Insurance Industry Blog

Preparations are being made in Texas as Tropical Storm Dolly gets closer. As of early today, a hurricane warning is in effect for the coast of Texas from Brownsville to Port O’Connor. Dolly is expected to become a Category 1 hurricane before making landfall tomorrow. Just yesterday, we heard that U.S. property/casualty insurers are expected to pay homeowners and businesses an estimated $6.025 billion for second-quarter property losses resulting from a total of 16 catastrophes in 27 states – nearly double the number of catastrophes in the first quarter. Interestingly Texas topped the list of the five most severely affected states for the second quarter, with $1.08 billion in insured losses, according to ISO’s Property Claim Services (PCS) unit. An AIR Worldwide study puts the insured value of coastal properties in Texas at $895.1billion, or 26 percent of the insured value of properties in the entire state. 

Tropical Storm Dolly could become a hurricane by tomorrow, the National Hurricane Center has warned. The storm is expected to begin strengthening today as it moves off the northern coast of Mexico’s Yucatan Peninsula and into the Gulf of Mexico. Interests in the Western Gulf of Mexico should monitor the progress of Dolly, according to the NHC. On its current track, Dolly could make landfall on the Texas/Mexico border early Thursday morning. Dolly is the fourth tropical storm of the Atlantic season. Meanwhile, Tropical Storm Cristobal continues its northeastward path after passing near the coast of North Carolina yesterday. On its current track it should be well offshore of the mid-Atlantic Coast later today. Check out I.I.I. information on hurricane and windstorm deductibles and hurricane facts and stats. 

If you’re still avoiding raw tomatoes or spinach, you’re apparently in good company. A new Associated Press-Ipsos poll finds that 46 percent of Americans are worried they might get sick from eating contaminated food and are avoiding foods they would normally buy. The poll revealed that 86 percent would support labeling produce so its origin can be tracked should there be an outbreak of illness. Some 80 percent would also support establishing stricter federal safety standards for fresh produce. Despite the concerns, 75 percent of respondents remain confident the food they buy is safe to eat. Food for thought. 

The obesity epidemic among adults in the United States continues to rise. Latest data from the CDC’s Behavioral Risk Factor Surveillance System show that an estimated 25.6 percent of U.S. adults reported being obese in 2007, an increase of 1.7 percent from 23.9 percent in 2005. Alabama, Mississippi and Tennessee lead the way with all three states reporting an obesity prevalence of above 30 percent. Colorado had the lowest obesity prevalence at 18.7 percent. Obesity is defined as a body mass index (BMI) of 30 or above. BMI is calculated using height and weight. By region, the report also finds that obesity is more prominent in the South, where 27 percent of respondents were classified as obese, compared with 25.3 percent in the Midwest, 23.3 percent in the Northeast, and 22.1 percent in the West. Check out I.I.I. information on obesity liability.

Towers Perrin is calling for data submissions for its 2008 Directors and Officers (D&O) Liability Survey. The survey is best completed by the person responsible for buying an organization’s D&O coverage. To participate, request a secure link from caroline.webb@towersperrin.com, then visit Towers Perrin’s Web site, www.towersperrin.com, to complete the electronic questionnaire. Deadline for participation is Friday, August 29. Check out our June 18 posting to review key findings of Towers Perrin’s 2007 D&O Liability Survey.

U.S. businesses lose an estimated seven percent of their annual revenues to fraud, according to a survey of Certified Fraud Examiners who investigated cases between January 2006 and February 2008. That translates to approximately $994 billion in fraud losses when applied to the projected 2008 United States Gross National Product. Fraud schemes tend to be very costly. For example, the median loss caused by the occupational frauds in the study was $175,000 and more than one-quarter of frauds involved losses of at least $1 million. The study also found that frauds were most often committed by the accounting department or upper management and that most fraudsters were first-time offenders. Small businesses are especially vulnerable to occupational fraud. Check out the I.I.I. small business owners’ guide to insurance.

The first of three public hearings takes place in Buffalo, New York, today on the form and disclosure of producer compensation (including contingent commissions). Co-hosted by the New York Superintendent of Insurance and the attorney general, the hearings are expected to elicit views about the proposed addition of a new regulation to the Insurance Department’s regulations regarding permissible forms of insurance producer compensation and disclosure by insurance producers of all forms of compensation. Two other hearings are scheduled for later this month: one in Albany on July 23 and one in Manhattan on July 25. You can follow the meetings live at www.totalwebcasting.com/live/nysins.

An increasing number of insurance buyers are purchasing auto insurance online. The J.D. Power and Associates 2008 Insurance New Buyer Study finds that the 44 percent of buyers who bought auto insurance from a new insurer did so via direct channels (including insurer Web sites and call centers), a 3 percent increase on 2007. Among buyers who changed their shopping channel, more buyers also changed to direct purchasing methods (22 percent), compared with those who switched to using an agent (15 percent). However, the study also finds that buyers who purchase their auto insurance via local agents give significantly higher average satisfaction scores, compared to those who buy direct. Despite this, J.D. Powers notes that insurers are enhancing their Web site capabilities and that most prospective buyers cite the ease of shopping via a direct channel. Erie, The Hartford and State Farm are the top three ranking companies among 18 major auto insurers in satisfying new buyers. 

There was some good news for auto owners and their insurers yesterday. The National Insurance Crime Bureau’s (NICB) 2008 Hot Wheels study indicates that auto theft is continuing its national decline. Based on preliminary FBI Uniform Crime Report (UCR) data, motor vehicle theft is headed for an 8.9 percent decrease in 2007. This would make it the fourth consecutive year of decline and follows a 3.5 percent decline in 2006. Final data will be released later in the year. Check out further I.I.I. info on auto theft.

Markup of three insurance bills, including H.R. 5840 the Insurance Information Act of 2008, will begin later today at a meeting of the Capital Markets Subcommittee of the House Financial Services Committee. H.R. 5840 would establish a federal Office of Insurance Information within the Treasury department. Creation of this office was part of the financial services regulatory reform package unveiled by the Treasury in April (see our March 31 posting). The two other pieces of insurance legislation up for consideration are: H.R. 5792, Increasing Insurance Coverage Options for Consumers Act of 2008 and H.R. 5611, National Association of Registered Agents and Brokers Reform Act of 2008. H.R. 5792 would amend the Liability Risk Retention Act of 1986 to allow risk retention groups to provide property insurance in addition to current liability coverage to their members. Check out further I.I.I. content on regulation modernization, the optional federal charter (OFC), risk retention groups and other alternative risk financing options.