Category: Allstate

Brrrr – MID throws Allstate’s requested rate increase out in the cold

Officials say the Mississippi Insurance Commission has rejected a company’s request to increase rates 65.1 percent on more than 50,000 homes statewide.

Mississippi denies Allstate rate increase makes a great headline; but there is more to the Clarion Ledger story:

Deputy Insurance Commissioner Mark Haire says the rejection order was sent Thursday to AllState Property and Casualty Insurance Co. of Northbrook, Ill.

Haire said Mississippi Insurance Commissioner Mike Chaney made the decision after specialists reviewed the request and found the large increase was not justified.

The requested increase would have covered 51,097 homeowners.

As with the initial denial of State Farm’s request, this is not the end of the story:

Haire said AllState has the option of having a hearing on the matter or filing a new request for a lower increase.

Brrrrr.

Is Chaney the Grinch who stole insurance industry’s Christmas?

He puzzled and puzzled till his puzzler was sore. Then the Grinch thought of something he hadn’t before! Maybe everyday doesn’t have to be Christmas for insurers who want higher rates for the shore.  Maybe Christmas…perhaps…means zones are no more!

They’re finding out now that no Christmas is coming! They’re just waking up, I know just what they’ll do. Their mouths will hang open a minute or two, then the Whos down in Whoville will all cry, “Boo Hoo.”

“We won’t take zone filings for the time being. I think the larger carriers have abused that privilege. We’re trying to bring some reasonableness to how they handle their rates.” Continue reading “Is Chaney the Grinch who stole insurance industry’s Christmas?”

…and the score in the State Farm game was 45-19.5…Allstate 65-0 next game in town

Beginning in mid-February, State Farm Fire & Casualty Co. will raise homeowner insurance rates 19.5 percent in the three Coast counties…Allstate is requesting a 65 percent rate hike statewide.

Anita Lee has the story on rising insurance rates for the Sun Herald.

Insurance Commissioner Mike Chaney approved the rate increase, rejecting State Farm’s request for a 45 percent rate hike along the Coast. New rates will apply only for current policyholders because State Farm is writing no new business in the three Coast counties…The Mississippi Insurance Department has asked for additional information from Allstate in reviewing the rate proposal. Chaney’s office did the same with State Farm before agreeing to the lower increase.

State Farm already had raised rates in the rest of Mississippi by 3.9 percent. Continue reading “…and the score in the State Farm game was 45-19.5…Allstate 65-0 next game in town”

Low tide, rising rates sink all ships

The study is expected to have many benefits. For one, it would give leaders a clear cost-to-benefit analysis. As important, the wind mitigation study would allow for systematic improvements in the hurricane resistance of buildings in the six counties on the Mississippi Gulf Coast (Hancock, Harrison, Jackson, Stone, Pearl River and George) by utilizing wind-resistant construction techniques to reduce property damage and/or loss.

This would result in a significant reduction in insurance premiums, as well as reduce the negative economic impact of a hurricane on the entire state and its citizens, the MID said.

Florida’s mitigation discount experience suggests any premium reduction in Mississippi will be short-lived, according to the latest news from Tallahassee.

In the coming months, hundreds of thousands of Florida homeowners will see insurance bills increase.  And many others will open their mailboxes and get the insurance industry’s version of the pink slip, forcing them to buy coverage from the state or turn to companies they might never have heard of. Continue reading “Low tide, rising rates sink all ships”

What’s the score? No, not the Saints game, I know they won – I’m talkin’ Katrina litigation and then some

So, what’s up besides the Saints? Well, for starters there’s the trial of Bossier v State Farm that got underway yesterday after the jury was seated mid-afternoon.  The grapevine reported there was time for opening statements (with no personal commentary re: Bossier’s motion in limine) and one witness before Court ended for the day.   The second day began at 10am and hopefully I’ll get another grapevine report or there will be something in the Sun Herald.

State Farm filed an an 11th hour trial brief, but  an interesting one nonetheless, that sets forth the Company’s position on the meaning of the Corban decision:

State Farm anticipates that Plaintiff at trial may attempt to satisfy his burden of proof merely by pointing to the totality of damage to his house at the conclusion of Hurricane Katrina. Continue reading “What’s the score? No, not the Saints game, I know they won – I’m talkin’ Katrina litigation and then some”

Companies that live in a glass house should not throw key performance indicators at glass shops.

First, the “glass house” – Insurance Agents and Brokers Fined for Accepting Kickbacks: Accused of Accepting Gifts to Steer Customers to Specific Auto Glass Shops:

Forty-three insurance agents and brokers have been fined a total of $42,650 for accepting kickbacks, or failing to supervise staff who accepted kickbacks, to steer customers to certain auto glass repair shops, New York Insurance Superintendent James Wrynn announced Friday.

The agents and brokers work at more than two dozen different insurance agencies in Western and Central New York. They are accused of accepting gift cards in return for recommending two specific glass shops to auto insurance customers who had filed claims to have their vehicles repaired.

State law prohibits insurance agents and brokers from accepting payments to steer their customers to specific auto repair shops…

…and, the moral of that story is…in Mississippi it would be a “federal crime”…just ask former Judge Bobby DeLaughter.

Lester said the investigation was begun when Bison Glass, which operates throughout Western New York, contacted the Insurance Department and said it was discontinuing the practice because it could no longer afford to make the payments. A second glass repairer, Pat’s Glass Inc., which had operated in Wyoming County, provided additional information after it went out of business.

The fines – ranging in amounts from $250 to $5,000 — followed an investigation by the New York State Insurance Department…

There are at least two ways to resolve the problem.  One comes at no cost.  Insurance companies could stop taking kick backs.  Duh! Likely, the cost of repairing glass would go down without the cost of kickbacks added.

The other solution would be to come up with some sort of program to cover up the lack of integrity in the industry.  Naturally, the good hand in a boxing glove would be the first out with such a program.

Allstate Insurance announced last week that it will begin recording and tracking a Continue reading “Companies that live in a glass house should not throw key performance indicators at glass shops.”

The ACC Bee Is Still In My Bonnet

ACC, the anti-concurrent cause issue, is burning up my head again. With health care insurance all the rage, it don’t hurt to remind ourselves how Big Insurance grew to be cracked-out body slammers. Most people don’t know that way back in 1945 the McCarran-Ferguson Act exempted Big Insurance (“Big-I”) from federal anti-trust law so long as long as the states “regulated” insurance. What a farce. Big-I and ISO hand out cash Tootsee Rolls to puppet commissioners and presto, before you know it, we’ve got regional, full-blown monopolies. Take health coverage: Wellpoint controls 71% of the Maine market; Blue Cross controls 90% of the North Dakota market and 100% of the Alabama market. All that said, keep your fingers crossed, the House Judiciary Committee (Senator Leahy) introduced an amendment to the health bill which would strip Big-I’s anti-trust exemption.

George Dale
George Dale

But, let’s revisit the magnolia ACC a minute. In prior posts, I talked about how Nationwide (probably with ISO’s help) quietly slipped the ACC into Mississippi in the ’80’s. By “slipped,” I mean they submitted a new policy form to the Commissioner for approval. Natch, it was instantly accepted. Recall, Mr Commissioner was indicted in ’94 for taking bribes from Big-I, but never went to trial. Undaunted, a mere 5 years later the legislative PEER committee caught him approving rate requests for State Farm, Allstate, Nationwide et al without any actuarial review. Over 380 rate requests, 59% of all, weren’t even looked at by actuaries.

MID Peer Report

Lee Harrell

  Some of you may recall that Dale’s deputy commissioner was the one who incessantly chatted with sycophantic law clerks overseeing Katrina, and probably caused the so-called “MID mediation plan” to be crammed down the throats of Katrina homeowners. Using Dale to the fullest, State Farm employed this sham mediation procedure to defraud hundreds and perhaps thousands of insureds. Evidence was produced showing State Farm staged the mediations in advance and actively concealed material evidence from homeowners during the “mediation” process. Continue reading “The ACC Bee Is Still In My Bonnet”

Empty handed on hand down Thursday – Corban v USAA

Another great Bam Bam post and once again I am thinking about our supremely slow Supremes, Corban v USAA and counting by the calendar again – empty handed for the 15th Thursday following Oral Arguments.Corban continued2

A virus called

A lot of Mississippians woke up on August 30, 2005, to no house, and thus no net worth. Estimates are 100,940 homes were destroyed or major damaged in the three coastal counties. These families lost nearly everything they owned. Most didn’t even have a copy of their policy, and God forbid, had to trust State Farm to faithfully reproduce it. Homeowners knew little or nothing about FEMA, wind-water protocol, George Dale, Computer Science Corp., David Maurstad, WYO’s or the strychnine phrase “anti-concurrent cause” (“ACC”). Some had policies with “Hurricane Deducible” emblazoned across the top page. (Right away the court declared, nothing misleading about that, it’s okay for insurers to write “hurricane” on the top page of the policy; that doesn’t mean you’re covered for a hurricane). However, in due time all these homeowners would come to realize insurers had sold them a rigged all-risk policy form, approved by a kept man facetiously known as “the insurance commissioner.” Yep, it was some awakening people were in for on August 30, 2005 . . . the nightmare called “Katrina” hadn’t ended, it’d just begun.

The virus that did them in was buried in the labyrinthine FP-7955, a 25 page word salad created exclusively by State Farm’s team of scriveners. The FP (form policy) – 7955 contained 13,859 copyrighted words, not a one of which was ever negotiated or actually consented to. Here was a stupefying irony: the biggest asset most people owned, very often the predicate of their entire net worth, was wrapped up in a junk contract they had no part in making or negotiating, and hadn’t even signed. For all the high and mighty principles contract law stood for, sermonized in treatises like Corban on Contracts, “bargained-for-exchange, reasonable expectations, mutual consideration, good faith and fair dealing,” this most precious of all contracts was nothing but a pile of 13,859 rigged words tethered to a central trap door – the ACC clause.

The fantasy of policy negotiation had been entrusted, “proxied” if you will to Mr Insurance Commissioner. Here again lay a hidden problem. Mr Commissioner was so in the pockets of big insurance he nearly went to prison back in the early 1990’s. Indicted January 12, 1994 on two sets of federal charges involving campaign contributions (bribes) from big insurance, somehow all the charges got mysteriously dismissed without a trial the very next year. I suspect big insurance wasn’t about to sit by and let an investment they’d been building on since 1975 just get pushed off a cliff.

It didn’t take long to see the trap people had stepped into. State Farm began to paper everyone with denial of coverage letters featuring the ACC. If fully invoked, the ACC was a fast action trap door that could drop an insured out of coverage in a nanosecond. Applied full nelson, the insurer could simply declare: “look, read the ACC, anything touched by a molecule of water, at any time, regardless of prior or concurrent wind, is not covered, period.” Of course insurers know pigs get fat, hogs get slaughtered. The better approach was half nelson because the real objective was to buy off legal liability with cheap releases, not break necks and hatch lawsuits. The wise corporate predator knows the policy is a tool to diminish the actual and full value of claims, not renounce all coverage and provoke ugly, one-sided lawsuits.

The ACC virus had been imported into Mississippi in the mid 1980’s, ironically by the same company (Nationwide) whose attorney explained in the Corban v. USAA hearing how the ACC applies. Continue reading “A virus called”

News from the Cat House Part Deux: Bondage and Discipline sometimes missing from the equation

I’ve been sent several articles on the Cat Bond market of late, some very good and some not necessarily worthy of the publication in which they were printed. I’ll start with an article from The Banker Magazine which is not yet online which I read courtesy of Factiva. While the article is generally good the author, Edward Russell-Walling parrots some long discredited facts about Cat Bonds, such as their being non correlated with the broader financial markets which the financial crisis of last year exposed as pure BS and it is there we start:

In 2008, the annus horribilis, non-correlation did not prevent it slumping to $2.7bn. Some hedge funds, which had been prominent players in this market, became distressed sellers and depressed pricing. The situation was aggravated by the downgrade of four cat bonds exposed to Lehman Brothers which, as total return swap counterparty, was effectively holding the investors’ capital.

What the author neglects to mention was “the innovation” of stuffing issues full of subprime mortgages whose accompanying (illusory) high yields no doubt drastically lowered the cost to the issuer. Lehman, as the guarantor, is cited as a problem because of its insolvency but the fact is TARP and the United States taxpayers are what has propped up every such issue so structured as major guarantors like AIG and the other Wall Street investment banks were essentially insolvent meaning their financial guarantees were worthless. Without the Lehman guarantee for instance Allstate’s Willow Re, which defaulted on their interest payments to investors earlier this year, plunged to around 50 cents on the dollar or roughly about what the underlying subprime mortgages were worth.

That said Russell-Walling did give a good explanation of the concept of the “trigger” in these agreements and it is there we pick back up:

One important choice that had to be made was the nature of the trigger. An indemnity trigger is activated by the issuer’s actual losses. So if the cover is for $100m with an excess of $400m, the bond is triggered once claims exceed $400m. Non-indemnity triggers may be based on other mechanisms, such as modelled loss, insured industry loss or physical parameters such as earthquake magnitude or wind speed. Continue reading “News from the Cat House Part Deux: Bondage and Discipline sometimes missing from the equation”