S.C. becomes 5th state to oppose federal driver's license program

South Carolina has joined Maine, New Hampshire and other states as it formally rejected a federal mandate that sets new national driver's license standards.

Gov. Mark Sanford signed a bill into law that says the state will not participate in the federal act because it costs taxpayers too much and would create long lines at Department of Motor Vehicle offices.

"If the federal government wants stricter ID standards, they should leave it to the states to come up with a way to implement them that works best for each individual state," Sanford said after signing the bill at a Greenville DMV office. "Until this top-down federal mandate is changed, South Carolina is going to continue to stand against joining this program."

South Carolina became the fifth state to refuse to participate in the federal 2005 REAL-ID Act, joining Montana, Washington, Oklahoma and Maine. New Hampshire Gov. John Lynch was expected to sign a similar bill last week. At least a dozen more states have passed measures urging Congress to repeal it, according to the National Conference of State Legislatures.

"It just can't work," said state Sen. Larry Martin, sponsor of South Carolina's bill. "It is the most bizarre thing I've seen our Congress do."

The federal act, a response to the Sept. 11 terrorist attacks, requires states to link their record systems to national databases. Critics complain it amounts to a national ID card, could promote identity theft and costs too much. It's estimated to cost states $11 billion to implement. The initial cost for South Carolina would be $25 million, then $11 million yearly.

To get the new license, drivers must show up in person and provide an original birth certificate and other documents. The paperwork would have to be authenticated and electronically scanned, which would take time.

Martin, R-Pickens, said there was no practical way to verify every birth certificates, and many drivers don't have original documents.

The federal law says driver's licenses that do not meet the national standard will not be accepted as identification to board an airplane or enter a federal building.

But bowing to the demands of the nation's governors and Congress, the Bush administration agreed earlier this year to give states an extra year and a half to comply. The new deadline is Dec. 31, 2009.

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 This material may not be published, broadcast, rewritten or redistributed.

Mississippi poses PR challenge for State Farm and industry

It's the latest version of the Hatfields versus the McCoys but with billions of dollars and an insurer's, if not an industry's, reputation at stake.

The State Farm Insurance Co.'s communications staff is compelled to retort as Mississippi Attorney General Jim Hood and the plaintiffs' Scruggs Katrina Group fire volley after volley in the effort to garner settlements nearly two years after Hurricane Katrina.

Last year, Hood, in his over-the-top style, sharply criticized five large national insurers' including State Farm for their denial of Hurricane Katrina claims in his state, charging they were "in lockstep like Nazis locking arms, coming at those people down there on the coast."

Those comments were labeled "hysterical and irresponsible" in a quick response from the industry.

In other situations, State Farm has faced the barrage on its own.

Earlier this year, the insurer stopped writing new policies in Mississippi, never a popular move. The insurer said it was concerned that its insurance policies were being reinterpreted after the fact to provide coverage not contemplated when the policies were written.

In response, AG Hood again blasted State Farm with language sure to garner headlines. "We're looking a robber baron in the face," Hood said. "State Farm is not a responsible corporate citizen."

Hood argued that the company oversold itself on the coast and was unable to pay claims based on the rates it charged. In one of his catchiest phrases, Hood described the situation of dealing with State Farm as "being in a death roll with an alligator."

Hood's attack prompted a State Farm spokesman to respond, "We never intended to pick a fight."

The Scruggs Katrina Group, headed by Attorney Richard "Dickie" Scruggs, has not been kind to the insurer either; its most recent lawsuit alleged racketeering by the insurer and some of its adjusters. It charged them with, among other things, concealing information that would work in the policyholder's favor and destroying or falsifying reports.

State Farm called this latest Scruggs volley "a regurgitation of every wild charge he (Dickie Scruggs) and his firms have made to date. This is Scruggs using one of the oldest tricks in the book: if attacked, deflect," Jonathan Freed, State Farm spokesman, said.

In this case, the U.S. Chamber of Commerce offered some help. According to Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform, this latest lawsuit by the Mississippi attorney general has little to do with compensating homeowners for their Katrina losses, and more to do with plaintiffs' lawyers getting their cut of the money.

In March, Miss. Insurance Commissioner George Dale announced an agreement with State Farm requiring the company to reopen all "slab" cases -- effectively mirroring the defunct court agreement that the Scruggs Group previously backed away from. At the time, Scruggs accused Dale of an election year ploy.

Rickard said the arrangement Dale brokered with State Farm after Scruggs withdrew the settlement offer cut out Hood's trial lawyer friends from the deal.

"... With this newest lawsuit, the bottom line is not whether the people of Mississippi will get fair compensation on their losses, it is whether or not the state attorney general can subvert a fair process in order to give trial lawyers a cut -- ultimately at the expense of Mississippi homeowners," Rickard charged.

Perhaps State Farm's most critical public relations challenge has come in delaying until relatively recently what it finds itself doing now -- reopening Mississippi claims that it once deemed non-payable, citing storm surge versus wind damage. In January, State Farm agreed to pay about $80 million to end lawsuits filed by 640 policyholders and to pay an additional $50 million minimum to reconsider claims of up to 35,000 additional policyholders.

State Farm confirmed that 35,000 letters have been mailed and that the insurer has offered or paid more than $17 million to date.

Release du jour

The public exchanges remind one insurance public relations and marketing expert of a presidential campaign, with a "new release du jour issued by alternate sides with all sorts of snappy sound bites."

"It actually would be rather entertaining if it weren't for all the suffering on the part of Katrina victims," says Peter van Aartrijk. CEO and managing director of the van Aartrijk Group LLC. "I'm afraid there are many people who are buying the argument that State Farm is intentionally screwing over its policyholders. That just doesn't make sense."

State Farm faces the difficulty of sparring with an elected official. "If you're a politician, what better industry to pick on than insurance? How far did that get Eliot Spitzer? So far, all the way to governor," van Aartrijk said. "It begs all the questions: Who loves paying for insurance? Who loves the insurance industry?"

While the State Farm case has evolved into a "he said/she said" scenario, van Aartrijk argues that the entire industry must be involved to do everything it can to encourage debate about how to mitigate the exposure homes and businesses face on the country's coasts.

"The more the industry is on the record in pointing out exposure, rather than simply silently hiding from it by actuaries, underwriters and lawyers making proclamations such as, 'We're managing our catastrophe exposure,' the more consumers will cut it slack in a disaster," van Aartrijk said.

The industry imaging veteran thinks the public will eventually be on the industry's side. "Ultimately the coastal exposure will be a growing taxpayer issue and insurance consumer issue in all parts of the country. The spread-of-risk doctrine that is fundamental to insurance is going to continue to be challenged big time," he adds.

When it comes to effective public relations, van Aartrijk advises companies to be proactive and fight for what's right for policyholders.

"The truth is always easier. For too long in our industry we have let lawyers do all the talking. Hopefully those days are over," van Aartrijk said. "I don't think tomorrow's consumer will allow our industry to be beaten up like it has in the last 25 years. In my mind, the 'insurance industry is evil' message doesn't add to the debate, it isn't fair, and it doesn't make good public policy sense for anyone. Insurance is too important a product. Deep down, consumers understand that. I believe tomorrow's consumers will come to respect the private insurance industry more."

Insurers: S.C. workers' comp package falls short

A recently-enacted South Carolina workers' compensation reform package lacks "some integral components necessary to achieve the desired cost saving for employers," according to the Property Casualty Insurers Association of America.

"South Carolina lawmakers continue to show determination and a willingness to advance important reforms and we thank Gov. [Mark] Sanford for being an unwavering advocate for the issue," said Robert Herlong, vice president and regional manager for PCI. "However, the passage of this reform measure is just the first step. There is still unfinished work that needs to be addressed in order to bring relief to insurers."

Herlong said insurers believe that the law does not go far enough in requiring that awards be based on objective guidelines in order to address excessive and unpredictable awards being rendered by certain members of the workers' compensation system.

Gov. Sanford, employers and insurers made workers' compensation reform a priority in response to skyrocketing claim costs in the state.

Frivolous litigation, increased Second Injury Fund assessments, and other cost drivers have stifled the business environment by hurting wages and suppressing job growth and economic development, according to PCI.

According to PCI, the most significant provisions of the bill are:

• Repeal of the Second Injury Fund, which in 2006 levied assessments against the industry for more than $250 million;
• Legislative remedies to several state supreme court decisions which insurers believe have had a negative impact on the state's workers' compensation system;
• Narrowing of the definition of "injuries" available for compensation and elimination of compensation for diseases relating to lifestyles or the aging process which are not work related;
• Clarification on the level of medical evidence required to establish a claim; and
• Streamlining of the appellate process and expanded and strengthened the laws and penalties for fraudulent conduct.

Herlong said PCI will continue to lobby for improvements.

Fla. regulators again irk insurers over credit rule

Property/casualty insurers are complaining that the Florida Office of Insurance Regulation is "off the mark" in developing rules implementing a law passed in 2003 addressing insurers' use of credit information.

Since the Legislature passed the National Conference of Insurance Legislators' model bill on credit-based insurance scores, the OIR has been mired in controversy attempting to adopt regulations implementing that law.

After years of administrative conflict and legal challenge, earlier this year a Florida Administrative Law Judge invalidated OIR's first set of regulations.

Now the OIR is issuing another rule that insurers say also goes far beyond the language of the statute.

"The OIR continues to push for regulations that are inconsistent with the intent of the law," said William Stander, assistant vice president and regional manager for the Property Casualty Insurers Association of America. "This proposal, as with the last one, goes well beyond the requirement of the law by requiring insurers to document the affects of insurance scoring with demographic information not collected by, or available to, insurers."

Stander said the state regulators are trying to prohibit insurers from using credit information by making it virtually impossible to comply with the rules.

"While Florida's law is in the mainstream regarding how states regulate insurers' use of credit information, the OIR interpretation is a blatant attempt to ignore the will of elected lawmakers and write its own law. We opposed the previous rule and will oppose this one just as strenuously," he said.

Gov. Riley halts hike in Alabama auto liability limits

Alabama Gov. Bob Riley decided to veto legislation that would have raised the minimum liability insurance limits that motorists must buy because he was concerned the legislation didn't give policyholders time to comply.

Riley's communications director, Jeff Emerson, said the governor agrees with the bill's intentions, but he did not sign it into law because it was worded so that the new insurance requirements would take effect the moment he finished his signature.

Emerson said Riley would support passage of the bill in a future session of the Legislature provided it has an implementation period for insurance companies to prepare new policies and motorists to buy them. "He thinks the bill is well-intentioned and he supports the concept," Emerson said.

The Legislature passed the bill with an immediate effective date, which concerned insurers. The Property Casualty Insurers Association of America requested that the governor veto the bill, saying raising the minimum limits will result in an increase in the cost of auto insurance for many who can least afford it and quite possibly increase the number of uninsured drivers.

William Stander, assistant vice president for PCI, said the insurer association told Riley that the immediate effective date made it impossible for insurers to comply.

"A policy change such as this requires insurers to reprogram computers, file rates and forms, and notify policyholders," Stander said. "If the state is going to require higher insurance limits, there needs to be a delayed effective date in order to provide sufficient time for insurers to process the changes and avoid some of the confusion for policyholders that is likely to occur."

The bill's sponsor, Sen. Roger Bedford, D-Russellville, said he was disappointed with the governor's decision because insurance companies could have sold new policies when motorists' old policies expired. "If he had been concerned about the implementation date, he should have put on an executive amendment or had his floor leader bring up the issue" before the Legislature wrapped up its final day, Bedford said.

Bedford said he will be back next year with the bill.

The legislation, also known as the Motor Vehicle Safety-Responsibility Act would have required motorists to have at least $25,000 in coverage for one injury or death, $50,000 for multiple injuries or deaths, and $25,000 for property damage. Current requirements are $20,000, $40,000 and $10,000, respectively.

West Va. worries about mine inspector shortage

West Virginia is looking for a few good mine inspectors, but the state's safety chief doesn't know where they'll come from.

Ron Wooten, director of the state Office of Miners' Health Safety and Training, told lawmakers he plans to hire 10 new mine safety inspectors in the coming fiscal year, in addition to the 85 currently employed by the state. But with competition from higher-paying jobs in private industry and the federal government, Wooten worries that's easier said than done.

"They're not the easiest folks to come by," he said.

Wooten said the agency has been paying inspectors overtime simply to comply with the mandated inspection workload. State law requires the 177 underground mines to be inspected four times a year, and the more than 500 surface mines to be inspected twice annually.

Although West Virginia pays new inspectors more, after about five years federal salaries surpass state wages. At the very top of the pay scale, federal inspectors can earn roughly $30,000 more than their state counterparts, Wooten said.

House bill renews federal terrorism reinsurance for 10 years

Congress officially has a new bill to reauthorize the federal terrorism reinsurance program. Two Democrats from Massachusetts -- U.S. Rep. Mike Capuano and the Chairman of the House Financial Services Committee Barney Frank -- have introduced HR 2761, the Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA).

The bill extends the Terrorism Risk Insurance Act (TRIA) for 10 years and, its supporters contend, will spur the development of a private market for terrorism risk insurance.

The Terrorism Risk Insurance Revision and Extension Act of 2007 (TRIREA) includes provisions to: Extend TRIA for 10 years with current co-payments and deductibles for conventional terrorism acts; Expand TRIA's "make available" requirement to include nuclear biological chemical and radiological (NBCR) coverage; Change TRIA's definition of terrorism to include acts of domestic terrorism; Set the program trigger at $50 million; Add group life insurance to the lines of insurance for which terrorism coverage must be made available; Decrease deductibles and triggers for areas previously impacted by a significant terrorist attack; and, Continue to require studies of the development of a private market for terrorism risk insurance.

After the 9/11 terrorist attacks, many insurance companies excluded terrorism events from their insurance policies. As a result, Congress in 2002 passed TRIA, which created a federal backstop to protect against terrorism related losses. In 2005, the measure was extended for two years and currently is set to expire at the end of 2007.

"TRIA has helped make terrorism insurance available and affordable to businesses, particularly those in our major urban areas. Improving and extending the program will help stabilize the economy, as well as help protect American workers and our communities against possible terrorist attacks," stated Rep. Capuano.

"We need to keep in perspective that this bill is necessary for economic development and to protect property owners, building tenants, developers and people who work or live in high risk areas," Frank said.

While the TRIA program has been credited with keeping terrorism insurance affordable, the President's Working Group on Financial Markets last year concluded that a private market for terrorism insurance is not yet commercially viable, especially with regard to insurance against nuclear biological chemical and radiological (NBCR) acts of terrorism.

P/C insurers invest $320 billion in public projects

The insurance industry holds investments in municipal bonds worth more than $320 billion, investments that help fund construction of schools, roads, and hospitals, and support a variety of other public sector activities, according to a new industry study.

The report issued by the Insurance Research Council (IRC) found that nearly one-fourth of all of those investments by property/casualty insurers at the end of 2005 funded education-related activities and projects.

The report, "Municipal Bond Holdings of Property-Casualty Insurance Companies," analyzes the types of public projects funded through municipal bonds purchased by insurers.

The report reveals that municipal bonds for projects involving public utilities made up 15 percent of the total combined value of all municipal bonds held by P/C insurers. Transportation-related bonds accounted for 12 percent of insurers' municipal bond investments.

Insurance companies invest the premiums paid by policyholders to ensure that the money to pay claims is available when the need arises. Municipal bonds make up a large portion of the investment portfolios of many P/C insurers.

"Property/casualty insurers' impact on the economy goes beyond insurance," explained Elizabeth A. Sprinkel, senior vice president of the IRC. "Insurers also provide a major source of capital for the public sector."

The findings of the IRC report are based on data compiled by A.M. Best Co. IRC analyzed municipal bond data to determine the bonds' purpose and the state in which they were issued. Bonds held by insurers as of Dec. 31, 2005, were analyzed.

Supreme Court ruling limits investors' antitrust

Last month's U.S. Supreme Court's ruling that blocks investors from suing Wall Street investment banks under antitrust laws could save Wall Street firms a bundle by limiting investors to smaller recoveries.

In a case dating back to the dot-com bubble, the high court ruled Monday that antitrust suits would pose a "substantial risk" to the securities market. Damages in antitrust cases are tripled, in contrast to penalties under the securities laws.

The ruling struck down a lower court decision that would have allowed investors to go after Wall Street firms that they say engaged in anticompetitive practices by conspiring to drive up prices on about 900 newly issued stocks in the late 1990s.

Because the well-documented implosion of names like Enron Corp. swallowed any serious money that investors might hope to recover from that and other flame-outs, some investors have turned to the banks and other Wall Street regulars such as accounting firms that did work for such companies.

"The fact that these antitrust cases have been thrown out on these grounds I think will send a high profile message to would-be plaintiffs who were thinking of bringing antitrust claims in the securities context," said Wesley Powell, an antitrust lawyer with Hunton & Williams in New York.

Lawyers for investment banks say the difference between legal and illegal activity is a highly technical matter that must be left to highly trained securities regulators to decide, rather than to courtroom juries.

Powell noted that not only do those pressing claims under securities laws not have the triple damages awarded in antitrust cases, but such claims also have to meet a higher legal burden than claims made under antitrust laws.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP writer Pete Yost contributed to this report.