RadioShack cited for failing to protect customer information

Texas Attorney General Greg Abbott announced he has taken legal action against Fort Worth-based RadioShack Corp-oration for exposing its customers to identity theft.

According to documents filed by the AG's office on April 2, 2007, RadioShack violated a 2005 law requiring businesses to protect any consumer records that contain sensitive information, including Social Security and bank account numbers.

The AG's office alleges that a RadioShack store in Portland, near Corpus Christi, exposed thousands of its customers' personal identifying information by dumping bulk customer records in garbage containers behind the store. According to investigators, the records contained sensitive consumer information, including Social Security numbers, credit and debit card information, names, addresses, and telephone numbers.

The records included personal information from one consumer's 1998 credit application and another receipt from a local woman who, ironically, purchased a shredder from RadioShack in order to protect herself from identity theft.

Also discovered among the discarded records was sensitive information from a credit card issued to the City of Portland, according to Portland Police Chief Randy Wright, who joined Abbott in denouncing the store's actions.

"Identity theft is one of the fastest growing crimes in the United States," Abbott said. "Texans expect their personal information to be protected. The Office of the Attorney General will take all necessary steps to ensure that consumers are protected from identity thieves."

RadioShack is accused of violating provisions of the 2005 Identity Theft Enforcement and Protection Act, which requires the protection and proper destruction of clients' sensitive personal information. Corpus Christi Sen. Juan "Chuy" Hinojosa sponsored the legislation, which gives the Office of the Attorney General authority to seek penalties of up to $50,000 per violation.

The AG also charged RadioShack with violations under Chapter 35 of the Business and Commerce Code, which requires businesses to develop retention and disposal procedures for their clients' personal information. The law provides for civil penalties of up to $500 for each abandoned record.

Investigators are trying to determine if any exposed data has been used illegally. Consumers who interacted with the Portland store are advised to monitor bank, credit card and any similar statements for evidence of theft. Customers should also consider obtaining free copies of their credit reports.

In addition to citing RadioShack, the AG's office recently took identity theft enforcement action against On Track Modeling, a North Carolina-based talent agency that apparently abruptly shut down its Grand Prairie office and abandoned more than 60 boxes containing hundreds of confidential client records, and against Jones Beauty College in Dallas for improperly discarding student financial aid forms containing Social Secur-ity numbers and other personal information.

Complaints may be filed with the the Office of the Attorney General at (800) 252-8011 or online at www.oag.state.tx.us. Consumers can also obtain information on how to detect and prevent identity theft from the AG's office.

Source: Texas Attorney General's Office.

Sen. Lott wants 'plain language' requirement enforced by Feds

U.S. Senator Trent Lott, R- Miss., wants to require insurers to disclose property insurance coverage and noncoverage in plain language on the front page of each homeowner's policy and has introduced a bill giving the Federal Trade Commission enforcement authority to see this is done.

"Insurance policies are notoriously hard to read and understand because they're primarily written in complex legalese," Lott said in introducing his bill. "While insurance is a legal contract, it also is a product purchased by consumers. That's why I believe every insurer should include a plain-English description of a homeowner's policy, prominently displayed on the policy's first page."

Lott's bill will require this basic description be contained in a "noncoverage disclosure" box stating in bold font, twice the size of the body of the policy's text, all conditions, exclusions and other limitations pertaining to the individual policy's coverage.

The bill further requires the Federal Trade Commission to enforce this disclosure requirement, and it establishes penalties for insurers who fail to comply through the FTC's existing laws governing unfair or deceptive practices.

Lott contends his bill, the Homeowners' Insurance Noncoverage Disclosure Act, would save money and time associated with insurance policy disputes.

"Consumer groups have estimated a provision like this could have saved consumers anywhere from $55 billion to $65 billion in Hurricane Katrina's aftermath," Lott said. "Having a clear, concise description of every policy serves the best interest of consumers, insurers and taxpayers."

But insurers oppose the bill, arguing that it duplicates state regulatory requirements involving "plain language" insurance terms and will in fact increase costs.

According to June Holmes, interim chief executive officer of Des Plaines, Ill.-based Property Casualty Insurers Association of America (PCI), many states -- including Lott's home state of Mississippi -- "are already doing an excellent job in enacting and enforcing these 'plain language' requirements."

Holmes said Lott's proposal "will do nothing to enhance the 'plain language' requirements already on the books in almost every state. But by calling for the FTC to enforce this redundant and unnecessary requirement, Senator Lott's proposal will add another layer of costly and duplicative federal oversight of a function best left to the states -- not to mention the confusion that dueling federal and state regulations would cause for consumers."

Doctors in Ark. stress ATV safety after recent deaths

Three recent deaths in all-terrain vehicle accidents in Arkansas, including a toddler and a teenager, are a reminder that ATV accidents are on the rise, and doctors at Arkansas Children's Hospital want to see the trend reversed.

"Arkansas has had increasing numbers of injuries for several years," said Dr. Mary Aitken, a pediatrician with the hospital's Injury-Free Coalition for Kids. "And at Arkansas Children's Hospital we've seen a dramatic increase in serious injuries."

She said the hospital saw 79 people with serious injuries from ATV accidents last year, including many with traumatic brain injuries. Other injuries include pelvic, skull and facial fractures and spinal cord injuries that can end in paralysis and short-term disabilities.

Doctors in Arkansas started tracking hospital admissions of children from ATV accidents in 1998, when the total was between 30 and 40 a year. The number has risen nearly every year since 1998 and now is more than 60.

On March 23, a toddler, Elizabeth Everett of Paragould, died at about 8:30 p.m. when the ATV carrying her was struck by a sport-utility vehicle while riding on a paved street. The ATV was being driven by Nicholas Cox, 26, of Paragould, who was hospitalized for treatment of his injuries.

Marcus T. Angel, 40, of Jonesboro, also died after the four-wheeler he was riding went into a ditch. Jonesboro police said the vehicle flipped onto Angel after it hit a metal fence post.

In Cave City on March 25, Elizabeth A. Simpson, 13, died after apparently flipping her four-wheeler as she checked on a calf on her family's property.

The girl's father, Gary Simpson, said he found the four-wheeler upside down on top of Elizabeth in the field. She was pronounced dead by Independence County Coroner Hardy Willis.

Most injuries are caused when an ATV flips, either throwing the rider and passenger off or pinning them underneath the vehicle, Aitken said.

"Most ATVs, with very few exceptions, are designed for a single driver," Aitken said. "A passenger makes the vehicles much more unstable, and they can turn over more easily."

Aitken said that anyone considering buying or driving an ATV needs to realize that the vehicles are not toys, but are powerful machines that can weigh nearly 600 pounds and can travel at speeds up to 60 or 70 mph.

Additionally, children should not be allowed to drive the vehicles, which are typically designed for adults, she said. One in three ATV crash victims is 16 or younger, and one in four of all people killed in such accidents are 16 or younger.

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

Okla. judge orders new trial in Ford rollover lawsuit

A federal judge in Tulsa, Okla., ordered a new trial in a lawsuit against Ford Motor Co., finding improper conduct by a plaintiff's attorney and vacating a $15 million jury award to a couple whose son was killed in a 2003 traffic accident.

U.S. Chief District Judge Claire Eagan said the automobile company showed in its post-trial motions that "it was prejudiced by plaintiffs' counsel's conduct, and the jury's unprecedented verdict for noneconomic damages supports this conclusion."

"Based on the cumulative error in this case and the size of the jury's verdict, the court has no doubt that the proper remedy is to order a new trial," she ruled Mar. 20. A July 16 trial date was set.

Tulsa jeweler Kevin Moody and Veronica Moody filed the lawsuit Nov. 18, 2003, a little more than 10 months after their 18-year-old son, Tyler Moody, died in a rollover crash in Tulsa. The lawsuit said the Explorer's roof had "an inadequate roof-crush tolerance," and that Tyler Moody became trapped in the vehicle with the roof pushing his neck into his chest.

The plaintiffs' attorney, Clark Brewster, said the basis for ordering a new trial involved matters "that -- for the most part -- were completely unobjected to at trial."

Ford attorney Mary Quinn Cooper said Eagan's order was proper.

"We're confident that when a jury hears the relevant facts, free from the shadow of abuse cast over the first trial, they will conclude that Ford was not responsible for this tragic accident," Ford said in a written statement.

Moody lost control of a 1995 Ford Explorer Sport while he was passing another vehicle in a no-passing zone on a curve, according to a Nov. 14 court order by Eagan. The SUV left the road and rolled at least 11/2 times, coming to rest on its roof.

Brewster told the jury that the Explorer's roof collapsed when the vehicle went through what he termed a relatively slow, easy roll. He said in his closing statement that the part that gave way was made of "spindly little pieces of metal engineered down to an unacceptable level to save money."

Cooper told the jury that the vehicle exceeded federal standards. She said while there was no doubt that Moody was "a great kid," on the day of the accident he made "bad decisions that had fatal consequences."

Moody was speeding through the curve, but Brewster argued that Moody's speed was irrelevant to the issue of whether the SUV's roof was defective.

Eagan wrote in her order for a new trial that personal attacks on Ford witnesses and attorneys, "along with plaintiffs' counsel's improper conduct, leaves this court with a firm conviction that Ford did not receive a fair trial."

She wrote that during his closing arguments Brewster "blatantly suggested that Ford Explorers were responsible for 10,000 deaths per year, and he had the temerity to compare this improper suggestion to the number of deaths in the Iraq War."

The judge said this statement alone likely prejudiced Ford's case and that because it was made in the final portion of Brew-ster's closing argument, "Ford had no opportunity to respond or cure any resulting prejudice."

Copyright 2007 Associated Press. All rights reserved.

Consultant: La. Citizens last balanced books 18 months ago

It's been a year and a half since Louisiana's insurer of last resort last balanced its checkbook, and its computer backup system loses details of records more than two weeks old, the agency's board recently learned.

The Louisiana Citizens Property Insurance Corp. board heard the news from a consultant hired after it learned that a breakdown in computerized records left Citi-zens and its auditors unable to make a reliable audit or finish financial statements for the past two years. Some board members asked why they hadn't been told earlier about the problems, and when they would learn about all of them.

The board and the Louisiana Department of Insurance had hired a Texas auditing firm, Bostick Crawford Consulting Group, to deal with the records problem. Billy Bostick said the backup system writes over data more than two weeks old. A new system will be installed to fix that, he said.

Consultants told the board accounting and banking records did not match because bank statements had not been reconciled -- the equivalent of balancing a checkbook.

Officials with the state legislative auditor, which brought the software crisis to light and is investigating the matter, said it was the first time they had heard about the bank account reconciliation problem at Citizens.

Citizens CEO Terry Lisotta said the board had made a business decision after Hurricane Katrina to concentrate on paying claims as quickly as possible. Everything else was put off, he said.

State Treasurer John Kennedy, a Citizens board member, said disruptions from the storm were understandable, but he could not see why the books had been out of kilter for so long.

A clerical team has been going through Citizens' records and bringing its bank statements up to date. As of March 22, the bank records had been reconciled through mid-2006.

The Citizens board also insisted that Lisotta immediately request money from 26 private insurance companies that they were due to pay as part of their obligation to the Citizens insurance pool after Katrina. The legislative auditor in December delivered a report showing that Citizens had failed to collect $4.8 million from the 26 insurance companies.

Citizens staff were aware of the collection gap in late 2005, Lisotta said. "We made a business decision to put this on hold and take care of this later," Lisotta said.

Insurance Commissioner Jim Donelon has started a formal search for a new chief executive for Citizens, a job that could pay $200,000 to $225,000.

Copyright 2007 Associated Press. All rights reserved.

La. commissioner proposes $100 million fund to lure insurers to state

Louisiana Gov. Kathleen Blanco has set aside $100 million in her budget to cover insurance issues and state Commissioner of Insurance Jim Donelon thinks it should be used to lure more property insurers to Louisiana.

Donelon has proposed legislation for the 2007 legislative session he says would increase the availability and affordability of property insurance and decrease the market share of Louisiana Citizens Property Insurance Corporation, the state's property insurer of last resort. According to the Louisiana Department of Insurance, the proposal would add $400-$600 million of property insurance capacity.

The Insurance Capital and Surplus Match Incentive Program would use a $100 million state fund to provide incentives to qualified insurers to commit new capital for writing new property insurance policies and increase market capacity in Louisiana. Under the plan, carriers would receive payments from the fund for writing coastal properties. Sen. Ken Hollis, R-Metairie, a member of the Senate Insurance Committee, is expected sponsor the bill that would create the fund.

The department said the details of the plan include:

• Propose a legislative appropriation of $100 million.
• To qualify, insurance companies would have to meet certain capital and reinsurance requirements and have experience writing property insurance.
• The state would match participating companies dollar for dollar.
• The minimum capital commitment for an insurance company is $2 million.
• The maximum matching fund is not to exceed $10 million per public offering, with a second public offering allowed if all funds are not used in the first offering.
• Participating companies must use the capital and surplus and the state matching grant to write new property insurance policies in Louisiana for a minimum period of five years. If an insurer fails to comply with the requirements, it must repay the remaining state matching funds on a pro rata basis.

The fund is supported by the Louisiana Association of Business and Industry, a pro-business lobbying group. In a letter on the association's Web site, www.labi.org, its director, Dan Juneau, wrote that of the many proposals expected to be introduced in the coming legislative session, Donelon's proposal makes the most sense. "The most ideal option is to encourage more property insurance carriers to write policies, thereby spreading the risk more widely within the private sector," Juneau wrote. "That can be done by developing incentives for the missing link in the industry in Louisiana: mid-sized regional carriers. ... Carriers like these have been missing in Louisiana since Hurricane Betsy, but a plan is being developed that may succeed in recruiting them to help alleviate our crisis."

A $100 million cat fund?

Meanwhile, the Associated Press reported that Minneapolis-based Paragon Strategic Solu-tions has released a study on how Louisiana might operate a catastrophe fund established with $100 million in state money. Such a fund would provide reinsurance to insurers with homeowners policies along the coast. Reinsurance would kick in after $1.25 billion in industry losses.

Paragon administers the cat fund created in Florida after Hurricane Andrew hit that state in 1993. Associated Press reports contributed to this article.

Mentoring process is at the core of new producer development

Most high performance, high growth independent agencies have a lot in common when it comes to finding, hiring and mentoring new producers: They dedicate the necessary time for their mentoring program and couple the educational aspects with a prospecting focus up front, according to one agency management consultant. In his view, setting new business appointments and getting in front of customers is what it's all about and if they can't do that, producers are bound to fail.

"If you can't get the plane off the ground, you might as well cut your losses and get out," says John Wepler of Concord, Ohio-based consulting firm Marsh Berry & Co. Inc.

According to Wepler, successful agencies with great mentoring programs "follow a dual track of prospecting and of education and learning. What that means is after a bumper zone of a month or so, a producer is responsible for setting one new quality business appointment a week. It doesn't mean they can close the account. It doesn't mean they know how to pitch value proposition of the agency. But if they can't set one new business appointment a week, of meaningful dollars, say $5,000 in commission, then you need to cut your losses and move on."

High growth agencies require new producers to prospect and set new business appointments themselves. If the young producer can get into someone's door, the agency will step in and help them close the deal. But, Wepler said, if a producer can't get on the phone and set those appointments, "they're probably not going to succeed in terms of driving new business production."

Wepler made those comments during the Independent Insurance Agency of Texas' Joe Vincent Seminar in late January 2007, as part of a panel addressing "Meaningful Mentoring: Growing Successful Producers." He was joined by Mike Haney, Morgan Insurance Agency, Lufkin, Texas; Garry Kaufman, Galveston Insurance Associates, Galveston, Texas; and Chris Peterie of Swingle, Collins & Associates, Dallas. The IIAT's Paul Martin moderated the event.

Kaufman emphasized that dedicating the time to spend with a new producer is important not only to help him or her to "understand the business, but just to open the lines of communication. ... Time to sit down with their mentor to strategize about policy development, to strategize on how to best prospect, talk about sales calls. I also think it's important for the mentor to take the time to take them out in the field as well."

Peterie said agency principals and mentors need to be aware of the significant amount of time and attention required of them by new producers. "If you don't want to invest the time and you're looking for a new producer to take time off of you and make money for you, that might happen down the road but when you first bring them in it is such an investment in them."

He added that the mentor should have a vested interest in dedicating that time. Agency management, he said, should provide incentives for experienced producers to take the time out to shepherd and educate new hires. "There's got to be a vested interest, there's got to be some value placed on the mentor spending time with the new producer," Peterie said. He added that picking the right people to be mentored is another part of the equation. "You have to have somebody that's really interested in being in this business. ... If you have someone that doesn't really want to do it, he might not succeed no matter what kind of culture you put him into."

First things first

"What do you do with new producers at first?" IIAT's Martin asked.

Peterie reiterated that the key is to get them in front of people. "You can't sell anything if you're not in front of people. And we can help them sell things, we can help them figure out what kind of mistakes they make, but at the end of the day, numbers, being in front of people and having one good meeting a week or five good appointments ... that's the place these people can get lucky. But if they can't get in front of anybody, they will never get lucky."

Kaufman said time management is an absolute essential. He starts new producers out by showing them how their activities will affect their success. "If they get too far down the road without understanding how time management can affect their job and how their daily activities can benefit them in the long run, it's difficult."

As one element of his training program Kaufman uses a formula: A+S+K=R, which stands for activities plus skills plus knowledge equals results. "I really start them all off with that. I try to find out where their skill level is. ... We talk about prospecting, sales calls, etc.; at the end of the day all those three things combined equals results."

Kaufman added that if the results are less than satisfactory, he uses that formula to diagnose the problem. If it's an activity, sales or education issue, "I can diagnose the results pretty quickly," he said.

Haney said his agency places a strong emphasis on education. "Ours is a tough business. I've decided that every producer that comes into our agency in Lufkin is immediately enrolled in the Big "I" school. ...You can't just throw them out into the fire, you've got to really help them, you've got to teach them," Haney said.

He explained that just visiting once a week with a new producer is not enough and added that he tries to be patient and really work with them. "I will go out with them, I don't want take over the call from them but they can't do this on their own until they get some knowledge of what they're trying to do. So I will sit with them. Every week they e-mail me a log activity. I want to know who it is that they've made contact with."

Martin asked how the panelists transition the initial sales call experience from listening exercise into participatory one.

"I always try to get them involved in the presentation at some point," Kaufman said. "It may be asking questions. ... It might be presenting part of the proposal. They do listen but I also want to get them comfortable early on so they will participate." He added that after the call he meets with the new producer to analyze the prospect's issues and how to best deal with them.

Haney said in training sessions with his new producers he takes on the role of the "bad guy, the customer that he's trying to sell insurance to. So I'm going to try and do everything I can possibly do to say -- why should I do business with you? So we take basically a risk reduction approach. And these guys have got to present this to me and we do this constantly, over and over and over again, so when they hit some of those obstacles out there they will know this is what they're supposed to do."

Peterie said unlike some other agencies his does not impose minimum premium levels on new producers and tries to get them out addressing potential customers as soon as possible. His belief is that anything they can sell at first -- small or big -- will help their confidence level. "You let them cut their teeth and be successful," he said.

A reasonable expectation

Wepler said Marsh Berry found that in 2006 the average producer brought in $57,000 in new business commissions, the top 40 percent of producers brought in about $100,000 in new business and the top 20 percent pulled in $200,000 in new business, which, he noted, "is a very high hurdle." He said in general Marsh Berry looks for a new producer to bring in new business equal to his salary the first year.

Kaufman said his agency, which writes a lot of small commercial business, allows three years for validation of a new producer's contribution to the agency. He said he seeks to build confidence in new producers early on and give them opportunities to write a wide variety of accounts during those first three years. However, he said, "I know this sounds crazy but I want them to have early failures, too. I think they learn from that. I certainly like to give them enough rope early on for them to go out and have the failure so when they come back we can talk through it. ... I think the more failures they have early on gives them more opportunities for success later on. And so that's something I encourage them to do is kind of go after everything early on and get told no, trip and fall, and come back and let's talk about it. I think in the long run that makes a better producer."

Haney said he deals with each producer individually and has different production volume requirements for each. And, he doesn't limit producers to set types of accounts. However, he said, "we designate accounts by A, B, C and D, and we do that by revenues. I'm not going to say that you can't write a D account, my problem is how much time do you want to spend on an account that's not generating a lot of revenue when you've got that A account there that you really need to spend a lot of time on." Haney explained that by the third year he expects new producers to be "well above what the salary is that we paid them."

Peterie said he expects 100 percent of a new producer's business in the first year to come from cold calls. The expectation for the second year is a 90/10 mix. "The third year, 80/20, fourth year, 70/30," he said. "In that way, when they start going after the referral sources that are part of their community they'll be more experienced, they'll have more knowledge. ... It's ... a good way to learn."

Kaufman said he starts his new producers out with a production goal and a worksheet and helps them try and determine how many calls it will take to reach the goal. "I really try to teach them to love the numbers because through that it helps them to understand eventually what their book of business looks like, how they generated it, and how they can change their road map of success if they are looking for different types of accounts to write."

For Kaufman, time management is "a big deal." So, he said, "for the newer, younger producers I do spend a lot of time focusing on what they need to be doing during that eight to five work day and what they don't need to be doing. [I] try to keep them focused, and try and keep the older experienced producers from wasting too much of their time when they're dealing with young guys. They need to be out there prospecting, trying to set appointments."

Find out what makes them tick

With new producers, Kaufman said, everybody is different, so he tries to find out what "makes the person tick, what motivates them." He said both business and personal goals, in addition to money, are significant when it comes to motivating employees to succeed. Still, Kaufman said, "if they tell you money doesn't motivate them they're in the wrong business."

Haney agreed. "Money is always going to be the big motivator but I don't think it's everything. We've got to let them know if they do something really good. ... I do think there's a lot of production people out there that if you give them a goal they're going to do whatever it takes because that's their ultimate goal -- they want to be a partner, they want to be an owner, they want to be a stock holder. And it doesn't really matter what percentage it is, they just want to say, 'I'm a partner in the agency.'"

Personal goals and dollar amount goals are both important motivators and so is peer pressure, Wepler said. "When we look at high growth agencies there's not an absolutely right recipe, but one common thread that we do see is that all of the non-production staff ... their year-end bonus is tied to whether or not the producers meet their production goals. So it becomes a grass-roots level of support ... the whole staff is pushing producers to hit their goals. ... We find that producers have a lot more pressure among their peers than they do from agency management."

Top 10 data loss disasters in 2006

Data recovery firm says no matter how bad the loss, there's a chance for recovery

Data recovery experts worldwide from Minneapolis, Minn.-based Ontrack Data Recovery chimed in for a poll to name the top 10 remarkable data loss disasters in 2006. While the data disasters could have been catastrophic for the companies and their customers, the company reported that all of its top 10 data disasters recovered at least some, if not all, of the lost data for its clients.

10. Helicopter Hi-jinks -- Employees of a global telecommunications company dropped a laptop computer while working from a helicopter in Monaco. Vital files on the laptop were retrieved and sent through an FTP server for a meeting in Hong Kong the very next day.

9. Wash the Data Away -- On a flight from London to Warsaw, a passenger packed his laptop and toiletries in the same bag. Unfortunately, his shampoo leaked and flooded everything in the bag, including the laptop, causing the hard drive to fail. Engineers had to clean the hard drive and other components in order to get the drive functioning.

8. Not a Jolly Occasion -- British comedian Dom Joly, presenter and co-creator of Trigger Happy TV, dropped his laptop, damaging a hard drive that held 5,000 photos, 6,000 songs, half a book he was writing and all of his old newspaper columns. Having read the tragic story in a newspaper column written by Mr. Joly, Ontrack contacted him and was able to recover everything.

7. Rescuing the Research -- A leading UK research university suffered a catastrophic data loss after a fire broke out in the computer science department on a weekend morning, damaging computer equipment with smoke and water from the fire department's efforts. Thirty computers were rescued and more than a terabyte of data recovered.

6. Beware of Bananas -- A customer left an old banana on the top of his external hard drive which proceeded to seep its contents into the drive, ruining the circuitry. The drive would no longer run, but was the drive was cleaned and the circuit board repaired so the drive would spin long enough to recover his data.

5. Hard Drive Speed Bump -- It happens every year, but people continue to leave computers and hard drives in the path of moving vehicles. This year, data was recovered from a laptop that was run over by a "people mover" at the airport, and more data recovered from several external hard drives stuffed in a backpack that was backed over by a truck.

4. Tenth Time's the Charm -- A man reformatted his hard drive not once, not twice, but 10 times before he realized there was some valuable information he needed recovered.

3. Finding Nemo -- A customer returned from the vacation of a lifetime in Barbados to discover that he couldn't access any of the snorkeling photos he took on his new "waterproof" digital camera. It seems the camera wasn't as waterproof as advertised, so all of his prized tropical fish photos had to be rescued.

2. Squeaky Drive Gets the Grease -- A university professor heard a squeaking noise from the drive of his new desktop computer. To solve the annoying problem, he opened the case and sprayed the inside of the drive with WD-40. Although successful in stopping the drive from squeaking, his actions also prevented the drive from booting up. But the drive was saved and his data recovered.

1. Sock it to Me -- Although the circumstances of the original data loss were unremarkable, the problem was intensified when the customer shipped his drive to Ontrack in a pair of dirty socks. The old socks didn't provide the necessary protection during shipping and the resulting damage made the recovery more challenging than normal. Next time, he'll stick with bubble wrap.

Ontrack Data Recovery can be found at: www.ontrack.com.

Bipartisan flood insurance 'modernization' bill boosts borrowing, maximum limits

Agents generally support legislation, but insurers caution changes could result in additional costs

U.S. Reps. Judy Biggert, R-Ill., and Barney Frank, D-Mass., introduced bipartisan legislation to revamp the National Flood Insurance Program that boosts the program's borrowing authority to $21.5 billion, increases the maximum coverage limits and provides for business interruption coverage.

Backers of H.R. 1682, the Flood Insurance Reform and Modernization Act of 2007, say it will increase accountability, eliminate unnecessary federal subsidies, and update the flood insurance program to meet the needs of today.

The bill seeks to address a number of weaknesses in the NFIP that some say were exposed by the unprecedented 2005 hurricane season. In an effort to make the program more actuarially sound, the NFIP phases out subsidized rates on vacation homes and second homes. Under this bill, small business owners will be eligible to purchase business interruption coverage in order to meet payroll and other obligations in the event of flooding.

Also, for the first time since 1994, the bill updates maximum insurance coverage limits for residential and nonresidential properties. The current NFIP coverage limits are $250,000 for a residential structure, $100,000 for contents, and $500,000 for a commercial structure. The legislation would raise limits for homes from $250,000 to $335,000; for contents from $100,000 to $135,000; and for businesses from $500,000 to $670,000.

The bipartisan bill is also sponsored by Reps. Earl Blumenauer, D-Ore., Gary Miller, R-Calif., Gene Taylor, D-Miss., Richard Baker, R-La., Doris Matsui, D-Calif., JoAnn Davis, R-Va, Maxine Waters, D-Calif. and Ginny Brown-Waite, R-Fla.

"This bill has been very carefully drafted and has passed out of the House before," said Rep. Frank, chairman of the House Committee on Financial Services. "It gives members an unusual chance to respond to the concerns of those who are pressing to reduce government expenditures and those who want to enhance environmental protection."

"The 2005 Gulf Coast hurricanes showed the nation how important the National Flood Insurance Program is to the average homeowner," said Rep. Biggert, ranking member of the House Financial Services Subcommittee on Housing and Community Opportunity. "We must act to strengthen and pull the program into the 21st century and before the next major disaster hits. The program needs to provide a financial safeguard for homeowners while protecting the interests of taxpayers. This bill strikes the right balance."

Bill provisions

Under the NFIP, which is administered by the Federal Emergency Management Agency (FEMA), flood insurance that could not be purchased in the private marketplace is made available to homeowners, renters and business owners in more than 20,000 communities across the country.

The bill seeks to improve accountability and financial responsibility at the NFIP. FEMA is required to report to Congress on the financial status of the NFIP and conduct a thorough review of the nation's flood maps. The bill makes the updating and modernization of flood maps an ongoing process, and calls for greater disclosures to consumers about flood insurance.

In addition to boosting NFIP's borrowing authority to $21.5 billion from $20.775 billion, the bill increases the amount FEMA can raise policy rates in any given year from 10 percent to 15 percent.

In order to help ensure that those homeowners who should have flood insurance do have flood insurance, the bill increases the fines on lenders who do not enforce the mandatory flood insurance policy purchase requirement for those who live in a floodplain and hold a federally-backed mortgage.

In addition to providing for optional business interruption coverage, the bill calls for additional living expenses coverage, optional replacement cost coverage for contents and optional finished basement coverage.

Agents approve; insurers cautious

The legislation met with approval from agents, while insurers reacted more cautiously.

The Independent Insurance Agents and Brokers of America noted the legislation incorporates many of the provisions it has recommended, including the higher maximum limits and business interruption coverage.

"Hurricanes Katrina and Rita clearly showed that homeowners and businesses need higher coverage limits by the NFIP in order to properly insure their properties," said John Prible, Big "I" assistant vice president for federal government affairs. "An increase in the maximum coverage limits will better allow both individuals and commercial businesses to insure against the damages that massive flooding can cause, and we're grateful that this increase was included."

IIABA did not make a specific dollar recommendation for raising coverage limits, but instead recommended that Congress raise them to "correspond with modern-day real estate prices and to consider periodic adjustments to reflect inflation," Prible noted.

While agents generally applauded the bill, insurers cited some concerns.

"Certainly, it is imperative that we address the solvency of the NFIP, both in the short term and in the long term, because this is a vital, necessary program for consumers," said Ben McKay, senior vice president, federal government relations for the Property Casualty Insurers Association of America (PCI). "A number of the bill's provisions work toward those goals, by increasing the borrowing authority in the short term and enhancing mitigation efforts and homeowner outreach for the long term. But we must be careful not to cancel out those positive steps by creating additional costs for a program that is already drowning in debt."

Of particular concern to insurers is a provision that would triple the time period, from 60 to 180 days, for policyholders to file proof of loss. This provision "could add significant costs both immediately and in the future, with such additional costs ultimately to be borne by taxpayers," according to PCI.

PCI cited the increase in borrowing authority, increased funding for mitigation programs and mapping updates, and increased outreach to encourage the purchase of flood insurance as positives however.

A.M. Best cites 15 P/C insurers as financially impaired in 2006

Seventeen U.S. insurance companies became financially impaired in 2006, despite a respite for property/casualty insurers from two consecutive turbulent hurricane seasons and more diversified asset portfolios among life/health insurers.

That is according to two new A.M. Best Co. special reports, "2007 Annual U.S. Life/Health Impairments" and "2007 Annual U.S. Property/Casualty Impairments."

The property/casualty report found 15 insurers in those lines of business became impaired last year, a rate of 1-in-233 companies.

While any impairment can be a hardship to policyholders and employees, 2006's impairment rate is half the historical rate of the past 38 years. So far in 2007, A.M. Best has identified one public impairment -- Vanguard Fire and Casualty Co. Florida. Regulators placed that company in rehabilitation in January. Vanguard Fire and Casualty was never rated by A.M. Best.

The majority of last year's impaired property/casualty companies were affiliated with either Poe Financial Group or Vesta Insurance Group.

Of the two life/health companies identified as impaired in 2006, one is a known confidential supervision. The other impairment is Security General Life Insurance Co., which was issued a cease-and-desist order by the Oklahoma Insurance Department last September. It was placed in rehabilitation in November. The company was not rated by A.M. Best at the time of impairment. 2006's impairment rate of 1-in-769 life/health companies continues a seven-year trend of below-average impairment rates.

"We have a circumstance with confidential supervision," said John Williams, senior business analyst at A.M. Best. "The states take action to try to prevent problems for companies that they see in financial trouble. We picked up three additional impairments for 2005 and there's a fair shot that you'll see a fair jump in the 2006 numbers as we go forward -- enough that they won't be the lowest numbers on record."

A.M. Best designates an insurer financially impaired as of the first official regulatory action taken by an insurance department. That marks the point when an insurer's ability to conduct normal insurance operations is adversely affected, capital and surplus have been deemed inadequate to meet legal requirements, or the company's general financial condition has triggered regulatory concern. The financially impaired companies identified in these studies might not technically have been declared insolvent. The definition of financially impaired is broader than that of a Best's Rating of E (under regulatory supervision), which is assigned only when an insurer is no longer allowed to conduct normal ongoing insurance operations.

Study claims U.S. 'tort tax' amounts to $865 billion cost each year

America's legal system imposes an economic cost of more than $865 billion, or more than $9,800 per family, every year, according to a new study released by the Pacific Research Institute (PRI), a free-market think tank based in San Francisco.

This figure is 27 times more than the federal government spends on homeland security, 30 times what the National Institutes of Health dedicate to finding cures for deadly diseases, and 13 times the amount the U.S. Department of Education spends to help educate America's children.

The authors of "Jackpot Justice: The True Cost of America's Tort System" calculated that the nation's tort system imposes a yearly "tort tax" of $9,827 for a family of four and raises health care spending in the U.S. by $124 billion.

According to the study's lead author, Dr. Lawrence J. McQuillan, unlike previous studies, Jackpot Justice calculates both the direct and indirect costs of America's legal system.

These include not just the direct cost of annual damage awards, plaintiffs' attorney fees, defense costs, and administrative costs from torts but also the indirect cost of the legal system's impact on research and development spending, the cost of defensive medicine, the related rise in health care spending and reduced access to health care, and the loss of output resulting from deaths due to excess liability.

"America's legal system doesn't just transfer wealth from companies to personal injury lawyers," said Dr. McQuillan. "It also changes behavior in economically unproductive ways. Any true estimate of the economic cost of our tort system must include these dynamic, negative-spillover costs."

Among the report's findings

The $865 billion annual cost of America's tort system is equivalent to the total yearly sales of the entire U.S. restaurant industry.

Every day, the American economy takes a $2.4 billion hit to sustain its legal system.

More than 51,000 U.S. jobs have been lost due to asbestos-related bankruptcies alone. Employees at these bankrupted companies have lost $559 million in pension benefits.

The liability system increases the cost of many risk-reducing products and services and health care services, making them less accessible, and in some cases unavailable to consumers. PRI estimates that more than 114,000 people would be alive and working today, but are not due to inefficiencies in the tort system over the last two decades.

The practice of "defensive medicine" by litigation-fearing physicians increases U.S. health care costs by $124 billion per year and adds 3.4 million Americans as uninsureds.

American companies suffer over $367 billion per year in lost product sales because spending on litigation curtails investment in research and development.

Lawsuits against American corporations generate an annual loss of $684 billion in shareholder value. Half of all Americans own stock either directly or indirectly through 401(k)'s or pensions.

According to another study cited by PRI, the U.S. spent 2.2 percent of its GDP on tort costs, compared to 0.7 percent for the United Kingdom, 0.8 percent for Japan, and 1.1 percent for Germany. The authors project that America wastes $589 billion per year on excessive social tort costs, equivalent to the total annual output of Illinois, compared to competing foreign countries.

"An efficient tort system provides proper incentives to firms to produce safe products in a safe environment and ensures that truly injured people are fully compensated for their injuries," said Dr. McQuillan. "Through tort reform, the U.S. can become a more favorable place to invest human, physical, and financial capital -- the ingredients for self-sustaining economic growth and a rising standard of living for all Americans."

For the full study see www.pacificresearch.org.

Insurers advise Congress private markets should handle most disasters

But mega-cats need a public-private partnership, first responders and industry agree

The best way for the federal government to help property owners recover from a natural disaster is to let private insurers do what they know, except in the case of a megadisaster, when federal aid would be needed. That was what insurer representatives told the House Financial Services Subcommittee on Housing and Community Opportunity, which held a hearing on whether the country needs a national disaster plan.

According to Chuck Chamness, president and chief executive officer of the National Association of Mutual Insurers, for the vast majority of natural disasters, government need not be involved. "We believe the private insurance, reinsurance, and capital markets can serve as the predominant source of risk management for natural disasters -- unless it's a mega disaster."

For mega catastrophes, a coalition of first responders, emergency management experts, businesses agreed with insurers that a comprehensive public-private, federal-state partnership is needed to protect against a massive hurricane or earthquake.

"Catastrophe protection and preparation is a nationwide priority that must be addressed immediately, before the next catastrophe strikes," according to Robert W. Porter, executive director of ProtectingAmerica.org.

However a catastrophe comparable to the 1906 San Francisco earthquake could potentially exceed private market capacity, Chamness said. "To prepare for a disaster of this magnitude, it is appropriate for policymakers to consider whether government programs should be created to supplement the supply of private-sector capacity," Chamness testified.

American Insurance Association President Marc Racicot urged Congress to take a holistic approach to addressing the problems posed by natural catastrophes.

"The reality is that there are no quick fixes or easy answers to the very difficult challenges we face," Racicot said.

"Large natural catastrophes are a national economic problem, not simply a local insurance problem," said Florida Insurance Commissioner Kevin McCarty, who also chairs the National Association of Insurance Commissioner's Catastrophe Insurance Working Group. "Congress and the states need to work together to develop a comprehensive plan today to better manage and mitigate the natural catastrophic events of tomorrow."

AIA's Racicot outlined specific measures that Congress and state legislatures can take to increase preparedness for and expedite recovery from devastating natural disasters. The proposals include measures to protect people and property in harm's way; regulatory and legal reforms to improve the stability of the insurance market; tax incentives for individuals to take a greater role in disaster preparation and response; and National Flood Insurance Program reforms.

To the extent government gets involved for megadisasters, such programs would need to be carefully designed to avoid undermining the private insurance market and "distorting public perceptions of the risk associated with living and doing business in disaster-prone areas," according to NAMIC.

"The question lawmakers ought to be asking is, 'What mix of policies will maximize the private sector's ability to provide property insurance in disaster-prone areas while minimizing the risk associated with living and doing business in these areas?'" asked Chamness.

Study: homeowners more volatile than private passenger auto

The homeowners insurance line was three times more volatile than private passenger auto during the 14-year period 1992-2005, due in large part to the active 2004 and 2005 Atlantic hurricane seasons, according to a recent study by Aon Re Global.

The study shows that the private passenger auto line experienced the lowest volatility during that period, followed by the auto physical damage, commercial auto and workers' compensation lines. Excluding catastrophe losses, the homeowners line has a risk level comparable to the commercial auto line. Liability lines and medical malpractice also have significantly above average volatility.

Aon Re's Insurance Risk Study quantifies the systemic risk for each line of business, representing the risk to a large portfolio from non-diversifiable risk sources such as: changes to market rate adequacy and underwriting terms and conditions; misestimating plan loss ratios; frequency and severity trends; weather-related losses; legal reforms and court decisions; level of economic activity and macroeconomic factors.

For large books of non-cat-exposed business, systemic risk is the major component of underwriting volatility.

The report examined volatility in nearly two dozen lines including commercial multi peril, other liability (occurrence and claims made), fidelity and surety, and medical malpractice.

The Insurance Risk Study applies sophisticated techniques from risk theory to a database of National Association of Commissioners' Annual Statement data from accounting years 2001-2005 for 1,875 individual U.S. groups and companies. The database, covering all 21 Schedule P lines of business, contains more than 800,000 observations.

Judge rules Spitzer suit may continue; Liberty Mutual not giving up fight

Liberty Mutual has vowed to continue its court fight against charges begun by former New York Attorney General Eliot Spitzer that it engaged in anti-competitive bid-rigging and broker compensation practices after a judge declined the insurer's bid to dismiss the attorney general's suit.

New York Supreme Court Judge Bernard Fried ruled late last month that the state's suit could go forward against Liberty Mutual subsidiaries that do business in New York, although he did agree that Spitzer's office had no jurisdiction over Liberty Mutual's Boston-based holding company and dropped that entity from the suit.

"Liberty Mutual is both pleased and disappointed with the court's ruling," John Cusolito, Liberty Mutual vice president and manager for external relations, said in a statement. "We are pleased that Liberty Mutual Holding Co. was dismissed from the matter. We are disappointed that the court did not accept our substantive arguments."

Cusolito said the court case will continue. "We continue to believe that the matter needs to be resolved through the judicial process. This is the first step in that process and we fully expect that we will prevail eventually."

Unlike American International Group, Zurich, ACE and other insurers that have settled similar charges, Liberty Mutual Insurance Group decided last May to fight allegations of anti-competitive practices brought against it by the attorneys general of New York and Connecticut.

The Boston-based insurer has maintained that charges regarding improper commissions and bid-rigging are untrue and overblown and has refused to settle with the states. Last May, Liberty Mutual said it had been unable to reach a resolution and believed the states' settlement demands were excessive.

The insurer took its stand following the filing of complaints by then-New York Attorney General Eliot Spitzer and Connecticut Attorney General Richard Blumenthal. The complaints described alleged cooperation of Liberty Mutual employees from 2001 through 2004 in a bid-rigging scheme.

The complaints also found fault with Liberty Mutual for paying contingent commissions -- or what the attorneys general call "kickbacks" and "payoffs" -- to insurance brokers and independent agents.

The case is now being pursued by Spitzer's successor as attorney general, Andrew Cuomo.

A number of other insurers agreed to alter their commission payment practice to settle with the states. But Liberty Mutual has defended its compensation practices as appropriate and lawful. As for the bid-rigging charges, Liberty Mutual has not denied that former employees engaged in bid-rigging but insists it is not a common practice as alleged.