Job, education underwriting factors under scrutiny in N.J.

New Jersey drivers could see a return to high prices and fewer choices for their insurance if legislators limit the use of occupation and education as rating factors, insurers warned lawmakers at a legislative hearing earlier this month.

Senate Bill 1714 would represent a "significant step backward for New Jersey, and it could very well be the first step toward a return to a moribund market," said Paul Tetrault, state affairs manager for the National Association of Mutual Insurance Companies.

The legislation would prohibit insurers from using occupation and education in the underwriting process. But according to NAMIC, such restrictions could hamper competition and thereby hurt consumers.

Tetrault suggested the proposal could mean individuals in certain occupations, such as teachers, librarians, or office workers would pay more for insurance than they would otherwise. The measure might also restrict the operation of companies that that serve specific occupational groups and prevent insurance companies from offering students discounts based on good grades, he added.

Also testifying in opposition to the measure, the Property Casualty Insurers Association of America agreed that passing the bill would signal a "major step backwards a major step backwards from the auto insurance reforms passed in 2003 that are helping to increase competition and drive down rates.

Richard Stokes, regional manager and counsel for PCI, argued that the use of education and occupation to underwrite and rate insurance has been approved by various state regulators, most recently in Maryland, where the insurance department found that a company's use of education and occupation was reasonably objective and confirmed that the use of these factors did not have a disparate impact on any protected class.

According to PCI, personal characteristics such as age, gender and marital status have long been recognized as accurate predictors of insurance loss. "Factors such as education and occupation are no different," said Stokes.

Mass. health insurers agree on $175 a month plan under new law

The average uninsured Massachusetts resident could obtain health care coverage for as little as $175 a month under the state's insurance law, Gov. Deval Patrick announced as he released the results of negotiations with the state's health insurers.

The lowest monthly premium is far lower than an earlier estimate of $380 a month suggested by some insurers.

"This is a big improvement from the first round of bids and a big step forward for health care reform," Patrick said. "The health security that was the point of health care reform will be delivered at an affordable price."

The minimum plan would cover the average uninsured Massachusetts resident, who is typically around 37-years-old. It includes prescription drug coverage and covers basic medical care, such as emergency room visits and outpatient medical care.

Lower cost plans would be available to young adults. Prices would also rise and fall depending on the age of the person and where they live. If purchased on a pre-tax basis, the lowest cost plans drop to $109 a month for someone earning $50,000 a year.

The panel charged with overseeing the law, the Commonwealth Health Insurance Connector board, is expected to give its seal of approval to the seven plans as meeting its affordability test.

The insurers include Blue Cross and Blue Shield, ConnectiCare, Fallon Community Health Plan, Harvard Pilgrim Health Care, Health New England, Neighborhood Health Plan, and Tufts Health Plan.

The lowest bidder was Neighborhood Health Plan.

The insurers will be able to offer different kinds of plans, from basic to premier coverage. The plans are a critical piece of the landmark insurance initiative, which requires all Massachusetts residents to have health coverage by July 1 or face tax penalties.

Plaintiffs: Md. court reinstatement of class action a breakthrough

A potentially far-reaching ruling by the Maryland Court of Appeals reinstates a class action suit against several U.S. automakers even though the plaintiffs were not injured by allegedly defective seat-backs.

Plaintiffs claim seats that collapse backward in rear-impact collisions have killed or seriously injured thousands of people across the country, although none of those filing suit have been injured. The suit was filed by nine Maryland consumers who owned cars made between 1990 and 1999 by General Motors Corp., DaimlerChrysler, Ford Motor Co. or Saturn.

The state's highest court ruled that the potential for death or serious injury was so great that the owners could sue under a purely economic loss theory.

Attorneys said the case could have far-reaching ramifications, although to date, few states have gone as far as Maryland.

"You have to start somewhere," plaintiff attorney Jack M. Mason told The (Baltimore) Daily Record. Allowing consumers to sue for economic loss from an "uncrashworthy" defect, he said, "represents the same kind of breakthrough the lawyers had in the '60s, where they persuaded the courts that the manufacturer had a duty to make the automobile crashworthy in the first place."

An attorney for defendant DaimlerChrysler AG, disagreed. "We think it's important because it's probably the most frivolous theory for a class-action suit that is making its way through the American court system today," spokesman Michael Palese said.

Beacon Mutual gets R.I. audit

Rhode Island officials have completed their audit of Beacon Mutual Insurance Co. and turned over the results to the workers' compensation insurer. However it will be weeks before the public learns what is in the report.

Department of Business Regulation Director A. Michael Marques said he transmitted the draft market conduct report on Feb. 19 to Beacon's CEO, James V. Rosati. Beacon is being given an opportunity to review the report for any factual errors.

DBR has been reviewing Beacon's practices and procedures since September 2005. It intensified the exam by retaining forensic auditors, Deloitte Financial Advisory Services in February, 2006, following receipt of an internal report that raised questions about the management at that time. The company has since replaced its chief executive officer with Rosati and Gov. Donald Carcieri has named several new members to the board of directors.

If any errors exist, Beacon has an opportunity to present them to DBR no later than March 1. DBR says it will then provide Beacon with a final version of the report, after which the insurer's board of directors will have 30 days to respond to DBR's findings. During this process, state law requires that the report remain private and confidential, according to DBR.

Beacon Mutual acknowledged receipt of the report. "We have assembled a team of board members and senior mangers to respond to the report in an open and substantive manner. I am committed to responding to DBR's findings in a cooperative manner on behalf of Beacon's 14,000 policyholders. Unfortunately, a spirit of cooperation did not always exist during this process. One of my primary goals as Beacon's new CEO is to continue the process of restoring relations between Beacon and the Department of Business Regulation," said Rosati in a statement.

Rosati said the report would be released to the public after the review process. "Once DBR deems the process complete, it is our intention to release the entire report and Beacon's response to our policyholders and the public," said Rosati. "It is our intention to waive our rights to a 30 day holding period and release the report as quickly as possible when the regulatory process is complete. It is critical that our policyholders understand Beacon is changing the way it does business."

Conn. AG probes insurer, agency relationship

Connecticut Attorney General Richard Blumenthal has issued subpoenas in an investigation of bonus commissions and other possible financial arrangements between Middlesex Mutual Assurance Co. in Middletown and H.D. Segur Inc., a large Connecticut insurance agency.

"The subpoenas are part of an ongoing investigation spurred initially by complaints within the industry and also from outside sources, customers and others," he said. He would not provide specifics.

The investigation is part of a probe into the "kinds of illegalities and antitrust violations" that produced $500 million in restitution and fines in several states, including Connecticut, Blumenthal said.

The Hartford Courant reported that it obtained a copy of a subpoena showing the state also is asking about ownership relationships between the firms and any experience involving "sham bids" for insurance.

Both companies said they stand by their business practices and long-standing reputations, the newspaper reported. "We don't think we've steered customers," William J. Morris, a partner in Segur, said. "We run a highly ethical business. I believe that in my heart and soul."

The agency has contingent commission agreements with various insurers as other agencies do, and the arrangements are "lawful and proper," he said.

Blumenthal and state attorneys general in Illinois and New York have argued that "contingent commissions" may be tantamount to kickbacks. They haves have won agreements from several companies to stop contingent commissions.

According to Morris, Middlesex Mutual owns a 22.5 percent stake in Segur, does not have members on Segur's board and does not vote or have any management control over the agency. Segur is among Connecticut's larger insurance agencies, with more than $100 million of premiums a year.

Middlesex, which sells auto, homeowners' and business insurance, is part of COUNTRY Insurance & Financial Services Group in Bloomington, Ill.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

N.Y. City, other U.S. centers need federal terrorism insurance to compete globally, says Supt. Dinallo

A continuing federal role in terrorism insurance is important so that U.S. financial centers including New York City can continue to compete with international markets, many of which are already covered by similar government insurance programs, New York Acting Superintendent of Insurance Eric Dinallo told a Congressional panel in Manhattan recently.

Dinallo told federal lawmakers that relying solely upon private markets to provide terrorism insurance would mean that only businesses in New York City, Washington, Chicago, Houston and other large cities seen as targets would buy terrorism insurance.

"Thus, instead of the risk being shared or pooled, it would be concentrated. That would increase the cost of doing business in our largest cities and hurt their ability to compete with cities in other countries, especially those which do provide a government backstop for terrorism insurance," the state insurance regulator said in urging renewal of the Terrorism Risk Insurance Extension Act (TRIEA), which will expire at the end of the year unless Congress acts.

Dinallo made his remarks before a subcommittee of the House Committee on Financial Services, which came to Manhattan to hear views on extending the federal terrorism insurance program.

Dinallo said that in addition to a federal backstop, private markets and even local governments must continue to do their part to deal with the risk of terrorism.

Noting that New York State and its business community spend billions of dollars to reduce the risk of future terrorism, despite the presence of the federal government program, he argued that the federal government must also recognize the benefits of concentrated financial centers.

"It is not realistic to spread the financial services industry throughout the country, so there is no one financial capital vulnerable to attack. There are still many strong benefits to concentration," he argued. "That's why the competition for New York comes from other financial centers, such as London, Tokyo and Hong Kong. And if New York is no longer the world financial capital, the alternative is not going to be another city in America, it's likely to be one of those foreign cities that are already competing for that title."

In addition to government, the private insurance market must do its part, Dinallo stressed.

"I don't believe in letting the insurance industry completely off the hook. Quite the opposite, it is essential that we continue to take measures to increase the private market's ability to take on as much terrorism risk as possible," he testified.

Dinallo cited an estimate by the American Academy of Actuaries that a large nuclear, biological, chemical or radiological (NBCR) event in downtown Manhattan could cause insured losses (property/casualty and group life insurance) of $778 billion. However, he cautioned, in 2005 the aggregate capital for all property and casualty lines was $427 billion and less than half of that is used to support the insuring of commercial enterprises.

"Obviously, even a small number of huge possible losses of that size will substantially increase the mean, pushing premiums to unaffordable levels," he explained. "What the federal backstop does is eliminate the very, very large losses and thus cuts off the tail. That substantially reduces the mean and thus reduces premiums that insurers must charge and makes them more affordable."

He said if the country were to rely solely upon private markets without a government backstop, insurers would have to charge to cover the largest potential risks and prices would rise so high that only those who "absolutely had to buy terrorism insurance would do so."

He warned of dire economic consequences if Congress fails to renew TREIA so that coverage is in place as of Jan. 1, 2008.

"Without a federal backstop, property insurance, especially in our urban cities, will become unavailable or unaffordable. Trophy properties across the nation, including hospitals, stadiums, and government buildings, will be significantly impacted and real estate and construction projects could come to a standstill," Dinallo argued.

At the same hearing in the heart of the world's financial markets, insurance agents and companies also urged Congress to protect the country's economic stability by ensuring availability of terrorism risk insurance through a continued federal role.

The Independent Insurance Agents & Brokers of America and the National Assocation of Professional Insurance Agents were among the groups submitting testimmony to the House Financial Services Committee's Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises.

Congressional leaders including House Financial Services Committee Chairman Barney Frank, D-Mass., and Senate Banking Committee Chairman Christopher Dodd, D-Conn., have said they want to address this issue early in the year. The New York City hearing by the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, followed a Senate Banking Committee hearing on the same topic a week earlier.

"Insuring against terrorist attacks is not just a 'New York state of mind,'" PIA said in its statement, which maintained that errorism coverage is being required by "lenders of their commercial insurance borrowers of all sizes, on any sizable commercial loan anywhere."

The American Insurance Association applauded lawmakers for recognizing "the importance of addressing this issue sooner, rather than later."

Key New York workers compensation reform proposals

Key elements of the proposed reform package as released by Gov. Spitzer's office are as follows:

• The maximum weekly benefit for injured workers will be increased from $400 to $500 in the first year, $550 in the second year, $600 in the third year, and to two-thirds of the average weekly wage in New York in the fourth year. Once the maximum benefit reaches two-thirds of the average weekly wage, the maximum benefit will be indexed annually.
• The minimum weekly benefit will be increased from $40 to $100.
• Cost savings worth hundreds of millions of dollars will be achieved by setting maximum number of years that a small population of claimants can receive cash benefits.
• New programs will be established to get workers prompt medical treatment and to help them return to work.
• Strong anti-fraud measures will be adopted, including the ability to stop work on a job site where a company has failed to purchase insurance for its workers, higher criminal penalties for violators and debarment provisions.
• The expensive Second Injury Fund that is now financed by assessments passed through to employers will be closed. The fund was initially set up to help injured Word War II veterans, but is now instead used by some insurance carriers as a costly loophole to avoid paying claims; and
• The Compensation Insurance Rating Board, which helps determine workers' comp costs for employers, will sunset as of Feb. 1, 2008. The Superintendent of Insurance will make a recommendation to the Legislature in September 2007 as to what, if anything, should replace it.

N.Y. Gov. Spitzer, labor, business reach workers' comp reform accord

But workers' comp insurers are nervous that cost savings promised by the reforms' supporters may not materialize

New York Governor Eliot Spitzer and legislative leaders have reached an agreement to reform the state's workers' compensation system that has the backing of business and labor.

Under the agreement, benefits for injured workers will be increased for the first time in more than a decade, and employer costs, which are among the highest in the nation, will be reduced by 10 to 15 percent with savings to grow over time, according to the plan's authors.

The plan calls for the possible scrapping of the current Compensation Insurance Rating Board, which helps decide what employers pay for coverage, and directs the state insurance superintendent to ensure that any system savings "are captured in premium rate reductions, beginning in the next rate setting cycle that concludes this July."

The plan also includes new anti-fraud measures and the closing of the state's Second Injury Fund, which the backers predict should lead to double digit savings.

While politicians, employers and labor praised the plan, insurers appeared concerned whether the savings promised could be realized.

"This is a remarkable win-win situation for both workers and employers," said Spitzer. "Thanks to the cooperation of legislative leaders and staff, and with constructive input from business and labor, we've developed an approach that will achieve the twin goals of helping injured workers and improving the state's competitiveness."

The accord was hailed by House and Senate leaders, both Republicans and Democrats.

"Under this agreement, the weekly benefit for injured workers would be raised significantly and, for the first time in the state's history, an ongoing maximum benefit rate increase would be indexed and not ever require further action by the Legislature or Governor, a provision the Assembly has long fought for," said Speaker Sheldon Silver.

"The agreement on workers compensation reform is a tremendous victory for workers, who will receive increased benefits, and for businesses that will see a significant reduction in premiums," said Senate Majority Leader Joe Bruno.

Employers predicted the plan would prove to be an economic boost for the state.

" It is a big win for improving our economic climate, especially Upstate," said Kenneth Adams, president of the Business Council of New York.

Dennis Hughes, president of the AFL-CIO, said labor is "immensely pleased" with the pact.

But insurers, the ones likely to be caught in the middle between benefit increases and promised rate cuts, were waiting for the details before celebrating.

Speaking for the American Insurance Association, Gary Henning, assistant vice president, indicated that carriers are being cautious until they see details.

"We need to carefully review this measure so we know exactly how the cost savings will be generated," Henning said in a statement.

Frank O'Brien, regional manager for the Property Casualty Insurers of America, said his group is "pleased to see Gov. Spitzer make this issue a top priority of his administration."

As for the specific reforms, PCI said it would comment after it analyzed them.

Insurance agents reacted positively.

The Independent Insurance Agents & Brokers of New York, Inc. said the accord is a "step in the right direction" but also stopped short of endorsing the entire package before seeing the fine print.

"The plan is bold and forward thinking," said IIABNY Chair Sharon Emek. "Eliminating such inefficiency as the Second Injury Fund and the Compensation Insurance Rating Board, while limiting the number of years a small population of claimants can receive benefits under permanent partial disability will drive substantial costs out of the system."

The Professional Insurance Agents of New York State Inc. applauded the reforms as well.

"We are pleased that the governor and Legislature have heard our appeals to identify and address inefficiencies in the system," said PIANY President David Dickson.

"Achieving reform is absolutely crucial to restoring integrity to New York's workers' compensation system."

Prospecting in the 21st Century: Using the Internet to find prospects

Former agent and technology guru provides tips on working the Web

Technology expert Steve Anderson of The Anderson Network Inc., a licensed independent agent for the last 25 years, began his presentation to the Independent Insurance Agents of Texas conference in February by asking his audience to consider these key questions: What technology is important to grow a business and how should these tools be used?

Anderson's answer was that Internet search engines are the new modern and efficient way to prospect clients -- a technology tool that offers strategic advantages.

It's all about the sales culture, Anderson said.

"If you've developed a sales culture in which your producers are relentlessly building their book of business -- not simply maintaining it -- then using the Internet can only enhance their productivity and the agency's value will grow with it," he said.

Anderson stressed these basic facts. Technology is a strategic advantage. Use technology to support marketing and sales. Don't let technology overshadow sales. Create marketing "systems" and understand customers' wants and needs.

"Technology is a support to the sales and marketing process, it doesn't replace the process," Anderson said.

"The skills you have in production and sales are still vitally important so don't let technology overshadow everything. Technology supports everything you do and that is what is different today."

A new era

"You know, the days of sitting in the office and taking orders by phone are over. It's a soft market again and agents must get out there and pound the pavement to increase their book of business," Anderson said. "It's a different era and now there are a lot of tools available to you today on the Internet that can help you in the sales prospecting process," he said.

The point is to learn how to utilize the Internet by learning how to find the key information, he added. "When you finally go in to meet with a prospect you're armed with information and that is the key to building a relationship with a prospect that will allow you to write insurance for that individual."

According to Anderson there are five components to a successful agent marketing system and all of them can be utilized and enhanced via the Internet.

Prospect management -- The process of finding prospects and acquiring information about those prospects.

Opportunity management -- How do you know you have an opportunity with a prospect? What criteria do you need to know?

Campaign management -- How are you going to stay in touch and build a relationship over time with that prospect?

Submission -- Marketing to insurance carriers and managing that process.

Results management -- How do you track what you're doing in the marketing area? In many cases agencies don't track the information within the organization very successfully.

Top sites

Prospect management is the beginning step, Anderson stressed to his audience. Know the top Internet sites that agents and producers should access such as: InfoUSA.com., Thomas Register (www.thomasregister.com); Hoovers.

com.; Google (www.google.com); SEC -- Edgar Database (www.sec.gov); and, www.datalister.com.

According to Anderson, it is crucial to have a plan once entering any of the sites above. Begin by asking who is the target? How many prospects are in the marketing area for this particular line? Are there two? It may not make sense to spend a whole lot of marketing time and money on an area unless there are 200, he cautions. Once the who, what, where and why are determined -- proceed on to the site, narrowing the field as the search continues.

Special Web sites

Anderson emphasized that it is also important to know which sites offer unique or specific information. In addition to the general search for prospects, Google has specialized areas that offer a bonus of information such as Google Finance which provides financial information about North American stocks, mutual funds and private companies and can be searched by company, industry, product/service. Google Local provides business listings, maps and directions. Google maps, among other information, provide a bird's eye view of an area.

Special prospect information tools are Hoover.com., Thomas Register (www.thomas

register.com), SEC-Edgar Database (www.sec.gov), RiskMeter.com, E2value.com and Nationwide Flood Research (www.nfri.com).

NetQuote offers leads on preferred auto, standard auto, juvenile auto leads as well.

Another site, Datalister.com is a service that supplies workers' compensation prospect information including X-dates and carrier of record details on over 3.4 million records in 30 states.

"With all of these technological resources at your fingertips, you can't afford not to make use of what's available. In the end all of these tools will help you be more successful and continue to grow your business ... one Web site at a time," Anderson said.

Industry gears up for more federal terrorism insurance debates

Advocates say the coverage still vital to national security and a long-term solution is needed

Insurance industry advocates urged Congress yet again to continue with a federal government role in terrorism risk insurance and to examine long-term solutions before the current backstop legislation, the Terrorism Risk Insurance Extension Act (TRIEA) of 2005, expires at the end of this year.

"The current public-private partnership created by TRIA, and extended in TRIEA, has worked well, allowing businesses across America to continue operating and growing, and preserving jobs in the process," said Tom Minkler, chairman of the Big "I" government affairs committee and an independent agent in Keene, N.H. Minkler testified before the Senate Committee on Banking, Housing and Urban Affairs on Feb. 28 in a hearing titled "Examining the Terrorism Risk Insurance Program." The hearing called on a collection of insurance experts to address the need for a long-term extension.

Minkler noted that the insurance market's ability to protect the American economy from the financial consequences of terrorism risk is a critical component of national security during the ongoing war on terror. Minkler said that terrorism risk coverage would become inordinately expensive and probably unavailable to many businesses if the federal role lapses.

Don Bailey, CEO of Willis North America, a subsidiary of Willis Group Holdings, said that the federal program has stabilized the market and made affordable terrorism coverage available to businesses across the country. Bailey, who testified before the Committee on behalf of Willis and The Council of Insurance Agents and Brokers, said TRIEA has been an "unqualified success, and allowing it to expire at the end of this year would be "economically devastating.

"The most important issue for the broker community is maintaining access to coverage at a price the business consumer can afford," Bailey said. "In order to get this access, we need insurers who are able and willing to provide the coverage. It is clear that they cannot and will not be able to provide terror coverage without a federal backstop or some other mechanism to cap their exposure."

The Big "I's" Minkler added that terrorism insurance coverage is not just a "big city" or a "big business" problem. "It is a business customer problem throughout the country," he said. "As take-up rates have gone up across the country, we have seen terrorism coverage purchased by a wide and diverse variety of interests, from small towns in Mississippi to small and large businesses in New York City."

More than half of adults could be in need of disability coverage

Most Americans are not prepared to deal with the possibility of becoming disabled and, in turn, unable to work, according to new research by the National Association of Insurance Commissioners (NAIC).

More than half (56 percent) of U.S. adults say they would be unable to pay their bills or meet expenses if they became disabled and could not work for a year or longer.

The survey, fielded by International Communications Research, showed consumers have an optimistic picture of their future, with only 13 percent saying it was somewhat or very likely they would become disabled and unable to work. However, data from the Social Security Administration (SSA) indicates that a substantial portion of the nation's population -- 20 percent -- will actually become disabled for a year or more before reaching age 65.

The NAIC says the findings highlight the need for long-term disability insurance, designed to protect people financially by replacing some of their lost income. In the NAIC survey, only 44 percent of respondents indicated they had long-term disability coverage. Of these individuals, 71 percent said their long-term disability insurance was employer provided rather than individually purchased. This suggests a significant number of people could lose their coverage in the event of a change in employment status.

"Many people don't think about the impact becoming disabled can have on their ability to earn a living and remain financially independent," said Walter Bell, NAIC president and Alabama insurance commissioner. "Understanding the role of disability insurance at each life stage is critically important to one's total financial security."

The NAIC provides information on disability insurance for consumers in all life stages on its consumer education Web site, Insure U (www.InsureUonline.org).

Caribbean nations establish joint disaster insurance pool

Caribbean countries joined by outside donors and international and regional organizations established a $47 million insurance pool to soften the blow from earthquakes and hurricanes.

Called the Caribbean Catastrophe Risk Insurance Facility, the program grew out of member governments' determination to rebuild quicker after catastrophic natural disasters.

The World Bank helped the 18 contributing governments establish the facility. It said they would save about 40 percent in premium payments by pooling their risks and would have money available immediately should disaster strike.

The facility will operate by allowing governments to buy catastrophe coverage similar to coverages for businesses to protect against interruption of operations by providing them with early cash payments after a major hurricane or earthquake.

Hosted by the World Bank, ministers from the 18 countries signed off on the arrangement at a conference with international and regional organizations and donors including Canada, France, Britain, Japan, the European Union.

Heads of government from the Caribbean Community, a regional transnational organization, asked the World Bank to help organize the facility after the 2004 Hurricane Ivan roared through the Caribbean. It clobbered Grenada, Barbados and other islands as well as the southern United States and was blamed for 121 deaths. An estimated 90 percent of homes on Grenada were damaged.

World Bank statistics show that a major hurricane affects a Caribbean state every two years and responses to them are severely limited by lack of resources. Ivan's hit on Grenada caused losses up to 200 percent of the island state's gross domestic product.

Participating countries are Anguilla, Antigua and Barbuda, the Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, the Cayman Islands, Dominica, Grenada, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago and Turks and Caicos Islands.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Number of catastrophe-related laws enacted rose significantly in 2006

State lawmakers ready to exceed or outpace last year's total

Enacted catastrophe-related laws increased dramatically in the states last year, according to the annual survey of state insurance laws prepared by an insurance group.

"Ten states enacted 17 catastrophe-related bills last year as compared to three states in 2005," said David Reddick, associate director of public policy, National Association of Mutual Insurance Companies (NAMIC). "Five bills were enacted in Louisiana following Hurricanes Katrina and Rita while Florida and Hawaii each passed resolutions calling for creation of a national catastrophe fund."

This year, state lawmakers already appear on pace to equal or exceed last year's total, Reddick added.

While catastrophe-related bills increased, the total number of property and casualty-related bills actually decreased last year. The NAMIC survey found that 44 states and District of Columbia collectively enacted 539 bills as compared to 625 property/casualty insurance laws in 2005.

Motor vehicle insurance bills represented the largest single category of bills in the 2006 survey with 169 bills. Traffic offenses were the largest sub-category with 42 bills.

Workers' compensation was the second largest bill category with 82 bills enacted. The largest number of those bills -- 21 -- related to benefits, claims and authorized treatments.

Identity theft legislation was the third with 22 states and the District of Columbia enacting a combined 36 bills.

A copy of the annual survey is available at www.namic.org.

Mexican trucks to travel deeper into U.S. roadways

Safety advocates say move will endanger motorists and could threaten national security

The news that Mexican trucks will be allowed to haul freight deeper into the United States drew an angry reaction from labor leaders, safety advocates and members of Congress. They said Mexico has substandard trucks and low-paid drivers that will threaten national security, cost thousands of jobs and endanger motorists on the northern side of the Mexican border.

The Bush administration late last month announced its plan to have U.S. inspectors oversee Mexican trucking companies that carry cargo across the border.

"This program will make trade with Mexico easier and keep our roads safe at the same time," Transportation Secretary Mary Peters said. She announced details of the plan to let 100 Mexican trucking companies travel beyond the border area.

Access to all U.S. highways was promised by 2000 under the 1993 North American Free Trade Agreement, as was access through Mexico for U.S. carriers.

That aspect of NAFTA was stalled by lawsuits and disagreements between the two countries, though Canadian and U.S. trucks travel freely across the northern border.

The Bush pilot project will let Mexican truck companies travel from Mexico throughout the United States and back. No hazardous material shipments will be permitted.

According to the Transportation Department, U.S. inspectors will inspect every truck and interview drivers to make sure they can read and speak English. They'll examine trucks and check the licenses, insurance and driving records of Mexican drivers. Inspectors will also verify that the trucking companies are insured by U.S.-licensed firms.

The first Mexican trucks are expected to drive into the United States beyond the border area in about 60 days.

National Transportation Safety Board member Debbie Hersman questioned how the U.S. could spare sending inspectors to Mexico when only a tiny percentage of the hundreds of thousands of U.S. truck companies are inspected every year. "They lack the inspectors to conduct safety reviews of at-risk domestic carriers," Hersman said.

One-fourth of all U.S. trucks are taken off the road after random inspections because they're so unsafe, she said. An even higher percentage of Mexican trucks are taken off the road at Texas border crossings, she said.

Mexican carriers insist their rigs meet U.S. standards.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

A.M. Best likes what it sees in property/casualty personal lines segment

Rating and industry analysts at A.M. Best are maintaining their stable outlook for the personal lines property/casualty segment in 2007 based on what they see as this sector's continued favorable risk-adjusted capitalization and ongoing operating profitability. They estimate that the personal lines segment will report strong earnings and capital growth in 2006, driven by several factors, including favorable frequency and severity trends, modest catastrophic activity and the maintenance of pricing and underwriting discipline.

Performance in the personal lines segment continues to be driven by the automobile liability and physical damage lines; combined they account for approximately 65 percent of net written premium for the personal lines composite. The combination of continually evolving pricing segmentation, avoidance of market-share based pricing decisions, declining frequency trends and modest increases in severity has enabled the segment to produce favorable results over the last several years, according to Best.

Although Best notes a slight increase in the underwriting expense ratio due to modest reductions in net written premium as well as increased overall marketing expenses, the rating expert figures that the impact has been more than offset by favorable loss trends.

Given the recent performance and heightened competition, the personal lines segment's overall margins will be compressed modestly, Best predicts. However, with the strong profitability levels of recent years, the reductions are unlikely to have a considerable negative impact on the segment in the near term.

In the homeowners' line, the generally modest catastrophe losses for the year coupled with ongoing underwriting and pricing discipline produced an "extremely strong" combined ratio, notes Best. Given the unprecedented catastrophic activity of 2004 and 2005, carriers continued to re-assess their risk tolerances during 2006.

Despite the modest catastrophic activity of 2006, Best anticipates that carriers will continue to be diligent in their efforts regarding risk management.

The regulatory environment remains "an important consideration in any assessment of the segment, as personal lines continues to be the most heavily regulated in the industry," the analysts note.

While Best says it expects deterioration in pricing and earnings given the increased competitive environment, it also believes it is likely that the overall impact, assuming a normal catastrophe year, will be modest in 2007.

Insurance exec: China offers lessons in globalization for U.S. and world

C.V. Starr's Greenberg on China's economic revolution and making the world safer through globalization

I am not going to talk about regulation, not yet. I will soon but it will not be today -- real soon. I cannot wait."

Thus Maurice "Hank" Greenberg -- target of Eliot Spitzer, prosecutors, competitors and rumor mills -- let it be known he would avoid controversy on a recent winter day when he addressed the Association of Professional Insurance Women and the Chartered Property Casualty Society in New York.

Instead of diving into domestic politics, the former American International Group discussed international affairs, offering a rationale for globalization and an education on China, where the insurance firm he now heads, C.V. Starr & Co., was founded in 1919 and where he himself first visited in 1975, at the tail end of the Cultural Revolution.

"It was not a very pleasant place for me, a very primitive place. The Cultural Revolution took some of the most important and the most affluent people and put them in farms, pig farms or whatever," recalls Greenberg.

He went to China in 1975 because there was a historic connection between his company and the people of China and because he saw opportunity. He has since developed close personal and business relations with the Chinese.

"I believe that 1.3 billion people could not be outlawed out of the world system forever. It would change; China was too important, too populous a country to develop outside the world trading system. Of course that turned out to be true. From 1975 to the time they have entered into the world trade system was years, a couple of decades actually."

Greenberg said he helped China obtain membership in the World Trade Organization "because that was good for the people and good for the world."

That, he said, has turned out to be true and China is rocketing to economic stardom.

"Never in the history of the world has so much been done in one country in such a brief period of time," the veteran insurance industry leader observed.

He told of visiting an area just across the river from Shanghai, which was simply a rice field when he first went to China, but which is today one of the world's most modern cities.

In 2008 the Chinese will be hosting the Olympics, which Greenberg predicts will further accelerate what is already a quick pace of change in China. "China is now preparing for the Olympics and you will see a dramatic change in Beijing where it will take place," he said.

To illustrate the progress, he noted that China Life, which is the largest life company in China and state owned, had a public offering in the Shanghai market. After the stock closed, China Life was the third largest insurance company in market capitalization in the world. "Now think about that. Who would have believed this just a decade ago and now it has happened."

Similarly, ICBC, which is the largest bank in China, also owned by the government, had a public offering in Hong Kong. It is now the third largest bank in the world, just behind Citigroup and Bank of America.

While critics of globalization maintain that it causes the U.S. to lose textile and other jobs to other countries like China and India where production costs are low, Greenberg prefers to see the positive.

"We buy products that people could not afford to have; they weren't getting them very inexpensively. So it helps the middle class and the lower income class of the United States. At the same time, the trade surplus, they buy up U.S. dollars and they buy Treasury bonds, and that keeps inflation down in our country. That is part of what globalization is all about. They benefit from their exports, we benefit from their products and, of course, they buy bonds and therefore it keeps inflation down, interest rates don't go up."

He predicted that in time, China's current trade surplus with the U.S. will moderate, as its own consumer class grows (per capita income is only $1,700 today) and its people buy more products produced in China.

"We want to see less of a trade deficit. China should do more to stimulate their consumer market so they sell more goods within China. China will do that in time. They cannot do that initially when they have $1,700 of per capita income. There is not much to stimulate in those areas in China where wages are very low. It will take time. There are 900 million people in that category."

Raising per capita income is just one of the challenges facing China today, Greenberg acknowledged. After the government got out of many industries, the pension and healthcare systems all but collapsed. Perhaps the biggest problem is the pollution brought about by the rapid growth of industry.

"The environmental issues in China are just staggering, and unless they deal with that, in a very, very forceful way, their healthcare costs and life span of the generation now will be harmed dramatically. The leadership knows that and are working on it."

Solutions may be slowed by certain traditions tied to China's 5,000-year history and the shear size of the country.

"It's a huge country of 1.3 billion people, and the center of Beijing can only influence so much. There's an old Chinese proverb, 'The mountains are high and the Emperor is far.' Essentially that simply means that the central government in Beijing cannot possibly influence day to day activity throughout the country, and so a lot of things happen around the country that are at odds with what the central government has ordered to do, which leads to lots of other issues."

He insisted that China is determined to deal with its pension, healthcare, pollution and other problems, although doing so will take time. The government has a five-year plan in place.

The government is also attempting to deal with corruption in government. "The party secretary in Shanghai, a very popular man was arrested because there was a claim, alleged, not proven, that he used the Shanghai pension funds for personal investments. It may be true, it may not, I don't know. But they're going to make examples of throwing in jail popular people who get a big head, and that influences others," he reported.

Unable to resist, Greenberg, who vowed not to discuss politics, added, "Does that sound familiar?" -- which brought laughter from his New York audience.

The Chinese are cautious about inviting more foreign capital. "You look at Chinese history, it's a 5,000-year-old country, a 5,000-year-old culture, and it's own history. Over the centuries, the Chinese believe that foreigners have always taken advantage of China, and history would prove that that's right, that foreigners did take advantage of China. They considered them not civilized. They're not going to let that happen again," he advised. "So the wealth that's being created in China, the trillion dollars of reserves, and a lot of Chinese who've been educated in the United States working in investment banks and other financial institutions or technology companies or scientists, are going back to China and starting up their own businesses.

"The government's saying, what do we need foreign capital for? We've got a trillion dollars mad money spending. Why don't we have our own private equity companies? What do we need others for? We've been educated in the states, we went to work for Goldman Sachs or Morgan Stanley or whatever, and that's true. So you're going to see more Chinese companies providing their own private equity firms."

While China may be cautious about inviting foreigners in, it will not hesitate to reach out to engage in the global economy elsewhere. The C.V. Starr executive predicted Chinese companies will begin buying up companies around the world, even setting up plants in the U.S. to manufacture lower cost automobiles.

"This is not a 10-year horizon; it's going to happen sooner than that. You'll be seeing a lot of Chinese and you won't be able to compete with them," he added.

According to Greenberg, the U.S. can't compete as it used to do on low cost goods but it can compete by continuing to develop ideas, products and new innovations. "That's what globalization is all about. If somebody can develop a product cheaper than you can, they should do that. Then you've got to continue to develop products that they can't develop. That's an ongoing process; it's not just a one-time process, it's constant," said the insurance executive.

To continue to be the leader in innovation, he warned, the U.S. will have to invest in its educational system, because China is also gaining in intellectual capital. "We have a great talent pool in this country. We have the best universities in the world, but probably one of the worst K through 12 in the world. Unless we solve that problem, the universities are not going to have great students coming in and we'll lose our edge in that," Greenberg said.

"We simply have to wake up and do the things that we can do best. We have always been a great, innovative society and we must not lose that momentum. If we do, I think we're going to find it much more difficult than we have up to date."

For Greenberg, the global economy is not just about business; it's about a safer world:

"The opposite of that is that you try to protect your jobs and what little you have going, and you put walls up. You become a world of regionalism rather than a globalized world. That kind of world becomes dangerous. There's a limited amount of commodities in the ground, oil or gas that exists. We need to develop alternate sources of energy. So, if you have a regionalized world, you're competing for the resources that everybody else needs."