Ohio's new teen driving law leads some insurers to lower rates
Ohio's new law restricting young drivers is saving some people money on car insurance bills because the companies believe the regulations will lower accident rates.
Some insurance companies lowered teen driver rates after the law that restricts the hours teens may drive and their number of passengers went into effect April 6.
Teen drivers with Grange Insurance will get up to a 5 percent discount when the company cuts its rates in June. Allstate Insurance Co. lowered fees last summer in anticipation of the law, and teen drivers can further cut their rates by taking an online safety program, spokeswoman Lisa Finney said.
In the last 18 months, State Auto Insurance dropped rates for teen drivers by 5 to 10 percent, said Joel Brown, vice president of personal insurance.
"Insurance companies are starting to see lower losses from teen drivers, and are turning around and passing those savings on to customers," said Mary Bonelli, spokeswoman for the Ohio Insurance Institute.
Nationwide Mutual Insurance Co. and State Farm Insurance Cos. say they'll wait to see if the law lowers the accident rate for young drivers. A study by the Ohio Department of Public Safety suggested states with similar laws saw a 23 percent drop in teenage accidents.
Ohio's law bars drivers under the age of 17 from carrying more than one non-relative as a passenger. It also blocks drivers under 17 from driving from midnight to 6 a.m., and 17-year-old drivers can't be on the road between 1 a.m. and 5 a.m. Exceptions can be made if the teen is driving to and from work, and the hours or number of passengers don't matter if a parent or guardian is in the car.
When the law took effect, some teens grumbled that it was unfair and that parents should have the right to determine who and when their kids drove.
Proponents argued the restrictions meant less distractions for teen drivers, and as of February, 43 other states had passed laws similar to Ohio's covering teen drivers.
The relaxed fees could help parents, whose insurance bill can double when they add a teenage driver to their policies, Bonelli said, although the actual cost is affected by many factors including the driver's age, driving record and the type of car covered in the policy.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
N.D. Poolman: Agent suspected of taking $700,000
An insurance agent who killed herself in late March is now suspected of taking $700,000 in premium payments from a number of businesses, state officials say. They have yet to figure out why.
Investigators also have not figured out what happened to the money taken by Diane Cottingham, 45, of Underwood, whose agency has offices in Bismarck, Underwood and Washburn, and sells policies statewide.
"We don't know what was going through Diane Cottingham's mind," Insurance Commissioner Jim Poolman said.
The fraud case is the largest in North Dakota in at least 20 years, he said.
Cottingham's body was found March 24 near her car in a pasture near Max. McLean County Sheriff Don Charging said Cottingham killed herself, though he would not say how. Cottingham had been scheduled to meet that day with Poolman, who planned to order her to stop selling insurance policies after being tipped that something was amiss.
Officials said Cottingham took premium payments from commercial businesses such as service stations that are considered to be high risk, but did not forward the money to insurance companies. Authorities suspect she forged documents to trick the customers into believing they were covered when they were not.
Poolman speculated that Cottingham was unable to find insurers who would assume the risk, so she "basically self-insured them," paying claims herself.
Cottingham might have been trying to avoid losing the customers, Poolman said. "She wasn't raiding the agency of money," he said.
He acknowledged authorities still are not sure of her motives.
Investigators have identified 19 suspicious accounts, almost all of them commercial accounts of businesses that assumed they were insured but were not. Seven were clear cases of fraud with premiums totaling $700,000 over a period of several years, Poolman said. The premium total is up from $300,000 estimated earlier in the investigation.
Poolman said a state crime bureau agent will tap into Cottingham's computer to try to find out what happened to the money. Some premium payments on the bogus accounts go back to 1999, meaning "a lot of bank account records to go through to parse out good money from bad money," he said.
The suspicious accounts were included with legitimate accounts on Cottingham Insurance's computer system. Other agency employees were instructed to direct any calls on the accounts to Diane Cottingham and had no idea anything was wrong, Poolman said.
Four of the seven fraudulent accounts had a total of $24,613 in claims, which Cottingham Insurance paid, Poolman said.
The investigation into the seven fraudulent accounts has been closed, Poolman said. Twelve other accounts are still being investigated, he said, but they will not increase the estimated missing premium value much.
Authorities do not believe any other accounts at the Cottingham agency outside the 19 in question were affected, and they believe Diane Cottingham acted alone, Poolman said. The agency is not being punished, though the insurance department is working with the company on restitution to the businesses that were defrauded.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Car thieves take the bait
Ill.-based the National Insurance Crime Bureau (NICB) reported in April that after three consecutive years as the area with the worst per capita vehicle theft rate in the nation, Modesto, Caif., has fallen into the number five position -- a dramatic improvement. Taking over the "Number One Hot Spot" is Las Vegas, Nev.
As in 2005, the western United States still ranks as the area of the country with the highest auto theft rates. All of the nation's top ten areas are in the west with five of them in California.
For 2006, the ten metropolitan statistical areas with the highest vehicle theft rates are:
1. Las Vegas/Paradise, Nev.
2. Stockton, Calif.
3. Visalia/Porterville, Calif.
4. Phoenix/Mesa/Scottsdale,
5. Modesto, Calif.
6. Seattle/Tacoma/Bellevue,
7.Sacramento/Arden-Arcade/Roseville, Calif.
8. Fresno, Calif.
9. Yakima, Wash.
10. Tucson, Ariz.
According to Hot Spots, its annual report on auto theft rates, NICB reviewed data supplied by the National Crime Information Center (NCIC) for each of the nation's 361 Metropolitan Statistical Areas (MSAs). MSAs are designated by the Office of Management and Budget and may include areas surrounding a specific city.
The rate is determined by the number of vehicle theft offenses per 100,000 inhabitants using the 2005 U.S. Census Population Estimates, the most current figures available.
Preliminary FBI data shows a 2.3 percent decrease in motor vehicle thefts during January-June, 2006, when compared with the same period in 2005. Nationally, this is the third straight year of decreases in vehicle theft.
"People can take any number of precautions to protect themselves from vehicle theft and, in most cases, those are sufficient to prevent a theft," said NICB President and Chief Executive Officer Robert M. Bryant. "But a determined thief, a serial vehicle thief, is someone for whom there is no absolute deterrent-except prison.
"NICB, through the support of its member companies, has pursued an aggressive "Bait Vehicle" and License Plate Reader Program around the nation. These cutting-edge enforcement tools offer law enforcement the latest in high- tech crime fighting, and are partly responsible for the absolutely outstanding results achieved in Modesto. When used in conjunction with comprehensive legislation and aggressive prosecution, police on the street can have a tremendous impact on vehicle theft and other crimes," added Bryant.
NICB recommends the following actions under its "layered approach" to protection that automobile owners can take to minimize their risk and prevent their car from becoming the next statistic:
Common sense
An unlocked vehicle with a key in the ignition is an open invitation to any thief, regardless of which anti-theft device you use. The common sense approach to protection is the simplest and most cost-effective way to thwart would-be thieves. Secure your vehicle even if parking for brief periods. You should always:
- Remove your keys from the ignition
- Lock your doors/close your windows
- Park in a well-lit area
Warning device
The second layer of protection is a visible or audible device which alerts thieves that your vehicle is protected. Popular second layer devices include:
- Audible alarms
- Steering column collars
- Steering wheel/brake pedal lock
- Brake locks
- Wheel locks
- Tire locks/tire deflators
- Theft deterrent decals
- Identification markers in or on vehicle
- VIN etching
- Micro dot marking
Immobilizing device
The third layer of protection is a device which prevents thieves from bypassing your ignition and hot-wiring the vehicle. Some electronic devices have computer chips in ignition keys.
For the complete information on Hot Spots 2006, visit www.nicb.org.
Source: National Insurance Crime Bureau
GAO report welcomed
The GAO's report, commissioned by the Senate Committee for Homeland Security and Governmental Affairs, chaired by Sens. Joe Lieberman, an Independent (ex-Democrat) from Connecticut, and Susan Collins (R-Maine), has garnered generally favorable reviews.
Collins, the committee's ranking Republican, indicated that the GAO's conclusions support the rapidly mounting evidence that climate change is a reality and a threat to the environment. She also noted that it places a potential burden on consumers and taxpayers that could add "billions of dollars" in costs, "as insured losses from floods and storms cause increases in federal spending and insurance premiums." While Collins praised private insurers for "paying serious attention" to the increased risks presented by climate changes, she chided federal programs for their failure to do so.
Claire Wilkinson, the International Insurance Institute's vice-president-Global, thinks the GAO report will be felt. "The report will increase U.S. attention [on the problems posed by climate change]," and will "have an impact on the current scientific debate," she said in an interview.
She strongly agreed with the GAO's conclusions that a lot more attention should be paid to where and how buildings are constructed in risk-prone areas. "The insurance industry has been involved for many years in strengthening building codes," Wilkinson said, "especially in areas like Florida and Louisiana." She acknowledged, however, that enforcing those codes is equally important.
However, Wilkinson said, "the many variables surrounding climate change make it difficult to relate increased losses directly to the weather, the links are too uncertain." She pointed out that each private insurer is different, and that, while practically all of them are aware of the potential dangers posed by climate change, each would most likely seek its own solutions to deal with the risks.
The federal agencies came in for some harsh comments from the Natural Resources Defense Council (NRDC), an environmental group. "We commend Senators Lieberman and Collins for exposing the inadequacies of federal insurance programs to protect taxpayers from catastrophic losses due to global warming," stated David Tuft, campaign director of the NRDC's Climate Center on the Group's Web site (www.nrdc.org).
"Not only has our federal government thus far failed to take action to prevent the worst consequences of unchecked global warming pollution, but it has failed fundamentally to take reasonable precautions against global warming-induced storms and drought, and the high costs that will be borne by families, businesses and ultimately, taxpayers." He called the government "woefully ill-prepared to protect its citizens against catastrophic losses," and, citing the GAO, said it has "blown the whistle on how ill-prepared we are as a nation for further destruction."
Commercial property/casualty premiums drop, underwriting relaxes, 1st quarter survey finds
Commercial property/casualty premiums for all sizes of accounts dropped sharply during the first quarter of 2007, with indications that insurance companies are starting to loosen underwriting standards and price aggressively to get business, according to the latest Commercial Property/Casualty Market Index by The Council of Insurance Agents & Brokers
"Once again, underwriting is out the door as the companies fight for growth/premium," observed an agent from the Southwest.
"All of the carriers want and need new business, and they are willing to do anything to get it," said another broker.
The Council members write 80 percent of the premiums annually in the United States. The Council's market surveys, which have been conducted since the fourth quarter of 1999, ask respondents to compare market conditions and premiums quarter-to-quarter.
Sharp declines
One broker from the Northeast, calling the premium drop "dramatic," said rates in the most recent quarter fell more sharply than during all of 2006.
Eighty-one percent of the survey respondents said their small account premiums for January through March 2007 were down 1 percent to 30 percent, while 97 percent said their medium accounts were down 1 percent to 30 percent. Ninety percent said their large accounts premiums were down 1 percent to 30 percent.
An analysis of the survey findings by Lehman Brothers placed the average premium decrease for accounts in the first quarter at 11.3 percent. The Lehman analysis said premiums for all sizes of accounts were at their lowest point since they peaked in the fourth quarter of 2001 following the 9/11 terrorist attacks.
Easier underwriting
Although the premium rate decreases have been evident in the last several market index surveys, this was the first time that less restrictive underwriting was widely reported. Brokers and agents from every section of the country said carriers were writing and quoting accounts that a year ago they would not consider.
"Underwriters are buying new business in the Midwest," one broker reported.
"More companies jumping in on each line. It's going to get more competitive still," said a broker from the Pacific Northwest.
Coastal property/casualty, wind coverage and California earthquake coverage remained tough to find and expensive, but no worse than previously reported, the agents and brokers said.
Key subcommittee chairman favors six to eight-year terrorism insurance extension
Insurance industry pushes for longer period with some in favor of 20 years or more
In his opening statement as chair of a U.S. House of Representatives subcommittee considering extension of the Terrorism Risk Insurance Act (TRIA), Rep. Paul E. Kanjorski of Pennsylvania said he believes the act should be extended for a period of six to eight years.
At a hearing on April 24 in Washington, D.C., Kanjorski asserted that this length of time "is long enough to provide greater certainty to the marketplace and short enough to encourage the private sector to develop its own solutions to the problems posed by conventional terrorism."
Congress enacted TRIA after the Sept. 11, 2001, terrorist attacks as a temporary program designed to give the private insurance markets time to develop models and pricing for terrorism risks. The act was extended in 2005 for two more years and is set to expire at the end of 2007.
"While TRIA has increased the availability and affordability of terrorism risk insurance, the market place is still tenuous," Kanjorski said. "Insurers still have limited capital to cover terrorism losses alone and without federal assistance." He noted that the property/casualty industry had $164 billion reserved for terrorism losses in 2005 but "according to the Insurance Information Institute, some models have predicted terrorism losses of more than double this number."
Insurance industry representatives who spoke at the hearing supported a longer period of time, with some in favor of extending the act for 20 years, and others proposing no expiration date. But Kanjorski said a 15 to 20-year or more extension would "for all intents and purposes" result in a loss of institutional memory of the topic at the committee level.
Brian Dowd, chief executive officer, Insurance-North America, for the ACE Group, appeared on behalf of both ACE and the American Insurance Association. In a list of principles supported by both the AIA and the Coalition to Insure Against Terrorism that Dowd submitted with his written testimony, he asserted that "the program should have no expiration date, and thereby end only when Congress determines terrorism is no longer a threat."
Vincent T. Donnelly, president and CEO of Pennsylvania-based PMA Insurance Group, who spoke on behalf of PMA and the Property Casualty Insurers Association of America, told the subcommittee that the need for market stability should be considered "so that we're not looking at this issue every two years." He said that a 10 to 15 year extension would add some permanency and enable the market "to react in a stable fashion."
According to Kanjorski, an in depth study of the terrorism insurance issue is needed. Such a study, he said, was lacking in the original TRIA legislation and without it "we're doing patchwork and that really does disturb me."
He said the committee needs to explore how to "add nuclear, biological, chemical and radioactive (NBCR) coverage to TRIA." The marketplace believes that in the event of an NBCR attack, "the federal government will step in and respond," he said. "We therefore should explicitly address the government's role."
Kanjorski also favored eliminating the distinction between foreign and domestic terrorism events. He noted the "need to make sure to move this legislation as soon as possible," and said the committee would try to move it along in the next few months.
Another report details property/casualty insurers' 2006 profitability, escape from storms
Warns falling prices mean profits are at, or are steadily, approaching the cyclical peak
Another report on the insurance industry confirms and details what has been widely acknowledged: a sharp decline in catastrophes in 2006 contributed to improved underwriting results for the year.
The U.S. property/casualty industry posted a $31.2 billion net gain on underwriting for the year. The net gain on underwriting in 2006 stands in stark contrast to the $5.6 billion net loss on underwriting in 2005.
The industry's overall profitability was the highest in 20 years.
The industry's positive underwriting results contributed to an increase in its net income after taxes to $63.7 billion in 2006 from $44.2 billion in 2005. Reflecting the increase in net income after taxes, the industry's rate of return on average policyholders' surplus (net worth) rose to 14 percent in 2006 from 10.8 percent in 2005, according to Insurance Services Office (ISO) and the Property Casualty Insurers Association of America (PCI).
The figures are consolidated estimates for all private property/
casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.
Overall profitability
Insurers' overall profitability as measured by their statutory rate of return on average surplus -- net income after taxes divided by average surplus during the year the income was earned -- climbed to 14 percent in 2006 from 10.8 percent in 2005. The rate of return for 2006 was the highest since 1986, when it equaled 15.1 percent, but it remained well below the record 23.1 percent statutory rate of return for 1977.
By decade, insurers' average rate of return climbed from 9.5 percent during the ten years ending 1976 to 13 percent during the ten years ending 1986 but has since fallen to 9.5 percent during the ten years ending 1996 and to 7.9 percent during the ten years ending 2006.
"The insurance industry's profitability last year compares quite favorably with its own results during the previous 20 years. But escalating competition and falling prices in insurance markets mean that insurers' profitability is at or near a cyclical peak, even though their rate of return is no better than that of firms in most other industries," said Michael R. Murray, ISO assistant vice president for financial analysis. "In fact, the insurance industry has a long history of being less profitable than other industries, with insurers' rate of return being less than that of the Fortune 500 in 21 of the 23 years from 1983, when ISO's data for the Fortune 500 starts, to 2005. During that span, insurers' rate of return averaged 8.2 percent -- 5.6 percentage points below the 13.8 percent average rate of return for the Fortune 500."
Catastrophe losses
According to ISO's Property Claim Services (PCS) unit, direct insured losses from catastrophes dropped to $9.2 billion in 2006 from $61.9 billion in 2005.
"Insurers and residents of coastal states dodged a bullet last year," noted Murray.
"Much of the improvement in insurers' underwriting and overall results last year reflects the decline in catastrophe losses from 2005's record high. Allowing for losses from Katrina, Rita, and Wilma that didn't emerge until after insurers closed their books for 2005 -- and factoring out losses covered by residual market insurers, the Florida Hurricane Catastrophe Fund, and foreign insurers -- ISO estimates the catastrophe losses included in private U.S. insurers' net financial results declined by $21.9 billion to $11.7 billion in 2006 from $33.6 billion in 2005. ISO also estimates that catastrophe-related net loss adjustment expenses declined to $0.6 billion in 2006 from $1.2 billion in 2005, contributing another $0.6 billion to the improvement in underwriting results."
But experts warned that despite the experience of 2006, catastrophe losses remain a threat.
"While meteorological anomalies confounded the experts and helped the U.S. escape major hurricane strikes in 2006, the threat of more frequent and severe storms, combined with the growing population and the increased value of property in the highest risk areas of the country, means that the threat of enormous losses from natural disasters is a financial problem the nation must deal with," said Genio Staranczak, PCI's chief economist.
Underwriting results
The improvement in underwriting results in 2006 reflects both growth in premiums and a decline in loss and loss adjustment expenses.
Net written premiums climbed $18.3 billion to $443.8 billion in 2006 from $425.5 billion in 2005, with written premium growth accelerating to 4.3 percent in 2006 from 0.3 percent in 2005. Net earned premiums rose $18.2 billion last year, increasing to $435.8 billion in 2006 from $417.6 billion in 2005. Earned premium growth accelerated to 4.4 percent in 2006 from 0.9 percent in 2005.
Overall loss and loss adjustment expenses declined $27.9 billion, or 9 percent, to $283.7 billion in 2006 from $311.6 billion in 2005. Non-catastrophe loss and loss adjustment expenses declined $5.4 billion, or 1.9 percent, to $271.4 billion in 2006 from $276.8 billion a year earlier.
Underwriting expenses -- primarily acquisition expenses, other expenses associated with underwriting, pricing and servicing insurance policies, and premium taxes -- rose $7.7 billion, or 7 percent, to $117.5 billion last year from $109.8 billion in 2005.
The net gain on underwriting in 2006 amounts to 7.2 percent of the $435.8 billion in premiums earned during the period, whereas the net loss on underwriting in 2005 amounted to 1.3 percent of the $417.6 billion in premiums earned during that period.
The combined ratio improved 8.5 percentage points to 92.4 percent in 2006 from 100.9 percent in 2005.
Study: Obese workers drive up workers' compensation costs
Gaining too much weight can be as bad for an employer's bottom line as it is for a person's waistline.
A Duke University Medical Center analysis found that obese workers filed twice the number of workers' compensation claims, had seven times higher medical costs from those claims and lost 13 times more days of work from work injury or work illness than did nonobese workers.
Workers with higher risk jobs were found to be more likely to file workers' compensation claims, and obese workers in high-risk jobs incurred the highest costs, both economically and medically.
Although workers' compensation plans vary from state to state, they all require that employers carry insurance policies to cover their employees should they be injured on the job. The plans can pay for employee medical costs, compensation for loss of current or future wages, or compensation for pain and suffering.
"We all know obesity is bad for the individual, but it isn't solely a personal medical problem -- it spills over into the workplace and has concrete economic costs," said Truls Ostbye, MD, PhD., professor of community and family medicine.
The results of the study were published April 23, 2007, in the Archives of Internal Medicine. The study was supported by a grant from the National Institute for Occupational Safety and Health.
"Given the strong link between obesity and workers' compensation costs, maintaining healthy weight is not only important to workers but should also be a high priority for employers," Ostbye said. "Work-based programs designed to target healthful eating and physical activity should be developed and then evaluated as part of a strategy to make all workplaces healthier and safer."
The researchers looked at the records of 11,728 employees of Duke University who received health risk appraisals between 1997 and 2004. Duke collects this information anonymously in order to identify areas of potential occupational risk and to develop plans to reduce that risk. The analysis covered a diverse group of workers, such as administrative assistants, groundskeepers, nurses and professors.
The researchers looked at the relationship between body mass index (BMI) and the rate of workers' compensation claims. Because the BMI takes into account both a person's height and weight, it is considered the most accurate measure of obesity. For Americans, a BMI of 18.5 to 24.9 is considered normal; 25 to 29.9 is considered overweight, and 30 and above is considered obese. (See BMI calculator here.)
The researchers found that workers with a BMI greater than 40 had 11.65 claims per 100 workers, compared with 5.8 claims per 100 in workers within the recommended range. In terms of average lost days of work, the obese averaged 183.63 per 100 employees, compared with 14.19 per 100 for those in the recommended range. The average medical claims costs per 100 employees were $51,019 for the obese and $7,503 for the non-obese.
The body parts most prone to injury among obese workers were the lower extremity, wrist or hand, and back. The most common causes of these injuries were falls or slips, and lifting.
"The primary message is that we need to reduce the burden on workers' compensation by intervening not only on individual risk factors such as obesity but also within the workplace to reduce the risk of injury," Dement said. "By targeting obesity and workplace risks simultaneously, we can reduce absenteeism, increase the overall health of our workers, and decrease the cost of health care for all employees."
Duke has a number of programs available to encourage employees to adopt more healthful lifestyles and occupational safety and health programs to reduce the risk of injuries. Future research is aimed at testing different strategies to see if they are effective in creating healthier and safer workplaces, and then determining whether or not they are cost effective.
