Xavier University v. Travelers / Chehardy v. Allstate

“The wise man listens to meaning; the fool only gets the noise.”
Poet C. P. Cavafy

“Favor distilled thinking, by which I mean the thinking based on information that is around us that is stripped of meaningless but diverting clutter. For the difference between noise and information has an analog: that between journalism and history.”
Nassim Nicholas Taleb in Fooled by Randomness Continue reading “Xavier University v. Travelers / Chehardy v. Allstate”

Gene Taylor to Speak on Insurance Reform

There has been an advertisement run in the print editions of the Sun Herald on Gene Taylor conducting an Issues + Answers lecture sponsored by the University of Southern Mississippi Gulf Park Campus on Friday, February 29, 2008 at the Advanced Education Center auditorium.

Thanks to one of our readers, I was emailed a link to the University press release and I am happy to pass it along to all so interested. Considering the other recipients listed in the address header I am honored Ida thought enough of this blog to pass me the good word.

I will be in attendance and hope we pack the house on the 29th.

sop

The Mississippi “R” Factor Part 2

I’ve noticed that when solutions to this insurance mess are offered it is one political party that is doing the offering. Outside of a few Democrats like US Senator Christopher Dodd the Republican party is the overwhelming choice for discriminating big business and insurance political donors.

Such must certainly be the case here in Mississippi as we found this Clarion-Ledger story concerning Phil Bryant’s State Senate Insurance Committee most disturbing. Lt. Governor’s Bryant stated campaign goal of continuing the coastal rebuilding efforts certainly are taking a back seat to his service to monied insurance interests. Continue reading “The Mississippi “R” Factor Part 2″

The Mississippi “R” Factor Part 1

We have more insurance news out most of it involving the State of Mississippi. As I noted yesterday the contrast between Commissioner McCarty and the Republican Party in Florida and Commissioner Chaney and the Republican leadership in Mississippi is striking and very unfavorable to our leadership here. Today we are greeted with this news story in the Sun Herald on the Mississippi Windstorm Underwriting Association: Continue reading “The Mississippi “R” Factor Part 1″

Insurance Complexities: The Myth of State Farm’s Financial Insolvency and Conflicts of Interests.

I occasionally run across “fans” of Nassim Taleb, a philosopher/visionary who is changing the way people view world events. His black swan concept, which is the name sake for his latest book, is understood and often repeated as the totality of his theory when in reality it is just a small part of his body of work. Russell and I share an interest in Taleb’s work, an interest that derives from actually reading his two books rather than simply embracing the pop culture lite version repeated in the popular media.

This subject of insurance is akin to understanding Taleb and his theories; one can get a slight flavor for the concepts of subjects like wind claims dumping from the media but the nuance and complexities of the subject escape the vast majority of the popular reporting just as Taleb’s theories are revealed completely only by reading his books. Taleb’s Black Swan is an important concept but his central thesis is far more involved. Taleb’s website, named for his first book gives a better clue the larger theory he espouses.

Such is the case with the recently issued GAO report and the concepts surrounding the Continue reading “Insurance Complexities: The Myth of State Farm’s Financial Insolvency and Conflicts of Interests.”

Florida Insurance Hearings: Not Every Company is Losing Money

We noted in our continuing coverage of the Florida Senate Hearings concerning their property insurance mess that Allstate used unapproved short term weather models to make actuary decisions on the purchase of reinsurance. Those poor business decisions have caused losses for Allstate’s Florida operating company, losses they now wish to dump on Florida consumers.

Allstate has since been joined by Nationwide and Farm Bureau in admitting the use of unapproved short term models to drive reinsurance purchase decisions. Farm Bureau also admitted losses deriving from that fact.

In a refreshing change, we have a story from the Miami Herald that Florida based American Strategic Insurance testified Tuesday they used approved long term models and have profited from the better decisions that resulted from that fact.

American Strategic, a St. Petersburg company that managed to cut rates an average 11.5 percent due to the money it saved by buying a portion of its reinsurance from the Florida Hurricane Catastrophe Fund.

The company also lowered rates another 9.5 percent later in the year, mostly because it paid a lower cost for additional reinsurance bought in the private market and had fewer claims and better cost controls.

”Generally speaking, apples to apples, reinsurance costs were coming down for everyone in 2007,” said CEO John Auer, who expects to see another drop this year.

Unlike many insurers, American Strategic said it is writing new homeowners policies, even some on the coast. The company has 260,000 policies, making it the third-largest insurer behind state-run Citizens and State Farm.

Sen. J.D. Alexander, R-Winter Haven, questioned American Strategic’s heavy use of reinsurance to cover potential losses. He asked if it would be in financial trouble if its reinsurers, especially the state catastrophe fund, couldn’t make good on their
policies.

Auer said the company, started 10 years ago, has already lived through highs and lows in the reinsurance market, noting that reinsurers are pleased with American Strategic’s management. And A.M. Best raised American Strategic’s rating to A-minus from B++ last December.

As I opined on the Allstate Yahoo Finance Message Board, the testimony of Allstate, Hartford, Farm Bureau and Nationwide Insurance reminded me of the confessions of an accomplished three card monte dealer. They expect their customers to foot their mistakes; both the mistaken decision to purchase more reinsurance and the decision to buy expensive reinsurance at all for that matter, rather than the cheaper variety offered by the State of Florida. Is insurance the only line of business that doesn’t have to pay for their business mistakes? In the small business world where I come from there is no government backstop save bankruptcy so the concept of profit entitlement is foreign to me.

In any other line of business the shareholders, not the public would be eating these business mistakes. So while we congratulate American Strategic and their owners for their ability to profit while their competitors languish we also hope free market principles apply equally to those who make bad business decisions.

Simply put there is a point where the insurance industry needs to take ownership of their mistakes. The mess in Florida illustrates exactly why so few present day insurers would survive in a truly competitive marketplace without that anti-trust exemption they currently enjoy. Our position is that the free marketplace should reign supreme where ever possible and the culture of big insurance profit entitlement should end.

Finally the events in Florida now have me wondering if our state regulators here in Mississippi have been hoodwinked by similar tactics. Our wind pool premiums are in the stratosphere, largely due to the astronomical cost of reinsurance. Given what we have learned through the application of Sunshine to the insurance industry by the Sunshine State, I challenge Mr. Chaney to hold rate hearings for any increases in property insurance, not just those he arbitrarily deems too high. We have quickly arrived at the point where he should put the interests of the citizens of this state ahead of the profit interests of these out of state insurance companies.

sop

The Allstate Battle in Florida: An Update

The Florida District Court of Appeals last week kept a temporary stay in place against the suspension of Allstate from Florida by the Florida Office of Insurance Regulation. The ruling is a double edged sword in that the expedited appeals process puts pressure on Allstate to produce records on its business practices; records it has been unwilling to produce in the past. According to Kevin McCarty, Commissioner of the Florida Office of Insurance Regulation Allstate has become more diligent in producing the subpoenaed records:

All the documents requested in our October subpoenas were due at the Jan. 15 hearing, but I am encouraged that as a result of my suspension order Allstate within a week produced about 25,000 pages of documents.

“I remain ever committed to Florida consumers to get to the bottom of this issue and to ensure that Allstate is held accountable to the law.”

The timetable for the expedited court appeal points to a resolution in early March, 2008. A copy of the court order that contains the milestones can be found here.

sop

Breaking News: Hood Fires Back

Jim Hood has made the news today with his Friday court filings in response to State Farm trying to prevent a new grand jury from looking into alleged wrong doings on their part in how Katria claims were adjusted here on the coast. I write this post with a heavy heart as we have just learned of Jody Compretta’s untimely passing in a parade accident last night in New Orleans. Our thoughts and prayers are with JP and his family.

The AP story:

A lawsuit filed by State Farm Fire and Casualty Co. that accuses Attorney General Jim Hood of using the threat of criminal charges to force settlements in civil lawsuits is based on “lies, speculation, and innuendo,” Hood said in court papers.

State Farm sued Hood in September, claiming he violated his part of a January 2007 settlement in which the attorney general’s office agreed to end its criminal investigation over the company’s handling of Hurricane Katrina claims. A judge ordered Hood to temporarily shut down the probe.

The accusations in court documents have intensified over the past week as both sides prepare for a hearing on Wednesday.

“Before allowing State Farm to use this court as a three ring circus to parade its inflammatory evidentiary rhetoric of innuendo, guilt by association, and smears, there should be some factual basis alleged to support a conclusion of retaliation and/or harassment,” Hood said in papers filed Friday in U.S. District Court in Jackson.

Jonathan Freed, a State Farm spokesman told The Associated Press on Friday, that the insurer is ready to “proceed with our case and we’re looking forward to airing these issues in court.”

Hood asked the court to dissolve the restraining order and allow him to resume his investigation. Hood’s 19-page filing came just days after State Farm used some of the strongest language yet in accusing the second-term attorney general of wrongdoing.

The company claimed Hood and wealthy plaintiffs attorney Richard “Dickie” Scruggs, who is facing corruption and contempt charges in other cases, participated in an “extortion conspiracy” by trying to force the company to settle civil litigation with private attorneys.

The court battle heated up when State Farm began urging a judge to allow the company to question Scruggs under oath. Hood has called Scruggs his “confidential informant” and has said Scruggs provided allegedly incriminating information about State Farm.”

General Hood is clearly concerned that his co-conspirator will either tell the truth or invoke the Fifth Amendment on specific questions related to their extortion conspiracy,” State Farm said in a motion filed Wednesday.

U.S. District Judge Michael P. Mills on Friday ordered Scruggs to submit to the questioning by 5 p.m. Monday. Scruggs will likely invoke his Fifth Amendment protection against self-incrimination when questioned because of the pending charges against him.

Scruggs, one of the most influential plaintiffs lawyers in the country, is facing federal charges that he conspired with several associates to bribe a judge in an unrelated dispute over $26.5 million in fees from a mass settlement of Katrina claims. He’s facing contempt charges in Alabama for allegedly violating a federal judge’s order by giving leaked Katrina assessment documents to Hood rather than returning them to the company from which they were taken.

Scruggs has denied wrongdoing in either case. Scruggs is not a party to the lawsuit State Farm filed against Hood, but the company claims he worked in collusion with Hood.

The January 2007 agreement that State Farm claims Hood violated by resuming a criminal investigation was part of a broader settlement that called for State Farm to reopen and possibly pay thousands of policyholder claims. However, a federal judge refused to sign off the terms of deal and State Farm later entered into another agreement with George Dale, who was then Mississippi’s Insurance Commissioner.

In August 2007, State Farm received a new subpoena for records from a grand jury. Less than a month later, the company sued Hood in an effort to stop the grand jury’s investigation.Hood claims he wasn’t reopening the same investigation, rather he was probing new claims.Hood has argued that he never provided “blanket immunity” from future investigations.

Pee on My Leg and Say It’s Raining Part 3: Marsha Thompson Joins Kevin Drawbaugh in the Drive by Reporting Craze

Since Lotus at Folo brought this report that aired on WLBT to my attention, I filed it away for further commentary, not only for its glaring factual inaccuracy (EA Renfroe is a claims adjusting firm not engineers), but also because of the sheer silliness of the logic used to frame the Rigsby sisters as document purloining perverts. I had to chuckle thinking of the State Farm commercial which no doubt aired at some point during the broadcast, informing us the good neighbor stands ready to sell us life and auto insurance; contracts that people such as Dr Leroy McFarland discovered post Katrina really were not worth the paper they were written on.

I filed Ms Thompson’s revealing report away as I was vetting the first Reuters story on the GAO report past some ordinary people off the coast to gauge their reactions to it and the context which it was framed. This is the paragraph that repeatedly came up in the feedback I received.

Study after study has come back with the same results, showing there is no evidence insurance companies improperly attributed wind damage from Hurricane Katrina to water,” said Justin Roth, senior federal affairs director at the National Association of Mutual Insurance Companies, an industry group.

“We fully expect this report to reach the same conclusion,” Roth said

Mr Roth’s artful wordsmithing must be appreciated in PR circles for its sheer intellectual dishonesty as is Mr Drawbaugh’s apparent willingness to serve as a mouthpiece instead of his stated vocation of reporter in the finest traditions of misinformation that would make Dr. Goebbels proud.

So how could Mr Roth be so confident in his statement, issued one day before the GAO report was released? Easy, the Three Wise Monkeys work for FEMA, and Mr Roth knew FEMA did not collect wind damage payment data in flood claims thus they had no way of knowing if NFIP was improperly charged for wind damage. This is what the GAO had to say on that exact subject:

FEMA officials stated that they did not have the authority to collect wind damage claims data from insurers. But without the ability to examine claims adjustment information for both the wind and flood damages, NFIP cannot always determine the extent to which each peril contributed to total property damages and the accuracy of the claims paid for losses caused by flooding.

FEMA cannot be certain whether NFIP has paid only for damage caused by flooding when insurers with a financial interest in apportioning damages between wind and flooding are responsible for making such apportionments.

However, when the public adjusters in Louisiana peeked under the hood of flood claim adjusting in New Orleans, they found a far different story than was conveyed by Roth and Drawbaugh:

“….a group of former insurance adjusters, identified only as the Georgia company Branch Consultants LLC, say they have reinspected 150 properties with flood and wind damage. In all cases, private insurance companies overcharged the federal flood program for storm damage while they underestimated wind damage.

“Every single one of them,” said Allan Kanner, a New Orleans attorney representing the insurance and construction experts as they pursue what they say is a violation of the False Claims Act on behalf of the federal government. “There’s a pattern here.”

In one striking example, the suit claims that a group of four-plex apartments in eastern New Orleans were compensated for flood damage with taxpayer money even though they experienced no flooding. Each building in same complex was paid only a pittance for severe wind damage on its regular property insurance policies.”

WLBT Jackson Joins in the Drive By Reporting Craze

In their anchor captioned report “Sex, Lies and Theft” WLBT tries their hand at character assassination. The story teller, Marsha Thompson, dutifully informs her viewers of Kerri Rigsby’s sex life and that the Rigby’s were “Stealing documents without State Farm’s knowledge or permission and then furnished copies to the Attorney general, US Attorney and Scruggs without permission.”

Following Ms. Thompson’s logic the Rigsby sisters, who publicly stated they believed they have witnessed crimes known in some legal circles as Racketeering, should have asked permission before calling the authorities. Following the Thompson logic means we should also obtain the permission of an armed robber before calling in a bank robbery. Thompson logic also evidently means the sex lives of witnesses to a crime are fair game too.

Is it any wonder around 26% of the public finds local TV news “believable” or that so few white collar crime witnesses are willing to come forward as whistleblowers. WLBT should hang their head in shame.

Fade out to the “Good neighbor” ad…..

sop