Slabbed Daily June 1, 2009: Hurricane Season / Toxic Paper Edition

Save your life and evacuate. Or stay to make certain your wind insurance pays. Decisions decisions….

Its that time of the year – the beginning of another Hurricane season complete with advance news stories why our insurance rates need to rise yet again. Some evac stories always make it to the mix and it is there we start with this Melissa Scallan Sun Herald story:

Womack and other state officials are encouraging residents to go north, not east or west and to leave by alternate rather than primary routes, such as U.S. 49.

Some of the new and less-traveled routes include Mississippi 605 and Mississippi 67, which tie into each other and lead to U.S. 49. Wayne Brown, Southern District transportation commissioner for the state Department of Transportation, encourages residents to take highways such as Mississippi 15, 57, 63 and 29.

“If people stick to those, in my opinion, they’ll have much less traffic to deal with,” Brown said.

The state has agreed again this year to allow south Louisiana residents to use Mississippi interstates to evacuate.

If asked by Louisiana Gov. Bobby Jindal, Mississippi will contraflow interstates 55 and 59, which means traffic in all lanes will flow north.

On I-55 contraflow will end just south of Brookhaven. On I-59 it will end just south of Hattiesburg.

Some exits will be open so motorists can get gas and food, Brown said, but those could be closed intermittently.

“We’re going to let them get off, but if that stop becomes congested we’ll close the exit,” he said.

Bob Chapman, emergency services manager for MDOT, said contraflow is one reason department officials encourage Mississippi residents to leave as early as they can.

“We can’t contraflow U.S. 49 for our residents because there are too many access points,” he said.

“The main emphasis is to evacuate early and go where you want to go.”

Next up is the obligatory Insurance (Mis) Infortmation Institute’s annual news plant explaining that costly Hurricanes are the reason rates are so expensive. What the story fails to mention is that insurers are paying out less in claims as a percenatge of their revenues than ever thus losses can’t be the true reason rates are sky high, coverage is scarce despite III’s paid shill Robert Hartwig’s protestations to the contrary. We pick up the AP story as published by the Houston Chronicle (h/t Mrs Sop): Continue reading “Slabbed Daily June 1, 2009: Hurricane Season / Toxic Paper Edition”

ABA throws up recommendations for flood insurance reform

Rebecca Mowbray’s usual fine writing wasn’t enough to keep me from seeing Pepto Bismol pinks as I read American Bar Association recommends flood insurance reform after picking up the link posted with this suggestion on a finance message board:

This Tulane Law professor needs to teach a course in securities fraud, or better yet take one, maybe at the Reinsurance University of Bermuda!

However,  this “Tulane Law professor” turns out to be the former Dean of the Law School, not just a professor – a fact that does nothing to improve the recommendations but better explains the how they came about.

Edward Sherman served as Dean of Tulane Law School from July 1996 through June 2001…Professor Sherman is an expert on civil procedure, complex litigation, and dispute resolution and is co-author of widely-used casebooks and treatises on those subjects… He has been…active as an arbitrator and mediator.

Before I say more, take a look at Mowbray’s story (emphasis added).

The American Bar Association recommends that insurers offer customers the option of buying insurance policies that cover flooding from storm surge to help cut down on legal disputes after events like Hurricane Katrina.

The suggestion is part of a set of recommendations issued by the ABA’s tort, trial and insurance practice section after a year and a half of study.

“The insurance industry needs to get creative in offering all kinds of policies, rather than just saying, ‘No, we don’t cover it,'” said Ed Sherman, a professor at Tulane Law School who served on the task force and helped draft the proposals.

The majority of the 25-person task force represented an insurance company perspective.

As such, the report includes a number of proposals that companies have advocated, such as seeking a greater federal role in insurance regulation and giving insurers incentives to build catastrophe reserves over multiple years. Continue reading “ABA throws up recommendations for flood insurance reform”

The Jawbone of an Ass: Unbridled Arrogance and Regulatory Capture at the NAIC.

With the jawbone of an ass, heaps upon heaps, with the jaw of an ass have I slain a thousand men.

Let’s set this up with yesterday’s WaPo story on the extraordinary recent events at the NAIC:

Insurance regulators from across the country were scrambling yesterday to address a growing threat to insurance companies and the consumers who depend on them.

As the industry’s financial condition deteriorates, many companies have asked their home-state regulators for permission to change the way they measure and report their financial strength. Some regulators have expressed a willingness to grant it.

The requests have been pouring in since the National Association of Insurance Commissioners last week rejected the insurance lobby’s plea for blanket relief.

The public faces the chaotic prospect that insurance companies could be allowed to operate by different rules, and that rules meant to protect their financial stability could diverge sharply from state to state.

The situation is shaping up as a major challenge to the industry’s system of regulation, which is controlled at the state level.

The Consumer Federation of America and the Center for Economic Justice, an advocacy group for poor and minority consumers, yesterday told regulators that granting relief on a case-by-case basis could amount to regulators “anointing winners and losers” and could reward companies that managed their finances poorly at the expense of more successful competitors. Continue reading “The Jawbone of an Ass: Unbridled Arrogance and Regulatory Capture at the NAIC.”

ACC not proximate cause of "peace of mind"

When they come up with an on-line 12-step program for bloggers, I’ll be signing in with a my name is nowdoucit and I google – and, suppose I’ll be required to admit that I went on an ACC binge after Proximo post this comment responding to my mention of the ACC clause in a post I put up today.

To win this argument one has to believe the insurer’s “sneaked” this language into the policies when AG Hood and others weren’t looking or that it is sooooo very deceptive that they didn’t know what it REALLY meant…Yeah, ACC is a bitch to understand but it wasn’t put in there the week before the storm hit.

Bitch to understand is right – just check that thread and you’ll see several comments from Brian Martin, including one that, when considered with the text from the State Farm wind/water protocol Proximo posted later, leads me to believe NFIP claims should have a different adjuster when an insured has other policies in place.

One certainty at this point is the ACC is not new. Brian confirmed that and so did Robert Hunter, director of insurance for the Consumer Federation of America, quoted in Home-Insurance Traps published by Consumer Reports.<span

“I knew the clause existed but I did not understand it, in part because it is so illogical. And I am an expert,” Hunter adds. “Imagine what consumers don’t know.”

Rather than imagine, I read Why Are Insurance Contracts Still Incomprehensible? posted on the TPM Cafe. Continue reading “ACC not proximate cause of "peace of mind"”

Sam Chips in His Two Cents on the Columbia Journalism Review Taking the Hartwig Challenge

I’m going to leave Sam alone this time. 😉 His blog entry today shows that passion for insurance that makes reading Sam’s blog enjoyable. Today he is not happy with Dean Starkman’s CJR story we profiled here earlier this week.

Three thoughts: Sam is no shill, not even close. The big time insurance shills are Hartwig and Rossmiller. I agree with Bob Hunter here 100%.

This battle–“pitting journalist against journalist,” as CJR characterized it–was detailed in an July 8 onlne CJR column by Dean Starkman. As part of his “audit,” he solicited my take via e-mail, and we had a rather lively but polite exchange. He also spoke with Bob Hartwig to hear out his complaints about the facts supporting the story. Continue reading “Sam Chips in His Two Cents on the Columbia Journalism Review Taking the Hartwig Challenge”

Multi-Peril Insurance: Dead for the Year?

Last Thursday, the National Underwriter contained a story of the unusual coalition that had developed in opposition to HR 3121. Matt Brady reports:

In a case of politics making strange bedfellows, J. Robert Hunter of the Consumer Federation of America and the Reinsurance Association of America have joined to oppose legislation expanding the National Flood Insurance Program.

Those that closely follow insurance issues know Mr. Hunter runs insurance issues for the Consumer Federation of America a non profit group composed of other consumer oriented non profits that speak with a single voice on issues they deem important. In this case the debate on HR 3121 and the CFA’s opposition derives from the intersection of environmentalism and insurance theory.

The basis for his opposition to plans to expand the NFIP, Mr. Hunter said, is that while it may sound like something that could help consumers, he believed it would instead likely only aid developers looking to build along the coast. Continue reading “Multi-Peril Insurance: Dead for the Year?”

Landrieu Legislation to Extract FEMA’s Head Out of Their Ass…..

Bill creates insurance oversight

Plan audits firms in flood program

Tuesday, February 05, 2008
By Rebecca Mowbray

On the heels of a federal report that found “an inherent conflict of interest” in having private insurance companies determine how much the government should pay on flood claims, Sen. Mary Landrieu, D-La., plans to introduce legislation creating an ombudsman to strengthen financial oversight of the National Flood Insurance Program. Continue reading “Landrieu Legislation to Extract FEMA’s Head Out of Their Ass…..”

Saturday Two for the Price of One: Consumer Federation Report Blasts Insurance Industry Practices

The Consumer Federation of America released it’s 2007 study of industry profits along with it’s analysis of the reasons behind the numbers. Those of us on the Mississippi Coast can readily identify with the conclusions of the study, conducted by former Texas Insurance Commissioner Robert Hunter. This document is well worth reading and I highly recommend it for those wondering why the 2004 tort reform promise of cheaper insurance after passage has largely never materialized.

“State and national consumer organizations joined the Consumer Federation of America (CFA) today to release a new study concluding that the property/casualty insurance industry continued in 2007 to systematically overcharge consumers and reduce the value of home and automobile insurance policies, leading to profits, reserves, and surplus that are at or near record levels. The study estimates that insurer overcharges over the last four years amount to an average of $870 per household.

The report provides extensive data demonstrating that property/casualty insurance companies are paying out lower claims in relationship to the premiums they charge consumers than at any time in decades. The pure loss ratio, the actual amount of each premium dollar insurers pay back to policyholders in benefits, was only 54.6 cents in 2007. Over the past 20 years, the amount paid back as benefits has dramatically declined from over 70 cents per premium dollar, indicating a huge loss in the value of insurance to consumers.

“Consumers ultimately pay the price for the unjustified profits, padded reserves, and excessive capitalization that exist right now in the insurance industry,” said J. Robert Hunter, the Director of Insurance for the Consumer Federation of America (CFA) and author of the study. Hunter is an actuary, former state insurance commissioner, and former federal insurance administrator.

“The insurance industry reaped record profits in 2004 and 2005, despite significant hurricane activity,” said Hunter. “Profits in 2006 rose to unprecedented heights and 2007 may set a fourth consecutive profit record,” he said. “Unfortunately, a major reason why insurers have reported record-high profits and low losses in recent years is that they have been methodically overcharging consumers, cutting back on coverage, underpaying claims, and getting taxpayers topick up some of the tab for risks the insurers should cover,” said Hunter.

In the last several years, insurers sharply increased premiums for homeowners and commercial insurance and reduced or eliminated coverage for tens of thousands of Americans in coastal areas. Insurers have succeeded in convincing Congress to continue taxpayer subsidies for terrorism losses and are seeking additional subsidies for catastrophe insurance”