Currents

Jury awards N.Y. man $30 million

A 44-year-old New York man has been awarded $30.3 million for career-ending injuries when he fell from a ladder five years ago.

Peter E. Bissell, of Sanborn, N.Y., suffered severe spinal and other injuries in 2002, in a building then owned by the town of Amherst he was repairing. The fall left him partially paralyzed. His attorneys said the ladder collapsed.

After a two-week trial in state Supreme Court, the jury ordered insurance carriers for the former McGonigle & Hilger Roofing Co. to pay the sum. In 2005, another jury found the town liable for Bissell's injuries under state Labor Law. The town countersued McGonigle & Hilger.

Court officials said Amherst is self-insured for up to $10 million, meaning a verdict against the town could have forced a dramatic hike in town property taxes. They said the verdict will likely be appealed.

Pa. insurers: merger won't harm competition

Pennsylvania's two largest insurance companies have formally asked state regulators to approve a change in control of their subsidiaries that would take effect when the nonprofit companies merge.

Independence Blue Cross of Philadelphia and Highmark Inc. of Pittsburgh outlined the advantages of their proposed merger and explained how it would comply with state antitrust laws in more than 3,000 pages of documents filed with the state Insurance Department.

The companies presented a market analysis that concluded a merger "will not substantially lessen competition or tend to create a monopoly in the lines of insurance in which (the companies) engage."

The merged company would become the state's largest health insurer, with more than 53 percent of the market.

The proposed merger, which the company boards approved March 28, "offers the opportunity to create a more efficient enterprise that will be better positioned to satisfy the needs of its customers by holding down costs and investing in desired new technologies and products," the companies said in their filings.

The filings did not say how a merger would affect insurance rates, however.

Lawmakers, hospitals, doctors and consumer advocates have expressed concerns that the merger would reduce competition -- leading to higher premiums and lower reimbursement rates to providers -- and that a larger company would deter other insurers from entering the state.

Independence currently serves 3.4 million members, mainly in the Philadelphia area, and employs 9,500 people.

Highmark has 4.6 million members, mostly in the western part of the state, and employs 18,500 people, more than half of them in Pennsylvania.

The filings also repeated statements the insurers have made about the merger's economic benefits -- more than $1 billion in savings and revenue growth over six years.

Among other measures, the combined company plans to cut prescription drug costs for customers by $285 million, and give more than $650 million to help the uninsured and underinsured

The Insurance Department will seek public comments on the merger during the next 60 to 90 days, and it will likely hold public hearings around the state in the fall, according to insurance department spokeswoman Rosanne Placey.

R.I. looking to AIG settlement to ease deficit

Rhode Island's estimated budget deficit could grow by almost $100 million because of a stalled settlement with an insurer accused of deceptive business practices, state officials warn.

As part of a massive settlement reached last year, American International Group Inc. agreed to pay states and other private companies about $1.64 billion to settle accusations it used deceptive accounting practices that misled investors and regulators.

But not all parties to the settlement are willing to sign, meaning Rhode Island's slice of the profits will be delayed for the foreseeable future, Joseph Torti III, the state's insurance commissioner, told The Associated Press.

Expecting the money, Republican Gov. Don Carcieri included it in a proposed budget that attempts to close an estimated $360 million budget deficit.

"Obviously, it's not what I wanted to hear," said state Rep. Steven Costantino, the Democratic chairman of the House Finance Committee. "If you can't get it, you can't get it. We still have to balance the budget."

Big 3 brokers still feeling Spitzer effect

The attack that began in October 2002 by then New York Attorney General, now Governor, Eliot Spitzer against bid rigging and contingent commissions generated significant losses, both in income and competitiveness, for the world's three biggest global insurance brokers.

Fortunately for Marsh & McLennan, Aon Corp. and Willis Group Holdings, the legal and regulatory fallout from the allegations and their aftermath is substantially over, leaving them to tackle the earnings fallout through a combination of cost and revenue initiatives. concludes a new report from Standard & Poor's Rating Servcies titled, "Global Insurance Brokerage Peers Focus On Core Operations."

According to Standard & Poor's, these global brokers still face several pressures. For example, insurance-carrier pricing has been softening for over a year, and Standard & Poor's expects rate pressure to continue through 2007.

Also, S&P reports, although declining insurance pricing is somewhat mitigated by increasing insurance exposures and broker compensation, the dampening net effect will result in low to potentially no organic revenue growth for many brokers and will slow global broker recovery from the Spitzer allegations.

N.H. agents offer changes to fiduciary, licensing

The Professional Insurance Agents of New Hampshire Inc. recently said it basically agrees with two insurance department proposals meant to clarify agents' fiduciary and licensing rules.

According to Judy George, president of PIANH, while the association generally agrees with the changes regarding producers' fiduciary obligations, it also suggested the department take the opportunity to address unanswered questions, such as whether a producer may retain interest that accrues on funds maintained in an interest-bearing premium trust account.

"PIANH suggests that producers should be permitted to keep the accrued interest," said George. "The practice, which is permitted in other states, will not compromise the integrity of a premium trust account or threaten the availability of funds."

Additionally, the association asked the department to clarify whether a producer is required to maintain any premium trust account in a bank that is located in New Hampshire.

PIANH voiced some concern with the deletion of provisions for educational requirements.

"Although the proposed sections clearly set forth the requirements applicable to producers and adjusters seeking to renew their licenses, these sections fail to specify the requirements for an individual applying for a new license," noted George.

Travelers Insurance luring top players to Conn.'s PGA stop

When Travelers agreed last year to become the title sponsor of Connecticut's PGA Tour stop, tournament officials bragged the event would not only be saved, but would be built into one of the tour's premier events.

There were bulldozers and backhoes in Cromwell a few weeks ago to back up the bragging.

Construction has started on a $5 million, 22-acre state-of-the-art practice center at the TPC at River Highlands. It is expected to be ready in time for the 2008 Travelers Championship. It will include a 360-yard driving range with 110,000 square-feet of tees, a short practice course, 11,000-square-foot putting green, and a 13,000-square-foot chipping area.

Northeast Utilities donated more than 100 acres of land.

Defending champ J.J. Henry said lack of that kind of practice center has been the "missing link" for tournament officials trying to sell Cromwell to the big names.

"A first class practice facility with a chipping area, especially around this golf course with a lot of run-offs and falloffs and little chip shots that you tend to hit, there's really nowhere to work on it," said Henry, who was back at the course this week to promote next month's tournament. "I think having this facility out here is going to be a great asset that the players are going to enjoy using."

When it's not being used by the players, the facility will serve as a learning center for the state's First Tee program, which is designed to introduce children to golf. Youngsters will have their own tees at the driving range, access to the other practice facilities, and a building with computers, classrooms and a library devoted to teaching them golf and life skills, said Ted May, a tournament official and member of the First Tee board. "This will help build the future fan base for the tournament as well," May said.

The tournament also has increased its purse by over $1 million to $6 million. The winner will walk away June 24 with a check for $1.08 million, up $300,000 from a year ago.

"Travelers has been extremely aggressive in saying, 'What do we have to do to get the top names back here?' and then going out and doing those things," said Nathan Grube, the tournament's director.

The June 21-24 tournament, played the week after the U.S. Open this year, is part of the new FedExCup championship, which will award $10 million to the golfer with the most points at the end of the season.

Vijay Singh has committed to playing in the Travelers Championship. Padraig Harrington and Trevor Immelman also were added to the field, which already had landed commitments from two-time Travelers champ Phil Mickelson, and Masters champion Zach Johnson. Singh, ranked second on the PGA money list and in the FedExCup points chase, has 31 tour victories, including three majors. He hasn't played in Cromwell since 2002.

Tiger Woods has never played in the event, and has not committed to do so this year. He and his wife are expecting their first child this summer, and his schedule will revolve around that event, said Henry, a friend who played with Woods on the Ryder Cup team.

"I've seen differences out here today that going forward I hope can attract the likes of say a Tiger or ongoing forward the fact that this is going to be a tournament that's going to be an upper echelon event, and I think the players are excited about it," Henry said.

Agents advised: fundamental shift in compensation coming

Contingent commissions for agents and brokers should be watched by regulators but these profit-sharing arrangements do not necessarily have to be eliminated, according to a leading insurance consumer advocate.

"I think they need to at least be regulated and moderated," Robert Hunter, director of insurance, Consumer Federation of America, said before a gathering of independent agents recently.

Hunter stopped short of calling for the elimination of contingent commissions, as some attorneys general have done in settlements with insurers, during a panel at a town hall-style meeting at the National Legislative Conference & Convention of the Independent Insurance Agents & Brokers of America (IIABA) in D.C.

Others on the panel sympathized with agents and brokers caught up in the controversy over profit-sharing payments but suggested agents should prepare for changes.

"Unfortunately contingency commissions and the local independent agent got dragged into this and as a result it's become very confusing," commented Rep. Earl Pomeroy, D-N.D., who is a former state insurance commissioner. "I think as we go forward we are going to see a fundamental shift in the way agents are compensated and more and more companies are going to be looking at eliminating contingency commissions they had in the past."

Attorney generals "are not good regulators," New Hampshire Commissioner Roger Sevigny said. "But I think [former New York Attorney General Eliot] Spitzer kicked up legitimate problems. We need to be diligent and be proactive and when we're not, when we have attorneys general get involved, things may go well beyond the things addressed."

Panelists discussed the state of the industry post-Hurricane Katrina and the mistakes that were made, but also discussed solutions such as a federal backstop or a tax credit for homeowners.

Tom Van Berkel, chairman and CEO, Main Street America Group, said he thought restoring insurance markets for disaster-prone areas should be a multi-step approach. "One thing is rate deregulation," he said. "I think we need to be able to match exposures with price ... a federal fund, along with some tax-free reserving for homeowners."

Sevigny added, "Tax deferral on reserves for catastrophes, we believe that's a good thing ... tax credits, we believe that's a good thing and stricter building codes we believe are a good thing."

On the federal Terrorism Risk Insurance Act, Hunter said that he is not in favor of a renewal but thinks renewal will pass. "When 9/11 happened, I was the first person to call for TRIA ... saying you got to do it by the end of the year, he said. "But then I watched what happened ... so I changed my position ... But I think NBCR (nuclear, biological, chemical, radiological) will be added and I think Congress will back that up."

Panelists also discussed a possible repeal of the McCarran-Ferguson limited antitrust exemption, which among other things permits insurers to share loss data.

"What my fellow agents want are more markets and more choices for consumers in Florida," said Alex Soto, IIABA president. "We're told time and time again, they (companies) will have difficulty having confidence in doing business if they don't have historical loss data and the ability to use aggregated information under McCarran Ferguson."

Sevigny believes the reason that Congress wants to look at repealing McCarran-Ferguson is misguided. "I can tell you that as a body, the NAIC [National Association of Insurance Commissioners] believes the repeal of the exemption would be bad for the consumers," he said.

When asked of the prospects of the antitrust repeal legislation in Congress, Pomeroy calmed those concerned. "I don't see anything at all on the fast track for McCarran, nor should there be," he said.

Conn. celebrates insurance industry

Connecticut's venerable insurance industry was celebrated at the state Capitol this month, though its lackluster job growth also was noted.

"The industry is as significant a part of Connecticut as it has been in earlier years," Ronald A. Williams, chief executive and chairman of Aetna, said at a forum on May 2.

However, Williams said the industry must compete for business not just in the United States, but also globally.

"What are we doing to make Connecticut competitive?" he asked. "There's a huge opportunity for the state to focus on that opportunity."

Connecticut has the highest concentration of insurance carrier jobs in the U.S. But other states are gaining, according to a recent study. Iowa, for example, has increased insurance carrier jobs by 8.8 percent over the last 10 years, while Connecticut's rate was just 2.4 percent.

"We do have a growth problem here," said Jeff Blodgett, vice president of research for the Connecticut Economic Resource Center.

Stalled AIG settlement could deepen R.I. deficit

Rhode Island's estimated budget deficit could grow by almost $100 million because of a stalled settlement with an insurer accused of deceptive business practices, state officials warn.

But not all parties to the settlement are willing to sign, meaning Rhode Island's slice of the profits will be delayed for the foreseeable future, said Insurance Commissioner Joseph Torti.

Expecting the money, Republican Gov. Don Carcieri included it in a proposed budget that attempts to close an estimated $360 million budget deficit.

Travelers establishes multi-year cat bond

The Travelers Companies, Inc. has set up a multi-year catastrophe bond program to provide reinsurance protection for its insurance subsidiaries for losses resulting from hurricanes and certain other catastrophes in the U.S.

Travelers may obtain reinsurance under the program by entering into one or more reinsurance agreements with Longpoint Re Ltd., a newly formed independent Cayman Islands insurance company.

Longpoint Re successfully completed an offering to unrelated investors under the program of $500 million aggregate principal amount of catastrophe bonds on May 8, 2007. In connection with the offering, Travelers and Longpoint Re entered into a three-year reinsurance agreement providing up to $500 million of reinsurance from losses resulting from certain hurricane events in the northeastern United States, according to the companies.

Amounts payable under the reinsurance agreement will be based on an index created by applying predetermined percentages to insured industry losses in each state in the covered area as reported by Property Claim Services, a division of Insurance Services Offices, Inc. Payments to Travelers under the reinsurance agreement will be based on index-based losses, which are designed to approximate Travelers' actual losses from any covered event. The principal amount of the catastrophe bonds will be reduced by any amounts paid to Travelers under the reinsurance agreement.

Travelers will be entitled to begin recovering amounts under the reinsurance agreement if the index-based losses in the covered area for a single occurrence reach an initial trigger amount of $2.25 billion. The full coverage amount of $500 million is available on a proportional basis until index-based losses reach an initial exhaustion amount of $3.0 billion. The trigger and exhaustion amounts will be reset annually to maintain a probability of loss on the catastrophe bonds equal to the initial modeled probability of loss.

Inspections to target small Mass. firms with dangerous materials

State inspectors in Massachusetts will target small companies handling dangerous materials in residential areas to try to prevent a repeat of a Danvers explosion that was blamed on a build up of chemical vapor.

The state fire marshal's finding released this week supports a preliminary conclusion by federal investigators that the vapor build up of a chemical used to make ink caused the blast at a paint and ink factory Nov. 22, damaging 270 homes and businesses and leaving hundreds homeless. No one was killed or seriously injured.

The explosion -- felt 25 miles away -- leveled the building used by ink manufacturer CAI Inc. and Arnel Co. Inc., a custom paint maker. Both companies used highly explosive chemical solvents in manufacturing, investigators said.

State Fire Marshal Stephen Coan's probe focused on a processing area shared by the two companies. He said CAI's ink-producing process involved heating chemicals, including heptane, in a large "mixing vessel," then shutting off the heat.

Steam heat system
"Witness interviews have led investigators to conclude that one of the chemicals involved, (1,000 gallons) heptane ... was most likely overheated due to a failure to turn off the steam heat system," Coan's report stated.

The ignition source could not be determined because the building was destroyed, Coan said, but possibilities included refrigerator and vending machine motors and condensers, space heaters, electrical exhaust fans and the furnace.

CAI officials said in a statement that while they have cooperated fully with the investigation, they could not comment on the fire marshal's report because "we have not been provided with the basis supporting their assumptions."

Own investigation
The company is conducting its own investigation. "(The explosion) demands a comprehensive investigation equal to the task -- an inquiry that employs advanced technology and expertise, and which thoroughly explores all potential avenues of cause," the statement said.

Arnel officials did not return messages left by The Associated Press.

Sixteen homes and six businesses were ordered demolished as a result of the blast, Coan's investigation found. More than 300 cars and trucks, as well as 65 boats, were damaged or destroyed.

The U.S. Chemical Safety Board planned to release the results of its investigation on Wednesday. Spokesman Daniel Horowitz declined to discuss the specifics of those findings ahead of that meeting.

A new inspection program was unveiled along with the cause in hopes it will prevent similar problems. Inspectors from the Department of Environmental Protection, Department of Fire Services and local fire departments will conduct hazard assessments at small- and mid-sized companies.

If companies resist, "access may be compelled though various means, up to and including administrative search warrants," according to a news release.

Inspectors already have identified 40 facilities across the state, selected because of proximity to densely populated areas, types of chemicals or waste materials used and stored and site history. The first 15 will be inspected in the next two months.

Maine adopts primary seat belt law

Maine Gov. John Baldacci has signed a bill that will make failure by motorists to use seat belts a primary offense, but violators will only get warnings for the first few months the law's in effect.

Under current law, police have to stop motorists for another violation before they can cite them for not buckling up.

The new law makes failure to buckle up reason enough for police action. The law will prohibit searches of vehicles and occupants solely because of a seat-belt infraction.

Although the new law will take effect 90 days after the close of this spring's legislative session, an amendment stipulates that no tickets will be written for violations until April 1, 2008. Police will issue only warnings between the time the law kicks in, probably September, and April.

The three-tiered fine structure is unchanged by the new law. Fines are $50 for the first violation, $125 for the second and $250 for the third and subsequent violations.

Baldacci first proposed making nonuse a primary violation two years ago as part of his budget. But the proposal was defeated in 2005.

Agent leader renews vow to defend incentive pay

The leader of the Independent Insurance Agents and Brokers of America has promised agents his group will vigorously defend incentive pay and contingent commissions that have come in for criticism by some attorneys general.

Citing the controversy of incentive pay paid to agents, Alex Soto, president of IIABA, pledged his association would continue to defend contingent commissions and incentive pay "whether in the court systems, state legislatures or in the halls of Congress and, importantly, in home offices of insurance companies that are partners of ours."

Soto maintained that such profit-sharing is "proper, it is legal and it is used in every facet of commerce to reward excellence."

Soto also said that if insurers insist upon disclosing to buyers what they pay their independent agents they should also disclose other expenses. He said if insurers require specific disclosure of agents' pay, the public should also be informed about the remaining "89 percent in home office expenses," including the cost of marketing and advertising, the cost of settling claims, and "what the CEO and top 10 officers make."

Soto made his remarks during IIABA's annual legislative conference and convention last month in Washington, D.C.

'Big 3' brokers still feeling effects of Spitzer attack, Standard & Poor's says

The October 2004 attack by then New York Attorney General, now Governor, Eliot Spitzer against bid rigging and contingent commissions generated significant losses, both in income and competitiveness, for the world's three biggest global insurance brokers.

Fortunately for Marsh & McLennan, Aon Corp. and Willis Group Holdings, the legal and regulatory fallout from the allegations and their aftermath is substantially over, leaving them to tackle the earnings fallout through a combination of cost and revenue initiatives, concludes a new report from Standard & Poor's Rating Services titled, "Global Insurance Brokerage Peers Focus on Core Operations."

Willis rejects insurers' alternatives for contingent commissions

After a review of the supplemental compensation plans recently proposed in the marketplace by certain carriers, Willis Group Holdings reported that it will not be accepting these incentive arrangements because, it says, they fail to fix the conflicts associated with the contingent commissions they are meant to replace.

Contingent commissions have come under fire by some attorneys general and been prohibited by settlements between these officials and several major insurers. Travelers and Chubb are among the insurers that have announced plans to replace contingent commissions with supplemental programs.

But in Willis' opinion, the new supplemental incentive pay plans are unacceptable -- even if government watchdogs approve them -- because they raise the same conflicts that were associated with contingent commissions.

According to agent association leaders, the new plans allow agents to know at the beginning of the year what their bonus check will be at the end of the year. With many traditional contingency programs, agents do not know what they will get at the end of the year because they don't know if they'll be profitable.

"They have performance-driven elements that make lump-sum payments contingent on factors such as retention, growth and profitability -- features that rendered contingent commission plans incompatible with conflict-free transparency and our clients' best interests. Such supplemental compensation plans are best housed in an agency relationship," Willis said in a statement.

According to Willis, compensation plans for brokers "need to meet the criteria of complete transparency and equity on each policy placed." The client has to be sure that the broker is acting objectively to get the best deal done for the client, in Willis' view.

"As currently designed, the proposals do not afford a conflict-free environment for the client and we are not going to take them," said Joe Plumeri, chairman and CEO of Willis. "It's not about being allowed to take them because a government authority or industry regulator says we can take them. For Willis, it's about making a principles-based decision because it's the right thing to do and is consistent with our Client Advocacy model. The proposals we have considered are based on 'if-then' equations and it does not matter whether the math is done on a prospective or retrospective basis; either way, we view these as contingents."

In his address to the UK's Financial Services Authority at the Annual Insurance Sector Conference in March, Plumeri spoke about a principles-based approach to regulation and to running the entire insurance industry.

"The outcome of a principles-based approach, practiced globally and with regulatory flexibility, will be that clients have confidence and faith in the industry -- and that is a must for everyone involved," he noted.

British auto insurer survey targets women's

A survey from the United Kingdom's Diamond, an automobile insurer that specializes in coverage for women drivers, reveals some of their male counterparts' most irritating driving habits.

While Diamond's survey, which included both male and female drivers, revealed that half of women drivers believe they don't have any irritating habits, "90 percent of them don't share that feeling when it comes to male drivers and their irritating habits."

Among Diamond's findings were the following: 31 percent of women think the most irritating driving habit men have is speeding; 30 percent of women think the most irritating driving habit men have is losing their temper; but 29 percent of men think the most irritating driving habit women have is lacking courtesy to other road users.

Diamond's managing director, Sian Lewis indicated that the survey rebutted the "old stereotype that men are always criticizing women's driving," as women are actually the ones who "get the most irritated.

When it comes to passengers, male passengers irritate two-thirds of women. Of those, 35 percent of women are driven mad by men who criticize their driving and 17 percent can't stand it when their male passenger tries to give them directions when they already know where they're going. Less than half of the men questioned found female passengers irritating, but having their driving criticized was also what annoyed them most.

Diamond added that 17 percent of women considered tailgating to be the most irritating male road user habit.

Diamond, a subsidiary of Admiral Group, was launched in launched in 1997, on the premise that women's car insurance claims cost less than men's.

D&O, workers' comp lead downhill pricing parade, according to risk managers' survey

Directors and officers insurance continues to be a highly competitive line. In the first quarter of 2007, D&O prices decreased by 7.7 percent and by more than 12 percent in the last two quarters of 2006 combined, according to the latest Risk and Insurance Management Society Benchmark Survey.

Workers' compensation also reflected further rate reductions. In the first quarter of this year, workers' comp decreased by 3.8 percent, and falling premiums show no sign of abating, the RIMS' survey reported.

Property insurance was the only line of business that increased in the first quarter. Rates reflected a 0.8 percent increase.

General liability premiums decreased slightly in the fourth quarter by 0.8 percent. These premiums have been steadily falling at a controlled pace for the past five quarters.

"A year and a half after Hurricane Katrina, companies with properties in catastrophe-exposed regions are still seeing premiums rise, but trends continue to be quite favorable in other regions and other lines of insurance," says Joseph Restoule, RIMS secretary and member of the board of directors. "Risk managers are especially benefiting from steadily falling workers' comp premiums in many areas."

"2006 was a banner year for the insurance industry with some insurers reporting record profits. That will encourage companies to compete even more vigorously for business," says David Bradford, editor-in-chief of Advisen. "However, forecasters predict that 2007 will be an active year for hurricanes, and a severe catastrophe could stop this soft market in its tracks."

Risk managers report total cost of risk continues downward trend

The commercial insurance industry continued to experience an overall decline in total cost of risk in 2006 despite coastal property premium hikes, according to the 2006 Annual Benchmark Survey book from the Risk and Insurance Management Society (RIMS).

The average total cost of risk fell by 9.2 percent for all survey participants, though there was wide variation by industry.

Property costs rose sharply in catastrophe-exposed regions, substantially offsetting decreases in other regions, according to the report.

Also, workers' compensation costs fell again in 2006, driven substantially by reform measures in several large states.

Even though the above-average season for hurricane activity predicted by meteorologists never materialized, hurricane losses were a significant contributor to the total cost of risk of North American firms and governmental entities in 2006 as the impact of the record-shattering hurricanes of 2005 reverberated across 2006.

Property insurance premiums skyrocketed not only in hurricane-exposed coastal areas, but also in California as lessons learned from Hurricane Katrina were factored into earthquake pricing models.

While premiums for properties in catastrophe-exposed regions were off the chart, insurance costs for property insurance in other regions and for most other lines of business continued the downward march begun in 2004.

"Falling insurance costs continue to be driven by rapidly accumulating policyholders' surplus, the measure of 'supply' in the insurance 'supply and demand' equation," says David Bradford, editor-in-chief, Advisen. "The insurance industry recorded a profit in 2005, in spite of record catastrophe losses, which further fueled competition in 2006, leading to a sharp decrease in total cost of risk. Absent unusually severe natural catastrophe losses, accumulating surplus should continue to exert downward pressure on insurance costs in 2007."

The 2006 RIMS Benchmark Survey book provides risk managers with insurance market information based on the insurance programs of more than 1,200 participants from the U.S. and Canada.

The book covers 14 industry groups (Banks, Consumer Staples, Education, Energy, Professional Services, Telecommunications, Government/Non-profit, Health care, Information Technology, Utilities, Industrials, Consumer Discretionary, Materials and Non-bank Financials).

Lloyd's and Economist Intelligence Unit report warns of threats from political violence

Global business leaders report they are increasingly concerned about risk; prevents some from investing overseas

A new report from Lloyd's and the Economist Intelligence Unit (EIU) has found that global businesses are becoming increasingly concerned about risks from political violence. However, too little has been done to analyze those risks and to "really understand" their impact.

One finding from the report "Under Attack: Global business and the threat of political violence," revealed that, "concerns regarding terrorism and political violence are causing businesses to avoid investing in politically sensitive areas or locating offices in large cities."

The survey canvassed 154 global business leaders and found that over a third of companies avoid investing in overseas markets for fear of political violence, while 20 percent have relinquished promising business opportunities for the same reason.

Lloyd's Chairman Lord Levene indicated that businesses needed to understand their risks better. "There is a large gap between what businesses perceive as a threat and the reality," he noted. "Many companies are changing their plans based on perceived threats, which is a problem if their information is incorrect."

The report is part of Lloyd's 360 Risk Project which aims to generate debate on how businesses can manage risk. One conclusion, revealed that some 60 percent of the businesses questioned rely on international media coverage to come to a decision on what risks they face.

Levene pointed out that "media coverage tends to focus on radical religious terrorism and rarely touches on the emergence of new risks, such as threats to supply chains, cyber terrorism, home grown terrorism and the threat of chemical, biological, nuclear and radioactive attack."

Dr. Paul Kielstra, author of the report and contributor to the EIU, also indicated that businesses place too much emphasis on the wrong information. "As a result, only 37 percent of business leaders feel their companies have a good understanding of the political violence risks they face," he noted.

In addition Lloyd's found that despite the multiple threats "over 37 percent of companies surveyed had either no business continuity plan, or one that did not adequately take account of political violence risks."

According to Chris Parker, Head of Terrorism at Marsh UK, the industry is responding to the threats. Parker said around $1.2 billion of capacity is now available from the private market for stand-alone terrorism coverage, compared with around $100 million before Sept. 11, 2001. He also said new products were becoming available, with $100 million capacity, to cover CBNR risks.

Marketing survey reports Baby Boomers remain loyal to auto, home, medical and life insurance brand

Baby Boomers may be more likely to switch brands across a wide variety of products and services, including apparel, cars, prepared foods, and airlines, but when it comes to service oriented categories such as banking and insurance companies, Boomers stay loyal to their brand, according to a new study.

The study, conducted by Focalyst, a market research and consulting firm focused exclusively on Baby Boomers and older consumers, surveyed more than 30,000 adults over the age of 42 in the continental U.S., who were born between 1946 and 1964. The study found that Baby Boomers frequently switched brands for categories such as televisions, computers, apparel, home appliances and prepared foods. But when it came to auto and home insurance, medical insurance, life insurance and banks, those same consumers remained loyal.

The lowest Boomer brand loyalty for products included: 1. televisions -- 22 percent; 2. computers -- 24 percent; 3. apparel -- 27 percent; 4. home appliances -- 30 percent; and 5. prepared foods -- 36 percent.

The highest Boomer brand loyalty for services included: 1. auto insurance -- 72 percent; 2. home insurance -- 72 percent; 3. medical insurance -- 67 percent; 4. life insurance -- 65 percent; and 5. banks -- 63 percent.

"Boomers are most loyal when companies give customized service, a natural reflection of Boomers' desire for personalized attention and rewarding brand experiences," said Heather Stern, director of marketing, Focalyst. "And they are willing to pay more for value if a product or service demonstrates the ability to help make their complicated and stressful lives easier."

Although the generation preceding Boomers, the "Goldens," is slightly more brand loyal than their Boomer counterparts, these Americans born before 1946 are often as fickle when it comes to making purchase decisions, according to the survey. In categories where high levels of consumer service are evident such as auto and home insurance, Goldens are significantly more loyal compared to low service level categories where they are just as likely to say that they "don't stick to any particular brand."

The implication for marketers is clear -- older Americans need to be targeted with appropriate advertising messages offering real information about the benefits of their products in order to develop a position as a trusted source over the competition, Focalyst said. Messages that are simple (not simplistic) and relevant to the life events that these adults are experiencing are key to connecting with this audience. Focalyst reports that adults over the age of 42 account for $3 trillion dollars of annual consumer spending, or one of every two dollars.