One issue that holds up both reform and long-term reauthorization is that flood insurance is not as important in some states as it is in Florida and other Gulf Coast states. In less flood-prone regions, insureds find themselves paying premiums for insurance they seldom need. For private insurance companies, the premiums aren't nearly high enough to cover what they pay out in claims. It's a lose-lose situation.
]]> Researchers at the Wharton Risk Management and Decision Processes Center reviewed claims data from 2011 and confirmed early predictions: Last year's natural disasters broke records by racking up $350 billion in claims worldwide. As far as NFIP is concerned, hurricanes and floods in the U.S. accounted for two-thirds of the almost 100 declarations of disaster by President Obama.All of this just piles on to NFIP's $17.8 billion debt load. The program has carried most of that debt since the 2005 and 2008 hurricane seasons -- the same seasons that prompted more private insurers to exit flood-prone states.
The obvious answer to NFIP's problems would be to lure private insurance companies back into the market. The study suggests it's possible.
We'll get into the details in our next post.
Source: Risk & Insurance, "Federal Flood Insurance Program Gets Extension," Jon Campisi, Jan. 24, 2012
]]>But why is health insurance so expensive?
]]> One reason has to do with bulk purchasing, for lack of a better term. To give an example, Medicare is cheaper than private health insurance because it can pay for many services all at once and thus negotiate a lower rate. Private insurers are smaller and do not represent as many consumers, so they don't have that ability. Thus, they have to pay more and pass the cost along to consumers.A second reason is that the American government doesn't get as engaged as do the countries of other governments. In some countries, healthcare is a public good, or doctors' education is heavily subsidized (so they are paid less, leading to less expensive doctor's visits) and factors like that mean lower costs. Please do not interpret this as a political statement or an endorsement of the way any other country does things. Rather, it's just a comparison that is worth turning over in your mind.
Finally, we approach healthcare differently than some societies. This is a more tenuous claim, but some people believe that if we led healthier lifestyles or engaged in more preventative care as opposed to only treating problems as they arose, we'd pay less in the long run. Again, this is the most abstract and debatable of the three reasons we have offered here, but like the last point, it's something worth thinking about.
So, health insurance is expensive, but that doesn't guarantee it will be there when you are counting on it. You should know that if you ever feel wronged by your insurance company, you can talk to a lawyer -- a lawyer who works for you and not for the insurance company -- about the matter. In some cases, lawyers like this can help you find a way forward.
Source: Slate, "Health Care Is Expensive Because The Prices Are High," Matthew Yglesias, Feb. 16, 2012
]]>A House bill pushed by a Bradenton legislator seeks to replace Florida's current PIP law with an insurance scheme that focuses on emergency care coverage. This bill would force car accident victims to receive coverage in emergency rooms within 72 hours of any accident and exclude chiropractors from receiving PIP benefits.
]]> Under the House bill, PIP benefits would remain at $10,000 in medical coverage situations and also provide benefits for funerals and lost wages. It is unclear whether this bill will result in a net reduction in benefits by forcing car accident victims to use the ER, which is the most expensive place to receive medical care.Another bill proposed in the Senate would reform the current PIP law in ways that prevent fraud and spiraling medical costs. The bill contains medical fee schedules, PIP licensing requirements for clinics, and a mandate for insurers to pay claims promptly. Delay in claim payment is one of the biggest problems in the current PIP system and fuels much of the auto insurance litigation in our state.
Source: Insurance Journal, "Florida Insurance Commissioner: 'This Is Year for PIP Reform," Michael Adams, Feb. 9, 2012
]]>The no-fault insurance law was intended to remove the need to litigate small insurance claims and to provide all Floridians with some protection in the event of a car accident. Lawmakers believe that the current law allows crime rings to stage accidents with the help of crooked doctors. Lawmakers seem to ignore the fact that many insurers underpay car accident claims, forcing car accident victims to sue for the benefits that they are entitled to.
]]> Claim denials and claim delays are the two main situations in which Miami residents need to obtain an attorney for auto insurance benefits. Many insurers will attempt to deny a claim despite the fact that a car accident victim sustained serious personal injuries in a crash. Another tactic is for insurers to delay the claim in hopes that the car accident victim will go away or become desperate and settle for less.There are also some insurers who will fail to defend policyholders who are sued after they become involved in an accident. Typically car insurance policies require a policyholder's insurer to pay for an attorney in these situations. Policyholders can hire experienced insurance litigation attorneys to enforce their rights under their insurance contracts and obtain the compensation that they deserve.
Source: Insurance Journal, "Florida Insurance Commissioner: 'This Is Year for PIP Reform," Michael Adams, Feb. 9, 2012
]]>This is just the first of many such settlements expected in the matter. The investigation targeted half a dozen companies and their handling of unclaimed life insurance benefits. The controversy stems from claims that companies did not do enough to locate beneficiaries and then held on to the funds, instead of turning them over to the state.
]]> The Social Security Administration maintains a "death master file" that contains information about individuals whose deaths are reported to the agency. More than 83 million records were available to insurance companies in 2009, for example, yet state officials believe that companies conducted only cursory searches on an irregular basis.As part of the settlement, Prudential agrees to check the death master file regularly for death information of any life insurance policyholders or annuities owners. The company will also use more sophisticated search techniques, such as revamping its name matching criteria to look for transposed letters; expanded searches should result in more "hits" against the death master list.
The insurer also agrees to use "all other means available" to ensure that beneficiaries receive what is owed them as soon as possible after the policyholder's death. And, the company must follow the law and turn over unclaimed benefits to the states.
Although seven states have signed the settlement agreement, it will not be final until 20 more states sign.
Source: Reuters, "Prudential reaches multi-state settlement over death benefits," Jack Welch and Suzy Welch, Feb. 3, 2012
]]>Proponents of the bill said the current law does not do enough to discourage bad faith lawsuits. In fact, they claimed, the law encourages lawsuits by providing an incentive for claimants not to settle. Opponents, however, said the bill was "a solution in search of a problem." According to one plaintiffs advocate, there is no crisis in bad faith litigation, so there is no need to change the law.
]]> The proposed bill added a notice provision to the current law. Before a claimant could file a bad faith lawsuit, he would have to give 60 days' notice to the Florida Department of Financial Services and the insurance company of his intention to sue. During that 60 days, the insurer could pay damages or pay to the policy limit. The lawsuit would then be unnecessary.Proponents explained that the cost of bad faith lawsuits is having a negative impact on small businesses. Insurance companies incur expenses in defending these suits and paying damages, and those costs are passed on to business customers. Small businesses are seeing their premiums increase as a result, they said.
Lawmakers who opposed the bill argued that insurance companies don't need an additional 60 days; the waiting period is an incentive for companies not to settle promptly. For claimants, the waiting period could cause enough of a financial strain that they would accept lower settlements than they deserve just to avoid the delay.
This is not the end of all insurance-related efforts at the Legislature. We'll keep an eye out for other issues and report back as they come up.
Source: Insurance Journal, "Florida Lawmakers Reject Bad-Faith Reform Bill," Michael Adams, Jan. 27, 2012
]]>The congressman meant that hurricanes in Florida are inevitable. The bill, which was backed by Gov. Rick Scott, is apparently meant to give Floridians more options in the event of a hurricane and to protect them from rates that have been described as "artificially low."
]]> According to the Miami Herald, the bill would allow Citizens to hand over its customers and homeowners to the surplus lines companies. Customers would still be given the option to switch back to Citizens.Citizens was initially created to be a sort of "last resort" insurer, but it has ballooned to the state's largest property insurer. As it stands now, the company can assess customers of other insurance companies regarding different coverage, including automobile policies, to cover its own finances.
Supporters of the bill say the surplus lines companies could help in the event of a massive hurricane such as Katrina. Any such companies would reportedly need to have $50 million in surplus funds to be a part of the program.
Opponents are still worried that switching to a different company could leave customers paying higher rates or left abandoned altogether if an insurance company goes underwater. The Florida Insurance Guaranty Association does not include surplus lines companies.
Source: Miami Herald, "Fla. House OKs alternative hurricane insurance," Bill Kaczor, Feb. 3, 2012
]]>In at least one country, parents are more likely to insure their pets than their children. A recent survey showed that 12 percent of consumers in England have critical illness coverage for their pets. Only 9 percent have the coverage for their children.
]]> Researchers say that cost is the main deciding factor. Respondents said they would happily pay for insurance for themselves and their children if the monthly payments were reasonable.News outlets are reporting that 50,000 pet owners will not have to make that choice anymore. The company that insures their pets will no longer offer the coverage; the insurer says it is just too expensive. Sadly, the insurer is not alone in its decision. In the last two years, 13 insurance companies have stopped offering pet policies. All point to rising veterinarian fees as their reason.
In the past year, the average vet bill for a cat has increased 28 percent. For dogs, costs have gone up 13 percent. Insurance policies have gone up more than 33 percent in the same period, and insurers say that still isn't enough to sustain the pet insurance line.
The company is not terminating coverage all at once. First, it will not sell coverage anymore. Second, current policyholders cannot renew their coverage, and, finally, all coverage will terminate in September.
With the insurance market shrinking, pet owners may have to make some difficult choices. Insurers are unlikely to cover animals that have histories of illness or chronic conditions.
Sources:
Business Insurance, "Critical illness insurance covers more pets than kids in U.K." Feb. 2, 2012
Daily Mail (UK), "50,000 pet owners face crippling vet bills after their insurance is axed," Ruth Lythe, Feb. 4, 2012
]]>Regulators are investigating a handful of major lenders to figure this out. As we discussed in our last two posts, lenders require homebuyers or homeowners applying for refinancing to have mortgage insurance and homeowners insurance. In a good economy, borrowers will refinance for lower rates or to borrow against equity.
]]> Right now, though, borrowers looking for refinancing are more often than not in some kind of financial distress. They are looking for lower payments or a reduction in the loan -- anything to help them make ends meet. And, because they've been having trouble making their mortgage payments, they gave up on their homeowners policies.In these situations, mortgage lenders have the right to purchase insurance for the homeowner. In the business, this coverage is referred to as force-placed insurance.
The lender is acting in its own interest, of course, and will continue to do so by charging the homeowner for the policy, either outright or by wrapping the cost into the monthly mortgage payment. And, because the lender isn't actually footing the bill, it won't waste time shopping around. The coverage is often more expensive than if the homeowner had purchased it on his own.
Part of the investigation involves where the lenders (or mortgage servicing companies) buy the coverage, and part involves the pricing structure. Regulators will be looking for conflicts of interest and kickbacks. When you miss insurance payments, your premiums may be higher on your next policy, because you present more of a risk. Investigators have at least one example of the premium being three times what it had been, though, and that feels inappropriate.
Before the foreclosure crisis, the force-placed insurance market was pretty small. Not surprisingly, it has grown significantly over the past few years.
Source: New York Times, "Big Banks Face Inquiry Over Home Insurance," Louise Story, Jan. 10, 2012
]]>In our last post, we discussed the differences between mortgage insurance and homeowners insurance. The former protects the lender, while the latter protects the borrower ... and the lender. The current investigation stems from banks taking matters into their own hands when homeowners did not have their own insurance.
]]> When a homeowner can't make his mortgage payments, it makes sense that he would cut back in other areas. What lenders have found is that one of those areas is homeowners insurance premiums.The insurance provides significant protection to the lender, though, so it behooves the lender -- or the mortgage servicing company -- to help the homeowner acquire insurance. Apparently, in some cases, the lender/mortgage servicing company guided the borrower to an affiliated insurance carrier, where the coverage was as much as 10 times as expensive.
First, by steering customers to affiliates, the lenders are sailing awfully close to the wind -- financial companies are highly regulated, and conflicts of interest are not taken lightly. In the starkest terms, robbing Peter to pay Paul is one thing, but robbing Peter to pay your brother is quite another.
Next, there's the predatory nature of the pricing schemes. Surely a distressed homeowner isn't going to be any more able to keep up with more expensive payments than he was with his old plan. The question then is whether kickbacks were involved.
We'll finish this up in our next post.
Source: New York Times, "Big Banks Face Inquiry Over Home Insurance," Louise Story, Jan. 10, 2012
]]>Two kinds of insurance figure in the purchase of a home. First, the homeowners policy protects the purchaser's investment in the house, the land and any personal property there.
]]> The second kind of insurance, mortgage insurance, protects the lender's investment. If the homeowner defaults on the loan, and the home is subsequently sold at a loss, the insurance company will reimburse the lender a certain percentage of the loss. It's important to remember, though, that mortgage insurance is not mandatory if a homeowner's equity hits a defined threshold.To illustrate, let's say Bob buys a $150,000 home with a $7,500 down payment. The lender's investment in Bob and his home is $142,500. If Bob defaults right away, and the home is sold at auction for $120,000, the lender's loss is $22,500.
Now, say the mortgage insurance policy covers 20 percent of any loss. The insurance company would cover $4,500 of the loss. The bank isn't left holding the whole bag.
Either the lender or the homebuyer can pay the premium. Most often, the premium is wrapped into the loan, and the homebuyer pays it as part of the monthly mortgage payment. When realtors and lenders talk about PITI, they mean principal, interest, taxes and (mortgage) insurance.
Lenders also prefer -- and some insist -- that homeowners maintain homeowners insurance coverage, too. The policy may only cover the homeowner's property, but, by doing so, it protects the lender. The homeowners policy will repair and rebuild the house, of course, but it will also offer financial protection to the homeowner so he can continue to make his mortgage payments.
This is where we turn to the force-placed policy -- in our next post.
Source: New York Times, "Big Banks Face Inquiry Over Home Insurance," Louise Story, Jan. 10, 2012
]]>Many will turn to the cruise line for relief. The cruise line will then turn to its insurance company for reimbursement. Without knowing the particulars of the policy, it's hard to know if the claim will be denied. Can a company indemnify against the (alleged) recklessness of an employee?
]]> A vacation like this would be expensive, and consumers like to protect their investments. Many, then, could have purchased trip insurance. Most policies cover trip "interruption" and cancellation for illness or a weather event, like a hurricane. Most policies will not cover a mere change of mind.In the days after the accident, it's impossible to imagine that people booked on future cruises didn't reconsider their plans. A typical trip insurance policy would not cover a cancellation.
This isn't to say they are without options. There is Cancel for Any Reason coverage that will cover a change of mind. One policy reimburses up to 75 percent of the trip's cost.
Again, these policies vary in coverage and in price. It's not a very large market, but it is possible to shop around. A policy typically costs 5-7 percent of the trip cost.
An agent with one travel insurance company explained one of the perks of having a policy through them. Insureds on the Concordia received assistance immediately from the insurance rep. The insurance company got messages to family members, replaced travel documents (including passports) and made arrangements for their customers to fly home as quickly as possible.
Source: USA Today, "Does travel insurance cover disasters such as Concordia?" Fran Golden, Jan. 19, 2012
]]>Generally, travel professionals offer trip insurance to vacationers when they book the cruise. The cruise line may offer its own coverage or have a relationship with an insurance company. The terms are fairly standard from policy to policy.
]]> For instance, policies usually include baggage protection. The insurer will also reimburse an injured policyholder for medical expenses and will cover an emergency evacuation. There is usually a death (or dismemberment) benefit, too, that will cover the cost of sending a body home.The most common reason travelers purchase trip insurance is the cancellation coverage. If the policyholder becomes ill and cannot make the trip, the insurance will reimburse a portion of the cost. If the weather interferes with the trip, the coverage will kick in.
Typically, a policy will limit the cancellation coverage to specific types of events, like sickness or weather. Travelers who changed their minds about cruising after watching the coverage of the Costa Concordia wreck, though, will probably not be covered under a standard policy.
Continued in our next post.
Source: USA Today, "Does travel insurance cover disasters such as Concordia?" Fran Golden, Jan. 19, 2012
]]>The best way to avoid an insurance claim -- for damage to property or a person -- is to limit the number of people allowed in the establishment at one time. General liability insurance, risk management professionals warn, does not usually cover political gatherings at neighborhood eateries or convenience stores.
]]> If business owners want to welcome the candidate and his followers, they may want to look into special events coverage. They can buy the insurance to cover the store for the week leading up to the primary, or the two weeks around the convention.One risk management adviser tells his small business clients not even to try to manage the event on their own. Hiring local security guards (rent-a-cops) and putting up velvet ropes for crowd control won't be enough. That night watchman, he says, has no idea what "an incident control center" or mutual assistance agreement means.
Instead, he says, small businesses should hire a security company. The business owner should make sure that the contract includes an indemnification clause, and that the company has insurance. It's all about transferring the risk.
Individual campaigns manage their own security -- in fact, according to one insider, they hire local rent-a-cops. The U.S. Secret Service doesn't get involved until later in the campaign, usually after a front-runner has emerged.
Small businesses should not rely on the campaigns or the Secret Service to watch out for the business's interests. It's best to take the elephant by the trunk or the donkey by the tail and make arrangements on their own.
Source: Risk & Insurance, "Thumbing Noses at Exposure," Cyril Tuohy, Jan. 10, 2012
]]>A small restaurant in one of the early primary states decided the headaches weren't worth the small benefits political campaigns brought in. An area television station aired a story about the owner of the breakfast and lunch café and the sign on the front door: "No Politicians. No exception."
]]> It isn't just that the political entourage and accompanying media circus take over the place and keep local patrons out, but it's also that they, along with the people who come to shake hands and have babies kissed, don't spend as much. The café owner said this crowd is more likely to buy a cup of coffee than sit down to a meal, but they'll linger for just as long.He said, too, that there is seldom any warning. The door opens, and suddenly the restaurant is "overrun by cameras and blah, blah and blah," he explained. It's hard to know how or if you have to prepare for a candidate visit.
Insurance and risk management professionals are with him. We'll get into more detail in our next post.
Source: Risk & Insurance, "Thumbing Noses at Exposure," Cyril Tuohy, Jan. 10, 2012
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