QUACK QUAKES
A state Senate panel voted May 3 to bar California's insurance commissioner from ever again allowing insurance companies to avoid fines by contributing to nonprofit foundations. The Senate Insurance Committee approved by an 8-0 vote to submit a bill to the full Senate that would prevent future tradeoffs similar to those undertaken by current Insurance Commissioner Chuck Quackenbush. The commissioner has admitted to allowing at least four insurance companies to avoid $3.3 billion in fines for allegedly underpaying claims during the 1994 Northridge earthquake in return for making donations to an earthquake foundation. Quackenbush's CDI legal team recommended the fines. No time line has been slated for presenting the state's Senate with such a bill. Meanwhile, a California Superior Court judge has seized the earthquake foundation and the LA Times has called on Quackenbush to resign.
GEORGIA FINES
Prudential HealthCare has drawn a $200,000 fine for slow payment of claims from Georgia Insurance Commissioner John Oxendine. The state's prompt-payment rule requires health insurers to pay a clean claim to a doctor or hospital within 15 working days of receipt, or notify them why the claim has not been paid. Also, the Medical Association of Georgia is suing Prudential, along with three other insurers, for routinely delaying payments of claims.
ITC, RACKLEY TEAM UP
Dallas-based Insurance Technologies Corp. (ITC) has partnered with Rackley Systems to provide commercial lines rating software to ITC's existing customers. The software features integration with leading management systems like Applied and AMS. In addition, Rackley provides free training and technical support with all their software products.
CONSECO CONCERNS
Conseco has signed a commitment letter to sell some of its assets to Lehman Brothers Bank and affiliates. Pursuant to this transaction, Lehman Brothers will purchase approximately $1.5 billion in loans from Conseco Finance, with up to $500 million of the proceeds available to repay inter-company indebtedness owed to Conseco.
Under heavy investor pressure, Conseco Inc.'s two top executives resigned their posts last month. Chairman Stephen C. Hilbert and Chief Financial Officer Rollin M. Dick made the announcement April 27, saying Conseco's market-value plummet over the last two years has impaired investor confidence in the pair. Conseco executives David V. Harkins and Thomas H. Lee have been chosen as interim chairman and CFO. The company will begin searching for permanent replacements immediately. The company's first-quarter results showed operating earnings dropped to 30 cents per diluted share to $107 million, with net cash from operations of $315.7 million.
Two stockholders have filed a class-action suit in an Indiana U.S. District Court alleging Conseco executives intentionally misled investors.
WORKERS' COMP DECLINE
Workers' compensation benefit payments and costs declined relative to wages in 1997 and 1998 according to a report released today by the National Academy of Social Insurance. This marks the sixth consecutive year of declining benefits relative to wages. In 1998, total workers' comp benefit payments were $41.7 billion. These payments were for medical care and cash benefits for workers with injuries or illnesses caused on the job. Total costs to employers in 1998 were $52.1 billion. The benefits and costs were slightly higher in 1998 than their 1997 levels of $40.6 billion in benefits and $52 billion in costs. When adjusted for the growing size of the work force and the rising wages of workers, however, benefits and costs continued to decline from their all-time highs in 1992 and 1993.
CONTINENTAL DERIDE
Continental Casualty Co. has agreed to pay nearly $135,000 in refunds to approximately 250 Mississippi residents as a result of a rate review analysis conducted by the Mississippi Insurance Department and Continental Casualty. The review revealed several instances in which Continental's rate increases were implemented for some group association health policies, but never filed with the department of insurance. In other instances, rate increases exceeded those allowed by the department.
GERMAN EXPANSION
Allianz and Munich Re are planning to reduce mutual cross-shareholdings worth more than $7 billion, while selling off some holdings in jointly held companies in order to free up cash for an expansion in fund management and insurance. The moves will allow the insurers to take advantage of the German government's plan to do away next year with a capital gains levy on shareholding sales. The companies plan to reduce their cross-holdings by between 20 and 25 percent by the end of 2003.
SPEEDY RELIEF
A company's prompt reporting of workers' injuries can have a considerable influence on its bottom line, a new study by The Hartford Financial Services Group has found. The study showed that claims filed five or more days after an injury cost an average of 15 percent more for medical and income-replacement benefits than similar claims that had been filed promptly.
IN RECEIVERSHIP
A Texas State District Judge has signed an order placing Bankers Commercial Life Insurance Co. of Dallas in temporary receivership. The company, founded in 1955, writes primarily Medicare supplement insurance and has approximately 23,000 policyholders. The company did not oppose the order, which freezes its bank accounts and other assets and appoints Insurance Commissioner Jose Montemayor as receiver for the company. The petition for court-ordered receivership states that Bankers liabilities exceed its assets by more than $4 million.
Film producer George Litto has sued French insurer AXA Re for revoking two insurance contracts that
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VROOM, VROOM
Motorcycle insurance can now be added to consumers' cyber-shopping lists in Texas and Alabama. Progressive has made it possible to buy coverage online, with instant coverage through its web site. Progressive is the number one motorcycle insurer in the country. The additions increase the number of states in which the company is offering online motorcycle coverage to 44.
INSPIRE CEO RESIGNS
INSpire Insurance Solutions, an insurance claims administrator based in Fort Worth, will replace CEO F. George Dunham III, who has resigned effective immediately, with R. Earl Cox III. Cox, who has been director of INSpire since the company's inception, will serve as chairman and CEO until a permanent replacement is found. No information on Dunham's departure was released. INSpire has branch offices in San Diego, Calif.; Edison, N.J.; Honolulu, Hawaii; Sheboygan, Wis.; Columbia, S.C.; and Roswell, Georgia.
DISCOVER COVER
Discover Financial Services, a business unit of Morgan Stanley Dean Witter & Co., and Nationwide Insurance Companies are forming an alliance to offer auto insurance products underwritten by Nationwide Insurance Companies to Discover cardmembers and other consumers. Future plans include the development of Discover-branded auto insurance products. During the development of the products, Discover will market Nationwide products through Discover Insurance Agency and affiliated agencies.
ST. PAUL SELLS
The St. Paul Companies has completed the sale of its nonstandard auto insurance business to the Prudential Insurance Company of America. Prudential purchased the nonstandard auto insurance business marketed under the Victoria Financial and Titan Auto brands for approximately $200 million. The purchase includes the THI Holdings Inc. legal entity and all of its subsidiaries, including the Victoria and Titan Groups. The St. Paul Companies, headquartered in St. Paul, Minn., provide property-liability insurance, reinsurance and life insurance products and services worldwide.
GENERALI EXPANSION
Expansion opportunities in Great Britain, Southeast Asia, Latin America and the U.S. are being eyed by Italian insurer Generali. Numerous reports indicate Generali chairman Alfonso Desiata informed reporters of the expansion interest while attending a meeting of insurer watchdog ISVAP.
NELSON SENATE BID
Florida Insurance Commissioner Bill Nelson made it official May 1, kicking off his U.S. Senate campaign for the seat currently held by retiring Republican Sen. Connie Mack. His platform will include HMO reform and expanding Medicare to cover prescription drugs. Nelson began his political career when he was elected to the Florida House in 1972. He was elected to Congress in 1978, serving until 1990 when he lost a bid for the state governor's seat. In 1994 he was elected Insurance Commissioner.
HMO CLASS ACTION
The national consumer law firm of Herman, Middleton, Casey & Kitchens has filed a class action against Humana Inc., Humana Insurance Co., and Humana Medical Plans pursuant to the Federal Racketeering Influence and Corrupt Organization Act. The suit alleges that Humana generated profits at their members' expense through undisclosed discounts and incentives with doctors, hospitals and other medical providers, as well as other breaches of contract. Also, the complaint asserts that Humana entered into agreements with medical providers that had "gag clauses" prohibiting medical providers from informing patients about alternative medical treatment.
CELL PHONE CLOSE CALLS
A new survey by Farmers Insurance Group shows 87 percent of adults believe using a cell phone while driving impairs a persons ability to drive. And while only two percent of drivers said they had been in an accident in which one of the drivers was using a cell phone, more than 40 percent reported to having had close calls or near misses with a driver who was on the phone.
PRESIDENTIAL VIEWS
President Bill Clinton told independent insurance agents from around the nation that a tax credit for long-term care, Medicare prescription drug coverage and improvements in health care that will result in Americans living longer, will all have an affect on the insurance industry. Speaking before more than 800 insurance agents attending the Independent Insurance Agents of America's 24th annual National Legislative Conference, President Clinton said he supports a $3,000 annual tax credit to help Americans pay for long-term care for a family member.
