State Farm "minimized damage"

Scott Miller, Pantagraph©(Bloomington, IL)

BLOOMINGTON — State Farm Insurance Cos. “minimized the damage” by settling a class-action lawsuit Tuesday with Mississippi Attorney General Jim Hood, an industry analyst said.

The Associated Press reported that State Farm agreed Tuesday to pay about $80 million to 639 policyholders involved in a class-action lawsuit filed by Mississippi Attorney General Jim Hood.

In turn, Hood dropped his criminal investigation of State Farm’s claims handling in Mississippi following Hurricane Katrina.

The Bloomington-based insurer also agreed to reopen the claims of an estimated 35,000 Mississippi policyholders who didn’t sue the company but may want more money.

State Farm spokesman Phil Supple would not discuss the company’s analysis of what the reopening might cost.

“It’s hard to tell what the final expenditure of this will be,” he said.

James Valverde, vice president of risk management for the Insurance Information Institute in New York, said State Farm’s decision will have a far-reaching impact on the entire industry, particularly with State Farm and other insurers still involved in hundreds of Katrina-related lawsuits.

Insurance could become costly and hard to find in the Gulf Coast, he said. But the added costs shouldn’t trickle into Central Illinois and other parts of the country, he said.

State Farm also could face more lawsuits if other homeowners see the settlement as a chance to cash in.

“Clearly, this kind of outcome creates a lot of uncertainty in an industry that’s already volatile and fragile,” Valverde said. “These cases give people the false impression that they can use the courts for their best interests. … In the litigious society we live in, (the settlement) could give rise to new lawsuits, but it’s too early to tell. We’re only seeing the beginning of this.”

Given a Mississippi jury’s recent decision to make State Farm pay a Mississippi couple $2.5 million in punitive damages, Valverde said the insurer “minimized the damage” by settling, rather than allowing other juries to follow suit.

Jim Jones, director of the Katie School of Insurance and Financial Services at Illinois State University, noted that State Farm also avoided future litigation expenses by settling this case.

“The industry as a whole settles a lot of cases. Most cases don’t go to trial,” he said. “Part of it is a recognition of the cost of litigation. Another part of it is uncertainly, and (State Farm is) probably feeling pretty uncertain about how a judge or jury is going to rule. … You have to make a business decision.”

State Farm tallied a $3.2 billion profit in 2005, the year Katrina struck. That was after paying $6.3 billion in hurricane damages in the Gulf Coast. The company paid more than $1 billion in Mississippi alone.

Last year looked like a much more profitable year for State Farm, however, though year-end figures haven’t been reported. While Katrina cost the insurer billions in 2005, the largest catastrophe in 2006 was a Midwestern hailstorm in March that cost State Farm nearly $300 million, spokesman Jeff McCollum said.

According to third-quarter financial statements filed with the Illinois Division of Insurance, State Farm’s net worth jumped 14 percent from $50.2 billion to $57 billion at the end of September.

Discount on quake insurance from California Earthquake Authority

On January 12, 2007 an article and televised broadcast was released from CBS 5 in San Francisco, CA. It stated the California Earthquake Authority (CEA) was not informing its policyholders they were entitled to refunds. This broadcast also had a customer that said they received a refund. This report was not entirely true. It failed to disclose the details of how the policyholder obtained a refund. A policyholder does have the right to the changed rate the day the request the change, however, this will require the policy to be canceled and re-written. This may have negative ramifications on their homeowners policy. Some carriers require a homeowners policy be canceled and re-written at the same time, and this day and age of carriers reducing risk, they may refuse to re-write a new policy, or have such a drastic increase in their homeowners policy that it absorbed some if not all of the saving on the Earthquake policy.

As for the refund the person received, well if he canceled his previous policy the refund would have been for the pro-rated policy from the time it was canceled to when it would renew. This change only affects policyholders of CEA policies and not all earthquake policies since the CEA is not the only provider of earthquake insurance in the State of California.

Watch the televised broadcast by clicking the following link: http://cbs5.com/video/?id=19921@kpix.dayport.com

Partisan politics influenced Katrina response, says former FEMA Chief

January 23, 2007,Nahal Toosi, The Associated Press© via Insurance Journal©

Full Article Here

Political storm clouds gathered again over the federal government's response to Hurricane Katrina as former Federal Emergency Management Agency Director Michael Brown said party politics played a role in decisions on whether to take federal control of Louisiana and other areas affected by the hurricane.

Louisiana Gov. Kathleen Blanco said the partisanship Brown described was "disgusting,'' while a White House spokeswoman said Brown was making "false statements.''

Brown told a group of graduate students Friday that some in the White House had suggested the federal government should take charge in Louisiana because Blanco was a Democrat, while leaving Mississippi Gov. Haley Barbour, a Republican, in control in his state.

Brown said he had recommended to President Bush that all 90,000 square miles along the Gulf Coast affected by the devastating hurricane be federalized a term Brown explained as placing the federal government in charge of all agencies responding to the disaster.

"Unbeknownst to me, certain people in the White House were thinking, 'We had to federalize Louisiana because she's a white, female Democratic governor, and we have a chance to rub her nose in it,''' he said, without naming names. "'We can't do it to Haley (Barbour) because Haley's a white male Republican governor. And we can't do a thing to him. So we're just gonna federalize Louisiana.'''

Brown declined to say who in the White House had argued for federalizing the response only in Louisiana. He said that he'd later learned of the machinations through Blanco's office and from federal officials.

Blanco reacted sharply to Brown's remarks.

"This is exactly what we were living but could not bring ourselves to believe. Karl Rove was playing politics while our people were dying,'' Blanco said through a spokeswoman, referring to Bush's top political strategist. "The federal effort was delayed, and now the public knows why. It's disgusting.''

Eryn Witcher, a White House spokeswoman, denied Brown's claims.

"It is unfortunate that Mike Brown is still hurling false statements about the events surrounding Hurricane Katrina,'' she said. "The only consideration made by the administration at the time of this tragedy and since are those in the best interests of the citizens of the Gulf region.''

Brown defended his statements.

"All I have done since I have left the government is tell the truth about what was going on,'' he said.

Hawaii commissioner talks with Japanese, Chinese governments

January 23, 2007, Insurance Journal©

Hawaii State Insurance Commissioner J.P. Schmidt will be among the U.S. officials working with the governments of China and Japan to improve regulation in the financial services industries.

According to the Hawaii Department of Commerce and Consumer Affairs, Schmidt has been asked by the National Association of Insurance Commissioners (NAIC) to represent U.S. regulators in Financial Sector Working Group Dialogues in Tokyo, Japan, and Beijing, China. Schmidt will be joining representatives from the U.S. Treasury Department, Federal Reserve Board, Federal Deposit Insurance Corp., Securities Exchange Commission, Office of Comptroller of the Currency and the Commodity Futures Trading Commission.

The meetings are scheduled for next week. Among the issues scheduled to be discussed are the Interstate Compact for Life Insurance Products, the Reinsurance Evaluation office and other new initiatives at NAIC. There will be discussion on the progress of the privatization of Kampo (the insurance arm of the Japan postal service), regulation of Kyosai (small insurance associations) and bank insurance.

The agenda in China will also include new product approval, investment performance of insurers and asset allocation. The Hawaii Insurance Division hosted four officials of the China Insurance Regulatory Commission (CIRC) as part of the NAIC internship program over the past three years.

"The business of insurance has become a global industry, which requires adherence to best principles in regulation for the benefit of companies and citizens," stated Commissioner Schmidt. He believes the improvement of regulations in each country will make it easier for companies in Hawaii and the U.S. to do business in Japan and China. Companies in China and Japan may also find it easier to do business in Hawaii and the United States.

Swiss Re backs independent European agency to assess Nat CAT risks

January 23, 2007, Insurance Journal©

Swiss Re has issued a "focused report," which assess the growth of the catastrophe bond market and calls for the establishment of an independent agency to "aggregate European claims data and provide the insurance industry with an efficient market loss index for natural catastrophe risks. This industry-wide effort will facilitate the further expansion of the insurance-linked securities (ILS) market in Europe and improve the transparency of natural catastrophe claims data."

According to the world's largest reinsurer, "current industry trends indicate that the European insurance industry will benefit from greater access to capital market solutions to cover natural catastrophe risks."

Swiss Re noted the significant growth in the market for "insurance-linked securities, with 2006 being a "record year with the issuance of catastrophe bonds increasing by 130 percent, bringing the total outstanding catastrophe bonds to $8.1 billion."

The growth in the market has been accompanied by "the widespread use of market loss indexes as bond loss triggers for US risks," the report continued. "In addition, the market for industry loss warranties (ILW) has grown significantly for US natural catastrophe exposures and currently totals in excess of $4 billion."

Swiss Re said, however, that the growth in the ILS and ILW markets "remains constrained due to the lack of an independent agency to collect industry-wide data and establish a reliable and effective market loss index."

"Industry loss indexes are key to unlocking additional capital market capacity for European insurers. With industry-wide support, this initiative can expand the traditional reinsurance and capital market solutions available to European insurers," noted Philip Lotz CEO of Capital Management and Advisory at Swiss Re.

"In addition to the advantages of more robust European ILS and ILW markets, reliable market loss data will benefit the industry by improving benchmarking, underwriting and exposure management," said the report.

The publication aims to "engage a dialogue within the European insurance industry and help bring about a practical and independent solution for establishing an European market loss index. In addition to the advantages of more robust European ILS and ILW markets, reliable market loss data will benefit the industry by improving benchmarking, underwriting and exposure management.

"With its new publication, Swiss Re aims to engage a dialogue within the European insurance industry and help bring about a practical and independent solution for establishing an European market loss index."

Many Will File Insurance Claims

Fox23

Watch This Video

(TULSA, Okla.) January 22 - Natural disasters create a large volume of insurance claims for damage to homes, businesses, cars and other property.

In the event of a disaster, claim representatives usually visit the most severely damaged homes first.

But, there are specific steps to take in reporting your damage that could help your claim move along more quickly.

1. Inspect your car, boat and home for damage - inside and out.
2. Look at every room in your house, and list any damage that you find.
3. When you report your claim, your insurance company will need to know if your house is damaged so severely that you can't live in it. They'll also need to know if a damaged car is safe to drive.
4. Help your insurance company handle your claim as quickly as possible by making a complete room-by-room inventory of your damaged property.

Remember, when you're making a list of what was damaged you should include specific details. An item's brand name, model number and purchase price are always helpful.

State Farm says for your future protection, it's a good idea to make a detailed inventory of all of your personal belongings.

Taking pictures of your property is also recommended.

State Farm settles a Miss. Katrina lawsuit before trial

January 22, 2007, Insurance Journal

State Farm Fire & Casualty Co. settled out of court last Friday with a Mississippi policyholder whose lawsuit over Hurricane Katrina damage was scheduled to be tried next week in federal court.

State Farm settled with Richard Tejedor of Long Beach only eight days after jurors awarded $2.5 million in punitive damages to a different policyholder a couple who sued the Bloomington, Ill.-based insurer for denying their claim after the Aug. 29, 2005, storm.

Terms of the settlement in the Tejedor case will not be disclosed, said State Farm spokesman Fraser Engerman. "We are pleased that we were able to resolve this issue before it went to (trial),'' Engerman said.

Jack Denton, one of Tejedor's attorneys, confirmed that the case has been settled but declined further comment.

Tejedor was one of hundreds of homeowners on Mississippi's Gulf Coast who sued their insurers for refusing to cover billions of dollars in damage from Katrina's storm surge.

Katrina destroyed his home, leaving nothing but a slab. A federal flood insurance policy paid him the maximum $200,000 for the home and $80,000 for its contents. Tejedor, however, said State Farm refused to pay for an additional $263,190 in damage to his home and its contents.

State Farm and other insurers say their homeowner policies cover damage from wind but not from water, and that the policies exclude damage that could have been caused by a combination of both, even if hurricane-force winds preceded a storm's rising water...Read More