2011: It’s A Wrap

As 2011 draws to a close, there’s little doubt that the top insurance story — and one of the biggest stories in general — of the year involved natural catastrophes.

As I.I.I. president Dr. Robert Hartwig noted in his commentary on the P/C industry’s 2011 – First Nine Month Results:

The first nine months of 2011 have been remarkably violent in terms of catastrophes on a global scale. Megacastastrophes worldwide caused an estimated $350 billion in economic losses, shattering the previous record of $230 billion set in 2005. Approximately one-third of that total or $108 billion was insured, second only to the $123 billion recorded in 2005.†

The Insurance Information Institute estimates that catastrophe losses around the world shaved 0.5 percent off global gross domestic product (GDP) in 2011.

Not surprisingly then, there are a number of stories and reviews of this year’s catastrophic impact that are worth taking in before we let old acquaintance be forgot.

“How 2011 Became a ‘Mind-Boggling’ Year of Extreme Weather† is the subject of a PBS Newshour broadcast that aired December 28.

PBS asked Kathryn Sullivan, deputy director of NOAA and Jeff Masters, meteorologist and blogger with the Weather Underground site for their observations on what was an exceptional year of weather.

The  impact of catastrophes  stateside is the focus of  a fact-packed post over at Dr. Masters’ Wunderblog looks at how the year 2011 will forever be known as Year of the Tornado in the U.S.

Preliminary damage estimates from Munich Re put 2011’s insured losses due to U.S. thunderstorms and tornadoes at $25 billion, more than double the previous record set in 2010, according to Wunderblog.

In Catastrophes 2011: The Top 10 – Revisited, PC360 has updated its list of the top natural catastrophes of the year with data gathered from Swiss Re and catastrophe modeler AIR Worldwide.

And if 2011 didn’t give the insurance industry enough to think about from the catastrophe perspective, a Reuters article looks ahead to predictions for what may be in store in 2012.

Also check out I.I.I. facts+statistics on U.S. Catastrophes and Global Catastrophes.

IRC Warns On Rising Auto Injury Claims Costs

Insurers and drivers awoke to some not so good news this morning. According to new findings from an Insurance Research Council (IRC) study of auto injury claim trends, insurance claim costs countrywide have recently increased, reversing previous trends of declining or relatively stable costs.

The IRC reports that although injury claim severity (the average cost of injury claims) has been increasing steadily in the last several years, much of the increase has been offset by declining claim frequency, producing relatively stable injury claim costs per vehicle.

However, recent data indicate that claim frequency on a countrywide basis is no longer decreasing.

In the case of personal injury protection (PIP) claims, the effect of rising claim severity has been magnified by a simultaneous increase in claim frequency. PIP claim costs per insured vehicle countrywide increased by more than 18 percent from 2008 to 2010, the IRC said.

For bodily injury (BI) liability claims, the effect of rising claims severity has been mitigated somewhat by stabilization, rather than an increase, in claim frequency. However, 2010 marks the first year since 1994 that BI claim frequency did not decline.

Elizabeth Sprinkel, senior vice president of The Institutes, summed up the findings:

While we hope these findings represent temporary conditions, we can’t be sure that is the case and can’t afford to ignore the factors driving rising claim costs.†

The IRC notes that much of the deterioration in PIP trends has been concentrated in three of the largest states with no-fault approaches to compensating auto injuries – Florida, Michigan and New York.

In Florida, the average PIP claim cost per insured vehicle in the state jumped 62 percent in just two years (2008-2010).

PIP costs per vehicle in Michigan have been increasing rapidly for several years now – rising more than 120 percent over the last decade, while the New York system has been on a roller coaster of rising and falling costs driving by a surge in suspected claim abuse.

Check out the I.I.I. issues update on no-fault auto insurance.

Reality TV Show Risks

Were you one of the 16.4 million viewers who caught the finale of the latest season of Survivor Sunday night? If so, did you ever consider the insurance required to produce one of these shows?

The extreme risks of reality TV shows are the subject of a post over at Risk Management Monitor blog. An article at PC360 looks at the same topic.

Many of these popular shows like Fear Factor and Survivor pit contestants against the elements and test their physical limits. It would seem the higher the risks, the more entertaining the show.

In a Q+A with an insurance industry reality TV expert at Aon/Albert G. Ruben, Risk Management Monitor addresses the key issues that arise in producing a reality show and insuring it.

Some of the key takeaways: with the exception of intentional acts, no stunts or activities are uninsurable; shows with the most stunts do not necessarily generate the most claims; many production companies have contestants sign liability releases, which hold them harmless if the participant is injured during filming of the show.

PC360 also reports that even as the popularity of reality TV has increased along with the risks of ever-more dangerous stunts, with a loss ratio of less than 3 percent, insurance coverage is available and mostly affordable.

When it comes to reality TV insurance coverage then, the tribe has spoken.

Judicial Hellholes 2011/2012

The annual Judicial Hellholes report has just been released by the American Tort Reform Association (ATRA).

Civil courts in Philadelphia top the list for the second year in a row, as “litigation tourism† is actually encouraged by some judges, according to ATRA:

Philadelphia hosts a disproportionate share of Pennsylvania’s lawsuits and, as demonstrated by this report, forum shopping for plaintiff-friendly courts within the state is primarily a “Philly phenomenon.†

Meanwhile, civil justice problems throughout California and West Virginia, earned them second and third place rankings respectively, while auto-accident fraud racketeers put perennial judicial hellhole South Florida in fourth place.

Madison and St. Clair counties in Illinois, return to fifth place in the rankings this year as recent civil justice reform efforts there appear to have stalled.

New York City and Albany, New York; Clark County, Nevada; and McLean County, Illinois round out the list of the worst judicial hellholes in the nation.

But it’s not all bad news.

ATRA notes that this year’s report, more so than any other in the past, also emphasizes a boom in good news at the state level, with nearly 50 positive tort reform laws enacted in more than 20 states through 2011.

In the words of ATRA president Tiger Joyce:

As anemic economic growth and high unemployment continue to plague much of the country, many governors and state legislators were determined to make their states more competitive and attractive to employers. A variety of tort reform measures figured prominently in these policymakers’ pro-growth, job-creation agendas.†

However, the report also highlights several additional jurisdictions that bear watching due to troubling developments or their histories of lawsuit abuse.

On this year’s watch list are: the Eastern District of Texas; Cook County, Illinois; Southern New Jersey; Atlantic County, New Jersey; Franklin County, Alabama; Smith County, Mississippi; and Louisiana.

The full report is available here.

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

New Madrid Anniversary Highlights Earthquake Risk

As you’ll see from the I.I.I. website today marks the 200th anniversary of the first of the New Madrid earthquakes.

This series of three earthquakes, the first of which occurred on December 16, 1811, with major temblors following in January and February of 1812, remain among the most powerful quakes in U.S. history (three of the earthquakes were above a magnitude 7, and there were up to 200 aftershocks of between magnitude 4 and 7).

According to the U.S. Geological Survey, a similar risk exists today in the New Madrid seismic zone, threatening eight states: Alabama, Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

That puts large cities such as Memphis, St. Louis and Nashville well within range of a large-scale New Madrid earthquake.

Recent projections by the USGS put the likelihood of a magnitude 6 or higher earthquake at about 25-50 percent over the next few decades, whereas a magnitude 7 or higher has a 10 percent chance of occurring.

As noted by the I.I.I. it’s important to remember that earthquakes are not covered under standard homeowners or business insurance policies. However, coverage is available in the form of an endorsement to a home or business insurance policy.

A wealth of additional information  is available at  the New Madrid Bicentennial website, but for residents sitting at home wondering how they can protect their home and property in the event of an earthquake, the Insurance Institute for Business  & Home Safety (IBHS) has some handy risk reduction tips.

For example, one of the most common sources of damage and injury during earthquakes in the U.S. are falling objects.

The IBHS guide “Reduce Six Common Earthquake Risks for Under $70† identifies affordable ways to secure five items commonly found in homes so that they are not shaken loose, including water heaters, wall-mounted flat panel TVs, and bookcases. Worth a read!

Social Media Brings Growing Opportunities and Liability

Are you a fan of Facebook, YouTube, Twitter or LinkedIn? If you are one of the millions who interact on these social networks every day, do you ever consider the risks as you tweet, message, share and “like†?

A new white paper from the I.I.I. observes that like any other new technology, social media brings enormous opportunities and benefits.

Yet as businesses and individuals navigate this shifting online risk landscape, they face a range of evolving social media related liabilities including privacy, security, intellectual property and employment practices liability.

The proliferation of social media use comes amid growing concerns over cyber security. Businesses that store confidential customer and client information online are exposed to increasing liabilities and costs as a result of cyber attacks and data breaches.

A massive data breach at Sony Corp’s online game networks in April 2011 resulted in the theft of more than 100 million online accounts, for example. Just months later in October 2011 Sony’s Playstation Network and other online entertainment services were hit in a second attack that compromised 93,000 user accounts.

Coming in the wake of the 2010 Wikileaks breaches of classified data, these high profile data breach incidents have served to increase both public and government scrutiny of cyber security practices.

The Securities and Exchange Commission (SEC) recently issued guidance urging publicly traded companies to disclose significant instances of cyber risks and events. Description of relevant insurance coverage was included in the SEC’s list of appropriate disclosures.

While traditional insurance policies typically have not handled these emerging risks, in recent years limited coverage under traditional policies has become available.

But as reliance on traditional policies is not enough, specialist social media and cyber insurance policies have been developed by insurers to help businesses and individuals protect themselves from an ever-evolving range of risks.

To learn more about this emerging risk area, check out the I.I.I. white paper “Social Media, Liability and Insurance.†

Corporate Equality Index Raises Bar for LGBT Workplace Equality

Remarkable advances have taken place on behalf of lesbian, gay, bisexual and transgender equality (LGBT) in the workplace since 2002, as documented in the Human Rights Campaign Foundation’s 2012 Corporate Equality Index (CEI).

When the CEI was launched in 2002, only 13 businesses achieved a top score. This year, some 190 corporations, including seven  insurers, have received a 100 percent score on significantly more stringent criteria, including 10 of the top 20 Fortune-ranked companies.

The CEI rates employers on a scale from 0 to 100 percent based on their LGBT workplace policies, benefits and practices, including non-discrimination policies and training, partner benefits, transgender inclusive health insurance coverage and LGBT resource groups.

Three years ago, HRC began an initiative to raise the bar on its rating criteria so that a 100 percent score would reflect best practices of LGBT inclusion in the workplace.

As part of this effort, in 2012 companies are now rated on equal health coverage for transgender employees, including sexual reassignment surgery. In 2009, 85 companies offered transgender health coverage. This year, some 207 companies offered all of the benefits – a 144 percent increase.

Insurers receiving the 100 percent rating this year are: AAA Northern California, Nevada and Utah, Chubb Corp, ING North America, MetLife, Nationwide, Prudential Financial, and Sun Life Financial.

Aon, Deloitte and Marsh & McLennan were among other insurance-related businesses to earn the top rating.

If you’re wondering why the list of insurers that scored 100 is shorter this year, the change in rating criteria clearly had an impact. It’s helpful to know that those insurers not receiving a 100 percent  rating are in good company – the number of companies 0verall  to receive a perfect rating fell by 44 percent this year.

HRC has also issued a challenge to the insurance industry to provide products that meet the needs of LGBT customers by launching an insurance equality task force comprised of top CEI company representatives, insurance experts and other key stakeholders.

In the words of HRC:

The main objective of this task force is to facilitate the development and availability of health plans and insurance products that provide coverage of medically necessary treatment for transgender individuals in accordance with accepted medical standards.†

A total of 850 businesses have been rated in the 2012 CEI, including the entire Fortune 500. Some 277 Fortune 500 companies voluntarily submitted surveys, while the remaining 214 were rated based upon publicly-available data.

In addition, 65 Fortune 1000 companies, 134 law firms and 160 other companies voluntarily participated in the 2012 CEI.

Looking Ahead to the 2012 Atlantic Hurricane Season

It is better to be qualitatively right than quantitatively wrong.†

This Warren Buffett quote cited by Colorado State University’s Tropical Meteorology Project opens their discussion of the features likely to affect next year’s Atlantic hurricane season.

As the Palm Beach Post’s Eye On the Storm blog notes, for the first time in 29 years, the CSU team is limiting its December forecast to probabilities rather than estimating the number of tropical storms that will form, which will become hurricanes, and which of those will be major hurricanes.

The CSU team says:

We have suspended issuing quantitative forecasts at this extended-range lead time, since they have not proved skillful over the last 20 years.†

Instead, the CSU team looked at two parameters: the strength of the Atlantic thermohaline circulation (THC) and the phase of El Nià ±o – Southern Oscillation (ENSO):

We have been in an active era for Atlantic basin tropical cyclones since 1995, and we expect that typical conditions associated with a positive Atlantic Multi-Decadal Oscillation (AMO) and strong thermohaline circulation (THC) to continue.†

The CSU team expects the 2012 Atlantic basin hurricane season will be primarily determined by the strength of the THC/AMO and by the state of ENSO.

So what can we glean about next year’s hurricane activity from their discussion?

– A 45 percent chance that the THC continues in the above-average condition it has been in since 1995 and no El Nià ±o develops resulting in a seasonal average net tropical cyclone (NTC) activity of 140, suggesting 12-15 named storms, 7-9 hurricanes, 3-4 major hurricanes.

– A 30 percent chance of a continuing above-average THC with the development of a significant El Nià ±o, resulting in NTC activity of 75, with 8-11 named storms, 3-5 hurricanes, 1-2 major hurricanes.

– A 15 percent chance that THC circulation becomes unusually strong in 2012 and no El Nià ±o develops resulting in NTC activity of 180, with 14-17 named storms, 9-11 hurricanes, 4-5 major hurricanes.

– A 10 percent chance of a weaker THC and a significant El Nià ±o resulting in NTC activity of 40, with 5-7 named storms, 2-3 hurricanes, 0-1 major hurricanes.

Come back April 4 for the CSU team’s update of its 2012 Atlantic basin hurricane forecast.

In the mean time check out  Ã‚  I.I.I. facts and statistics on hurricanes.

MarketScout: Soft Market Over

After six years and eight months the soft market cycle is finally over, according to latest analysis from online insurance exchange MarketScout.

MarketScout reported that the composite rate for U.S. based property and casualty insurance was up 1 percent in November 2011.

Richard Kerr, CEO of MarketScout, said:

November 2011 is the first composite rate increase since the soft market began in February 2005.†

MarketScout noted that jumbo accounts (those over $1 million) are the only segment of the market measuring a rate decrease. These accounts were down 1 percent in November 2011.

All other classifications, by either coverage, industry group or account size, measured flat or up as compared to this time a year ago.

Commercial property, business owners policies (BOP) and workers’ compensation coverages led the way with rate increases of 2 percent in November. All other coverages were up 1 percent or flat compared to November last year.

PC360 has more on this story.

Meanwhile, a benchmarking survey from Marsh Inc. found that nearly half of all U.S. property insurance renewals in the fourth quarter to-date have experienced rate increases. Check out Business Insurance for the scoop.

Check out I.I.I. information on industry results and market conditions.

The Office – With Treadmills

How would you feel about conducting a business meeting while walking on a treadmill?

According to an article in the New York Times Sunday Business, “walking meetings† are becoming more common as companies look to keep their employees active and healthy during the work day.

Sitting for long periods is hazardous to your health, increasing the risk of diabetes, obesity, heart disease and some cancers.

While many employers already offer on-site gyms, or subsidized gym memberships, the NYT reports:

Now some employers are going a step further by aligning the ‘move while you work’ mandate with the corporate culture. They hope to improve their employees’ health and to lower medical costs in the process.†

The idea of taking shorter exercise breaks during the work day is not only practical but also effective.

The NYT cites a study conducted by the Mayo Clinic in 2007 that monitored the activities of 18 employees over a six month period. The employees were given access to treadmill desks and wireless headsets to promote walking while conducting meetings.

The study found the employees as a group lost more than 150 pounds and lowered their cholesterol and triglyceride levels.

You may be laughing, as many of the employees did when exercise was first introduced into their work day, but for those quoted in the NYT it appears the changes have led to better health and more energy at work.

Check out I.I.I. information on health insurance.