Supporting State Economies

A new study by the National Conference of State Legislatures (NCSL) last week found that with few exceptions, state budgets are deteriorating. In fact, William Pound, NCSL executive director, noted that the fiscal situations have declined so much in some states that they appear to be in recession. So it’s perhaps timely to mention again the key contributions the insurance industry makes to state, local and national economies. The I.I.I. recently released updated 2008 state-specific editions of its online publication “A Firm Foundation†. The Web site shows the myriad ways in which insurers support national and state economies, from offering employment and fueling the capital markets, to defraying the cost of catastrophes and providing financial security and income to individuals and businesses through the payment of claims. Check out the updated California, South Carolina and Texas editions online.

Benchmarks on Insurers and Brokers

While we’re on the topic of risk management, insurers attending this week’s RIMS conference might want to stop by the Willis booth to check out a demo of the broker’s new carrier benchmarking tool, the Willis Quality Index. The tool will rate and compare carriers on their performance in underwriting, policy administration, claims performance and service activities. Last June the findings of the inaugural carrier survey from Willis (see our June 22, 2007 posting) indicated that insurers needed to do more to differentiate themselves through service and performance. The latest Spring 2008 survey found evidence that carriers across all parts of the business had scored, on average, better than in their last survey.

Meanwhile, RIMS and Advisen Ltd have released the Broker Services and Remuneration Study. This study finds that insurance buyers are driving brokers to change their service offerings and the way brokers are compensated. Buyers were surveyed on how their brokers are compensated, how much their brokers receive for their services and what types of services their brokers provide. For the industry’s largest programs, buyers are spending the majority of their broker money on fees instead of commissions, the study reports. It goes on to quantify the differences in average costs to insurance buyers of fee-based broker remuneration, as opposed to traditional commission-based remuneration.

Risk Management Spotlight

The annual Risk and Insurance Management Society (RIMS) conference opens in San Diego today, so expect a flurry of risk management surveys to be released this week.  Amid the fallout from the credit crisis, the risk management and supervision of financial institutions will surely feature among risk managers’ discussions. Check out I.I.I.’s insuring your business Web site for further info on insurance and risk management for businesses.

‘The Best Shot in Golf’

Golfing aficionados among you might want to tune in to a documentary to be aired on CBS Saturday May 3 at 2pm, ET, illustrating how the 1,500-foot aerial shot has become an essential part of how CBS Sports covers the PGA Tour.

Presented by MetLife, The Best Shot in Golf, will show how the MetLife blimp, Snoopy One, provides a birds eye view combining both the beauty of the courses with a unique above the ground view of the game. Whether it’s the nomadic journey of the 14-person MetLife Snoopy One crew, or the CBS broadcast team on the ground, it’s a fascinating process. From the rugged beauty of California’s Pebble Beach and Torrey Pines, to the low-lying resorts at Hilton Head Island, South Carolina and Ponte Vedra Beach, Florida, the documentary will take viewers behind the scenes to see how dramatic golf shots are captured.

State Litigation Threat

The U.S. Chamber Institute for Legal Reform (ILR) has released its annual study ranking the best and worst state liability systems across the country. For the third year running, West Virginia’s legal climate ranked as the worst in the country. Louisiana, Mississippi, Alabama and Illinois rounded out the bottom five states. Meanwhile, the states doing the best job of creating a fair and reasonable litigation environment are: Delaware, Nebraska, Maine, Indiana and Utah. The ILR noted that just over half (55 percent) of senior attorneys view the state court liability systems in America as only fair or poor. A majority (63 percent) also report that the litigation environment in a state is likely to impact important business decisions at their company, such as where to locate or do business, up from 57 percent in 2007. Check out further I.I.I. information on the liability system.  

Even Softer Market

Surveys of current policy renewal prices as reported by agents and brokers, and corporate risk managers, appear to confirm that the soft cycle for commercial lines is getting even softer. According to the latest market survey from the Council of Insurance Agents & Brokers (CIAB), the average premium decline for all commercial accounts regardless of size was -13.5 percent in the first quarter of 2008, compared with a -12 percent decline in the fourth quarter of 2007. Although coverage for coastal properties was still problematic, there was more capacity available and rates were down in most areas.

Similarly, the 2008 RIMS Benchmark Survey reports that another year free of major natural catastrophes, combined with abundant insurance capacity contributed to falling insurance costs, leading to lower average total cost of risk (TCOR) per $1,000 of revenue in 2007. Even property premiums began to edge downward, according to RIMS. Meanwhile, online insurance exchange MarketScout puts the average P/C rate decrease at -12 percent in March 2008, with commercial property and general liability experiencing the largest rate decreases of -14 percent.     


CA Wildfire Claims Update

This week marks the six-month anniversary of the October 2007 California fire and wind storms (see our Oct 24, 2007 posting) and we’re pleased to report that a new survey of insurers estimates that nearly 90 percent of claims stemming from the event have been settled. A poll by the Insurance Information Network of California (IINC) of companies representing nearly two-thirds of the California’s homeowners market found that 29,954 of their 33,789 residential claims have been settled. To date, those claims have resulted in more than $1.27 billion in claims settlements among the surveyed companies, a total which is ultimately expected to reach $1.47 billion. By comparison, roughly 86 percent of claims from the 2003 wildfires had been settled by April 2004, according to a previous IINC survey. The survey tallied brushfire and wind-related homeowners insurance claims settled. Check out further I.I.I. wildfire statistics.  

Midwest Earthquake

The U.S. Geological Survey (USGS) today will issue updated earthquake hazard assessment maps for the entire U.S. Information on these maps is used to update building codes. The USGS map updates come as a strong aftershock shook southern Illinois early this morning, three days after a magnitude 5.2 quake struck the region. The quake is a reminder of the fact that earthquakes can strike anywhere, not just in California and parts of the west. The USGS noted that the event also highlights that earthquakes east of the Mississippi River are felt more widely than those in the west. Apparently the Illinois quake was felt as far west as Kansas, as far north as Upper Michigan, and as far south as Georgia. It is the strongest quake in southern Illinois since a magnitude 5.4 earthquake occurring in November 1968. Check out further I.I.I. earthquake facts & stats.  

‘Invisible Wounds of War’

Is the title of a new RAND report that estimates nearly one in five military service members who have returned from Iraq and Afghanistan report symptoms of post traumatic stress disorder or major depression, yet only slightly more than half have sought treatment. Researchers also found about 19 percent of returning service members report experiencing a possible traumatic brain injury while deployed, with 7 percent reporting both a probable brain injury and current PTSD or major depression. In what RAND describes as a “major health crisis†, researchers estimate that PTSD and depression among returning service members will cost the nation up to $6.2 billion in the two years following deployment, including both direct medical care and costs for lost productivity and suicide. Injured veterans returning from war present unique challenges for insurers as I.I.I. president Dr. Robert Hartwig outlined in a January 2006 report: When Johnny Comes Marching Home.  

Increasing Coverage Options

After all the hearings that have taken place up and down the country on coastal property insurance, legislation introduced in the House earlier this week that would expand the coverage options for commercial property insurance has been welcomed by the Risk and Insurance Management Society (RIMS). HR 5792, known as the “Increasing Insurance Coverage Options for Consumers”, would allow Risk Retention Groups (RRGs) and Risk Purchasing Groups (RPGs) to write property coverage. The issue is likely to be a topic of discussion at the upcoming 2008 RIMS annual conference in San Diego April 27 to May 1. For further information on RRGs and RPGs, check out the I.I.I. issues update on captives and other risk-financing options.