Market Adjusts

For the first time in a long while a survey of the condition of the U.S. commercial property/casualty market appears to indicate a slight easing of the soft market. Online insurance exchange MarketScout reports that the average property/casualty rate decrease was 15 percent in January 2008, compared with a year ago. MarketScout attributes the moderation largely to D&O prices related to the subprime crisis. D&O rates adjusted 3 percent to post a rate drop of 14 percent in January, compared to a decrease of 17 percent the prior year. Nevertheless, MarketScout warns not to mistake this as a trend towards a hardening market, referring to it simply as “a normal adjustment during the course of the current soft market”. By line of coverage, umbrella/excess led the pack with a rate decline of 18 percent in January 2008. Commercial property and general liability experienced the second largest drop in rates of 17 percent. Surety and workers’ compensation saw the smallest rate decline of 8 percent. Check out the I.I.I.’s latest industry outlook.  

American Dream Alive

With Super Tuesday underway, it’s only appropriate we cite a new study showing that the American Dream is alive and well. The MetLife study finds that 86 percent of individuals believe the U.S. economy is headed in the wrong direction, up from 64 percent just one year ago. Despite this collective pessimism, 85 percent of individuals expect their own financial situation to be about the same or even better this year, compared to last year – a sign that the American spirit of personal optimism and self-reliance is holding strong, MetLife says. Still, the findings reveal Americans have growing concerns about energy costs, healthcare costs, and rising levels of personal debt, as well as shrinking government-sponsored benefits.

In fact, more than three-quarters (77 percent) of Americans say they are planning to build their own personal safety nets to protect their family’s financial future. Exactly which products they think should comprise a personal financial safety net differ by generation. Health insurance that continues through retirement and retirement savings plans such as a 401(k) are the top priorities of both Baby Boomers and GenYers. But Boomers rank income annuities and long-term care insurance next, whereas GenYers would include life insurance followed by income annuities in their personal safety net. To help put your financial house in order the I.I.I. has free downloadable personal finance software. Check it out at http://www.myfinancialhouse.org  

Complaints Decline Again

The National Association of Insurance Commissioners (NAIC) has just released its top insurance complaints for 2007. Given the media’s tendency to focus on the negative, we shouldn’t overlook the fact that consumer complaints against insurers declined for the fourth consecutive year by 3.6 percent to 222,814 in 2007. Delays (16 percent), denial of claims (14.7 percent) and unsatisfactory settlement offers (9.8 percent) were the top three reasons consumers filed formal complaints against their carriers during the course of the year. Policy cancellations (4.6 percent) and premium/insurance rating issues (4.4 percent) rounded out the top five, the regulators noted. Meanwhile, accident & health (36.4 percent), auto (34.4 percent) and homeowners (12.5 percent) were the top three complaints by type of coverage in 2007. It would be remiss of us not to mention that the NAIC collected the data via its centralized electronic Complaint Database System (CDS), through which states voluntarily report “closed† complaints. A closed complaint is one that has been investigated and resolved to the satisfaction of the state or jurisdiction in which it is filed.  

Risking the Super Bowl

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.  

Internet Key to Growth

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.

Financial Risk Outlook

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 Socià ©tà © Gà ©nà ©rale of $7.2 billion. Check out  further I.I.I. info on financial  and market  conditions for insurers.

Nanotech and Art

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.  

Accident Response Fee Facts

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  

Hall of Shame

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.  

Changed Energy Risk Landscape

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.  

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