PCI COMMENDS NEVADA DOI ON BROKER COMPENSATION ISSUE:
The Property Casualty Insurers Association of America commended the approach taken by the Nevada Division of Insurance on the disclosure of broker compensation in a temporary regulation adopted in early February. "Instead of overreacting to generalities and erroneous perceptions about the broker compensation issue, the Nevada Division of Insurance took a well-reasoned approach in crafting its temporary regulation," said Sam Sorich, PCI vice president and western region manager. "Appropriately, the temporary regulation applies only to brokers," Sorich said. He added that public investigations of producer compensation have focused on brokers, not agents. Agents represent one or several companies and are compensated by the insurers. Brokers may be paid by both their clients and insurers. Sorich said that the regulation, which is expected to go into effect soon, requires brokers to disclose to their clients that insurers may compensate brokers. The regulation also imposes on brokers a duty against placing their own financial interest above the clients'. Additionally, it requires brokers to disclose to clients the name of each insurer which supplied a quote. The regulation is temporary and will be the subject of additional public policy consideration later this year. In considering the regulation, the Division of Insurance conducted a three-hour workshop, followed by an hour-and-a-half hearing. The division considered all viewpoints and thoroughly analyzed the issues before reaching a resolution. "While PCI has concerns with some portions of the temporary regulation, overall we believe that the regulation is sound and represents good public policy," Sorich said. "We look forward to working with Nevada regulators to iron out our concerns before the temporary regulation becomes permanent."
STATE FUND PRESIDENT ANNOUNCES RETIREMENT:
State Compensation Insurance Fund announced that after three years of leading California's largest workers' compensation insurer, Fund President Dianne Oki will retire in the coming month after a 37-year career at State Fund. "I am extremely proud of what State Fund accomplished during my tenure, especially the way we managed the dramatic changes in our industry over the last few years," she said. "In an incredibly short period of time, the workers' compensation market underwent a significant shakeout and consolidation, making State Fund the largest insurer in the state, with a market share of more than 50 percent. Our industry also saw major legislative and regulatory change during that period. I am also pleased to bring my career to a close assured that State Fund is financially sound with solid reserves and surplus that has doubled within the last two years," Oki said. State Compensation Insurance Fund Board Chair Jeanne Cain announced that the Fund has hired a nationally-recognized consultant, Neal Conolly, of CP Associates, to lead a nationwide search for a new State Fund president. He will also conduct a review of the Fund's operations, in order to provide the Board and the new president with recommendations for the Fund's future direction.
U.S. P/C INSURERS CONTINUE TO BOOST LOSS RESERVES FOR OLD BUSINESS:
For U.S. property/casualty insurers, periodic glimpses of rising profitability have been overshadowed by relentless price-cutting, natural and man-made catastrophes, and claims inflation. Following an unprecedented surge in losses for terrorism, asbestos, and corporate liability, however, came new hope that firm pricing would trigger a turnaround in performance that would bolster balance sheets and produce respectable earnings. And so it will, but the need to fund future claims for policies underwritten prior to 2002 casts a shadow on the industry's recovery and rules out any rapid return to higher credit ratings, according to a report titled "Dark Clouds Linger As U.S. Property/Casualty Insurers' Loss Reserves For Old Business Upped Again," which was published by Standard & Poor's Ratings Services. S&P's outlook on the U.S. commercial lines P/C industry remains negative because of continuing concerns about the need to fund reserves, skepticism about the industry's ability to maintain pricing discipline, and uncertainties surrounding the wave of investigations into the industry's business practices. Although 2004 will produce strong earnings, and signs are reasonably good for 2005, reports S&P, the negative outlook indicates that the industry will see more ratings falling than rising over the course of the year.
INSURERS TO PAY $5.9M FOR LOST SOCAL AIRPORT REVENUE:
Officials with the city of Los Angeles announced that they reached a $5.9 million settlement with their insurers due to the Sept. 11, 2001 terrorist attacks, according to the Associated Press. The Federal Aviation Administration ordered that Los Angeles International and Ontario International airports close immediately following the attacks, which resulted in revenue losses for city agency Los Angeles World Airports. The settlement was reached after the city sued Westport Insurance Corp. and Industrial Risk Insurers after they rejected a claim for compensation. Los Angeles World Airports also owns Palmdale Regional Airport and Van Nuys Airport.
ALLIANCE OFFERS FREE INFO SECURITY PROGRAM KITS TO MEMBERS:
The American Agents Alliance recently completed a year-long project to help their members comply with state and federal regulations concerning protecting client information. The project, culminating in an "Information Security Program" kit, is available free of charge to all Alliance members. In addition, a series of tutorials to guide producers in adapting the material to their own unique business situations were held in January, with more scheduled in the future. Presenting these "how-to" clinics was Alliance Vice President Gary Jensen, who spent some of 2003 and most of 2004 working with attorneys and privacy experts to compile a definitive guide for creating and maintaining a viable privacy safeguarding procedure. "Over the past few years, the Department of Insurance has not aggressively enforced the privacy regulations, but we understand that the issue is now a top priority with Department investigators and producers found not in compliance face stiff penalties," said Alliance President David Nielson. Each kit is divided into sections covering different aspects of an information security program and includes sample forms and notices, guidelines for developing individual procedures, and what to do if security is breached. For anyone interested in obtaining a kit, visit the Alliance's Web site at www.agentsalliance.com.
D&O RATES TO DECREASE EVEN MORE:
The start of 2004 was a testing time for the global D&O market, reports Willis' Directors & Officers Index which asked participating insurers for their views about the past three and next three months. Results of the index revealed a favorable perception of the future market for clients even though high profile claims and investigations made insurers nervous about potential losses. As a result premium rates were still generally increasing in the first quarter of 2004, however, in the second quarter of 2004 there was a noticeable leveling out in the market as the influx of new carriers increased competition levels. Responses for the Willis Index, looking at non-US companies, were invited from 95 percent of the market and the results speak volumes. Sixty-one percent of insurers who responded felt that primary premium rates had dropped in the past three months, with 69 percent of the market anticipating that rates would further decrease in the next three months. This sentiment was echoed on an excess basis with even more definitive feedback; 46 percent of insurers believing that rates had dropped on average by between 11 percent and 25 percent in the past three months, with 75 percent anticipating a similar drop in the forthcoming three months.
AIA SAYS INCREASING IDAHO'S SPEED LIMIT IS DANGEROUS:
Increasing Idaho's speed limit from 65 mph to 75 mph is dangerous public policy, according to the American Insurance Association. A bill (SB 1082) introduced by the Senate earlier in February will reportedly exact a terrible toll on Idaho's citizens in lost lives, more severe traffic crash injuries and increased medical costs. "Speeding reduces the time drivers have to avoid crashes and lengthens stopping distances, increasing both the likelihood of crashing and the severity of the crashes that occur," explained David Snyder, AIA vice president and assistant general counsel. According to the National Highway Traffic Safety Administration, speeding is one of the most prevalent reported factors associated with crashes. Speeding is a factor in 31 percent of all fatal crashes, killing an average of 1,000 Americans every month. In 2002, more than 13,000 people died in speed-related crashes. NHTSA estimates the economic cost to society of speed-related crashes to be more than $40 billion each year. "The risk of death and severe injury is a direct exponential function of speed," explained Snyder. "And in reality, raising the speed limit means that real speeds will be 85 mph--far beyond the ability of car safety systems to prevent serious injuries. These injuries will result in more victims and unnecessary medical costs and productivity losses paid for by the state's employers, taxpayers and insurance consumers," he stated. Additionally, young drivers reportedly speed more often than older drivers. Although speeding is a problem among all driver age groups, the crashes and violations of young drivers are reportedly much more likely to be related to speed than is the case for drivers of other ages. A NHTSA analysis found that the relative proportion of speed-related fatal crashes decreases with increasing driver age. The National Highway System Designation Act of 1995 repealed the maximum speed limit, allowing states to set their own limits for the first time since 1974. Many states quickly moved to raise speed limits on both rural and urban interstates and limited access roads. As of June 2003, 29 states had raised speed limits to 70 mph or higher on some portion of their roadway systems.
