AIA WELCOMES NEW ARIZ. DIRECTOR OF INSURANCE:
The American Insurance Association (AIA) welcomed Christina Urias to the Arizona Department of Insurance. Arizona Gov. Janet Napolitano (D) announced the appointment of the department's new director on Oct. 16. "AIA and its member companies congratulate Ms. Urias on her appointment as Arizona's new insurance commissioner," said Bill Gausewitz, assistant vice president, Western region. "We look forward to working with the new commissioner and her team to foster a competitive insurance market that makes quality insurance products available to Arizona consumers and businesses." The insurance industry provides jobs to more than 34,000 Arizona residents, who earn a combined income of more than $1.6 billion. The most recent investment and tax data shows that insurance companies operating in Arizona paid more than $1.8 billion in premium taxes in 2001 and hold more than $3.9 billion in Arizona municipal bonds.
SAFECO PRODUCES STRONG UNDERWRITING RESULTS IN AUTO, HOMEOWNERS AND SURETY:
Seattle-based Safeco—which recently announced a clear focus on property/casualty insurance—reported strong third-quarter underwriting results in most insurance lines. As previously announced, the company strengthened workers' compensation reserves in the quarter by $133.3 million after tax ($205.0 million pretax). For the quarter, Safeco reported a net loss of $28.9 million ($0.21 per share). This compares to net income of $75.2 million ($0.59 per diluted share) in the third quarter of 2002 when the company put its Lloyd's of London operation into run-off and took a $17.1 million after-tax charge ($0.13 per share). Factors contributing to Safeco's overall results in the third quarter of 2003 were: the workers' compensation reserve strengthening; impairments of investments securities held by Life & Investments (L&I), which aren't expected to recover in value before L&I is sold. Although Safeco intends to continue holding these investments, accounting rules require impairment recognition of unrealized losses because the business unit is for sale. During the quarter, Safeco recorded total after-tax investment impairments of $87.0 million, with $80.5 million associated with L&I; a $13.2 million benefit due to a favorable federal income tax settlement regarding prior tax years for L&I. In the fourth quarter, Safeco anticipates an after-tax restructuring charge of approximately $10 million associated with previously announced actions to reduce expenses by $75 million in 2004. This charge is related to eliminating 500 jobs not affected by the sale of L&I. Overall revenues in the third quarter were $1.8 billion, down slightly from a year ago. Operating revenues—excluding net realized investment gains—grew 5.2 percent. Net earned premiums for all P/C operations increased 10.1 percent compared with the third quarter of 2002. Net written premiums, a leading indicator of revenues in future quarters, increased 11.2 percent. Insured catastrophe losses for the quarter totaled $21 million. This compares with $9.9 million favorable catastrophe reserve development reported in the third quarter of 2002. In conjunction with its strategy to focus on property and casualty products, the company is winding down its Safeco Financial Products operation, which primarily sells credit default swaps.
CALIF. DWC APPROVES SB 228/AB227 UPDATES TO WC PAMPHLETS:
The Administrative Director of the Division of Workers' Compensation has approved updates to the California Workers' Compensation Institute pamphlets and posting notices used by employers and insurers to meet workers' compensation employee notice requirements mandated by the California Labor Code. The Institute updated its employee notice materials to include benefit changes in SB 228 and AB 227, signed by Gov. Davis late in September, so that employers and insurers can provide accurate, up-to-date information that meets the state notice requirements when the changes take effect on Jan. 1, 2004. Both insured and self-insured employers are subject to the posting notice and pamphlet requirements, and failure to provide the information to employees can result in loss of medical control, the tolling of the statute of limitations for filing claims, and civil penalties of up to $7,000 for each posting notice violation. CWCI consulted with the Division of Workers' Compensation to develop appropriate language for its new hire pamphlet, "Facts About Workers' Compensation," and its posting notice, "If A Work Injury Occurs." The new laws led to several revisions, including new information on the 24-visit caps for physical therapy and chiropractic care, the timeframe for vocational rehabilitation benefits (pre-2004 dates of injury), and the criteria for the new Supplemental Job Displacement Benefit. CWCI made similar changes to its "Facts For Injured Workers" pamphlet, which is no longer required by the state, but which many insurers and employers continue to use to advise workers of their rights and obligations after they file a claim. CWCI will also continue to offer the vocational rehabalitation pamphlet, "Help in Returning to Work" in English and Spanish, as it will still need to be included with the 90-day VR notice and notice of potential eligibility for pre-2004 claims. The revised notice and pamphlets are being translated into Spanish per LC §3551(b) and CCR §9883. CWCI is accepting orders for shipment by mid-November so that the information can be distributed prior to the Jan. 1 effective date for the new laws. The materials can be ordered from the Bookstore on the CWCI Web site www.cwci.org.
ALLIANCE ENCOURAGED BY CLOSENESS OF VOTE ON CLASS ACTION LEGISLATION:
The efforts of the business community, insurers, and concerned citizens are reportedly beginning to show results as evidenced by the close procedural vote that occurred on class action reform legislation Wednesday in the U.S. Senate. "The American public is growing weary of the continued abuse of the class action system and is making its voice heard," Kenneth Schloman, Washington counsel for the Alliance of American Insurers, said. "The public's message to our nation's leadership is to put a stop to civil actions that do little to achieve justice but do much to enrich a few. We remain confident that the Senate leadership, given the closeness of this vote, will try again to seek a vote on the merits of S 1751, the Class Action Fairness Act. This is modest court reform that seeks only to assure that class actions that are national in scope are heard by the most appropriate forum, the federal courts." The legislation is reportedly aimed at preventing abusive litigation practices such as forum shopping. It includes consumer protection provisions that require "plain English" notices and judicial oversight of settlements including those in which the consumer receives only a coupon for their award. "We applaud the leadership of those Senators who crossed party lines to support this needed reform," Schloman concluded.
CALIF. COMMISSIONER MEETS WITH GOV. ELECT-SCHWARZENEGGER:
Focusing the spotlight on solutions to California's economic problems, State Insurance Commissioner John Garamendi urged Governor-elect Arnold Schwarzenegger to convene a special session of the legislature on workers' compensation when he takes office this month. Garamendi met with Schwarzenegger recently at the Department of Insurance, where the two discussed various issues, chief among them workers' compensation. The Commissioner also proposed holding a Summit on Workers' Compensation to seek more expert input on the serious problems plaguing the $29 billion system. Garamendi has worked since taking office in January to reform the system. "Our economy cannot recover unless more jobs are created to stimulate the state's revenue stream," Garamendi said. "Businesses cannot create jobs when they are burdened with the enormous weight of this dysfunctional system. The Governor-elect and I are in very close agreement on that." Garamendi recently launched the second stage of his workers' comp reform effort. During this phase he will direct the Department to tackle the highly subjective and unfair permanent disability rating system; reinvigorate efforts to combat fraud; work to institute 24-hour care as a health care substitute for multiple coverages already provided by employers; and work to reform the State Compensation Insurance Fund.
SENATE PASSES BILL TO REAUTHORIZE FLOOD PROGRAM:
The Senate this week passed by unanimous consent agreement S. 1768, the "National Flood Insurance Program Reauthorization Act of 2004." The bill, introduced by Senator Jim Bunning (R-Ky.) and Senator Richard Shelby (R-Ala.), provides a one-year reauthorization of the program through Dec. 31, 2004. "The National Association of Independent Insurers (NAII) supports reauthorization of the National Flood Insurance Program (NFIP) and praises Sens. Bunning and Shelby for recognizing the importance of renewing this program, and for making every effort to see that legislation moves forward. Reauthorization of the NFIP will maintain stability for millions of homeowners, prospective homebuyers and business owners across the country who must purchase flood insurance coverage," Carl Parks, senior vice president, government relations, said. The House bill provides for a multi-year extension of the NFIP until 2008. The Senate Banking Committee is reportedly interested in examining the program and perhaps making some reforms. The single year renewal would reportedly assure the program does not lapse as it did last year, and provides the Committee with time to hold hearings and examine the issue during the next session of Congress.
