'Concierge' claims service
More than 11,300 car accidents happen in the Albany, N.Y. metropolitan area each year -- that's about 215 a week. Many claims cause less than $2,000 in damage but, according to Progressive Insurance, the time wasted and inconvenience caused are anything but minor.
About 40 percent of drivers involved in crashes report spending four or more days managing the process of getting their vehicles repaired. This means Albany drivers in just one week collectively lose more than 10,500 hours of time -- that's about three and a half years - managing the claims/repair process as a result of even minor accidents.
That's about to change.
Progressive Direct and Drive Insurance from Progressive have opened their first Albany-area Service Center. Drivers can now choose to receive a "concierge" level of claims service that reduces the time each driver spends on the claims/repair process from four days to about 15 minutes. The service is not limited to just Progressive customers - it's also available to anyone involved in a claim handled by Progressive.
A driver simply drops off the damaged vehicle at the service center and, in about 15 minutes, can leave in a rental car knowing that a claims representative will handle the entire process and that the repairs will be guaranteed. Otherwise, drivers have to spend several days arranging for alternate transportation, getting repair estimates, finding a shop, getting updates and inspecting the repairs.
"By using a service that handles the claims/repair process from start to finish, people can save time and spend it the way they want to," says Scott Hickok, Colonie manager
The service center in Colonie marks the 37th Progressive Service Center in the U.S. and the first in the Albany area.
In Mass., competition not like a box of chocolates
Massachusetts Rep. Ronald Mariano, D-Quincy, and the committee staffers who crafted his auto insurance competitive rating bill tried to sweeten the deal by throwing some bon bons into the box, including fraud fighting funds, an apparent ban on the use of credit scoring, mandatory rate relief, retention of certain subsidies for urban drivers and seniors, and temporary caps on liability rate increases.
But even with these extra goodies thrown in, the state's independent agents and other opponents see only jellies and they aren't biting, just as they didn't last year when they came out against a similar bill offered by Gov. Mitt Romney.
"We are still opposing it," declared Daniel Foley, vice president of government affairs for the Massachusetts Association of Insurance Agents.
"This bill is terrible for consumers," maintained Steve D'Amato from the Center for Insurance Research. "Even drivers with perfect driving records could see dramatic increases in their auto insurance rates."
Sen. Andrea Nuciforo, D-Pittsfield, co-chair along with Mariano of the Joint Financial Services Committee, which endorsed the bill without the support of senators, termed the bill "dreadful" and vowed it would be "dead on arrival" should it even make it to the Senate.
A number of homegrown insurers including Arbella and Commerce that are behind the group called the Massachusetts Coalition for Affordable Auto Insurance are running ads warning against changing the system. "With this so-called reform, you pay more for auto insurance if you live in a city, park on the street, maintain a credit card balance, work a blue-collar job, or have other circumstances that have nothing to do with your driving record," one of the group's ad proclaims.
An analysis of the Mariano measure prepared by Arbella and echoed by other opponents questions the claim that the bill would prohibit the use of credit scoring. The use of credit scoring, while prohibited in pricing, could still be used in offering or canceling a policy. Companies will simply set up various subsidiaries and steer the undesirable credit risks to one of their higher-priced units as they do in other states, the critics contend.
Also, insurers would be free to use other pricing variables, such as home ownership and accidents, whether at fault or not.
Critics also maintain that the current system has been saving drivers money at a better clip than the caps and refunds promised in the Mariano bill would do, at least in the short run.
While they tout the rate caps and other sweeteners, supporters' main argument is that the measure would help make the state's system run more like those in other states and thereby attract additional insurers and consumer choice.
"There is no competition between companies for business today. By bringing in more companies, and by bringing competition back to the Massachusetts automobile insurance market, we will help consumers get the lowest rates," promised Mariano.
"Insurance companies have fled the state, leaving consumers with little choice. More importantly, our convoluted auto insurance system, the only system in the country in which the state sets the rates, is contributing to a growing problem in our personal lines market," Mariano added.
Supporters have backtracked a bit on the latter contention that the bill might also help solve a homeowners insurance crisis in coastal communities, acknowledging that even if new insurers came on the scene they too would likely steer clear of coastal properties.
But they insist reform is a matter of fairness and more choice for Massachusetts consumers.
"This bill will go a long way to bringing real reform to auto insurance by increasing consumer choice and competition, it offers numerous protections for consumers as well as attracting much needed new capital," James Harrington, spokesman for Fairness for Good Drivers, said.
The American Insurance Association and Property Casualty Insurers of America recognized that the road to reform would not be easy.
"We are facing a hard fought battle ahead with anti-reform organizations willing to go to great lengths to defeat a bill that will ultimately provide additional choice and competition to Massachusetts' long--suffering consumers," the groups said.
Are Bay State drivers so "long suffering" that they now clamor for change? MAIA's Foley has his doubts. "People aren't out there screaming for auto insurance reform," he notes, adding that both houses have other priorities including a budget to iron out before they adjourn in July. Plus this is an election season.
However, veteran lobbyist Foley also knows anything can happen. "We're not taking anything for granted," he says. He will continue urge agents to contact lawmakers to oppose the bill.
If N.Y. bans cell phones, what's next-- drinking coffee, driving with pets?
New York's cell phone ban could clear the way for laws against anything that causes accidents, from having a pet in the car to drinking coffee, warns a lawyer fighting to have the ban declared unconstitutional.
"This is a new kind of law," James Ostrowski said in Erie County Court. "It's not about how you drive, it's about how you live your life."
Ostrowski is representing a motorist fined $105 for talking on her cell phone in suburban Kenmore in 2004. She is appealing the conviction. But he maintains the case is about more than a traffic ticket.
"Almost all prior legislation concerning driving regulated the rules of the road: how you drive," he told Judge Shirley Troutman. "With the cell phone law, we entered the previously uncharted territory trying to figure out all the little things in life that may or may not be the cause of accidents, then banning or regulating those activities."
In 2001, New York became the first state to prohibit drivers from talking on hand-held devices while operating a motor vehicle. Using a phone with a handsfree headset is permitted. Proponents said the law was meant to reduce traffic accidents and save lives.
"It's a green light to Albany. You're going to have 15 more laws," The Associated Press reported Ostrowski arguing on behalf of his client.
But Kenmore village prosecutor Kevin Stocker argued that because the statute addressed safety, it met the constitutional challenge. "Driving a vehicle is a privilege; it's not a civil right. So the court just has to look at the legislative intent and whether it has a reasonable relation to its intended use," he said.
Ostrowski argued the statute violates equal-protection clauses by singling out one activity without citing others, such as using a hand-held computer or citizens band radio.
N.J. pays premium
N.J. pays premium
Flood insurance is a particularly salient issue for my home state of New Jersey. Surrounded by the Delaware River to the west and the Hudson River and Atlantic Ocean to the east, New Jersey is especially prone to damaging floods. Additionally, the average property value in New Jersey is close to the highest in the nation. Subsequently, New Jerseyans already pay very high premiums averaging approximately $630 per policyholder, 38 percent more than the national average of $455 per policyholder.
Sen. Robert Menendez, R-N.J. during Senate Banking mark up of The Flood Insurance Reform and Modernization Act of 2006
Map quest
I believe the federal government needs to provide Americans with the most accurate data that reflects flooding hazards from hurricanes and other natural events so that homeowners, businesses, and communities know their risk. Unfortunately, FEMA's flood maps do not reflect the real flood hazard risks. Over 70 percent of FEMA's maps are over 10 years old. In the case of Rhode Island, many maps are over 20 years old. Development alters watersheds and floodplains and its effects on floodplains are not accurately reflected in FEMA flood maps. In addition, these maps do not include information on coastal flooding reflected in the Army Corps of Engineers' inundation maps. This is important information needed by the public to assess their risks.
Sen. Jack Reed, D-R.I., during Senate Banking mark up of The Flood Insurance Reform and Modernization Act of 2006
Family fraud
"This particular gang of con artists may be the most brazen defendants to ever be prosecuted by our Insurance Fraud Section. Together, they pretended to suffer serious injuries from staged slip-and-fall accidents, car wrecks, food poisonings and work-related incidents. They were each other's witnesses, and even faked evidence to bolster their claims. Three of the suspects used their minor children as claimants and witnesses in several bogus filings."
Pennsylvania Attorney General Tom Corbett on six suspects sentenced in one of the largest "slip and fall" rings in Pennsylvania history known as "Operation Family Fraud."
Driven to safety
"I always tried to stay under 60 or 65."
Conn. trucker Robert C. Wrenn, who drives a division of Smithfield Foods of Smithfield, Va. and has charted more than 6 million miles with no accidents or traffic tickets. He was one of four drivers inducted into the truck driver hall of fame.
Media suits and settlements
A veteran who lost both arms in the war in Iraq is suing filmmaker Michael Moore for $85 million, alleging that Moore used snippets of a television interview without his permission to falsely portray him as anti-war in "Fahrenheit 9/11." Sgt. Peter Damon, a National Guardsman, is asking for damages because of "loss of reputation, emotional distress, embarrassment, and personal humiliation," according to the lawsuit filed in Suffolk Superior Court in Boston.
'The Sopranos' diet drug
The actor who played a gay mobster on HBO-TV's "The Sopranos" is being sued by the manufacturer of a diet drug. The maker of Stacker 2 filed suit against Joseph Gannascoli, claiming he hasn't been doing enough to promote the product after being paid about $316,000 over the last two and one-half years. Gannascoli disputed the company's claim.
Privacy payments
Five news organizations have agreed to pay a former nuclear weapons scientist $750,000 as part of a settlement of his privacy lawsuit. Wen Ho Lee, once suspected of being a spy, ended his six and one-half-year-old lawsuit against the Energy and Justice Departments. Lee had accused federal officials of smearing him by leaking information that he was under investigation as a spy for China. Federal judges held five reporters in contempt of court for refusing to disclose the sources of their stories about the government's investigation of Lee. The payment by The Associated Press, The New York Times, the Los Angeles Times, The Washington Post and ABC is the first of its kind in recent memory, legal and media experts said. The companies bluntly said they agreed to the sum to forestall jail sentences for their reporters, even larger payments in the form of fines and the prospect of revealing confidential sources.
In N.H.'s positive climate, insurers free to focus on competition and technology
Insurers find the political and regulatory environment in New Hampshire favorable.
"[I]t's clear that in New Hampshire, we have a different marketplace than the other New England states. It's a very positive environment ... here," explains Michael Christiansen, president of the New England division for Hanover Insurance.
That positive environment frees up New Hampshire insurers to worry about core challenges including competition and technology.
According to Christiansen, his company's overall challenge in the Granite State is to confront competition "while at the same time growing profitably in a marketplace that is somewhat stable as far as agencies and accounts."
Christiansen was one of several executives sharing his thoughts during a recent panel for the Independent Insurance Agents and Brokers of New Hampshire.
The competitive landscape everywhere, not just in storm-prone areas, is being shaped by rising reinsurance costs. This a matter of concern to Tom Tierney, president and chief executive officer of Vermont Mutual, and all executives today.
"This past year, 2005, there were three major cats: Katrina, Rita and Wilma. It cost the industry somewhere in the neighborhood, depending on who you believe, of $60 to 80 billion. That now is starting to flow back into the system...," Tierney noted.
As a result of those catastrophes, insurers are having to accept major price increases in reinsurance renewals from a marketplace that offers them little choice.
"[I]n the reinsurance market, there's probably $170 billion and of that $170 billion, 60 percent of that is controlled by 10 companies. So we're not talking a large competitive scale here. And the field is narrowing," according to Tierney.
Concord Group, a primarily personal lines insurer, also finds itself under pressure from reinsurers.
"The reinsurance is more expensive, and where you write the business, depending on where it is, it gets even more expensive," noted Linda Day, Concord Group president and chief operating officer.
Insures aren't alone in feeling the reinsurance hikes; they also affect agents who have to explain the resulting premium hikes to their customers.
Technology
Reinsurance concerns aside, these CEOs contend their firms' ability to compete in today's marketplace is directly linked to technology.
For Concord's Day, whose company is scrapping its legacy system for a state-of-the-art system, technology presents a challenge on several fronts.
"The new generation that is coming up, they are so computer-literate, and they want fast service, and they want to be able to service on-line. Companies have to be aware -- and agents as well -- that we need to provide that service for them," she maintained.
Day pointed to statistics indicating that while about 7 percent of consumers were going online in 2004 to get quotes, last year in 2005 that number grew to 27 percent.
These consumers are interested in more than just quotes, however. "The big numbers ... came in going to company sites, to service their accounts, to pay their bills, to maybe add a car, take a car off, that kind of things. So that is really important...," Day pointed out.
Technology is also behind the competitive pressure Concord Group is facing. "{W}e're all feeling a tremendous amount of competition, particularly from the direct writers. They have very sophisticated predictive modeling tools that they use. They have advertising budgets that are probably twice as much as our surplus at Concord Group. So it's a big challenge, trying to go up against those folks," Day said.
As part of its response, her company has hired a consulting actuary to revamp its auto book. "I don't mind the competition. It makes us all better. But we're certainly feeling it there," she acknowledged.
Vermont Mutual's Tierney thinks technology has improved insurer decision-making. He gets a daily update on losses for the month and the year. "[T]hree or four years ago, that was impossible. Through automation we get information quicker, we're able to make decisions quicker, and we're able to react to the market quicker," he said.
Driving competition
The current challenge is making the company's technology work for its agents. "Agencies often take the path of least resistance. In our situation, we need to make it easy for you to do that. And at the same time, we need to make sure that the underwriting principles that we have within the company, are adhered to," Tierney said.
"Beyond that, it's all about relationships."
Hanover's Christiansen believes technology will drive the competition that New Hampshire agents will soon face as insurers introduce more sophisticated products. The competition will not be limited to local companies.
"For example, with the multi-variant auto products, I think you'll see the regional companies currently in the state adopt those products to some extent. You will also see the national companies that have not been in this marketplace before come in here with their multi-variants, which enable them to act like a regional because of the sophistication of the system," Christiansen added.
He predicts this will benefit agents as more companies make personal lines appointments in the state. Also, the competition will not be limited to personal lines.
"I think you'll see a greater movement towards segmentation of small commercial versus first-tier middle-market business. This arms race that's going on right now with automation is not just happening in personal lines. It's also happening in commercial lines," Christiansen told the agents.
High risk lowball
Catastrophes? Climate change? Terrorism? Are these the biggest insurance risks?
Not according to insurance executives attending Standard & Poor's Ratings Services insurance conference in New York, who poinnted to irresponsible competition as the single biggest risk impacting the insurance industry. Irresponsible competition occurs when insurance companies price their product too low so they can grab more market share. Of the approximately 100 executives who answered the survey, 36% cited this factor. Other risks cited included natural catastrophes (29%), regulatory risks (16%), terrorism (9%), rapidly rising interest rates (8%), and pandemics such as avian flu (2%).
These same executives said their decision-making is most influenced by shareholders (according to 47%) with competition cited by 27%. Ratings agencies (17%) and regulators (9%) were also mentioned.
Allstate dropping most earthquake coverage nationwide
Allstate Insurance Co. says it is dropping earthquake insurance to most of its 407,000 quake customers nationwide as a part of a larger move to reduce exposure to catastrophic losses.
Allstate Spokesman Mike Siemienas in Chicago said four states require the company to offer earthquake coverage, but the company is in various stages of talks with regulators there.
He said the states are Kentucky, Connecticut, Rhode Island and Florida. Additionally, the company will continue to renew earthquake coverage in New Hampshire, New York and Pennsylvania.
Allstate regional spokeswoman Caitlin Gorand, in Bothell, Wash., said the company has not written new earthquake insurance since March 6 and that existing earthquake policies will not be renewed.
Northbrook, Ill.-based Allstate Corp. is the nation's second-largest personal lines insurer. Siemienas said the company has declined storm renewals in some parts of Florida and New York and has taken a hard look at coastal coverage from Texas to Florida beginning with Hurricane Andrew in 1992.
He said some policies in those areas for wind and hail coverage are being put into state wind pools.
He said the company recently purchased $2 billion in reinsurance to help cover future losses from named storms, earthquakes and fires-after-earthquakes.
Allstate lost $1.55 billion in the third quarter last year largely because of Hurricane Katrina, its largest quarterly loss since it was publicly traded.
Aside from quake-prone California, the Insurance Information Institute also lists Seattle, Portland, Ore., New York City and Salt Lake City as among cities with high loss potential.
Gorand said Allstate has found other companies willing to take over coverage in some states and is seeking those willing to take it over in others. Allstate agents will begin offering earthquake coverage through a California firm, Geovera, which specializes in the earthquake field, spokeswoman Caitlin Gorand said.
California coverage is not affected by the Allstate decision, Gorand said. It is covered by the California Earthquake Authority, which has about 750,000 policies in force covering about 13.5 percent of the state's homeowners. The authority, founded by the Legislature in 1996, has approved a 22 percent rate cut effective July 1 to encourage more people to buy coverage.
Earthquakes, which cannot be predicted with any degree of precision, are most frequent in the West, and while a few deadly ones have been recorded in the Eastern and central parts of the country, there have been no major ones there since the 1800s.
It is a matter of time before another major quake hits the seismically active West, home to considerable volcanic activity and geologic fault lines. The country's most severe quake in modern times had a magnitude of 9.2 in Alaska in 1964. One believed to be almost as large hit the Pacific Northwest coast in 1700, permanently changing the coastline.
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
High court agrees to hear appeal in $80 million tobacco case settlement
The Supreme Court said this month it will decide if tobacco giant Philip Morris must pay nearly $80 million in damages to the family of a longtime smoker, a case that could shield companies from large jury awards if the company wins.
Lawyers on both sides of the issue said the case could go a long way to determining whether the high court will place limits on punitive damage awards in a variety of cases beyond tobacco.
"The case is significant with respect to ... constitutional constraints on runaway punitive damage awards, which is what we feel happened in this particular case," said Andrew Frey, a lawyer for Philip Morris.
A ruling could set a precedent for a range of civil cases, including those involving wrongdoing by a criminal defendant, said Edward Sweda Jr., senior attorney for the Tobacco Products Liability Project at Northeastern University School of Law in Boston.
A decision in favor of Philip Morris "could largely eviscerate the whole concept of punitive damages," which is to punish wrongful behavior to deter future wrongdoing, Sweda said.
At $79.5 million, the award in the Oregon case is more than 150 times the $521,000 actual damages awarded by the jury.
The Oregon Supreme Court ruled in February that the amount was not excessive given the "extraordinarily reprehensible" conduct of Philip Morris in marketing cigarettes.
A jury had ordered damages be paid to the family of Jesse D. Williams, a janitor who smoked three packs of Marlboros a day before he died of lung cancer in 1997. Williams took up cigarettes in the 1950s while serving in the U.S. Army in Korea.
The case gives Supreme Court justices a chance to clarify a 2003 ruling in an insurance case that said punitive damages should generally be in line with actual damages. Robin Conrad, a lawyer for the U.S. Chamber of Commerce, said business groups have been seeking a case to apply the court's ruling in the 2003 case, known as State Farm v. Campbell.
Justices ruled that punitive damages should be "proportionate to the amount of harm" someone suffers but did not give a specific formula for determining how such damages should be set.
Arguments in the Oregon case are expected this fall. The case is Philip Morris USA v. Williams, 05-1256.
In a statement, Philip Morris called the punitive damages in the Oregon case "grossly excessive and inconsistent" with the State Farm ruling. Philip Morris is part of Altria Group Inc.
The Oregon Supreme Court said in the Williams case that Philip Morris "knew that smoking caused serious and sometimes fatal disease, but it nevertheless spread false or misleading information to suggest to the public that doubts remained about the issue."
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Lack of confidence in cyber security has economic, political effects
Americans share a lack of confidence in the Internet that could have political consequences. In addition, the lack of action by government to boost security of the digital infrastructure is manifesting itself in economic losses.
Those are two conclusions formed by the Cyber Security Industry Alliance at the release of its survey measuring the American public's confidence in the security of the nation's digital infrastructure.
The results of the nationwide survey of 1,150 adults conducted on behalf of CSIA by Pineda Consulting show that fewer than one in five Americans feel that existing laws are enough to protect them on the Internet. Moreover, voters express a clear preference for strong federal data security legislation even when presented with the argument that it will result in unwanted notices and higher prices. Some 70 percent of likely voters agree that Congress should pass a strong data security law anyway.
"The rash of high-profile data breaches over the past 18 months has compromised more than 55 million personal records. Meanwhile, Congress has spent more than a year debating data security legislation without results as the issue of data security has been rising in the public consciousness," said Paul Kurtz, executive director of CSIA. "While data security alone won't be a deciding factor in an election, the survey does reveal that voters have serious doubts about candidates opposed to strong data security laws."
Kurtz maintains that consumers are beginning to understand the link between their privacy and data security and they are looking to their government leaders for action. His group is encouraging Congress to pass a comprehensive national data security law this year. Such a law would "establish reasonable security measures, create a consistent and recognizable notification standard, encourage best practices such as encryption, and include effective enforcement."
According to CSIA, this lack of confidence continues to manifest itself through consumer behavior that suggests economic losses.
Only 44 percent of Americans feel their information is safe when engaging in e-commerce and 50 percent avoid making purchases online because they are afraid their financial information will be stolen.
Cat model reassessments cause rating and capital changes
Last fall's disastrous hurricanes provided some rough times for the catastrophe modeling industry. Consequently the principal cat modelers -- Applied Insurance Research, EQE International's EQECAT, and Risk Management Solutions -- went back to the drawing board to reassess their models of the risks and the consequent potential losses from natural disasters, particularly hurricanes.
These revised models are now becoming available, and practically without exception they contemplate higher loss figures. Speaking at the World Insurance Forum in Bermuda in February, Hemant Shah, RMS CEO, warned that insurers should be preparing to increase their reserves for catastrophe losses, not only due to the unprecedented 2005 hurricane season, but also to prepare for a "stormy future."
In April RMS said increases to hurricane landfall frequencies in the company's U.S. hurricane model would increase "modeled annualized insurance losses by 40 percent on average across the Gulf Coast, Florida and the Southeast, and by 25 percent to 30 percent in the Mid-Atlantic and Northeast coastal regions relative to those derived using long-term 1900-2005 historical average hurricane frequencies." For good measure RMS also upgraded its European Windstorm model in May, as did AIR, which had already updated its Florida hurricane model. This month RMS updated its earthquake models for the Eastern U.S. and Canada.
In April EQECAT's President Rick Clinton issued a stark warning to insurers, reinsurers, corporations, and government entities, urging them to be prepared for more frequent and severe hurricanes in the Atlantic Ocean, Caribbean Sea, and Gulf of Mexico for the next decade or more. "The current forecast, coming after the industry's difficult 2004 and 2005 hurricane experience, is putting more pressure on companies to improve their understanding of and to aggressively manage their catastrophe risk," he observed.
Standard & Poor's reacted by putting a number of Cat Bonds issued by Swiss Re, PXRE, Hartford, Converium and USAA on its CreditWatch list with negative implications. "The change has been prompted by recent actions taken by catastrophe modeling firms ... to update their calculations of expected loss," S&P said.
The effects are already showing up. Swiss Re, a leading advocate of transferring risk to the capital markets through Cat Bonds, announced a $950 million natural catastrophe protection program named "Successor," a follow-up vehicle to its "PIONEER" and "Arbor" securitization programs. It covers North Atlantic Hurricanes, Europe windstorms, Californian and Japanese earthquakes.
While S&P rates Swiss Re "AA," it rated the notes between 6 and 8 notches lower, putting them in the "BB," "BB-" and "B" range. Even though there has yet to be a reported loss to investors on a Cat Bond, S&P is signaling that the probability that there will be one has significantly increased. The cost to Swiss Re, and other companies, who issue Cat Bonds, has also significantly increased, as more points and higher interest payments are going to have to be made to make the bonds attractive to the institutional investors who buy them.
