P/C Joint Industry Forum

The 12th annual Property/Casualty Insurance Joint Industry forum will be held next Tuesday January 8, at the Waldorf-Astoria Hotel in New York City. Tony Snow, former White House Press Secretary for President George W. Bush, will be the keynote speaker at the event. The Forum, sponsored by the 15 leading p/c insurance trade associations, was created to provide p/c insurance and reinsurance company leaders with an opportunity to meet and discuss topics of general interest. A panel of insurance regulators will first discuss the insurance industry from their perspective. This will be followed by a panel of insurance company CEOs who will discuss general trends in industry services. As always, the event is expected to be well-attended and to stimulate lively discussion on the industry. For more information on the Forum, contact I.I.I. vice president of communications Loretta Worters at 212-346-5545 or lorettaw@iii.org.

Nat Cat Focus

Much has been made of the lack of megacatastrophes during 2007, but Munich Re’s annual natural catastrophe review is a reminder that size is not everything. In fact, the insurance industry had to cope with far higher natural catastrophe losses in 2007 than in 2006. Despite the absence of extreme events, Munich Re notes that overall economic losses had reached $75 billion by the end of December 2007 — a 50 percent increase on 2006. While the loss figures were well short of 2005’s record $220 billion, at just under $30 billion, insured losses were almost double those of 2006 ($15 billion). The number of natural catastrophes recorded in 2007 also increased to 950 (compared with 850 in 2006) — the highest figure since 1974 when Munich Re began logging records in its NatCatService database. The message from the reinsurer is don’t be misled by the absence of megacatastrophes in 2007 as these loss figures are in line with the continuing rising trend in natural catastrophes. Check out I.I.I. info on global catastrophes.  

Avian Flu Update

We ring in the New Year with I.I.I. chief economist and resident bird flu expert Dr. Steven Weisbart’s year-end update on H5N1 (the Avian Flu). Dr Weisbart reports that in 2007, 83 people were confirmed to have been infected with the disease, and 55 of them have died (66 percent). This brings the cumulative total to 346 confirmed infected and 213 dead since December 2003 (the start of the current outbreak) through 2007. The year had roughly the same pace of infections and deaths as in 2006 (69 percent death rate), though the number of cases is down from 115. Dr Weisbart explains that the lethality rate of the virus varies substantially: in 2007, 6 of 23 (26 percent) of those infected in Egypt died, compared to 36 of 41 (88 percent) of those infected in Indonesia. In 2007, infection and death reached several new counties, including one case each in Myanmar, Nigeria, and Pakistan, and two cases in the Lao People’s Democratic Republic. Vietnam, which had no infections and deaths in 2006, 2005 or 2004, had 8 infections (5 deaths) in 2007. Human infection is still believed to be mainly from birds to humans, basically from very close contact with infected chickens and similar birds in home environments. Virtually all of the cases continue to be under 40 years old. There are still no cases of birds or people in the U.S. with this flu virus.

Happy Customers

During the course of this year, we’ve posted a number of items about the importance of claims handling and service in our industry. As we look ahead to 2008, there’s no doubt that these two factors will continue to have a major influence on insurance customer satisfaction. A new report from J.D. Power and Associates is the latest to substantiate this view. It reveals that the time it takes to repair the damage to property or vehicles has a major impact on the satisfaction of homeowners and auto insurance claimants. For example, among the two-thirds of customers whose vehicles are fixed and returned within 14 days, satisfaction averages 843 on a 1,000-point scale. But that satisfaction declines by 71 points among the 36 percent of customers who must wait longer than two weeks for their vehicle to be repaired. Homeowners claimants are similarly impacted when repairs take longer than initially expected, J.D. Power reports. It goes on to say that managing customer expectations is a crucial part of the claims process. Something to keep in mind as we go into 2008.

FYI this is our last posting of the year. Thanks for reading and join us January 2 for more commentary on the industry.  

2007 Judicial Review

Apart from the headline news that Atlantic County, New Jersey, and Clark County, Nevada, for the first time made the 2007 judicial hellholes list, the American Tort Reform Association’s (ATRA) sixth annual report highlighted a number of other hotspots. One trend to watch, according to ATRA president Sherman Joyce is the increasingly common contractual relationships between some state attorneys general and their leading political patrons: personal injury lawyers. ATRA explains: “The scheme works like this: trial lawyers help a friend become an attorney general, the attorney general then “hires† his or her trial lawyer friends by deputizing them with the awesome power of the state and unleashing them to sue entire industries for the promise of billions of dollars in contingency fees.† The problem? These contingency fee arrangements are too often made behind closed doors without any public oversight, leading to potential abuse for personal gain, political patronage and litigation based on profit, not the public interest. In the last year ATRA says it has filed amicus (friend of the court) briefs in three appeals against these unholy alliances, including one in a Rhode Island lead paint case. By the way, last year’s public nuisance trial in the state’s lead paint case put Providence, Rhode Island on ATRA’s watch list for the first time. It remains a place to watch this year. Check out further I.I.I. info on the liability system.  

Terrorism Backstop Moves Ahead

Congressional deadlock on extension of the federal terrorism risk insurance program has been broken with House approval of a bill extending the program for seven years from December 31. The bill, which passed the House yesterday  by a vote of 360-53,  is the same Senate measure that was passed last month (see our November 19 posting). The bill is now expected to be signed by the President. For more on this story check out a December 18 Business Insurance online article by Mark Hofmann. I.I.I. has further info on terrorism risk available online.

Phishing Attacks Up

In November the Federal Trade Commission (FTC) reported that approximately 8.3 million U.S. adults were victims of identity theft in 2005. In 10 percent of these cases, thieves got at least $6,000 in goods and services, and in 5 percent of cases at least $13,000. With the holiday shopping season underway, now a Gartner Survey finds that 3.6 million adults lost money in phishing attacks in the 12 months ending August 2007, up from 2.3 million the previous year. Phishing is a form of online identity theft where emails and Web sites masquerading as official businesses are created and used to deceive Internet users into disclosing their personal data.  According to Gartner,  the average dollar loss per incident declined to $886 from $1,244 in 2006, but because there were more victims, a total of $3.2 billion was lost to these attacks in 2007. The attacks were also more successful than the previous two years. Of the individuals who received phishing emails in 2007, 3.3 percent say they lost money because of the attack, up from 2.3 percent in 2006 and 2.9 percent in 2005. Check out further I.I.I. info on identity theft.

I.I.I. Earlybird Survey

It’s that time of year again. The Insurance Information Institute’s Earlybird Forecast 2008 is out, revealing the prospects for the industry in the year ahead according to a panel of Wall Street stock analysts and industry professionals. I.I.I. president Dr Robert Hartwig notes that this year’s results – with the apparent paradox of strong profits but stagnant premium growth – are a reminder of the highly cyclical nature of the property/casualty business. Looking ahead, Dr Hartwig also points to looming challenges for the industry in 2008. Catastrophic loss and the potential loss of pricing and underwriting discipline are among the chief concerns. Resurgence in bad faith litigation in auto, home and medical malpractice claims and state referenda that potentially raise damage awards are other causes of concern. Regulatory and legislative risks also loom large in 2008.  

Climate Compromise?

As the United Nations Climate Change Conference in Bali enters its final day, a scan of the news headlines suggests the U.S. and Europe may be able to reach compromise on targets to reduce greenhouse gas emissions. The UN’s World Meteorological Organization (WMO) this week released a report saying that the decade from 1998-2007 was the warmest on record. Preliminary data compiled by WMO in the report also  indicates that 2007 will be the seventh warmest year on record. Whatever the outcome in Bali, the latest reports continue to point out that climate change  represents a key risk for countries, governments, businesses and individuals moving forward.  

Tort Costs Update

Tillinghast has just released its 2007 update on U.S. Tort Cost Trends. The good news is that tort costs declined by 5.5 percent to $247 billion in 2006. That approximates $825 per person – $57 less per person than in 2005. The $13.4 billion decrease in costs over 2005 marks the first downward trend since 1997. A significant drop in commercial tort costs, due in part to the waning impact of asbestos costs was a contributing factor. But the near-term outlook is not so rosy, according to Tillinghast. It warns that several factors, including the potential fallout from the current subprime loan crisis, are expected to reverse the figures in 2007. As it notes: when people lose money, litigation tends to follow. Looking ahead Tillinghast expects growth in U.S. tort costs of around 2.5 percent in 2007, with slightly higher growth of 4.5 percent in the following two years. As well as subprime mortgages, global warming and backdating of options are just some of the issues that it expects will impact future trends. Check out I.I.I.’s update on the liability system.  

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