan would more fairly distribute high-risk drivers among insurers, while also reducing losses and fraud to help keep consumer rates low.
Before Bowler's ruling, Massachusetts assigned agents representing high-risk drivers to insurance companies, and then allowed the companies to assign individual drivers into a pool where losses were shared among carriers in the state's so-called "residual market.''

The Dec. 13 plan included a so-called "clean in three'' provision to remove drivers from the high-risk pool after a three-year period in which an individual maintains continuous insurance coverage and isn't found to be at fault for an accident or traffic violation.

Critics argued the previous system was susceptible to gamesmanship and fraud as drivers moved in and out of the high-risk pool, with some companies ending up with a disproportionate share and others dumping drivers they didn't want to insure into the pool.

Source: Associated Press (www.ap.org)

From: Insurance Journal (www.insurancejournal.com)

AZ Bills Take Disparate Approaches to Border Security

By Mike Sunnucks
Business Journal of Phoenix

An Arizona state lawmaker wants to define border vigilantes as domestic terrorists and have them charged with criminal felony counts if they are caught patrolling the Mexican border with weapons.

The bill, sponsored by state Rep. Kyrsten Sinema, D-Phoenix, is aimed at the Minuteman Civil Defense Corps. The volunteer, civilian group patrols border areas in Arizona and other states hoping to better secure the Mexican border. Sinema and other critics contend the Minutemen are vigilantes and anti-Hispanic.

"The purpose of the legislation is to point out that the Minutemen and other similar vigilante groups, endanger our society and undermine legitimate law enforcement by attempting to take the law into their own hands," said Sinema, who pushed a similar measure last year.

Defenders counter that the Minutemen are looking to supplement official border security efforts and symbolize the frustration in Arizona and other states with illegal immigration.

On the other side of the aisle, a Republican state senator wants to establish a homeland security force to help secure the Mexican border and deal with public safety emergencies. Sen. Jack Harper, R-Surprise/Glendale, has introduced a bill to create a volunteer Homeland Security Force that could be activated by the governor and a state panel. The state force would have similar duties and powers as the state National Guard.

"Public safety is the highest priority of government and I am looking forward to creating the Homeland Security Force," Harper said.

From: Business Journal of Phoenix (www.bizjournals.com)

Farmers to Get Help from Out-of-State Adjusters

California Insurance Commissioner Steve Poizner issued an emergency declaration Monday that will help speed up insurance claims by farmers hard hit by the devastating freeze this month.
The action allows the commissioner's office to help dispatch out-of-state insurance adjusters to assist handling claims by the farmers.

Agriculture officials estimate the state's farmers have lost at least $1 billion in damage -- including $700 million to citrus, avocado and strawberry crops -- from the below-freezing temperatures. About 90 percent of the state's crops are covered by crop insurance, according to representatives of the insurance commissioner.

Gov. Arnold Schwarzenegger proclaimed a state of emergency Jan. 12.

From: Sacramento Business Journal (www.bizjournals.com)

Long-Term Care Insurance Becomes Increasingly Popular

By Joe Ruff
Omaha (NE) World-Herald

People expecting to live longer and foot more of the bill for their retirement needs are turning to long-term care insurance as part of financial planning.

"We certainly can't count on the government to pick up the tab," said Kathy Lee, director of special risks for the Carson Wealth Management Group in Omaha.

A private room in a nursing home can cost about $190 a day, or $70,000 a year in Nebraska, Lee said. And no one knows how many years one stay might last, she said.

"It makes a lot of sense to transfer the risk to the insurance company," Lee said.

Government-funded Medicare covers part of the cost of hospitalization for Americans older than 65 and people with permanent disabilities. But generally it is designed to cover only about three months in a hospital or skilled nursing facility. After that, people must pay for care from their own resources.

Medicaid provides health care and long-term care to people with very low incomes and assets, but it often limits choices of facilities. For example, it will not pay for an assisted living facility, and it will pay only limited benefits for home health care, said Steve Ryan of Grand Island, long-term care specialist for Northwestern Mutual Financial Network in Nebraska.

Long-term care insurance, however, can cover a range of services, including nursing home care, extended care at home, adult day care centers and assisted living facilities.

Many people obtain long-term care insurance to protect their savings and investments and to preserve some freedom of choice about their care, said Leslie Johnson, who specializes in long-term care insurance as president and owner of LJINS in Fremont, Neb.

AARP estimates that about 7 million people nationwide have long-term care insurance. Benefits usually are triggered when a person cannot perform at least two key daily activities, such as dressing or bathing, or is cognitively impaired by Alzheimer's or another form of dementia.

The costs and terms of long-term care insurance vary greatly, partly based on a person's age. A 55-year-old might pay $3,000 a year in premiums, while a 66-year-old might pay more than $5,000.

Other factors in pricing include the benefit amount, such as $180 a day or $200 a day. Some coverage kicks in at about 40 days after a triggering event, while other policies start at 90 days, and some coverage provides enough money to cover about three years of care, while others are designed to cover six years, 10 years or a lifetime, experts said.

People should make long-term care insurance part of their overall financial planning, taking into account what they want out of a policy and how it fits into other parts of a portfolio, said Clark Bellin of Omaha-based wealth management firm Mundy and Associates.

"A lot of people decide it's black and white: 'I have nothing or I have the Cadillac,'" Bellin said. "There are degrees in between."

Couples often get discounts on premiums because they tend to enter skilled care facilities later in life and need them less frequently, Lee said.

People can pay higher premiums for 10 years on some policies that will be good for their lifetimes, with cost-of-living adjustments built in, experts said. Some people buy policies that require premium payments until age 65, while others pay premiums annually regardless of their age.

It is important to understand the policy you are purchasing and to buy it from a long-standing, successful company, experts said.

Some companies entered the business in the 1990s, charged inadequate premiums and failed, Lee said. Larger firms bought out many of those companies, but the premiums people paid often increased, Lee said.

There are no hard rules for when people should consider buying long-term health insurance, Lee and others said. People often are in their 40s when they begin considering purchasing policies, experts said. Generally, they said, people whose salaries or savings are enough to afford the premiums should seriously consider it, experts said.

Who needs it, and who doesn't?

"If you earn $20,000 and you have $300,000 to $400,000 in savings, that is at risk" without long-term care insurance, Johnson said.

People who probably don't need long-term care insurance have low income and few assets so Medicaid will cover their nursing home care.

Even people with millions of dollars who could afford to pay for their own long-term care should buy the insurance, Lee said, because their fortune would be protected and could be used for other things, such as an inheritance or to benefit charity.

Source: Omaha World-Herald (www.omaha.com)

From: Insurance News Net (www.insurancenewsnet.com)

Bank Life Insurance Sales Continue Steady Growth: Kehrer-LIMRA

The typical bank in the latest Kehrer-LIMRA Bank Life Insurance Sales Study increased its new life sales revenue by an estimated 15 percent last year, on the heels of a similar increase the previous year.

“Banks are making steady progress in tapping their customer base for life sales, even though customer penetration remains low,” said Kenneth Kehrer, Ph.D., co-director of the study. ”The typical bank selling life insurance produced only $1.33 in new life sales commissions per customer household of the bank.”

At the same time, the profit margin for banks’ life insurance sales programs was 42 percent on average, which compares favorably with other uses of bank sales staff. For example, the profit margin in the typical bank investment sales program was 24 percent last year.

“While banks seem to produce high profit margins from life insurance relative to other investment product sales, overall revenue penetration remains disproportionately low,” said Chris Bergeon, vice president, Great-West Life, a co-sponsor of the study. “In order to achieve more meaningful revenues and customer penetration levels, banks should work with carriers to increase their sales staff’s life insurance participation and productivity.”

While banks have a variety of ways to sell life insurance at their disposal (including financial consultants, licensed platform bankers, direct response methods, retail agents, advanced agents and referrals to outside agencies in the bank), most focus on only one or two.

“Fifty-three percent of banks reported using only one method of distribution for their life insurance programs, and 27 percent of banks use more than two methods, up from 20 percent in 2004,” said Joan H. Cleveland, senior vice president, Business Development, Individual Life Division of co-sponsor Prudential Financial. “But this research shows that the typical bank could increase its customer penetration by 135 percent just by selling life insurance through four compatible distribution channels – direct response, platform bankers, financial consultants and advanced agents – even if they achieved only average penetration from each method.”

"By banks utilizing multiple distribution channels, they are in fact giving their customers multiple access points and allowing consumers to buy coverage when and how they want. That indeed will increase customer penetration."

From: Insurance News Net (www.insurancenewsnet.com)

Insurance Industry Under More Scrutiny

U.S. District Court Judge L.T. Senter Jr.'s opinion that State Farm Fire & Casualty Co. failed to investigate a policyholder's claim has sparked another congressional inquiry into the insurance industry's response to Hurricane Katrina.

U.S. Reps. Gene Taylor and Bennie Thompson, D-Miss., have supplied ammunition for hearings planned by U.S. Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee.

Taylor's ultimate goals are an all-perils policy that would eliminate the need for separate coverage for wind and water damage, removal of the insurance industry's exemption from anti-trust laws and federal rather than state oversight of the industry.

Spokesmen for industry-sponsored organizations maintain insurers have paid what is owed under their policies and did not collect premiums to cover damage from Katrina's unprecedented surge.

Joseph Annotti, a spokesman for the lobbying group Property and Casualty Insurers of America, said the industry handled more than 90 percent of claims promptly and fairly.
The inquiry is not unexpected, he said, given that both Taylor and Republican Sen. Trent Lott have sued State Farm Fire and Casualty Co. for denying their claims. Both lost their waterfront homes, Taylor's in Bay St. Louis, Lott's in Pascagoula.

But they've also heard insurance horror stories from thousands of constituents. In fact, Taylor is collecting such stories for the hearings.

At issue is whether insurance companies took advantage of Katrina's massive surge, writing off what could have been wind damage their policies covered to the National Flood Insurance Program. Property owners without flood insurance, along with many who relied on their homeowner's policies to help cover hurricane losses, have been left without money to rebuild.
Senter ruled last week that State Farm failed to prove its water exclusion applied to the slab Katrina left on the property of Biloxians Norman and Genevieve Broussard. State Farm attorneys conceded during the trial that wind could have damaged the roof before the surge arrived.

Even so, State Farm denied the homeowner's claim, leading a jury to award the Biloxi policyholders $2.5 million in punitive damages after Senter's ruling. State Farm representatives have said the decision might be appealed.

Taylor has forwarded detailed allegations against insurers to Frank, whose Subcommittee on Oversight and Investigations is expected to explore the issues. Frank's communications director, Steven W. Adamske, said the subcommittee will hold hearings, but hesitated to call the proceedings an investigation.

"The goal is to make sure that the insurance system is working as it was intended and that people are able to rebuild their lives," Adamske said Thursday.

Taylor also asked that Frank hold hearings on "excessive premiums increases, market withdrawals and other actions to force states to make concessions or to assume more coastal risks."

The Homeland Security Department also has been directed to investigate whether insurance companies, in adjusting flood claims for the government, improperly wrote off Katrina damage to the Flood Insurance Program. Thompson chairs the House Homeland Security Committee.

Source: The (Biloxi, MS) Sun Herald (www.sunherald.com)

From: Insurance News Net (www.insurancenewsnet.com)

Insurance Industry Under More Scrutiny

U.S. District Court Judge L.T. Senter Jr.'s opinion that State Farm Fire & Casualty Co. failed to investigate a policyholder's claim has sparked another congressional inquiry into the insurance industry's response to Hurricane Katrina.

U.S. Reps. Gene Taylor and Bennie Thompson, D-Miss., have supplied ammunition for hearings planned by U.S. Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee.

Taylor's ultimate goals are an all-perils policy that would eliminate the need for separate coverage for wind and water damage, removal of the insurance industry's exemption from anti-trust laws and federal rather than state oversight of the industry.

Spokesmen for industry-sponsored organizations maintain insurers have paid what is owed under their policies and did not collect premiums to cover damage from Katrina's unprecedented surge.

Joseph Annotti, a spokesman for the lobbying group Property and Casualty Insurers of America, said the industry handled more than 90 percent of claims promptly and fairly.
The inquiry is not unexpected, he said, given that both Taylor and Republican Sen. Trent Lott have sued State Farm Fire and Casualty Co. for denying their claims. Both lost their waterfront homes, Taylor's in Bay St. Louis, Lott's in Pascagoula.

But they've also heard insurance horror stories from thousands of constituents. In fact, Taylor is collecting such stories for the hearings.

At issue is whether insurance companies took advantage of Katrina's massive surge, writing off what could have been wind damage their policies covered to the National Flood Insurance Program. Property owners without flood insurance, along with many who relied on their homeowner's policies to help cover hurricane losses, have been left without money to rebuild.
Senter ruled last week that State Farm failed to prove its water exclusion applied to the slab Katrina left on the property of Biloxians Norman and Genevieve Broussard. State Farm attorneys conceded during the trial that wind could have damaged the roof before the surge arrived.

Even so, State Farm denied the homeowner's claim, leading a jury to award the Biloxi policyholders $2.5 million in punitive damages after Senter's ruling. State Farm representatives have said the decision might be appealed.

Taylor has forwarded detailed allegations against insurers to Frank, whose Subcommittee on Oversight and Investigations is expected to explore the issues. Frank's communications director, Steven W. Adamske, said the subcommittee will hold hearings, but hesitated to call the proceedings an investigation.

"The goal is to make sure that the insurance system is working as it was intended and that people are able to rebuild their lives," Adamske said Thursday.

Taylor also asked that Frank hold hearings on "excessive premiums increases, market withdrawals and other actions to force states to make concessions or to assume more coastal risks."

The Homeland Security Department also has been directed to investigate whether insurance companies, in adjusting flood claims for the government, improperly wrote off Katrina damage to the Flood Insurance Program. Thompson chairs the House Homeland Security Committee.

Source: The (Biloxi, MS) Sun Herald (www.sunherald.com)

From: Insurance News Net (www.insurancenewsnet.com)

Nationwide Cuts Coverage Along Coast: Thousands of Texas Homeowners Affected

By Denise Trowbridge
The Columbus (Ohio) Dispatch

Nationwide is paring back on insurance policies in coastal areas again.

This new round of cuts will affect homeowners along the Texas Gulf Coast starting in May.
Nationwide no longer will cover wind or hail damage for 1,020 customers in counties bordering the Gulf of Mexico, and won't renew about 800 policies on barrier islands and within half a mile of the Gulf of Mexico.

Another 50,000 homeowners, most in the Houston area, will see their set-dollar-amount policy deductibles switched to a 2 percent storm deductible. That means homeowners will have to pay the equivalent of 2 percent of the homes' insured value for any damages before their insurer will pay.

Nationwide was Texas' fourth-largest homeowners insurer in 2005, with 168,086 homeowners policies in effect.

In a statement, the company said it has an obligation "to responsibly manage our coastal exposure," and that changes to Texas policies will "provide the long-term stability" to customers in Texas and across the country.

Spokesman Charley Gillespie said Nationwide will help some of its policyholders seek coverage from the Texas Windstorm Insurance Association, the state's insurer of last resort.

Alterations to Texas policies are the latest in a series of moves Nationwide has made since the 2005 hurricane season to reduce its exposure to catastrophic storms.

The company stopped writing new homeowners-insurance policies in Florida in 2005, and didn't renew about 25,000 homeowners-insurance policies and 4,800 mobile-home policies.

Nationwide isn't the only insurer to protect itself from financial losses along the coast.

"Insurers are re-evaluating their risks in coastal areas, where the potential for disasters have increased," said Mary Bonelli, vice president of public information with the Ohio Insurance Institute.

They are "looking for ways to develop new products to address the risk," such as increasing deductibles and cutting back on wind and hail coverage, she said.

Large insurers, including Allstate and State Farm, have raised rates, instituted larger storm deductibles and cut back on coverage in coastal areas from Texas to Maine.

Source: Columbus (Ohio) Dispatch (www.dispatch.com)

From: Insurance News Net (www.insurancenewsnet.com)

Billions of Dollars, Millions of Lawsuits May Hinge on Supreme Court Insurance-Scoring Decision

By R.J. Lehmann
BestWire News Service

The insurance industry could face billions in statutory fines and lawsuits from tens of millions of policyholders if a federal appellate court's rulings in credit-based insurance scoring cases are allowed to stand, attorneys for two major automobile insurers told the U.S. Supreme Court.

The court heard consolidated arguments of complaints against units of Geico and Safeco Insurance Cos., with both cases on appeal from the 9th U.S. Circuit Court of Appeals in San Francisco. The Bush Administration weighed in for the insurers, with Assistant U.S. Solicitor General Patricia Millett arguing before the court to reverse the 9th Circuit's decision in the Geico case and to vacate its ruling in the Safeco case.

At issue in both cases is whether the insurers "willfully" violated the federal Fair Credit Reporting Act and whether the appellate court's interpretation of reporting duties imposed by the law was overly broad. Under the FCRA -- originally enacted in 1970 and most recently reauthorized with passage of the Fair and Accurate Credit Transaction Act in November 2003 -- businesses must provide an "adverse action notice" in any case where a review of a consumer's credit report negatively impacts the quoted price for goods or services.

The 9th Circuit held the law compels insurers to notify policyholders or prospective policyholders any time they consider an individual's credit score and do not ultimately quote the company's best possible rate to that individual. The court further accused the insurers of making an "implausible and indefensible" interpretation of the law that amounted to "willful" violation, thus opening the door to punitive damages in private civil suits and triggering a provision that calls for Federal Trade Commission fines of $1,000 for each violation.

The insurers argued they could not have willfully violated the law's reporting requirements because the law itself is ambiguous, which they contended was proven by the fact that the 9th Circuit and the lower U.S. District Court came to opposite conclusions on the same question.

"Congress didn't provide the benchmarks that you have to use for comparison to determine whether there has been an increase in a charge or whether there has been an adverse action based on the consumer report," attorney Maureen E. Mahoney argued on behalf of Geico and Safeco. "You need benchmarks to answer those questions, and there aren't any regulations and there were no cases."

But the policyholders contended, in a civil law context, a "willful" violation refers to one in which the parties showed "reckless disregard" for whether they may have been violating the law.

Attorney Scott A. Shorr pointed the court to a "guidance" letter provided by the FTC that advised insurers to issue adverse action notices in any instance where credit history may have played some role in the rates or terms quoted to a policyholder, and said the law's clear intent was to give consumers every opportunity to check whether their credit reports were accurate.

"It's a system of checks and balances, and unless you give this consumer the opportunity to check that they are, in fact, using the correct information -- it wasn't mistaken, it wasn't driven down by identity theft -- you can continue to charge people more based on inaccurate information," Schorr said.

Several members of the court questioned the policyholders' and 9th Circuit's definition of an "increase" in rates, noting it would apply even where the rate was the first ever quoted to the policyholder or where a decrease in premiums was granted that was not as large as it might have been. Chief Justice John Roberts also wondered why the law should use the "best possible" rate as a standard, rather than the rate the average consumer paid, while Associate Justice Stephen Breyer suggested the appellate court's standard would require an adverse action notice to any consumer whose credit information was considered.

"There will be tens of millions of notices going out, and they'll have the same effect on the public that these privacy notices have today," Breyer said. "We get them every day, dozens of them, and they go right in the wastebasket, because they will become meaningless. Because to an average person, that notice will not mean that he better look at his credit report. It will mean: throw it in the wastebasket."

Mahoney told the court Safeco estimates it would have to notify 80% of its customers if the 9th Circuit's standard were upheld, and Geico could have to notify all but the 10% of applicants who qualify for the company's top credit tier. According to an amicus brief filed by the American Insurance Association, since the beginning of 2001, more than 150 million new personal lines policies have been written, and adverse action violations could be found in as many as half of those policies under the 9th Circuit's standard.

In Geico vs. Edo, policyholder Ajene Edo protested that the insurer did not properly disclose it had used his credit information in deciding to issue him an auto policy through its standard-rate Geico Indemnity unit, rather than a lower-rate, "preferred" policy through Geico General. Geico argued it owed no duty to issue an adverse action notice to Edo, as it would have offered the same policy at the same price even if his credit information played no role in the underwriting decision.

In Safeco vs. Burr, Safeco unit American States Insurance Co. used the InsurQuest underwriting platform to place an auto policy for Charles Burr, using a formula that included his credit information. Safeco contended that, while Burr's credit score contributed to his being placed in a low tier, his premium would not have been any lower even if he had the most favorable credit score.

Source: A.M. Best Company (www.ambest.com)

From: Insurance News Net (www.insurancenewsnet.com)

Governor's Health Care Puzzle Has Risky Pieces

By Daniel Weintraub
Oakland Tribune

Gov. Arnold Schwarzenegger's plan for universal health insurance rests on a risky idea that might be difficult to explain to the average person: He wants to require every Californian to have health insurance.

In an age when people seem to expect more and more from government, Schwarzenegger is telling them that solving this problem begins at home. His proposal for an "individual mandate"
stresses personal responsibility as the first step toward creating a culture where everyone is expected to have insurance.

But most people would already have health insurance if they could afford it. So how is requiring them to get it going to change anything?

Schwarzenegger believes that the state's insurance market is becoming increasingly dysfunctional. As costs rise and more employers drop coverage for their workers, more people are searching for plans on their own. They are joined by small business owners and entrepreneurs who don't have a big employer to do their insurance shopping for them.
At the same time, insurers are becoming more adept at reducing their own risk by winnowing their customer pool down to only the healthiest people.

The result: Insurance is harder to find, and more expensive than ever.

The government could try to solve this problem by taking over the entire industry and creating a "single-payer" system. The state would collect taxes from everyone and either provide health care directly or contract with private doctors and hospitals to provide it. Schwarzenegger opposes that approach. He believes it would limit choice and innovation while eventually forcing rationing and long waiting times for care.

The most realistic alternative is the individual mandate. Californians are already required to insure themselves for liability in automobile accidents. Banks require most homeowners to insure against fire. So requiring people to carry health insurance is not a huge leap in logic.
An individual mandate broadens the insurance pool to include everybody, sick and healthy. The insured would no longer be charged more to cover the costs of caring for the uninsured and insurance companies would have millions more people over whom to spread their risk.

But individuals can't be required to buy a product that is difficult if not impossible to acquire. So Schwarzenegger has proposed insurance reforms and subsidies to make coverage more accessible and affordable. The reforms would require insurers to cover everyone who applies, without regard to their health history. That would broaden access but wouldn't make insurance any more affordable. To address that, Schwarzenegger is proposing subsidies for low-income people.

The poorest would be eligible for Medi-Cal, the state's fully subsidized system for the poor. Children in families earning up to about $60,000 a year would be eligible for coverage under the existing Healthy Families program.

And adults earning up to about $50,000 a year for a family of four would be able to buy subsidized coverage through a state-run pool. A comprehensive set of benefits would be available on a sliding scale. A family with an income just above the poverty level, about $20,000 a year, would pay about $50 a month. A family making $50,000 would pay up to $250 a month.

People with incomes higher than that would be able to buy their coverage through the pool, but not be eligible for subsidies. To satisfy the state requirement, they could buy a policy designed only to protect them against financial ruin in the case of a catastrophic illness or injury.

The subsidies in the governor's plan would be financed by taxes on the revenues of all doctors and hospitals, and a 4 percent payroll tax on employers of 10 or more who did not provide insurance to workers.

One major unknown is how many employers would quit providing coverage to their workers and pay the tax instead. If many did that, it would create a huge group of individuals buying through the state pool.

That wouldn't necessarily be a bad thing. Health insurance and the economy would both be more stable if employers stopped being the middlemen in health care. The individual mandate is going to be a tough sell for the governor. Skeptics on the right see it as big government. On the left, they see it as a way to shift the burden from employers to workers. But without it, Schwarzenegger's plan falls apart. He can't compromise on that point and still pass a law that promises universal coverage.

Source: Oakland Tribune (www.oaklandtribune.com)

From: Insurance News Net (www.insurancenewsnet.com)

California Proposal May Face Legal Challenge

Some benefit experts question whether aspects of the California plan are legal.

In particular, they say challenges may arise over one of the foundations of Gov. Arnold Schwarzenegger's plan-the imposition of a 4% assessment on employers that do not offer health insurance plans.

Such assessments, benefit legal experts say, may run afoul of the federal Employee Retirement Income Security Act. The act, which pre-empts state rules and laws that relate to employee benefit plans, could void Gov. Schwarzenegger's proposed requirement-at least as it applies to self-funded health care plans.

Health insurance plans offered by commercial insurers are not covered by ERISA pre-emption.
In questioning whether California's plan would survive a legal challenge, some experts point to a somewhat similar Maryland law that was struck down last year by a federal judge who said it was pre-empted by ERISA.

The Maryland law required any employer with at least 10,000 employees in the state that did not spend an amount equal to at least 8% of payroll on health insurance to contribute the difference to a state fund that provides coverage to the low-income uninsured.

The way the Maryland law was written, it would have applied only to retailer Wal-Mart Stores Inc. A federal appeals court is now reviewing the lower court ruling.

"Could (California) even do this?'' asked J.D. Piro, an attorney in Norwalk, Conn., office of Hewitt Associates Inc., referring to the 4% assessment. "We are talking about a provision that is quite similar'' to the Maryland law, he added.

"This would run the risk of an ERISA pre-emption challenge,'' said Chris Renz, a principal in the San Francisco office of Mercer Health & Benefits.

From: Insurance News Net (www.insurancenewsnet.com)

Online Producer Appointments, Cancellations Now Available in Ark.

The Arkansas Insurance Department announced the availability of LEO, an online producer/agency appointment feature offered by service provider Aithent. This new online service will allow for direct appointments and/or agency (shared) appointments or terminations.

The department said the advantage of this service is that fees for these appointments/terminations can be paid by credit card and the transactions are completed in real time. After the appointment(s) or termination(s) are completed, results can be seen immediately.

Insurers or licensing services must register with Aithent to create their own user ID and password. The registration is for a one year period. Register with the service provider at https:\\leo.aithent.com. Any questions about this service may be sent to leospecialist@aithent.com.

Source: Arkansas Insurance Department (http://insurance.arkansas.gov/)

From: Insurance Journal (www.insurancejournal.com)

Virginia Bill Would Require Notice When Personal Data Is Lost or Stolen

By Larry O'Dell
Associated Press

Two Virginia lawmakers said this week that they will introduce legislation requiring government agencies and businesses to notify Virginians if their personal information is lost or stolen.

Del. Robert Brink, D-Arlington, and Sen. Janet Howell, D-Fairfax, said at a news conference that their bill would help combat the fast-growing crime of identity fraud. Four percent of Americans have been victims of identity theft, Brink said.

"Giving people the right to know if their personal information is lost or stolen may seem like common sense, but Virginia has not followed the lead of 34 other states in requiring this important notification,'' Brink said.

The legislators cited some high-profile security breaches in Virginia, including the exposure of thousands of taxpayers' Social Security numbers in Hampton last July. An investigation determined faulty software was to blame.

The following month, a U.S. Veterans Affairs subcontractor in Reston lost a desktop computer containing as many as 38,000 veterans' personal data, and Virginia Commonwealth University learned about 2,100 current and former students' Social Security numbers had been available on the Internet for eight months.

Brink also noted that an investigation by Virginia's auditor of public accounts last year found that a majority of state agencies are doing an unacceptable job protecting citizens' private information.

The legislation will not have specific penalties for noncompliance but will authorize the attorney general's office to bring action against any companies violating the notification requirement.

"This is not to penalize so much as to promote notification,'' Brink said.

Notification could be given by mail, e-mail or telephone. A general public notice could be given in cases involving more than 250,000 people.

Hugh Keogh, president of the Virginia Chamber of Commerce, expressed some concerns about the notification mandate.

"If it became labor intensive it could be very bothersome,'' he said.

However, the organization has not taken a position on the proposal, which is still being drafted.
"We will take a look at it, but there's a general feeling businesses already have become more sensitive and judicious in how they deal with customers' information,'' Keogh said.

Source: Associated Press (www.ap.org)

From: Insurance Journal (www.insurancejournal.com)

Fla. Officials Get to Work as Special Insurance Session Opens

By Brian Kern
Insurance Journal

In the hours leading up to the opening of a special legislative session in Tallahassee aimed at slowing Florida's rising insurance costs, lobbyists, elected officials and citizens weighed in on ways to resolve the crisis.

The session began at 1 p.m. yesterday and is expected to last seven days.

Alex Sink, the state's new chief financial officer, cited the state's insurance market as "spiraling into full crisis over the past several years."

Sink offered several potential legislative proposals including lowering the retention level of the Florida Hurricane Catastrophe Fund, ending the Panhandle exemption to statewide building codes, repealing a requirement that Citizens Property Insurance Co. price its product by factoring in the cost of private reinsurance and using increased tax revenue to cover assessments.

Sink said her concerns go beyond the effects of the insurance crisis on homeowners.

"As we consider solutions to the insurance crisis, I would urge us to keep in mind that commercial insurance rates are also spiraling out of control," Sink said. "As a former banker I am concerned that we are facing a threat to our economy the likes of which we have never seen before. We must encourage the business community of our state to collaborate and work wit legislative leaders to find solutions to the current commercial insurance crisis."

Insurers chimed in that they, too, want to see the insurance market stabilized.

"All of us insurers, homeowners, businesses and government want the same thing: a healthy, stable and competitive insurance market that delivers economic security and peace of mind to consumers," Tallahassee-based Assistant Vice President of Property and Casualty Insurers of America William Stander.

Stander said too often the political rhetoric gets overheated ,creating an "us versus them" situation: "The reality is that we're all in this together," he added.

While none of the involved parties is proclaiming that a fix can be achieved during a seven-day special session, the consensus from all sectors seems to land on the notion of "what's good for insurers is good for the insurance consumers."

"The special session is our chance to help Floridians who are struggling with rising insurance costs and to take comprehensive steps to reform our market," said Speaker of the House of Representatives Marco Rubio.

From: Insurance Journal (www.insurancejournal.com)

Ark. Bankers Group Names Travelers Preferred Provider

St. Paul, Minn.-based Travelers today announced that the Arkansas Community Bankers Assn. has chosen the company as its preferred provider for bank insurance products.

The Arkansas Community Bankers Association represents 161 community banks and thrifts throughout Arkansas. Travelers SelectOne(SM) for community banks product will provide the Arkansas Community Bankers Association with property-casualty coverages and directors and officers liability, fiduciary liability and bankers professional liability coverages. Travelers is now the insurance coverage partner for 11 affiliate members of the Independent Community Bankers of America (ICBA).

"This partnership provides members of the Arkansas Community Bankers Association with access to the portfolio of products in our SelectOne(SM) program," said Mark Horton, second vice president and national director of community banks, Travelers. "Additionally, the Arkansas Community Bankers Association will be eligible to participate in the ICBA/Travelers Insurance Program, which offers a policyholder safety group dividend plan."

Since 1890, Travelers has provided coverage to financial institutions and is the endorsed carrier of the ICBA. The ICBA/Travelers Insurance Program has been offered to ICBA members for the past 24 years.

The Arkansas Community Bankers Association was founded in 1980.

Travelers is a business of The St. Paul Travelers Companies, Inc., a property casualty insurer selling primarily through independent agents and brokers.

Source: Travelers Insurance (www.travelers.com)

From: Insurance Journal (www.insurancejournal.com)

Allstate May Stop Selling Home Policies in CA

By Kelly Johnson
Sacramento Business Journal

Allstate Insurance Co. is mulling whether to stop selling new homeowners policies in California, possibly as early as April, insurance agents say.

An agent with the state's third-largest homeowners insurer said the company is reaching its capacity for risk in the Golden State and fears that a major catastrophe could create losses that it couldn't afford. In September, Allstate asked the state to approve a 12.2 percent rate increase of homeowners insurance, while other large home insurers are seeking rate cuts.

Allstate said Wednesday it is "still open for business" for homeowners insurance. "That's our business plan as of today," company spokeswoman Patti Kelly said.

Some agents, though, said Allstate executives in meetings and individual conversations have discussed the possible change. The agents spoke on condition they not be identified, fearful Allstate might take action that could hurt their business. Some expect a decision from Allstate next month and any ban on new home business to take effect during the first quarter.

This would be the first time a major insurer stopped accepting new homeowners business in California since 2002, when State Farm Insurance Cos., the nation's and state's largest home insurer, did so. That freeze, which occurred when toxic mold claims were rising, lasted about a year.

The company has about 900,000 home policies and more than 1,200 exclusive agents in the state. If Allstate stops writing new homeowners business in California, it would follow its actions in other states. The "Good Hands" company has curtailed or stopped writing new homeowners business in coastal parts of states along the Eastern seaboard and around the Gulf Coast to Texas in an effort to minimize disaster-related risk, especially from hurricanes.

Allstate wants to protect its ability to make good on payouts to current customers in a catastrophe. Publicly traded Allstate Corp. (NYSE: ALL) also has to satisfy Wall Street and shareholders. In addition, the carrier's actions in the various states, some sources suggested, would make sense as part of a political strategy to push for a national catastrophe-insurance plan that would help stabilize markets for insurers. Several insurers have called for such a government-backed plan.

Costs in California

The insurer already has tightened underwriting requirements in California, which has led to fewer new applications for home coverage, Allstate said in a Securities and Exchange filing.
The company's 12.2 percent rate increase request got a cold reception from John Garamendi, the insurance commissioner at the time who considered Allstate's old rates excessive. It's unclear how Commissioner Steve Poizner, sworn in Monday, will respond to the proposal. He didn't have an opinion on it this week. A hearing is planned but not scheduled; it likely would be in the summer or early fall, said Jennifer Kerns, state Department of Insurance spokeswoman.

The Northbrook, Ill.-based insurer also is seeking state approval for a new type of auto insurance policy that has sold well in other states. If the insurer gets the go-ahead for California, Allstate could decide to focus on that profitable type of business instead of the risky and often-unprofitable home business, one Northern California Allstate agent said.

"Auto's where they make the money," the agent said.

Allstate submitted plans for the new auto product as part of filings required from all insurers, Allstate spokesman Rich Halberg said. No hearing date on the product has been set.

Selling others' policies?

A ban on writing new Allstate homeowners policies wouldn't necessarily mean Allstate agents couldn't sell home policies at all. Allstate might establish agreements with other insurers whose policies Allstate agents would be allowed to sell, sources said. The agents' commissions, however, could be less on those policies. Some Allstate agents might decide to call it quits, the Northern California agent said.

The ban would apply to individual homeowners policies and landlord policies for rental units, the agent said. Allstate would still offer new policies for renters, boats and so-called umbrella coverage. Existing home customers could keep their policies. Those selling one house for another, though, couldn't continue their coverage with Allstate. Coverage they got with another insurer through their Allstate agent likely would be the same price, the Northern California agent said.

Allstate also would change its auto rating plans, the agent said, so that auto customers would still find the pricing attractive despite the loss of discounts for dual auto and homeowners coverage.
Other homeowners insurers would be happy to pick up the business that Allstate doesn't take, one Sacramento independent broker said. "The market is really quite loose today," he said.

While Allstate's big concern along the East Coast is hurricanes, the worry in California is earthquakes and the wildfires that might follow. California established the quasi-governmental California Earthquake Authority after the 1994 Northridge quake when many insurers refused to sell homeowners policies. Quake coverage is separate from home coverage. But Allstate still fears what it could be on the hook for after a big temblor.

"Allstate remains accountable for as much as $800 million in potential earthquake claims through the California Earthquake Authority's industry assessments," Allstate said in a September news release in which it explained its 12.2 percent rate increase request.
Allstate said it also needs the increase because its catastrophe reinsurance costs -- insurers buying insurance for themselves -- have increased significantly. "Allstate spent nearly $70 million on reinsurance in California in 2006, a cost that is not reflected in current rates," Allstate said. Unlike most other states, California does not allow insurers to pass along reinsurance costs to customers, Halberg said.

In that release, Allstate said it also needs the rate increase because:

The cost of rebuilding homes has increased dramatically, which has increased Allstate's exposure.

Drier, warmer summers are increasing California's susceptibility to more frequent and intense wildfires.

Independent rating agencies now demand insurers maintain higher capital levels to receive acceptable financial strength ratings.

Professional catastrophe risk modeling companies determined that previous models underestimated losses from disasters.

The Foundation for Taxpayer and Consumer Rights in Santa Monica has challenged the rate-hike request, which would fetch Allstate an additional $99.7 million, and asked the state for a public hearing. With the increase, the group alleged in a news release in September, Allstate would take an excessive 23.75 percent underwriting profit and would "run afoul" of rules designed to keep prices fair and appropriate.

The Northern California Allstate agent doesn't want the insurer to stop writing new policies. But, he said, "I understand where they're coming from." He'd rather the carrier act now rather than be unable to pay existing customers after a major disaster.

With its proposed rate increase, Allstate is bucking the industry trend, noted Nick Brozdounoff, who owns a Brooke Insurance & Financial Services brokerage and previously was an Allstate agent. But the company is well-run and knows what it is doing, he added. "Obviously they feel they can't make money on their model."

From: Sacramento Business Journal (www.bizjournals.com)

Washington Rep. Wants To Require Drivers to Purchase Vehicle Liability Insurance

Washington Rep. Dean Takko has introduced a House Bill 1046 that would make drivers show proof of financial responsibility or motorvehicle liability insurance.

According to the bill, the department of vehicle licensing, when it sends a registration renewal notice, shall also provide notice of the requirement for proof of meeting the financial responsibility requirements to renew the license. The department shall not renew a vehicle license due for renewal Jan. 1, 2008, or after unless the applicant provides proof of meeting the financial responsibility requirements for operating a motor vehicle as provided in RCW 46.30.020.

A public hearing on the mattter is scheduled for Jan. 18 at 3:30 p.m. For more information, visit http://apps.leg.wa.gov/billinfo/summary.aspx?bill=1046&year=2007#documents

From: Claims Guides (www.claimsguides.com)

AZ State Lawmakers Look to Limit Mexican ID Cards, Wire Transfers

By Mike Sunnucks
Business Journal of Phoenix

State lawmakers are pushing a number of measures aimed at illegal immigrants and employers who unlawfully hire them.

The get-tough proposals are sponsored by Republicans including State Rep. Russell Pearce, a leading conservative immigration hawk.

They want to bar immigrants from sending money back to Mexico and other countries unless they have paid taxes on that income earned in the state. Drug cartels and smugglers also send money out of the country via such transfers.

A Republican bill prohibits banks and financial service firms from allowing Mexican and other foreign wire transfers unless the sender proves they paid required taxes on that money. Business violators of the proposed rule face fines of as much as $50,000 per transfer, if the plan becomes law.

Wire transfers and financial remittances to Mexico are an increasingly big business for U.S. banks and financial firms. They play a key role in the Mexican economy

There is also a proposal requiring persons appearing in Arizona courts for traffic violations and speeding tickets to prove they are in the country legally. Another bill bars government entities from recognizing Mexican identification cards as valid IDs. A number of banks and car dealerships accept Mexican IDs from immigrant customers.

There will also be pushes from conservative Republicans and some liberal Democrats to punish and fine businesses that illegally hire undocumented workers. Business groups want to water down those employers sanctions bills.

Democratic Gov. Janet Napolitano did not offer very many immigration related proposals in her new budget released Friday. She has generally opposed many of the get tough measures pushed by Republican lawmakers.

From: Business Journal of Phoenix (www.bizjournals.com)

Insurers Boost Claims-Paying Capacity As Premium Rates Drop In Most Of U.S., I.I.I. Reports

With elevated hurricane activity predicted over the next 15 to 20 years, insurers took advantage of last year’s respite to fix the roof while the sun was shining, setting aside billions to bolster the industry’s claims-paying capacity, according to the Insurance Information Institute (I.I.I.). At the same time, insurers are lowering rates for most drivers, many homeowners and a wide variety of businesses.

The I.I.I. estimates property/casualty insurers boosted by $55.7 billion its cumulative claims paying resources in 2006, a number equal to 93 percent of the $59.8 billion in expected net income. The $55.7 billion figure was a near record, second only to the $62 billion increase in 2003 as insurers worked to recover from the September 11, 2001 terrorist attacks.

“Insurers directed a significant share of their 2006 profits and investments back into the business,” said Dr. Robert Hartwig, President and Chief Economist for the Insurance Information Institute. Dr. Hartwig added that excellent underwriting results, the substantial drop in catastrophe losses and strong investment performance enabled insurers to reinvest billions of dollars in 2006, allowing claims-paying resources to reach an all-time record high estimated at $481.5 billion.

“This reinvestment by the industry comes at a critical time for insurers and consumers alike,” Dr. Hartwig said. “The industry is bolstering its capital position in advance of what is already predicted to be a 2007 hurricane season that is 40 percent above average.” Insurers paid out more than $80 billion in insured losses during the 2004 and 2005 hurricane seasons.

The source of the reinvested funds is primarily profits earned in 2006 and investment gains as well as new capital from investors, the I.I.I. has found. Industry profits have been beneficial to policyholders, allowing insurers to lower prices for many types of insurance across most of the country. The share of P/C insurance premiums paid relative to the overall economy is expected to drop by 3.1 percent in 2007 on top of a 2.5 percent decline in 2006, the I.I.I. said.

Policyholder surplus – a key measure of claims-paying capacity or capital – increased by an estimated 13 percent overall to an estimated $481.5 billion in 2006, from $425.8 billion at year-end 2005. The $55.7 billion increase in policyholder surplus for 2006 compares favorably with a $35.8 billion increase in 2005. Hartwig warned, however, that certain catastrophes, such as hurricanes and earthquakes, could produce insured losses in excess of $100 billion while a terrorist attack utilizing nuclear, chemical, biological or radiological weapons could result in claims exceeding $700 billion.

Insurers are also building capital to comply with new, more stringent ratings agency criteria. In the wake of Hurricane Katrina, agencies which assess the financial strength of insurers and their creditworthiness require them to demonstrate an ability to pay claims arising from more than one major catastrophe per year.

“Meanwhile, buyers of insurance in non-coastal states are the big winners as rising profitability has intensified competition throughout the property/casualty insurance industry,” Dr. Hartwig added. “The bottom line is that falling insurance prices are lowering the cost of driving a car, owning a home and the cost of doing business for most Americans.” He noted that property insurance prices in hurricane-vulnerable coastal areas continue to rise.

I.I.I. research shows that drivers, homeowners and businesses in most parts of the United States will be left with more cash in their pockets in 2007 as insurance costs fall in absolute terms, or at least relative to income growth and growth in the Gross Domestic Product. More details can be found in the I.I.I. ' s 2007 Earlybird Forecast at http://www.iii.org/media/industry/financials/forecast2007/.

Auto insurance expenditures for the typical driver nationwide are expected to fall 0.5 percent in 2007 as compared to 2006, the first such year-to-year drop since 1999 (see I.I.I.'s Auto Insurance Forecast: 2007). Homeowners in non-coastal states are expected to see stable, or even lower, homeowners’ insurance premiums this year while businesses purchasing workers’ compensation and liability insurance should see reduced prices, too. For additional information on the industry’s financial outlook, go to the I.I.I.’s Web site at http://www.iii.org.

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.

Source: Insurance Information Institute (www.iii.org)

From: Insurance News Net (www.insurancenewsnet.com)

State Farm Verdict Fallout: Ruling Kindles Insurance Anxiety

A federal court ruling last week in Mississippi has insurers rethinking business in coastal markets because of the difficulty in separating wind and water damage.

U.S. District Judge L.T. Senter Jr. told State Farm Fire and Casualty Co. what policyholders and Mississippi Insurance Commissioner George Dale have said for the last 16 months: Insurers must cover wind damage from hurricanes unless they can prove the excluded peril of storm surge caused the loss.

Senter's ruling, which State Farm has said it may appeal, emphasizes the necessity for insurers to separate wind and water damage in hurricanes, something even they concede is tough.

"I would state it would be extremely difficult, when a home is sitting on the water and is washed away, as the homes were down there, that it is very difficult - I don't care if you're a structural engineer or a trained claims rep - to solve that issue," Robert L. Trippel, a senior claims officer at parent company State Farm Mutual Automobile Insurance, conceded in sworn testimony he was forced to give in another case in November.

Trippel was explaining the company's decision to stop offering coverage within one mile of the coastline in Mississippi, Alabama and South Carolina.

The case Senter tried in court last week, and documents State Farm has been forced to produce in other cases, show the company didn't try to separate the damages on thousands of claims. State Farm adjusters initially filled out requests for engineers, but company representatives have said in court records the requests were in many cases cancelled.

Instead the company developed a "wind-water protocol" about two weeks after Hurricane Katrina hit Aug. 29, 2005, which State Farm claims personnel used to deny claims from one end of Mississippi's coast to the other, leaving thousands of policyholders in storm-surge areas to fight for payment.

The protocol was conceived by a highly trained claims consultant with the parent mutual company at Bloomington, Ill., headquarters, then refined by in-house attorneys and other employees, court documents show.

It includes language not found in the policy, which is a binding contract. When a claims investigation shows damage was from excluded water, it says, a claim should be denied unless "independent windstorm damage to separate portions of the property" is revealed.

"Claim-handling guidelines aren't in a policy, but we need to give claim handlers a guide," said State Farm spokesman Phil Supple. "When we realized Katrina was a very unique and monumental event, we wanted to make sure our adjusters had consistent and fair guidelines to address the wind and water issues that confronted us."

Instead, attorneys suing State Farm in Mississippi say, the insurer used the protocol to fraudulently deny claims.

State Farm said it relied on policy language that purports to say a covered peril (wind) will be excluded when the uncovered peril of water contributes. Senter found the policy language ambiguous and unenforceable.

After Senter ruled State Farm had breached its contract with Biloxians Norman and Genevieve Broussard, the jury awarded them $2.5 million in punitive damages. The eight-member jury unanimously found "clear and convincing evidence that (State Farm Fire and Casualty) engaged in malicious or grossly negligent conduct."

The Broussards maintain physical evidence around the property, including brick veneer lying in four directions around the slab, indicated it exploded from tornadic winds before Katrina's storm surge arrived. State Farm did not send damage experts to the property until after the Broussards filed their lawsuits.

Even at trial, those experts were unable to say with any certainty what damage the wind did or did not do.

About 200 lawsuits are pending on the Coast against State Farm Fire and Casualty. There are about 1,000 lawsuits in total filed against insurers in federal court. Senter recently granted one policyholder permission to add State Farm Mutual to her lawsuit because officers there drafted and edited the wind-water protocol.

State Farm and insurance-industry representatives have said Senter's opinion jeopardizes the insurance market in Mississippi because insurers are being asked to cover damages for which they collected no premiums.

One of the attorneys suing State Farm in Mississippi and Florida, William F. "Chip" Merlin of Tampa, cried foul.

"That verdict really said it's wrong to cheat people out of what you owe them," Merlin said. "That's the reason punitive damages came along. It's just not right to cheat people out of their own money. That has nothing to do with destabilizing the market.

"What State Farm and the insurance industry want to do is almost explain it by saying, 'It's OK if we cheat people out of their money as long as we continue to give them insurance,' and that can't be tolerated by society."

Source: The (Biloxi, MS) Sun Herald (www.sunherald.com)

From: Insurance News Net (www.insurancenewsnet.com)

Health Care: As California Leads, Other States Will Follow

California's new health care plan will focus attention on the issue and add momentum to efforts already under way in many state capitals. With the federal government deadlocked on how to provide health care to the 47 million Americans who are uninsured, many states are taking the lead in working out solutions of their own.

The plan announced by Gov. Arnold Schwarzenegger (R) is similar to one adopted by Massachusetts in that it requires all persons in the state to buy health insurance. Employers with 10 or more workers would have to pay 4% of their payroll into a fund if they don't offer coverage to full-time staff. Employers also would have to offer flexible spending accounts to their employees.

Odds are good that most of the plan will win approval from the Democratic legislature in California, though opposition in some quarters will be fierce. Physicians and hospitals are likely to chafe at the requirement that they pay into a fund for the uninsured, and the insurance industry will object to a requirement that it offer coverage to all individuals regardless of their medical condition. Many Republican legislators will also object to Schwarzenegger's plan to cover the children of illegal immigrants.

Other states will move to provide coverage for the uninsured, including Oregon, Ohio, Colorado, New Jersey, Minnesota and Maryland.Proposals range from the incremental, such as covering all children, to more-comprehensive reform, such as what Schwarzenegger proposed and that Massachusetts and Vermont approved last year. "Massachusetts and Vermont showed that Republicans and Democrats can come together to reform health care, and success tends to be contagious," says Enrique Martinez of Academy Health, a health care policy group in
Washington, D.C.

States considering plans to cover all children include New Mexico, Kansas, Washington and Wisconsin. Wisconsin will also work to expand Medicaid eligibility, as will Michigan.
Massachusetts led the way by aiming to cover 460,000 uninsured residents by July. All residents must buy insurance. Those who can't afford it will be subsidized by the state. Employers with 11 or more workers that don't provide coverage to their employees must pay $295 per worker a year into a state fund.

Vermont's plan is similar to Massachusetts' in that it offers assistance in paying premiums to the poor and penalizes employers that don't provide insurance to their workers. But the Green Mountain State's plan also deals with the underlying drivers of health care costs by attempting to better coordinate the care of those with chronic illnesses. "Focusing on cost containment issues is important. Many states are afraid that otherwise they won't be able to sustain any of the coverage initiatives," says Martinez.

How to pay for covering the uninsured is the big conundrum. Many states have budget surpluses and are in a better position to consider coverage expansion, but will also seek to leverage federal Medicaid funds and raise cigarette taxes. Those states looking to pass more-ambitious reforms will probably follow the lead of Massachusetts and Vermont and require employers that don't offer insurance to pay into a fund.

From: Insurance News Net (www.insurancenewsnet.com)

Key Federal Katrina Ruling Favoring Homeowners Surprises Industry

In a Hurricane Katrina claims decision that surprised the insurance industry, a federal judge ruled that State Farm did not provide sufficient evidence to prove what damage to a Mississippi family's house was caused by wind versus water and the jury subsequently assessed $2.5 million in punitive damages against the insurer.

In a directed verdict, U.S. District Court Judge L.T. Senter in Broussard v. State Farm ruled that the homeowners needed to only prove a direct physical loss. He ordered State Farm to pay $223,000 in actual damages for the home and belongings of Biloxi couple Norman and Genevieve Broussard, before turning the case back to the jury to decide on the punitive damages.

State Farm and others in the insurance industry expressed surprise and concern over the ruling.

"We did not expect this decision," said Kim Brunner, general counsel for State Farm. Testimony of expert witnesses showed that damage to the Broussard home was overwhelmingly caused by water and not wind."

After State Farm refused to pay for any damage to their demolished home after Katrina, the Broussards sued to obtain full insured value of their home plus $5 million in punitive damages. They maintained that winds from Katrina destroyed their house.

State Farm, however, denied any payment, arguing that all the damage was cussed storm surge waters.

Insurers maintain that traditional homeowner policies cover damage from wind but not from water or damage caused by a combination of both.

Senter's ruling, however, maintains that in the Broussard case the insurer failed to prove as it claimed that all of the damage to the Broussards' home was caused by storm surge. He also said the insurer failed to show how much damage was caused by wind and how much by storm surge.

"We believe that the ruling is inconsistent with the insurance contract and Mississippi law," said State Farm's Brunner.

State Farm also expressed disappointment with the jury's finding the company is liable for punitive damages in the amount of $2.5 million. The company will be evaluating its next steps with regard to this decision which will likely include an appeal.

State Farm said it has has closed 98 percent of the claims it received arising from the storm and has paid out over $1.1 billion in claims in Mississippi.

From: Insurance Journal (www.insurancejournal.com)

Sen. Kennedy Urges Universal Health Plan, Solicits Recommendations

By Kevin Freking
Associated Press

The federal government should join the state of Massachusetts in enacting universal health coverage, according to Sen. Edward Kennedy, D- Mass., the new chairman of the Senate committee with jurisdiction over numerous health issues.

Kennedy's home state is the first to require everyone to have health insurance, just as drivers must have automobile coverage.

Kennedy has his own version of what universal health coverage would look like. He wants to extend Medicare to all. In his first hearing Wednesday as chairman of the Senate Health, Education, Labor and Pensions Committee, the Massachusetts Democrat called on 10 witnesses from all over the country to talk about how to make health care more affordable.

"Insurance coverage is down. Costs are up. And America is heading to the bottom of the league of major nations in important measures of the quality of care,'' Kennedy said.

Kennedy emphasized how Democratic legislators in his home state worked last year with Republican Gov. Mitt Romney in crafting universal coverage there. He wants the same spirit of compromise to take hold in Congress.

However, the hearing also showed that finding agreement won't be easy. While all the witnesses agreed that health care is becoming less affordable every year, they often had very different solutions.

For example, the Business Roundtable renewed its calls to change medical liability laws and for the federal government to give consumers more information about the cost and quality of the care they get, two priorities often cited by the Bush administration.

"High health care costs are affecting job creation, and high health care costs are hurting our ability to compete in global markets,'' said Larry Burton, the roundtable's executive director.
But Andrew Stern, international president of the Service Employees International Union, called for much more dramatic change. He told lawmakers that it's time to recognize that employer-based coverage "is dead.'' The statement infers a much more active role for the federal government in funding health care.

Karen Davis of the Commonwealth Fund, which conducts health research, told lawmakers to look at Denmark as a model for the U.S. She said that nation's government pays doctors a capped rate for each of their patients, plus additional amounts when they perform a service. Each doctor handles about 1,500 patients, and they can handle walk-ins and same-day appointments. And Denmark residents love their health care system, she said.

Most of the witnesses agreed on two points:

First, Congress should expand funding for a health insurance program that now provides health insurance to about 5 million children. The children live in families that make too much to qualify for Medicaid, but not enough to afford the monthly health insurance premiums offered through the private sector.

Second, Congress should not get in the way of states trying to grow the number of residents who have health insurance.

The state of Massachusetts employs a combination of subsidies and penalties to make insurance more affordable and to force people to buy it. The law requires employers with 11 or more full-time employees to offer health coverage or be subject to a $295 fee for each employee, as well as face being billed for services their uninsured employees get.

California Gov. Arnold Schwarzenegger this week proposed a plan that would extend health care to 6.5 million uninsured Californians. Under the proposal, all Californians must have insurance, although the poorest would be subsidized.

Some of the committee's Republicans would like the committee to renew its attention to help for small businesses. They support a plan that would let businesses buy insurance through regional or national trade associations. The insurance would be free of many state mandates. That could make it a cheaper alternative, but would also provide scaled-back coverage in some instances.

"My primary interest is to provide health insurance reform for small businesses and working families, and I believe that 1 million more people will be insured if we enacted the (small business health plans),'' said Sen. Mike Enzi, R-Wyo.

Also, Wednesday, the Children's Defense Fund called on Congress to provide health insurance for all children in the U.S. About nine million live in families without insurance. The organization said all children in Medicaid or the State Children's Health Insurance Program should be automatically enrolled in one program that provides all medically necessary care.

Children in families with incomes over 300 percent of poverty could also pay premiums that would allow them to participate.

"A child's chance to survive and thrive should not depend on the lottery of geography,'' the organization said.

Source: Associated Press (www.ap.org)

From: Insurance Journal (www.insurancejournal.com)

State Farm to Lower Texas Auto Rates

State Farm announced plans to lower its overall auto insurance rates in Texas. The change, which represents a savings of nearly $104 million annually to State Farm's Texas auto insurance customers, will be effective Feb. 26 for new business and March 26 for renewal business.
The change will mark the fifth time in less than three years that State Farm has lowered auto insurance rates in the state.

State Farm plans to lower its overall auto rate level in Texas by an average of 4 percent. Overall premium changes for individual motorists will vary, depending on where they live, the coverage they choose, type of car insured, who drives it and how much it is driven.

"When an insurer reduces the cost consumers pay for their product other companies view that as an indication that Texas is good place to business in the auto market. The reforms enacted by the 79th Legislature were in the best interest of consumers and have created a fiercely competitive market with a lot of choices for those who consume these products," commented Jerry Johns, president of Southwestern Insurance Information Service.

State Farm is also enhancing discounts for auto customers with another qualifying State Farm product and introducing a new driver safety program for young drivers called Steer Clear. Young drivers who complete the program and maintain a clean driving record are eligible for a premium discount of up to 15 percent.

State Farm offers a variety of other discounts in Texas, including multi-car, academic achievement, good driver and renewal discounts.

About one in every 5 cars insured in Texas is insured by State Farm, the company said.

Source: State Farm Insurance Company (www.statefarm.com)
Source: Southwestern Insurance Information Service (www.siisinfo.org)

From: Insurance Journal (www.insurancejournal.com)

101 Indicted in Calif. Insurance Fraud Sting

An two-year undercover sting operation by the Los Angeles County District Attorney's office has resulted in 101 indictments, of which 88 have been arrested to date.

Following a tip from a confidential informant, an investigation was launched in September 2004 involving suspected attorneys and legal office employees who were allegedly selling accident insurance claim cases for referral fees and kickbacks from chiropractic clinics.

The informant allowed an undercover investigator to be planted in the informant's chiropractic clinic. The investigator served as the office administrator. As part of the so-called "capping" scheme, employees from 12 San Gabriel Valley law offices allegedly referred clients to the chiropractor clinic and then filed fraudulent documentation and padded the bills sent to insurance companies. Settlements were then distributed by the law offices to the client, the law office and the chiropractic clinic. Prosecutors documented more than $500,000 in losses to insurance companies from just one chiropractic clinic.

Last week, prosecutors announced 13 Grand Jury indictments were returned naming 101 defendants charged with more than 200 counts of insurance fraud. To date, 88 defendants have been arrested. Four are out of the country and 11 are in other states. A total of 325 police officers from 10 agencies assisted in the arrests.

Of the 101 people indicted, 13 are office administrators who allegedly worked as "cappers," two are attorneys and 86 are insurance claimants.

These people not only sought to rob California insurers and consumers of their money, but in their dishonesty have struck at the trust we place in our medical and legal professionals every day," said Insurance Commissioner Steve Poizner. "I'm happy to say that the conduct of those arrested is the exception, not the rule."

The following is a list of companies that cooperated in the investigation:

* 21st Century* AAA* AIG* Allstate American Express (Ameriprise)* American Family* Berkley Risk Administrator* Carl Warren & Co. (Los Angeles County)* CNA Commercial* Coast National Commerce* West Continental Western Group* Danielson National* Electric Everest National* Farmers* Gallagher Bassett* Geico* Hartford* Horrace Mann* Infinity* Kemper Independent* Los Angeles City* Liberty Mutual Liberty* Mutual Commercial* Lincoln General* Mercury MGA Insurance* Mitsui-Sumitomo* Ocean Harbor Casualty* Permanent General* Progressive* Safeco* Safeway Direct* St. Paul Travelers* State Farm* Sterling Casualty* The Robert Plan* Unitrin Direct* Unitrin Specialty* USAA* Viking* Wawanesa* Western General* Western United* York Claims* Zurich Empire

Source: California Department of Insurance (www.insurance.ca.gov)

From: Claims Guides (www.claimsguides.com)

California Community Colleges Offer Entry-Level Insurance Classes

The California Insurance Careers Program and the state's community college system are offering insurance classes online and on select college campuses. Classes are being geared to prospective or current entry level workers who require additional training in the insurance industry. Because classes are offered during the day, evening and online, they are applicable to people outside the state as well.

"An educated workforce is the cornerstone of the insurance industry," said Paul White, CEO of Vantage Insurance Services, and originator of the program. "Tapping into the community college system to help provide basic insurance training for entry-level workers makes good business sense and one that will benefit the entire industry for many years to come," said White.

The California Insurance Careers Program was designed in response to industry demand for qualified entry level workers. The Insurance Educational Association and the Insurance Brokers and Agents of the West, among others, have helped shape the curriculum. Available classes include: Introduction to Insurance, Property and Liability Principles, Personal Insurance, Commercial Insurance, and Insurance Code & Ethics.

"These college-level classes give entry-level workers the necessary training to fully capitalize on the high-growth opportunities provided by the insurance industry," said John Urrutia, dean of the Business and Computer Science Division at Solano College. "This model of working collaboratively with the business sector reinforces the valuable role community colleges can play in training tomorrow's workers," added Linda Avelar, dean of the Business and Creative Arts Division at the College of San Mateo.

The insurance classes are for entry level workers and are not intended to satisfy Continuing Education requirements. For information, visit www.ca-icp.com and click "Available Classes" on the main menu.

From: Claims Guides (www.claimsguides.com)

Schwarzenegger Proposes Sweeping Plan to Cover Uninsured

California Governor is hoping to develop a plan to extend health care to 6.5 million uninsured Californians, but to do so, he will have to find common ground between groups that often are at odds.

Union leaders quickly balked at a requirement that all Californians have insurance, calling it a tax on the middle class. A demand that all but the smallest businesses offer their workers insurance upset many of Schwarzenegger's business allies.

"I look forward to everyone now having those debates," Schwarzenegger said via videolink to a panel of health care stakeholders who assembled Monday to hear his plan. "There are a lot of people around the table."

Under the proposal, all Californians must have insurance, although the poorest will be subsidized. Those who go uncovered will be subject to tax penalties.

Businesses with 10 or more employees will have to offer insurance to their workers or pay 4 percent of their payroll into a state fund. Smaller firms, which the governor's office said make up 80 percent of California businesses, will be exempt.

Insurers would no longer be allowed to deny coverage to people because of their medical problems. All children, regardless of their immigration status, will be covered through an expansion of the state and federal Healthy Families program.

"If you can't afford it, the state will help you buy it. But you must be insured," said the governor, who presides over a state with more uninsured people than any other. "That is number one."
Schwarzenegger said his plan will save $10 billion a year by cutting costs and redirecting money already in the health care system.

Many applauded the breadth and ambition of the Republican governor's plan, which a special team of advisers spent six months developing in secret.

Several experts said it went even further than Massachusetts, which last year became the first state to require everyone to have health insurance.

"This plan one-ups Massachusetts," said Peter Harbage, a health care consultant with the New America Foundation. "The governor has gone further and added doctors, hospitals and health plans" to those who must help pay.

The state will subsidize the estimated 1.2 million low-income people who do not currently qualify for coverage. They would be able to buy insurance through a state-run pool and will have to make a small contribution toward their premiums.

Kim Belshe, Schwarzenegger's health secretary, said an additional $10 billion to $15 billion will go to health care providers under Schwarzenegger's plan. The state will increase reimbursement rates to help doctors and hospitals.

But in turn they will have to pay into the new system. Hospitals will be assessed 4 percent of their revenues, while doctors will pay 2 percent.

Insurers, seeing the possibility of 4 million to 5 million new customers, praised the proposal, despite the new restrictions it places on them, such as limiting administrative costs.

"The governor's plan is bold, comprehensive and visionary," said Bruce Bodaken, chairman of Blue Cross of California. "Taking each part separately, there's something for everyone to hate. But taken as a whole, there's a lot to like."

But employers and doctors said they were being taxed to fund it, while unions protested that low-income workers would bear the brunt of the costs because they will be forced to buy insurance.

"This is all going to be on the backs of the individual, the workers," said Angie Wei, a lobbyist with the California Federation of Labor.

Schwarzenegger's decision to include an employer mandate is a blow to his business allies, who waged an expensive fight against a similar requirement just three years ago -- with the governor's help. Republicans reacted negatively.

"Imposing a new jobs tax on employers of any size and expanding costly government mandates is the wrong approach, one which will devastate our economy," Assembly Republican leader Mike Villines said in a statement.

Democrats said they were open to the governor's ideas. But Assembly Speaker Fabian Nunez, a Democrat, said if all workers are required to buy insurance, insurers will raise their prices "and ultimately make health care less affordable."

Nunez and Senate President Pro Tem Don Perata, a Democrat, have put forth their own health reform ideas. They and the governor now begin what may be a long process of trying to achieve a compromise.

Republicans, who are in the minority, may have less of a say in whatever plan emerges unless it involves raising taxes, which requires a two-thirds majority.

Source: Associated Press (www.ap.org)

From: Claims Guides (www.claimsguides.com)

Progressive's Drive Enters Mass. Commercial Auto Market

Drive Commercial Auto, part of The Progressive Group of Insurance Companies, announced plans to offer commercial auto insurance to Massachusetts business owners available exclusively through independent agents. With its entry into Massachusetts, Drive Commercial Auto business is now available in all states, except Hawaii.

Currently, there are about 50 agencies throughout Massachusetts authorized to sell Drive Commercial Auto. Commercial vehicle owners can go to www.driveinsurance.com to find a local agent.

The group's Commercial Auto business, which specializes in insuring small fleets for new and established businesses, including delivery vans, passenger cars, tow trucks and dump trucks, has grown an average of about 18 percent a year over the past four years.

"We believe that consumers benefit when companies compete for their business, so we're excited to bring another option to commercial vehicle owners in Massachusetts," said Cory Fischer, Drive Commercial Auto product manager, Massachusetts.

Source: The Progressive Group of Insurance Companies (www.driveinsurance.com)

From: Claims Guides (www.claimsguides.com)

Pesos for Pizza: Texas-based Chain Treats American, Mexican Currencies The Same

Customers of a Texas-based chain of pizza parlors can now pay for their slices with pesos or dollars.

"Under the program – which is set to end in late February but may be extended – the chain's 59 stores will take peso bills only, not coins," The Dallas Morning News reports. "Using cards listing the conversion calculations, cashiers will enter the figure in U.S. dollars into the cash register and give the change in U.S. currency. "

A press release from Pizza Patrón says "The program will be supported by in-store graphics and displays that feature the flag of Mexico as well as the message "Bienvenido Paisano" (Welcome Countrymen)."

"You know what's really sad is we've received a number of e-mails at our website and I read some of those e-mails and many of them are just filled with hate and it's very sad ... I just didn't realize there was that much hate out there," founder Antonio Swad tells NPR.

"People are linking it to patriotism, people are linking taking pesos for a hot pizza to illegal immigration ... and it's really nothing of the sort. It's an opportunity to practice business in the most competitive way we know in a very competitive business," Swad says.

From: USA Today (www.usatoday.com)

State to Pay Insurance Firms $2.25M in Settlement

The Department of Insurance announced Friday that it will pay $2.25 million to two insurance companies seeking to recover legal fees.

The insurance department said it has reached a resolution in its obligation to pay attorneys' fees to two of the insurance companies that challenged the constitutionality of the state's Holocaust Victims Insurance Relief Act of 1999.

In 2003, the U.S. Supreme Court ruled by a 5-4 vote that California's efforts to obtain information concerning insurance policies issued by private insurance companies in Europe during the period prior to the Holocaust violated the President's authority over foreign affairs.

Three of the plaintiffs, the American Insurance Association, along with two insurers, then sought to recover their legal fees from the state, according to a news release from the insurance department. Federal District Judge William Shubb ruled that they were not entitled to their fees, but the Ninth Circuit Court of Appeals reversed, sending the case back to Judge Shubb to determine the amount of fees the insurers should recover.

Lauren Hersh, deputy press secretary with the state's department of insurance, said the state will pay $650,000 to Italian insurance firm Generali and $1.6 million to German insurance firm Gerling.

Hersh said the insurance department has not reached a settlement with AIA, which she says wants $6 million.

From: Silicon Valley/ San Jose Business Journal (www.bizjournals.com)

Schwarzenegger Unveils $12B Universal Health Plan

By Timothy Roberts
Silicon Valley / San Jose Business Journal

A $12 billion health plan aimed at covering all Californians was introduced by Governor Arnold Schwarzenegger on Monday.

Under the governor's plan, employers would have to either offer their employees health insurance or they would have to pay into a state fund that would be used to assist people in buying their own insurance. At the same time, insurance companies could not reject applicants because of existing illness.

In addition, the governor's plan to achieve universal coverage would:

-- Require employers with 10 or more employees to offer health insurance or pay an amount equal to 4 percent of payroll toward the cost of employees' health coverage
-- Direct between $10 billion and $15 billion to hospitals and doctors, but hospitals will be required to contribute 4 percent of gross revenue back to the state; doctors will have to contribute 2 percent of gross revenues.
-- Redirect $2 billion in medically indigent care funding into the new program.
-- Pull down additional federal money to help pay for Medi-Cal rate increases, expand Healthy Families and government coverage to low-income parents and single adults.

The governor's plan also would cover illegal aliens.

"I know this is controversial, but federal law requires us to treat anyone who shows up at an emergency room in need of care," Schwarzenegger said. "So, the decision for my team was do we treat them in emergency rooms at the highest cost available or do we do it right and do it efficiently?''

The plan was greeted warmly by Democrats in the legislature, whose approval would be necessary for any bill to pass.

"The governor's proposal to cover all kids in California is a prime example of the kind of 'post-partisan' attitude he spoke of in his inaugural speech," Assembly Budget Chairman John Laird, D-Santa Cruz, said in a statement after the governor released his plan. "His proposal is far-sighted and mirrors what Democrats proposed in last year's budget--a concept supported by more than 80 percent of Californians."

The governor's plan may not please business interests, who have generally opposed a "pay or play" approach as an unfair burden. And insurance companies may not like another provision that requires that 85 percent of premium revenues be spent on patient care, not administration.

Doctors may be pleased to learn, however, that under the governor's plan MediCal reimbursements for doctors would increase significantly.

From: Silicon Valley / San Jose Business Journal (www.bizjournals.com)

Report: Calif. Health Insurers Deny Policies over Jobs, Medications

Some Californians are refused individual health insurance policies even if they are in good health and can afford coverage because of their jobs and use of certain medications, according to a published report.

Such considerations by health insurers are legal, according to the report in the Los Angeles Times Monday, but consumer advocates say the policies are too restrictive.

The restrictions are outlined in confidential underwriting guidelines that health plans provide to insurance brokers but not to the public. The newspaper obtained the guidelines for four health plans in the state: Blue Cross of California, Blue Shield of California, PacifiCare Health Systems Inc. and Health Net Inc.

All four health plans look at prescription drug use to decide whom they will sell individual policies, the documents said. Eight of the 20 top-selling prescription drugs in the U.S., including No. 1 Lipitor, which fights cholesterol, make the lists of two health plans.

Blue Cross of California, the state's top seller of individual policies, is the only one of the four plans that does not exclude applicants based on occupation. The other three consider entire categories of workers, including roofers, pro athletes, migrant workers and firefighters, who may pose too big a risk.

"This is something that has been actuarially determined to keep insurance affordable for a very broad range of people," said David Olson, a spokesman for Woodland Hills-based Health Net.
Individual policies are purchased by people who do not have job-based group health benefits. They are granted case-by-case, meaning in effect that health plans are free to choose whom to cover and what to charge them.

Studies show "guaranteed issue can price people out of the market, and, as public policy, it achieves the opposite goal of getting more people insured," said Shannon Troughton, a spokeswoman for WellPoint Inc., the Indianapolis-based parent company of Blue Cross of California.

The problem with adding even one high-risk member to an insurance plan is that the costs go up for everybody, said Tyler Mason, a spokesman for PacifiCare, a division of Minneapolis-based UnitedHealth Group Inc.

"It's the whole risk-pool thing, and one affecting the hundreds."

David Seldin, a spokesman for Blue Shield of California, a nonprofit health plan that favors universal coverage but nonetheless currently underwrites based on medical condition, prescription use and occupation, said the company would like to see the system changed.
"We think it's a bad system," he said. "We operate the same way as everybody else in the marketplace does, using the same actuarial data that everyone else in the marketplace does, because it's the only way to remain economically viable."

The health plans' actuarial determinations are not always the same. In the case of firefighters, PacifiCare lists them as ineligible, but HealthNet recently agreed to sell them coverage through the state firefighters association.

"This is one of the features of our polyglot system of health insurance," Health Net's Olson said. Health plans have "different approaches. Our view would be that's a good thing."

But consumer advocates say such policies are too restrictive.

"This isn't cherry picking; this is ignoring whole orchards of people," said Jamie Court, president of the Foundation for Consumer and Taxpayer Rights.

The issue comes as Gov. Arnold Schwarzenegger and state lawmakers are seeking ways to expand coverage to many of the 6.6 million uninsured Californians. The governor was set to announce his plan Monday.

Source: Associated Press (www.ap.org)

From: Insurance Journal (www.insurancejournal.com)

Calif. Insurance Commissioner Poizner Sworn In

Steve Poizner took the Oath of Office Monday afternoon, becoming California's new Insurance Commissioner. During his remarks, Poizner vowed to make the office bi-partisan, lower insurance rates by combatting fraud, and to help the state prepare for natural disasters.
Following is excerpted from his speech:

"First, we must divorce the job from 'politics as usual'. Consumer protection is not a Republican or a Democratic affair,' he said. "When I return to Sacramento, I'll call upon the Legislature to officially make this office non-partisan -- just like California's Superintendent of Public Instruction.

"In addition, this office must always be fiercely independent from those being regulated. I didn't take money from insurance companies in my campaign. I won't accept their donations during my tenure. To do so would be like refereeing a game while being on one of the team's payroll. When I return to Sacramento, I'll ask the Legislature to pass a new law banning contributions to my office from those who are regulated by, or do business with, the Department of Insurance.

"Second, I'll fight to lower insurance rates by aggressively attacking insurance fraud. Right now, insurance fraud takes $500 out of the pocket of every man, woman and child in this state. I'll enhance the capacity of the fraud units in my department to find and shut down insurance scam operations.

"And I will work with District Attorneys around the state to make the fraud unit so effective, and so renowned, that in California, criminals will be looking for honest work?.. or they will be looking through the bars of a prison cell.

"Third, I will work with the Governor and the state legislature to help prepare the state for the next major natural disaster. Hurricane Katrina was a huge wake up call. Yet experts believe that California is less prepared for a major disaster than Louisiana was. This needs to change.

"Last year marked the 100th anniversary since the great San Francisco earthquake of 1906 - one of the worst natural disasters ever in the history of our country . . . 8.25 on the Richter scale.

"It's time to review the insurance coverage offered by the California Earthquake Authority, especially given the fact that only one in eight homeowners in California even has earthquake insurance.

Underscoring his effort to strike a bipartisan tone at the agency, Commissioner Poizner also announced today that key executive staff members from the previous administration, including Chief Deputy Rick Baum and General Counsel Gary Cohen have accepted his invitation to remain on board for the near term to ensure a smooth transition.

The inauguration took place in front of 500 of Silicon Valley's leaders at the Tech Museum of Innovation in downtown San Jose.

Former Bay Area State Senator and current Superior Court Judge Quentin Kopp administered the Oath to Poizner, who was joined by his wife Carol and their 15-year old daughter Rebecca.
Commissioner Poizner plans to travel this week to the Department of Insurance's three main offices (Sacramento, San Francisco and Los Angeles) to meet with the agency's 1,300 employees.

For more information about the Commissioner Poizner and the Department of Insurance, visit www.insurance.ca.gov.

Source: California Department of Insurance (www.insurance.ca.gov)

From: Insurance Journal (www.insurancejournal.com)

Report: Nearly 20% of Customers Consider Switching Insurers After Collision

Nearly one out of every five customers considers switching insurance companies after experiencing the collision claim process, according to the J.D. Power and Associates 2006 Collision Repair Satisfaction Study.

"Filing an insurance claim is a critical moment of truth that shapes a customer's overall perception of their insurer," said Jeremy Bowler, senior director of the insurance practice.

"Often, this is the first time they truly become familiar with their insurance policy.

Misconceptions about what is covered by the auto policy, or what to expect during the claim and repair processes can lead to significantly lower customer satisfaction, which in turn increases the likelihood that the customer may consider switching carriers in the future."

The study finds that 7 percent of customers chose not to file a claim with their insurer after their most recent collision. Common reasons include: the insurance deductible was more than the cost of the repairs; concern that the carrier would increase the premium after the claim; or at the advice of their insurance agent.

"Before filing an insurance claim for minor damage, customers may want to first get an estimate for the cost of repairs," said Bowler. "If it's less than the deductible on the policy, the insurer will likely not cover any of the expense anyway."

Additionally, while more than 30 percent of auto insurance customers who chose not to file a claim after a collision feared their premium would increase, 62 percent of respondent who did file a claim more than six months prior to being surveyed indicate their premium has not been re-adjusted by their insurer.

According to the study, the factors that drive customer satisfaction with a repair include: claims/estimation (62%); body shop (36%); and rental car (2%).

With a score of 821 index points on a 1,000-point scale, Amica Mutual ranked highest in satisfying claimants with the collision repair process, receiving the highest ratings from customers in the claims/estimation factor. Erie Insurance and State Farm, respectively, follow Amica Mutual in the overall ranking. USAA, an insurance provider open only to the U.S. military community and their families and therefore not included in the rankings, also had a high level of customer satisfaction.

The study also found that claimants whose vehicles are totaled rather than repaired are significantly more satisfied if their insurer gives them a clear explanation of why the vehicle is totaled and how they calculated the settlement amount. Nearly 85 percent of total loss claimants receive an explanation of why their vehicle is being totaled and how their actual cash value settlement is derived.

"The difference in satisfaction is primarily driven by how well the insurer manages the claims process, which is significantly longer for claimants experiencing a total loss," said Bowler.

"However, when the damage exceeds $5,000, total loss claimants tend to be significantly more satisfied with their collision experience, perhaps due to concerns surrounding repair quality and diminished value of the vehicle."

The 2006 Collision Repair Satisfaction Study is based on responses from 5,752 customers who have had collision damage repaired on their vehicle or have had a total loss within the past 12 months.

Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered marketing information services firm and a business unit of The McGraw-Hill Companies.

Source: J.D. Power and Associates (www.jdpower.com)

From: Insurance Journal (www.insurancejournal.com)

DOI Taking Over Insurance Firm

By Lee Weisbecker
Triangle Business Journal

North Carolina Insurance Commissioner Jim Long is taking over the claims paying and financial administration of the Phoenix Fund, a self-insurance pool created by small companies to provide workers' compensation coverage.

Based in Charlotte, Phoenix is one of about a dozen self-insurance pools in the state. It currently has about 573 member companies statewide and annual premiums of about $27 million.

Long, according to a judge's recent order, will place the company under so-called rehabilitation, a legal status allowing DOI regulators to take over all Phoenix assets, including cash, securities and bonds. Rehabilitation also grants DOI full access to the company's financial records.

DOI will pay any outstanding claims, even as it drafts a business plan to put the firm back on solid financial footing or looks for potential buyers of the company's assets. Failing that, regulators could seek to liquidate Phoenix in a proceeding similar to bankruptcy.

DOI spokeswoman Chrissy Pearson declined to discuss Long's actions beyond the court documents filed in the case.

Those documents show that DOI's questions and concerns over the financial stability, record keeping and reinsurance record of Phoenix go back over a period of eight years and include one allegation that Phoenix spent $20 million to purchase reinsurance but "has obtained no valid reinsurance coverage in exchange for those premiums."

Under state law, insurance pools are required to purchase reinsurance, which essentially is a contract the pool signs with another insurance company. Under the terms of the contract, the pool transfers a part of its claims risk and potential losses to the reinsurer, which collects a fee for its services.

In court papers, DOI regulators say they examined a reinsurance contract that Phoenix allegedly drafted with a German company called Hannover Ruckversicherung AG but found that "the purported reinsurance contact is a forgery."

In other findings, regulators say the pool failed to keep adequate financial reserves on hand against potential losses, issued workers' comp coverage certificates to ineligible clients, and that its premium income was inadequate to sustain operations.

Phoenix was showing an underwriting loss of $4.6 million as of Dec. 31, 2005, say the court documents.

A company identified in court documents as National Benefits of America Inc. serves as the third party workers' comp administrator for both the Phoenix Fund and the North Carolina Chamber of Commerce Self Insurance Fund.

In 2002, regulators say, Phoenix was released from a four-year period of DOI supervision after National Benefits pumped $700,000 into Phoenix to support its bottom line.

Two administrators at National Benefits said through a spokeswoman that they would have no comment. Repeated attempts to reach Raleigh attorney Robert Paschal, who represented Phoenix in DOI's action against the company, were not successful.

From: Triangle Business Journal (www.bizjournals.com)

Growing Insurance Player Brooke Banking on Sacramento Region

By Kelly Johnson
Sacramento Business Journal

Greater Sacramento is looking good to a fast-growing network of franchised insurance agencies.
Brooke Franchise Corp., whose parent is Brooke Corp. (Nasdaq: BXXX), has 750 locations operating in 29 states. After expanding its local presence last year, Brooke now considers Sacramento among its top five markets, both in terms of existing locations and the potential for new offices.

"Sacramento is real high on our list," said Nick Rhodes, who manages advertising, branding and marketing for Brooke's franchisees.

Brooke, the nation's only franchised chain of insurance agencies, is still far from being a recognized brand. Even some of Sacramento's largest insurance brokers are unfamiliar with the company. But Brooke's presence and numbers are growing.

Four years ago, Brooke had about 100 locations. It added 198 locations in the past year, and 182 in 2004. Brooke Corp., the parent company based in Overland Park, Kan., reported profit of $9.7 million on revenue of $145.4 million in 2005, compared to $6.7 million profit on $101.9 million in revenue the previous year.

In July, trade publication Business Insurance ranked Brooke No. 22 on its list of Largest Insurance Brokers of U.S. Business. And Entrepreneur Magazine this year ranked Brooke the 17th fastest-growing franchise.

Franchise building

The four-county area has a dozen Brooke Insurance & Financial Services offices, which entered the state in 2004. Brooke's largest franchisee is Fausto Bucheli Jr., who has seven locations in the region and 20 overall. Collectively, his locations employ 70 people and generate about $100 million in annual premium, predominantly in auto insurance. His annual revenue is about $10 million.

In June, Bucheli took over Capitol City Auto, an agency with five locations including one in Sacramento. In 2005, Bucheli gained the 15 locations of Cheap Insurance when owner Dave Hosford retired.

"My goal is to have between 60 and 100 locations in California within three years," Bucheli said.
Brooke acquires the existing brokerages and then sells them to franchisees. The company bought the brokerage portion of Gold River-based InsWeb Corp. in the spring and distributed the business to different franchisees. Brooke provides franchisees access to many insurers they might not otherwise have. All revenue goes to Brooke and is funneled back to the franchisees.
This is a good time in the insurance market for Brooke, company representatives say. A large percentage of insurance agents, especially independent owners, are reaching retirement age.
"They're ready to get out and retire and cash out their chips," Rhodes said. "We're trying to give these guys a perpetuation model."

In addition, consumers increasingly turn to brand names so they can feel confident they'll receive consistent quality in a product or service. Sacramento has seen efforts to bring a national brand to martial arts with Kovars and massage with Massage Envy. Insurance is no different.
Brooke sees its competition as other independent agencies and direct writers such as State Farm Insurance Cos. and Allstate Insurance Co. Brooke has three different agency models: auto, general lines and business insurance. Its largest category is auto, followed by homeowners.
The bulk of its franchisees are small mom-and-pop operators with one or two employees in one location.

Brooke focused on growing through acquisitions during its first 15 years. The company has had a lot of success the past three years with startup agencies, Rhodes said. More than half of Brooke's future growth will come through startups, he added. 'An endless amount of money'

David Nielson isn't sold on the business model. This summer, he and partner Andy Byers sold off the 28 locations of their Sacramento-based insurance brokerage NBI, but not to Brooke. The company approached them four years ago, but they declined.

Brooke "pretty much calls all the shots," Nielson said. "The franchisee has no control over their destiny."

"I've never seen anybody as aggressive as them," said Mark Schmoekel, who has operated a Sacramento auto brokerage bearing his name for 42 years. He said he gets two letters a month from Brooke asking him to sell. He said he won't sell to Brooke. Some of Brooke's franchisees don't have much insurance experience, he said.

But locals who have sold to Brooke are said to have been well-paid.

"They apparently have an endless amount of money," Schmoekel said.

Greater Sacramento's three largest Brooke franchisees said they have great expectations for Brooke.

A key factor in Brooke's growth is its financing arm, said Nick Brozdounoff, who was Sacramento's first Brooke franchisee. Brooke Credit Corp. lends money to franchisees to buy an existing agency or start a new one. Few players could have bought all 15 locations of Cheap Insurance, Brozdounoff noted, but the financing arm enabled Bucheli to do so.

The credit subsidiary allowed Brozdounoff in 2004 to buy out partners of his Sacramento independent agency and convert to the Brooke brand, and later buy two locations of the former Budget Insurance. His three Sacramento locations sell home, auto and commercial insurance and collect a combined $500,000 in annual premium. Brozdounoff, a native Russian fluent in the language, has developed a niche in serving the Russian community.

Brozdounoff spent 13 years as an Allstate agent. "I understand the importance of name branding," he said.

He and other franchisees also benefit from Brooke's support, which allows them to operate with fewer workers. When Brooke acquires existing agencies, support staff is reduced or eliminated.
Gary Spangler set up shop as a Brooke franchisee in July 2005 by acquiring the three offices of the former Tri-Valley Insurance. He's grown his premium volume to $20 million from $15 million at the time of the acquisition. About 70 percent of his business is commercial, with the rest in home and auto.

Spangler had been a vice president with a large employee-owned brokerage in Mountain View. He switched to Brooke because he wanted to own his own business, and he was tired of the commute from Rocklin. The corporation's support, he said, has been "phenomenal."

"I think we'll definitely be a notable competitor, but nothing that will rock the ship," he said of the Brooke chain. "There's plenty of business for everybody."

From: Sacramento Business Journal (www.bizjournals.com)

Steve Poizner Takes Oath of Office as California’s New Insurance Commissioner Today

Steve Poizner took the Oath of Office today, becoming California's new Insurance Commissioner. The inauguration took place in front of 500 of Silicon Valley's leaders at the Tech Museum of Innovation in downtown San Jose.

Former Bay Area State Senator and current Superior Court Judge Quentin Kopp administered the Oath to Poizner, who was joined by his wife Carol and their 15-year old daughter Rebecca.
Former San Jose Mayor Tom McEnery, Sheriff Laurie Smith, and Santa Clara University President Reverend Paul Locatelli participated in the ceremony.

Underscoring his effort to strike a bipartisan tone at the agency, Commissioner Poizner also announced today that key executive staff members from the previous administration, including Chief Deputy Rick Baum and General Counsel Gary Cohen have accepted his invitation to remain on board for the near term to ensure a smooth transition.

The post-Inaugural lunch entertainment featured comedian Kevin Pollak - a Silicon Valley native and veteran actor who has appeared in over 50 films. Pollak was recently named by Comedy Central as one of the top 100 comedians of all time.

Commissioner Poizner will travel this week to the Department of Insurance's three main offices (Sacramento, San Francisco and Los Angeles) to meet with the agency's 1,300 employees.

Excerpts from Commissioner Poizner's Inauguration speech follow:

"We're holding this celebration in San Jose, rather than in Sacramento today because Silicon Valley is more than my family's backyard. It's where my dreams began when I first arrived here nearly 30 years ago.

"Silicon Valley is more than a place on a map. . . it's a mindset. Here, original thought is promoted . . . risk taking is encouraged…and creativity is embraced.

"Silicon Valley is also a collaborative community . . . people with diverse backgrounds and a shared vision pushing the envelope . . . testing and perfecting ideas that will make lives better for literally millions of people around the globe. "The theme of my campaign was 'the power of new ideas.' It is the expression of everything that Silicon Valley represents and it is this spirit I want to export to Sacramento and to our state government.

"Because if we don't . . . if we don't take a new approach to how the state does its business - and how our leaders go about their business . . . then California will no longer be at the forefront of progress and prosperity. And our children won't be able to experience the California dream as we have. The closest they'll come to it is in their history books.

"One of my favorite books talks about this - maybe you've read it: "The World Is Flat", by Thomas Friedman. Friedman talks about big events and trends just in the last 20 years that have transformed world politics and economics: the Berlin Wall coming down . . . Netscape going public . . . insourcing, outsourcing and offshoring . . . 300 million new hard-working, highly educated competitors from India, China and Russia who can simply plug in to compete head-to-head with Californians.

"If Tom Friedman wrote a sequel 20 years from now, what would he have to say about the California of today?

"Will he write that we used this time to build a more powerful, durable economic engine and improve our social structure so that every citizen has the opportunity to be well-educated and fully employed?

"Or will he conclude that California lost out permanently… because we suffered from a major design flaw - namely, a political system that was too partisan, too controlled by special interests, and too self-absorbed to realize that urgent action was needed?

"I intend to run the Department of Insurance in a non-partisan manner, independent and citizen-focused. Our mantra will always be "California First".

"The Insurance Commissioner is one of the very few jobs that has a very real impact on the well-being of every individual, family and business in the state of California.

"The Insurance Commissioner regulates close to 15% of the entire California economy - everything from workers comp to life insurance.

"Insurance must be made available to all Californians at fair and reasonable prices.

"Essential to that goal is an insurance marketplace where competition is robust, and insurance companies are held accountable for solvency, for claims practices, and for representations and recommendations they make.

"I'll build upon the strong foundation at the California Department of Insurance to make it the single best consumer protection agency in the country.

"Initially, we will focus on three major initiatives.

"First, we must divorce the job from 'politics as usual'. Consumer protection is not a Republican or a Democratic affair.

"When I return to Sacramento, I'll call upon the Legislature to officially make this office non-partisan - just like California's Superintendent of Public Instruction.

"In addition, this office must always be fiercely independent from those being regulated. I didn't take money from insurance companies in my campaign. I won't accept their donations during my tenure. To do so would be like refereeing a game while being on one of the team's payroll. When I return to Sacramento, I'll ask the Legislature to pass a new law banning contributions to my office from those who are regulated by, or do business with, the Department of Insurance.

"Second, I'll fight to lower insurance rates by aggressively attacking insurance fraud. Right now, insurance fraud takes $500 out of the pocket of every man, woman and child in this state. I'll enhance the capacity of the fraud units in my department to find and shut down insurance scam operations.

"And I will work with District Attorneys around the state to make the fraud unit so effective, and so renowned, that in California, criminals will be looking for honest work….. or they will be looking through the bars of a prison cell.

"Third, I will work with the Governor and the state legislature to help prepare the state for the next major natural disaster. Hurricane Katrina was a huge wake up call. Yet experts believe that California is less prepared for a major disaster than Louisiana was. This needs to change.
"Last year marked the 100th anniversary since the great San Francisco earthquake of 1906 - one of the worst natural disasters ever in the history of our country . . . 8.25 on the Richter scale.

"It's time to review the insurance coverage offered by the California Earthquake Authority, especially given the fact that only one in eight homeowners in California even has earthquake insurance.

"This is the challenge I've accepted - transforming the post of Insurance Commissioner from simply a compliance officer… into the state's Chief Risk Manager.

"I think it's fair to say that you and your fellow Californians have taken out a four-year policy on me. Here's what that policy entitles you to: an Insurance Commissioner guided by a nonpartisan compass . . . committed to driving down the cost of insurance for everyone . . . and doing what it takes to prepare for the future…

"On behalf of Carol and Rebecca, thank you for joining me today. And thank you for joining with me to continue building upon this remarkable start-up that we call California."

For more information about the Commissioner Poizner and the Department of Insurance, visit www.insurance.ca.gov.

From: California Department of Insurance (www.insurance.ca.gov)

Schwarzenegger's Proposal to Insure Illegal Aliens Opens Californians to Billions in Additional Costs

Gov. Arnold Schwarzenegger's proposal to provide health coverage to every child in California, including illegal aliens, could leave the state liable for untold billions in unforeseen costs in the future, warns the Federation for American Immigration Reform (FAIR). The conservatively estimated cost of $400 million a year could easily balloon to many times that figure. Costs will grow as the numbers of illegal aliens in California increase and may rise even more dramatically as legal residents of other states take advantage of a federal law that requires that state benefits made available to illegal aliens must be made available to all legal U.S. residents.

The irony of Gov. Schwarzenegger's proposal to publicly fund health insurance for an estimated 6.5 million residents who lack basic coverage is that illegal immigration has been one of the key factors in creating millions of uninsured Californians. A large percentage of U.S. citizen children without coverage are the offspring of illegal immigrants. Moreover, the presence of millions of low-wage illegal aliens in the California labor force has led to many employers dropping coverage that they used to provide to workers and their families.

"Gov. Schwarzenegger's proposal, if enacted, would create yet another magnet attracting still more illegal aliens to California," commented Dan Stein, president of FAIR. "Illegal aliens themselves will be attracted by this very generous benefit the governor wants to make available, and the knowledge that the taxpayers will pick up the tab for health insurance will convince still more California employers to shift that cost burden to the public."

Another factor apparently not accounted for by Gov. Schwarzenegger is a provision of a 1996 federal immigration law that requires a state that provides a benefit to illegal immigrants to make that same benefit available to all legal residents of the U.S.

"There are millions of children all across the country who do not have health insurance," observed Stein. "If this proposal is enacted, all of them could claim the same health benefits in California, according to federal law. Gov. Schwarzenegger is either unaware of this law, or ignoring it."

California voters have made it repeatedly clear that they oppose granting benefits to illegal aliens and that they demand fiscal responsibility from their elected officials.

"The governor's proposal runs afoul of the public's distaste for being burdened with the costs of illegal immigration -- even if the state had the resources, which clearly it does not. In addition to creating a vast and expensive new entitlement for illegal aliens, Gov. Schwarzenegger's plan is short on details about how he plans to pay for it now and into the future," said Stein."

Illegal immigration is the leading cause for the increase of uninsured families in California and throughout the U.S. The problem can only be addressed by enforcing laws against illegal immigration, not through unsustainable schemes that will only encourage more illegal immigration," Stein concluded.

The Federation for American Immigration Reform (FAIR) is a national, non- profit, public interest membership organization of concerned citizens who share a belief in stronger border enforcement, an end to illegal immigration, and a reduction of immigration levels consistent with national interests.

Source: Federation for American Immigration Reform (www.fair.org)

From: Insurance News Net (www.insurancenewsnet.com)

Purdue Study: Drivers' Age and Gender Major Factors in Severity of Accident Injuries

Understanding the differences among drivers in different gender and age categories is crucial to preventing serious injuries, according to researchers in a new study showing stark statistical differences in traffic-accident injuries depending on the gender and age of drivers.

The new findings are especially important because the number of drivers 65 and older is expected to double by 2030 in the United States to 70 million, said Fred Mannering, a professor of civil engineering at Purdue University and the study's co-author. National statistics show that fatalities rose by 7 percent for drivers 75 and older from 1981 to 2000, remained steady for drivers from 65-74, but dropped for younger drivers.

"It is reasonably well known that age and gender have an effect on the likelihood of an accident, but the influence that age and gender have on driver injuries once an accident has occurred is not well understood," Mannering said.

The Purdue researchers found statistically significant differences in the severity of injuries suffered in accidents involving men and women drivers and drivers within three age groups: young drivers, 16-24; middle-aged drivers, 25-64; and older drivers, 65 and above.

"Because the factors that affect how severely you are going to be injured vary depending on your age and gender, a better understanding of age and gender differences can lead to improvements in vehicle and highway design to minimize driver injury severity," Mannering said. "What is clear is that safety research and policy must begin to seriously address gender- and age-related matters because there are compelling differences and considerable potential to improve safety if these differences are properly addressed."

Findings were detailed in a paper published last year in the Journal of Safety Research. The paper was written by Purdue doctoral student Samantha Islam and Mannering.

The researchers used mathematical models to calculate various probabilities using data from one-vehicle accidents in Indiana.

The study included findings showing that:

* Accidents involving an overturned vehicle increased the likelihood of a fatality by 220 percent for older men and only 154 percent for young men. For women, rollover accidents increased the likelihood of fatality by 523 percent for older women and only 116 percent for young women.

* Vehicles carrying one or more passengers at the time of the accident increased the likelihood of driver fatality by 114 percent for young men and 70 percent for middle-aged men, but had no significant effect on the injury levels of older male drivers.

* Vehicles less than five years old increased the likelihood of fatality for older men by 216 percent and for young men by 71 percent, but did not have a significant effect on the likelihood of a fatality for middle-aged men.

* Not using safety belts increased the likelihood of injury by 119 percent for young women, 164 percent for middle-aged women and 187 percent for older women.

* Accidents occurring in rural areas increased the likelihood of fatalities by 208 percent for young women but had no significant effect on the injury levels of other female age categories.

* Vehicles six years old and older increased the likelihood of injury for middle-aged female drivers by more than 200 percent but had no significant impact on the injury levels of other female age categories.

* Fatalities were more likely for middle-aged men who fall asleep at the wheel, exceeded the speed limit, got into an accident at an intersection or had an accident after midnight on Friday or Saturday, while the same factors had no significant effect on the injury levels of middle-aged female drivers.

* Injuries were shown to be more likely for middle-aged women who drive during daytime hours, drive while under the influence of alcohol or drive while ill, while the same factors did not significantly influence the injury levels of middle-aged male drivers.

* Driving on curvy roads and driving vehicles six years old and older increased the likelihood of injury for middle-aged female drivers but were found to have no significant effect on the injury levels of middle-aged male drivers.

"We can only speculate as to why these differences exist," Mannering said. "Possibilities include differences in reaction time and physical differences relating to height, weight and body structure and vehicle design attributes that affect drivers differently. Another possibility is that vehicle safety systems, such as safety belts and airbags, may be more effective for some age and gender categories than for others."

While alcohol played a role in some categories, such as middle-aged female fatalities, its impact was not statistically significant for most age and gender categories, Mannering said.

"In many cases, alcohol consumption may have an indirect effect by increasing the probability of not wearing a safety belt, speeding and the likelihood of certain types of collisions, but once you know these factors, the direct effect of alcohol on injury severity may not be statistically significant," he said. "For the most part, if you are drunk and hit a utility pole at 70 mph, you will have the same injury probabilities as if you are sober and hit a utility pole at 70 mph. On the other hand, whether you would have been going 70 mph and hit the utility pole if you were sober is another question - one that we do not address in this paper because our statistical models are conditioned on the accident having occurred."

Future areas of research should be pursued, Mannering said, including an expansion of analyses to consider accidents involving more than one vehicle and accidents in other geographical areas; analyses of the effect of various vehicle safety systems on drivers of different height, weight and body structures; and comprehensive analyses of male and female age-related responses in accident situations.

Source: Purdue University (www.purdue.edu)

Source: Newswise (www.newswise.com)

From: Claims Guides (www.claimsguides.com)

AAA Opens First Arizona Insurance Office

By Cathy Luebke
Insurance Journal of Phoenix

AAA Arizona Thursday announced the opening of its first insurance sales office in Arizona.
The office at 2743 S. Market St. in Gilbert will offer all of the services that AAA provides, including auto, home, life, health, boat, and RV insurance.

A second office is planned for the Goodyear area in summer 2007 to serve the West Valley, said Public Affairs Manager Linda Gorman. While the concept of independent sales offices is new to AAA, the organization has long sold insurance, she said. The idea is to reach out into local neighborhoods beyond the group's headquarters in central Phoenix.

Additional expansion opportunities will be considered as the new operations are evaluated in the next six months, Gorman said.

AAA Arizona, the Arizona affiliate of AAA, provides emergency road help, insurance and auto travel services to nearly 750,000 Arizona members. For more: www.aaa.com.

From: Insurance Journal of Phoenix

Texas Agent Replaces Gecko Ads with 'The Middle Man' Campaign

The Al versus The Gecko ad campaign has been replaced by "The Middle Man." According to Al Boenker, CEO of Al Boenker Insurance Agency in North Texas, the term middle man has long been a negative in American business, but he aims to change that perception with his new ad campaign.

"Everyone needs the middle man," says Boenker. "I believe we can turn the term into a positive, as we show North Texas consumers the benefits of the independent agent."

Boenker starts his ads with examples of bad situations caused by a lack of the middle man: surgery without an anesthesiologist, taxes without a CPA, a trial without your lawyer. He then states the value of contacting the Al Boenker Insurance Agency and allowing him to act as their middle man.

"We represent numerous insurance companies, so you can find the best rate. Call a company direct and all you get is their one rate," states Boenker. "Save money with the middle man."
The campaign has been pre-released on 10 radio stations in Dallas / Fort Worth and network TV.

The agency is promoting the campaign at www.thanksal.com.

"For far too long the middle man has been associated with overhead, mediocrity and something no one should aspire to be," says Boenker. "We're taking ownership of the term and informing consumers what a value it is to have a middle man watching out for them.

The Al Boenker Insurance Agency will celebrate 35 years in business this January. Owner Al Boenker started the agency in Fort Worth in 1972.

"We've been acting as the middle man for 35 years in order to help consumers understand insurance and save money." says Boenker.

Boenker was forced to shut down a previous campaign, which featured an actor dressed up as a gecko, by a cease and desist order initiated by GEICO.

From: Insurance Journal (www.insurancejournal.com)

Consumer Group to Unleash Attack on P/C Insurers for 'Overcharging'

On Monday, January 8, the Consumer Federation of America says it will release new data demonstrating that "auto and home insurers dramatically increased profits and surplus in recent years, in part by systematically overcharging for insurance and by shifting costs to consumers and taxpayers."

CFA said it will provide detailed information on the strategies that insurers have used to, as it claims, "inappropriately shift costs and on how state and federal policymakers can prevent these practices."

The report is being released as many insurers are increasing premiums for homeowners insurance and in some cases reducing or eliminating coverage in coastal areas.

CFA said its data will show that insurers are offering the "lowest payouts to consumers in over 50 years, in part because policy coverage cutbacks have made insurance less valuable."

CFA is also criticizing insurers for asking Congress to continue taxpayer subsidies for terrorism losses and to create a federal catastrophe insurance program that could also involve taxpayer subsidies.

The news conference is scheduled for 10 am at the National Press Club in Washington, D.C.
The speakers will be J. Robert Hunter, director of insurance for CFA and Travis B. Plunkett, legislative director for CFA.

Source: Consumer Federation of America (www.consumerfed.org)

From: Insurance Journal (www.insurancejournal.com)

With Ad Deal, Insurer Wades Into Bridge Traffic

By Ken Belson
New York Times

Drivers crossing the George Washington Bridge must contend with 18-wheelers, infuriating delays and noxious exhaust. Soon, they will also have advertisements from Geico.

The Port Authority of New York and New Jersey is expected to announce an arrangement with Geico, the auto insurance giant, that will include the posting of a huge billboard on top of the toll plaza in Fort Lee, N.J., that says “Geico Drive Safely.” Drivers will also see Geico signs with the company’s mascot, a gecko, on the tollbooths and electronic signs on the approach roads.

Geico’s message will also be integrated into the Port Authority’s direct mailings and its Web site, and costumed gecko mascots will appear at Port Authority bus stations.

The arrangement, first reported in The Wall Street Journal, will provide the agency with $3.2 million over two years. It is the first of its kind for the Port Authority, which has been trying to find new sources of revenue to offset rising costs, said Stephen Sigmund, the agency’s chief of public and government affairs.

Geico is not the first company to think about buying a bridge — or at least the advertising rights to one. And other public agencies have been exploring unconventional ways to bring in more money, even if it means toying with long-held taboos about commercializing public spaces. The Golden Gate Bridge, Highway and Transportation District, for instance, is exploring how to sell sponsorships in San Francisco.

Mr. Sigmund said the Port Authority had been looking for the right advertisers since at least 2005, adding that Geico was a natural since it is one of the country’s largest and best-known auto insurers.

“This is more than just eyeballs; it’s about reinforcing a message about a bridge that people have an endearing feeling to,” said Drew Sheinman, chief executive of Axcess Partners Worldwide, a marketing company hired by the Port Authority to develop new advertising.
Mr. Sheinman said that under the agreement, no other signs can compete with Geico’s at the bridge, which may allay fears that the toll plaza will become overrun with ads.

“This is not going to be left field at Yankee Stadium,” he said.

Brand experts questioned whether Geico, which has won plaudits for its imaginative advertising campaigns, may turn off customers and dilute its name by making it too prominent.

“Since advertisers have generally lost some degree of control over what messages get into people’s lives, consumers resent getting them foisted on them,” said Robert Passikoff, the president of Brand Keys, a brand consultant.

But, Mr. Passikoff added, consumers may warm to the Geico ads as well as others on prominent public buildings and bridges if they know the proceeds are being used to improve service.

From: New York Times (www.nytimes.com)

Deer Accidents Are Often Not Covered

By Christine Dugas
USA Today

Insurers in states with high rates of deer-vehicle crashes are trying to get the word out this winter: Check your auto policy.

Cold months are peak season for deer-vehicle crashes, especially given the soaring deer population. Thousands of the 1.5 million drivers who hit deer last year found out the hard way that their auto insurance did not cover damage to their vehicle. Only comprehensive insurance pays up in such crashes. "Many people are not aware that the collision coverage under an automobile insurance policy does not cover you if you hit a deer," says Wisconsin Commissioner of Insurance Jorge Gomez.

Nationally, 36 million auto owners don't have comprehensive insurance, says the National Association of Insurance Commissioners (NAIC). Many drivers drop comprehensive coverage because they decide their vehicles are too old or worth too little to justify the cost.

For example in Michigan, the state with the second-largest number of deer accidents, comprehensive policies dropped by 16,000 in 2003, according to a recently released NAIC report. Insurers say that's risky for vehicle owners in states with large deer populations.

Pennsylvania, which tops the list of states with the most deer-related accidents, is bucking the downward trend. The number of policyholders in the state with comprehensive policies actually increased by 85,000 to 6.3 million in the most recent year available, according to the NAIC. And one Pennsylvania-based insurer says its deer-related accident claims have declined in each of the past two years.

Erie Insurance, which operates in 11 states, credits a driver education program it began in 1999 with helping to avoid crashes. In the past year, its deer-related collision claims declined by 6%, even though more drivers were covered.

Deer crashes result in at least $1.1 billion a year in vehicle damage, says the Insurance Institute for Highway Safety.

On average, the collisions cost $2,800 per insurance claim; $10,000 if there is injury to the driver or a passenger, according to the Insurance Information Institute.

Lorie Honor applauds Erie's driver education program and is urging a coordinated national campaign by the insurance and highway safety industries and wildlife management to provide Americans with more information and education about deer accidents. "There is a huge hole in public safety," she says. Honor became involved after her brother, Paul Bollmeyer, and two friends were killed in Wyoming in November. Their vehicle hit a deer and spun into the path of a tractor-trailer.

About 200 deaths every year are the result of animal-auto accidents — most involving deer, according to the federal government data.

From USA Today (www.usatoday.com)

Brooke's Purchase Of Generations Bank Gains Ok

Federal regulators have approved Brooke Corp.'s purchase of Generations Bank from Kansas City Life Insurance Co., Brooke said in a Securities and Exchange Commission filing today.
Formal closing of the transaction is expected later this month, the Overland Park financial services franchiser said in the filing. Brooke announced a year ago it planned to buy the bank for $10.1 million after a previous purchase offer for that price, from private investors in October, 2004, expired while waiting for Office of Thrift Supervision approval.

Generations Bank, with approximately $55 million assets, is a primarily on-line bank that Kansas City Life opened in July, 2000, to augment the company's traditional life insurance and annuities businesses. Brooke has said it wants to add banking products to other financial services it offers through a network of more than 700 insurance agency offices across the U.S.

In late-morning trading on the Nasdaq Stock Market, Brooke Corp. shares were up 10 cents at $11.60.

Source: Kansas City Star (www.kcstar.com)

From: Insurance News Net (www.insurancenewsnet.com)

Bank of the West Picks Up Two More Insurance Agencies

San Francisco-based Bank of the West kicked off the new year with the acquisition of two insurance agencies, bringing to eight the number of agencies the bank has acquired since December 2005.

This week the bank's BW Insurance Agency said it bought Contractor's Insurance Services Inc. in the Portland suburb of Tualatin, Ore., and closed on its acquisition of Omaha-based agency Nabity-Perry Insurance Inc.

"This acquisition is a logical extension of BW Insurance Agency's expansion into Bank of the West markets, giving us BWIA presence for the first time in the Pacific Northwest," said Tom Anderson, president of BWIA, said of the Contractor's transaction.

Bank of the West is a unit of BancWest Corp., which is owned by BNP Paribas SA.

From: San Francisco Business Times (www.bizjournals.com)

State Farm Requests 30 Percent In Reductions

By Kelly Johnson
Silicon Valley / San Jose Business Journal

State Farm Insurance Cos. has asked state regulators for approval to reduce homeowners rates by 20 percent and auto insurance rates by 10.1 percent, marking the insurer's largest-ever combination rate cut in California.

State Farm's 3 million auto policyholders would collectively save $259 million, while 1.4 million homeowners, renters and condo owners in the Golden State could save $230 million. The rate decreases would take effect in early March for auto, and late April for homeowners.

Most of State Farm's customers would enjoy some savings, but policyholders who buy both home and auto from State Farm would experience the most significant decreases, the insurer said in a news release Wednesday. Discounts would increase depending on the number of years the policyholder has been insured by State Farm, the type of policies held and other factors.

State Farm, the state's largest insurer for both home and auto, initially asked for a 10.6 percent decrease for homeowners in September, but later added another 9.4 percent to the request.
The insurer also reduced homeowners rates by 6.2 percent in 2005. It decreased auto rates 7.6 percent in 2004 and 4.2 percent in 2005.

From: Silicon Valley / San Jose Business Journal (www.bizjournals.com)

Ind. Commissioner Revokes License When Agent Gambles Away Premiums

An insurance agent will lose her license after state officials said she spent customers' money on gambling and clothing instead of using it to pay their premiums.

Investigators said Daneile Frydrych, owner of All Star Insurance in South Bend, spent money intended for customers' home and vehicle policies at casinos in Las Vegas and Michigan City, at clothing and book stores, and at a local adult entertainment store.

"Frankly I think it's the tip of the iceberg,'' attorney Jim Holden, chief investigator for the Indiana Department of Insurance, said during a public hearing in Indianapolis during which some of Frydrych's customers testified.

Frydrych did not attend the hearing. There was no number under her name in published listings for South Bend and a phone rang unanswered at All Star Insurance.

State Insurance Commissioner Jim Atterholt said he would allow 30 days for additional complaints, after which he would revoke Frydrych's license. Her license already has been suspended.

Atterholt said he also would order Frydrych to make restitution and pay $285,000 in fines. He said her customers likely lost more than $1 million, counting premium fees and expenses they incurred while uninsured.

Ronda Ankney, an investigator with the state insurance department, said Frydrych had received "at least 100" complaints about All Star. No one spoke on Frydrych's behalf during the hearing.

Source: Associated Press (www.ap.org)

From: Claims Guides (www.claimsguides.com)

Despite 2004 Ruling, Mexican Truck Travel Still Limited

Mexican trucker Brigido Moctezuma lives in a city just south of Mexico's border with Texas, far from talks on whether he'll be able to drive his loads of vehicle air bags all the way to assembly lines in Detroit.

All he knows is that he and his boss' fleet of trucks are ready, and have been for years.

"The line is ready. We've bought many new trucks; everything is in good order,'' he said. "But it seems like every time it almost happens that we can go, it doesn't.''

Access to all U.S. highways was promised by the year 2000 under the 1993 North American Free Trade Agreement, as was access through Mexico for U.S. carriers. A similar exchange with Canada has been carried out without a hitch.

But U.S. trucking companies, unions and environmental groups blame Mexico's loosely regulated trucking industry. They contend that trucks used by Mexican carriers are older and poorly maintained, the result of that country's less stringent environmental and safety standards. The provision will cost Americans thousands of jobs, pollute the air, damage highways and threaten national security, they say.

Mexican carriers insist their rigs meet U.S. standards. Meanwhile, however, their trucks can't go beyond a 20-mile border zone in Texas.

Mexico has said the United States is reneging on part of its NAFTA role, and a February 2001 international arbitration panel agreed.

President Bush said in 2001 said he would allow the trucks, and a June 2004 decision by the U.S. Supreme Court seemed to remove the last legal barrier.

In an unanimous decision, the court said that the president - not federal agencies - had ultimate say on whether the trucks could enter.

The ruling in response to a lawsuit by Public Citizen against the U.S. Transportation Department rendered moot the nonprofit organization's efforts to keep out Mexican trucks until air quality issues are studied.

Justice Clarence Thomas wrote for the court that agencies may not "countermand the President's decision to lift the moratorium or to act categorically to prevent Mexican carriers from registering and Mexican trucks from entering the country.''

But two and a half years later, the trucks still aren't rolling.

Ian Grossman, spokesman for the Federal Motor Carrier Safety Administration , said a safety plan for Mexican trucks is ready should the highways be opened. But he added negotiations with Mexico are ongoing.

He said he was not at liberty to discuss the details.

"There's a number of topics that continue to be ironed out,'' he said.

A Bush spokesman said Grossman was the administration's spokesman on the trucking issue.
Joan Claybrook, president of Public Citizen and the former head of the NHTSA, said the sticking point is legislation calling for U.S. inspectors to perform safety checks at trucking companies in Mexico.

"The Mexican government disagreed or disapproved,'' she said. "That has caused a standoff. That's why the border hasn't opened.''

She said Public Citizen is now working on legislation requiring drivers from Mexico to have "black boxes'' to record driving hours and prevent fatigue, something the group also is seeking in the United States.

Fairborn Ghadar, director of the Center for Global Business Studies at Pennsylvania State University, said the delays were political and that NAFTA was being compromised.

"I think this is just embedded with all sorts of politics - local politics, labor union politics,'' Ghadar said. "The law can say one thing but you can put so many barriers in front of people that finally it just doesn't make any sense for people. I think that's what's going on.''

What it means is that truck loads are transferred from a Mexican to U.S. carrier, Ghadar said, and the consumer ultimately pays the added cost. The transfer business itself is a thriving border trade.

"If we really have NAFTA and NAFTA's serious, why shouldn't the trucks be able to come? We first said they were dirty, then we said it's not safe .... They've gone through all the hoops and loops and jumped this way and that way, and soon as you have an election in the state or the county or this or that they just put new barriers. When you put enough of these small barriers together, you prevent free trade.''

George Grayson, a government professor at the College of William & Mary said it was a simple equation.

"Environmental Protections (plus) Safety (plus) Potential Job Loss (equals) politics,'' he wrote in an e-mail. "For many lawmakers, especially those in the House of Representatives, NAFTA represents a four-letter word. They are not only concerned about the possible loss of jobs by American drivers, but many point to safety hazards and environmental degradation that, they believe, would follow.''

For Moctezuma, the Mexican trucker, it's a continuing frustration.

"They talk a lot about we'll be able to go but things always return to normal,'' he said. "There are maquilas (Mexican border factories) that want to be able to go all the way ... I want to go, it earns a little more, right?''

Source: Associated Press (www.ap.org)

From: Claims Guides (www.claimsguides.com)

Delta Dental merges with PMI

By Kathy Robertson
San Francisco Business Times

PMI Dental Health Plan, one the largest prepaid dental plans in California and the nation, said it merged with parent company Delta Dental of California on Jan. 1.

The merger -- recently approved by the state Department of Managed Health Care -- will have little impact on customers and enrollees, but will streamline administration and eliminate the need for duplicative regulatory approval.

Employers who offer workers the choice of a managed-care plan or traditional fee-for-service dental insurance will have to deal with only one company in the future.

"The merger both means a lot and nothing at all," said company spokesman Jeff Album. "It doesn't change things for employees, because PMI already integrated into Delta Dental staff. If doesn't change things for enrollees; the benefits are the same and the contracts are the same. It does eliminate a lot of duplicative processes -- and any administrative savings will be passed on to the customer."

Delta Dental, a nonprofit dental service company based in San Francisco, has nearly 21 million enrollees nationwide.

PMI, based in Cerritos, operated under a separate health care license since its acquisition by Delta Dental in 1985. The company offers the DeltaCare USA prepaid dental plan in California.

From: San Francisco Business Times (www.bizjournals.com)

Insurance Crisis in South Florida

By Jim Freer
South Florida Business Journal

Locals are looking for an insurer "who'll come on in and cover me."

That takeoff on Bruce Springsteen's "Cover Me" describes South Florida's longstanding property insurance crisis in a nutshell. But the crisis hit a new level in 2006, creating concerns that many businesses and their employees might not be able to afford to stay in the tri-county region.

Business owners and homeowners are bracing for the prospect of another year of widespread rate increases and policy cancellations.

They also are worried that state-run Citizens Property Insurance Corp., which in 2006 became South Florida's largest residential insurer, might keep expanding if other insurance companies continue to cancel policies.

The combination of 2006 property insurance increases, in many cases more than 200 percent, and rising property taxes could start hurting South Florida's efforts to recruit businesses, according to officials of Miami-Dade County's Beacon Council and Broward County's Broward Alliance.

State Sen. Steven Geller, D-Hallandale Beach, has heard leaders of economic development agencies say that some businesses, which they did not name, are considering moving headquarters out of South Florida.

"I have not heard any businesses tell me that, directly," said Geller, who this month began a two-year term as Senate Democratic leader. "But almost every day, I am hearing people say they can't find homeowners insurance or can't pay for it, and might have to move away [from South Florida]."

The Legislature will hold a special session, scheduled to begin Jan. 16, on property insurance.

A primary goal is amending a section on the 2006 insurance bill on Citizens rate increases.

Starting with renewals on Jan. 1, annual premiums on Citizens' policies will rise an average 25.9 percent statewide.

Under a provision of the 2006 insurance law, premiums on Citizens' residential windstorm-only policies are scheduled to rise an average 55.8 percent on renewals beginning May 1.

That provision, requiring Citizens to build reserves to cover a once-in-70-years hurricane, calls for triple-digit increases on Citizens' commercial policies. The biggest increase, in one part of Miami-Dade, would be 678 percent.

Geller said there is wide support to change the law and require Citizens to have reserves for a less-severe storm.

Actuaries would determine the size of that possible storm and accompanying rate hikes. In any case, Geller expects a law change that would result in lower Citizens increases.

Citizens' number of policies grew from 810,000 on Dec. 31, 2005, to 1.3 million on Nov. 30. The new Citizens policies include about 300,000 that were written by Tampa-based Poe Financial Group's three companies, which state regulators shut between May and July due to their large losses.

The rate-setting systems that insurance companies and reinsurance companies put in place in 2006 are based on new projections of possible claims in Florida and several other states. Those systems call for higher rates than those of 2005.

U.S. insurance companies had $60 billion in claims losses on 2005 hurricanes, including Wilma, according to the Insurance Industry Institute.

No hurricanes hit Florida in 2006. Thus, when property insurers report data for the year, they will have profits that will help them replenish part of the capital they lost in 2005.

Reinsurers have agreements to pay portions of insurance companies claims. Insurers pay reinsurers for that coverage.

The insurance crisis grew beyond earlier levels, starting in May. Many reinsurers began reducing the amount of coverage they would buy on Florida homes and commercial properties, and raising prices for that coverage.

That led many insurers to raise rates or cancel policies on annual renewal dates.

One big impact has been a slower pace in sales of commercial buildings, said Tom Dixon, president of Dixon Commercial Real Estate in Coral Gables and the Industrial Association of Dade County.

Traditionally, insurance companies that covered a commercial property offered similar policy to its buyer.

In 2006, insurers that wanted to reduce their number of South Florida policies told many prospective commercial buyers that they would not provide coverage.

From: South Florida Business Journal (www.bizjournals.com)

Laws on Uninsured, Soft Rates Muddy Auto Insurance Picture

By Kelly Johnson
Sacramento Business Journal

Auto insurers and brokers are hoping for a boost in business now that the California Department of Motor Vehicles is enforcing new laws aimed at uninsured motorists.

With the legislative changes and a soft auto insurance market, local brokers are seeing mixed results, with some experiencing gains and others reporting dips in business. One local auto insurance wholesaler said he's never witnessed such divergent results in the marketplace.

Brokers and insurers that specialize in auto insurance for high-risk motorists, called "nonstandard insurance," hope to attract new customers as a result of two bills. Senate Bill 1500 requires the DMV to suspend a vehicle's registration if the driver doesn't have valid auto insurance coverage, and Assembly Bill 2709 gives law enforcement officers the ability to electronically verify if a car is covered by insurance.

SB 1500 was signed into law in 2004, but it wasn't until Oct. 1 that the DMV had authority to start searching its records for proof of auto insurance. From mid-November through Tuesday, DMV sent out 492,000 letters statewide to motorists who had not supplied proof. DMV told the recipients they had 30 to 45 days to do so or their registration would be suspended, said DMV spokesman Mike Miller. Between Dec. 13 and Tuesday, 22,200 follow-up letters were mailed, notifying recipients their vehicle registration had been suspended.

Motorists caught driving without insurance or registration could be fined $1,000 or more, lose their license for a year and could have their vehicle impounded, Miller said. The new legislation allows DMV to pursue people who have been taking advantage of the system by getting their plates then canceling their insurance.

Industry sources also say having fewer people driving without insurance could reduce the cost of insurance overall.

A competitive market

Brokers selling policies for Progressive Corp. reported increased calls in October, but "ever since, it's been kind of business as usual," said Mark Niehaus, who manages Progressive's regional office in Rancho Cordova. "It didn't seem to have legs from what I can see."

The floodgates haven't opened as a result of the new legislation, said Brian McGrail, who heads statewide operations of Titan Auto Insurance Inc. from Carmichael. But November and December are slow months for auto insurance buying anyway. "I think it will have a significant impact in the long run."

By mid-December, Mark Schmoekel, who has owned his Schmoekel Insurance Agency in Sacramento for 42 years, was doing double the business he usually does for the month and was having trouble keeping up with all the new paperwork. The frantic pace later slowed, but December will still finish at average or above average, he said Wednesday.

"Our business is very strong this year," he said. He attributes some of the boost to the legislative effort to get uninsured motorists covered.

It's not an easy market for auto brokers and insurers right now. Schmoekel considers this to be the most competitive market he's seen in 42 years.

Insurance markets go in cycles. In a soft -- or buyer's -- market, insurance is plentiful. Insurers fiercely compete to protect or gain market share, and sell coverage at lower prices. Eventually, insurers price their product too low and lose money, which depletes capital and reduces the supply of insurance. In that hard market, rates rise.

Auto insurers' results started looking good in 2004, and that continued in 2005 and 2006, Niehaus said. "Rates have come down."

Claims frequency has declined and claims severity is increasingly only slightly. Auto rates have been dropping because there's more competition, better underwriting, more emphasis on fighting fraud and safer cars on the road, said Tully Lehman, spokesman for the Insurance Information Network of California.

More uncertainty

New players have entered the Golden State to write and sell auto insurance. Titan Auto Insurance, the agency arm of insurer Titan Indemnity Co., moved into California this year. New and existing players have started or added TV and radio commercials, billboard ads and direct mailings. But motorists aren't comparing policy prices as much as they would in a hard market.

"People generally aren't motivated to shop when rates are going down," Niehaus said. "Clearly, advertising is way up."

In the nonstandard market, "there's a lot more competition" than there had been, said Nick Brozdounoff, who owns three local Brooke Corp. agency offices. Auto business is off by up to 25 percent for him and others he's talked to, he said.

Sales at Titan Auto Insurance, meanwhile, are "meeting expectations," McGrail said.

"The last 21/2 years you can't pinpoint the (nonstandard auto) market," said Matt Speed, state marketing manager in Sacramento for Legacy Insurance Services Inc., an Arizona-based insurance wholesaler. In nine years in business, he said, he's never seen such divergent results, with one agency doing great and another finding business slow.

The insurance industry also is dealing with much uncertainty stemming from regulatory changes. State Insurance Commissioner John Garamendi, whose term ends Jan. 5, adopted new auto-rating regulations that de-emphasize the importance of where a driver lives and place greater emphasis on driving record, annual miles driven and years of driving experience.

Insurers are still fighting that in court, and have two years to fully implement the new regulations. Insurance Commissioner-elect Steve Poizner could decide to withdraw or change the regulations.

From: Sacramento Business Journal (www.bizjournals.com)

Year in Review: AIG Up 5 Percent

Shares of American International Group Inc. have tread water in 2006 as investors take some time warming up to a new management team in the wake of a massive accounting scandal.

AIG's stock has been dogged since 2004, when New York Attorney General Eliot Spitzer accused AIG and several other companies of rigging the process brokers use to steer customers to insurers. Spitzer also said AIG smoothed earnings through sham reinsurance contracts and other accounting tricks, fooling investors with deceptively rosy financial statements.

Maurice 'Hank' Greenberg, who led AIG for more than 30 years, stepped down in 2005, replaced by Martin Sullivan. AIG paid $1.64 billion earlier this year to settle Spitzer's allegations of bid-rigging and accounting fraud.

AIG's earnings have risen so far in 2006 and analysts expect earnings growth of 78 percent for the fiscal year. But the stock has spent much of the year underwater and after a runup is just 5 percent higher for the year, versus a 15.5 percent gain for the Dow Jones Industrial Average.

The financial services conglomerate's insurance operations have benefited from a benign hurricane season. Record hurricane damage in 2005 ravaged earnings across the property and casualty insurance sector, prompting insurers to raise prices in hurricane-prone areas. With barely any hurricane damage in 2006, insurers retain those price increases as profit.

In AIG's life insurance operations, an inverted yield curve has hurt sales of fixed-payment annuities. An inverted yield curve, which means long-term interest rates are lower than short-term rates, makes a fixed payment over a long period of time an unattractive investment.

With a market value of $186.32 billion, AIG's operations range over life and non-life insurance, mutual funds and even aircraft finance.

Shares of AIG rose 13 cents to $71.80 in afternoon trading on the New York Stock Exchange.

Source: Associated Press (www.ap.org)

From: Insurance News Net (www.insurancenewsnet.com)

Flood Insurance Getting Political Nod

The federal flood insurance program may be going broke after incurring $20 billion in debt from recent storms like Hurricane Katrina. Still, politicians want to extend the taxpayer-subsidized coverage for some of the riskiest _ and potentially most valuable _ properties in the country.
For all it didn't accomplish this year, Congress passed two bills carving out exceptions to a law passed years ago to phase out federal spending that might encourage development in environmentally sensitive and disaster-prone areas.

One of the bills benefited Jekyll Island, a vacation spot off Georgia's coast that is poised for redevelopment, while the other helped a mostly undeveloped 10-lot subdivision on Florida's Gulf Coast.

A handful of similar proposals are pending. After seeing the success of the Georgia and Florida bills this year, property owners in Alabama, Texas and elsewhere are lobbying for their own continued coverage.

The debate involves a Reagan-era environmental law called the Coastal Barrier Resources Act that was hailed as a free-market approach to conservation. Instead of restricting where private landowners could build, the law, nicknamed COBRA, mandated that the government would not subsidize such construction, whether through flood insurance, roads or otherwise.

However, Congress has repeatedly chipped away at the covered territory, often in response to wealthy property owners who argue they were mistakenly included. Lawmakers have redrawn COBRA maps more than 40 times in the past 15 years, according to the U.S. Fish and Wildlife Service, which oversees the maps.

At least four other bills stalled this year, and Fish and Wildlife officials say they have received more than 20 other requests for changes.

Even critics concede that mapping corrections are sometimes warranted and that the two exemptions approved this year are hardly a blip in the federal flood portfolio, which carries 5.4 million policies and recently eclipsed $1 trillion in coverage.

But they say Congress' continued willingness to extend coverage is alarming, particularly in the hindsight of Katrina.

Despite anecdotes that private flood insurance is unavailable, industry officials say it is for sale, just without the government subsidies.

It's those subsidies that have put the federal system in need of a taxpayer bailout. The program owes the Treasury $20 billion. It takes in just $2 billion a year in premiums. More than a third of that _ nearly $720 million a year _ is now eaten up by interest on the debt.

Congress has wrestled with reforming the system by raising premiums and placing new requirements on homeowners. But lawmakers adjourned again this year without acting.

Instead, in the two COBRA bills that were passed, they added hundreds of high-risk properties and paved the way for new construction on vulnerable land.

From: Insurance News Net (www.insurancenewsnet.com)