Claims And Issues

Totally Overtreated.

     The State Health Access Data Assistance Center at the University of Minnesota has just released a study comparing two things in the past 5 years:  Earnings and Health Insurance Premium contributions by the employees reporting those earnings.  Lisa Girion, "Workers' Health Insurance Costs Soar" (Los Angeles Times Online, Tuesday, April 29, 2008).

     The researchers report that the Health Insurance costs increased 10 times more than earnings in the past 5 years.

     Their findings are that wages increased by 3% while the employees' contributions to Health Insurance Premiums rose by 30%.  And that comparison does not pretend to report the total amount paid for Health Insurance Premiums.  For one thing, it does not include the employer's contribution.

"Overtreated," a book by Ms. Shannon Brownlee, is an excellent and well-written study of the problems with Health Care and Health Insurance since the current ways of doing both began.  It is eye-opening.  I hope it will cause some needed changes.

Postscript on May 1, 2008:

The findings in Florida are little different from the rest of the United States.  The headline of this linked newspaper article says it all:  Bob LaMendola, "Soaring Costs Force Many Florida Workers to Drop Health Insurance" (South Florida Sun-Sentinel.com, Tuesday, April 29, 2008).

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Debt Securities Albatross Causes Drowning Insurance Results.

     Hartford Financial Services Group Inc. reportedly lost 83% in 1Q 2008 profit due to its investment losses.

     Hartford has also already reportedly lost 18% of its share value in 2008.

     These plunging financial results are blamed on the universal writedown of Bonds "linked to mortgages and other debt securities."  Andrew Frye, "Hartford's Profit Plunges 83% on Investment Losses (Update 1)" (Bloomberg.com, Monday, April 28, 2008).

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Credit Raters Examined!

      Many specifics and lots of broad implications about the workings of credit rating corporations including their roles in Insurance are discussed in Roger Lowenstein, "Triple-A Failure," p. 36 (New York Times Sunday Magazine, April 27, 2008).  One thing is hardly mentioned but fairly clear:   While the credit rating corporations recognize that their models of evaluating subprime mortgages and collateralized debt obligations were inadequate if not counterproductive by providing a rating structure on paper or in theory, but not in reality, it does not appear that any of the credit rating companies ever declined even one opportunity to be paid large amounts of money to rate the credit of even one "asset-backed" financial product including Insurance.  Not one.

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Insurance Regulation Lowers Premiums.

"Optional" No Insurance Regulation And Premiums Skyrocket.

    Automobile Insurance Regulation over the last two decades has been studied exhaustively by the Consumer Federation of America.  Its study has just been released:   Download ConsumerFederationofAmerica.state_auto_insurance_release.pdf.

    Premium Rates for Automobile Insurance Policies are directly related to the amount of scrutiny they receive from a State Insurance Department, the study found.  The more a given State has regulated Automobile Insurance, the lower the Premium for Automobile Insurance Policies in that State.  The less a State has regulated Automobile Insurance, the higher the Premium for it.

    The people currently in charge of the Federal government have a theoretical proposal based on how they think power should flow in this regard.  They have proposed that control over Insurance be taken away from the States for the first time in 150 years, and given to them.  This is how they imagine the financial system of the United States would be made better.    They also propose not to look at Insurance Policy Premium Rates at all, i.e., not to regulate them in any way.

    The likely result is a flood of new Insurance Premium Rates across the board based on actual experience over the last two decades. 

 Please Read The Disclaimer.

California State Government Department Reviews Health Insurance Policy Rescissions ...

... And It's NOT the California Department of Insurance Performing this Review.

    The California Department of Managed Health Care, responding to numerous accounts of cancellations and rescissions of Health Insurance Policies in California after Claims were made, announced that it would submit Health Insurance Policies rescinded over the last 4 years by each of California's 5 major Health Insurance Companies "to an independent arbiter."  Lisa Girion & Marc Lifsher, originally published online under the headline, "State to Review Canceled Health Insurance Policies" changed to, "Hope For Patients Who Lost Insurance Policies" (Los Angeles Times Online, Friday, April 18, 2008).

    If the "independent arbiter," not otherwise identified or explained in the linked newspaper article, determines that a given Health Insurance Policy was wrongly canceled then that Policy reportedly will be reinstated "and the insurers would be responsible for medical bills incurred while patients were without coverage".

    It is reported that California officials do not have a clue how many Health Insurance Policies were rescinded in California in the past 4 years, but they apparently believe that the number is in the thousands.

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Title Insurance: Pricing, Products Coverage Confusing to Many.

    Title Insurance Policies, including Premiums and various Products' Insurance Coverage, are examined in Binyamin Appelbaum, "Title Insurers Face Criticism Over Pricing/Do You Really Need an Owner's Policy?" (Boston Globe, Sunday, April 13, 2008).   In Massachusetts, as in many States or Commonwealths, it is mandatory to purchase a Title Insurance Policy at the closing on a real estate deal for a house, for example, that protects the lender.  It is ordinarily optional, however, to also purchase a Title Insurance Policy that protects the buyer-owner.  The two kinds of Title Insurance provide different Coverages and they come with different Premiums, all touched upon in the linked newspaper article.

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Big Advertising Budgets May Portend Big Premiums for Fewer Insurers.

     The Liberty Mutual takeover of Safeco has inspired a new prediction:  Bigger may be better.  Okay, not so new.  Property and Casualty Insurance Companies may consolidate more frequently now in order to advertise more and more and more, it is reported by Erik Holm, "Safeco Buyout May Make Mercury, Hanover Next Targets (Update 2)" (Bloomberg.com, Thursday, April 24, 2008).  Does this mean, though, as was written in the linked news report, that even the biggest Insurance Companies have "money to spend on price cuts"?  (Prediction:  That sentence will be edited by the time you link to the news report.)

     Safeco has surely benefited from Liberty Mutual's takeover.  In the latest New York Times Interactive "Sector Snapshot, Insurance," Safeco is the only Insurance Company clearly shown as both ahead over the last year and also ahead over the last week.  Link here:  Go to  the Times's "Multimedia" for "Today's Sector," then select "Category" - "Financials," and finally click on "Insurance".

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Federal Administration, Big Insurers Want Price Hike Options Before 2008 Hurricanes.

    The current Federal government proposal to take over regulation of Insurance Premiums by not regulating Insurance Premiums at all is supported by the two largest U.S. Insurance Companies, Allstate and State Farm.  Reported by Jeffrey H. Birnbaum, "Insurers Are at Odds Over Paulson Plan" (washingtonpost.com, Sat., April 19, 2008).   The current Federal government proposal is dubbed an "option" between no limit on Premiums if they are put in charge, or continued regulation by the States which is the way Insurance Companies have pretty successfully been regulated for some 150 years.

    That is, by measuring success from the standpoint of the millions of people who live in the United States.

    It appears that most Insurance Companies, and all or almost all Insurance Agents and Brokers, are not so short-sighted.  They instead see their Premium profits maximized over the long term by the present system of Insurance Premium requests to State regulators who know their industry.

    Apparently the supporters of success are unwilling to believe that an opportunity for obscenely higher Premiums is a good thing in the long run for the Insurance Industry.  The people who are marketing this proposal as a new opportunity for limitless Premiums, have not earned a lot of confidence.  Many of them in the not-too-distant past enabled what is now a financial fiasco for everyone but the richest people.  The analogy is not lost.

    If something looks too good to be true, it probably is.

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Bond Insurance Companies Pull Down Citigroup Financial Results.

    Citigroup lost $5,100,000,000.00 or $5.1 Billion in 1Q2008.  Since the first day of 2008, Citigroup has also announced 13,200 related job eliminations.  In the 1Q2008, Citigroup further reported downgrading $6,000,000,000.00 or $6 Billion on subprime mortgages and another $1.5 Billion "related to exposure to bond insurers," among other markdowns to zero.  The role of Bond Insurance Companies in shaping the continuing financial free-fall is no longer the largest, but it is significant still.  Associated Press Copyrighted Story Published Online by the Los Angeles Times, "Citigroup Reports $5.1 Billion Loss on Hefty Write-Downs," Friday, April 18, 2008.

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Premium, Claim, Rescission of Health Insurance in California: Lawsuit.

     Hyping the Health Insurance Company bottom line by canceling or rescinding Policies after a Premium is collected and a Claim for benefits is made, are conduct that is frowned upon in California.   The Los Angeles City Attorney has filed a lawsuit based on such allegations including an apparent fraud cause of action perpetrated upon 500,000 Policyholders by California's "largest for-profit health insurer".  The lawsuit was filed in Los Angeles County Superior Court.  The City Attorney reportedly seeks restitution and penalties.  Before the lawsuit was filed, the City Attorney's Office established a web site at which it received information regarding Health Insurance Company claim practices, at www.protectingtheinsured.org.  Lisa Girion, "Anthem Blue Cross Sued Over Rescissions" (Los Angeles Times Online, Thursday, April 17, 2008).

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Healthcare Cost Managers Reportedly Benefit Exclusive Distributors of Life-Saving Drugs ...

                                        ...  Themselves.

    Employers hire Healthcare Cost Managers, companies which reportedly contract to help employers manage their Health Insurance programs "and get medicines at the best available prices."  Milt Freudenheim, "The Middleman's Markup/Benefits Managers Earn Profits With Exclusive Rights on Specialty Drugs" p.B1, col. 2 (New York Times Nat'l Ed., Saturday, April 19, 2008).

    Some Drug Benefit Managers also have separate contracts with some Drug Manufacturers.  Under those contracts, the same businesses which contract with employers as Drug Benefit Managers, also enter into exclusive distribution contracts with Drug Manufacturers to  sell  expensive specialty drugs. 

    Drugs like this are so-called specialty drugs not merely because of some inherent novelty, but because there is no generic substitute for them.  An example given in the report is an exclusive contract to distribute an anti-seizure drug prescribed for an epileptic child.

    Separate and apparently conflicting contractual duties in these reported situations certainly benefit the Drug Benefit Managers/Exclusive Drug Distributors, and perhaps these situations also benefit the Drug Manufacturers who contract for the exclusive distribution of their 'specialty' drugs.

    However, what benefit is conferred upon employers who pay for Drug Benefit Management, if any?  What positive effect is there upon the employers' own form of self-administered Health Insurance?

    The linked news article does not suggest one.  Perhaps the Managers/Distributors can suggest one or more.  If so, they are invited to leave a Comment. 

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Excess, Credit Conditions, and Insurance.

    "Like at the end of the Gilded Age and the Roaring Twenties, we are going the other way.  We are clearly in a period of excess, and we have to swing back to the middle or the center cannot hold."

William H. Gross, chief investor at a bond fund, quoted  by Jenny Anderson, "Wall Street Winners Hit a New Jackpot:  Billion-Dollar Paydays" p. A1, col. 3 (New York Times Nat'l Ed., Wed., April 16, 2008). 

    Credit conditions affect the purchase of Insurance and the regulation of Premium Increases.  Current reports concerning the availability and use of credit reflect:

• The Mortgage Bankers Association began tallying foreclosure actions in 1979.  The current number of foreclosures in the United States is the highest that the Mortgage Bankers Association has ever reported.
• Almost every State in the Union has experienced the effects of an increase in the number of foreclosure proceedings.  In 47 States, foreclosure totals increased by 20% or more in one year's time, from December of 2006 to December, 2007.
• In the State of Ohio for example, in 2007 over 80,000 foreclosure lawsuits were filed.  That is an increase of 40% from only four years ago.

    Yet States are taking steps to face the credit crisis from which the current Federal government always seems to flee.  Taking Ohio as an example again, the Ohio Supreme Court approved a new Mediation program in January, 2008.  When a lender files a foreclosure action in Ohio, the lender is allowed to obtain copies of the real estate closing documents only after the lender first tries "to work out payments with homeowners."  In other words, they have to mediate their dispute with the borrowers they are suing in the foreclosure action.  "'It slows down the process and gets everyone to the table,'" says the Ohio Treasurer.  Dina ElBoghdady & Renae Merle, "States Tackle Foreclosures in Absence of Federal Help" (washingtonpost.com, Wed., April 16, 2008).  This newspaper report is based on a study prepared by the Pew Charitable Trusts, as was this one:  John Leland, "Foreclosures Push States to Try a Mix of Solutions" p. A14, col. 6 (New York Times Nat'l Ed., Wed., April 16, 2008).   

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Balderdash to Insurance Regulation by The Feds ....

.... Whether or Not These People Say Katrina Was So Good, They Want to Do It Again.

     Ms. Leigh Ann Pusey, identified as "the senior vice president for government affairs" at an Insurance trade group identified with the current administration, calling itself the American Insurance Association, is quoted as endorsing the current Federal government's offer to take over Insurance.  The current Federal government's proposal was placed without publicity among the 200+ pages of a document it recently issued in response to unfair financial practices.  Their offer is to take over Insurance Premium Regulation by doing away with it.

     See this quote by Bloomberg in a news report published on April 16, 2008:

"With all due respect to many of the leaders at the NAIC [National Association of Insurance Commissioners], I think they are structurally and functionally incapable".

Ms. Pusey was apparently talking about regulating Insurance Premium Rate Hike Requests.  She is also quoted in the news article as saying that Federal regulation of Insurance will "happen sooner than people think."

     Thinking like that is mistaken.  On several grounds.  After looking at quotes like these, investing a little effort into research pays dividends in a reality check.  One easily understood fact is that, to the contrary of what anyone may think, the NAIC does not regulate Insurance Premium Rate Hike Requests.

    Insurance Departments in the 50 States regulate Insurance Premium Rate Hike Requests.  They have done that job for 150 years.  All of a sudden we are to believe that 50+ Departments of Insurance have been rendered incapable of doing that job?  What changed?

     The news article does not even try to address what if anything has changed.  Neither do the Federal government supporters quoted in it.  And that would have been a revelation.

     Nothing is known to sentient beings that changed at all except that the people in charge of the current Federal government, before they cease to be in charge of the current Federal government, want to provide Insurance Companies with no oversight for any Insurance Premium Rate Hikes the Insurance Companies may want.

     It is of interest, particularly to businesses and people in Florida at this time, that besides of course the people currently in charge of the Federal government who made this proposal (surprise, they endorse their own proposal, duh), their proposal is "endorsed" by Allstate Corporation according to this and other news articles.

     Allstate is currently appealing a Court Order that affirmed the Florida Office of Insurance Regulation's suspension of Allstate's authority to write new Insurance Policies in Florida until Allstate provides documents it has withheld that were subpoenaed by the O.I.R. months ago -- which include documents and unauthorized Computer Models that Allstate used to endorse its own Florida Insurance Premium Rate Hikes.

Please Read The Disclaimer. 

Co-Payments For Drugs That Have No Alternative.

    Health Insurance Companies are reportedly introducing a new and higher co-payment into their plans.  Policyholders who require expensive drugs that have no available generic will be paying a high percentage of the drugs' cost under these plans.  There will no longer be a flat fee co-pay for these particular drugs, such as $50.00, after which the Health Insurance Companies will pay the rest of their cost.

    The drugs in question are the kind that are prescribed as the only known tools to combat cancer, rheumatoid arthritis, multiple sclerosis, hemophilia, and hepatitis C it is reported in Gina Kolata, "Co-Payments Go Way Up For Drugs With High Costs/Insurers Shift Burden/Fees For Most Expensive Class of Pills Soar Tenfold or More" p. A1, col. 6 (New York Times Nat'l Ed., Monday, April 14, 2008).

    For drugs targeted by this new co-pay percentage, there are no generics.  The alternative to these drugs is the condition they are prescribed to treat.  Without treatment, the conditions treated by these drugs cause great pain and in many instances, a painful death.

    It is very naive, and potentially dangerous, to equate capitalism with greed.  Some Health Insurance Company executives seem to have done that.  At the same time as Health Insurance Companies target these particular no-alternative drugs with these tailored new co-payment plans, thereby adding enormous sums of money in profit obtained from those people who come up with the money to pay the co-pays for even a little while, their officers are provided increasing sums of money in outsized bonuses and other pay.  This situation cannot last.  Patients will not long submit to such plans.  Suffering people will not for long voluntarily pay such a high price, a price  imposed once by fate, and imposed a second time by greed.

    One of the enduring lessons of life is that greed does not impose its own limits.

Please Read The Disclaimer.

Federal Insurance Regulation is to Regulation ...

... What FEMA is to Katrina Disaster Relief.

    The people currently in charge of the Federal government propose a choice on Insurance:  Insurance Companies can choose either to continue to be regulated by the States, or they can choose to be regulated by the current Federal government.  There is a catch.  It is hidden, which should not come as any surprise.

    The current Federal government's offer includes zero control and oversight over Insurance Premium Rate Hikes if the Insurance Companies choose to be 'regulated' by the Federal government.

    Under the offer, no Insurance Company would appear to have any obstacles to increasing their Premiums as far as Premiums can go.  Under the current Federal proposal, the Rate Hikes of Insurance Premiums would not be controlled by anyone outside of the Insurance Companies imposing the increases.  See  Becky Yerak, "Federal Regulation Could be an Option for Property Insurers," originally published in the Chicago Tribune, published with additional reporting contributed by Julie Patel in South Florida Sun-Sentinel.com, Sunday, April 13, 2008.  [READERS BE AWARE:  Readers of the paper editions of the Chicago Tribune or the South Florida Sun-Sentinel should not face the issue about to be mentioned.  Linking to this newspaper online site, however, resulted in a barrage of "ads" through one isp, apparently harmless, that were completely blocked by another isp.  EXERCISE CAUTION IN THIS REGARD.  Further, a search of the Chicago Tribune web site has not yet resulted in locating its version of this article, which may or may not provoke a similar outburst of "ads".]

    Some Insurance Companies are understandably in favor of the current Federal hidden proposal.  Other Insurance Companies, not named in the linked article, are reportedly opposed such that there is a reported split in the Insurance Companies' rejection or acceptance of the proposal.

    There is no reported split among the State Insurance Commissioners, however.  Charged with giving consideration to those who pay Insurance Premiums, Insurance Commissioners such as the Florida Insurance Commissioner reportedly do not favor the unpublicized choice hidden in the Federal proposal.   "'It's a recipe for disaster,'" he is quoted as saying.

Please Read The Disclaimer.

Claim Handling Should Not Be Shame in the Making.

    Some adjusters at certain Insurance Companies are reportedly overzealous in referring their Companies' Policyholders to Social Security if the Policyholders file for Health Insurance benefits or Worker's Compensation Insurance or similar Insurance benefits.

    In more cases than may reportedly be appropriate, they require their Claimants-Policyholders to apply for Social Security benefits, in some instances reportedly even if the Claimants-Policyholders are not eligible for Social Security benefits.

    In the interim, these same few adjusters reportedly keep both the number of Claims and their Company's Insurance Policy Payments down.  This recent newspaper reporting on these allegations of Claims, and Payments/Nonpayments is a result of "lawsuits filed by whistle-blowers" in the wake of such matters:  Mary Williams Walsh, "Insurers Faulted as Overloading Social Security"  p. A1, col. 6 (New York Times Nat'l Ed., Tuesday, April 1, 2008).

Please Read The Disclaimer.

Forecast: The Katrina of All Insurance Regulation.

     The people currently in charge of the Federal government want to regulate something:  Insurance.  The Independent Insurance Agents and Brokers of America reportedly object.  Jeffrey H. Birnbaum, "Main St. Fighting Treasury Blueprint" (washingtonpost.com, Friday, April 11, 2008).

     Apparently the independent agents and insurance brokers do not think that the current Federal government is doing a heckuva job.

Please Read The Disclaimer.

 

Hurricane Predictions From Colorado: Better Results From Flipping Coins ...

    ... And These People Flip Your Coins -- They Use Taxpayer Money to Fail.   
   
    The Hurricane predictions from Colorado are out again, if anyone other than the people funding them are interested.  (Who would turn to the Rocky Mountains to find people to predict Hurricanes?)

    For background, here is an excerpt from a post in this space on December 9, 2007:

   Here is the web site for the Colorado State atmospheric prediction failures.  The web site contains this statement:

   (Partially supported by the National Science Foundation and AIG - Lexington Insurance Company)

     It is fairly clear why the current federal government is steering Federal Taxpayer Funds to Colorado State University for this purpose.  Reuters reports that the head person responsible for the Hurricane Prediction lack of success,  disputes that global warming has affected the number or intensity of Hurricanes.

     Is anyone outside of the current federal government paying attention to these latest Hurricane Predictions from the Rocky Mountains and, if so, why?

    The current Federal government uses Taxpayer money to fund these poor predictions. 

    Using Taxpayer funds, the Colorado predictors were plain wrong about Hurricanes in 2005, and again in 2006, and again in 2007.  Reportedly, the Rocky Mountain observers have issued 10 Hurricane forecasts in the past 10 years -- and they admit being wrong about 5.

    Did getting half the questions right on any test in school make anyone an  authority on that subject?

    Or did anyone make half the decisions right at work over the course of 10 years, and continue to get paid for it?

    A very real question is asked in this recent newspaper article:  Why does anyone still listen to these people?  Ken Kaye, "Hurricane Predictions Turning Out Risky at Best/Seasonal Forecasts Often Miss the Mark" (South Florida Sun-Sentinel, Wed., April 9, 2008).   To that question I would add this one:  Why does the current Federal government continue to use Taxpayer money to pay for these false predictions, particularly when there are alternatives which have shown success?

    One more thought.  Just coincidental, to be sure.  The Colorado predictions previously came out in December in 2005, in 2006, and in 2007.  December predictions of more Hurricanes released in December were avidly read by Florida Legislators gathering together to do Committee work.

    Why is there now a renewed set of predictions in April?   Just coincidental again, certainly.  April predictions were released in 2008 while Premium Rate Increases are pending in Florida.  More Hurricanes, more money for Premiums.  We in Florida have been hearing that argument in 2005, in 2006, in 2007, and in 2008 -- when the Colorado predictions would only have been correct for Florida if they had predicted zero Hurricanes.

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Subprime Insurance Claims Worldwide, Not Limited to U.S.

     Brit Insurance is reportedly the largest Insurance Company in Lloyd's.  Andrea Felsted, Insurance Correspondent of The Financial Times, "Companies - UK: Brit Insurance Sets Aside 60m to Cover US Subprime Claims" (ft.com, Tuesday, March 11, 2008).  Brit received "25 notifications of potential claims under policies written to protect financial institutions."  In response, Brit set aside an additional reserve on top of the reserves it set in the ordinary course of business "to pay for [these potential] claims arising from the collapse of the US subprime mortgage market."

     The amount of the reported additional reserve is 62.5 Million Pounds.

     A spokesperson for Brit Insurance is quoted as saying that the cost of Insurance Coverage for financial institutions is now rising.

     More to come.

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Can You Hear Me Now? Cellphone Insurance Disclosure Issues.

    In an online newspaper article reportedly taken from a web log, the Washington Post reports that wireless carriers AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile have reached an agreement changing Cellphone Insurance Disclosure practices in Maryland:  Kim Hart, "Loud and Clear on Cell Insurance" (washingtonpost.com, Saturday, April 5, 2008).

    The issue addressed by the newspaper article is disclosure of Cellphone Insurance.  It appears that the Maryland Attorney General became interested in the issue when the time came for  his own family to report a lost phone and request a replacement phone.

    The Attorney General's family called Asurion Protection Services, LLC and was reportedly told that they faced a $50.00 deductible and that a replacement phone might be made of after-market parts in effect, i.e., that it might not be new but rebuilt.  Asurion is described in the newspaper article as "the insurance company," although the newspaper article also  describes CNA as the "underwriter" of the Cellphone Insurance Policy.

    A lawyer speaking for Asurion is quoted in the article as saying that there was no problem with disclosures about the Cellphone Insurance.

    However, the Maryland Attorney General negotiated with the companies that appear to actually be responsible for the disclosures:  the wireless carriers.  They agreed to change the disclosure practices.  As a result, Cellphone consumers in Maryland will reportedly be given "more information about the policies before those people [agree] to buy the service," and "[s]ome salespeople will be retrained."  Asurion must have signed off on the agreement in some unreported way, since the newspaper article goes on to report that "Asurion said it will take similar actions nationwide."

    Asurion's status in this arrangement is not easy to pin down.
   
    Sprint's web site publishes a description of Asurion Protection Services, LLC as the "administrator" of the "insurance" program it makes available for  Cellphone users which is "underwritten" by CNA, and according to Sprint's web site, Asurion the administrator is "a licensed agent" of CNA.  Here is a link to Sprint's web site:  Sprint.

    Asurion's own web site describes it as doing many things, some of which are not entirely clear:  Asurion.  On the "About Us" page which Asurion makes publicly available on its web site, Asurion provides this description of its available services:

Services:

• Handset and Device Protection programs provide handset insurance and warranty management to protect customers against loss, theft, damage and malfunction of their wireless devices
• Roadside Assistance services cover automobile emergencies and inconveniences, including flat tires, lockouts, dead batteries and breakdowns
• Customized Solutions designed to meet new industry challenges

Whether Asurion Protection Services, LLC is an "administrator," an "insurance company," or performing these or other services, it is worth repeating that the linked Washington Post article reports that "Asurion said it will take similar actions [which include "more prominent notice" and retraining of some salespersons] nationwide."

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McKinsey Report Released.

    After many long battles, Allstate reportedly has released the famous McKinsey Report.  It has allegedly guided its claims handling practices balanced against its production of profit.  Erik Holm & Josh P. Hamilton, "Allstate Releases McKinsey Records Sought by Critics (Update 2)" (Bloomberg.com, Friday, April 4, 2008).   

    The documents released by Allstate as the McKinsey Report are said to total 150,000 pages.  More to come on what they contain.

Please Read The Disclaimer.

Florida Administrative Law Judges Rule: Rate Rejections Reaffirmed.

    Florida Farm Bureau joined Hartford Insurance as the first two recipients of rulings in which the Insurance Companies challenged the rejection of Premium Rate Increases they requested.  The decisions in these two proceedings mark the first time that a new review process has been employed for Premium Rate Increase requests in Florida.

    FFB and Hartford are the first two Insurance Companies to challenge Premium Rate Increase rejections since the Insurance Companies requested them in 2007.  In that year, the Florida Legislature revamped the previous Rate Increase process.  Previously, all kinds of Property Insurance Premiums in Florida were subject to Rate Increases because the Insurance Companies charging them, wanted them.  The State Office of Insurance Regulation could later decide against such Rate Increases, but the Insurance Companies could appeal the O.I.R. decision "through a fairly quick mediation process."

    The 2007 changes made by the Florida Legislature to this process were fairly simple.  In 2007, the onus was put on the Insurance Companies to submit themselves and their Premium Rate Increase applications to an "appeal" process passing before Florida Administrative Law Judges in the event of an adverse decision by the Florida O.I.R.  The Insurance Companies can still appeal after that to Florida's First District Court of Appeal in Tallahassee, in the event of an adverse decision by the Florida Administrative Law Judge.

    Florida Farm Bureau actually asked for a Rate decrease of 1.6% on 140,000 Homeowner's Insurance Policies, it is reported.  Hartford asked for a Premium increase ranging from 0.4% to 2.8% on some 92,000 Homeowner's Insurance Policies and an additional Premium Increase of 28% to 54% on some 2,550 "dwelling and fire policies".

    Both lost.  There is no word available on whether either or both of these two Insurance Companies will file a further appeal to the First District Court of Appeal.  Jennifer Liberto & Helen Huntley, "Insurers Ruffled, Regulators Pleased by Judges' Rulings" (St. Petersburg Times Online, Thursday, April 3, 2008).

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Florida Court Upholds Allstate New Business Suspension Until Documents Produced.

    Florida's First District Court of Appeal issued its Opinion on Friday, April 4, 2008 upholding an Order suspending Allstate's authority to transact new business in Florida:  Download Allstate_v. Office of Insurance Regulation (Fla. 1st DCA Case No. 01D08.0275, Opinion Filed 04.04.08).pdf.  See the posts in this space through January 24, 2008 to understand the leadup to this event.  In basic and simple terms, the saga began in the Fall of 2007 with subpoenas by the State of Florida Office of Insurance Regulation, Allstate's refusal to produce the requested materials at an O.I.R. Hearing in January, 2008, and the O.I.R.'s immediately resulting Order suspending Allstate's authority to conduct new Insurance business in Florida.

    The Order was issued by the Florida Department of Insurance or Office of Insurance Regulation.  The Order, termed an Immediate Final Order or IFO, "immediately suspended Allstate's Certificates of Authority to transact new insurance business in Florida.  The suspension would terminate upon Allstate producing documents OIR previously subpoenaed in an investigation of Allstate's insurance practices."

    The Florida Appellate Court held that OIR was within its rights to issue this narrowly tailored Order to enforce its own subpoenas.  Allstate v. Office of Insurance Regulation, attached official Opinion of the Court, at 2.  The OIR Order is narrowly tailored because it "was limited in scope."  Id. at 13.  The OIR could have issued an Order suspending any Allstate business, the First District appellate panel unanimously wrote.  "In limiting the scope to suspension of new business, OIR's action mitigates the  potential harm from Allstate's alleged insurance practices while still allowing Allstate to service existing policies."  Id.

    The documentation Allstate refused to produce -- and all 30,000 documents Allstate did produce were each and every one labeled "Trade Secret" -- were in response to subpoenas "in connection with OIR's investigation of Allstate's relationship with risk modeling companies, insurance rating organizations, trade associations and compliance" with legislation concerning Premium Rate Increases passed at the 2007 Special Session of the Florida Legislature.  Id. at 2-3.

    The Order in question was issued by the OIR in response to Allstate's refusal to produce almost all of the documents actually requested by the OIR and "Allstate's 51 pages" of objections.  Id. at 6.

    The First District's decision was to affirm and immediately lift its earlier stay of the OIR Order.  Allstate in its many manifestations which are parties to the appeal -- e.g., Allstate Floridian, Allstate Indemnity, Allstate Property & Casualty, Allstate Insurance, etc. -- has time if so advised to file a Motion for Rehearing and possibly to seek appellate review in the Supreme Court of Florida.

Please Read The Disclaimer.

Auto Lines Line Up Profit Hikes.

   Many Auto Insurance Companies reportedly have been seeking to raise Premiums in 20 States or more.  In the $160 Billion Automobile Insurance Industry, the 4 largest Automobile Insurance Companies ranked by Premiums charged are currently State Farm Mutual Automobile Insurance Co., Allstate Corp., Progressive Corp. and GEICO Corporation.  Safeco, another familiar Auto Insurance Company name, is ranked 13th by the total amount of Auto Insurance Premiums it charges.

   There are two reasons given for the Premium increase, and the two reasons given relate to Property Damage Insurance and to Bodily Injury Coverage:  Increasing costs for Auto Repair and for Medicalcare.  Erik Holm, "Auto Insurers Boost Premiums on Injury, Crash Costs (Update1)" (Bloomberg.com, Fri., Feb. 8, 2008).

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And the Title (Insurance) Belongs To ... Who, Exactly?

    Title Insurance can be a confusing thing.  It is certainly not unknown, because it is reportedly a part of "virtually every real estate transaction," but it is certainly confusing to many people in many respects.  To some degree, participants in the process of obtaining it and explaining it  sometimes seem to intend for it to be that way.

    Title Insurance exists in basic terms to address or "cover" defects in title.   Here is a popular explanation of what Title Insurance is intended to cover: "Defects in title include errors or omissions in deeds, mistakes in examining records, forgery, liens for unpaid taxes or contractor's bills, conflicting wills related to the home and missing heirs who suddenly appear and claim to own the property."   This is what was posted by the Los Angeles Times Online on Friday, February 8, 2007 in an article bylined and entitled Scott J. Wilson, "The Title Insurance Toll/Consumers Usually Trust Recommendations From Real Estate Agents, Lenders and Builders -- And Risk Choosing Insurers Who Give Kickbacks to Boost Business" (Los Angeles Times Online, Fri., Feb. 8, 2008).

    The price of Title Insurance in California is reportedly $1,200.00 - $2,000.00 for a $500,000.00 house.  Those figures would make the Premium at something like a 1/250 ratio of Premium for Title Insurance/Sales Price of the Property.  However, it is also reported in the above article that for "a house with a $400,000 mortgage, the policy would usually cost $500 to $600."  That would be a ratio of more like 1/800 or 1/700.

    In Iowa, the $500,000.00 house bears a Title Insurance Premium of $110.00 through Title Insurance run by the Iowa State Government.  Other costs -- including lawyers -- reportedly raise the total to around $500.00.  At the higher figure of $500.00, that ratio of Title Insurance Premium/Sales Price of the Property would be 1/1,000.  Do not get too excited.  Iowa is the only one of the 50 States to provide a "title insurance program" that is run by the government.

    In 2006, Title Insurance Companies reportedly drew in revenues of $16,600,000,000.00 or $16.6 Billion.  Revenues including Premium monies have undoubtedly declined since the subprime collapse, but figures are not reported in the linked newspaper article.

    Whatever the decline in Title Insurance Company revenues in 2007, it is not because of paying claims, apparently.  "While auto and homeowner insurers return about 70% of their premiums to customers in claims, title insurers pay out just 5%."  The article linked above was apparently so good, that the Los Angeles Times Online offered a Sunday version, to which you can link here:  Scott J. Wilson, "The Trouble With Title Insurance/Consumer Groups Say Policies Are Overpriced; Home Buyers Have Little Choice But to Pay" (Los Angeles Times Online, Sunday, Feb. 10, 2008).

   

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Make a Buck for Citizens in Florida: Auto Insurance Too?

    At least one concerned Florida citizen has written a letter to the editor regarding what that citizen perceives as attempts by various Insurance Companies to circumvent legal requirements put in place in 2007.  That year, in a Special Session of the Florida Legislature, Insurance Companies were mandated to, among other things, make Homeowner's and other Property Insurance Policies available in Florida if the same Insurance Companies or their parents offer (the much more lucrative) Auto Insurance Policies in Florida.

    The letter writer suggests that Insurance Companies are evading the 'offer one, then offer two' rule and suggests a solution:  Allow Citizens Property Insurance Corporation, a public corporation owned by Florida Taxpayers, to issue not just Homeowner's and other Property Insurance Policies that private Insurers do not want to touch, but also allow Citizens to issue Auto Insurance Policies, too:  "Citizens, Consider Adding Auto Insurance" by Samuel Z. Kobran ([Ft. Lauderdale] Sun-Sentinel .com, Friday, March 28, 2008).

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"Civic-Facility Bonds" Defined.

    "Civic-Facility Bonds" appear to be a type of Municipal Bond issued by "industrial development authorities".  Sadly, they can include "auction-rate debt," it is reported by Darrell Preston & Linda Sandler, "Horace Mann Yields Surge as Schools Stuck by Auctions (Update 1)" (Bloomberg.com, Wed., March 26, 2008).

    A definition a day helps the lack of knowledge go away.  Still, the question is:  Is Bond Insurance really necessary for the party that issues Municipal Bonds or the party that buys Municipal Bonds, of any kind?

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What For O Bond Insurance?

    The two largest public pension funds in the United States are both reportedly in California:  the California Public Employees Retirement Fund and the California State Teachers' Retirement System.  Together they hold $415,000,000,000.00 or $415 Billion in assets.  They also both "already guarantee municipal issues through letters of credit."  No wonder then, that the Treasurer of California is encouraging both funds to take the next step and form their own Bond Insurance Company as an alternative and a competitor to the high Premiums charged by private Bond Insurance Companies, it is reported by Josh P. Hamilton & Christine Richard, "Callifornia Rebuffs Buffett's New Muni Bond Insurer (Update 1)" (Bloomberg.com, Friday, March 28, 2008).

    To say again what has previously been posted in this space, it is also reported in the linked news article that Corporate Bonds defaulted at much higher 10-year rates than so-called Munis or Municipal Bonds.  Yet, inexplicably perhaps, the credit rating corporations reportedly rate the credit much lower for Munis than for Corporate Bonds.  This development, too, has previously been commented on here and many issuers of Municipal Bonds are wondering why the credit raters are allowed to treat them differently from Corporate Bonds, so much so that the parties which issue Munis are forced to purchase commercially available Bond Insurance in order for the credit raters to rate their credit high enough for investors to invest in Munis.   Josh P. Hamilton, "California May Wage Proxy Battle to Alter S&P Ratings (Update 2)" (Bloomberg.com, Thursday, March 27, 2008). 

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"And A Little Child With Autism Shall Lead Them" Continues.

    Florida Governor Charlie Crist and former quarterback Dan Marino reportedly have endorsed plans to mandate Health Insurance Coverage for autism, a subject previously and repeatedly posted here.  See Linda Kleindienst & Josh Hafenbrack, "Gov. Charlie Crist Backs Mandatory Insurance For Autism/Marino Also Teams Up With Democrats to Seek Coverage" (South Florida Sun-Sentinel.com, Thursday, April 3, 2008).

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More On "Socialized Risk, Private Gain?"

      

    In a March 21, 2008 post on Insurance Claims Bad Faith Law Blog at www.insuranceclaimsbadfaith.typepad.com, this question was asked in response to a newspaper editorial that contained the assumption that certain corporate executives would not have to disgorge allegedly ill-gotten gains:  "Why not?"

    Michael J. Missal may have an answer to that question in at least one case.  He is reportedly "a U.S. Bankruptcy Court examiner".  E. Scott Reckard, "Mortgages/Sub-prime Lender Allegedly Inflated its Profit" (Los Angeles Times Online, Thursday, March 27, 2008).   Mr. Mittal filed a Report with the Bankruptcy Court in connection with the Bankruptcy proceeding of former Mortgage Company New Century Financial Corporation.  Bonuses paid to certain former "top executives" and "senior managers" of that  company "were tied to reported financial results".  "These and other bonus payments to executives may be recovered 'under unjust enrichment and bankruptcy law theories,' he said."

    Would Directors and Officers Insurance Coverage respond in the event that such bonus payments are recovered under similar circumstances, or not?

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