CONTRIBUTOR PASSES AWAY:
Joseph F. Mangan, a widely-respected author and editor of many insurance industry publications, passed away on Nov. 4, 2004. Mangan served as a frequent contributing writer to Insurance Journal and will be sorely missed by IJ staff. Mangan was the author of four textbooks on underwriting commercial lines property and casualty insurance, which were adopted as the required text for the Insurance Institute of America's associate in underwriting professional designation program. He served as a longtime managing editor and columnist for Mount Vernon, N.Y.-based Insurance Advocate, and was a monthly columnist for Risk & Insurance magazine. He worked 12 years at the A.M. Best Co. as a consultant, project manager, editor and manager. Prior to that, he worked for GNY Insurance Companies in New York and served as an assistant professor of property and liability insurance at The College of Insurance, also in New York. Mangan said what he loved more than anything was his volunteer work at the Rescue Squad.
MICH. TO SEE 11.2% DROP IN AVERAGE COMP RATE:
Michigan will see an 11.2 percent decline in the average workers' compensation insurance rate, the largest drop in nearly a decade. The pure premium rate decline is reportedly due, in part, to well-developed safety programs that reduced losses, more seasoned workers remaining in the work force during job reductions over the past two to three years, and the medical fee schedule adopted by Michigan's Workers' Compensation Agency, which seems to work better than those in most other states. The move was recently approved by the state's quasi-public Data Collection Agency Board. It is an annual yardstick against which private insurance carriers can compare their rate structures for workers' compensation coverage. Although the rate registered small increases in 2003 and 2004, it has declined in eight of the past 10 years. The rate drop for 2005 is the largest since a 15.7 percent decline in 1996.
MO. DOI CALLS FOR 7.7% COMP RATE CUT:
Both a national private industry group and the Missouri Department of Insurance agreed the state's workers' compensation environment has stabilized, and insurers should reduce rates in 2005, though they disagree on how big the cuts should be. The National Council on Compensation Insurance--a national consortium of workers' comp insurers--is advising its members that underlying costs should drop 1.3 percent in 2005 in Missouri, while MDI's independent actuary, David Cox Co., recommended an even larger reduction of 7.7 percent next year in such loss costs that are the primary factor in setting premiums for Missouri employers. Cox said NCCI didn't give enough weight to the Show Me State's favorable experience record, included higher-risk employers who will wind up buying from the residual market anyway, and overstated projected costs for legal and claims-handling expenses. Average rates in Missouri rose 1.97 percent in 2004 compared to 14.7 percent in 2003, the lowest level since 2000 and less than the projected inflation rate for 2004.
OHIO EMPLOYERS TO GET 1-TIME 20% COMP DISCOUNT:
The Ohio Workers' Compensation Oversight Commission voted to grant employers a one-time 20 percent dividend on their upcoming bills. The 20 percent dividend reportedly means a savings of more than $61 million for public employers and more than $176 million in savings for private employers. Public employers, which include city, county and state employers, will see the dividend reflected in their bill for calendar year 2004 payable May 15, 2005, while private employers, mostly small- and medium-sized businesses, receive invoices every January and July. The 20 percent dividend will be applied to the January private employer billing.
DOC-OWNED MED-MAL CARRIER GETS LICENSE:
The Healthcare Underwriters Group Mutual of Ohio, a medical liability insurance company owned and governed by the state's doctors, has received authorization from the insurance department to begin issuing insurance policies to doctors. HU, based in Columbus, is the only insurance company domiciled in the state that offers Ohio doctors ownership and governance of the company as well as protection against claims of malpractice. HU is a mutual insurance company. The new company is nonprofit and does not carry a premium load for profit. Additionally, HU will operate as a nonassessable mutual, meaning that policyholders cannot be "assessed" to pay for losses if HU's losses are greater than anticipated. HU said in a statement that it has secured high-quality reinsurance for extraordinary losses. If, on the other hand, losses are less than anticipated, HU's policyholder-owners may receive either a dividend payment or a reduction in future premiums. Dividend payments and premium reductions are both subject to approval by the insurance department. The company said it will take an aggressive approach to defending claims, including an intolerance of nuisance claims.
INDUSTRY SEES 1ST 9-MONTH PROFIT SINCE 1986:
Benefiting from profits on underwriting, the U.S. property/casualty insurance industry's net income after taxes rose 28.3 percent to $26.7 billion in the first nine months of 2004, up from $20.8 billion in the first nine months of 2003. Reflecting the growth in the industry's income, its surplus, or statutory net worth, increased $22 billion, or 6.3 percent, to $369 billion at Sept. 30 of this year, up from $347 billion at year-end 2003, according to the Insurance Services Office and the Property Casualty Insurers Association of America. The industry's surplus as of Sept. 30 would have been a record if not for inflation, but surplus remained 5.2 percent below its inflation-adjusted peak of $389.1 billion at June 30, 1998. ISO said it was the industry's best nine-month showing since at least 1986, when the group began tracking quarterly results. The industry's nine-month combined ratio improved 2.4 percentage points to 97.9 percent, down from 100.3 percent for the 2003 period.
NONSTANDARD AUTO MARKET STUCK IN CYCLE, SAYS BEST:
A study released by A.M. Best has confirmed that the nonstandard automobile insurance sector is cyclical in nature, characterized by periods of severe price competition and excess capacity followed by periods of high premium rates and shortages of underwriting capacity. In the late 1990s, many nonstandard auto insurers attempted to capture business by reducing rates. These industry-wide rate reductions, combined with increased severity trends, contributed to the deterioration of industry loss ratios in the years 1999 through 2001. Since that time, most nonstandard auto carriers raised rates and tightened underwriting standards to address poor results. Some insurance companies withdrew from the market because of their inability to compete successfully, impaired capital positions, or because of a decrease in the availability of reinsurance. However, the nonstandard auto sector has rebounded considerably over the past few years. Evidence of this can be found in Wall Street's confidence and several successful IPOs. But as the industry continues to fall down toward the trough of the pricing cycle, the combination of a flattening rate environment and expanding capital levels brings to light concerns about when competition will emerge wholeheartedly within the industry.
