Report: N.D. has the best roads, Kansas ranks 3rd
Nearly 52 percent of U.S. urban interstates are now congested and traffic fatality rates rose slightly, but road surface conditions and bridge conditions improved, according to the Reason Foundation's latest annual highway performance report.
"Gridlock isn't going away," said David T. Hartgen, Ph.D., the study's lead author. "States are going to have to prioritize and direct their transportation money to projects specifically designed to reduce congestion if we are going to reverse this troubling trend."
Drivers in California, Minnesota, New Jersey and North Carolina are stuck in the worst traffic, with over 70 percent of urban interstates in those states qualifying as congested, the researchers say.
The study measures the performance of state-owned roads and highways from 1984 to 2005 in 12 different categories, including traffic fatalities, congestion, pavement condition, bridge condition, highway maintenance and administrative costs, to determine each state's ranking and cost-effectiveness.
The report finds that fatality rates vary significantly from state to state. Massachusetts reported the lowest fatality rate -- 0.79 deaths per 100 million vehicle miles traveled. Meanwhile, Montana's roads were the deadliest, with 2.256 fatalities per 100 million vehicle miles. The national average was 1.453 fatalities.
The study does find some good news for drivers. The percentage of roads in "poor condition" fell sharply for both interstate highways and major rural roads. Since 1998, the percentage of poor urban interstate mileage has been reduced by 31 percent. The number of bridges deemed deficient, meaning they are eligible for federal repair dollars, also fell slightly in 2005.
In the overall rankings, North Dakota and South Carolina took the top spots for the second consecutive year. Meanwhile, New Jersey's gridlocked highways, poor pavement conditions and high repair costs put the state last in overall cost-effectiveness for the eighth consecutive year.
Florida, California, Michigan and New York are among the states joining New Jersey in the bottom 10. When it comes to comparing the most populous states, Georgia (6th overall), Texas (15th) and Ohio (16th) are the top performing large states.
"The big states that score well have been able to achieve needed improvements and adequate maintenance at relatively low costs," Hartgen explains.
The full report is available online at http://www.reason.org, as is Reason's 2006 study showing how congested each city in the country will be in 2030.
Allstate hit for linking fire renewals to separate wind policy in Miss.
Michael McAndrews would like to know what business Allstate has telling him he must buy wind and hail coverage -- or else. McAndrews received a letter July 12 that said Allstate will not renew his homeowner's coverage for fire and theft next year unless he offers proof that he has wind insurance from another carrier. McAndrews planned to self-insure for wind damage because he said the insurance costs too much through his only available source, the state wind pool.
"Maybe they'll make us buy Shell gasoline next," said McAndrews, who owns a home in Ocean Springs, Miss. "For me to have fire insurance I have to buy wind insurance? That makes no sense at all."
Northbrook, Ill.-based Allstate spokesman Kate Hollcraft explained. "If a customer chooses to not take that protection, they are at more of a risk. And we have to manage our risk. The individual policyholders we have make up our total risk in an area. It's just more responsible for us to protect as many of our customers as we can and to continue to educate our customers so they are protected completely rather than partially."
J. Robert Hunter, who heads the Consumer Federation of America, offered a different explanation in a report the nonprofit group released. It concludes that Allstate has led the industry in developing "anti-consumer insurance practices" designed to shortchange policyholders while fattening the bottom line.
The report details "unjustifiable" rate increases, tiered pricing that penalizes lower-income people and makes price comparison almost impossible, automated systems that reduce claim payments, policy clauses that take away coverage consumers thought was included, and allegations that Allstate and other insurers shifted Katrina losses to the federal flood insurance program.
"Allstate's practices reflect the significant but not always highly visible changes that property-casualty insurers have made in recent years in the way they assess risk, set rates and manage claims," Hunter wrote in a study summary.
"We urge consumers to pay close attention to the concerns we have identified with Allstate's practices before purchasing home and auto insurance from Allstate or renewing a policy."
The study concludes the changes have paid off for insurers. From 1987 to 1996, Allstate paid out 73 percent of premiums collected as benefits, compared to only 59 percent from 1997 to 2006, a 19.2 percent decrease. The overall industry paid 65 percent from 1997 to 2006, the study said, a 7.1 percent decrease.
"Allstate's goal is to attract the capital necessary to run the business and to remain financially strong so we can pay claims when our customers have losses," spokeswoman April Eaton said. "To do this, we need a reasonable rate of return."
She said the company remains confident in its handling of Katrina claims and claims-handling practices in general. And she said Allstate is proud of its "sophisticated" pricing system.
Copyright 2007 Associated Press. All rights reserved.
Minn. groups sue AIG for $100 million in damages for fraud, violations
The Minnesota Workers' Compensation Reinsurance Association (WCRA) and the Minnesota Workers' Compen-sation Insurers Association (MWCIA) filed suit on July 17, 2007, against American International Group Inc. (AIG) to recover more than $100 million in damages for alleged fraudulent actions and violations of the Federal Racketeer Influenced and Corrupt Organizations Act (RICO).
The WCRA is a nonprofit association created by the Minnesota Legislature in 1979 to supply reinsurance to all insurers and self-insurers in Minnesota. This reinsurance is used to pay catastrophic workers' compensation claims to injured Minnesota workers. MWCIA is nonprofit corporation authorized under Minnesota law to collect workers' compensation insurance information from all insurers in Minnesota and to supply ratemaking information to WCRA, state regulators and insurers.
In the complaint filed in United States District Court for the District of Minnesota, WCRA and MWCIA allege that AIG underreported its workers' compensation premiums to MWCIA and WCRA for the last 22 years in order to avoid paying reinsurance premiums to WCRA and assessments to MWCIA that were computed based upon AIG's reported premiums. The WCRA is seeking to recover underpaid reinsurance premiums from 1985 to present, plus the investment income the WCRA would have earned on those premiums. MWCIA is seeking to recover underpaid assessments due from AIG for this same period.
"We first became aware of AIG's fraudulent reporting of workers' compensation premium data to the WCRA and MWCIA in the spring of 2005," according to WCRA president and CEO Carl W. Cummins III. Cummins obtained a copy of a memorandum written in 1992 by AIG's former general counsel, as a result of the New York Attorney General's investigation of AIG. That memorandum acknowledged that AIG's workers' compensation business was "permeated with illegality" and revealed that as a part of this illegal conduct, AIG was lowering reinsurance premiums due WCRA.
In a settlement with the State of New York in 2006, AIG agreed to pay $1.64 billion for fraudulent business practices including underpaying workers' compensation premiums. How-ever, the estimated $1.2 million reward that Minnesota would have received under that settlement did not provide compensation to WCRA or MWCIA for the damages they sustained as a result of AIG's false reporting practices.
"We contacted the Minnesota Department of Commerce and the Minnesota Attorney General and, together with MWCIA and other affected Minnesota entities, entered into negotiations with AIG to settle this matter," said Cummins. "After nearly two years of investigations and discussion, we concluded that AIG had underpaid millions of dollars in premiums, which caused us to lose millions more in investment returns. Unfor-tunately, we have also learned that AIG is unwilling to correct its misdeeds. The only remaining option to collect the money owed us was to sue AIG."
The WCRA/MWCIA lawsuit against AIG is in addition to litigation by the Minnesota Attorney General to determine losses suffered by the Minnesota Department of Revenue, the Minnesota Insurance Guaranty Association and the Minnesota Assigned Risk Plan.
A copy of the WCRA/MWCIA complaint against AIG is available by contacting Cathy Kennedy at cathy@cathrynkennedy.com or 1-612-309-3951.
Editor's note: As of this writing, AIG has 20 days to respond to the suit.
Source: Minnesota Workers' Compensation Reinsurance Association
Federal court throws out rules on extended hours for truckers
A federal court dealt a blow to U.S. trucking companies in July by striking down rules on working hours that were strongly criticized by safety advocates.
The decision is the latest chapter in a long-running battle between advocacy groups such as Public Citizen and the Transportation Department's Federal Motor Carrier Safety Administration, which have fought over a rule extending truckers' hours of service since 2003.
Judge Merrick B. Garland, writing for a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit, invalidated a rule issued by the federal safety agency in August 2005 that allowed truckers to drive 11 hours in a row, rather than the previous limit of 10.
The judge also threw out a rule that would have effectively increased weekly time limits on drivers' hours by at least 25 percent, critics said.
The agency had failed to follow proper procedures in issuing the two measures, the court said, such as allowing public comment on the 11-hour limit. The provisions were part of a larger regulation that was allowed to stand.
The FMSCA said it was still analyzing the decision and considering its next steps.
The American Trucking Associations said it would seek a stay of the ruling until the federal safety agency can address the court's concerns. ATA's members include United Parcel Service Inc., FedEx Corp., JB Hunt Transport Services Inc. and YRC Worldwide.
The two measures will otherwise remain in place until Sept. 14, when the court's ruling takes effect, the FMCSA said.
"The good news in the decision is that the flaws that the court found were procedural in nature and can be corrected by the agency," the ATA said.
"We're delighted with the decision," Bonnie Robin-Vergeer, a senior attorney for the Public Citizen Litigation Center, said. "Long-haul truckers drive too many hours, and a rule that allows them to drive more hours is dangerous for the public and for the drivers themselves."
Robin-Vergeer said the court's decision expressed "grave doubts" about many aspects of the rule and argued the court would be unlikely to uphold it on substantive grounds.
As part of the same decision, the court rejected a challenge by the Owner-Operator Indepen-dent Drivers Association regarding parts of the rule that reduced the number of on-duty hours to 14 from 15.
The FMCSA first extended consecutive drivers' hours to 11 and increased weekly limits in a 2003 rule. Before that, the limit in consecutive hours had stood at 10 for over 60 years.
But that rule was struck down by the same court in 2004, after a challenge by Public Citizen. The rule FMCSA issued in August 2005 was largely the same as its predecessor, with some changes in an effort to mollify the court.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Midwestern states push for truck-only lanes
With truck traffic rising, at least nine states are considering proposals to separate big rigs from cars on heavily traveled interstate highways, hoping to reduce congestion, improve safety and increase commerce by moving goods faster.
Ohio, Nevada and other states are exploring whether to build or designate truck-only lanes on various stretches of interstate highways, though they're not yet sure how they would pay for them. Tolls are one option; public-private partnerships another.
Proposals for truck-only lanes are cropping up because freight being carried by trucks is expected to skyrocket at a time when population and passenger traffic continue to increase.
Some truckers question the wisdom of truck-only lanes. And many oppose having to pay tolls for special lanes without being given the option of using non-toll routes.
Travel on the nation's highways has nearly doubled since 1980, but the highway system has expanded by about 3 percent. There are 2.9 million large trucks traveling U.S. highways, up from 2.6 million in 2000 and that figure is expected to increase by 75,000 each year, according to the American Trucking Association.
Indiana, Ohio, Illinois and Missouri are suggesting a truck-only lane on a 789-mile stretch of Interstate 70.
The I-70 corridor rolls through or by Kansas City, St. Louis, Indianapolis and Columbus and is within 25 miles of six major international airports and air-cargo hubs. The highway teems with trucks because of the high concentration of manufacturing, retail and other industries nearby. Much of the I-70 corridor is expected to reach or exceed capacity by 2030.
A proposal to improve Inter-state 10, a 2,650-mile highway that runs from Florida to Califor-nia crossing eight states, identifies several areas that could become truck-only bypass highways. They include Phoenix and Houston.
Financing is a sticking point.
Trucking pays 43 percent of the annual $35 billion in user fees for federal highways, according to the trucking associations. Truckers also pay a federal diesel fuel tax of 24.4 cents a gallon, a 12 percent excise tax on new trucks, an annual vehicle-use tax and a tax on tires.
Some motorists say truck-only lanes are a good idea for safety reasons alone.
In 2005, 442,000 large trucks were involved in crashes
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
The Hartford settlement ends agents' contingent commissions
The Hartford Financial Services Group Inc. announced it has reached a settlement with the New York, Connecticut and Illinois attorneys general resolving matters relating to their investigations of the compensation arrangements between the insurer and its property/casualty agents and brokers.
As part of the deal, The Hartford will no longer pay its property/casualty insurance agents commissions that are contingent upon growth or future performance but will implement a new supplemental payment scheme with fixed commissions per policy based more on an agency's past performance with the insurer.
In this change in compensation plans, the insurer joins others including Chubb and Travelers in instituting fixed commission plans for agents.
The company also reported a settlement regarding the New York Attorney General's investigation of market timing within the company's variable annuity products.
In settling both the market timing and broker compensation matters, The Hartford said it has agreed to pay, in total, $115 million.
The Hartford did not admit or deny any violation of federal or state law as a result of this settlement.
Other previously disclosed matters that were under investigation by these attorneys general have been concluded, according to the insurer.
In addition, The Hartford had previously disclosed an investigation by the staff of the Securities and Exchange Commission into matters related to market timing. In light of the settlement, the company said that the SEC staff informed The Hartford that it has concluded its investigation without recommending any enforcement action.
The $115 million total amount consists of $89 million in restitution ($84 million for market timing and $5 million for broker compensation) and $26 million in penalties.
According to the insurer, a "substantial portion" of the cost of the settlement has already been funded by a previously disclosed reserve of $83 million set aside for regulatory matters.
"We are pleased to have these matters behind us," commented The Hartford Chairman and CEO Ramani Ayer. "Since these investigations began more than three years ago, we have cooperated fully with the attorneys general and other regulators. We have worked assiduously to strengthen and improve our business practices and will continue to do so. We emerge from this period with an unwavering resolve to uphold our longstanding commitment to providing our customers with outstanding products and exemplary service."
Of the total settlement amount, $5 million will be paid into a fund to compensate certain commercial property/casualty policyholders "related to a limited number of isolated instances of improper quoting between 2001 and 2004."
The attorneys general found that in these instances, certain employees of The Hartford engaged in improper underwriting by providing quotes for commercial insurance that were not based on an adequate assessment of the risk. The company said these activities were not in keeping with its standards and that over the last several years, the company has voluntarily strengthened its internal controls, guidelines and training in this area.
The Hartford also agreed that it will forego paying contingent compensation in any line of its property/casualty business in which more than 65 percent of the U.S. market does not pay contingent compensation.
The Hartford said it has decided to implement a new program for 2008 to compensate property/casualty agents and brokers for their performance in these lines of insurance and in its other standard commercial lines of insurance. Under this new supplemental commission program, The Hartford will pay a fixed commission, set prior to the sale of a particular insurance policy, that is based among other things on the agent or broker's past performance.
"We value our strong partnerships with independent agents and brokers," said Ayer. "Our new property/casualty supplemental commission program reflects their feedback for a more predictable compensation package."
In addition to the property/casualty fund monies, $84 million of the settlement will be paid into a fund to compensate certain variable annuity contract holders of The Hartford for harm the New York Attorney General found to have resulted from the market timing activities of variable annuity contract holders from 1998 through 2003.
House panel votes to add wind to flood program
Private insurance companies are balking at a decision by a key House panel to expand the federal flood insurance program to include wind coverage. The House Financial Services Committee voted late last month to add wind coverage to the National Flood Insurance Program (NFIP).
"We continue to believe that adding wind coverage to the NFIP is not the right solution," commented American Insurance Association (AIA) President Marc Racicot.
AIA commissioned a study by Towers Perrin showing that adding wind could cost taxpayers as much as $100 billion to $200 billion if the federal government began displacing the private market by providing wind coverage.
At a recent hearing, AIA was joined by other insurer groups in opposing the expansion. They included the Property Casualty Insurers of America and the Reinsurance Association of America.
PCI told lawmakers that, while the inclusion of wind coverage within the federal program is well-intentioned, it may produce unintended negative consequences for millions of American insurance consumers.
"Including wind coverage within the NFIP will create artificial subsidies, thereby essentially raising rates for consumers in inland parts of the country who are not subject to the same kind of wind-damage risks faced by policyholders on the coasts," said Ben McKay, PCI's senior vice president, federal government affairs. "It is hard to believe that Congress wants to give more responsibility to a failed government program. I wouldn't invest in a company that had inadequate cash flow and $17.5 billion of debt."
According to PCI, the combination of homeowners insurance coverage, state wind pools and flood coverage available through the NFIP already provide consumers protection from wind and water damage. Moreover, the current system provides consumers the opportunity to purchase coverage at a price that reflects the risk based on the location of the property and the likelihood of a loss.
"State residual market mechanisms provide wind coverage where there is no market, and private insurers provide wind coverage where there is a market," McKay said. "The Taylor bill simply creates a federal government fund that will compete with existing state funds and potentially with the private sector."
Franklin W. Nutter, president of the Reinsurance Association of America (RAA), also argued that the expansion provision was unnecessary because private sector insurers, reinsurers, capital market participants, and residual market programs already provide wind coverage.
In a letter sent to Chairman Barney Frank, D-Mass., and Ranking Member Spencer Bachus, R-Ala., of the House Financial Services Committee, Nutter said that it "fundamentally alters who bears the risk of loss from wind. Instead of spreading this risk throughout the private worldwide insurance marketplace, this legislation puts the entire burden of deficits on the U.S. taxpayer. This fundamental shift is not needed."
Insurers had hoped lawmakers would have instead pursued a proposed six-month study by the Government Accountability Office, which they said would have provided an analysis of adding wind coverage to the NFIP and provided a better understanding of the real cost of adding wind.
The measure approved by the House Financial Services Committee is H.R. 3121, the "Flood Insurance Reform and Modernization Act of 2007," which also includes other reforms to the NFIP that insurers support
Sandy Praeger, president-elect of the National Association of Insurance Commissioners (NAIC) and Kansas Insurance Commissioner, testified earlier in July before the Subcommittee on Housing and Community Opportunity on the merits of all-perils insurance coverage.
The NAIC stated that it believes adding wind coverage to the NFIP would help resolve potential conflicts between consumers and insurers regarding the cause of damage to their homes during a hurricane, but would also move the line of contention to other perils, such as fire or earthquake damage.
Praeger suggested that instead the NFIP could be restructured to function as a reinsurer. Alternatively, the private market could offer all-perils coverage and be supported by a federal backstop or credit line that would cap the industry's share of such catastrophic losses.
Agents say 'no' or nothing to adding wind coverage in flood program
Some independent insurance agents are taking a "neutral" position when it comes to adding in wind coverage in the National Flood Insurance Program (NFIP). Still others say "no" to wind entirely.
Patrick Royal of the Independent Insurance Agents and Brokers of America says his association remains "neutral," neither supporting nor opposing adding wind coverage to the flood program.
But the Professional Insurance Agents agents seem to be pleased that H.R. 3121, the "Flood Insurance Reform and Modernization Act of 2007" is moving forward, but disagree on some of the "language" in the bill.
"PIA is pleased the flood proposal is moving forward," said Patricia A. Borowski, PIA senior vice president. "However, we continue to be disappointed by and oppose the House's inclusion of Rep. (Gene) Taylor's language attaching a multi-peril (wind) coverage."
Borowski said that if the NFIP added wind coverage to policies, in essence those policies would have to become comprehensive property policies.
"PIA understands, appreciates and agrees with the challenge that Rep. Taylor is trying to resolve for constituents, that is to be sure that people have coverage that will respond no matter whether the damage is from flood or wind or water surge, etc.," she said. "However, the specific approach Rep. Taylor has selected and now is in the House version is highly defective and will not resolve the fundamental problem. It just adds more cost for insurance coverage for consumers and increases the number of parties and coverage forms that could be drawn into a claims coverage controversy."
Borowski said the challenge with adding wind to flood policies is that most states do not exclude wind from private property policies.
"So, now you have a problem with a person with a flood policy with wind coverage, and a property policy with wind coverage," she noted. And when there's a flood "who pays?" she asked. "Whose limits pay? Who's in control? Who makes the decisions?"
While Borowski added that PIA "absolutely understands Mr. Taylor's position" this concern has to be worked out in a different way.
"Imposing wind in the NFIP truly is not a solution," she said. "If this goes through we might be here three years later and have the same loss circumstance and those people who will have a flood policy with wind coverage, a property policy and a wind policy, will still be left short."
Borowski added that the PIA is currently working with the Senate "to fix this problem aspect of the bill."
