Ark. company recalls 40,000 pounds of ground beef sold in 12 states
Springdale, Ark.-based Tyson Fresh Meats Inc. (www.tyson.com) on June 8 recalled more than 40,000 pounds of ground beef shipped to Wal-Mart stores in 12 states after samples tested at a Sherman, Texas, plant showed signs of E. coli contamination.
No illnesses had been reported. Tyson Foods said the recall is not related to contaminated ground beef distributed by California-based United Food Group LLC., which is also subject to a recall.
Tyson's recalled products were sent to Wal-Mart stores in Alabama, Arkansas, Colorado, Kansas, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, Oklahoma, Tennessee and Texas, the company said.
Wal-Mart has removed the products from its meat cases and is destroying the recalled ground beef still in its possession, officials said.
Tyson recalled 40,440 pounds of ground beef, all of which had sell-by dates of June 13. The ground beef was sold in prepackaged trays that were placed directly into the meat case.
The recalled products included:
- 11/2-pound trays of Angus steak burger all natural, 85/15, six quarter-pound patties;
- 1.33-pound trays of Angus steak burger all natural, 85/15, extra thick, 4 1/3-pound patties;
- 21/4-pound trays of 73/27 all-natural ground beef; and
- 51/2-pound trays of 73/27 all-natural ground beef.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
La. and Fla. taking different paths on insurance woes
Florida and Louisiana are hurricane-prone states with similar property insurance problems, but their governors are taking wildly different approaches to fixing the insurance headaches.
Florida Gov. Charlie Crist, a Republican, has led that state's push to increase government regulation of the insurance industry, setting price controls and publicly attacking insurers who oppose him.
Insurance experts prefer the path taken by Gov. Kathleen Blanco, a Democrat who has teamed with Louisiana's Republican insurance commissioner in supporting an industry-friendly approach to decrease -- not increase -- government's role in the market. Among experts, Blanco's approach is considered more likely to ease the cost of insurance in the years ahead.
The policies backed by Blanco and Insurance Commissioner Jim Donelon are theories: Changes in state law that are designed -- not guaranteed -- to lure more insurance companies to Louisiana. They assume those moves will attract more companies and policy rates will fall as competition rises.
Blanco and Donelon insist that no immediate cure exists for double- and triple-digit rate hikes -- particularly in coastal Louisiana -- and Florida-style solutions would only make things worse in the long term. They say the only way to bring rates down is to remove government regulation from the marketplace, to make the state more appealing to industry.
"I wish I could wave a wand and make rates go down," Donelon recently told the House Insurance Committee. "But it doesn't work that way."
Blanco is backing Donelon's unusual proposal to offer $100 million in financial incentives to firms that agree to begin doing business in coastal Louisiana. South Carolina has a new $6 million plan that includes tax credits for insurers, but Donelon's plan is considered the first in the nation that would offer taxpayer cash directly to private insurance firms, much as states offer money to other industries -- such as auto manufacturers -- to attract jobs.
The industry likes the plan, but Rob Hoyt, professor of risk management and insurance at the University of Georgia, said incentives probably aren't the most important factor in solving Louisiana's insurance troubles.
"You can offer incentives for any business, but if the opportunity to succeed in the long run is not there, its success is going to be transitory and short," Hoyt said.
On that front, Blanco supports abolishing the Louisiana Insurance Rating Commission, a state body of political appointees that has the power to block insurance companies when they want to raise rates by more than 10 percent. Companies regulated by the commission have long complained that the panel's powers impede business and should be eliminated.
No other state still has an insurance rating commission.
William Ferguson, professor of insurance at the University of Louisiana-Lafayette, said doing away with the regulating commission is arguably the most important move that Blanco could make.
"It's actually a very big deal. That's a step in the right direction -- to depoliticize the insurance process is really vital to the insurance situation in Louisiana," Ferguson said. "Historically, that body has been heavily politicized. It hasn't served the interest of the citizenry, because the artificial, nonmarket-driven activity has really put a damper on things."
All Louisiana homeowners would be affected if the Blanco-Donelon plans are enacted.
But homeowners and businesses in hurricane-stricken coastal areas are the most in need of some sort of relief from jumping policy rates, a prime reason the recovery from the 2005 storms has been so slow.
"The insurance situation has really been an albatross around the recovery's neck down here," said Peter Ricchiuti, a Tulane University finance professor who monitors companies in the New Orleans area. "Everyone, from individuals who want to come back to companies that want to expand, finds that insurance is the last great variable."
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Poll: Many coastal residents still not ready for hurricanes
Many people along the Atlantic and Gulf Coasts still lack a hurricane survival plan and don't feel vulnerable to storms, despite Katrina's dramatic damage and pleas from emergency officials for residents to prepare before the season starts, according to a recent poll.
The six-month Atlantic season started June 1, and forecasters have predicted an above-average year: 13 to 17 named storms, with seven to 10 of them becoming hurricanes and three to five of those major ones of at least Category 3 strength. One forecaster said odds were high that a major hurricane would hit the U.S. this year.
Nevertheless, 44 percent of people who live within 30 miles of the shore in 18 Atlantic and Gulf Coast states say they feel "not too" or "not at all" vulnerable to a hurricane, or to related tornadoes and flooding, according to the Mason-Dixon poll.
The poll also surveyed people farther inland in those states and found those residents were not as concerned or as prepared for hurricanes.
But forecasters warn that flooding and powerful winds from hurricanes can reach well inland, so people should be prepared even if they live far from the coast. Computer models show that a Category 3 storm that hits the New York metropolitan area could spread hurricane-force winds into Vermont and Canada.
National Hurricane Center Director Bill Proenza said a population shift to the nation's coastlines may be contributing to the lack of storm readiness.
"We actually have more and more people ... with little or no experience with hurricanes and tropical storms," Proenza said.
Public safety officials tell residents to stockpile at least a three-day supply of bottled water, nonperishable food and medicine.
Despite the predictions for a busy season, public safety officials worry that an uneventful 2006 lulled residents into complacency; there were only 10 named storms, and the two that hit the U.S. were weak.
The 2005 season set a record with 28 named storms, 15 of them hurricanes; four of those hurricanes hit the U.S. coast, including Katrina, the third deadliest in U.S. history with a death toll topping 1,500.
The poll was commissioned by the organizers of the 2007 National Hurricane Survival Initiative. The group includes the National Hurricane Center, the Federal Emergency Management Agency, the National Emergency Manage-ment Association, the Salvation Army and others. Window clip maker Plylox Inc. and insurance company Travelers were also sponsors.
The May 10-15 telephone poll was conducted among people in 18 states along the Gulf and Atlantic Coasts. Among the 422 people who live within 30 miles of the coast, the margin of sampling error was plus or minus 5 percentage points.
Associated Press writer Mike Baker in Raleigh, N.C., contributed to this report.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Slow death for coastal windstorm bill in last days of Texas session
In the waning days of the 2007 session of the Texas Legis-lature, marked by a tumultuous, unsuccessful struggle to oust the current Speaker of the House of Representatives, windstorm insurance legislation that was almost universally supported by insurance agents and carriers alike died a slow death. House Bill 2960, introduced in early April, was changed so much during the last week of the session that coastal legislators, originally some its staunchest supporters, could not vote for it.
HB 2960 was meant to address funding for the Texas Windstorm Insurance Association, the insurer of last resort for windstorm insurance in 14 counties along the Texas coast and a small portion of Harris County. Many believe TWIA is vastly underfunded should a major hurricane hit heavily populated areas of the coast, such as Galveston, Brazoria and Harris Counties.
The failure of the windstorm bill was "hugely disappointing to me," said Rep. Larry Taylor, R-Friendswood. "I've been pushing it for two terms. Unfortunately it was pushed off until the end." Taylor, speaking as part of a panel discussing legislative issues at the recent annual conference of the Independent Insurance Agents of Texas in San Antonio, said while as a coastal legislator the windstorm issue is of vital importance, he insisted that it is a statewide concern. "For those of you that don't know, windstorm is a huge financial catastrophe that is waiting to happen in the state of Texas. This is not just a coastal issue," Taylor said.
He indicated that if Gov. Rick Perry should call a special session for other legislation, such as transportation or the failed electric utility reform bill, there's a good possibility the windstorm bill could have another chance this year. If no special session is called, it will be two years before the legislation can be taken up again.
James Langford, a member of the TWIA Board and a vice president at the Texas Farm Bureau insurance company, said the windstorm pool is seeing rapid growth. "The liabilities in force at the end of April were in excess of $45 billion. When it started this year, the liabilities were $38 billion, so it's grown 18 percent through the first four months of this year. To make that even worse, 35 percent of that $45 billion is in Galveston County; 15 percent of that $45 billion in liabilities is in Brazoria County. Those two counties, which are next door to each other, account for 50 percent of all the liabilities in force in the wind pool."
Langford said it has been estimated that a 100-year storm hitting those areas of the coast could cause losses of between $3 billion to $3.6 billion to the windstorm pool alone. Through its various current funding mechanisms -- its own reserves, the statewide catastrophe reserve fund and reinsurance -- TWIA would have around $1 billion to pay for losses. Insurance companies across Texas would be assessed at various stages to pay for the rest. Those assessments could result in a drastic hit on the state's general revenue fund through premium tax credits to the assessed insurers, the panelists said. They would also endanger the smaller companies with fewer resources to pay them.
Among other things, the original legislation would have allowed for the issuance of pre-event and post-event bonds to boost TWIA's funding.
Swingle named president of IIAT; Elbert and Braniff honored
The Independent Insurance Agents of Texas introduced new officers for the coming year at its 110th Annual Conference & Trade Show, held in early June in San Antonio. The IIAT also recognized the winners of its highest awards, the Drex G. Foreman Award and the Paige Eiland Award.
Frank Swingle, president of Swingle, Collins & Associates, Dallas, was elected IIAT president for 2007-2008. Swingle founded his agency in 1982 following a stint with Arthur Gallagher. A former president of the Independent Insurance Agents of Dallas, he was elected to the IIAT Board in 2002 after having served in many committee capacities.
Garry Kaufman of Galveston Insurance Associates was named president-elect. Kaufman has held leadership positions as a board member of the Texas Windstorm Insurance Association, and as a member of the governing committee and board for the Texas Fair Plan Association. He has been an IIAT director and served on the Windstorm and Catas-trophe Response task forces. Kaufman was IIAT Young Agent of the Year in 2003.
Bryan Shofner, president of Shofner & Associates Insurance Agency in Lubbock was elected vice president. Shofner joined his agency in 1986, achieved his ACSR designation in 1993 and was named IIAT Young Agent of the Year in 2001.
IIAT Executive Director David VanDelin-der will retain his position as secretary-treasurer. VanDelinder joined IIAT in 1982. He previously served as IIAT assistant executive director and director of education.
Drex G. Foreman Award
James Elbert, president of the Elbert Insurance Agency in Lake Jackson, was named winner of the 2007 Drex G. Foreman Award, the association's highest award. The award honors Drex Foreman, who served as executive director of IIAT for 30 years.
Elbert began his professional life as a Methodist minister but left the ministry in 1971 and joined his father's insurance agency. In 1983 he joined the former Jahn-Austin Insurance Agency in Galveston as vice president and general manager. In 1995 he returned to Lake Jackson and bought the Bennett Elbert Agency, now the Elbert Insurance Agency. Elbert has been actively involved with Texas windstorm issues, working to find common ground among insurance companies, agents, consumers and elected officials. He serves on the Texas Windstorm Insurance Association and the FAIR Plan board.
Paige Eiland Award
Tom Braniff, founder of Texas Insurance Consulting, Houston, was named winner of the 2007 Paige Eiland Award for Voluntary Political Action. A former independent agent, Braniff has been active in Texas politics for more than 30 years. The award honors Paige Eiland, a long-serving politically active IIAT member.
Risk managers take strong stand against contingent commissions
RIMS issues new policy statement denouncing such incentive pay for all agents and brokers, whether Wall Street or Main Street
The largest association of commercial insurance buyers has stepped-up its opposition to the acceptance of contingent compensation by any agent or broker, calling such compensation "an inherent conflict of interest" in a strongly worded policy restatement.
The 10,000-member Risk and Insurance Management Society (RIMS) said it is "troubled" that some in the insurance industry continue to promote contingent compensation even after "recent investigations, admissions and fines demonstrate how these practices can be manipulated to the disadvantage of the insurance buyer."
"RIMS supports a business model for the insurance industry which does not provide for, offer or make available contingent commission arrangements for the brokerage industry," the group said in its revised policy statement.
For any broker or independent agent to accept these fees "represents an inherent conflict of interest," according to RIMS, which called for an end to contingencies.
RIMS had issued a policy position in 2005 that criticized contingencies but which did not call upon the insurance industry to discontinue them as the current policy does.
According to Terry Fleming, RIMS board member and risk manager for Montgomery County (Maryland), the association's members have been asking the group to come out with a stronger position against these supplemental compensation programs.
He said the organization decided to produce the new policy statement after a number of CEOs at the recent RIMS annual meeting took a "wait-and-see" attitude towards proposed alternative supplemental payment plans, some of which pay contingent fees prospectively or vary with the size of the account or brokerage involved.
Fleming said RIMS is "extremely concerned" that some of the same brokers that promised risk managers they would not accept contingent fees a few years ago are now considering reneging on that promise and accepting alternative contingent fees.
New compensation plans
The compensation plans being questioned traditionally involve payments to brokers after they place a certain volume of business with an insurer or meet other performance criteria such as profitability or business retention.
However, the structure of contingent plans has been changing in response to criticism. Several insurers, including Chubb and Travelers, are promoting alternative supplemental plans, which pay brokers prospectively for achieving certain volumes or performance goals. Critics say these prospective plans have the same effect as traditional retrospective plans.
Fleming said the RIMS opposition to contingencies applies to prospective as well as retrospective plans and to agents and brokers regardless of size.
At a CEO panel during the RIMS annual meeting in early May, executives from several large brokerages were given an opportunity to denounce contingent payments but did not clearly do so.
Marsh CEO Brian Storm claimed the issue must be addressed as part of the bigger issue of how to pay for improvements brokers make in the insurance process.
"Marsh is going to take its time with this issue. We want to know how our clients, how the industry feels about it. We certainly understand transparency as well or better than anyone. I think that we'll come to a conclusion that is good for the industry, not just for Marsh," Storms told the RIMS audience.
Gregory C. Case, president and CEO, Aon Corp., indicated that contingencies were still in play at his firm.
"One observation I would make, and from Aon's standpoint, we don't know what the definition of supplemental is. We can't take the answer as 'no' right now. I don't know what it means," Case maintained.
Patrick Gallagher Jr. chairman, president, CEO, Arthur J. Gallagher & Co., suggested that the commitment that his firm and others have made to making all compensation plans transparent eliminates any potential conflict of interest cited by critics of contingencies.
Absent from the RIMS panel was Joseph Plumeri, CEO of the large broker Willis Group Holdings. Plumeri's firm has stood out for its strong vow not to accept any form of contingent payments, which is now the RIMS position.
After a review of the prospective compensation plans recently proposed by certain carriers, Willis renewed its vow. Plumeri said his firm would not be accepting these new incentive arrangements because in its opinion they fail to fix the conflicts associated with the contingent commissions they are meant to replace.
"They have performance-driven elements that make lump-sum payments contingent on factors such as retention, growth and profitability -- features that rendered contingent commission plans incompatible with conflict-free transparency and our clients' best interests," Willis said in its statement.
Anti-contingency policy
RIMS is urging its members to enforce the anti-contingency policy in their dealings with brokers but Fleming said the risk managers would also support a prohibition through legislation or regulation.
He said risk managers can't tell the insurance industry how to structure its compensation but the group can make known its opposition to a particular form of compensation.
The large risk management organization is also supporting full disclosure of "all sources of compensation, direct and indirect, now or in the future" even where buyers fail to request it.
"Failure to disclose such arrangements runs counter to the spirit of partnership that risk managers seek to achieve with their brokers, vendors, and insurers," the RIMS policy says.
RIMS urged its members to evaluate their relationships with brokers and take action to correct situations where transparency and full disclosure are not followed.
Fast-growing, state-run property insurers pose risk for taxpayers
Exponential growth of state-run property insurers of last resort ultimately may shift much of the long-term risk of hurricane-related losses to policyholders and taxpayers, even those who live nowhere near the coast, reports the private insurance industry's Insurance Information Institute (I.I.I.).
By year-end 2006, total exposure to loss in state-run property insurers is estimated to have surged to more than $600 billion, compared with $54.7 billion in 1990. Total policies in force had also risen to in excess of two million.
The explosive growth in these plans is attributable to a number of factors, including the rapid rise in coastal development and property values, and the changing shape and role of state-run property insurers in a number of states, according to a new study from the I.I.I.
"While state-run insurers of last resort fulfill a key role by ensuring that policyholders can obtain insurance coverage, many have morphed from their traditional role as urban property insurers into major providers of insurance in high-risk coastal areas," said Dr. Robert P. Hartwig, president and chief economist of the I.I.I.
According to Hartwig, this shift of high risk exposure away from the private property insurance market is placing an enormous financial burden on state-run insurers, leaving a number of them operating at substantial deficits. As a result, state-run insurers of last resort may end up shifting the long-term risks of hurricane-related losses to policyholders and taxpayers who do not live near the coast.
"Depending on the state, the redistribution of costs is commonly achieved via laws that allow state-run insurers (which are often the largest insurers in the most hazardous areas) to recover their losses in excess of their claims-paying resources by assessing (effectively taxing) the insurance policies of homeowners and business owners throughout the state, including those well away from the coast and those who have never filed a claim," Hartwig said. "In some cases, even unrelated types of insurance such as auto insurance and commercial liability coverage can be assessed."
"Even in states where the value of insured coastal property represents a relatively small percentage of total insured property values, this does not mean that state-run property insurers are not experiencing rapid growth," added Claire Wilkinson, vice president, Global Issues at the I.I.I. and co-author of the study.
For example, North Carolina's $105.3 billion in insured coastal exposure represents just 9 percent of the state's total insured property values. Yet the state's beach and windstorm plan saw its exposure and total policy count more than double between 2003 and 2006.
"The insurance industry is committed to working in partnership with public policymakers, consumers and businesses in developing solutions to the formidable challenges posed by catastrophe risks in future," Hartwig said.
Court sides with insurers on credit reporting case
The Supreme Court has sided with two insurance companies in a case involving alleged violations of the Fair Credit Reporting Act. The law requires insurance companies and other businesses to notify customers who are charged more because of their credit ratings.The law requires insurance companies and other businesses to notify customers who are charged more because of their credit ratings.
In a unanimous decision, the justices said Geico General Insurance Co. did not violate the law and that Seattle-based Safeco might have, but did not do so recklessly.
The insurance industry said a decision against it could have subjected companies to billions of dollars in punitive damages for failing to notify customers.
The Property Casualty Insurers Association of America agreed that the ruling by the U.S. Supreme Court clarifies significant issues related to the rules regarding insurers' requirements to provide adverse action notice to consumers.
"Today's ruling reverses the appeals court decision that said the defendant insurance companies had acted in 'willful disregard' of the law for failing to send adverse action notices," said Kathleen Jensen, senior legal counsel for PCI. "We contended in our amicus that the 9th Circuit Court used a very low standard for determining whether insurers acted in willful disregard for the law."
The court also ruled that the benchmark for determining whether FCRA notice is required at new business should be the rate the applicant would have had if the company had not taken his credit score into account, not a benchmark of what the "best" rate is. The court further clarified that once a consumer has learned that his credit report led the insurer to charge more, he has no need to be told over again with each renewal if his rate has not changed.
Thirteen state insurance commissioners said that a lower threshhold for proving liability, adopted by the 9th U.S. Circuit Court of Appeals in San Francisco, would motivate compliance with the law.
To find liability, a company's conduct must be more than "merely careless," wrote Justice David Souter.
Souter said that a company's conduct must entail an unjustifiably high risk of harm that is either known to a company or is so obvious that it should have been known.
The appeals court warned companies against relying on "creative lawyering that provides indefensible answers." Liability, the appeals court said, could stem from a company's "deliberate failure to determine the extent of its obligations."
Relying on implausible interpretations of its obligations may constitute reckless disregard for the law and therefore amount to a willful violation, the appeals court said.
The Supreme Court adopted a notification requirement favored by the industry. The standard limits the circumstances in which customers must be told their premiums are higher because of their credit ratings. The appeals court and lawyers for consumers said they must be notified any time they pay more than the lowest rate available to customers with the very best credit scores.
"Geico has the better position," the Supreme Court said.
Geico did not owe a prospective customer such notification, the court said. The company had offered him a rate that was the one he would have received if his credit score had not been taken into account.
Safeco did not notify two of its customers because it thought the law did not apply to initial applications, a mistake that left the company in violation of the law.
"The company was not reckless in falling down on its duty," Souter wrote.
Under a more expansive notification standard, Safeco would be required to send adverse action notices to 80 percent of the company's new customers, Maureen Mahoney, an attorney defending the two companies, said at arguments in the Supreme Court in January. At Geico, just 10 percent of new customers qualify for the top tier of credit, Mahoney added.
There are credit reports on 200 million Americans, and consumer information is used by an array of lenders, retailers, employers and government agencies. Credit reporting agencies generate 1.5 billion consumer reports per year.
Congress passed the credit reporting act in 1970 to protect consumers from flaws in the system and improve the reliability of reports so that the business sector can accurately gauge risk. Consumer groups point to the notification requirement as the cornerstone to cleansing credit reports of inaccurate information.
Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
