I-Fans,

The quote is from a State Farm lobbyist, and the hysteria is not in Baton Rouge or Jackson, but Tallahassee.

Here’s the headline:

Suddenly, a pro-consumer Legislature emerges

and here’s the story from Sunday’s Sarasota-based Herald-Tribune.

What matters about the proposals below is that they’re backed by the new Republican governor, Charlie Crist, the former attorney general who became known as “Chain Gang Charlie” because he supported their use for prison inmates. Although Crist has pro-consumer initiatives on his record as well, this isn’t exactly Rosa Luxemburg.

Also noteworthy is what the Herald Tribune State House reporter, Lloyd Dunkelberger, says in his lede (first paragraph):

“TALLAHASSEE — In this week’s special session, Florida lawmakers are poised to pass some of the strongest, pro-consumer insurance legislation that perhaps has ever been seen in Tallahassee. “

And then in this interesting observation:

“If the legislation becomes law — which seems likely at this point – it will be harder for property insurance companies to raise their rates despite the state’s recent history of hurricanes. The overnight transformation of a Republican, anti-regulation Legislature into a Ralph Nader-esque entity has left insurance lobbyists stunned.

‘It’s hysteria right now,’ one complained.”

The measures, which seem likely to pass, include:

1. Rolling back a 56 percent rate hike by Florida’s state-run Citizens Property Insurance

2. Prohibiting cancellations during hurricane season;

3. Banning “excess profits” by insurers;

4. Ending “cherry-picking,” refusing to sell property coverage while selling auto and other more profitable lines;

5. Banning the longstanding use of Florida-only subsidiaries, known as “pup companies, which critics say obscure a national insurer’s true financial health.

6. Eliminating arbitration panels considered industry friendly.

7. Requiring insurance executives to sign legal oaths validating the truthfulness of their state financial filings.

8. Requiring annual “insurer report cards,” which would give companies a letter grade based on issues such as the number of consumer complaints filed against the company. (Report cards. Hmm. Why didn’t ITP think of that?)

There’s more, but you get the point. If those seem to be market-unfriendly measures, they probably are. I sometimes say Katrina created an important insurance laboratory, but really Florida’s insurance dilemma is much bigger, more advanced and more acute.

Thanks to Non-Profit Prophet

More news from Florida:

Insurance weighs heavily on state

The sub-headline is: “Nature’s fury, market forces drive Florida to the brink.”

And in Mississippi, the Sun-Herald’s Anita Lee reports that Attorney General Jim Hood’s grand jury investigation is continuing:

State Farm employee to testify

Thanks to MizBizJourno

I-Pods,

ITP appreciates the mail it gets from thoughtful readers, who include media types, academics, insurance executives, bankers, lawyers and, last, and really, first, policyholders on the Gulf. It warms War Eagle’s heart because a main theme of ITP has always been to broaden the conversation about insurance to include many more people than currently think about this industry, which I happen to like, and which matters a lot more than it’s covered, put it that way.

I even value the bluntest criticism for the simple reason that everyone needs an editor, and after 22 years of writing in very satisfying, but confining, newspaper environments, ITP — how shall I say it? — can get carried away with its editorial freedom and self-perceived cleverness. I may even put War Eagle(2) down, humanely, if it comes to that. I will certainly cut down on sloppy mistakes.

However, I think it would be a mistake to leave the topic to specialists, as important as they are. This subject needs a popularizer. Or, to put it another way, this beat needs a reporter. As always, PLEASE let me know if you want off this list. I only hurts (me) a minute.

Ok, now up on the site is a note to me from a senior policymaker familiar with insurance discussions at the state and federal level talking about the Mississippi wind pool. This note deals with reinsurance, so you might want to drop off now, but it also deals with a more familiar topic, politics, which wends its way through this industry like kudzu. I offer it because it provides insight into the mechanics of insurance politics.

However, the takeaway for people with, you know, jobs, is, according to the official, a big chunk of federal Community Development Block Grant money intended for uncovered flood victims is going to pay reinsurers:

“The net effect is that federal taxpayers will pay a large share of reinsurance premiums to profiteers in Bermuda or whatever tax haven the reinsurers currently call home.”

The details: The Mississippi Windstorm Underwriting Association, the wind pool, was formed by the legislature in 1987 to provide a market for hurricane coverage after previous storms caused insurers to flee the coast. It is the equivalent of Louisiana Citizens, a state-run insurance company. Controlled by an eight-member board, the pool buys reinsurance up to a certain amount. That amount is passed through to policyholders’ premiums. Any losses that exceed the reinsurance, however, are assessed to all insurers statewide. Insurers that write on the coast get a discount on the assessment, meaning the burden shifts to insurers that write only up north. Because insurers are the final backstop, the industry was given control of five of the pool’s eight seats.

So, basically: the more reinsurance the board buys, the more policyholders pay. The less, the more insurers pay directly.

Ok. At the time of Katrina, the wind pool carried $1.8 billion in risk but had only $175 million in reinsurance. Katrina caused wind pool losses of $700 million. Our official says that post-Katrina the board decided to buy a lot more reinsurance, eventually settling for $350 million.

“But, of course, reinsurance is a cartel, not a market, so there were no bids and no competition to reinsure the wind pool,” our official says.

So here comes the new premium: “Reinsurers, who love to go profit-seeking after a disaster, divvied up layers of the $350 million at an incomprehensible total cost of $42 million for one year of premiums. Now, Katrina and global-warming scares justify a reassessment of the risk on the Mississippi Coast,” but the risk doesn’t come close to justifying the price, the official adds.

However, the wind pool bought the policy and send along a 398% premium increase for policyholders to Insurance Commissioner George Dale. And as the official puts it:

“Dale was saved by Gov. (Haley) Barbour, who was saved by Sen. (Thad) Cochran, (R-Miss.) , who had succeeded in getting the state $5 billion in” CDBG funds.

And we continue: “The primary purpose of those funds is to help homeowners who suffered flood damage but had not bought flood insurance, in large part because
FEMA’s flood-risk maps ” didn’t consider the coast to be that dangerous. The taxpayer funding limited the increase to 90%.

The net effect is described above: tax money paying a “cartel” in Bermuda, according to our official. See the site or below (depending on where you’re reading this) for the full item. An important point: more and higher reinsurance bills are on the way.
Ok. A tendentious item fraught with opinion from a blind source. However, this isn’t just any schmo.

I would love, however, to hear from our reinsurance friends, particularly on the “cartel” assertion. One counterpoint I suspect we would hear is that reinsurers compete with every other form of investment — stocks, bonds, real estate — in global capital markets, and, far from being a cartel, reinsurance represents capital flowing in its freest, most competitive state. That certainly was the general assumption at the Insurance Information Institute forum at the Waldorf last week.

Thanks to senior policy official. Reinsurers: can we address the premium question as well as the anti-competitive assertion? Frozen Dead Athlete, I realize you have other things to do.

(1) ITP mascot. He is fictional, but lovable.

Full text of senior official’s note:

“Dean,

You may know all of this, but here are some more details about the Mississippi wind pool.

First, unlike Florida or Texas or Louisiana, Mississippi has a small coastline, roughly 75 miles between Louisiana and Alabama, so when Mississippi gets hit by a hurricane, all of the coastal area is affected. There is no other large region of the state paying high windstorm premiums but not filing claims, so we go a decade or two without many claims and then we have a hurricane and a lot of claims. And then the insurance companies want to rewrite the terms again.

The Mississippi wind pool was set up in the 1980s after a previous attempt by insurers to coerce concessions by threatening to leave. The wind pool is the wind writer of last resort in the bottom six counties, the three right on the coast and the three just above them. The wind pool purchases reinsurance and then if claims are beyond the reinsurance, all the property insurers in the state are assessed according to their market share to pay the balance. Except that, to encourage companies to write wind in the coastal counties, those who cover wind in the wind pool counties get a 1.4 to 1 credit against their wind pool assessment. (It doesn’t matter whether they actually pay on those policies.)

At the time of Katrina, the wind pool carried $1.8 billion in risk and had reinsurance to $175 million, which pre-Katrina was believed to be a 250-year event. Katrina losses to the wind pool exceeded $700 million, and the wind pool assessed approximately $545 million to insurers based on their market share in Mississippi. State Farm, Nationwide, Allstate who had the largest market shares, but who covered wind on the coast, got the 1.4 to 1 credit, deeply discounting their assessments to the wind pool, which of course means that other insurers with much less market share had to pay extra. Many insurers in the state who did not cover much on the coast were hit hard by the wind pool assessment and have requested large premium increases to begin to recapture that money. That has made the wind pool a statewide issue, but not necessarily in favor of coastal property owners.

Because insurers are the backstop for the wind pool, the state gave the industry 5 of the 8 seats on the board. Shortly after Katrina, the board decided that the wind pool needs to buy a LOT more reinsurance, which would put more risk onto premium payers and less on assessments on insurers. They wanted to buy $600 million in reinsurance, but those premiums would have been too high for even the industry-controlled wind pool board to recommend, so they purchased “only” $350 million reinsurance. But of course, reinsurance is a cartel, not a market, so there were no bids and no competition to reinsure the wind pool. Reinsurers, who love to go profit-seeking after a disaster, divvied up layers of the $350 million at an incomprehensible total cost of $42 million for one year of premiums. Now, Katrina and global warming scares justify a reassessment of the risk on the Mississippi Coast, but a disaster of that scale is not a 1 in 10 event or a 1 in 20 event or anywhere near the risk needed to justify that price. Still, the wind pool, controlled by insurance companies, bought it and then sent a request for a $398% premium increase to Commissioner Dale.

Dale was saved by Gov. Barbour, who was saved by Sen. Cochran, who had succeeded in getting the state $5 billion in Community Development Block Grant funds. The primary purpose of those funds is to help homeowners who suffered flood damage but had not bought flood insurance, in large part because FEMA’s flood risk maps did not consider a major hurricane to be a 100-year event on the Mississippi Coast. As it turned out, there are enough CDBG funds for Gov. Barbour to use several million dollars to subsidize the wind pool for the next two years. That limited the premium increase to 90% for residential properties in the wind pool. The net effect is that federal taxpayers will pay a large share of reinsurance premiums to profiteers in Bermuda or whatever tax haven the reinsurers currently call home. Commercial properties have not been subsidized, so that is the current hot topic for the Mississippi legislature – not whether to subsidize, but how much and from where. Without a subsidy, the wind pool premiums for commercial properties increased by 268%.

However, all those numbers were based on the old wind pool that covered a relatively small share of properties on the Mississippi Coast. Now that State Farm, Allstate, Nationwide, and commercial insurers are not writing new wind policies near the coast, many more properties will have to be covered by the wind pool. The total coverage will be much higher than $1.8 billion, so the industry-controlled board is sure to demand much more than $350 million in reinsurance.

Congressman Taylor is asking for hearings in the new Congress to get to the bottom of this and several other Katrina-related abuses by insurance companies, with the goals of enacting a federal program to provide for all-perils coverage for natural disasters and of repealing the insurance industry’s antitrust exemption.”

I-Fans,

I was tempted to put up an ironic headline to accompany this Anita Lee/Sun Herald story. It would go something like this:

“Another 11 People Fail to Understand Insurance”

The story says U.S. District Judge L.T. Senter, in the Southern District of Mississippi, ruled from the bench that State Farm improperly placed on two Biloxi policyholders the burden of proving that wind not water destroyed their house and, on his own, awarded the family the policy limits of $224,000. A jury then awarded punitive damages, finding that the company’s decision was not a simple mistake.

Listen, anyone thinking that the ITP War Eagle is up here on Joralemon Street jumping around clicking his, uh, talons over this verdict is quite mistaken. I never liked the fact that water and wind perils were separated in the first place, leading to ludicrous arguments over what caused a slab to be a slab. Who benefits from that stupid fight?

When ITP gets a bit more sophisticated, I will post a two-hour video taken by a brave/foolish policyholder in nearby Slidell, La., that shows Katrina hitting, causing crazy wind damage and crazy water damage. Trying to separate them is like, as I’ve said, trying to take the matzoh out of the ball. Or at least the meat mixture out of the kreplakch, which, as you know, is difficult to do, and what’s the point?

ITP is further certain that the backlash will begin soon enough — in fact has already
started on the Sun Herald’s comment forum.

“If I was an insurance company I would get out of Mississippi as fast as I could. This is going to be bad for everyone in the long run.”

As a pre-shabbes, pre-Sunday thought, I’m going to step back and observe that logically, ITP can see only two alternative reasons, from an insurers’ point of view, why a customer would ever sue his or her carrier: venality or ignorance. Either you are trying to get something for nothing, which is a crime, or you don’t understand your policy.

I suppose there can be good-faith disagreements, too. And there are. But remember, and I think Person Familiar with the Situation will agree, policies are written to favor the policyholder. Lawyers, please check me here, but these are “contracts of adhesion,” the take-it-or-leave-it kind, and insurers, who wrote the policies, generally speaking are supposed to bend over backwards to pay unless there’s a reason not to. So to deny most or all of a claim (as State Farm did in this case, initially) is not something insurers do lightly. They must believe the policyholder really doesn’t get it. By the way, that means Trent Lott,  Congressman Taylor, a federal judge and many other people in court for the first time in the lives also don’t get it.

There appear to be lot of customers on the Gulf who apparently don’t understand insurance. And now we can add 9 more. The eight jurors and Judge Senter, plus the policyholders, Norman and Genevieve Broussard. Earlier this week, I wrote that I detected both hopeful and not-so-hopeful sentiments at the Insurance Information Institute Property/Casualty Forum at the Waldorf. The hopeful stuff was AIA President Marc Racicot(1) and his call for shared responsibility, and, especially, Paula Rasput Reynold(2) and her call for the industry rethink the way it talks to customers. But I did hear a surprising amount of talk, as I said, about the need to “educate” policyholders, their foolhardy insistence on living near water, their tendency to fall sway to demagoguing politicians, their wanting to have things both ways, etc.

ITP probably agrees with some of that even, but it does observe that this is an industry that seems to be at odds with a large number of its customers.

Private note to War Eagle: Was that pompous?

War Eagle to Dean:  Seek help, stat.
(1)Former Montana governor and RNC chairman, now head of American Insurance Association, the leading industry lobby.

(2) President and CEO of Safeco Corp., Seattle (ticker: SAF).

I-Fans,

Because I went long yesterday, I’ll keep it short today. But in the race between Mississippi and Louisiana to become the state to watch for the insurance industry, policyholders, lawmakers, InsNerds, War Eagles, Deputy War Eagles and ITP Junior Scouts, Ole Miss seems to be pulling ahead.

I attribute that to the presence of Scruggs, Taylor, Lott and Hood(1), that is, an aggressive and well-funded plaintiffs’ bar, and government officials who are also aggressive, for better or worse. It seems to be better for transparency, generally speaking.
First, where would we be without Anita Lee and the Pulitzer-winning Sun Herald? (or, for that matter, Becky Mowbray and the Pulitzer-winning Times-Picayune?.)

Nowhere, that’s where, MSM bashers.

The story just happened, so it’s only a couple paragraphs. I assume Anita is dictating over the phone (those were the days).

“GULFPORT - U.S. District Court Judge L.T. Senter Jr. on Thursday morning ordered State Farm Fire and Casualty Co. to pay policy limits to a Biloxi policyholder because the company failed to prove how much damage was caused by Hurricane Katrina’s storm surge.”

And:

“Senter also denied State Farm’s motion to dismiss the possibility of punitive damages against the company. Although attorneys for policyholder Norman and Genevieve Broussard were only able to establish that wind may have damaged the property and State farm conceded there could have been wind damage to the roof, the Broussards will be able to argue State Farm should be punished for not meeting it obligation to fully investigate what was owed under the policy.”

I-Fans need no additional comment from me.

But just check out the sheer volume of I-news in today’s paper:

Here’s a story by the industrious Geoff Pender about about how insurance has become
Topic A among Mississippi policymakers and business leaders.

Wine, dine, insurance

Legislative party has serious side

Here one about the House passing a wind-pool bailout, um, aid.
And here’s one, well, the headline is pretty interesting:

Top execs of State Farm are targeted

It says U.S. Magistrate ruled that State Farm’s parent can be sued as well as the local subsidiary. It involves a suit brought by Judy Guice, an Ocean Springs holder.
The order will allow Guice’s attorney, Richard “Flip” Phillips of Batesville, to develop evidence that he believes will show executives at the highest level of the company worked to minimize their exposure after the most catastrophic hurricane to ever hit the United States.Phillips is seeking coverage for Guice’s losses, plus unspecified punitive damages.

” ‘From my experience with the insurance industry,’ said Phillips, who has litigated insurance cases for 34 years, ‘when the money is billions with a B, the fraud, if any, is never low-level. This ruling will allow us to pull back the curtain on State Farm’s home office activities and motives.’ “

State Farm’s Phil Supple replies:

“While the judge will allow Phillips to develop evidence against the mutual company, a State Farm representative pointed out that no wrongdoing has been established.

” ‘Katrina was an unprecedented storm that required the efforts of thousands of State Farm employees to respond to our customers’ losses,” spokesman Phil Supple said. “The wind-water protocol was used to convey consistent and fair claim handling guidelines to the various adjusters assisting our policyholders.’ “

Read the whole story to learn about the wind-water protocol. War Eagle is going over it now.

(1) Plaintiffs’ lawyer Richard Scruggs, Rep. Gene Taylor, D-Miss. and Sen. Trent Lott, R-Miss., both leading insurance change efforts in Washington, and Attorney General Jim Hood, who has a grand jury going.

Thanks to Ida and MissBizJourno.

I-Fans,

It was a night of a 1,000 stars. Martin Sullivan. George Dale. Pierre Ozendo. Jim Schiro. Paula Rosput Reynolds. Paula Abdul. Gwyneth Paltrow and Apple. Derek Jeter. Clive Owen(1). Even so, ITP War Eagle, resplendent in cufflinks and his brand new Brioni, was, in my opinion, the belle of the ball.

And what can one say about New York’s Waldorf-Astoria Hotel? Quel Magnifique! The chandeliers, the distinguished oak-paneled lobby, the menacing doormen every five feet, the dust, the thoughts-of-suicide-provoking Sir Harry’s Bar, the ancient carpets. Hey, Waldorf (owned by Hilton): I got two words for you: “Cap Ex.”

Listen, I joke around. But ITP thanks III(2) for its sense of humor and hospitality. ITP is also grateful that Bob Hartwig, the president, is too busy to respond to these blogs. ITP would hate for its long-cherished beliefs to be demolished.

Jokes aside, the news out of the conference came from the first panel, when Mississippi Insurance Commissioner George Dale debunked a NYT story yesterday that said the state and State Farm were in talks to settle 639 Mississippi wind claims for $80 million.

(By the way, this wasn’t even close to a scoop. Anita Lee’s Sun Herald readers knew this on Dec. 28. By the way, it’s considered common courtesy — not the Times’s strong suit — in the newspaper business to acknowledge something was reported elsewhere first.)
ITP will have a lot more to say about this proposed deal, but I will draw readers’ attention to this paragraph:

“To close the deal, State Farm wants the approval of Mississippi’s attorney general, Jim Hood, and the state’s insurance regulator, George Dale, lawyers close to the talks said. As a condition of the deal, these lawyers said, Mr. Hood would be required to drop a criminal investigation into State Farm’s handling of claims as well as a civil lawsuit against State Farm and other insurers.”

Dale said the story “jumped the gun” and no deal has been reached. ITP doesn’t know if it’s even possible to “drop” a criminal investigation as part of a civil settlement. ITP doesn’t really care. ITP isn’t interested in paying policyholders, frying insurers, or vice versa. ITP wants to know what happened on the Gulf and of course opposes any deal that keeps important insurer-performance data from the public domain. Usually such deals involve confidentiality agreements. War Eagle takes a dim view — a very dim view – of those. With all due respect to Commissioner Dale, Attorney General Hood, distringuished plaintiffs’ lawyer Richard Scruggs and the policyholders themselves, ITP goes on, no matter what they decide to do.

But why be gloomy after such a magical night? In the interest of brevity, I’m going to keep this, um, short.

The backdrop to the conference was the industry’s record profit forecast for 2006 — $60 billion — the best year since the late 17th century, when George Dale was still an assistant principal at Moss Point High School, and its so-called combined ratios in the low 90s, the best since the 1950s.

I-Fans, combined ratios are important. They measure losses and expenses against premiums collected. If your combined ratio is below 100, that means you’ve earned money after your expenses, which is in addition to what you earn on investments while you hold policyholders’ money. There is nothing wrong with low combined ratios, at least in theory.

Jay Gelb, a stock analyst from Lehman Brothers, forecast that the industry’s rate of return on its capital, would stay in the 10% to 13% range through 2008. I-Fans, listen up: 10-year Treasury Bills are paying 4.5%. These kinds of returns are measured in hundreths of a percentage point. Even my pal Bob Hartwig would acknowledge, those are extremely generous returns. (Yes, he would also say, it’s in the middle of the pack of the S&P 500. And I would counter that Allstate, a proxy for the business, has clobbered the S&P in the last five years, so investors are clearly looking at something else. And since he’s not here, I win the argument.)

To be fair, as Zurich’s CEO Jim Schiro pointed out, these are unusual times, and much cautionary talk was in the air about the need to maintain pricing discipline and to look over the long term, when insurers haven’t done as well. High returns in the past have caused capital to rush in and uneconomic pricing competition to occur, contributing to the industry’s traditional wild cyclicality, much , interestingly, like two of my old beats, paper and real estate. (Yes, I do get the glamour beats, don’t I?)

And, to be sure, Katrina overhung the meeting, I feel, at least atmospherically. There were many nervous jokes and remarks about outstanding lawsuits, Senator Lott’s current anti-insurance attitude, reputational “black eyes,” regrettable political demagoguing and the need to educate policyholders and politicians about why profits and Katrina claims have nothing to do with each other.
But the most thoughtful note was struck by Marc Racicot, president of the American Insurance Association, the industry’s main D.C. lobby, and, you will recall, a former Montana governor and chairman of the Republican National Committee and of President Bush’s 2004 reelection committee. Racicot warned the audience, which included most all of the industry’s most important figures, that the industry is entering a “precarious environment,” politically.

“I think we have reached a pivotal moment in the property/casualty industry in this country,” he said. The result, he added, could entail “big changes in a sytem as old as the Civil War.”

ITP agrees. He didn’t precisely spell out what he meant, but I suspect he was talking about the Katrina overhang, looming Congressional and Department of Homeland Security investigations of the property/casualty business and the flood program, respectively, and poposals to revoke insurers’ anti-trust exemption and reorder the state-based regulatory system. Oh, and the whole health insurance thing.

There’s a lot more to say, but ITP will leave it there except to note that it did take heart from two things and was disturbed by another thing.

ITP noted favorably Mr. Racicot’s call for “shared responsibilty” in solving various insurance dilemmas and the need for civility. I also applaud his call to help make insurance “a value proposition,” instead, I assume, of a political football. Fair enough.

But ITP was really impressed by Paula Rosput Reynolds, president and CEO of Safeco Corp., who, like ITP, is new to the industry, having spent her career at an Atlanta energy-services holding company, AGL Resources.

The only woman in sight, Reynolds told the group it needed to change its very relationship to, or at least the form of its discourse with, its customers. “We don’t even know how to speak to consumers,” she said, particularly given the high and increasing financial literacy of baby boomers. (She also applauded automated underwriting, which, in ITP’s view, is so long overdue it’s not even funny. Where is this industry’s Charles Schwab?)

And that bring me to my final point. For the three people out there, plus Mom, reading this and for what it’s worth, ITP noted an attitude toward customers that, I found, faintly, but disturbingly, how shall I put it, condescending. I refer to the constant talk about customers’ need to be educated and their tendency to fall under the sway of trial lawyers, unnamed demagogues and opportunistic politicians, clear references to Scruggs, Hood, Rep. Gene Taylor and, I suppose, these days, Senator Lott.

I won’t get into names in the interest of courtesy, but ITP noted too many references to consumers’ traditionally “uninformed” responses to insurance questions, their wanting to have things all ways — shared risk, but low rates — their irresponsible insistence on living near the coast and the fact that they don’t “stay up at night worrying about underwriting issues.”

Frankly, you don’t hear that kind of talk about readers at newspaper conferences. You really don’t. Nor do you hear it about customers at paper industry, packaging or real estate conferences. You just don’t.

The ITP spirit is the spirit of respect and civility. War Eagle is just offering an observation to think about. Sorry, this was not at all brief.

(1). President and CEO of AIG; Mississippi Insurance Commissioner; CEO of Swiss Re America Corp.; CEO of Zurich Financial Services; president and CEO of Safeco Corp.

(2)Insurance Information Institute, industry-backed reserach organization.
Correction and private note to Frozen Athlete: You are correct. It’s “Vestimenta.” I spelled it wrong two ways.

I-Fans,

ITP doesn’t have a lot of time today. He and War Eagle are late for the Insurance Information Institute Property/Casualty Forum at the Waldorf, and War Eagle has misplaced his cufflinks again. Myself, I couldn’t decide what to wear, but am finally going with the black Vestamente with an open-collar shirt (it sort of says, “I’m a writer”).

But, you have to read this great piece by Steve Myers in the Mobile Press-Register to understand how archaic our insurance regulatory system looks to ITP.

The debate is over how much Allstate will be allowed to charge homeowners in Alabama. The company argues that even with a 25% increase statewide and tripled rates on the coast, it will not still not turn a profit. Its officials displayed a large graphic that showed, according to Myers, that the company “has lost $120 million since 1984.”

My insurer pals are going to have to forgive a little skepticism here. This reminds me a bit of those Hollywood deals, where, because you have to split up profits at the end, no picture ever makes money. And I thought insurance profits came from investments, not underwriting, which was supposed to be basically a wash. And, hmm, why 1984. What happened in ‘83?
But never mind. I-Fans already know where ITP is heading. Why are we talking about Alabama anyway? Who cares? And what do the boundaries of that state have to do with risk?

But let’s take another step back: Rate hearings? Excuse ITP a moment while he checks his calendar. I thought so. It’s the 21st century! For a minute there, I thought Teddy Roosevelt was still president.

I don’t mean to be overly harsh, but will someone please step in and justify this? Yes, War Eagle, I’m coming.

See you at the Waldorf.

Insureds,

First, welcome to a new crew of readers. Hope you like it.

Second, here’s a link to the Sun Herald Op-Ed I wrote; ITP War Eagle was very pleased with the way it turned out. I know of at least two people who read it.

Staying in Mississippi, today’s item amplifies a call for testimony from Congressman Gene Taylor and points up inevitable shortcomings of his data-collection methods. The congressman is holding a press conference in couple hours at the Bay St. Louis (ex-) house of John Hadden, a financial planner whose (unnamed) carrier, according to this Anita Lee story (quoting a Taylor press release) gave him bupkis (1) on his $650,000 wind policy. You still have time to get over there.

Taylor is also asking constituents to mail in their claims experience, including amount of policy, amount paid, a statement, before and after photos, etc. (His address is Box 900, Gulfport, MS, 39501.)

A couple words on Rep. Taylor (you remember, decorated Coast Guard commander,
Redford-look alike, etc.). This is not Henry Waxman we’re talking about. Much as ITP likes Waxman, Taylor is a conservative Democrat who opposed Nancy Pelosi as leader of the House Democrats twice (and voted for her this time) and was pro-tort reform (pro insurer) before the post-Katrina experience, uh, changed his mind, as it were.

A big shot on the House Armed Services Committee, Taylor is also planning hearings on the insurance industry’s post-Katrina response and to boost his push for federal oversight of the property/casualty business and a repeal of the industry’s anti-trust exemption.

ITP favors data collection in all its forms, of course, even the haphazard and piecemeal approach. But as soon as ITP War Eagle gets finished with his breakfast, he is going to start raising money for a scientific poll of the six Mississippi coastal and near coastal counties as well as the relevant parishes in Louisiana: Orleans, St. Charles, St. Bernard, Plaquemines, St. Tammany.

If we want data, get data. Anecdotes are fine, but they’re no substitute. People writing in is also good, but obviously, that makes for a self-selecting and skewed (and dismissible) sample. Let’s find out what really happened.

Or better yet, maybe my pal George Dale(2) will require industry disclosure.

In the meantime, where the heck did ITP put Soros’s cellphone number?

(1) Yiddish for “nothing,” as in “I got bupkis for shemini atzeret this year, but my brother got lots of gelt for hanukkah.”

(2) Nation’s longest-serving insurance commissioner.

Insureds,

I realize we’re a bit Mississippi-heavy this week, but then again it’s not as if the state’s been exactly overexposed after Katrina, if you see what I’m saying.

First, I direct your attention to a promo in today’s Sun Herald:

“COMING SATURDAY: Mississippi must broaden the discussion to solve its
insurance crisis, an insurance blogger writes in an opinion article.”

Sounds familiar? So will many of the jokes. Thanks to Tony Biffle of the Sun Herald’s Op-Ed page, I’ve got an opinion piece going to tomorrow. It’s ITP’s first foray into cold type, and War Eagle’s a little nervous. The reason I bring it up is to emphasize to myself, at least, that 2007 is the year ITP moves from being a vanity project to something useful, or it ceases to be. This is going to be a big year, insurance-wise, as the indispensable Amy Bach(1) has been saying. If ITP doesn’t become relevant in and outside the blogosphere this year, it never will.

Insurance news dominates Friday’s News Herald editions, most of it depressing. There’s this well-done-but-still-a-bummer piece by Geoff Pender, who’s been covering the insurance debate.

“Wind pool plan taking shape”
http://www.sunherald.com/mld/sunherald/16388047.htm

Put it this way, the insurance subsidies planned for insurers are even more extensive than even ITP feared.

This qualifies as the most depressing quote of the week:

“I believe there ultimately will be an equitable resolution within the Legislature to this crisis,” said Coast businessman Dave Dennis, who was at the Capitol for a Mississippi Economic Council meeting Thursday. “It has to happen, because this is a STATEWIDE, not just a COAST issue. It’s as important to the people in BOONEVILLE and MACON as it is to the Coast.” (Sorry about the ALLCAPS; ITP War Eagle and the tech staff will work out bold-face issues over the weekend.)

ITP believes this is much more than a statewide issue and is as important to people in Rockville, Brooklyn, Evanston, San Francisco, Cambridge and Tulsa, not to mention, Dade County, Houston, St. Bernard Parish, as it is to people in Bay St. Louis.

But, as shabbes approaches, let’s look at the life-affirming side. Here’s a cool piece by Anita Lee about Kevin Buckel, a Long Beach resident who has mounted a grass-roots effort to pass an insurance bill of rights. Check this out:

http://www.sunherald.com/mld/sunherald/16388035.htm

“My big push all along has been that George Dale should be required to disclose HOW THESE INSURANCE COMPANIES PERFORM,” said Buckel, who started his grassroots campaign when Dale refused to provide complete claims numbers. “There’s no law on the books requiring him to do it and he’s not doing it after Katrina because he knows the INSURANCE COMPANIES NUMBERS ARE HORRIBLE.”

Whoa. Who is this Buckel, and why is he stealing ITP’s ideas? I have roused ITP’s attorney from the cot on which he he sleeps. He is exploring ITP’s options.

I goof around, of course. Here’s a link to Buckel’s site: http://www.msbillofrights.com/

The only change I’d make is that I’d move up the right from its current position at No. 23 of 25.

“23. CLAIMS REPORTS. Insurance Commissioner must produce an annual report to MS residents of all insurance companies on the performance of insurance claims amounts paid, claims amounts denied, and claims filed.”

(1)Duomo of San Francisco-based United Policyholders, at unitedpolicyholders.org, who gave ITP a nifty ballcap yesterday. UP is basically the policyholders’ counterpart to the Insurance Information Institute, which was kind enough to invite ITP to its property/casualty forum at the Waldorf next tuesday. ITP War Eagle still doesn’t know what he’s going to wear, but is thinking of that backless number.

 I-Fans,

First of all, thanks for all the response in recent days. I will be doing an ITP Mailbag soon.

Second, I’ve got to be brief again. ITP is on the West Coast doing a geothermal analysis of the San Andreas Fault

Third, sorry about the sloppy long links. The transition to MacBook Pro is a little bumpier than expected. 

The headline above is part of a quote from a banker and member of the Gulf Coast Business Council, who is lobbying the Mississippi State House for a state appropriation to shore up the state wind pool.

“Hopefully, at some point soon, the invisible hand of
competition is going to reach in and make insurance premiums - I won’t
call them reasonable - but halfway reasonable.”

You’ve got to read the story to appreciate 1. how bad things look down there and 2. the poverty of what pass for solutions.

http://www.sunherald.com/mld/sunherald/business/industries/insurance/16379472.htm

whole story 

ITP recognizes the letimate concerns and good intentions of the council, lawmakers and insurers, too, for that matter.

But,  the invisible hand is not going to come to anybody’s rescue anytime soon. It’s not even a relevant concept in a market that has this much government intervention, particularly the government’s insistence on dividing up markets into irregular pools of various size, some tiny, like Mississippi, with outsized risks, like the coast.

Sure, the Mississippi coast is risky, but the entire coastal United States is, by definition, less risky. Insurer pals, check me here, but it’s more spread out geographically and has a lot more people paying premiums, making it more efficient right?

I haven’t had time to invite onto the list the National Association of Insurance Commissioners, the main bulwark of support for state-based insurance, but is there anyone out there who can make a good case for it? And what are the policy benefits of McCarran-Ferguson?

http://insurancetransparencyproject.com/2006/12/07/mccarran-ferguson-and-its-discontents/

I-Fans,

ITP let you down yesterday. The FBI criminal probe of insurance issues was actually reported was back in 2005 and hasn’t come up again. ITP didn’t check the data in his scramble to get yesterday’s item out.

ITP War Eagle is pretty down about it. He could barely eat his mouse this morning.

The worry around ITP HQ is that our insurance pals might think that ITP is anti-insurance and, looking for trouble, will always find it. Actually ITP considers itself pro-insurance and/but looking for change. Big difference.

Ok. We move on.

Today’s item really did occur in the recent past in the Mississippi State House.

“GOP blocks insurance bailout.”

The link is below. But that is not another ITP mistake. Mississippi Republicans, in the new legislative session yesterday, blocked an effort by Democrats to appropriate $30 million in state money to match $30 million in federal money to bail out the state windpool, which is seeking to raise commercial rates 288%. The bail out is hoped to reduce the increases to a mere 100%.

Here’s an excerpt from the Pulitzer-winning Sun Herald:

“…Meanwhile, a group of Coast business leaders on Tuesday was putting on a full-court press lobbying effort at the Capitol, urging lawmakers to quickly help solve the Coast’s insurance crisis, which threatens to stifle recovery.”

The gist of the debate: Democrats are trying to help out coastal businesses, while Republicans feel like they’re being stampeded without time even to read the bill:

“Rep. Diane Peranich, D-DeLisle, author of the insurance bailout bill, said she could not understand how some of the Coast delegation could help block its prompt passage Tuesday.

‘The business community is up here saying they need this immediately,’ Peranich said. ‘I’m voting with my constituency, and trying to do what the business community on the Coast told us they needed. I don’t understand how (Republicans) could do this.’

“GOP leaders accused House Democrats of grandstanding and of trying to strong-arm them into approving spending more than half the state budget just hours after the three-month legislative session opened.

” ‘We don’t like not being able to read the bill before we are supposed to vote on it,’ said Rep. Jim Simpson, R-Pass Christian, House Republican leader. ‘It wasn’t about the merits of any one particular bill. We’re all here to work together, not get into big partisan battles.’ ” (ITP wishes it could work the italics on the Safari program.)

This is about helping state-run fund that is taking the worst risks off the industry’s hands. I’m not being facetious here, but I thought risk was basically what insurance does. ITP would like to start an honest debate about wind pools.

So here’s a proposition:

“State wind pools are like the State of Michigan offering to help out Ford by building the drive train and steering wheels on all Crown Victorias and F-150 pickups.”

ITP really believes that, but is open to alternative points of view. III, let’s hear from you!

Thanks to insurance pals for the fact-checking. ITP appreciates it.

http://www.sunherald.com/mld/sunherald/16371483.htm