HARTFORD MAY GAIN IN MERGER:
The Hartford community has been encouraged by signs that it may not lose as many of its close to 6,000 jobs at Travelers Insurance as first feared when St. Paul acquires the high-profile insurer. In fact, Hartford stands to gain jobs. Although the corporate headquarters of The St. Paul Travelers Cos. will be in St. Paul, Minn., significant operations will be run from Hartford. Documents filed by Travelers with the state insurance department prior to the Feb. 10 public hearing suggest that not only is Hartford likely to remain headquarters for the combined company's sizable commercial lines (which will represent 44 percent of combined net written premium of the merged entity) and personal lines (24 percent) divisions, but also the combined surety operations will be stationed in Hartford. In addition, leadership of the information systems and technology operations will also set up shop in Hartford. St. Paul will assume the investment and payroll management services of Travelers that Travelers had outsourced to Citigroup outside Connecticut. Travelers used to be a division of Citigroup before it was spun off in 2002. Travelers has not detailed the employment impact of the deal, preferring to stress that it will seek savings from real estate leases, purchasing and supplies, and service contracts. But its filings maintain the new "growth platform" should provide "new opportunities for existing and future employees."
VERMONT GETS COMP PACKAGE:
As promised, Vermont Gov. Jim Douglas has introduced legislation to make changes in the state's workers' compensation system. The reform package, H.632, contains provisions for higher penalties for fraud, incentives for return-to-work, mandatory medical case management, shortening of the time allowed to file claims, restrictions on cost of living adjustments and changes to the law governing on-premises recreational vehicle injuries. The recommendations follow a recent report identifying problem areas with the workers' comp system. The administration proposes treating workers' comp fraud as a felony, thus enlarging penalties to include imprisonment. To streamline the claims process, Douglas wants to simplify the rate calculation to provide that injured workers receive two-thirds of their usual wages as well as penalize insurers that fail to pay benefits within 30 days of their becoming due. Citing national data that indicates Vermont workers are out of work longer than in other jurisdictions and the length of disability is increasing, Douglas called for mandating medical case management. He also is proposing trimming the state's statute of limitations for filing a claim from six to three years, curtailing cost of living adjustments and making vocational rehabilitation, which is now mandatory, voluntary as it is in most other states. New England Regional Manager Frank O'Brien of the Property Casualty Insurers of America was first with industry reaction to the plan. "While there are no easy answers to these issues, passage of this bill should significantly improve the system by simplifying some processes and rationalizing others. In this regard, PCI is especially supportive of the sections of the bill pertaining to changes to the calculation of benefits and limiting cost of living adjustments to permanent total disability," O'Brien said.
MASS. PRESSURE FOR COST STUDY:
Massachusetts's auto insurance agents are being told that their participation in a new cost study could determine what they will see for future commissions on their auto business. The Massachusetts Association of Insurance Agents (MAIA) is stressing the need for its members' participation as its actuary, Tillinghast, contacts randomly selected agents this month. The study will pinpoint how much it costs an average agency to service a private passenger auto policy for one year. That number will become the foundation of MAIA's case to win fair 2005 private passenger commissions in rate hearings this fall. "It's imperative that agents who are asked to participate do so. Otherwise, everyone's commission is in jeopardy. You can't just pass it to someone else and say, "the next guy can do it,'" said MAIA Chairman Bob Vaudreuil. Relatively few agents participated in the previous study, and the Attorney General and State Rating Bureau claimed it wasn't a credible sample. Insurance Commissioner Julie Bowler agreed and gave it little weight in her decision setting 2003 commissions.
TOUGH RHODE ISLAND FIRE CODE:
The panel that interprets Rhode Island's fire code saw a flurry of requests for waivers and extensions as business owners, school superintendents, architects and town officials rushed to comply with the state's updated fire code which went into effect on Feb. 20, the one-year anniversary of The Station nightclub blaze that killed 100 people, injured about 200 others and compelled the state to create tougher fire safety regulations. Each week, the Fire Safety Code Board of Appeal and Review listened to business owners and others who were seeking waivers, extensions, or plain interpretations of the code. "People are trying very, very hard. They aren't trying to cut corners on safety. We wouldn't let them anyway," said Tom Coffey, the board's executive director. The new fire law includes a ban on pyrotechnics in nightclubs like The Station, where a pyrotechnics performance started the deadly blaze. The new code also gets rid of the so-called grandfathering statutes that allowed older buildings to ignore new safety standards, mandates fire alarms be municipally connected in all nightclubs with occupancies of at least 150, and requires smoke and carbon monoxide detectors in three-family apartment buildings.
VIRGINIA CHANGES COMP RATES:
The State Corporation Commission in Richmond has approved revisions to the premium levels charged for workers' compensation insurance in Virginia. The National Council on Compensation Insurance sought the revisions. The changes approved by the SCC will decrease the overall premium level for industrial and federal classifications in the voluntary market and in the assigned risk plan. Overall loss costs and premium levels will increase for the surface and underground coal mining classes in both the voluntary and assigned risk markets. The changes will become effective April 1, 2004, for new and renewal policies. For voluntary risks, the approved rate changes are: Industrial, -6.7 percent; Federal, -12.4 percent; Coal Mines (surface), 7 percent; and Coal Mines (underground), 7 percent. For the assigned risk, the rates change will be: Industrial, -3.8 percent; Federal, -12.2 percent; Coals Mines (surface), 10 percent; and Coal Mines (underground), 5.2 percent.
NEW JERSEY REPORTS ON AUTO:
The New Jersey Department of Banking and Insurance released its first Auto Company Performance Report. Banking and Insurance Commissioner Holly C. Bakke said the performance report is the first step in a program that will result in the Auto Insurance Company Consumer Report Card to be issued this summer. In addition, consumers will be receiving a Consumer Bill of Rights and have access to an interactive Web-based guide to understanding coverage options. The most recent report ranks 42 insurers by valid complaint ratios. The Rutgers Group, with a market share of 0.63 percent had the highest complaint ratio, while Tokio Marine and Fire, with a market share of 0.05 percent had the lowest. The state's largest carrier, New Jersey Manufacturers, ranked near the bottom of the list at 39. Also included is an indicator of company financial strength that shows that 10 companies have been downgraded in the last year, while only two companies have been upgraded.
NEW YORK EYES MUNICIPAL REFORMS:
The New York Senate says its municipal liability reform package (S. 2944, S.5395) would save local governments across New York State $1 billion dollars by limiting judicial awards which proponents claims have spiraled out of control in recent years. From 1988 to 1996, annual tort case filings in New York State grew by almost 60 percent, from 53,104 to 84,089. Last year, the City of New York paid out more than $550 million in settlements and judgments in lawsuits claiming the city negligently caused injuries. According to the Public Policy Institute, in 1996, the 'tort tax' cost every taxpayer in New York $800. "Every sector of New York's economy is affected by the threat of virtually open-ended liability created by the state's current tort laws and unfortunately municipalities throughout our state face the brunt on this out of control system," said Senator Dale M. Volker, sponsor of the legislation. The reform package would repeal joint and several liability, placing a $250,000 cap on non-economic damages and extend Court of Claims jurisdiction to localities.
NEW YORKERS IGNORE PHONE BAN:
New York drivers hung up their cell phones for a while when the state banned them three years ago but are back to using hand-held models at nearly the same rate they were before the ban, a study shows. The Insurance Institute for Highway Safety attributed the behavior mostly to a lack of publicity, a possible warning to the other states and cities considering similar bans. "If you look at the experiences with other laws in highway safety like seat belt and drunk driving laws, what seems to make a difference in the long-term is publicized enforcement," said the institute's Anne McCartt. The institute found the rate of New York drivers chatting on cell phones declined from 2.3 percent before the law went into effect to 1.1 percent in the first few months after the law was passed. By March 2003, a year after the law took full effect, the rate had risen to 2.1 percent. McCartt said there was a flurry of advertisements during the implementation of the New York ban, but publicity has since dwindled. She also said that while cell phone citations made up 2 percent of all traffic violations in 2002, there was no targeted enforcement such as seat belt checkpoints to ticket drivers who ignore the law. In 2001, New York became the first state to prohibit drivers from talking on hand-held devices while operating a motor vehicle. Since then, New Jersey and Washington, D.C., have passed cell phone bans.
NEW JERSEY ALLOWS GAY BENEFITS:
New Jersey has become the fifth state to recognize same-sex partnerships. Under the new law, domestic partners will gain access to medical benefits, insurance and other legal rights. New Jersey also will recognize such partnerships granted in other states. The bill does not authorize gay marriage and Gov. James E. McGreevey said he would not support legislation that would amend the state's marriage laws to include same-sex partners. The law will not force businesses to offer health coverage to same-sex partners of employees but does require insurance companies to make it available. It also allows a surviving partner to gain property rights and other survivor's benefits. Domestic partnerships are recognized in California, Massachusetts and Hawaii, and civil unions between same-sex couples are legal in Vermont.
PENN. COURT SEEKS CLAIMS DATA:
The Pennsylvania Supreme Court's chief justice wants local court officials across the state to report the number of medical malpractice claims filed in the past four years and monitor new cases as they come in. The request came in a letter sent to judges in the state's 60 judicial districts on behalf of Chief Justice Ralph J. Cappy. The letter was in response to a reform proposal Gov. Ed Rendell made last year. "This is a step in the process of gathering as much information as we can that's out there so that a thoughtful and careful analysis can be done," said Art Heinz, spokesman for the Administrative Office of Pennsylvania Courts. Adams County notary Patricia Funt, whose office handled about 1,300 new lawsuits last year, said the chore of separating the med-mal lawsuits from other litigation will have to be done by hand. Doctors' groups have complained that skyrocketing insurance rates are forcing them to leave the state, and have lobbied aggressively for reforms that would lessen their insurance burden. A spokesman for the Pennsylvania Trial Lawyers Association predicted that the data collection effort will show that in about half of the state's 67 counties, med-mal cases are virtually nonexistent. Sam Marshall, president of the Insurance Federation of Pennsylvania, whose members include large med-mal insurers, said he was concerned that the collected information could hamper efforts to stabilize the state's malpractice insurance marketplace.
MIIX GROUP INCREASES RESERVES:
Medical malpractice insurer MIIX Group, which is in runoff status, has alerted the New Jersey Department of Banking and Insurance of the need to increase its loss and allocated loss adjustment expense reserves based on the progress of the annual audit to date. The company expects to complete its analysis by mid-March when it will issue its earnings release. MIIX acknowledged that the increase in reserves, given the company's marginal surplus levels, would have a materially adverse effect. It expects to delay filing its statutory financial statements. It has also entered into discussions with its reinsurers regarding possible commutations of treaties for some or all years. If the company is unable to successfully negotiate commutations, the reinsurers are likely to seek to increase premiums payable by the company if it records a significant reserve adjustment or falls short of other stipulated contract provisions, including the failure to maintain appropriate trust fund balances. Such increases could, depending on their amounts and timing, materially and adversely affect the company.
AUTO RESIDUAL MARKET LOSSES RISE
The Property Casualty Insurers Association of America reported that residual market plans for private passenger auto insurance continue to result in significant losses. The private passenger auto residual market increased from 1.5 percent of premiums nationwide in 2000 to 1.8 percent in 2001, reversing an annual decline in the residual market share since 1992 when it was at 5.6 percent. In the majority of states, the market share is less than 1 percent, but seven states have more than the average market share. In North Carolina, it's 15.4 percent and in Massachusetts, it's 11.2 percent. "While the residual market share has remained fairly low over the past few years, the loss ratio in 2000 and 2001 skyrocketed," said Roger Kenney, PCI's assistant VP of research. The loss ratio decreased somewhat from the record level of 181.8 in 2000, but the loss ratio of 146.1 was still 75 percent higher than the loss ratio for the private auto industry in 2001. New York, in particular raised concerns because of its high loss ratio of 156. The residual market plans in nine states (Florida, Hawaii, Maryland, Massachusetts, Michigan, Missouri, New Hampshire, North Carolina and South Carolina) generated an underwriting loss of $596 million in 2001.
CORRECTION:
An article in the Jan. 26 issue incorrectly said Property Casualty Insurers Association of America (PCI) carriers write $154 million in annual premium. PCI carriers write $154 billion in annual premium.
WASH. PHYSICIANS MEET WITH LEGISLATORS TO DISCUSS MALPRACTICE CRISIS:
Steve Woods, MD, Overlake Hospital OBGYN and partner in a private medical practice, along with several of his Overlake Hospital and Evergreen Hospital colleagues, met in Olympia, Wash., recently to talk to King County Legislators about Washington's medical malpractice crisis and the need for tort reform. "Malpractice insurance rates for physicians are going up drastically in this state and unless something is done about the tort system, more doctors will have to close, move their practice to another state or drop their specialty," Woods said. "Unlike a normal business, we can't increase fees to cover the $60,000 to $80,000 per year malpractice insurance costs because our reimbursement rates are fixed and are not negotiable." According to the Washington State Medical Association, out of control jury awards and settlements are overloading the system and raising physician's insurance premiums to impossible levels. Consequently, doctors in this state are facing some tough choices: limit services, move out of state or close completely. Woods and his colleagues met with the following King County Legislators: District 5 — Senator Cheryl Pflug (R), Representative Glenn Anderson (R), Representative Jay Rodne (R); District 45 — Senator Bill Finkbeiner (R), Representative Toby Nixon (R), Representative Laura Ruderman (D); and District 48 — Senator Luke Esser (R), Representative Ross Hunter (D), Representative Rodney Tom (R). For more information on the Tort Reform, go to www.wsma.org.
