PROP. 103 PROVISIONS NULL
A California appeals court ruled Dec. 29 that auto insurers can calculate premiums based on where a customer lives, a ruling that could result in a California Supreme Court showdown. The decision from the First District Court of Appeal nullified provisions of Proposition 103, a 1988 initiative that required insurers to base prices on a driver's safety record, years of experience and miles driven. The proposition provided for insurers to consider ZIP code as an "optional" factor. The three-judge court agreed that insurers need to give significant weight to a customer's ZIP code because risk factors affecting the price of a policy vary from area to area. The Foundation for Taxpayer and Consumer Rights, which sponsored Prop. 103, plans to appeal the decision. 21st
CENTURY FACES CLASS ACTION
On Jan. 2, a class action lawsuit was filed against 21st Century Insurance Co. on behalf of policyholders who filed timely property damage claims stemming from the 1994 Northridge earthquake but whose claims were mishandled. The complaint charges that 21st Century (formerly 20th Century Insurance) took part in unfair and fraudulent business practices to minimize the amount of benefits it had to pay to insureds who incurred property damage during and after the Jan. 17, 1994, Northridge earthquake. More than 4,000 21st Century policyholders may be part of the class, according to the plaintiff attorneys in the case. Under a new law that went into effect on Jan. 1, 2001, policyholders have a right to sue their insurance companies to force them to reopen previously filed insurance claims relating to the Northridge earthquake. But plaintiffs attorneys in the suit say this case is different, because the suit also seeks to halt the alleged unethical business practices that created the situation.
FAILURES ON THE RISE
In the face of a slowing economy and stiff competition, 35 insurance companies failed in 2000, a 30 percent increase over the 27 failures recorded in 1999, according to Weiss Ratings Inc., an independent provider of ratings and analyses on the insurance industry. "Increasing financial weakness in the property/casualty sector of the industry was the driving force behind the large jump in insurer failures. And there's bound to be more bloodletting in this sector as the weaker companies are further pounded by a slowing economy," stated Martin D. Weiss, chairman of Weiss Ratings. Property/casualty insurers represented a disproportionate 27 of the 35 insurance company failures last year. All told, there were 53 insurance company and HMO failures in 2000. Among these, Weiss had issued financial safety ratings on 47, giving 72 percent of those rated a grade of D+ ("Weak") or lower. Weiss had rated the remaining 28 percent in the C ("Fair") range. The largest failed companies were: Fremont Indemnity Company, Harvard Pilgrim Health Care Inc., Fremont Industrial Indemnity Co., Fremont Casualty Ins. Co. and California Compensation Insurance Co.
ONLINE AUTO PLAN NIXED
Priceline.com and insurer W.R. Berkley Corp. dropped their combined plan to create a new company to sell auto insurance online, naming current market conditions as the reason. The new company was in early development stages, but had hired no staff and had written no business. The companies said capital invested in the venture will be returned to investors.
INSURANCENOODLE OFF & RUNNING
Kemper Insurance Cos., headquartered in Long Grove, Ill., signed an agreement with InsuranceNoodle to expand its initiative of products designed for small business owners. The agreement allows InsuranceNoodle to enhance its offering to small business owners and better serve key markets: home-based business owners and 360,000 light manufacturing businesses. The agreement also expands the variety of professional liability products. In other news, InsuranceNoodle recently received its license to sell insurance in Alaska, said Rick Madock, InsuranceNoodle chairman and co-founder. The online insurance e-broker for small businesses is now licensed to provide its products and services in 31 states and the District of Columbia. Chicago-based InsuranceNoodle offers small business owners direct access to comparative quotes and online purchasing.
BIG 2 LAUNCH ONLINE RE
The world's two largest reinsurers, Munich Re and Swiss Re, whose combined premiums total more than $25 billion, teamed up with Internet Capital Group, a leading B2B provider, and Andersen Consulting to launch "inreon," an on-line platform for standard reinsurance policies. The name stands for "insurance meets reinsurance online" and aims to provide insurance companies, brokers and professional reinsurers with transaction capabilities for standardized reinsurance covers. Swiss Re, Munich Re and ICG each have a 25 percent stake in the London-based venture, with an initial capital of $37.5 million. Andersen holds 5 percent, and the remaining 20 percent is reserved for management shares, and for interested insurers.
SPEEDING UP THE PROCESS
Washington Insurance Commissioner Deborah Senn issued a final report on the international effort to recover Holocaust Era insurance policies, urging an international commission to speed up its claims process and force insurers to publish records from that time. Commissioner Senn, who launched the international claims process three years ago, will soon be vacating her statewide office. In her report, "A Status Report on Holocaust-Era Insurance Claims," Senn stated that the National Association of Insurance Commissioners, which became the driving force behind the formation of the International Commission on Holocaust Era Insurance Claims (ICHEIC), should be proud of its leadership role. But she also noted that survivors and their families have grown increasingly frustrated with the slow progress. Washington State has assisted survivors in submitting more than 500 claims to ICHEIC and the companies involved, but only two claims have been settled so far.
A BUDDING RELATIONSHIP
An agreement between the Insurance Educational Association and The National Alliance for Insurance Education & Research has resulted in a new working relationship in the Western U.S. The organizations will work together in research, program and faculty development and the promotion of a broad spectrum of professional insurance education programs, allowing insurance professionals to choose from a broader range of training offerings.
