Monthly Archives: February 2014

Auto Insurance, Regulation, Workers Compensation

IRC: P/C Insurers Not Immune to Effects of Affordable Care Act

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The Insurance Research Council (IRC) has taken a closer look at the potential effects of the Affordable Care Act (ACA) for property/casualty insurers.

Its analysis – which doesn’t make any specific estimates of the potential cost implications for the P/C industry – identifies the possible ways in which P/C insurance claim costs will be affected by the Act.

The upshot is that the IRC believes the most significant impact will be cost shifting by hospitals and other providers from public and private health insurers to p/c insurers.

According to the report:

Cost shifting will occur in response to increased cost containment efforts by public and private health insurers, and will appear in the form of higher charges and a higher volume of billed services.†

And:

Cost shifting will be particularly severe in state jurisdictions and with coverages where the differences between public and private health insurance reimbursement levels and property-casualty reimbursement levels are greatest.†

The potential magnitude of the cost-shifting is likely to be major, the IRC notes.

To mitigate this potential impact, the IRC suggests that P/C insurers should consider options to ensure that the prices paid as reimbursement for medical services are consistent with prices paid by public and private health insurers.

While market-based fee schedules and bill review authority are among the tools often applied to address medical pricing issues, the IRC says P/C insurers should also consider alternatives to ensure that only medically necessary and appropriate treatment is provided to P/C insurance claimants and reimbursed by insurers.

Utilization review authority, evidence-based treatment guidelines, and the authority to deny reimbursement for unnecessary or inappropriate treatment are among the tools that P/C insurers should consider, the IRC suggests.

PC360 reports on the IRC analysis here.

Health & Safety

Risks of Physical Inactivity

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Are you physically active? You may have more reason to be after reading these startling statistics on physical inactivity from the World Health Organization (WHO).

According to WHO, physical inactivity is the fourth leading risk factor in global mortality. It is only outstripped by high blood pressure (13 percent) and tobacco use (9 percent) and carries the same level of risk as high blood glucose (6 percent).

In fact some 3.2 million people die each year because they are not active enough, WHO says. Globally, one in three adults is not active enough.

And physical inactivity is on the rise in many countries, adding to the burden of noncommunicable diseases, such as cardiovascular diseases, cancer and diabetes, and affecting general health worldwide.

WHO notes that people who are insufficiently active have a 20 percent to 30 percent increased risk of death compared to people who engage in at least 30 minutes of moderate intensity physical activity on most days of the week.

Another interesting takeaway: in high-income countries, 41 percent of men and 48 percent of women were insufficiently physically active, compared to 18 percent of men and 21 percent of women in low-income countries.

Low or decreasing physical activity levels often correspond with a high or rising gross national product, WHO reports.

The decline in physical activity is partly due to inaction during leisure time and sedentary behavior on the job and at home. Likewise, an increase in the use of “passive† modes of transportation also contributes to physical inactivity.

It’s important not to confuse physical activity with exercise.

WHO defines physical activity as any bodily movement produced by skeletal muscles that requires energy expenditure – including activities undertaken while working, playing, carrying out household chores, traveling and engaging in recreational pursuits.

Exercise (a subset of physical activity) is planned structured, repetitive, and aims to improve or maintain one or more components of physical fitness.

So what do we need to do to reduce our risk?

For children and adolescents WHO recommends 60 minutes of moderate to vigorous intensity activity per day.

For adults (18+), the recommendation is 150 minutes of moderate-intensity activity per week.

Check out I.I.I. facts and statistics on mortality risk.

Business Risk, Specialty Coverage, Technology

Target Data Breach: More on the Numbers

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Two months after Target announced a massive data breach in which hackers stole 40 million debit and credit card accounts from stores nationwide and the rising costs related to the incident are becoming clear.

Costs associated with the Target data breach have reached more than $200 million for financial institutions, according to data collected by the Consumer Bankers Association (CBA) and the Credit Union National Association (CUNA).

Breaking out the numbers, CBA estimates the cost of card replacements for its members have reached $172 million, up from an initial finding of $153 million. CUNA has said the cost to credit unions has increased to $30.6 million, up from an original estimate of $25 million.

So far, cards replaced by CBA members and credit unions account for more than half (54.5 percent) of all affected cards.

In a press release, CBA notes that the combined $200 million cost does not factor in costs to financial institutions other than credit unions or CBA members, nor does it take into account any fraudulent activity which may have occurred or may occur in the future:

Fraudulent activity would push the cost of the Target data breach to the industry much higher, as consumers would not be held liable.†

A post over at the Wall Street Journal Corporate Intelligence blog points out that cyber attacks like these continue to be a drain on the wider economy.

It cites a study backed by computer security firm McAfee that last year estimated the total cost of cybercrime and cyber espionage to the United States at up to $100 billion each year.

Meanwhile, legal experts caution that companies need to take stock in the wake of the Target breach and make sure they have adequate insurance in place.

A post by Emily R. Caron in Media, Privacy and Beyond published by law firm Lathrop & Gage notes that fortunately Target appears to have a lot of insurance in place.

It cites reports suggesting that between cyber coverage and directors and officers (D&O) coverage, Target has $165 million in total limits, after self-insuring the first $10 million. (Hat tip to @LexBlogNetwork for highlighting this article)

However, The New York Times recently reported that total damages to banks and retailers could exceed $18 billion according to estimates by Javelin Strategy & Research.

In addition the NYT noted that nearly 70 lawsuits have already been filed against Target, many of them seeking class-action status.

As Caron notes  in her article at Media, Privacy & Beyond, there is a big gap between $165 million and $18 billion.

Check out I.I.I. facts + statistics on ID theft and cyber security.

Auto Insurance, Regulation, Workers Compensation

Health Care Reform and Potential Impact on P/C Industry

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The Affordable Care Act (ACA) will have both potential positive and negative effects on the property/casualty insurance industry, according to a recently published paper by Travelers.

In the paper, Travelers notes that medical trends impact workers compensation, general liability, and auto insurance costs, which make up about 5 percent of health care revenue.

Key ACA components expected to affect the P/C industry are:

— Extended healthcare coverage – a 15 percent increase in demand for a fixed supply of healthcare services

— Black lung presumptions – any miner (or surviving spouse) with 15 or more years of underground coal mine employment and a totally disabling respiratory or pulmonary impairment is presumed to be disabled due to pneumoconiosis and eligible for Black Lung benefits.

— Pharmacy and durable medical equipment (DME) taxes and assessments – the potential to increase costs 1.5 percent and 2.3 percent, respectively.

— Medical data – enhanced electronic record-keeping and sharing of data among providers.

Some of the potential positive effects of the ACA on P/C insurers include increased wellness – a healthier and better conditioned population – and a decreased incentive to file questionable P/C claims, Travelers says.

However, on the negative side, the ACA could result in decreased access to care, increasing indemnity costs as prompt access to physicians is reduced and return to work is delayed, the paper notes.

Travelers also cautions that there could be increased cost shifting from Medicare to P/C payers by physicians and hospitals due to declining Medicare reimbursement rates.

Hat tip to Claims Journal for its report on P/C insurer impacts of the ACA here.

Business Risk, Legal Environment, Specialty Coverage

EEOC: Job Bias Claims Decline in 2013

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Job bias charges reported to the U.S. Equal Employment Opportunity Commission (EEOC) dropped to 93,727 in fiscal year 2013, down 5.7 percent from 99,412 charges in 2012, and a 6.6 percent decrease from the record 99,947 charges reported in fiscal year 2011.

But the decline in the number of charges was offset by an increase in the amount of monetary relief obtained for victims.

Monetary relief obtained for victims increased by $6.7 million to $372.1 million – the highest monetary recovery from private sector employers in agency history through its administrative process, the EEOC said.

As in prior years, retaliation under all statutes was the most frequently cited basis for charges of discrimination, increasing in both actual numbers (38,539 up from 37,836) and as a percentage of all charges (41.1 percent up from 38.1 percent) from the previous year.

This was followed by race discrimination (33,068/35.3 percent); sex discrimination, including sexual harassment and pregnancy discrimination (27,687/29.5 percent); and discrimination based on disability (25,957/27.7 percent).

The EEOC noted that both race and disability discrimination increased in percentage of all charges while decreasing in raw numbers from the previous year, while charges of sex discrimination were down by over 2,600 charges.

The EEOC also received 333 charges under the Genetic Information Nondiscrimination Act, which prohibits discrimination on the basis of genetic information, including family medical history.

Despite the overall positive trend, employers should remain vigilant, legal experts say.

In a post  on  legal newsfeed Lexology, Hannesson Murphy, a partner at law firm Barnes & Thornburg, writes:

While employers should be encouraged by current trends, this is no time to let down their guard: EEOC charges remain well above the levels of the mid-1990’s or mid-2000’s, retaliation claims are on the rise, and the EEOC is as active as ever. In short: remain vigilant.†

Check out further I.I.I. facts and statistics on employment practices liability insurance here.

Insurers and the Economy, Tornadoes

Hartwig: Economic Toll of Tornadoes Adding Up

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Today’s post by fellow blogger Lynne McChristian, Florida representative for the Insurance Information Institute (I.I.I.), comes to us live from the National Tornado Summit in Oklahoma:

Hurricanes get the headlines, but tornadoes are stealing their thunder. The economic toll of tornadoes and severe thunderstorms is adding up – to the tune of an average $9.6 billion per year payout in insurance claims. I.I.I.’s CEO/President Dr. Robert Hartwig made that point clear at the National Tornado Summit held this week in Oklahoma City.

Dr. Hartwig’s presentation on tornadoes and the insurance trends for severe convective events noted that tornadoes account for 36 percent of all insured losses since 1993; hurricanes losses over that time period were a just over 40 percent. He pointed out that areas in the heart of “Tornado Alley” may have 20-25 severe weather days each year. But, it’s not the number of storms that matters most. It’s all about where they hit.

Tornadoes are part of the landscape in many areas of the U.S., and the landscape has changed. If a tornado touches down on farmland, there may be little to no structural damage, and no witnesses to record the event. Today, what was once farmland is dense suburban development, putting more people and more property in a twister’s path — and bringing more devastation.

Average insured losses from thunderstorms are up seven fold since the 1980s. Historically, Oklahoma is second to Texas in terms of losses from tornadoes, thunderstorms and hail. The tornado that hit Moore, Oklahoma in May 2013 was the costliest storm of the year. At the Tornado Summit, Moore’s Mayor said he expects 85 percent of Moore residents will rebuild. That’s insurance at work!

To help spearhead the rebuilding of schools in Moore, Dr. Hartwig presented the Moore Public Schools with a check for $10,000 following his presentation at the Summit. He reminded the audience that knowing the numbers associated with natural disasters is a small part of the story. It’s helping the people impacted that matters most to the insurance industry. The I.I.I.’s contribution on behalf of the insurance industry underscored the human factor of disaster recovery, and that reminder earned a standing ovation.

Technology

Data Breaches Becoming More Damaging

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Recent breaches of customer data at retailer Target and banking giant Barclays are making headlines and underscore the growing risk to businesses from data breaches.

Of course, there’s a personal impact too.

The just-released 2014 Identity Fraud Report by Javelin Strategy & Research reveals that data breaches are now the greatest risk factor for identity fraud.

In 2013, one in three consumers who received notification of a data breach became a victim of fraud, up from one in four in 2012, the report found.

Some 46 percent of consumers with breached debit cards in 2013 became fraud victims in the same year, compared to only 16 percent of consumers with a social security number breached.

Other key takeaways from the report are that the overall incidence of fraud has increased even though the amount stolen has decreased.

The number of identity fraud victims increased by more than 500,000 to 13.1 million people in 2013, the second highest number since the study began. However, the dollar amount stolen fell to $18 billion, down from $21 billion in 2012.

This reflects more aggressive actions from financial institutions, identity theft protection providers and consumers, Javelin Strategy said.

There has also been a dramatic increase in account turnover fraud in the past year. According to the findings, account takeover fraud accounted for 28 percent of all identity fraud in 2013, a new record for the second year in a row.

Fraudsters also increasingly turned to eBay, PayPal and Amazon with the stolen information to make purchases.

Check out I.I.I. information on identity theft and cyber security here.

Industry Financials, Market Conditions

MarketScout: Moderating Rate Trend Continues for U.S. Risks

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Online insurance exchange MarketScout reported that the composite rate for U.S. commercial insurance increased an average of 3 percent in January 2014.

Commercial auto and workers compensation rates led the way with increases of 4 percent.

However, rates for five coverage classes – inland marine, EPLI, fiduciary, crime and surety – increased by just 1 percent.

Richard Kerr, CEO of MarketScout noted that the  average rate  increase in January 2014 barely matched year-end 2013  at plus 3 percent:

If we were to post rate changes by fractional increments, you would see the actual increase at 2.55 percent, so the moderation trend continues.†

Additional capacity, insurance linked securities and a more stable economic environment (despite recent stock market adjustments) are partly responsible for the moderating rate environment, according to MarketScout.

Hat tip to Business Insurance which reports here.

Check out latest information from the I.I.I. on financial and market conditions.

Catastrophes

Car Insurance: Theft And Break-In Problems

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It’s not always convenient or easy to be a car owner. Cars are attractive to thieves due to their mobile character and hence can be broken into and stolen in the blink of an eye. Wire cutting experts will have no problem immediately starting your ignition and driving away with your car before you even know what hit you. Not to mention the number of break-ins and reported theft from vehicles — people tend to leave their most valuable assets such as laptops or jewelery on the back or front seats, turning into easy targets for thieves lurking around parking lots in search of their next prey. But where do you think car insurance falls into these horror stories?Authorized Locksmiths protect your car

How To Deal With Car Break-ins

Have you ever fallen victim to a vehicle break-in? How valuable were the items stolen from you? Did you feel your privacy has been violated? Picking up the pieces after such an incident is not easy, and it requires nerves of steel and clear steps to follow. Making a claim on an auto insurance policy is one way to handle it; you can ask for the damage to be fixed in the shortest time possible. Unfortunately, not all items are covered by this type of an insurance; you may have gotten your cell phone, laptop, or car stereo stolen from your vehicle. But do you know if they all fall under the safety net of insurance coverage?

Your Comprehensive car insurance policy covers the damages caused by theft. If you are the victim of a car break-in, check and see if the Comprehensive coverage has got you covered. Find out exactly which are the items that are covered covered in case there is a theft. For example, car stereos are usually covered by these policies, but there is no actual guarantee for this. As for mobile phones, laptops, pr wallets and electronics, they are most likely covered by your separate homeowners insurance policy, in the event you have one. If you do not own such an insurance at the moment, you might want to reinforce your car’s locks and make sure no one can easily break in and steal items you will not be covered for.

Keep Your Car Safe From Thieves: Tips And Advice

Get in touch with an Authorized Locksmith in your area or pick a company that offers nationwide service, automotive services included. Take a look at their credentials and references, expertise, experience, and flat rates. Check their list of services and see if they can cater to your car reinforcement needs by repairing your locks or jammed ignition, reprogramming your transponder key, or fixing your broken trunk lock. All of these vulnerabilities are nothing but open invitations for thieves looking forward to steal your belongings or even car. While certain U.S. states will cover sudden and direct or accidental loss to your vehicle, as well as equipment and parts, this is not true for all states. So just to play it safe, you should immediately pick up the phone and call an authorized and licensed/bonded locksmith; such a specialist will be able to cover any potential damage done to the car in case of poor locksmithing repair equipment use. Since we are on the topic of insurances, make sure you only opt for an inured and bonded locksmith so you are not forced to cover any additional damage.

 

Insurers and the Economy

Drought Intensifies Across California

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An article in The New York Times over the weekend gave a frightening account of the ongoing severe drought across California that is now threatening the state’s water supply.

As farmers, ranchers and homeowners brace for what could be the state’s worst drought in 500 years, The NYT reports that the snowpack in the Sierra Nevada, which supplies much of California with water during the dry season, was at just 12 percent of normal last week, reflecting the lack of rain or snow in December and January.

The NYT quotes Tim Quinn, executive director of the Association of California Water Agencies, saying:

We are talking historical drought conditions, no supplies of water in many parts of the state. My industry’s job is to try to make sure that these kind of things never happen. And they are happening.†

The latest U.S. Drought Monitor, published last Thursday, put 9 percent of the state of California into “Exceptional Drought† – the worst possible category of drought. According to Dr. Jeff Masters’ WunderBlog this is the first time since the Drought Monitor product began in 2000 that a portion of California was put into “Exceptional Drought.†

Meanwhile, parts of the state experiencing “Extreme Drought,† the second worst category of drought, increased to 67 percent.

The U.S. Drought Monitor notes that a few of the impacts within the “Exceptional Drought† areas include fallowing of land, wells running dry, municipalities considering drilling deeper wells, and little to no rangeland grasses for cattle to graze on, prompting significant livestock sell off.

Over at Slate.com Eric Holthaus says that puts the current California drought on par with recent major droughts in Texas (2010-11) and the Midwest (2012), both of which were multibillion-dollar disasters.

For insurers, droughts can be costly too. According to analysis by Munich Re, drought in various parts of the U.S. in 2012 caused $15 billion to $17 billion in insured losses, making it the second costliest disaster after Hurricane Sandy.

Check out I.I.I. information on crop insurance.