I’ll have in depth analysis in another post. Let’s begin with Anita Lee and her front page story in today’s Sun Herald where Mike Chaney the tap dancing politician is long on rhetoric as he prepares coastal policyholders for the shaft:
The focus at State Farm headquarters in Bloomington, Ill., is on the bottom line, not consumers, Mississippi Insurance Commissioner Mike Chaney said after receiving the insurance company’s request for an average 45 percent rate increase on existing business on the Coast.
“The more I’m around these folks, the more I worry about them,” Chaney said Friday. “They don’t have a heart. The corporation as a body has no compassion for the consumer.”
Coast agents were notified of the rate increase request on Friday, when it was filed. The proposed increase would be 46.9 percent south of Interstate 10 and 43.5 percent on the north side. Continue reading “Let’s give them the Chaney (without vaseline): State Farm files for a 45% rate hike on the coast”
Thursday, August 6, 2009
Baton Rouge, Louisiana
INSURANCE DYSFUNCTION CONTINUES
Press reports, both nationally and at home, have confirmed what financial analysists and investigators have known for months. Louisiana continues to have the most dysfunctional insurance system and the worst insurance climate in the country. In almost every category, insurance rates are the highest nationwide. And just last week, the New York Times published a front page investigative report on major financial trouble involving Louisiana’s largest insurance company.
The American Insurance group (A.I.G.) does more insurance related business in Louisiana than any other company. A.I.G. recently received the largest bailout in history. Yet serious questions are being raised about insider swapping of both assets and liabilities among numerous A.I.G. subsidiaries. The Times article says A.I.G. is selling way too much insurance. “State insurance commissioners are supposed to keep insurers from writing new policies if in doubt that they can cover their claims,” the article concludes.
One of the voices raising alarms is former Louisiana chief insurance examiner W.O. Myrick. He was quoted extensively in the Times article, and has looked at a number of A.I.G. subsidiaries that do extensive business in Louisiana. W.O. was of great help in my initial days of taking over a deeply troubled department back in 1991. He assisted me in shutting down some 50 insolvent insurance companies. So he knows the territory, and when he says there is potential trouble, you can bet on it.
Remember now that we are talking not only about Louisiana’s largest company, but one that so far has received over $210 billion in federal bailout funds. That’s a lot of dough in anyone’s book. How much? Figure that $700 for you and each member of your family goes from the tax till to A.I.G. And since the government has to borrow the money, add in 10% for the next 30 years. We ain’t talkin’ chump change here. Continue reading “Jim Brown Joins Slabbed in Calling Out AIG: You’re Insolvent and We Know It”
There have been a good number of news tidbits that do not necessarily constitute a post here on Slabbed on their own but when taken together tie up several loose ends and lend context to a story that does merit it’s own post in Mike Chaney’s recent insurance forum held last Thursday and Friday here on the coast. So let’s backtrack a week and shake us up slabbed insurance cocktail by beginning with Anita Lee’s coverage of day 2:
Gov. Haley Barbour joined the coastal insurance debate Friday, telling an audience he believes regional compacts would be the best way to regulate wind coverage in coastal zones from Texas to Maine.
Barbour introduced The Travelers Insurance Cos. president, Brian MacLean, to explain the company’s proposal for improving the coast insurance market. Insurers have pulled back from coastlines in recent years, leaving state-run wind pools to fill the void.
Wind pools were intended as insurers of last resort, but their market shares have grown to levels that experts agree are unsustainable. Insurance works by spreading risk, not concentrating it.
Haley has been conspicuously absent from the insurance scene refusing to comment on the litigation while offering cheap lip service to Gene Taylor’s multi peril bill. I suspect he and the State GOP has been searching for a way to throw a bone to the people on the coast that helped elect him while working hard to preserve GOP big business bonafides with the campaign money machine that is big insurance. Continue reading “Slabbed Daily July 22-24. Lets tie a few things together”
With the very recent publishing of yet another list of the worst bad faith insurers, this time by the American Association for Justice, the topic of why the public holds these companies in such low esteem again becomes topical.
We’ve well chronicled the dirty tricks and underhanded tactics these socially deviant companies employ to satisfy their relentless thirst for profit but that is not the thrust of this post. Rather, in keeping with today’s theme of “the why” as Nowdy linked my comment on the Yahoo Allstate message board in her Daily slab post I’m expanding on the concepts from that post and in the process explain one of the possible reasons why an insurer with a good reputation in Chubb will be inherently more profitable than one with a bad reputation in Allstate.
When I first met Nowdy and we began to get to know each other I told her my favorite hobby was investing and to that end, the fields of Game Theory and Behavioral Finance were of great interest to me along with their political first cousin Public Choice theory, the latter two economic disiplines being relative newcomers to our body of collective knowledge.
After 20 months of writing here at slabbed I finally get to indulge those passions and perhaps educate our readers on the mechanisms at work that resulted in what became known here on Slabbed as The Scheme, a series of posts by Nowdy that explained the bad behavior of the insurers here after Katrina. In short not only do we tell you who dunnit but also how it could happen in a large organization like State Farm, Nationwide, USAA, Allstate and others. We start with the July-August edition of the Harvard Business Review and Dan Ariely’s article The End of Rational Economics:
In 2008, a massive earthquake reduced the financial world to rubble. Standing in the smoke and ash, Alan Greenspan, the former chairman of the U.S. Federal Reserve once hailed as “the greatest banker who ever lived,” confessed to Congress that he was “shocked” that the markets did not operate according to his lifelong expectations. He had “made a mistake in presuming that the self-interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders.” Continue reading “Have we seen the end of rational economics? Behavioral Economics explains the Scheme.”
Not that such doesn’t help Gene Taylor with the local voters, the majority of which are very conservative and part of the 30 percent of the populace who do not care for Obama’s job performance (and never will). So while the new adminsitration didn’t even bother to meet with Gene on his bill to reform the NFIP before he came out against it, here is Mr Prez cuddling up with big insurance so they can have an advance briefing of what he intends to do along the lines of regulatory reform. Reuter’s reporter and Sen Chris Dodd mouthpiece Kevin Drawbaugh has the III talking points well summerized:
Insurance industry reform will be the chief focus of a briefing scheduled for Thursday evening by Obama administration officials to financial industry lobbyists, said sources familiar with the agenda.
Topics possibly open for discussion include a proposal to establish a U.S. insurance regulator. The nation’s more than 6,000 insurers are now regulated largely by state and territorial governments.
The briefing could range further afield, possibly covering other parts of the administration’s financial reform agenda, such as establishing a systemic risk regulator and writing new rules for derivatives markets, the sources said.
The snubs don’t stop there as Michael Newsome reported today in the Sun Herald: Continue reading “Some clear signals the Prez is crossways with Gene Taylor”
Kevin Buckel is a familiar name to us at Slabbed and I was very happy to hear from him via email last week. Anita Lee at the Sun Herald has been keeping up with Mr Buckel’s efforts at fostering transparency at the Mississippi DOI as well as his citizen push to have the legislature afford Mississippian/policyholders basic protections afforded citizens elsewhere via a policyholder bill of rights which once again fell victim earlier this year to the insurance lobby at the capitol. Mr Buckel has also received assistance and some backing from United Policyholders in his efforts.
The DOI here in Mississippi, run by former insurance agent underwriter Mike Chaney, has thus far resisted Mr Buckel’s efforts. He subsequently filed suit against the Commish to compel production of the MID’s public records in an action I briefly profiled in early March. The Sun Herald story is long gone from their website but there is still a copy in the google cache for those interested in seeing the story in its entirety.
Since that time Mr Chaney has filed a motion for summary judgement and Mr Buckel has replied. Mr Buckel has a website with links to some of those legal docs as well as proposed state legislation he has pushed.
Tomorrow there will be a hearing on this case. We’re trying to get more specific info which is a challenge as the online court docket is down. If Steve can shake some time loose we’ll also be there.
Kevin emailed me with the hearing time tomorrow. It will be at 9:30AM at the County Courthouse, Chancery Court.
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”