Archive for January, 2008

We can’t let the week go by without mentioning this weekend’s Super Bowl game. Whether your money is on the Patriots or the Giants, a few risk management tips appear to be in order. Before you head out to the game or switch on the TV Sunday, bear in mind that a study just published in the New England Journal of Medicine finds that viewing a stressful soccer match more than doubles the risk of an acute cardiovascular event. Researchers examined the relation between emotional stress and the incidence of cardiovascular events during the FIFA World Cup held in Germany in the summer of 2006. The findings suggest the risk is higher in men, than in women, and particularly in men with known coronary heart disease. In view of this excess risk, researchers say preventive measures are urgently needed. Meanwhile, for those throwing a Super Bowl party, the I.I.I. offers tips for being a responsible host. The day of the big game is also one of the most dangerous days to be on the road as too many impaired drivers make their way home after the party. Making sure your gathering includes a number of designated drivers is the way to go. 

Just how important a role the Internet will play in the sale of insurance in coming years is a question that elicits a range of viewpoints. The latest World Insurance Report from consulting group CapGemini and the European Financial Management & Marketing Association (EFMA) signals a startling shift in Internet usage among customers. According to its findings, in mature markets such as North America and Western Europe, some 28 percent of customers said they intended to buy their life insurance policies online in three years, while 34 percent said they would buy non-life policies online. The report suggests the rise of the Internet will clearly put some existing distribution networks at risk. Insurers prepared to embrace and leverage these changes and to adopt a structured multi-distribution strategy could benefit from significant growth opportunities, it says. Check out online insurance sales facts & stats from the I.I.I.

We head across the pond today, where the U.K. financial regulator has published its annual Financial Risk Outlook. Amid the continuing slowdown in the economy, the FSA’s 2008 report focuses on the risks arising from the events of the second half of 2007 and specifically warns firms and consumers of the risks that could impact them in a less benign economy. Among the risks identified as priority, the FSA notes that tighter economic conditions could increase the incidence or discovery of some types of financial crime or lead to firms’ resources being diverted away from tackling financial crime. An interesting point, given last week’s revelation concerning a rogue trader who defrauded French bank Société Générale of $7.2 billion. Check out further I.I.I. info on financial and market conditions for insurers.

The potential impact that nanotechnology may have on insurers is a frequently discussed topic at industry seminars and gatherings, so we read with interest today’s posting by Barnaby J. Feder in the Bits blog of the New York Times. It describes the work of an artist who by day designs lithium batteries that incorporate nanomaterials and who by night incorporates his exploration of nanotechnology into works of abstract art. Cris Orfescu, the artist, sees NanoArt as a way to more effectively communicate with the general public and to raise the general awareness for nanotechnology and its impact on our lives. Just another example of the increasing array of products and procedures using nanotechnology today. 

We’re again seeing an uptick in interest on the issue of accident response fees. Such fees can appear an attractive alternative to raising local taxes for budget-constrained municipalities. In short, some municipalities are attempting to bill insurance companies for police or fire department responses to auto accidents. This practice is a growing trend in a number of Midwestern states, including Michigan, Ohio and Wisconsin, as well as other states like Kentucky and Florida. Indeed, several cities and municipalities have passed ordinances permitting the collection of such fees. In some cases, third party fee companies are encouraging the practice by soliciting municipalities for the collection of accident response fees.

We note that the response to and investigation of auto accidents has long been handled by police and fire departments, supported by local taxes. Such response services have never been covered or charged for in auto insurance policies. If insurers are to be expected to pay for services historically supported by local taxes, then going forward this additional cost component will have to be factored into auto insurance policies. For more information, check out the I.I.I. primer on municipal accident response fees. Further resources are available at www.accidenttax.com and www.accidentresponsefees.com 

The Coalition Against Insurance Fraud (CAIF) has released its annual Insurance Fraud Hall of Shame, listing the year’s most brazen insurance scams. We read that a glass-eating gypsy, a teacher who faked cancer, and an insurance agent who killed the homeless are among the top insurance swindlers of 2007 and have been duly inducted into the Insurance Fraud Hall of Shame. According to the Coalition, insurance fraud is an $80 billion-a-year crime and has grown more violent and invasive in recent years, as indicated by this year’s Hall of Shame swindlers. Check out further I.I.I. info on insurance fraud. 

Sharp increases in the price of commodities such as oil, steel, building materials and contractor day rates have had a significant impact on the energy industry risk management landscape. That’s the analysis from Willis in its latest Energy Market Review. Willis notes that superheated commodity prices have resulted in increased replacement cost valuations and provided extra scope for longer and costlier delays in the event of an accident. This means the energy industry is facing significantly increased exposures and the potential for higher losses. While the energy sector has benefited from a benign loss environment over the last two years, Willis questions whether the market is really prepared for more expensive future losses that are the inevitable result of these developments. In such a market, it urges clients to re-examine their risk exposures and asset valuations in order to make sure they are adequately insured. 

We all value our privacy, and the 2008 survey from the University of Southern California’s Center for the Digital Future finds that privacy and security continue to be a major concern when shopping online. The study also underscores the significant threat businesses face from breaches in data security. According to its findings, the percentage of respondents who were very or extremely concerned when they buy on the Internet increased in 2007, and overall concern was the highest since the first study was published seven years ago. Concerns about credit card security when or if buying online also continue to remain high but stable, with 57 percent of respondents very or extremely concerned in 2007. Check out further I.I.I. info on identity theft.

Yesterday the U.S. Supreme Court issued its decision in the much anticipated securities litigation case of Stoneridge Investment Partners LLC v. Scientific Atlanta Inc. In a 5-3 opinion, the Court held that shareholders cannot sue third parties (such as accountants and lawyers) charged with aiding a corporation that has defrauded its investors. The ruling upholds two lower court decisions. As we have discussed before (see our October 9, 2007 posting), a decision in favor of investors would have exposed U.S. companies as well as those doing business with them to the likelihood of significant additional costly shareholder suits. Further commentary on the Stoneridge case can be found at The D&O Diary, a blog focused on D&O liability issues. 

Could it be the next Facebook or MySpace? In a release yesterday, Dynamia Interactive announced the launch of what it claims to be the world’s first social network for the insurance industry, Sexy Insurance. Found at www.sexyinsurance.com the site is designed to provide a niche space for professionals in our industry to meet, network and job search. Users simply sign up, log-in, and meet other users – similar to other popular social networking sites. With 42 members so far, Sexy Insurance has a way to go before rivaling Facebook’s 60 million members. Still, the site does fill a gap in the otherwise insurance-less social networking web. We’ve taken a quick look and welcome your thoughts on this or other web initiatives in insurance.