ALLIANCE, NAAA PART WAYS
Effective Jan. 1, 2001, the relationship between the American Agents Alliance and the National Auto Agents Alliance (NAAA) was officially terminated according to a resolution reached by the Alliance Board of Governors on Nov. 30. The resolution was the culmination of an ongoing dialogue between the NAAA and the Alliance with regard to the former's direction and goals. According to the Alliance, the 1996 passing of its founder Don Stewart, who was deeply involved in the early leadership of the five-year-old NAAA, contributed to a loss in direction for the national organization. Alliance President Herb Jones stated that the decision to withdraw from the NAAA was a difficult one for the Alliance Board of Directors, which decided in the end that monies used on behalf of the NAAA could be better utilized to fund the Alliance's legislative and regulatory lobbying efforts in California. In a later development, the NAAA elected one of its co-founders, James W. Holthaus of Denver, Colo., as its new president. Holthaus replaces Jack Ellis of Houston, Texas.
CHUBB WEIGHS OPTIONS
Chubb announced that it was reevaluating its options as a long-term investor in the Lloyd's insurer Hiscox. Chubb currently has a 27-percent holding of Hiscox shares and had offered $3.087 a share, or $458 million, for the remaining Hiscox shares, prompting Hiscox's withdrawal from negotiations. Chubb indicated it might sell or reduce its stake, which it acquired in 1998 for $3.3075 a share. Analysts have recently valued Hiscox at $3.38 and $4.41, and most believe a hostile takeover by Chubb unlikely given the number of shares the management of Hiscox holds.
CREDIT GENERAL TO LIQUIDATE
The Franklin County Court of Common Pleas in Ohio granted a request for liquidation order filed by the Ohio Department of Insurance with respect to Credit General Insurance Co., which was placed in rehabilitation on Nov. 6, 2000. Also approved by the court was the Ohio Department's liquidation plan for Credit General, which allows for guaranty association funds in most states to cover benefit payments to Credit General policyholders. Credit General was rendered insolvent largely as a result its parent and affiliate companies failing to pay monies due to the property/casualty insurer; the diversion of corporate funds; and the failure of certain reinsurers of the company to pay their share of the claims. Formerly licensed in 48 states, Credit General Insurance wrote commercial coverages, including workers' comp, auto, contractors general liability and surety products.
ACE TO SPLIT
a move to enhance company efficiency, Hamilton, Bermuda-based ACE Ltd. announced its plans to divide its operations into two units. Various senior executive level duty changes were also announced. Dominic Federico, current president and COO of the company, will become president and CEO of the U.S. and Bermuda Group, where he will oversee insurance, reinsurance and financial services operations. John Charman, chief executive of ACE Global Markets, will become president and CEO of the ACE International Group.
BANKING ACT BRINGS INSURER PROTEST
The Independent Insurance Agents of America (IIAA) and the National Association of Insurance and Financial Advisors (NAIFA) expressed opposition to the draft National Bank Act, which was recently proposed by the American Bankers Association Insurance Association. In a joint letter to Michael G. Oxley, Chairman of the House Financial Services Committee, IIAA and NAIFA outlined their objections to the legislation. One of those was that it would result in the creation of two new federal charters for insurance companies and insurance agencies, respectively, and a new federal bureau to regulate the two new types of entities. The organizations maintained the legislation should be rejected to avoid the creation of a federal bureaucracy that would regulate the business of insurance. Secondly, they stated that while ABAIA had characterized its proposal as an "optional federal charter," the obtainment of a federal charter would be wholly optional for insurers, but not for insurance agencies, under the draft Act. Despite their opposition to the legislation, IIAA and NAIFA indicated they would be supportive of a proposal that would offer strong incentives to states to create a national licensing and oversight system for insurers.
CAR-BUYING QUIRKS
A survey of consumers' new car-buying attitudes conducted by Progressive Insurance finds that many people place a higher value on the looks of a new car than on its safety features. Ranked in order of importance to the consumer, the survey listed the top five considerations when purchasing a new car as: overall purchase price; practicality; monthly payment amount; look/style of the car; and safety features. According to the survey, 47 percent of respondents said the color of the car was more important than side air bags, and 22 percent said a CD player held more importance than anti-lock brakes in influencing the decision to purchase a new car. When asked how they would change their driving behavior upon purchasing a new car, the number of respondents who said they would abstain from eating and drinking when driving a new car was three times that of those who said they would stop speeding or tailgating. Moreover, 27 percent of respondents said auto insurance premiums do not vary significantly by vehicle type, and 19 percent said that their premium would be the same regardless of their insurer.
ARGONAUT REPORTS LOSS
For the 12 months ended Dec. 31, 2000, Argonaut Group Inc. reported a consolidated net loss of $83.3 million on total revenue of $209.9 million, compared with a consolidated net loss of $15.2 million on total revenue of $164.3 million for the same period the year before. The consolidated net loss for the fourth quarter 2000 was $39.0 million on total revenue of $47.1 million, compared with a consolidated net loss of $36.9 million on total revenue of $21.5 million for the same quarter in 1999. For principal subsidiary Argonaut Insurance Co., workers' compensation in-force premium in 2000 increased to $113 and its in-force workers' comp premium in California decreased to 29 percent of the total in-force at Dec. 31, 2000. Argonaut Insurance indicated that significant rate increases were achieved during 2000 and continued rate increases were expected through 2001. Primarily as a result of a countrywide review of the company's claims operation, implemented in the third quarter 2000 and concluded in December, workers' comp loss reserves were increased by 10 percent to $448 million to reflect increased loss exposures in certain regions and product lines, particularly in California. A $10-million increase in reserves for loss adjustment expenses was also recorded in the fourth quarter to reflect the ongoing costs in handling the company's discontinued lines. In a separate announcement, Argonaut Group revealed plans to relocate its corporate headquarters this Spring from Menlo Park, Calif., to San Antonio, Texas, as a means of cutting costs.
CIAB REPORTS P/C RATES UP
Through its fourth quarter 2000 Commercial Insurance Market Index, The Council reported commercial property/casualty premium rates across all lines of the business and group medical coverage rose significantly over the last year. The Index also shows rates continuing to climb during the last quarter of the year. Perhaps the most dramatic changes for 2000 were rates for medium and large business accounts. Nearly all brokers responding to the survey saw some price increases for medium accounts. Of those, 78 percent said rates rose more than 10 percent since the previous year. The Index is based on a quarterly survey of The Council's member firms, who represent the top one percent of agents and brokers in the U.S., and who place more than 80 percent of all commercial insurance premiums. Across the five commercial property/casualty lines—auto, workers' comp, property, general liability, and umbrella—well over the majority of brokers reported hardened rates.
BILL OF RIGHTS REQUIRED
A new California law went into effect Jan. 1, 2001, requiring insurers to provide insureds with an Auto Body Repair Consumer Bill of Rights. All insurers that issue automobile liability or collision policies must distribute the standardized form either at the time of application or following a reported accident, according to the California Department of Insurance (CDI). The bill of rights entitles consumers to: select the auto body repair shop to repair auto body damage covered by the insurance company; receive an itemized written estimate for auto body repairs and, upon completion of repairs, a detailed invoice; be informed about coverage for towing services; be informed about the extent of coverage; and be informed of where to report suspected fraud or other complaints and concerns about auto body repairs. The form is accessible on the CDI's website, www.insurance.ca.gov.
NAII VOICES PRIVACY CONCERNS
As part of a Washington coalition of insurers, banks and retailers, the National Association of Independent Insurers (NAII) spoke out against a privacy bill that the organization maintains would exceed the federal standard of Gramm-Leach-Bliley. NAII Local Counsel Melvin Sorensen, one of the three co-chairs of the Association of the Washington Business Privacy Task Force, echoed the bank and retailer interests in expressing concern and opposition to SB 5503, a bill designed to establish standards for information collection and distribution by financial institutions. Sorensen stated that in its current form, SB 5503's privacy standards are inconsistent with those established by federal GLB and its related rules. Although GLB provides an opportunity for consumers to "opt out" of information collection and distribution activities, SB 5503 requires consumers to "opt in," a requirement that is more onerous for both consumers and financial institutions. Both provisions provide consumers with the same degree of control over disclosure, but opt-in is more costly and difficult to implement. The panel was preceded by testimony from Washington Attorney General Christine Gregoire, who spoke out in support of SB 5503.
FRONTIER PULLS NYSE LISTING
Frontier Insurance Group Inc. has voluntarily withdrawn from the scheduled appeal of its delisting from the New York Stock Exchange. The company's stock has been trading under $1 a share since June of 2000 and is currently valued around 15 cents a share. The company plans to move its trading to the Over The Counter Bulletin Board. Harry W. Rhulen, president and chief executive officer of Frontier, stated: "Management continues to focus on executing our business plan and improving the financial strength of the holding company. We believe that the efforts and resources required to sustain our listing on the NYSE would be better spent focusing on the turnaround of the company. We expect that the OTC Bulletin Board will provide a viable trading platform for our investors."
