Texas orders homeowners carriers to justify rates

The Texas Department of Insurance said on Mar. 9, 2007, it will require homeowner insurance carriers to file and justify their current rates in the coming months. The department said 2006 loss ratios, recent changes in the Texas market, and carriers' decisions to exclude previously written risks prompted the move.

The combined ratio for the industry in 2006 was an estimated 64.8 percent; the loss ratio was 34 percent. In 2001 the in-dustry had a loss ratio of 116.9 percent and a combined ratio of 165.6 percent.

TDI said any rate review will be based on a multi-year period, taking into account severe weather/hurricane exposure and the need for companies to address adequate reserves for catastrophes.

If a carrier is found to be charging excessive rates, TDI will require the company to reduce its rates. Because risk exposure and policy forms are different, the rates will not be uniform for all carriers.

"Our duty under statute is to ensure that rates are reasonable and adequate," said Jerry Hagins, insurance department spokesperson, in TDI's announcement. "Even when you take into account Texas tornado, hail and hurricane exposure, companies should make sure that their rates are both competitive and affordable. If they're not, then we have the tools to deal with it." He cited a recent state district court decision to uphold a rate reduction order that had been challenged by Allstate.

Other factors that may affect rates and subsequent TDI actions include pending enforcement actions, rate changes that companies may already have made in 2006, and legislation affecting the Texas Wind-storm Insur-ance Associ-ation (TWIA) or other aspects of the Texas market, the department said.

Insurance industry trade groups were quick to respond.

"2006 was not a typical year for the insurance industry," stated Mark Hanna, spokesman for the Insurance Council of Texas. "We were fortunate that we did not have the violent wind and hailstorms that have been the historical cost drivers for homeowners insurance in Texas and other states that are prone to severe weather."

Hanna said homeowners insurance in Texas has more often than not been a losing proposition or break even at best. He said a good year like 2006 allows the industry to be better prepared to pay the claims from future losses.

He said when insurers are profitable, "it allows them to grow their business and be more competitive in the marketplace. Insurance is a cyclical business and it is not very often that we have a good year, much less a notable one."

Jerry Johns, president of Southwestern Insurance Infor-mation Service, explained that insurers currently file and justify their rates and being told to do so again is redundant.

"The 2005 Texas legislature enacted an insurance modernization law which allows insurers to file their rates and use them unless they are deemed excessive by the Texas Department of Insurance," Johns said.

"Profits enable companies to make improvements in the way they serve their customers, invest in Texas communities and pay for multi-billion dollar catastrophic weather events," he added.

Profitability should be viewed over multiple years not a single year. For many years insurers lost hundreds of millions of dollars in Texas, Johns said.

ICT's Hanna also said that recent profitability has led to lower rates. Specifically, he said that homeowners and auto rates have gone down statewide every quarter for the past 10 quarters since Jan. 1, 2004. For the past two and half years, the statewide average for homeowners insurance premiums has decreased 10.5 percent.

La.'s Donelon forges agreement with Allstate over cancelled policies

Louisiana Commissioner of Insurance Jim Donelon reported on March 19, 2007, that he had reached a settlement with Allstate concerning 4,772 policyholders in four south Louisiana par-ishes whose homeowners insurance was cancelled due to what the Department of Insurance said was a flawed home inspection process. The cancellations resulted in 775 complaints being filed with the department, the announcement said.

On March 6, Donelon ordered Allstate to ditch the faulty inspection process and reinstate coverage on policyholders affected by them. Allstate balked, according to the Associated Press, and appealed the order to an administrative law judge. The company asserted that Donelon had "overstepped his power," the AP reported.

According to Donelon, the consent agreement grants prompt reinstatement to policyholders affected by the flawed inspection process and adds two provisions: An additional six weeks to qualify for reinstatement and to begin the repair process; and the right for Allstate insureds not ready to repair their homes the option to still obtain new coverage until Dec. 31, 2008.

The terms of the consent agreement include the following:

(1) By March 23, Allstate would mail a "Notice of Right to Reinstatement" to each of the 4,772 homeowners in Jefferson, Orleans, Plaquemines and St. Bernard Parishes who received a cancellation letter due to an alleged substantial change in the risk. This does not include those homeowners who have voluntarily agreed to cancel their coverage or those who have already been reinstated by Allstate.

This notice gives the cancelled policyholder the right to full reinstatement of their original policy without a lapse in coverage if the policyholder provides one of the following to Allstate by April 30:

• Satisfactory evidence that the insured premises is currently inhabited by the policyholder and in insurable condition; or
• Satisfactory evidence that the insured location is currently under active reconstruction.

Satisfactory evidence must include a copy of: A properly issued building permit for the insured premises; a 2007 utility bill for the insured premises; a signed agreement with a contractor for the insured premises; or material receipts showing the policyholder's intent to reconstruct or repair the insured premises. Homeowners may also have their property reinspected as satisfactory evidence of insurability.

(2) Allstate will reimburse any cancelled policyholder who was forced to retain substitute insurance coverage with another carrier in the interim period between notice of cancellation and reinstatement.

(3) Allstate will maintain a separate database of all policyholders requesting reinstatement but who are unable to establish their right to reinstatement under this consent agreement. Until Dec. 31, 2008, these policyholders have the option of purchasing a new 12-month homeowners insurance policy, which shall include coverage for wind and hail, subject to applicable deductibles in force at that time for policyholders living in the same rating area, once they have reconstructed their home.

(4) Allstate must also advise policyholders of the terms and conditions of the consent agreement through radio commercials and in ads in local newspapers.

(5) In the event of a disagreement as to reinstatement between Allstate and any cancelled policyholder, Donelon may render a final and non-appealable decision in the conflict that would be binding upon Allstate.

(6) Donelon reserved his right to consider monetary sanctions against Allstate.

The properties affected by the settlement are in Jefferson, Orleans, Plaquemines and St. Bernard Parishes.

La. lawmakers support overhaul of Citizens Insurance Company

Two Louisiana lawmakers said they support a plan to overhaul the state-backed insurance company by opening much of its business to bidding among private firms.

Sen. James David Cain, chairman of the Senate Insurance Commit-tee, and Sen. Ken Hollis, chairman of the Senate Commitee on Commerce, said they'll file a bill that would award the high-risk homeowners policies, now carried mainly by the state-backed Loui-siana Citizens Property In-surance Corporation, to the best bidder.

Some of the state's actual and projected $2 billion surplus could be used to subsidize the program, Hollis said, at least in its first years.

Missouri adopted a low-bid program for its workers' compensation program in 1994 that was costing businesses annual 25 percent premium increases, said Hollis, an insurance executive. Workers' comp rates in that state have since leveled off.

Hollis said he would like to see a bill requiring the low-bidding company be awarded a three-year contract to carry the high-risk coastal Louisiana homeowners policies.

Cain said a part of the bill also will include a provision reworking the 15-member Citizens board to reduce how much influence the insurance industry has on the company. Under existing law, the industry is guaranteed a majority of at least eight of the board's 15 seats, and could have as many as 11 seats, because the governor is required to appoint members from certain sectors.

Cain, R-Dry Creek, said gubernatorial appointees should instead cover a wider spectrum of interests, including accountants, retired judges and consumer advocates.

Hollis said details need to be worked out: "This is just in the beginning stages."

He said the bill's purpose will be to help reduce homeowners insurance rates or reduce or eliminate the annual assessment on homeowners policies to pay off the $1 billion in bonds.

"Citizens is not doing the job," said Hollis, R-Metairie. "It is only going to get worse."

Insurance Commissioner Jim Donelon has not spoken to Hollis or Cain about their plan, but said he was unimpressed with the idea.

"I think the proposal raises more questions than it answers," Donelon said. "Putting together a program for workers' compensation is totally different than putting together a proposal for wind exposure ... Nothing I heard offers much hope of fixing the problem."

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Agents group and Texas PTA team up to fight teen drinking

With Texas leading the nation in alcohol related deaths among young people, the Texas PTA and the Independent Insurance Agents of Texas have launched a statewide campaign designed to prevent underage drinking.

The campaign includes a workshop series, curriculum guide and local presentations all aimed at helping families and communities throughout Texas prevent underage drinking. It features a documentary, "Party 101: Con-sequences" which premiered in Austin on Feb. 28, at the Paramount Theatre.

In addition to the main documentary, the DVD includes special breakout sessions, one designed for parents and the other designed for educators to explore the damaging effects and severe consequences of teen drinking.

The "Party 101: Consequences" development team involved teens in the creation, production and taping of the program. It allows viewers to learn directly from teens about what really goes on at teen parties and the real consequences of underage drinking. Some of the issues addressed include drinking and driving, missing out on teenage rituals such as prom and graduation, date rape, developmental effects, easy access to alcohol and the fact that many teens get alcohol at homes rather than from external outlets.

The documentary and breakout segments were produced by Christopher Productions, an Emmy-award winning filmmaker recognized for work on social issues, many of which are focused on challenges teens face. Sen. Kay Bailey Hutchison introduces the documentary, acknowledging the need to combat the epidemic of teenage drinking in Texas.

IIAT and Texas PTA members are prepared to lead free programs of "Party 101: Consequences" in communities across the state. Those who prefer to view the documentary at home with their families, can request free DVDs; both the presentations and the free DVDs can be requested via the IIAT Web site at iiat.org and the Texas PTA Web site, www.txpta.org or by calling 1-800-TALK-PTA.

Teen drinking -- a survey

The Texas Commission on Alcohol and Drug Abuse conducts a Texas School Survey every two years that examines alcohol and drug use among students.

The following are highlights from the 2003 survey:

• In 2002, alcohol was blamed in the deaths of 614 Texans under the age of 21, almost five times the number of youth deaths due to all other illicit drugs combined.
• The average age for first use of beer is 12.4 years in Texas.
• Alcohol is the most widely used substance among Texas students in grades 7-12 with 71 percent reporting they had used alcohol at some point in their lives and 35 percent in the month before the survey.
• More than 165,000 Texas teens (more than 9 percent of all students) say they have gone to school drunk.
• 25 percent of Texas high school seniors say they have driven a car while drunk. That represents 80,000 underage impaired drivers on Texas roads at least once during the past year.
• Texas led the nation in alcohol-related deaths in 2002 with 1,745. That was 47 percent of the traffic fatalities in the state. The national average was 41 percent. (National Highway Transportation Safety Administration 2003)
• In 2002, there were 65 alcohol-related traffic fatalities 14 and under in Texas. The number of alcohol-related deaths among those 15-20 was 261, which was 44 percent of all traffic deaths among the age group of 15-20. (National Highway Transportation Safety Administration 2003)
• The latest statistics show a minor drop in total deaths in the percentage of alcohol related deaths among youth age 15-20. However, Texas still leads the nation in alcohol related deaths among young people.
• It is estimated that another 10 percent decrease in alcohol-related crashes would save the state of Texas $220 million in claims payments and loss adjustment expenses.
• Almost 17 percent of all secondary students classified themselves as "binge drinkers," meaning they had five or more drinks at one sitting when they drank (for girls it is four or more drinks at one sitting).
• The easier it is to obtain a substance, the higher the rate of use by students. About 71 percent of the students believe that alcohol was very or somewhat easy to obtain compared to 66 percent for tobacco.
• The TCADA survey shows that girls (71 percent) are now reporting a slightly higher rate of lifetime alcohol use than boys (70 percent).
• The number of binge drinkers almost doubles between the 7th and the 8th grades. In the 7th grade, 5.1 percent admit to binge drinking, while the number jumps to 9.3 percent in the 8th grade, and 16.3 percent in the 9th grade.
• More Texas 7th and 8th graders believe it is more dangerous to smoke than to drink. 64.5 percent of 7th graders believe it is dangerous to smoke or use smokeless tobacco, while 57.4 percent believe in is dangerous to drink alcohol. Among 8th graders, 54.5 percent believe tobacco is dangerous, while 47.6 percent see danger in drinking alcohol.

Source: IIAT/Texas PTA

Ark. Senate passes teen driving rules; highway bond measure

Teenage drivers in Arkansas would have more restrictions on their driving privileges under Senate Bill 196, which recently passed the state Senate.

According to the Senate announcement, teens with a learner's permit or an intermediate license would not be able to use a cell phone while they are behind the wheel. Also, they could not carry more than one other teenaged passenger, and they would be prohibited from driving between 11 p.m. and 5 a.m.

SB 196 has exceptions, and the prohibitions would not apply if there is an adult in the car. Also, teens could drive between 11 p.m. and 5 a.m. if they are going to work or to school, and in cases of emergency.

The Senate also passed HB 1716, which requires motorists to signal before changing lanes.

In addition, a $575 million bond issue for improvements to Arkansas interstate highways would go before voters, under Senate Bill 840.

The bonds would be paid off with a portion of federal highway funds that Arkansas is anticipated to receive, as well as with revenue from a 4-cent-a-gallon increase in the diesel tax authorized in 1999. The Highway and Transportation Department last year completed upgrades to 356 miles of Arkansas interstates, and highway officials say renewed bonding authority is essential for keeping them in proper maintenance.

The bond issue would have to be approved by voters in a statewide election. Senate Bill 840 is part of the highway package under consideration this legislative session. Some legislators also want to spend $100 million from the state's budget surplus on highways.

Source: Arkansas State Senate

Recent "opt-out" settlements challenge D&O severity, limits assumptions

A recent wave of individual institutional in-vestor securities lawsuit "opt-out" settlements is raising troubling new questions about both D&O carriers' claims severity assumptions and D&O policyholders' limits adequacy.

An opt-out action involves a separate lawsuit brought by an individual investor who elects not to participate in the settlement of a securities class action lawsuit brought on behalf of all investors that supposedly have been harmed as a result of alleged securities fraud. In a series of recent settlements of opt-out actions, individual investors have secured massive individual settlements, the expense of which for the settling defendants must be added on top of the cost of defending against and resolving the class action lawsuit.

For example, in Time Warner's class action litigation, the class reached a settlement of $2.65 billion. Although the settlement represented one of the largest class action settlements, several individual institutional investors elected to opt out of the class settlement. Over the past few months, several of the investors who opted out have announced very large individual settlements, in each case accompanying their announcement with the added assertion that their individual recovery greatly exceeded what they would have recovered from the class settlement.

Thus, the state of Alaska announced a $60 million settlement with the Time Warner defendants, which it said represented "50 times what we would have gotten if we remained in the class." The California State Teachers' Retirement System (CalSTRS) announced that it had reached a $105 million settlement in its individual action against the Time Warner defendants, which CalSTRS said represented 6.5 times what it would have recovered from the class settlement. And then on Feb. 28, 2007, the University of California, in what is believed to be the largest opt-out settlement in history, announced a $246 million settlement with Time Warner, which the amount also represented a large multiple of what the University would have recovered in the class settlement.

Institutional investors also have recently announced significant settlements in individual actions involving Qwest Communications and WorldCom, in each case, after the individual investors had chosen to opt out of very large shareholders' class action settlements. According to the settling parties, each of the individual settlements represented a much larger recovery than the parties would have recovered from their share of the class action settlement.

The emergence of large separate opt-out settlements represents a potentially very significant development in securities fraud litigation. Certainly, if institutional investors perceive that they can substantially increase their recovery by proceeding individually rather than participating in the class action settlement, the utility of class action litigation could be significantly reduced, for all parties. If a company is forced to defend itself against both a class lawsuit and multiple individual lawsuits, the costs of defense escalate. And if individual investor recoveries really do exceed class recoveries as a percentage of putative investor loss, then the aggregate cost of final resolution could escalate significantly as well.

To be sure, the incentive for an individual investor, or his or her counsel, to pursue a separate action rather than participating in a class action may be limited to cases where the prospective recovery is very large. According to the National Economic Research Associates, the median securities fraud class action settlement in 2006 was $7.3 million. With half of all class actions settling below $7.3 million, there may be relatively few occasions when individual investors (or their lawyers) have sufficient financial incentive to pursue individual actions.

Nevertheless, at least with respect to the larger cases, the emergence of opt-out settlements could require a reassessment of the range of potential D&O claim severity. It may no longer be sufficient for D&O carriers to look at class action settlement data alone to assess the probable range of claims severity. The possibility of additional opt-out cases, with the added defense and settlement expense, also must be taken into account.

The added potential exposure could also have important implications for policyholders' D&O limits selection. The limits required to defend a company and its directors and officers in a multi-front war involving both a shareholder class actions and separate individual investor actions could be significantly higher than has been assumed in the past. Similarly, the aggregate cost required to resolve a class lawsuit and separate individual actions could be significantly greater than the cost of resolving the class action lawsuit alone.

Yet the emergence of these large individual investor opt-out settlements is a relatively recent phenomenon. For that reason, there may be good reason to hesitate before jumping to too many conclusions about the likely future impact of those settlements. All of the recent opt-out settlements were in connection with the huge cases arising from the wave of corporate scandals that emerged earlier in the decade. It is entirely possible that once the cases arising from the corporate scandals have worked their way through the system, the individual investors may be less interested in pursuing separate actions.

The long-term significance of opt-out settlements may remain to be seen. But in the meantime, it is difficult to argue with the recent assessment of Columbia Law School professor John Coffee, who called the recent emergence of large opt-out settlements "probably the most significant new trend in class action litigation."

Kevin M. LaCroix is an attorney and a director of the OakBridge Insurance Services, Beachwood, Ohio, office. An earlier version of this article appeared on LaCroix's Internet Web blog: the D&O Diary, http://dandodiary.blogspot.com. E-mail: klacroix@oakbridgeins.com. Phone: 216-378-7817.

Okla. Commissioner: Faith-based benefit firm considered an insurer

TITLE: Okla. Commissioner: Faith-based benefit firm considered an insurer

A Tulsa, Okla.-based Christian organization that pools member money to pay medical bills, but says it isn't an insurance company, is still going to be treated like one, a state official said.

Medi-Share, a Christian Care ministry of the mission-driven American Evangelical Association, will have to prove to the state it can cover claims that members file, Oklahoma Insurance Commissioner Kim Holland said Mar. 14.

"If it looks like a rose and smells like a rose, then it's a rose," Holland said. "We are going to treat Medi-Share like an insurance company."

But Robert Baldwin, the group's president, said his organization has no money on reserve other than members' shared dollars being processed before going to pay a medical bill.

Oklahoma Insurance Code has not historically applied to Medi-Share because it was considered a religious group that helped members with health-care costs but does not promise to pay or assume risk for those costs.

But District Judge Joe Vassar decided recently that wasn't the case, ruling earlier this month that Medi-Share was "involved in the offering of contracts for insurance" and wasn't exempt from state Insurance

Department regulation.

Judges in four other states have made similar rulings, but Baldwin said Medi-Share still operates in those states: South Dakota, Illinois, Wisconsin and Montana.

He said the group would likely appeal the court's decision.

"We do believe the ability for Christians to share medical bills on a nonprofit, noninsurance basis should be preserved," he said.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Swiss Re sigma study details 2006 natural, man-made disasters

in its just released sigma study, "Natural catastrophes and man-made disasters in 2006", Swiss Re notes that "losses due to natural catastrophes and man-made disasters were below the long-term trend in 2006." Cat losses totaled around $48 billion, of which approximately $5.9 billion was covered by insurance.

Swiss Re also noted that "insurers have modified their catastrophe simulation models, where appropriate, to bring them into line with higher expected damage -- especially in the light of the record loss years 2004/05 and an increasingly volatile climate."

Although 2006 was a relatively benign year in economic terms, "natural catastrophes and man-made disasters claimed more than 31,000 human lives worldwide," according to the report. There were 349 catastrophes. However, "unlike in the two previous years, natural catastrophes affected mainly developing countries where property values are low," said Swiss Re, "resulting in comparatively light economic losses of $48 billion. Low insurance penetration in developing countries also meant that only one third of these economic losses in 2006 was actually covered by insurance."

The $15.9 billion insured loss figure produced the "third-lowest losses of the past 20 years -- only 1997 and 1988 were less expensive (after allowance for inflation)." The total for natural catastrophes was $11.8 billion and man-made disasters around $4 billion, mainly attributable to "the calm hurricane season in the U.S. and the absence of any highly damaging events in Europe."

Swiss Re doesn't see the 2006 results as a reversal of the trend towards higher losses over the past decades, which have been due "mainly to weather-related catastrophes." The "increasing concentration of property values and urban encroachment into highly-exposed regions" has also raised loss figures.

The trend is also linked to climate change. "Going forward, the effects of global warming are also likely to aggravate the loss situation," the report explained.

This is the first time the Swiss Re sigma report has included statistics from flood losses in the U.S. "The historical series as of 1970 have been revised accordingly," said the report. As a result of this change, the insured loss of Hurricane Katrina was revised upward to $66 billion from $49 billion without National Flood Insurance Program.

Washington warming to national disaster plan idea

Sen. Dodd says hurricane and flood disasters are not just a local issue, but a national one

A proposal for a national disaster plan to backup private hurricane and flood insurance markets appears to be gaining momentum in Washington.

This month, Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, expressed his support for a national disaster program.

"It is clear that the government has got to step in," said Frank during a press conference where he was flanked by Rep. Ginny Brown-Waite, R-Fla., and Rep. Carol Maloney, D-N.Y., who are advocating a federal role.

Citing the federal government's role in providing a backstop for terrorism insurance, Frank said, "We believe that we have reached a similar point with regard to what happens with floods and hurricanes. ... I believe that some federal backstop is necessary."

U.S. Sen. Chris Dodd, D-Conn., chairman of the Senate Committee on Banking, Housing and Urban Affairs and a Democratic presidential candidate, is also interested. Dodd has said he will hold hearings on insurance issues on April 11 either in Washington or the New Orleans area.

"This is not a local issue. It's a national one," Dodd told The Associated Press. He noted that more than 60 percent of the country's population lives within 100 miles of the coast. "What happened here could happen in my state. It could happen to an awful lot of people in this country."

Industry watching closely

The insurance industry tends to agree that policymakers must address this issue but is watching closely how Congress responds.

The Property Casualty Insurers Association of America (PCI) is hoping lawmakers will respect the role of private insurers and come up with state-specific remedies that provide releif where it is most needed.

"Insurers, regulators, and consumers all want the same thing: a healthy and competitive insurance market in which consumers can choose a variety of coverage options from a variety of financially secure insurers," said June Holmes, PCI's interim CEO. "PCI is a strong believer in the power of market systems and signals to solve most problems. At the same time, we believe there are some risks in some areas that market solutions alone may not have the tools to address. Mega-catastrophe hurricane and earthquake risks fall into this category. Mega-catastrophe risks, if not addressed, can undermine the economies in these critical areas of the country and insurers need to work with state and federal policymakers to develop innovative solutions that promote increased insurance availability and responsible economic development."

Holmes said solutions should meet the unique needs in each state. She maintained that a one-size fits all approach is not likely to work.

"Conditions in Florida are unique from any other state," said Holmes. "Over 80 percent of the insured property in Florida is located along the Gulf and Atlantic Coasts and the total value of insured property there is nearly $2 trillion and growing. Florida is the most hurricane-prone state in the U.S., accounting for roughly half of the total U.S. annual aggregate storm losses. The solution to market disruptions in Louisiana, South Carolina, or Massachusetts will look much different from one crafted by Florida legislators. That's why we favor a state-by-state approach backed up at a very high level by federal liquidity protection."

R.I., Mass. safest while Wyo., Ark. deadliest states for truck crashes

Wyoming and Arkansas are the deadliest states for truck crashes, according to a safety group that has called for tougher federal regulation to reduce fatalities hovering above 100 a week nationwide for years.

The safest states for truck crashes are Rhode Island and Massachusetts, based on the number of fatalities per 100,000 residents in 2005, the most recent year with complete figures.

Seven years since its creation by Congress to improve the safety of trucks, the federal Motor Carrier Safety Administration "is still putting cargo over people," said Joan Claybrook, chair of Citizens for Reliable and Safe Highways. "This federal agency has failed miserably."

In 1999, when the agency was created, 5,380 people died in crashes with big trucks, Claybrook told a news conference by the Truck Safety Coalition. "That figure has barely budged." It was 5,212 in 2005. The agency's spokesman, Ian M. Grossman, was not available to respond.

Speakers at the event called on the agency to reduce the hours that truckers are allowed to drive without rest, increase safety inspections of big trucks, require on-board electronic monitors to ensure compliance with hours-of-service rules, and train drivers better.

The group said that in 2005 Wyoming had 6.09 deaths in big truck crashes per 100,000 residents, followed by Arkansas at 4.17, Oklahoma at 3.41, New Mexico at 3.27, Mississippi at 3.12, and West Virginia at 3.03.

The safest state, Rhode Island, had 0.09 fatalities per 100,000 residents, followed by Massachusetts at 0.38, Connecticut at 0.48, District of Columbia at 0.54, Hawaii at 0.71, Alaska at 0.75, New York at 0.76, New Hampshire at 0.84 and Delaware at 0.95.

Largest increases

The largest increases in truck fatality rates between 2004 and 2005 came in Oklahoma, South Carolina and Louisiana. The greatest drops were in Alabama, Indiana and South Dakota.

"We spend millions of dollars on food safety. Nearly 61 people die from E.coli (infections) each year, which is equivalent to the four-day death toll from truck crashes," said Jacqueline Gillan, vice president of Advocates for Highway and Auto Safety. "Anytime there is an E.coli outbreak, the federal government uses every resource available to stop this public health threat. Yet, unsafe big rigs kill and maim tens of thousands each year because truckers are pushed to drive long hours under unsafe conditions while the federal response has been silence and indifference."

Gillan and Claybrook criticized the motor carrier administration for increasing the number of hours a driver can operate a truck by 28 percent since 2003, up to as much as 88 hours over an eight-day tour of duty.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

A.M. Best says commercial P/C outlook stable

Pricing remains rational for now despite increasing competition

A.M. Best Co. has completed its assessment of the U.S. commercial market and revised the outlook to stable from negative for 2007. Although Best says there continues to be evidence of pricing deterioration, the level of deterioration thus far has been gradual as irrational pricing has yet to surface.

The outlook change also considers the level of rate adequacy in the sector, the record underwriting profits recorded in 2006 and an expectation of stabilized reserve development over the near term.

Best anticipates that there will be few rating upgrades or positive rating outlooks assigned in 2007 as most commercial lines companies will need to demonstrate their so-called underwriting discipline through the next soft market, which Best believes is inevitable.

Price discipline

Through 2006, Best believes that many U.S. commercial lines insurers were the recipients of much improved pricing, proving the old adage, "a rising tide lifts all boats." With the beginning of a new soft cycle now underway, however, many companies will be put to the test in proving their underwriting discipline, according to the rating organization.

Over the near term, Best says price discipline remains rational. It is over the longer term that Best is wary of price competition intensifying to a level where price discipline is compromised for the sake of growth.

In 2007, Best expects commercial lines premium to decline a modest 1 percent. While on the surface this level of deterioration is quite modest, it does not consider actual pricing changes such as terms and conditions, premium credits and exposure growth. Nevertheless, Best expects commercial lines to produce a net underwriting profit in 2007.

The outlook for the commercial lines market is intended to span over the next 12 to 36 months and is a prospective view that considers the effects of potential internal and external pressures, the sector's ability to optimize capital and its ability to preserve capital while maintaining balance sheet integrity over that period. While Best said it expects the inevitable lowering of the tide will happen again, thus far the commercial lines sector seems to be maintaining a rational level of price discipline while keeping the integrity of the balance sheet intact.

Navigating the cycle

Best believes a trend should not be measured by any single cycle -- hard or soft -- and believes rating upgrades will be few in number until companies can truly demonstrate their underwriting acumen through the soft as well as hard market cycles. Those companies that are able to navigate through these cycles will benefit from rating upgrades over time. On the other hand, those companies that have insufficient price monitoring tools, relaxed underwriting standards and are aggressive during soft markets are certain to face negative rating actions in the future.

Best said it will continue to take a "more rigorous approach in its due diligence when evaluating companies' capitalization, cycle management and risk management controls." Exposure to terrorism, its impact on capitalization and the uncertainty surrounding a long-term solution to this issue are key concerns.

The rating firm says that catastrophe models will continue to be "valuable tools for the quantification of risk but are not the only barometers."

As part of enterprise risk management and cycle management, companies will need to demonstrate their ability to monitor and measure risk and provide quality data and adequate underwriting and risk controls, the firm adds.

Three ways to bag more personal lines sales

The Post Office isn't the only way to deliver insurance marketing materials. Inserts, e-mails, Web site downloads, and hand delivery are some of the other options that are available. The first three methods are regularly employed; the last is often overlooked. Basically, it involves placing promotional materials in plastic bags and handing them to, or dropping them off for prospects. This style of delivery is common at trade shows, so why not employ it outside of the exhibit hall? It distinguishes the aggressive personal lines agency from other marketers who limit themselves to the more traditional avenues of distribution.

Here are a few possibilities.

Auto litter bags

These transitory trash receptacles serve as short-term insurance billboards. Once in use, they usually hang in full view of the driver for weeks before they are filled and discarded. The colorful plastic bags cost about 20 cents each, custom imprinted with your logo, agency information, and sales message. Print different bags with messages that promote auto, home, boat, and life insurance. Then add your prospect's first pieces of trash: a custom marketing memo that ties in with the bag's message, a free pen, and a business reply card. Prospects can then fill out the card with the pen and drop it off at the nearest mailbox, all without leaving the car.

• home
• boat
• life] insurance rates."

Distribution possibilities: Supply select business clients and commercial prospects with litter bags to give to their customers. Invite them to join in the promotion by inserting a coupon or marketing brochure of their own. Potential distribution sites: Gas station shops, car washes, repair/collision/muffler shops, and parking lots. Persuade restaurants with drive-up windows to hand out your bags by inviting them to add a copy of their take-out menu. To promote watercraft insurance, encourage marinas and dockside restaurants to distribute your boat litter bags as a free environmental service.

Plastic newspaper bags

Gone are the days when children on bicycles pedaled from door to door delivering carefully folded newspapers. Now they are rolled up and placed in weatherproof plastic bags and tossed from moving mini-vans. So check with your local daily or weekly's ad department to learn if you can provide these bags for subscribers who live on routes that match up with your desired demographic. If they agree (for a fee) supply them with imprinted bags from a vendor or purchase them directly through the paper, if they offer the service. Either way, the approach is most effective when you also advertise in the paper that's being delivered in your bag. Emblazon it with a message that guides the reader to your ad's location. Or, if you prefer to place an agency insert, use the bag to let readers know it's there. Either way, this bag-to-ad tie-in can favorably increase your response rate.

Door-hanger bags

These bags can contain any type of insurance solicitation that you want, such as an auto policy rate comparison graph or a coverage checklist for homeowners. You can even provide sample rates and facts on renters or condominium-unit owners policies. Apartments and condos are especially quick to deliver to by this method, due to the close proximity of their doors. Furthermore, many of these prospects don't carry any property insurance at all, mistakenly believing that the landlord or the master condo policy protects their personal belongings. Consider enclosing an agency certificate for a free gift along with your promo material as a reward for dropping by your office for a new or comparative quote.

Here's a different twist on this concept. Team up with other neighborhood businesses or your own commercial lines clients to put together specially imprinted "coupon bags" that are hung on the doorknobs of pre-selected prospects. You might even support your efforts with a postcard that tells people to look for a special discount coupon bag this week. Test out various themes such as automobile services containing discounts for auto parts, detailing, tires, etc. Home safety bags might include discount coupons for first aid kits, burglar alarms, etc. As for who physically hangs the bags on the doorknobs, hire your clerical staff, employee's kids, or a professional delivery firm.

Conclusion

Try thinking outside of the mailbox, inbox, and Web. Hand delivery may not be the most sophisticated marketing method there is, but it has a key advantage. You know that it won't be blocked by a spam filter or misdelivered by a letter carrier; as it is physically transported to its destination. However, it still comes with its own set of cautions. Always check first with your state insurance department and local government to see if the above types of promotional gifts and delivery activities are freely permitted in your marketing territory.

Alan Shulman, CPCU, is the publisher of Agency Ideas, a subscription-only sales and marketing newsletter. He is also the author of the 1001 Agency Ideas book series and other popular P/C sales resources. He may be reached at 800-724-1435 or by e-mail shulman@agencyideas.com. Visit: www.agencyideas.com.