Archive for June, 2012

The unanimous decision by a federal appeals court to uphold a finding by the Environmental Protection Agency (EPA) that greenhouse gases endanger public health and can be regulated under the Clean Air Act is drawing a wide range of responses in the media.

The New York Times reports that in addition to upholding the E.P.A.’s so-called endangerment finding, the three-judge panel of the United States Court of Appeals for the District of Columbia let stand related rules setting limits on greenhouse gas emissions from cars and limiting emissions from stationary sources.

The Wall Street Journal describes the decision as a blow to the coal industry and other companies, noting that he court gave the EPA almost everything it wanted in the 82-page ruling.

According to Wonkblog at the Washington Post this is what the decision means:

For one, the EPA will finish up drafting standards requiring cars and light trucks to get a fleet-wide average fuel economy of 54.5 miles per gallon by 2025. And the agency can move forward with its rules limiting carbon pollution from new power plants. Next up: The agency has to decide whether to place carbon limits on existing power plants, as well as whether to regulate other major sources of pollution such as oil refineries or cement plants.”

The NY Times Dot Earth blog has a downloadable version of the full court decision posted here.

Check out I.I.I. information on climate change and insurance.

Overall customer satisfaction with auto insurance companies has reached an all-time high, led primarily by increases in satisfaction with policy offerings and billing and payment, according to the J.D. Power and Associates 2012 U.S. Auto Insurance Study.

Overall satisfaction with auto insurers reached 804 on a 1,000-point scale, up 14 points from 2011 and the highest since the study was launched in 2000.

That’s the headline of this year’s findings. However, J.D. Power and Associates’ analysis also provides some useful intelligence about how well customers tolerate rate hikes.

Basically, customers that are notified in advance and given options tolerate rate hikes well.

Among auto insurance customers who were notified prior to a rate increase and had a discussion with their insurer, satisfaction is 807. This compares with a satisfaction score of 746 among those customers who were not notified of the rate increase prior to the renewal notice.

The study finds that 20 percent of customers experienced an insurer-initiated rate increase from 2011, with 63 percent of these customers experiencing an increase of $50 or more. Satisfaction among customers whose premiums increase by at least $50 is 735, compared with 797 among those experiencing an increase of less than $50.

A press release quotes Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates:

Among customers whose insurers meet or exceed all their service expectations, modest rate increases appear to be well tolerated, provided the rate adjustment amounts to less than $50. However, larger rate adjustments may trigger customers to consider shopping for a new insurer, especially those customers who are less engaged with their insurance company.”

The study is based on nearly 35,000 responses from auto insurance customers and was fielded between March and May 2012.

Check out I.I.I. facts and statistics on auto insurance: costs and expenditures.

June is Pride month. Here’s our annual round-up of some of the latest news and developments affecting the lesbian, gay, bisexual and transgender (LGBT) community:

Equality Is: Allstate Insurance has announced a new marketing campaign aimed at the LGBT audience. The Denver Post reports that Allstate is offering its services in an online/social media campaign called “Equality Is”, tapping into what is widely regarded as a growing business segment. What does equality look like to you? Share a quote, image or video to add to the story on Allstate’s interactive webpage. Better yet, get any insurance quote and Allstate will give $10 to the San Francisco LGBT Center or the Los Angeles Gay and Lesbian Center.

Gay Rights Infographic: It’s well understood that the ever-changing legal landscape can affect both how you do business and which products you sell in a particular country or region. Gay rights laws in the U.S. vary from state to state.  This cool infographic from the London Guardian shows how these laws affect the lives of LGBT people on a range of issues, including marriage, hospital visitation, adoption, employment, housing, hate crimes and school bullying.

Corporate equality: The list of insurers to score 100 percent in the Human Rights Campaign Foundation’s 2012 Corporate Equality Index (CEI) based on their LGBT workplace policies, benefits and practices was shorter than prior years. That’s because HRC has raised the bar on its ratings criteria, now including a new metric that rewards companies that offer equal health coverage for transgender employees, including sexual reassignment surgery. Even so, some 190 corporations, including seven insurers, still received a 100 percent score on the significantly more stringent criteria. We posted more on the 2012 CEI here.

Every year lightning strikes the ground 30 million times and injures about a thousand people in the United States, according to the Lightning Protection Institute (LPI).

As next week is Lightning Safety Awareness Week, here’s a recap by the numbers of this underrated weather hazard and cause of property damage, courtesy of the Insurance Information Institute (I.I.I.).

Note to readers: numbers are based on an analysis of homeowners insurance data by the I.I.I. and State Farm:

186,000: The number of lightning claims paid out by homeowners insurers in 2011. Losses ranged from damage to expensive electronic equipment to structural fires that destroyed entire homes.

$5,112: The average cost of a lighting claim in 2011, up 5.5 percent from 2010.

93%: The increase in the average cost per claim from 2004-2011, even as the actual number of paid claims fell by over 33 percent over the seven-year period. This decline may be due to increased use of lightning protection systems.

Loretta Worters, vice president of the I.I.I., sums up the findings:

The number of paid claims is down, but the average cost per claim continues to rise, in part because of the huge increase in the number and value of consumer electronics in homes. Plasma and high-definition television sets, home entertainment centers, multiple computer households, smart phones, gaming systems and other expensive devices—which can all be destroyed by power surges—continue to have a significant impact on claims losses.”

With this in mind, it’s good to know that damage caused by lightning, such as fire, is covered by standard homeowners and business insurance policies. Some home and business insurance policies provide coverage for power surges that are a direct result of lightning striking a home or business, according to the I.I.I.

There is also coverage for lightning damage under the comprehensive portion of an auto insurance policy.

Check out more I.I.I. facts and statistics on lightning here.

Companies need to undertake ongoing and more robust analysis of potential water-related risks and provide more quantitative data on overall water use and financially material risks as part of their disclosures in Securities and Exchange Commission (SEC) filings, according to a new report from Ceres.

Ceres maintains that while overall corporate disclosures of water-related risks have increased since the SEC issued its climate change guidance in 2010, most reporting remains weak and inconsistent.

In its analysis of changes in water risk disclosures by more than 80 companies between 2009 and 2011, Ceres says that reporting is lacking especially in regard to data on financial impacts, quantitative water metrics and potential supply chain risks.

Ceres notes that drought and flood cycles have led to billions of dollars in losses for corporations worldwide. Drought in China in the spring of 2012 left 3.5 million people with limited or no access to drinking water and cost the affected provinces an estimated $2.3 billion. Flooding in Thailand in November 2011 cost the semiconductor industry an estimated $15-20 billion.

Here in the U.S. in early June rain inundated the Florida panhandle and coastal Alabama, resulting in more than two feet of precipitation and at least $20 million in flood damage. The region had previously been classified as in severe or extreme drought. This has led Florida officials to call for increased disclosure of risks.

A key takeaway from the report is that significantly more companies are disclosing exposure to water risk, with a focus on physical risk. Some 87 percent of companies now report physical exposure to water risk versus 76 percent in 2009, with the biggest increases coming from the oil and gas sector, according to Ceres.

The report also finds that more companies are making the connection to climate change. In 2009, only eight of the 82 companies assessed (10 percent) disclosed that climate change posed growing physical risks in the form of water scarcity, flooding or quality issues to their operations and supply chains. In 2011, that number jumped to 22 (27 percent).

Hat tip to Business Insurance for flagging this story.

The I.I.I. has information on climate change and insurance issues.

There’s no way to guarantee your workplace won’t ever have to deal with natural or manmade disasters, but by being prepared and communicating effectively, employers can help employees be calm and responsive when disaster strikes.

This fact-filled infographic from CareerBuilder has all you need to know to:

 

As wildfires continue to burn in Colorado, New Mexico, Utah, Wyoming and Arizona, we read that U.S. Forest Service chief Tom Tidwell is renewing his call to restore forests to a more natural state in which fire was part of the landscape.

The Associated Press reports that the Forest Service’s plan is to set the clock back to zero, accelerating restoration programs – including prescribed fires and mechanical thinning – by 20 percent each year in key areas that are facing the greatest danger of a catastrophic fire.

According to AP, four million acres are being targeted this year with a $1 billion budget.

Meanwhile, a new report from scientists at the University of California at Berkeley and Texas Tech University says that climate change will cause more wildfires across North America and Europe in the next 30 years.

The study used 16 different climate models to generate its results. Risk Management Monitor has more on its findings.

And a new climate analysis from NOAA notes that the U.S. experienced its hottest spring (March-May) on record, with an average temperature of 57.1°F, 5.2°F above the 1901-2000 long-term average, surpassing the previous warmest spring (1910) by 2.0°F.

With the warmest March, third warmest April and second warmest May, Spring 2012 marked the largest temperature departure from average of any season on record for the contiguous United States, NOAA says.

In May, ongoing drought, combined with windy conditions, created ideal wildfire conditions across the Southwest.

NOAA notes that the Whitewater-Baldy Fire complex in the Gila National Forest of western New Mexico had charred over 210,000 acres by the beginning of June, surpassing 2011’s Las Conchas Fire as the largest wildfire on record for the state. The Whitewater-Baldy fire is still burning.

Check out I.I.I. facts and statistics on wildfires.

The Rocky Mountain Insurance Information Association (RMIIA) is a good resource for information on the Colorado wildfires.

Obesity now affects 17 percent of all children and adolescents in the United States, triple the rate from one generation ago, according to the Centers for Disease Control and Prevention (CDC).

So the announcement by Walt Disney Co last week that it is banning junk food advertising on its television and radio programs for kids is a welcome move.

Disney’s new standards will apply to all food and beverage products advertised, sponsored, or promoted on Disney Channel, Disney XD, Disney Junior, Radio Disney and Disney-owned online destinations targeting families with younger children.

The nutrition guidelines are aligned to federal standards, promote fruit and vegetable consumption and call for limiting calories and reducing saturated fat, sodium, and sugar.

Though the rules won’t take effect until 2015, as a parent you have to applaud this effort.

First Lady Michelle Obama described the new initiative as a “game changer” for the health of our children, saying:

This is a major American company – a global brand – that is literally changing the way it does business so that our kids can lead healthier lives. With this new initiative, Disney is doing what no major media company has ever done before in the U.S. – and what I hope every company will do going forward. When it comes to the ads they show and the food they sell, they are asking themselves one simple question: “Is this good for our kids?”

A recent report by the Institute of Medicine (IOM) noted that 87 percent of food and beverage commercials seen by children ages 6-11 on TV advertise foods high in saturated fat, sugar, or sodium. Meanwhile, older children and adolescents consume more than 7.5 hours of media each day.

In an earlier report Obesity, Liability and Insurance the Insurance Information Institute (I.I.I.) flagged the potential liability risk facing food manufacturers, advertising agencies and ingredient manufacturers to name a few from obesity-related tort actions.

We note that Ferrero, the manufacturers of Nutella recently agreed to pay $3 million to settle a class action lawsuit over misleading advertising that claimed the chocolate-hazelnut spread was healthy.

And orange juice maker Tropicana is facing lawsuits over labeling its juice as “all natural” amid allegations that the company adds chemically engineered flavoring to its product.

Since the causes of obesity and overweight are varied and complex, it would be naïve to think that one company’s actions could solve the obesity epidemic.

However, given that media is embedded in our culture and the most frequently marketed foods and beverages are higher in added fats and sugars, any move to make the ads our children see more nutritious at the least will have a positive influence.

The IOM report put the annual cost of obesity-related illness in the U.S. at $190.2 billion. By comparison, the potential cost to Disney is a mere fraction of this amount.

A new report from CoreLogic underscores just how important a purchase of flood insurance may be to homeowners, especially those living in the Northeast.

The report reveals that over four million homes in the U.S. along the Atlantic and Gulf Coasts are at risk of hurricane-driven storm-surge damage, with more than $700 billion in total property exposure.

In the Atlantic coast region alone, there are around 2.2 million homes at risk, valued at more than $500 billion. Total exposure along the Gulf Coast is nearly $200 billion, with just under 1.8 million homes at risk for potential storm-surge damage.

What this means is that there are millions of homeowners living outside of FEMA designated flood zones that might still be in an area susceptible to coastal storm-surge flooding.

CoreLogic makes the point that FEMA flood zones define areas at risk for fresh-water flooding, which is an entirely different hazard than hurricane-driven storm surge.

Extensive areas along both coasts are actually vulnerable to storm surge, yet not located within designated FEMA flood zones—and therefore homeowners are not required to purchase flood insurance.”

It goes on:

Since homeowner’s insurance excludes flood losses from either fresh or salt water, homeowners who are not located in FEMA flood zones but are in high-risk surge zones have not historically considerebuying National Flood Insurance Program (NFIP) coverage for their properties.”

To illustrate its point CoreLogic compared the number of homes in surge inundation zones against those located in both surge and FEMA flood zones for each of 14 metro areas.

For example, of 463,844 total properties exposed to flood or surge inundation in the New York/Northern New Jersey/Long Island metro area, 68.1 percent are located in a surge zone, but only 1.9 percent are located in a FEMA flood zone, while 30.1 percent are located in both a flood zone and a surge zone.

Hurricane Irene in 2011 showed the level of damage that even a weak storm could cause, but CoreLogic estimates the storm surge from a Category 4 storm hitting New York City and Long Island could cause damage of nearly $168 billion.

An I.I.I. chart shows that the top 10 most costly flood events in the U.S. ranked by NFIP payouts are associated with hurricanes or tropical storms.

Many factors, including demographics, economic conditions and the litigation landscape, can affect an insurer’s decision to operate in or to continue doing business in a particular state. The regulatory environment is another important consideration for insurers.

According to the 2012 Insurance Regulation Report Card from non-profit think tank R Street Institute, Vermont, Illinois and Ohio had the best property/casualty insurance regulatory environments in the U.S. this year, receiving ‘A+’ grades.

At the other end of the scale, Florida was the only state to receive a failing grade, falling more than two standard deviations below the mean (the mean was -3.1).

Other states falling more than one standard deviation below the mean include Alaska, Michigan, New York, California, Massachusetts and Texas.

Interestingly enough the best state, Vermont, only scored 26 out of a maximum possible score of 55.

R Street based its assessment of states on 14 objective metrics, including:

- the concentration of their home and auto insurance markets and relative size of their residual markets

- the effectiveness of state solvency and fraud regulation

- the transparency and politicization of insurance regulation

- the tax and fee burdens placed on insurance markets and the proportion of fees used to support insurance regulation

- the relative freedom granted to insurers to set risk-based rates, including through the use of credit and territorial information

A press release cites the report’s author R.J. Lehmann saying:

Overall, in 2011 and early 2012, we saw continued modest trends toward greater consumer and business freedom in the homeowners and automobile insurance markets, as well as real efforts in some states to scale back, or otherwise place on more sound financial footing, residual insurance markets and state-run insurance entities.”

Those are positive trends, and we hope this report card encourages other states to move forward in that direction over the next year.”

Stay tuned.