AMERICAN FAMILY INS. AUTO RATES TO INCREASE IN NEV
Nevada Insurance Commissioner Alice A. Molasky-Arman has approved the request of American Family Mutual Insurance Company (American Family) for an overall statewide increase of 4.4 percent for private passenger automobile insurance. American Family made adjustments to its auto and home discounts, which lowered its original requested increase from 5.3 percent to 4.4 percent. The overall premium changes will vary by customer, depending on various factors such as type of coverage purchased, number of miles driven and type of car insured. Generally, rates for bodily injury and property damage liability coverage will increase 5.5 percent. Medical payments coverage rates will increase 16.2 percent. Uninsured/underinsured motorist coverage rates will increase 15.8 percent. Collision rates will decrease 0.1 percent and comprehensive rates will increase 2.5 percent. Changes vary slightly by territory with the largest increases in the remainder of state and remainder of Clark County territories. Since entering the Nevada marketplace in Jan. 2001, American Family has grown to be the fourth largest private passenger automobile insurer in Nevada, insuring 46,497 Nevada vehicles. The new rates become effective on Oct. 18, 2003, for both new and renewal business.
WESTBOURNE INT. OBTAINS INJUNCTION AGAINST ARROWHEAD
California-based Westbourne International obtained an injunction against Arrowhead General Insurance Agency last month after a federal jury had previously awarded the company over $5.8 million stemming from Arrowhead's reported infringment of Westbourne's software. According to a sworn statement by Steve Boyd, San Diego-based Arrowhead's VP of Information Systems, "[this injunction] will cause at least a temporary shutdown of all the electronic business for each division... The Arrowhead On-line (YouZoom) division will be completely shut down." In a release, Arrowhead expressed its disappointment in the decision made by Southern District Chief Judge Marilyn Huff to grant an injunction sought by Westbourne International in an intellectual property suit. Judge Huff's decision will have little impact on Arrowhead's daily business operations as the decision was anticipated due to the complexity of the case and various motions still pending, according to Francis Ruyak, Arrowhead president and CEO. Ruyak said that Arrowhead has put contingencies in place, saying that, "We are implementing the necessary software revisions to minimize the impact on our business partners and normalize operations. We have already identified alternative processes, and we are working to put them into operation." Counsel for Arrowhead noted that Westbourne was a subcontractor to one of the software firms engaged by Arrowhead to develop software for it. An eight-day jury trial before the U.S. District Court for the Southern District of California was concluded Monday (Aug. 11), with a finding by the six-member jury on behalf of Westbourne's intellectual property suit. Judge Huff's decision on the injunction had been deferred due to the complexity of the issues involved in the litigation. Arrowhead's counsel said that the firm plans to appeal. Ruyak said, "We are certain that Arrowhead will ultimately be found to have lawfully used the software in question, and we believe that the injunction will be vacated." Arrowhead General Insurance Agency Inc. is a member of the Arrowhead Group.
ALLIANCE SAYS CALIF. EMERGENCY REGS ON FRAUD INVESTIGATIONS ARE UNNECESSARY
The California Department of Insurance's proposal to further regulate the special investigations units of insurance companies is excessive and unnecessary according to the Alliance of American Insurers. In written comments on the Department's proposed emergency regulations, Alliance vice president and Western regional manager Peter Gorman said, "Insurers take fraud investigation and referral for prosecution very seriously, and most companies are dedicated to fulfilling their commitment. Insurers spend over $650 million a year to detect and deter fraud. But these regulations specify to an extreme level of detail - even to the level of 'micromanaging' - as to how companies are to conduct these procedures. Indeed, the method and effectiveness of fraud investigation is one of the competitive market forces at work in the insurance industry. Those companies who do it more effectively can offer lower rates and will succeed, while others that do not will charge higher rates and become uncompetitive." Several sections of the emergency regulations raise serious questions, said Alliance Director of Claims Kirk Hansen. "For instance, under the proposed emergency regulations, all Special Investigation Unit (SIU) employees and other integral anti-fraud personnel would be required to be fully trained within 30 days of their hiring and would be required to be knowledgeable of all fraud-related law. That definition could include claims handlers, underwriters, agents, and other employees who may deal with fraud but are not SIU employees. By that definition, virtually every employee in an insurance company would be required to receive training within 30 days. This is not practical or necessary." According to Gorman, "While we commend the Department's efforts to crack down on fraud, overstating the seriousness of the problem and placing unnecessary burdens on insurers is not the way to go about improving the situation. We urge the Department to forget about these emergency regulations and work with insurers to implement meaningful reform that will help us fulfill our mission to investigate and refer for prosecution all suspected insurance fraud."
MOLD LEGISLATION SLOWS TO A CRAWL IN STATEHOUSES, ALLIANCE SAYS
Despite an initial rush of proposed legislation aimed at dealing with the problems related to mold claims and homeowners insurance, very few bills have been enacted in 2003, according to the Alliance of American Insurers. "Compared with 2002, when only a handful of bills were introduced, 2003 has seen an onslaught of would-be solutions to the mold issue," Alliance director of Claims Kirk Hansen said. "But as the legislative sessions come to a close, we've seen only a small number of bills actually passed, and most of those have been positive bills that will help the situation. So far in 2003, 56 bills have been introduced in 21 states. Only 10 bills have been signed into law while 29 did not pass and 17 remain in committee or appear destined to die without making it to a vote." Hansen said several of the bills have dealt with setting standards or licensing procedures for mold inspectors and remediators as lawmakers have tried to stop unethical fly-by-night opportunists from passing themselves off as experts in the field of environmental remediation. Others have focused on public education programs about mold. Texas, which leads the nation in water damage and mold-related claims and lawsuits, had 15 bills introduced in the legislature, but only three have been signed into law. "We are happy to report that attempts to establish exposure or air-quality standards at the state level have failed, largely due to the efforts of insurers to educate lawmakers about the facts related to mold," Hansen said. "Mold is everywhere, and scientists say there is no way to establish a standard for permissible exposure limits in homes or buildings. We are hopeful that the hysteria related to mold has died down some and lawmakers and regulators have begun to enact rational approaches that allow insurers to either exclude mold from homeowner policies or set limits for mold-related claims."
S&P PUBLISHES ENCOURAGING REPORT ON ASIA-PACIFIC REINSURANCE MARKET
Standard & Poor's has published a report on the Asia-Pacific non-life reinsurance market, which indicates that it "is experiencing a period of profitability following a decade of weak results due to under priced excess capacity." "Over the past two years, premium levels have grown across all Asian markets due to pricing discipline," stated S&P credit analyst Ian Thomson. "Although some markets are softening slightly after two years of rate increases, the broad trend of a sustained, hardening market is expected to continue during the 2004 renewal season, providing much-needed respite for a region that has suffered significant setbacks over the past few years." S&P noted, "in some cases capacity has been rationed," but said that nonetheless the region" remains attractive to global players, citing the area's "geographical remoteness and relative lack of correlation with the rest of the world," as giving companies an opportunity "to add diversity to global reinsurers' risk portfolios." In contrast to international reinsurers, however, S&P said the outlook for domestic national reinsurers, remains challenging, "characterized by geographical risk concentrations and diminishing local market requirements." It also noted that, "relative to global players, domestic reinsurers have less capital, as well as less financial and technical resources." The report noted a hardening of rates in Australia and New Zealand. Thomson indicated that "higher underwriting standards, higher retentions by direct insurers, and an increased focus on providing efficient returns on equity look set to improve profitability in the absence of any major catastrophe." The same situation appears to be taking hold in Japan, where he noted that, "increased premiums stemming from rate hikes in the global reinsurance market and low catastrophic loss incidence have improved profitability." He indicated, however, that while "the market is expected to remain profitable over the short term. Nevertheless, the consolidation of some major domestic players in the direct non-life market is expected to result in a slight decline in premiums due to greater retentions and price competition." S&P said "Singapore, Hong Kong, and Taiwan have all experienced double-digit reinsurance premium growth over the past two years, with most domestic reinsurers in these and several other Southeast Asian economies reporting a combined ratio - a key indicator of profitability - below the 100 percent break-even level." Thomson pointed to the 28.4 percent increase in reinsurance premium growth in Hong Kong, indicating that the growth was "largely due to rate increases in the underlying insurance market rather than new business." As far as Mainland China is concerned S&P said the "non-life market remains very soft, and has not been significantly buoyed by the hardening of reinsurance rates. With foreign competition now licensed in the reinsurance market, there is a growing challenge for the state-owned reinsurer, China Reinsurance Corp., currently the sole operating professional reinsurer in the market. Nevertheless, through the sheer scale of the market, the growth potential remains favorable."
