Very occasional in fact though Part 1 brought tears to the eyes of Mr CLS over at Yahoo ALL (and I bet he still has that old link) and remains one of our all time greatest finance posts considering Nowdy wrote it. That is not a knock on my partner-in-blog as much recognition that someone who was previously illiterate in high finance could “see-it” around the time we were 6 months old as a blog. This global insurance thing is a complicated critter.
There are people on the bottom of this critter who live here on Main Street. Included in that number are the insurance agents who live in our communities across the coast from Bar Harbor, Maine to Brownsville, Texas. A few years ago, at an insurance forum similar to the event held today at USM Gulf Coast, Congressman Taylor was heckled by an irate insurance agent who was forcibly removed from the building by security. Today during Q&A State Farm agent Elvis Gates told the panel he was behind their efforts 100% as he didn’t get paid on policies he didn’t sell. My own agent’s office mostly looks deserted during business hours. These days everyone is feeling the pain. Elvis seems like he is a sharp guy.
The marketplace demands a single solution in an all perils policy. With State Farm pulling out the NFIP after being caught with their hand in the taxpayer cookie jar agents like Mr Gates have been made a casualty along with the rate paying public in the communities where they live. My own personal observation is that Allstate agents are farther along the path to disillusionment after being sacrificed en mass during the evil reign of Ed Liddy. Our readers may remember ol’ Ed was brought in to right AIG during the financial implosion in 2008. Continue reading “My brother Darryl and my brother Darryl – and we’re all in this together Part Trois: The multiperil drumbeat continues. An occasional series.”
Being that I am a hard hat CPA a tie is not required in my line of work but I thought what the heck, I need to look my best for insurance commish Mike Chaney, who will certainly be at the RAND forum. Man o man was I disappointed though because I looked high and low for Mike, who we affectionately know as Mikey the Cook here on Slabbed due to his warm association with fellow Commish Jim “Jimbo the clown” Donelon.
Now there were several theories about Mikey the cook’s whereabouts. One theory goes that he was in Bloomington giving an interview with the Pantagraph which is State Farm’s hometown newspaper. Such is not a far-fetched theory as Mikey has graced the pages of the Pantagraph before waxing nonsensical. Here is a snippet from their Katrina coverage which featured Mikey the Cook’s remarks:
“It was a win-win for State Farm, the state and the courts,” said Mississippi insurance commissioner Mike Chaney, who monitored the mediation program. A probe of State Farm’s claims handling by his department found questionable decisions and irregularities, but no elaborate scheme or illegal actions, he said.
Now we’ve always said Mike Chaney wouldn’t know insurance fraud if it bit him on the ass, unless that is, Continue reading “So this time I actually put on a tie before the insurance forum…….”
Goals for the Residential Insurance Market
These problems illustrate just how dysfunctional the residential insurance market has become for private insurers, policyholders, and taxpayers. Because tightly regulated residential insurers have dramatically
reduced their wind exposures in coastal areas, wind risk has shifted to state residual market entities.
The growth in these markets has transferred risk to taxpayers and to policyholders in inland areas, just as the growth in the federal flood program has transferred risk to federal taxpayers, who are subsidizing a substantial share of the residential policies in high-risk coastal areas. In addition, wind insurance coverage limits have fallen and deductibles have risen, creating greater retained risk for policyholders in high-risk areas. Adding to their burden is the need to purchase multiple policies with inherent contractual uncertainties that will likely cause another wave of litigation following the next major storm.
When considering what types of reforms might improve outcomes, policymakers and other interested parties should be guided by four basic goals for the performance of a residential insurance system:
1. Insurance premiums should create appropriate incentives to mitigate risk. As discussed above, appropriate incentives are needed to discourage homeowners from locating in risky areas and to encourage developers to build wind-resistant structures. When insurance premiums on a property are lower than the losses expected on that property, the incentive to avoid risky areas or to build windresistant structures is inadequate. Analogously,when insurance premiums are higher than expected losses, development will be unnecessarily discouraged and buildings over-engineered.
2. Decisions by households and residential developers should factor in wind and flood risk. It is not enough for insurance premiums to reflect expected losses on a property. Households and businesses must also take wind and flood risks into account when making decisions. A household that does not fully appreciate the risks in its area may not purchase wind or flood insurance, and, in consequence, losses that do occur may be borne by taxpayers, charities, or others.
3. The insurance system should pay legitimate claims efficiently and expeditiously. Claims should be paid without undue litigation and other transaction costs in order to maximize the percentage of insurer expenditures that reach those policyholders who have suffered losses. The expeditious resolution of claims aids rebuilding efforts after a disaster and helps the local economy recover.
4. The market should encourage innovation and price competition. Innovation can result in better loss-prevention programs, policy features that better serve the needs of homeowners, and faster and more efficient payments to those who sustain damages. Competition can speed innovation and reduce inefficiency.
More later from both the report and Sop.
What’s Wrong with the Insurance Market Along the Gulf Coast and How Do We Fix It?
Wednesday, October 20, 2010
The University of Southern Mississippi
Gulf Park Campus
Fleming Education Center Auditorium
Long Beach, Mississippi 39560
A coffee reception will begin at 8:45a.m. and a reception will follow the presentation. The event will include a panel discussion of the current insurance market and the future of reform efforts.
There is no charge to attend, but space is limited.
Panelists will include, but are not limited to:
Gene Taylor, U.S. Congressman, 4th District Mississippi
Steve Scalise, U.S.Congressman, 1st District Louisiana
Lenwood Brooks, Legislative Assistant, Senator Roger Wicker
Lloyd Dixon, Senior Economist, RAND Corporation
Dave Treutel, President, Treutel Insurance Agency, NFIP Advisory Council
Jim McDonald, Independent Insurance Consultant, RAND Contributor
The forum’s title, Gulf Coast Insurance Forum: What’s Wrong with the Insurance Market Along the Gulf Coast and How Do We Fix It? pretty much says it all. It is being held next Wednesday, October 20 9:00 AM sharp at the Fleming Education Center Auditorium at USM Gulf Park in Long Beach.
According to the folks at Source Watch RAND Corp “ranked fifth in the latest survey of think tank media citations by FAIR (Fairness & Accuracy in Reporting)” and is considered centrist. IMHO their work in the area of insuring right tail catastrophes like hurricanes has been very good as they tackle the issues from a broader standpoint that is not found in the insurance industry’s bought and paid for university research from places like U Penn.
The panel includes folks in the trenches with this issue everyday in David Treutel, Gene Taylor and Steve Scalise. Senator Wicker will have his policy guy there as well. This forum is sponsored by the Gulf Coast Business Council, the regional voice of the Mississippi coast business community.
I’d like to issue a special invite to the Slabbed Nation and especially our friend Lynda in central Mississippi to come join me and party the day away cussin’ and discussin’ the very real problem of the dysfunctional coastal wind insurance market.