Crude file of early Insurance Notes! ™.

Notes! Archive:

10/20/06

Fellow Insureds, policyholders and other uncovered perils (honk):

People often ask me, ‘Say, Dean, why do you spend so much time on the sexy, sensational aspects of insurance , like claims-handling and crop insurance – but ignore the really hot-buttom issues, the tabloid stuff, like insurance accounting and taxation? Isn’t that irresponsible?”

I tell them, `Patience, Notes! Nation(TM). All will be revealed.”

Today, though, we’re talking about Katrina-related lawsuits, as reported by my favorite Southern Mississippi paper. A couple things about counting insurance plaintiffs: It’s really hard. Policyholder suits are generally filed under state law in individual state courthouses and even then are generally not categorized by court officials as “insurance cases,” but rather filed under broader categories, such as “breach of contract” or something else. So no one really knows (except insurers) how often an insurer is sued by its chiseling, gold-digging, suit-happy policyholders, oops, I mean, its customers.

Katrina, however, offers something of an opportunity. So big it was, Grasshopper, that some court officials, for administrative purposes, are keeping track. Also, for legal reasons I’ll spare you, nearly ALL the Mississippi Katrina cases are filed in the federal court in Pascagoula (love writing word.)

But even now, we don’t know how many individual plaintiffs there are. A single suit, for instance, can, and does, contain hundreds of plaintiffs. Richard Scruggs, famed tort king, tells me he has nearly 3,000 individual plaintiffs himself. And, as commonsense tells us, only an (unknown) fraction of unhappy insureds (or unhappy anyone) will sue. And of course each case must be heard individually, according to a recent ruling by the lead judge in the cases, L.T. Senter.

So, even with two visiting judges brought in to help out, at 290 cases a year (see the story), the last of these cases should (conservatively speaking) be headed for trial in 2011, more likely closer to 2014. Oy.

But that’s ok, most of these retired factor workers and customer-service representatives down here are loaded, believe me. Insurers are no match for them.

Coming soon: insurer litigation tactics.

In an effort to widen the circle, I’m going to invite The World’s Hardest Working Economist, The Oklahoma Kid, The Washington Duomos and gulp, funders.

Private note to Foxy Oregonian: Stop reading this far down. I’m not going to mention you!

http://www.insurancejournal.com/news/national/2006/10/20/73450.htm

10/17

Hello Insurance Gluttons,

Today’s punishment is a part of a great series from my favorite newspaper. Basically, the head and subhed tell the story:

Crop Insurers Piling Up Record Profits

Why? Subsidies and No Competition

The lede describes an insurance company that tried to compete in this industry-run but government-paid-for program (can you say, National Flood Insurance Program?) by offering a 10% discount to farmers.

Cool graf:

An eruption ensued. The other companies quickly turned to Congress to quash the idea. In congressional testimony and letters to lawmakers and regulators, they complained that competing on price threatened the “unique public-private partnership” that the companies had with the government.

With the help of several powerful members of Congress, the program was eventually derailed.

The upshot?

Last year, the companies made $927 million in profit, a record ((my note: that’s from farmers)). They received an additional $829 million from the government in administrative fees to help run the program. On top of that, taxpayers kicked in $2.3 billion to subsidize premium payments for farmers.

All of that to pay farmers $752 million for losses from bad weather.

Nice. Oh, and, uh, hmm: are you getting the feeling that the insurance story isn’t just about Katrina homeowners’ claims?

The link is below.

Today, we welcome the Jackson Chicken Herder, the Fighting Lawyer, the Sultry Demographer and the Portland Communicator. Remember, you asked for it.

Oh, and a private note to the Greenwich Village Documentarian, who complains about getting no Insurance Notes!(TM) the last few days: Get yourself some help, girlfriend!

http://www.washingtonpost.com/wp-dyn/content/article/2006/10/15/AR2006101500585.html

10/12

Hi Insureds,

Thanks to the Debonaire Wall Streeter for passing this along:

As I told him, when you deny Trent Lott’s claim, you either:

1.) Really believe that Category Five Hurricane winds blowing for hours did zero damage to his house, and that damage was caused only by the water that surged hours later or:

2.) Really have a lot of money at stake on the coast and don’t care whose claim it is.

I’ll leave it there. I understand these Notes! are piling up in some people’s inboxes, hard as they must be to resist. I’ll say again, writing these really helps me frame my ideas, and I think it’s very nice of people to tolerate them, seriously. And remember, there’s the party at Freddy’s (finger food, cash bar).

Insurers Get an Earful From Senator

By JOSEPH B. TREASTER

Published: October 12, 2006

Sometimes, political connections come in handy. Ask Senator Trent Lott of Mississippi.

10/11

G’day, insurance-heads:

Today, a departure from Insurance Journal clips –which, to me, are like the sports pages — to talk about what’s not known about insurance. This is going to be a big theme with what I’m calling the Insurance Tranparency Project (TM) (I’m getting business cards mades, so it must be real).

My big idea is that the market for insurance is inefficient because buyers don’t have access to (at least) two important things about insurance — price and performance. 1. You can’t easily compare insurance prices; there’s no exchange or place where prices are posted for what is essentially a commodity, like a bushel of wheat, (insurers would argue with the commodity thing, but stick with me). 2. And even, more importantly, you can’t compare performance, to wit: which insurer is likelier to pay a claim. These are not minor details.

My view is that if the market could distinguish good actors from bad actors (and, believe me, they know who they are) the invisible hand would do the rest. You don’t need an army of regulators, as much as I, as a liberal, love those (and the more intrusive the better, I say!).

More on this later, but back to Orleans Parish. One bit of datum I thought would be useful would be to know how often insurers are sued by their customers. This is not something insurers are required to disclose to state regulators, who don’t ask so they can’t tell. No one collects this data, so I will, or will try. This presents many logistical problems, owing to how cases are filed and categorized (and physically separated) in various state and federal courthouses, in this case. Orleans, St. Tammany, Jefferson, etc. etc. and three coastal counties in Mississippi (Hancock and a couple others, I forget).

My bulldog reporting (well, I walked over to the court and used its computer) found that from Aug. 30, 2005 (Katrina +1) to Oct. 9, 2006 (the other day), 2,850 suits were pending in Orleans parish in cases categorized by the court as “Hurricane Litigation.” However, clerks tell me, other insurance cases were filed under the court’s “breach of contract” and a few under “other” codes. A total of 5,020 cases turned up under a search between those dates with the word “insurance” under the “litigant’s name” category.

Are these all Katrina cases? No. Some could be run-of-the-mill auto claims.
Even if they’re all insurance cases, is 5,020 lawsuits a lot, a little or to-be-expected in a single parish (the county that includes New Orleans)?

I have no idea, really, but I will…..

10/8

This is big, insurance fans.

Normally, the federal government has nothing to do with insurance regulation and is in fact barred from regulating the industry by a 1945 law known as the McCarran-Ferguson Act (more later on that that one; it’s priceless). In this case, however, Congress has directed the the IG of the DHS (which includes FEMA, which runs the National Flood Insurance Program) to explore whether insurers “improperly attributed” damages caused by wind to water, thereby cheating the flood program.

The flood program, by the way, required a $22 billion infusion from Congress this year and paid more for Katrina than in its entire 38-year history put together.

Key quote:

Sen. Trent Lott added the provision calling for the investigation to the Homeland Security Appropriations Act, which passed both chambers Friday. U.S. Rep. Gene Taylor had included a similar provision in the Flood Insurance Modernization and Reform Act, but that bill failed.

Although insurance companies do not cover flood losses, they do handle policies and investigate flood claims for the NFIP.

Lott and Taylor are suing their insurer, State Farm Fire & Casualty, over Hurricane Katrina damage. Lott owned a home on the Pascagoula waterfront, while Taylor ’s waterfront home was in Bay St. Louis. Both congressmen had flood insurance, but maintain their homes also suffered wind damage that should have been covered by State Farm.

They have championed the causes of thousands of homeowners who also believe they were unfairly treated by their insurance companies.

I didn’t see this anywhere but in one of the local papers, the (Biloxi-Gulfport, Miss.) SunHerald (posted on the Center for Public Integrity, www.publicintegrity.org and passed along by Karen from the Mississippi Center for Justice).

And a word about “local papers.” Having worked for such things for 13 years, in Anniston, Ala. and Providence, R.I., I know how dismissive that term sounds to “local reporters” coming from us East Coast elites; actually the Sun Herald and Times-Picayune shared the Pulitzers last year. (And the Projo won it for Investigations in 1994.) Take that, East Coast snobs.

Also: Bears 27-Bills 0, halftime.

Insurer practices to be investigated
Claims handling in question
By ANITA LEE

10/10

Good morning, fellow insureds, or should I say, fellow InsNerds (get it?):

If you’re new to the list, welcome to my experimental insurance blog, where I bring riveting news from the insurance industry trade press and elsewhere, topped off with my own mellow blend of witty, dubiously informed commentary and strange use of fonts and bold face. The purpose of this riotously amusing blog would be to start opinion makers (funders/editors, even, yes, citizens) thinking about insurance, which, in seriousness, is a big deal that goes way beyond Katrina and property insurance. I just need to find a way to convey this.

Again, by merely receiving these blurbs, you are doing me a favor. If you don’t want them, please, just say so and I’ll take you off. No offense will be taken. (Mom, for the last time, that does NOT include you.)

Today’s lesson is just a slice of a larger picture, which I’ve expounded on in past Notes!: insurance industry fobbing off costs or siphoning income from taxpayers. In this case, Gov. Blanco is going to reimburse ratepayers by dunning taxpayers for higher post-Katrina homeowners’ rates.

Keep in mind that despite record “losses” (a business-term misnomer that I’ll explain later) of $60 billion “suffered” (another funny insurance word; watch for more on that bad boy) by the industry in 2005 from Katrina, Rita, Dennis and Wilma, the insurance industry’s net income hit a record high for the year: $43 billion, up 11% from the previous year, 2004, which itself was the third-highest profit year ever, despite four notoriously destructive storms that hit Florida. And believe me, those aren’t my figures.

What’s going on? Stay tuned, insurance fan(s).

Louisiana governor aims to send out insurance rate relief checks

BATON ROUGE, La. (AP) — The governor proposed a $1 billion plan Monday to ease the post-hurricane insurance burden on Louisiana homeowners by sending them refund checks to cover

10/11

Good morning, fellow insurance nerds:

In the giving-the-devil-his-due department, this smart columnist from my favorite newspaper and ex-vendor says the private insurance sector is smart when it comes to recognizing — and calculating — the risks of global warming, while the government-run insurance sector is stupid by not charging enough for flood insurance premiums. Both points are true.

Not the whole story, by a long shot, but true enough.

Here’s a key quote:

The federal flood insurance program uses taxpayers’ money to subsidize houses that are prone to flooding: It is, in two senses, the quintessential slush fund. The program’s most extreme subsidies go to old properties that were grandfathered into the system; these pay only 38 percent of the actuarily fair insurance premium. That might sound bad enough, but it isn’t the worst feature. David Conrad of the National Wildlife Federation has shown that, when these old properties get flooded, the feds often pay to rebuild them — in the same way and in the same place.

Two other things to keep in mind, however. 1. The only reason the government runs the flood program at all is that insurers, in 1968, said they couldn’t underwrite that particular risk. (Just as they now say they can’t undewrite a). earthquakes in California; b.) hurricanes in the gulf and c.) terrorism, among other things, without government support. And 2. Well, I forgot Point 2, but I’m sure it was a good one.

THANKS: for feedback, especially puzzlement, as in: “What are we supposed to do with these?” etc. The answer is: whatever you want, including nothing. It’s all very helpful as I consider widening the circle to include journalists and funders, not just pals. Also, to the Lovely Republican who said, in a nice way, “I see, you’re on the path to being the Ralph Nader of insurance.” To which I say: Yikes! The goal, I think, is to be and remain a journalist, an honest broker, but then again I don’t want to dump information on people without context. So, we’ll see.

I do notice I come across as anti-insurance. Actually, I’m not at all. More later.

Flood Insurance for Dummies

By Sebastian Mallaby
Monday, October 9, 2006; A17

We all love stories about evil corporations that hijack public policy, riddling it with tax loopholes and earmarks. But sometimes corporations are the ones that formulate enlightened policy — and then get hijacked by government.

10/10

Hello Insurance Fans,

Thanks for the feedback yesterday. Note the new name and more sober tone. I decided to get out of bed and sit up straight to write these.

Today’s item — like so many news stories — is summed up in the headline and basically all you need to know. The background is that in June, two executives at a contractor to State Farm turned whistleblower, alleging the insurer shredded some engineering reports and manipulated others to support the denial of claims. In June, the executives, sisters Cori and Kerri Rigsby, turned over 15,000 internal company documents to Mississippi Atty. Gen. Jim Hood and Tort King Dickie Scruggs.

How unusual is a criminal probe into insurer conduct after a major catastrophe? Not sure. That’s one of things I’ll be checking.

And if this item seems too serious, I’ve appended a reminder that insurers underwrite a lot of things, and hence have a lot of things to worry about (if I knew how to link, I would do so here; as it is you have to scroll down to the next story; we’re experimenting here).

State Farm Says Employees Targets of Katrina Criminal Probe

By Michael Kunzelman
October 5, 2006

At least two employees of State Farm Fire and Casualty Co. are targets of a criminal investigation of the insurer’s handling of policyholders’ claims after Hurricane Katrina, the company disclosed in court papers.

State Farm attorneys are asking a judge to protect four employees, including Alexis “Lecky'’ King and Lisa Wachter, from being questioned under oath by lawyers in civil cases while they are under investigation by Mississippi Attorney General Jim Hood.

Hood’s office has told an attorney for both King and Wachter that they are both targets of the attorney general’s investigation, according to State Farm lawyers.

State Farm also says a federal grand jury is expected to issue a subpoena for a third employee, Mark Drain, to testify before the panel. However, it’s unclear whether Drain is a target of either the state or federal investigation, the company says.

http://www.insurancejournal.com/news/southeast/2006/10/05/73039.htm

FIRST ONE:

Hello and welcome to Insurance Blurbs!

Each of you are unwilling test monkeys as I try to get my arms around what
I’m calling The Great insurance Transparency Project (TGIP). Most of you
don’t know each other but there will be a party at Freddy’s Lounge in
Brooklyn one day, when you will all meet. Unfortunately, it will be a masked
ball, so you still won’t know who each other is (are?), but, still, it will
be fun. All of you provided inspiration in some way or at least an idea that
I was able to steal. None of you are in involved in the insurance industry,
really, and certainly not as employees or consumer advocates. You are
basically friends and relatives (Oops! Just gave up mom!). That’s why this
is still a test.

Please, do not feel the need to respond. We are all (check that: most of
you) are very busy. In seriousness, if you cannot handle another email, to
be removed from this list, please hit “reply” and type “$#@$% you!” (removal
program is case sensitive), and I won’t bother you again.

By receiving this email, you are doing me a favor. The purpose is to help me
think and to find the proper voice for an idea I have related to my Soros
grant. I will troll each morning’s insurance press — I do it because I know
you just don’t have the time — for something interesting. Often it will not
be funny, but the insurance industry will surprise you. These will not come
every day, because even the insurance industry, as rich as it is, can yield
only so much.

So with that, here is the key except from an Insurance Journal story today
about a study backing insurers’ demand for a change of venue in a wind-water
trial (if you don’t know what that is, just ask):

…49 percent agreed with a televised remark by U.S. Rep. Gene Taylor,
D-Miss., that “there ought to be a national registry of child molesters and
insurance company executives, because I hold them in the same, very low
esteem.'’

“I submit that if potential jurors roughly equate insurance executives to
child molesters, insurance companies have no chance for a fair trial among
those who hold that opinion,'’ Tedin wrote in his 23-page report.
A proposed rule of thumb: No change of venue until they hit 50 (rim shot).

Thanks for tuning in. We’ll see how this goes

No need to read the rest, but just in case:
State Farm Wants Katrina Trial Moved, Claiming Jury Pool Bias in Miss.

By Michael Kunzelman
October 3, 2006

The jury pool in south Mississippi has been tainted by “media propaganda'’
about the insurance industry’s handling of claims after Hurricane Katrina, a
major insurer argued in a bid to move the trials for several lawsuits
spawned by the storm.

State Farm Fire and Casualty Co. commissioned a survey of 3,600 register