December 23, 2008
A trade group for Massachusetts insurance agents has asked the state's top regulator to force Progressive Insurance to take down its Web site, which agents say routinely gives inaccurate quotes -- particularly when comparing Progressive's prices to its competitors.
The complaint comes in a letter to Insurance Commissioner Nonnie Burnes from the Massachusetts Association of Insurance Commissioners. The letter follows an admission by Progressive that its Web site was mistakenly doubling the rates of several competitors -- Commerce Insurance and Liberty Mutual.
It's the second time in the seven months Progressive has been selling personal auto insurance online that the company has become a target of agents' ire. In August, the company admitted that its Web site was mistake-prone in some circumstances, and vowed to correct any problems.
"It is safe to say that an independent insurance agent found to be providing inaccurate quotes, particularly for competing companies, would face a regulatory hearing and fine by the Division of Insurance," wrote Frank Mancini, president of the Massachusetts Associaton of Insurance Agents. "We are not aware of any action taken by the DOI for the inaccurate quotes provided to Massachusetts consumers earlier this year by Progressive."
Mancini is requesting that Progressive be forced to take down its Web site until the accuracy of its quoting system can be verified. Mancini has also said the company should be fined for every inaccurate quote
It's not the only problem the agents' group has with Progressive. Agents say Progressive is selling six-months-only policies, which are supposedly against regulations in the Bay State, as well as altering deductibles and PIP coverage without informing purchasers of the ramifications of the changes.
In a statement, Progressive spokeswoman Cristy Cote said the mistakes were caused by human error in the design of the site. Cote also said that Progressive has sent apologies to the 21,000 consumers who saw incorrect quotes.
"To help remedy this situation, we notified both companies as well as the Massachusetts Division of Insurance and the Attorney General's office, and we removed the comparison rating service from our Web site," she said. "We will not re-install this service until we're completely confident that it is delivering fair and accurate pricing information to Massachusetts consumers."
Wednesday, December 31, 2008
Friday, December 5, 2008
Most Holiday Travelers Unaware Of Insurance Coverages
A majority of travelers don’t fully understand what insurance covers during their trips according to a national survey by an agents group.
The telephone poll was sponsored by Trusted Choice and the Independent Insurance Agents & Brokers of America based in Alexandria, Va.
Conducted by International Communications Research, an independent research firm based in Media, Pa., the survey contacted 1021 households during the month of November.
People were asked if they thought their personal auto insurance would cover a car rental for damages or other related expenses; if their insurance would cover them for loss of luggage containing gifts; or if health insurance covered them if they became ill or were injured while traveling.
Thirty to 75 percent of the respondents either did not think they were covered or did not know if they were.
“With so many people traveling for the holidays, it is imperative that they understand their insurance needs and rights before leaving home,” said IIABA President and Chief Executive Officer Robert A. Rusbuldt.
He said IIABA advises that travelers “consult with their Trusted Choice independent insurance agent to discuss their current policies and what do to in the event that they need to file a claim while on vacation.”
Madelyn Flannagan, IIABA vice president for education and research, said, “Many consumers do not know when they may already be covered or where they might have gaps while on vacation.”
The survey found that about 75 percent of homeowners did not think or did not know if they would be covered in the event the airline lost their luggage containing holiday gifts.
Actually, most homeowners or renters insurance policies do provide worldwide coverage for most belongings, IIABA said. Airlines have reimbursement policies for lost luggage. Lost gifts purchased with a credit card may also have some level of protection from the issuer. Before purchasing baggage insurance, consumers should check their current policies. It may be a waste of money, according to IIABA.
Nearly one third of consumers do not think or do not know if their current policies cover them in a rental vehicle. In fact, driving a rental car is considered to be the same as driving your own vehicle for liability purposes, IIABA advised.
The purchase of liability damage waiver and collision damage waivers are often not necessary, but IIABA said that consumers should consult their independent insurance agent to find out what’s best for their travel needs, especially when traveling outside of the United States.
The survey found that more than 35 percent of respondents did not think or did not know if they were covered in the event they became ill or injured no matter where they were located.
Most individual and employer-provided health and medical insurance policies cover you when you are injured or become sick no matter where your injury or illness occurs for short recreational trips, said the IIABA
The group said that in general, major medical health insurance plans sold in the U.S. will provide coverage for emergency medical services you require while traveling. Still, insurance companies cannot guarantee the quality of care that is available wherever you travel and some policies have territorial restrictions.
The telephone poll was sponsored by Trusted Choice and the Independent Insurance Agents & Brokers of America based in Alexandria, Va.
Conducted by International Communications Research, an independent research firm based in Media, Pa., the survey contacted 1021 households during the month of November.
People were asked if they thought their personal auto insurance would cover a car rental for damages or other related expenses; if their insurance would cover them for loss of luggage containing gifts; or if health insurance covered them if they became ill or were injured while traveling.
Thirty to 75 percent of the respondents either did not think they were covered or did not know if they were.
“With so many people traveling for the holidays, it is imperative that they understand their insurance needs and rights before leaving home,” said IIABA President and Chief Executive Officer Robert A. Rusbuldt.
He said IIABA advises that travelers “consult with their Trusted Choice independent insurance agent to discuss their current policies and what do to in the event that they need to file a claim while on vacation.”
Madelyn Flannagan, IIABA vice president for education and research, said, “Many consumers do not know when they may already be covered or where they might have gaps while on vacation.”
The survey found that about 75 percent of homeowners did not think or did not know if they would be covered in the event the airline lost their luggage containing holiday gifts.
Actually, most homeowners or renters insurance policies do provide worldwide coverage for most belongings, IIABA said. Airlines have reimbursement policies for lost luggage. Lost gifts purchased with a credit card may also have some level of protection from the issuer. Before purchasing baggage insurance, consumers should check their current policies. It may be a waste of money, according to IIABA.
Nearly one third of consumers do not think or do not know if their current policies cover them in a rental vehicle. In fact, driving a rental car is considered to be the same as driving your own vehicle for liability purposes, IIABA advised.
The purchase of liability damage waiver and collision damage waivers are often not necessary, but IIABA said that consumers should consult their independent insurance agent to find out what’s best for their travel needs, especially when traveling outside of the United States.
The survey found that more than 35 percent of respondents did not think or did not know if they were covered in the event they became ill or injured no matter where they were located.
Most individual and employer-provided health and medical insurance policies cover you when you are injured or become sick no matter where your injury or illness occurs for short recreational trips, said the IIABA
The group said that in general, major medical health insurance plans sold in the U.S. will provide coverage for emergency medical services you require while traveling. Still, insurance companies cannot guarantee the quality of care that is available wherever you travel and some policies have territorial restrictions.
Monday, September 22, 2008
Status of AIG
AIG, Inc. continues to work with regulators during this difficult time for financial markets. As has been stated many times publicly, AIG Property Casualty Insurance is not a solvency risk; the value of its assets exceeds its liabilities.
AIG Private Client Group is continuing to write new business.
In addition, here are a few more important facts to note:
*AIG Private Client Group, which operates as part of AIG Property Casualty Insurance, faces no such liquidity concerns.
*AIG Property Casualty Insurance has $26.7 billion in policyholder surplus, as well as invested assets of $65 billion. These assets are protected by law and cannot be taken from policyholders!
As a point of reference, a leading AIG Private Client Group competitor has policyholder surpluses of $14 billion.
As you likely know, yesterday AIG reached an agreement in principle with the New York State regulators to exchange illiquid assets from the parent company with more liquid assets in operating insurance companies. These assets are of like kind and quality to one another; the only difference is duration.
AIG Property Casualty Insurance has the resources to pay policyholder claims and will continue to do so. On average, we are paying $73 million in claims each day.
AIG Property Casualty Insurance was downgraded by A.M. Best yesterday. Even with this downgrade, our insurance companies carry a rating of “A” or “Excellent.” This rating compares favorably with most major companies.
AIG Property Casualty Insurance results:
*AIG Commercial Insurance continues to exhibit strong financial performance with 2008 second quarter operating income of nearly $1 billion, net written premiums of $5.99 billion and a profitable combined ratio of 93.7%.
*AIG Private Client Group’s year-to-date results: $87.3 million in operating income; $520 million in net written premium; combined ratio of 81.4%.
We remain committed to, and capable of, serving the needs of our policyholders. If you have any questions, please contact your local representative. Thank you for your continued support of AIG Private Client Group.
Copyright © 2008 American International Group, Inc. All rights reserved.
AIG Private Client Group, 70 Pine Street, 21st Floor, New York, NY 10270
AIG Private Client Group is continuing to write new business.
In addition, here are a few more important facts to note:
*AIG Private Client Group, which operates as part of AIG Property Casualty Insurance, faces no such liquidity concerns.
*AIG Property Casualty Insurance has $26.7 billion in policyholder surplus, as well as invested assets of $65 billion. These assets are protected by law and cannot be taken from policyholders!
As a point of reference, a leading AIG Private Client Group competitor has policyholder surpluses of $14 billion.
As you likely know, yesterday AIG reached an agreement in principle with the New York State regulators to exchange illiquid assets from the parent company with more liquid assets in operating insurance companies. These assets are of like kind and quality to one another; the only difference is duration.
AIG Property Casualty Insurance has the resources to pay policyholder claims and will continue to do so. On average, we are paying $73 million in claims each day.
AIG Property Casualty Insurance was downgraded by A.M. Best yesterday. Even with this downgrade, our insurance companies carry a rating of “A” or “Excellent.” This rating compares favorably with most major companies.
AIG Property Casualty Insurance results:
*AIG Commercial Insurance continues to exhibit strong financial performance with 2008 second quarter operating income of nearly $1 billion, net written premiums of $5.99 billion and a profitable combined ratio of 93.7%.
*AIG Private Client Group’s year-to-date results: $87.3 million in operating income; $520 million in net written premium; combined ratio of 81.4%.
We remain committed to, and capable of, serving the needs of our policyholders. If you have any questions, please contact your local representative. Thank you for your continued support of AIG Private Client Group.
Copyright © 2008 American International Group, Inc. All rights reserved.
AIG Private Client Group, 70 Pine Street, 21st Floor, New York, NY 10270
Wednesday, September 17, 2008
Fed takes over AIG
Fed in AIG rescue - $85B loan
Government response reaches dramatic new level: U.S. will take 80% stake in nation's largest insurer to prevent global financial chaos.
NEW YORK (CNNMoney.com) -- In an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group, officials announced Tuesday evening.
The Fed authorized the Federal Reserve Bank of New York to lend AIG (AIG, Fortune 500) the funds. In return, the federal government will receive a 79.9% stake in the company.
Officials decided they had to act lest the nation's largest insurer file bankruptcy. Such a move would roil world markets since AIG (AIG, Fortune 500) has $1.1 trillion in assets and 74 million clients in 130 countries.
An eventual liquidation of the company is most likely, senior Fed officials said. But with the government loan, the company won't have to go through a tumultuous fire sale.
"[A] disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said in a statement.
The bailout marks the most dramatic turn yet in an expanding crisis that started more than a year ago with the mortgage meltdown. The resulting credit crunch is now toppling not only mainstay Wall Street players, but others in the wider financial industry.
The line of credit to AIG, which is available for two years, is designed to help the company meet its obligations, the Fed said. Interest will accrue at a steep rate of 3-month Libor plus 8.5%, which totals 11.31% at today's rates.
AIG will sell certain of its businesses with "the least possible disruption to the overall economy." The government will have veto power over the asset sales and the payment of dividends to shareholders.
The company's management will be replaced, though Fed staffers did not name the new executives. Edward Liddy, the former head of insurer Allstate Corp (ALL, Fortune 500)., will lead the company, the Wall Street Journal reported.
The board will remain. For customers, it will be business as usual, officials said.
Taxpayers will be protected, the Fed said, because the loan is backed by the assets of AIG and its subsidiaries. The loan is expected to be repaid from the proceeds of the asset sales.
The government had resisted throwing a lifeline to AIG, hoping to entice investment firms to set up a $75 billion rescue fund. Officials opted not to bail out Lehman Brothers, which filed for bankruptcy on Monday. But by Tuesday night, it became clearer that the private sector would not step in to help AIG, which has a greater reach into other financial companies and markets than Lehman does.
"We are working closely with the Federal Reserve, the SEC and other regulators to enhance the stability and orderliness of our financial markets and minimize the disruption to our economy," said Treasury Secretary Henry Paulson. "I support the steps taken by the Federal Reserve tonight to assist AIG in continuing to meet its obligations, mitigate broader disruptions and at the same time protect the taxpayers."
Dramatic end, high stakes
The firm's options grew more limited as the day wore on. Its already-battered share price fell another 21% with more than 1 billion shares trading hands, and plummeted another 46% in after-hours trading.
At one point Tuesday morning, shares fell more than 70% - a day after losing 61% of their value.
In a statement late Tuesday night the company said, "AIG is a solid company with over $1 trillion in assets and substantial equity, but it has been recently experiencing serious liquidity issues. We believe the loan, which is backed by profitable, well-capitalized operating subsidiaries with substantial value, will protect all AIG policyholders, address rating agency concerns and give AIG the time necessary to conduct asset sales on an orderly basis."
The company also commended the Federal Reserve and the Treasury Department for "taking action to address AIG's liquidity needs and broader financial market concerns."
Furthermore, the firm expressed its gratitude to New York Governor Paterson, and other NY State as well as Federal officials.
New York State officials, who regulate the insurance titan, had urged the federal government to rescue AIG. The state attempted to help AIG on Monday by allowing it to tap into $20 billion in assets from its subsidiaries if the company could comes up with a comprehensive plan to get the much-needed capital, said a state Insurance Department spokesman.
Pleased with the federal government's response, New York Gov. David Paterson said Tuesday night: "Policy holders will be protected. Jobs will be saved. Business will continue."
The funding became ever more crucial as the insurer was hit Monday night by a series of credit rating downgrades. The cuts meant AIG (AIG, Fortune 500) could be forced to post more than $13 billion in additional collateral.
Late Monday night, Moody's Investors Service and Standard & Poor's Ratings Services each said they had lowered their ratings. A few hours earlier, Fitch Rating had also downgraded AIG, saying the company's ability to raise cash is "extremely limited" because of its plummeting stock price, widening yields on its debt, and difficult capital market conditions.
The downgrade could force AIG to post $13.3 billion of collateral, Fitch said in a statement. Also, the moves would make it more expensive for AIG to issue debt and harder for it to regain the confidence of investors.
All the while, analysts urged the company to unveil its restructuring plan.
"Management needs to address investor concerns now before the market sell-off becomes a self-fulfilling prophecy," Rob Haines, analyst at CreditSights, said Tuesday.
Global ripples
The failure of AIG could have caused unprecedented global ripple effects, said Robert Bolton, managing director at Mendon Capital Advisors Corp. AIG is a major player in the market for credit default swaps, which are insurance-like contracts that guarantee against a company defaulting on its debt. Also, it is a huge provider of life insurance, property and casualty insurance and annuities.
"If AIG fails and can't make good on its obligations, forget it," Bolton said. "It's as big a wave as you're going to see."
AIG has had a very tough year.
Rocked by the subprime crisis, the company has lost more than $18 billion in the past nine months and has seen its stock price fall more than 91% so far this year. It already raised $20 billion in fresh capital earlier this year.
Its troubles stem from its sales of credit default swaps and from its subprime mortgage-backed securities holdings.
AIG has written down the value of the credit default swaps by $14.7 billion, pretax, in the first two quarters of this year, and has had to write down the value of its mortgage-backed securities as the housing market soured.
The insurer could be forced to immediately come up with $18 billion to support its credit swap business if its ratings fall by as little as one notch, wrote John Hall, an analyst at Wachovia, on Monday.
This year's results have also included $12.2 billion in pretax writedowns, primarily because of "severe, rapid declines" in certain mortgage-backed securities and other investments.
The company brought in new management to try to turn the company around. In June, the company tossed out its chief executive, Martin Sullivan, and named AIG chairman Robert Willumstad, who joined AIG in 2006 after serving as president and chief operating officer of Citigroup (C, Fortune 500), in his place.
Government response reaches dramatic new level: U.S. will take 80% stake in nation's largest insurer to prevent global financial chaos.
NEW YORK (CNNMoney.com) -- In an unprecedented move, the Federal Reserve Board is lending as much as $85 billion to rescue crumbling insurer American International Group, officials announced Tuesday evening.
The Fed authorized the Federal Reserve Bank of New York to lend AIG (AIG, Fortune 500) the funds. In return, the federal government will receive a 79.9% stake in the company.
Officials decided they had to act lest the nation's largest insurer file bankruptcy. Such a move would roil world markets since AIG (AIG, Fortune 500) has $1.1 trillion in assets and 74 million clients in 130 countries.
An eventual liquidation of the company is most likely, senior Fed officials said. But with the government loan, the company won't have to go through a tumultuous fire sale.
"[A] disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said in a statement.
The bailout marks the most dramatic turn yet in an expanding crisis that started more than a year ago with the mortgage meltdown. The resulting credit crunch is now toppling not only mainstay Wall Street players, but others in the wider financial industry.
The line of credit to AIG, which is available for two years, is designed to help the company meet its obligations, the Fed said. Interest will accrue at a steep rate of 3-month Libor plus 8.5%, which totals 11.31% at today's rates.
AIG will sell certain of its businesses with "the least possible disruption to the overall economy." The government will have veto power over the asset sales and the payment of dividends to shareholders.
The company's management will be replaced, though Fed staffers did not name the new executives. Edward Liddy, the former head of insurer Allstate Corp (ALL, Fortune 500)., will lead the company, the Wall Street Journal reported.
The board will remain. For customers, it will be business as usual, officials said.
Taxpayers will be protected, the Fed said, because the loan is backed by the assets of AIG and its subsidiaries. The loan is expected to be repaid from the proceeds of the asset sales.
The government had resisted throwing a lifeline to AIG, hoping to entice investment firms to set up a $75 billion rescue fund. Officials opted not to bail out Lehman Brothers, which filed for bankruptcy on Monday. But by Tuesday night, it became clearer that the private sector would not step in to help AIG, which has a greater reach into other financial companies and markets than Lehman does.
"We are working closely with the Federal Reserve, the SEC and other regulators to enhance the stability and orderliness of our financial markets and minimize the disruption to our economy," said Treasury Secretary Henry Paulson. "I support the steps taken by the Federal Reserve tonight to assist AIG in continuing to meet its obligations, mitigate broader disruptions and at the same time protect the taxpayers."
Dramatic end, high stakes
The firm's options grew more limited as the day wore on. Its already-battered share price fell another 21% with more than 1 billion shares trading hands, and plummeted another 46% in after-hours trading.
At one point Tuesday morning, shares fell more than 70% - a day after losing 61% of their value.
In a statement late Tuesday night the company said, "AIG is a solid company with over $1 trillion in assets and substantial equity, but it has been recently experiencing serious liquidity issues. We believe the loan, which is backed by profitable, well-capitalized operating subsidiaries with substantial value, will protect all AIG policyholders, address rating agency concerns and give AIG the time necessary to conduct asset sales on an orderly basis."
The company also commended the Federal Reserve and the Treasury Department for "taking action to address AIG's liquidity needs and broader financial market concerns."
Furthermore, the firm expressed its gratitude to New York Governor Paterson, and other NY State as well as Federal officials.
New York State officials, who regulate the insurance titan, had urged the federal government to rescue AIG. The state attempted to help AIG on Monday by allowing it to tap into $20 billion in assets from its subsidiaries if the company could comes up with a comprehensive plan to get the much-needed capital, said a state Insurance Department spokesman.
Pleased with the federal government's response, New York Gov. David Paterson said Tuesday night: "Policy holders will be protected. Jobs will be saved. Business will continue."
The funding became ever more crucial as the insurer was hit Monday night by a series of credit rating downgrades. The cuts meant AIG (AIG, Fortune 500) could be forced to post more than $13 billion in additional collateral.
Late Monday night, Moody's Investors Service and Standard & Poor's Ratings Services each said they had lowered their ratings. A few hours earlier, Fitch Rating had also downgraded AIG, saying the company's ability to raise cash is "extremely limited" because of its plummeting stock price, widening yields on its debt, and difficult capital market conditions.
The downgrade could force AIG to post $13.3 billion of collateral, Fitch said in a statement. Also, the moves would make it more expensive for AIG to issue debt and harder for it to regain the confidence of investors.
All the while, analysts urged the company to unveil its restructuring plan.
"Management needs to address investor concerns now before the market sell-off becomes a self-fulfilling prophecy," Rob Haines, analyst at CreditSights, said Tuesday.
Global ripples
The failure of AIG could have caused unprecedented global ripple effects, said Robert Bolton, managing director at Mendon Capital Advisors Corp. AIG is a major player in the market for credit default swaps, which are insurance-like contracts that guarantee against a company defaulting on its debt. Also, it is a huge provider of life insurance, property and casualty insurance and annuities.
"If AIG fails and can't make good on its obligations, forget it," Bolton said. "It's as big a wave as you're going to see."
AIG has had a very tough year.
Rocked by the subprime crisis, the company has lost more than $18 billion in the past nine months and has seen its stock price fall more than 91% so far this year. It already raised $20 billion in fresh capital earlier this year.
Its troubles stem from its sales of credit default swaps and from its subprime mortgage-backed securities holdings.
AIG has written down the value of the credit default swaps by $14.7 billion, pretax, in the first two quarters of this year, and has had to write down the value of its mortgage-backed securities as the housing market soured.
The insurer could be forced to immediately come up with $18 billion to support its credit swap business if its ratings fall by as little as one notch, wrote John Hall, an analyst at Wachovia, on Monday.
This year's results have also included $12.2 billion in pretax writedowns, primarily because of "severe, rapid declines" in certain mortgage-backed securities and other investments.
The company brought in new management to try to turn the company around. In June, the company tossed out its chief executive, Martin Sullivan, and named AIG chairman Robert Willumstad, who joined AIG in 2006 after serving as president and chief operating officer of Citigroup (C, Fortune 500), in his place.
Tuesday, June 17, 2008
Master Policy Deductibles
June 2008
A few years ago I did a Tech Talk on this subject. Based on the emails I have received in the last few months … perhaps it bears repeating and updating …
Condominium Master Policy deductibles … can they be deadly for personal lines clients who live in condominium units? Yes!
First … in a condominium arrangement who insures what??????
That can be an EXCELLENT question! We all know that when one buys into a condominium situation – shared ownership – one receives two different ownership interests. First, the individual unit for living is individually owned. If I buy a condominium unit, it belongs to me. Everything in that unit that I can touch, I own!
I also receive “common” ownership in the non-individual or common areas such as land, roof of building, common walls, common beams, swimming pools, etc. In Massachusetts, as in most other states, the Association is required to purchase insurance on common areas.
How does the individual unit get insured?
That depends. It depends on the bylaws or insuring agreement in the condominium documents. Sometimes the bylaws only require the Association to insure commonly owned area and the individual unit owner must insure ALL of his/her individual unit. The individual unit owner accomplishes this through the purchase of large amounts of Coverage A – Dwelling value under the HO-6 Unit-owner policy. This can be expensive for the unit owner, but insurance coverage can be easily obtained.
In other situations the Association agrees to “take on” the responsibility of insuring individually owned unitbuilding items through a discussion in the bylaws. The Association may insure ALL building items in the individual units or just some of the individually owned unit-building items. One must read the bylaws carefully to determine what, if any, insurance responsibility is left for the unit-owner. Does the Association OWN the items in the individual unit. NO, NO, NO!!! But, through the bylaws, a contract, an insurable interest is granted to the Association allowing the Association’s commercial policy to apply to individual unit-owner items.
There are TWO ways where the Master Policy deductible could be a problem for unitowners
Way one … Let’s suppose … The Association, through it’s bylaws, has chosen to accept responsibility for insuring the individually owned items …
The Association buys a Condominium master policy to cover the building items whether common or individually owned … hopefully on a Special Form basis. Suppose the Association purchases a $250 deductible for the Master policy and there is a loss fully contained in one unit, who pays the deductible?
This is a point that the unit-owner should address when purchasing his/her unit. Or, you should have them look into this issue when you sell them their Unit-Owner Policy covering their contents and liability exposures. If the Association chooses to pay the deductible, great! If the Association makes the unit-owner responsible for the deductible …$250 out of pocket for the unit-owner shouldn’t be too much of a hardship!
What if the Association has a $5,000 deductible for all losses …
The bylaws required the association to cover the individually owned units as well as common areas and the loss happens entirely in your client’s unit … a kitchen fire … who pays the deductible amount here?
Again, your client should check into this issue with the Association. Quite often, the Association bylaws state the Association will provide insurance for unit-owner building items, but will NOT cover the deductible. Generally, a loss that is contained in a specific unit is NOT assessed to other fellow unit-owners. The individual unit-owner suffering the loss is expected to pay for the deductible.
How do we cover the deductible in this situation????
I have NO idea!!! I used to think that I knew. Years ago I had read and had been taught that one buys coverage for one’s unit through Coverage A and it would respond to a loss not covered by the Master Policy.
After all … the definition of “Coverage A – Dwelling” in the HO-6 certainly LEADS ME TO BELIEVE that I can insure my “stuff”!
COVERAGE A – Dwelling
We cover:
1. The alterations, appliances, fixtures and improvements which are part of the building contained within the "residence premises";
2. Items of real property which pertain exclusively to the "residence premises";
3. Property which is your insurance responsibility under a corporation or association of property owners agreement; or
4. Structures owned solely by you, other than the "residence premises," at the location of the "residence premises."
Reading the whole policy can be a drag …
However, it appears that the Other Insurance Provision of the HO-6 is being used to NEGATE the individual’s right to insure his/her own property. It’s almost “un-American”!
The Other Insurance Provision has always stated that if the Association and the unit-owner insure the same property, then the Association Master Policy will be primary and the HO-6 will be excess. How can the Master policy cover the same stuff as the HO-6? Well …through the bylaws/condominium documents. If the bylaws told the association to cover the condominium building ..both common areas and individually owned areas then this “contract” provided an insurable interest to the association IN the individually owned unit property. The Unit Deed gave the unit-owner an insurable interest in the individual unit.
Normally when two entities can insure the same thing … the parties themselves determine WHO should do it … and act accordingly.
The following is the ISO 2000 Other Insurance Language. The only difference between the HO-2000 language and the HO-91 language are those words that I crossed out.
F. Other Insurance And Service Agreement
…
2. If, at the time of loss, there is other insurance or a service agreement in the name of a corporation or association of property owners covering the same property covered by this policy, this insurance will be excess over the amount recoverable under such other insurance or service agreement.
The Other insurance clause states that when both the Master Policy and the HO-6 cover the SAME property then the Master Policy is primary and the HO-6 is excess. Now ... just WHAT does that mean? For years many insurance “pundits” explained this to mean that the loss first goes to the Master Policy and then back to the HO-6 for the amount of the loss not paid by the Master Policy … i.e. the Master Policy deductible.
Unfortunately, ISO has chosen not to interpret their policy in this way and stated in the HO-2000 Homeowner filing:
“The unit owner is only covered for the amount of loss that exceeds the amount recovered by the association under its policy. If the association doesn’t recover because of a high deductible or other reasons, the unit-owner does not recover.”
With this interpretation then Coverage A can ONLY be available at the “high-end”… that Coverage A will NOT pick up any master policy deductible. If the bylaws told the association to cover your client’s unit then the client’s Coverage A will ONLY respond when every last dime of the Master policy has paid out.
If the master policy bylaws do NOT insure certain items for the unit-owner, then Coverage A will be the PRIMARY and the ONLY coverage responding to the loss. If the bylaws tell the Association to cover some or all of the unitowner building items, then Coverage A will NOT pick up any Master Policy deductible for damage to these items.
This interpretation is ESPECIALLY dangerous in the light of increasing Master Policy deductibles!!!!!!
What should you do????
If I were you, I would ASK my HO-6 carriers HOW they interpret the Other Insurance Provision. If your carriers agree with the ISO interpretation of the mechanics of the Other Insurance Provision, then Coverage A will NOT respond to a Master policy deductible situation when damage to the individual unit occurs.
How can this loss under the Master Policy deductible be covered?
Under the HO-2000 ISO “addressed” this situation by creating an endorsement to “fix” the Other Insurance Provision. The endorsement that ISO created to fix this situation is HO 17 34 Unit Owner Modified Other Insurance condition. The endorsement merely recites the Other Insurance Clause and adds “whether they can collect on it or not”. I’m not sure what this wording really does … but the filing states that it fixes the problem. Will your carriers sell it? Who knows?
Under the HO-91 this endorsement does not “officially” exist and therefore there is NO WAY to fix this if your carriers take a non-user friendly interpretation. HOWEVER, I was just told by an agent last week that one of his HO-91 carriers had filed the HO 17 34 for use on its HO-6 policies. So …evidentially ..more personal condominium insurance carriers are agreeing with ISO’s interpretation and opting for a “premium generating” endorsement to provide coverage for this situation.
Just what IS the premium for this endorsement?
The ISO premium for the HO 17 34 Unit-Owners Modified Other Insurance condition is 25% of the base premium -- Rule 529 tells you to multiply the HO-6 base premium by 1.25!!! Isn’t that INTERESTING … The “base premium” for an HO-6 is the premium for the Coverage C limit … How ridiculous is this…we are buying an endorsement that applies to BUILDING coverage and rating it based on the amount of CONTENTS the client has.
So ... the MORE contents you have the MORE this endorsement costs … the premium has NOTHING to do with the SIZE of the Master Policy deductible and the amount of Coverage A purchased!!!
WAY TWO …that the Master policy deductible can be a problem…
How is the Master Policy deductible paid when the loss happens to COMMON property?
Suppose a fire burns the commonly owned clubhouse and there is a $10,000 deductible on the Master Policy, how does the Association get this first $10,000 to rebuild? Well, hopefully, there is a “slush fund” to cover deductibles, but I suspect in many associations that is NOT the case. What does the Association management do? They assess the unit-owners since each unit owner owns a share of the clubhouse and other common areas.
Can the unit-owner insure his/her assessment responsibility?
Yes … and no. The unit-owner can insure his/her share of assessments due to “insurance related situations.” Loss Assessment is an additional coverage provided under the HO-6.
7. Loss Assessment
a. We will pay up to $1,000 for your share of loss assessment charged during the policy period against you, as owner or tenant of the "residence premises", by a corporation or association of property owners. The assessment must be made as a result of direct loss to property, owned by all members collectively, of the type that would be covered by this policy if owned by you, caused by a Peril Insured Against under Coverage A, other than:
(1) Earthquake; or
(2) Land shock waves or tremors before, during or after a volcanic eruption.
The limit of $1,000 is the most we will pay with respect to any one loss, regardless of the number of assessments. We will only apply one deductible, per unit, to the total amount of any one loss to the property described above, regardless of the number of assessments.
b. We do not cover assessments charged against you or a corporation or association of property owners by any governmental body.
c. Paragraph P. Policy Period under Section I – Conditions does not apply to this coverage.
This coverage is additional insurance
If a loss that would be a covered peril under the unit-owners HO-6 damages COMMON PROPERTY, then the loss assessment additional coverage will pay the unit-owners assessment responsibility up to $1,000. The unit-owner can increase this assessment coverage up to $50,000 with HO 04 35 Increased Loss Assessment Endorsement for only $25 or so.
What if the Association has a Percentage Windstorm deductible and there is MAJOR windstorm damage to common property??????
Suppose your client purchased HO 04 35 Increased Loss Assessment coverage in the amount of $50,000 and his/ her assessment share of this Master Policy windstorm deductible is $10,000, will the HO 04 35 respond for the whole $10,000? NO, NO, NO per the following clause in the HO 04 35 Increased Loss Assessment Endorsement:
SPECIAL LIMIT – We will not pay more than $1,000 of your assessment that results from a deductible in the policy of insurance purchased by a corporation or association of property owners.
The HO 04 35 under both the HO-91 as well as the HO-2000 program has a restriction for assessments that are due SOLEY to master policy deductibles.
This endorsement should always be sold for it can be very helpful in other property assessment situations as well as many liability assessment situations but it is NOT helpful in “deductible” assessment situations. The insured will ONLY receive the “free” $1,000 loss assessment coverage that is found under his/her HO-6 unit-owner policy towards an assessment that is due SOLELY to a Master Policy deductible. The rest of the assessment will come “out of pocket.”
Make sure that you address this restriction with your client when selling this endorsement.
I have to admit that I do agree this restriction is NECESSARY in the HO 04 35 Increased Loss Assessment endorsement. Otherwise, the Association would buy commercial property EXCESS policies assuming that each loss will be assessed BACK to the individual unit-owner who has been TOLD to carry HIGH Loss Assessment coverage.
So, back to the original issue… Who pays the Master Policy deductible????
As usual ... the answer is …”it depends.”
Buying a one family house has FEWER insurance headaches than buying into a condominium situation!
* * * * *
A few years ago I did a Tech Talk on this subject. Based on the emails I have received in the last few months … perhaps it bears repeating and updating …
Condominium Master Policy deductibles … can they be deadly for personal lines clients who live in condominium units? Yes!
First … in a condominium arrangement who insures what??????
That can be an EXCELLENT question! We all know that when one buys into a condominium situation – shared ownership – one receives two different ownership interests. First, the individual unit for living is individually owned. If I buy a condominium unit, it belongs to me. Everything in that unit that I can touch, I own!
I also receive “common” ownership in the non-individual or common areas such as land, roof of building, common walls, common beams, swimming pools, etc. In Massachusetts, as in most other states, the Association is required to purchase insurance on common areas.
How does the individual unit get insured?
That depends. It depends on the bylaws or insuring agreement in the condominium documents. Sometimes the bylaws only require the Association to insure commonly owned area and the individual unit owner must insure ALL of his/her individual unit. The individual unit owner accomplishes this through the purchase of large amounts of Coverage A – Dwelling value under the HO-6 Unit-owner policy. This can be expensive for the unit owner, but insurance coverage can be easily obtained.
In other situations the Association agrees to “take on” the responsibility of insuring individually owned unitbuilding items through a discussion in the bylaws. The Association may insure ALL building items in the individual units or just some of the individually owned unit-building items. One must read the bylaws carefully to determine what, if any, insurance responsibility is left for the unit-owner. Does the Association OWN the items in the individual unit. NO, NO, NO!!! But, through the bylaws, a contract, an insurable interest is granted to the Association allowing the Association’s commercial policy to apply to individual unit-owner items.
There are TWO ways where the Master Policy deductible could be a problem for unitowners
Way one … Let’s suppose … The Association, through it’s bylaws, has chosen to accept responsibility for insuring the individually owned items …
The Association buys a Condominium master policy to cover the building items whether common or individually owned … hopefully on a Special Form basis. Suppose the Association purchases a $250 deductible for the Master policy and there is a loss fully contained in one unit, who pays the deductible?
This is a point that the unit-owner should address when purchasing his/her unit. Or, you should have them look into this issue when you sell them their Unit-Owner Policy covering their contents and liability exposures. If the Association chooses to pay the deductible, great! If the Association makes the unit-owner responsible for the deductible …$250 out of pocket for the unit-owner shouldn’t be too much of a hardship!
What if the Association has a $5,000 deductible for all losses …
The bylaws required the association to cover the individually owned units as well as common areas and the loss happens entirely in your client’s unit … a kitchen fire … who pays the deductible amount here?
Again, your client should check into this issue with the Association. Quite often, the Association bylaws state the Association will provide insurance for unit-owner building items, but will NOT cover the deductible. Generally, a loss that is contained in a specific unit is NOT assessed to other fellow unit-owners. The individual unit-owner suffering the loss is expected to pay for the deductible.
How do we cover the deductible in this situation????
I have NO idea!!! I used to think that I knew. Years ago I had read and had been taught that one buys coverage for one’s unit through Coverage A and it would respond to a loss not covered by the Master Policy.
After all … the definition of “Coverage A – Dwelling” in the HO-6 certainly LEADS ME TO BELIEVE that I can insure my “stuff”!
COVERAGE A – Dwelling
We cover:
1. The alterations, appliances, fixtures and improvements which are part of the building contained within the "residence premises";
2. Items of real property which pertain exclusively to the "residence premises";
3. Property which is your insurance responsibility under a corporation or association of property owners agreement; or
4. Structures owned solely by you, other than the "residence premises," at the location of the "residence premises."
Reading the whole policy can be a drag …
However, it appears that the Other Insurance Provision of the HO-6 is being used to NEGATE the individual’s right to insure his/her own property. It’s almost “un-American”!
The Other Insurance Provision has always stated that if the Association and the unit-owner insure the same property, then the Association Master Policy will be primary and the HO-6 will be excess. How can the Master policy cover the same stuff as the HO-6? Well …through the bylaws/condominium documents. If the bylaws told the association to cover the condominium building ..both common areas and individually owned areas then this “contract” provided an insurable interest to the association IN the individually owned unit property. The Unit Deed gave the unit-owner an insurable interest in the individual unit.
Normally when two entities can insure the same thing … the parties themselves determine WHO should do it … and act accordingly.
The following is the ISO 2000 Other Insurance Language. The only difference between the HO-2000 language and the HO-91 language are those words that I crossed out.
F. Other Insurance And Service Agreement
…
2. If, at the time of loss, there is other insurance or a service agreement in the name of a corporation or association of property owners covering the same property covered by this policy, this insurance will be excess over the amount recoverable under such other insurance or service agreement.
The Other insurance clause states that when both the Master Policy and the HO-6 cover the SAME property then the Master Policy is primary and the HO-6 is excess. Now ... just WHAT does that mean? For years many insurance “pundits” explained this to mean that the loss first goes to the Master Policy and then back to the HO-6 for the amount of the loss not paid by the Master Policy … i.e. the Master Policy deductible.
Unfortunately, ISO has chosen not to interpret their policy in this way and stated in the HO-2000 Homeowner filing:
“The unit owner is only covered for the amount of loss that exceeds the amount recovered by the association under its policy. If the association doesn’t recover because of a high deductible or other reasons, the unit-owner does not recover.”
With this interpretation then Coverage A can ONLY be available at the “high-end”… that Coverage A will NOT pick up any master policy deductible. If the bylaws told the association to cover your client’s unit then the client’s Coverage A will ONLY respond when every last dime of the Master policy has paid out.
If the master policy bylaws do NOT insure certain items for the unit-owner, then Coverage A will be the PRIMARY and the ONLY coverage responding to the loss. If the bylaws tell the Association to cover some or all of the unitowner building items, then Coverage A will NOT pick up any Master Policy deductible for damage to these items.
This interpretation is ESPECIALLY dangerous in the light of increasing Master Policy deductibles!!!!!!
What should you do????
If I were you, I would ASK my HO-6 carriers HOW they interpret the Other Insurance Provision. If your carriers agree with the ISO interpretation of the mechanics of the Other Insurance Provision, then Coverage A will NOT respond to a Master policy deductible situation when damage to the individual unit occurs.
How can this loss under the Master Policy deductible be covered?
Under the HO-2000 ISO “addressed” this situation by creating an endorsement to “fix” the Other Insurance Provision. The endorsement that ISO created to fix this situation is HO 17 34 Unit Owner Modified Other Insurance condition. The endorsement merely recites the Other Insurance Clause and adds “whether they can collect on it or not”. I’m not sure what this wording really does … but the filing states that it fixes the problem. Will your carriers sell it? Who knows?
Under the HO-91 this endorsement does not “officially” exist and therefore there is NO WAY to fix this if your carriers take a non-user friendly interpretation. HOWEVER, I was just told by an agent last week that one of his HO-91 carriers had filed the HO 17 34 for use on its HO-6 policies. So …evidentially ..more personal condominium insurance carriers are agreeing with ISO’s interpretation and opting for a “premium generating” endorsement to provide coverage for this situation.
Just what IS the premium for this endorsement?
The ISO premium for the HO 17 34 Unit-Owners Modified Other Insurance condition is 25% of the base premium -- Rule 529 tells you to multiply the HO-6 base premium by 1.25!!! Isn’t that INTERESTING … The “base premium” for an HO-6 is the premium for the Coverage C limit … How ridiculous is this…we are buying an endorsement that applies to BUILDING coverage and rating it based on the amount of CONTENTS the client has.
So ... the MORE contents you have the MORE this endorsement costs … the premium has NOTHING to do with the SIZE of the Master Policy deductible and the amount of Coverage A purchased!!!
WAY TWO …that the Master policy deductible can be a problem…
How is the Master Policy deductible paid when the loss happens to COMMON property?
Suppose a fire burns the commonly owned clubhouse and there is a $10,000 deductible on the Master Policy, how does the Association get this first $10,000 to rebuild? Well, hopefully, there is a “slush fund” to cover deductibles, but I suspect in many associations that is NOT the case. What does the Association management do? They assess the unit-owners since each unit owner owns a share of the clubhouse and other common areas.
Can the unit-owner insure his/her assessment responsibility?
Yes … and no. The unit-owner can insure his/her share of assessments due to “insurance related situations.” Loss Assessment is an additional coverage provided under the HO-6.
7. Loss Assessment
a. We will pay up to $1,000 for your share of loss assessment charged during the policy period against you, as owner or tenant of the "residence premises", by a corporation or association of property owners. The assessment must be made as a result of direct loss to property, owned by all members collectively, of the type that would be covered by this policy if owned by you, caused by a Peril Insured Against under Coverage A, other than:
(1) Earthquake; or
(2) Land shock waves or tremors before, during or after a volcanic eruption.
The limit of $1,000 is the most we will pay with respect to any one loss, regardless of the number of assessments. We will only apply one deductible, per unit, to the total amount of any one loss to the property described above, regardless of the number of assessments.
b. We do not cover assessments charged against you or a corporation or association of property owners by any governmental body.
c. Paragraph P. Policy Period under Section I – Conditions does not apply to this coverage.
This coverage is additional insurance
If a loss that would be a covered peril under the unit-owners HO-6 damages COMMON PROPERTY, then the loss assessment additional coverage will pay the unit-owners assessment responsibility up to $1,000. The unit-owner can increase this assessment coverage up to $50,000 with HO 04 35 Increased Loss Assessment Endorsement for only $25 or so.
What if the Association has a Percentage Windstorm deductible and there is MAJOR windstorm damage to common property??????
Suppose your client purchased HO 04 35 Increased Loss Assessment coverage in the amount of $50,000 and his/ her assessment share of this Master Policy windstorm deductible is $10,000, will the HO 04 35 respond for the whole $10,000? NO, NO, NO per the following clause in the HO 04 35 Increased Loss Assessment Endorsement:
SPECIAL LIMIT – We will not pay more than $1,000 of your assessment that results from a deductible in the policy of insurance purchased by a corporation or association of property owners.
The HO 04 35 under both the HO-91 as well as the HO-2000 program has a restriction for assessments that are due SOLEY to master policy deductibles.
This endorsement should always be sold for it can be very helpful in other property assessment situations as well as many liability assessment situations but it is NOT helpful in “deductible” assessment situations. The insured will ONLY receive the “free” $1,000 loss assessment coverage that is found under his/her HO-6 unit-owner policy towards an assessment that is due SOLELY to a Master Policy deductible. The rest of the assessment will come “out of pocket.”
Make sure that you address this restriction with your client when selling this endorsement.
I have to admit that I do agree this restriction is NECESSARY in the HO 04 35 Increased Loss Assessment endorsement. Otherwise, the Association would buy commercial property EXCESS policies assuming that each loss will be assessed BACK to the individual unit-owner who has been TOLD to carry HIGH Loss Assessment coverage.
So, back to the original issue… Who pays the Master Policy deductible????
As usual ... the answer is …”it depends.”
Buying a one family house has FEWER insurance headaches than buying into a condominium situation!
* * * * *
Tuesday, May 6, 2008
MAIA Cautions Consumers About Progressive Quotes
MAIA Cautions Consumers About Progressive Quotes;
Files Formal Complaint With DOI
Today, MAIA issued a press release to every daily newspaper in the state cautioning consumers about serious issues with quotes received from the Progressive Direct website. After initial reports of "dirt cheap" rates, MAIA took a long, hard look at the quotes produced by the site.
According to MAIA President and CEO Frank Mancini, "Our review of the quotes provided by Progressive reminds us of the old saying, 'it it looks too good to be true, it probably is.' Consumers should use extreme caution when requesting online quotes because a computer doesn't ask the questions a live person would ask to be sure you are adequately protected."
Since many of MAIA's issues with the website are believed to be serious violations of the managed competition regulation, MAIA has also filed a formal complaint with Commissioner Nonnie Burnes and notified Attorney General Martha Coakley and Undersecretary of the Office of Consumer Affairs & Business Regulation Daniel Crane of the violations.
The most flagrant violations include:
Progressive requires anyone requesting a quote to provide their social security number, gender, recent military service and marital status. The quote process also informs applicants that Progressive obtains credit reports and credit scoring information, which is prohibited in Massachusetts for both rating and underwriting purposes.
Progressive acknowledges that Massachusetts law requires that every insurer offer twelve-month term private passenger motor vehicle insurance policies at the consumer's option, yet there is nowhere on the Progressive site where a consumer may exercise that option. When questioned on the phone about a twelve-month policy, a Progressive representative admitted that twelve-month policies are not available.
Comparative quotes of Progressive rates with the rates of other companies writing autoinsurance in Massachusetts are inaccurate and use a policy term of six months which is notavailable from any other insurance company in Massachusetts. While other insurance company quotes include an indication of the impact of your driving record in terms of surcharges for at-fault accidents and conviction of traffic violations and credits for good driving, the Progressive quote does not appear to include merit rating information.
We have posted the complete text of the MAIA press release on our website, and you may access it by clicking here.
It is imperative that the information in this press release be seen by as many consumers as possible, and we need your help with this. If you have contacts with your local daily and weekly newspapers, please walk the press release into your contact as soon as possible. Offer to answer any questions your contact or consumer reporters have, or refer them to us if you're not comfortable in that role.
We have also posted a copy of our complaint letter to the Commissioner on massagent.com. You may access this document by clicking here.
Please feel free to contact Frank Mancini or Donna McKenna or by phone at 800.972.9312 or 508.628.5452 if you have questions or need additional information.
Files Formal Complaint With DOI
Today, MAIA issued a press release to every daily newspaper in the state cautioning consumers about serious issues with quotes received from the Progressive Direct website. After initial reports of "dirt cheap" rates, MAIA took a long, hard look at the quotes produced by the site.
According to MAIA President and CEO Frank Mancini, "Our review of the quotes provided by Progressive reminds us of the old saying, 'it it looks too good to be true, it probably is.' Consumers should use extreme caution when requesting online quotes because a computer doesn't ask the questions a live person would ask to be sure you are adequately protected."
Since many of MAIA's issues with the website are believed to be serious violations of the managed competition regulation, MAIA has also filed a formal complaint with Commissioner Nonnie Burnes and notified Attorney General Martha Coakley and Undersecretary of the Office of Consumer Affairs & Business Regulation Daniel Crane of the violations.
The most flagrant violations include:
Progressive requires anyone requesting a quote to provide their social security number, gender, recent military service and marital status. The quote process also informs applicants that Progressive obtains credit reports and credit scoring information, which is prohibited in Massachusetts for both rating and underwriting purposes.
Progressive acknowledges that Massachusetts law requires that every insurer offer twelve-month term private passenger motor vehicle insurance policies at the consumer's option, yet there is nowhere on the Progressive site where a consumer may exercise that option. When questioned on the phone about a twelve-month policy, a Progressive representative admitted that twelve-month policies are not available.
Comparative quotes of Progressive rates with the rates of other companies writing autoinsurance in Massachusetts are inaccurate and use a policy term of six months which is notavailable from any other insurance company in Massachusetts. While other insurance company quotes include an indication of the impact of your driving record in terms of surcharges for at-fault accidents and conviction of traffic violations and credits for good driving, the Progressive quote does not appear to include merit rating information.
We have posted the complete text of the MAIA press release on our website, and you may access it by clicking here.
It is imperative that the information in this press release be seen by as many consumers as possible, and we need your help with this. If you have contacts with your local daily and weekly newspapers, please walk the press release into your contact as soon as possible. Offer to answer any questions your contact or consumer reporters have, or refer them to us if you're not comfortable in that role.
We have also posted a copy of our complaint letter to the Commissioner on massagent.com. You may access this document by clicking here.
Please feel free to contact Frank Mancini or Donna McKenna or by phone at 800.972.9312 or 508.628.5452 if you have questions or need additional information.
Thursday, April 17, 2008
Auto Insurers Rip Rules on High-Risk Drivers
3-year break for newcomers writing polices called unfair
By Jeffrey Krasner, Globe Staff April 17, 2008
Many of the state's auto insurers say competition rules that took effect April 1 give an unfair advantage to companies just entering the Massachusetts market.
Under the state's revamped auto insurance system, insurance companies new to Massachusetts do not have to take on its riskiest and least desirable drivers for about three years. That could give them a financial boost compared with insurers already established in Massachusetts, which will automatically be assigned high-risk drivers based on their market share.
"Those that are in the market are seeking equity and fairness and those that are just entering the market are seeking any advantage they can get," said James T. Harrington, executive director of the Massachusetts Insurance Federation, an industry group that supported the new system, called managed competition.
Progressive Corp. of Ohio, the only insurance company that so far has firm plans to enter the Massachusetts auto market, said it supports the rules exempting it from having to insure high-risk drivers.
"The plan as written is fair, equitable, and consistent with plans in other states," said Emily A. Vlasich, corporate counsel for Progressive, in written testimony to the Division of Insurance.
The Patrick administration last year undertook an ambitious overhaul of the Massachusetts auto insurance market, which was the last one in the country where rates were set by regulators.
Under the new system, companies set their own rates and have greater flexibility to introduce innovative product features and discounts for different drivers. The overhaul was also intended to address problems with how high-risk drivers were assigned to companies. Some insurers claimed their competitors were able to manipulate the old sys tem to avoid paying their fair share for undesirable drivers, who typically generate more claims, causing losses for insurers.
Since auto policies only started renewing this month, relatively few motorists have signed up for policies under the new rates, which are expected to be lower for most drivers.
At the center of the current dispute are rules enacted this year by Insurance Commissioner Nonnie S. Burnes that control the so-called residual market for bad drivers, such as those with numerous moving violations. A public comment period on the rules ends tomorrow, and they must eventually be finalized by Burnes. Under the new system, insurance companies will be assigned high-risk drivers randomly, and are expected to cover such drivers commensurate with their share of the market.
But companies just entering Massachusetts will receive an exemption for almost three years.
"This result is patently unfair to existing companies, especially when one considers how quickly a large company with significant resources can gain market share when entering a new state," wrote Paula W. Gold, vice president and chief regulatory counsel for Plymouth Rock Assurance Corp. of Boston, in testimony to the Division of Insurance. "There should be no free ride for any carrier."
John F. Kittel, executive vice president of Arbella Insurance Group, said in written testimony that with the three-year wait in place, "the rest of the market is subsidizing the new entrant."
He said insurers should be able to provide timely market share data to the state, so there's no practical reason why new entrants could not take on their share of undesirable drivers quickly.
Chubb Group of Insurance Companies, which is based in New Jersey and does not sell auto policies in Massachusetts, disagreed. Michael W. O'Malley, senior vice president of state government affairs for the company, wrote in testimony that an insurer needs to be selling for at least a year before accurate market share numbers can be compiled. He said the rules giving new entrants in Massachusetts three years without high-risk driver assignments are similar to the "tried and true" methods used in about 40 other states.
Progressive, which will begin Internet-only sales May 1, acknowledged in its testimony that it is viewed by some as getting a "free ride" under the new system. But the insurer disagreed with the characterization and said it would voluntarily write policies for high-risk drivers, and thereby avoid random assignment of such customers.
By Jeffrey Krasner, Globe Staff April 17, 2008
Many of the state's auto insurers say competition rules that took effect April 1 give an unfair advantage to companies just entering the Massachusetts market.
Under the state's revamped auto insurance system, insurance companies new to Massachusetts do not have to take on its riskiest and least desirable drivers for about three years. That could give them a financial boost compared with insurers already established in Massachusetts, which will automatically be assigned high-risk drivers based on their market share.
"Those that are in the market are seeking equity and fairness and those that are just entering the market are seeking any advantage they can get," said James T. Harrington, executive director of the Massachusetts Insurance Federation, an industry group that supported the new system, called managed competition.
Progressive Corp. of Ohio, the only insurance company that so far has firm plans to enter the Massachusetts auto market, said it supports the rules exempting it from having to insure high-risk drivers.
"The plan as written is fair, equitable, and consistent with plans in other states," said Emily A. Vlasich, corporate counsel for Progressive, in written testimony to the Division of Insurance.
The Patrick administration last year undertook an ambitious overhaul of the Massachusetts auto insurance market, which was the last one in the country where rates were set by regulators.
Under the new system, companies set their own rates and have greater flexibility to introduce innovative product features and discounts for different drivers. The overhaul was also intended to address problems with how high-risk drivers were assigned to companies. Some insurers claimed their competitors were able to manipulate the old sys tem to avoid paying their fair share for undesirable drivers, who typically generate more claims, causing losses for insurers.
Since auto policies only started renewing this month, relatively few motorists have signed up for policies under the new rates, which are expected to be lower for most drivers.
At the center of the current dispute are rules enacted this year by Insurance Commissioner Nonnie S. Burnes that control the so-called residual market for bad drivers, such as those with numerous moving violations. A public comment period on the rules ends tomorrow, and they must eventually be finalized by Burnes. Under the new system, insurance companies will be assigned high-risk drivers randomly, and are expected to cover such drivers commensurate with their share of the market.
But companies just entering Massachusetts will receive an exemption for almost three years.
"This result is patently unfair to existing companies, especially when one considers how quickly a large company with significant resources can gain market share when entering a new state," wrote Paula W. Gold, vice president and chief regulatory counsel for Plymouth Rock Assurance Corp. of Boston, in testimony to the Division of Insurance. "There should be no free ride for any carrier."
John F. Kittel, executive vice president of Arbella Insurance Group, said in written testimony that with the three-year wait in place, "the rest of the market is subsidizing the new entrant."
He said insurers should be able to provide timely market share data to the state, so there's no practical reason why new entrants could not take on their share of undesirable drivers quickly.
Chubb Group of Insurance Companies, which is based in New Jersey and does not sell auto policies in Massachusetts, disagreed. Michael W. O'Malley, senior vice president of state government affairs for the company, wrote in testimony that an insurer needs to be selling for at least a year before accurate market share numbers can be compiled. He said the rules giving new entrants in Massachusetts three years without high-risk driver assignments are similar to the "tried and true" methods used in about 40 other states.
Progressive, which will begin Internet-only sales May 1, acknowledged in its testimony that it is viewed by some as getting a "free ride" under the new system. But the insurer disagreed with the characterization and said it would voluntarily write policies for high-risk drivers, and thereby avoid random assignment of such customers.
Tuesday, March 25, 2008
Mass Auto Insurance Has Bumpy Past
Sunday, March 23, 2008
By Dan Ring
The Republican
Insurance Commissioner Nonnie S. Burnes said she picked up some important lessons from history before her bold move to start competitive car insurance for the state on April 1.
Thirty years ago, Massachusetts dropped its highly regulated form of auto insurance and introduced competition. It turned out to be a brief, failed experiment that drove up rates too high for urban motorists and left the state gun-shy for decades about making any similar changes.
Burnes, who was appointed commissioner in early 2007, said she was keenly aware of the turmoil that erupted after a sweeping law for competitive auto insurance took effect in 1977.
"That was terrible for the consumer, awful for the companies," said Burnes, a former 10-year superior court judge appointed commissioner by Gov. Deval L. Patrick.
Massachusetts has a long tumultuous history with auto insurance. The state approved the country's first compulsory car insurance and first regulated rates in 1926.
A public outcry over mandatory insurance and rising rates caused a crisis on Beacon Hill and prompted the resignation of the state's insurance commissioner in 1928.
Fifty years later, another major dispute erupted when the state made its initial attempt at competition in auto insurance.
Back then, companies were given little time to prepare. Actual rates were unavailable on Jan. 1, but policies were renewed anyway for consumers, taking away choice.
"You can imagine how consumers felt about that," Burnes said.
According to a history provided by the state Division of Insurance, rates skyrocketed in Boston and nearby urban areas.
Patrick B. Bresnahan, who started Bresnahan Insurance Agency in Holyoke in 1957, said urban youth were hit especially hard by the first effort at competition in auto insurance.
"It was chaos," Bresnahan said. "Kids were paying more for insurance than they were for their cars."
Legislators responded by passing a law to cap increases at 25 percent over 1976 levels and ordering insurers to send rebates to some auto owners.
Insurers filed lawsuits and the state's insurance commissioner abandoned the new competitive system and returned to setting rates for 1978.
In succeeding years, auto insurance companies fled the state.
Bresnahan, 73, said he watched companies desert the state during the 1980s and 1990s. "They just could not make a profit here," he said.
In 1977, there were 111 auto insurers doing business in the state. By 1990, that number dwindled to 53 and it stands at 20 today, although that number is expected to grow as other companies come back to the state.
Several insurers paid the state huge exit fees to be released early from their legal obligations. It made more financial sense to pay the fees instead of remaining in the state and continuing to lose money.
Peter T. Robertson, lawyer in Massachusetts for the Property Casualty Insurers Association of America, said insurers were discouraged by the state's method for covering high-risk drivers.
Insurers are allowed to place those drivers in a pool where their accident costs are shared by all insurers and then passed on to all drivers annually.
Burnes is gradually moving to a system of randomly assigning those drivers to an insurer. The amount of assignments to any company would hinge on a company's market share.
Under "assigned risk," insurers will be more responsible for the accident costs of its riskier drivers, giving insurers an incentive to more closely examine claims and reduce fraud.
Robertson said assigned risk is also a fairer way to allocate such drivers.
When Burnes announced her intentions to start managed competition in July of last year, she said the state should no longer be held hostage by the 1977 experience.
She used a state law to administratively phase in managed competition.
She opted to begin the new system on April 1 when 314,000 policies renew.
A total of 540,000 policies renewed on Jan. 1, but are based on last year's rates.
In order to avoid mistakes of the state's past attempt at competitive rating, Burnes capped rate increases at 10 percent for the state's worst drivers. Insurers can set their own rates but only with strict state oversight.
Burnes also retained vestiges of the old system where regulators set all auto insurance rates.
For example, she kept a system of "rating territories" that allows for suburban communities to subsidize rates of urban centers to slightly cut insurance costs in cities where accident rates are higher. Experienced drivers are also paying somewhat higher premiums to keep down the insurance costs of younger motorists.
Burnes is also continuing to ban the use of credit scores and certain socioeconomic factors in determining auto insurance rates.
"I'm going to retain a lot of control to make sure it is rolled out in a smooth way and is beneficial to the consumer," Burnes said.
Insurance costs will still hinge on a person's driving record, type of car and coverage selections.
Other aspects of the state's auto insurance system are sealed in state law and can't be changed administratively, Burnes said.
Under state law, for example, motorists must have only $2,000 in medical bills before they can sue the driver who caused the crash.
Former Gov. W. Mitt Romney sought unsuccessfully to raise that threshold to $4,000 to limit personal injury lawsuits and wring costs out of the system.
Romney also wanted to save money by limiting windshield replacements. He sought to create a $100 deductible that would have been waived for a more economical repair of a windshield. Right now, there is no deductible on windshield replacements.
Future historians may tell us the fate of those and other proposed reforms.
By Dan Ring
The Republican
Insurance Commissioner Nonnie S. Burnes said she picked up some important lessons from history before her bold move to start competitive car insurance for the state on April 1.
Thirty years ago, Massachusetts dropped its highly regulated form of auto insurance and introduced competition. It turned out to be a brief, failed experiment that drove up rates too high for urban motorists and left the state gun-shy for decades about making any similar changes.
Burnes, who was appointed commissioner in early 2007, said she was keenly aware of the turmoil that erupted after a sweeping law for competitive auto insurance took effect in 1977.
"That was terrible for the consumer, awful for the companies," said Burnes, a former 10-year superior court judge appointed commissioner by Gov. Deval L. Patrick.
Massachusetts has a long tumultuous history with auto insurance. The state approved the country's first compulsory car insurance and first regulated rates in 1926.
A public outcry over mandatory insurance and rising rates caused a crisis on Beacon Hill and prompted the resignation of the state's insurance commissioner in 1928.
Fifty years later, another major dispute erupted when the state made its initial attempt at competition in auto insurance.
Back then, companies were given little time to prepare. Actual rates were unavailable on Jan. 1, but policies were renewed anyway for consumers, taking away choice.
"You can imagine how consumers felt about that," Burnes said.
According to a history provided by the state Division of Insurance, rates skyrocketed in Boston and nearby urban areas.
Patrick B. Bresnahan, who started Bresnahan Insurance Agency in Holyoke in 1957, said urban youth were hit especially hard by the first effort at competition in auto insurance.
"It was chaos," Bresnahan said. "Kids were paying more for insurance than they were for their cars."
Legislators responded by passing a law to cap increases at 25 percent over 1976 levels and ordering insurers to send rebates to some auto owners.
Insurers filed lawsuits and the state's insurance commissioner abandoned the new competitive system and returned to setting rates for 1978.
In succeeding years, auto insurance companies fled the state.
Bresnahan, 73, said he watched companies desert the state during the 1980s and 1990s. "They just could not make a profit here," he said.
In 1977, there were 111 auto insurers doing business in the state. By 1990, that number dwindled to 53 and it stands at 20 today, although that number is expected to grow as other companies come back to the state.
Several insurers paid the state huge exit fees to be released early from their legal obligations. It made more financial sense to pay the fees instead of remaining in the state and continuing to lose money.
Peter T. Robertson, lawyer in Massachusetts for the Property Casualty Insurers Association of America, said insurers were discouraged by the state's method for covering high-risk drivers.
Insurers are allowed to place those drivers in a pool where their accident costs are shared by all insurers and then passed on to all drivers annually.
Burnes is gradually moving to a system of randomly assigning those drivers to an insurer. The amount of assignments to any company would hinge on a company's market share.
Under "assigned risk," insurers will be more responsible for the accident costs of its riskier drivers, giving insurers an incentive to more closely examine claims and reduce fraud.
Robertson said assigned risk is also a fairer way to allocate such drivers.
When Burnes announced her intentions to start managed competition in July of last year, she said the state should no longer be held hostage by the 1977 experience.
She used a state law to administratively phase in managed competition.
She opted to begin the new system on April 1 when 314,000 policies renew.
A total of 540,000 policies renewed on Jan. 1, but are based on last year's rates.
In order to avoid mistakes of the state's past attempt at competitive rating, Burnes capped rate increases at 10 percent for the state's worst drivers. Insurers can set their own rates but only with strict state oversight.
Burnes also retained vestiges of the old system where regulators set all auto insurance rates.
For example, she kept a system of "rating territories" that allows for suburban communities to subsidize rates of urban centers to slightly cut insurance costs in cities where accident rates are higher. Experienced drivers are also paying somewhat higher premiums to keep down the insurance costs of younger motorists.
Burnes is also continuing to ban the use of credit scores and certain socioeconomic factors in determining auto insurance rates.
"I'm going to retain a lot of control to make sure it is rolled out in a smooth way and is beneficial to the consumer," Burnes said.
Insurance costs will still hinge on a person's driving record, type of car and coverage selections.
Other aspects of the state's auto insurance system are sealed in state law and can't be changed administratively, Burnes said.
Under state law, for example, motorists must have only $2,000 in medical bills before they can sue the driver who caused the crash.
Former Gov. W. Mitt Romney sought unsuccessfully to raise that threshold to $4,000 to limit personal injury lawsuits and wring costs out of the system.
Romney also wanted to save money by limiting windshield replacements. He sought to create a $100 deductible that would have been waived for a more economical repair of a windshield. Right now, there is no deductible on windshield replacements.
Future historians may tell us the fate of those and other proposed reforms.
Wednesday, March 12, 2008
Goal: More Insurance Choices
By Jerry Kronenberg
Wednesday, March 12, 2008
Boston Herald
Market watchers hope Massachusetts’ new “managed-competition” car-insurance system puts Nationwide on our side - along with Geico, AIG and other firms that have avoided the Bay State for virtually decades.
“If consumers get more choices, that’s a good thing,” state Insurance Commissioner Nonnie Burnes said, saying more firms might enter Massachusetts once the new system starts on April 1.
Burnes said more than 80 percent of insurers quit the Massachusetts car-insurance business during the 30 years that the state heavily regulated rates. Other underwriters never set up shop at all.
All told, only half of the nation’s 10 largest car-insurance firms currently operate here.
However, No. 3 insurer Progressive recently announced plans to begin writing policies under the new system. So has smaller underwriter Peerless, a subsidiary of Boston’s Liberty Mutual.
“The new system hasn’t even started yet and we already have two new (insurers),” Burnes said. “I don’t think that’s a bad start.”
Massachusetts had 111 insurers in place when the state began setting car-insurance rates in 1977.
But 92 have left since then, with no one coming in to replace them.
“Under the old system, it was very difficult for most companies to make money here,” said Frank O’Brien of the Property Casualty Insurers Association of America. “But assuming managed competition sticks, I think we should see more companies coming here.”
Still, Stephen D’Amato of the Center for Insurance Research said adding new insurers “is only a good thing if it produces lower, fairer rates for consumers.”
D’Amato claims the new system gives insurers too much power to base rates not just on driving records, but also on things such as homeownership - factors he said favor the rich.
“Competition can be good,” D’Amato said, “but not the way it’s being implemented.”
Wednesday, March 12, 2008
Boston Herald
Market watchers hope Massachusetts’ new “managed-competition” car-insurance system puts Nationwide on our side - along with Geico, AIG and other firms that have avoided the Bay State for virtually decades.
“If consumers get more choices, that’s a good thing,” state Insurance Commissioner Nonnie Burnes said, saying more firms might enter Massachusetts once the new system starts on April 1.
Burnes said more than 80 percent of insurers quit the Massachusetts car-insurance business during the 30 years that the state heavily regulated rates. Other underwriters never set up shop at all.
All told, only half of the nation’s 10 largest car-insurance firms currently operate here.
However, No. 3 insurer Progressive recently announced plans to begin writing policies under the new system. So has smaller underwriter Peerless, a subsidiary of Boston’s Liberty Mutual.
“The new system hasn’t even started yet and we already have two new (insurers),” Burnes said. “I don’t think that’s a bad start.”
Massachusetts had 111 insurers in place when the state began setting car-insurance rates in 1977.
But 92 have left since then, with no one coming in to replace them.
“Under the old system, it was very difficult for most companies to make money here,” said Frank O’Brien of the Property Casualty Insurers Association of America. “But assuming managed competition sticks, I think we should see more companies coming here.”
Still, Stephen D’Amato of the Center for Insurance Research said adding new insurers “is only a good thing if it produces lower, fairer rates for consumers.”
D’Amato claims the new system gives insurers too much power to base rates not just on driving records, but also on things such as homeownership - factors he said favor the rich.
“Competition can be good,” D’Amato said, “but not the way it’s being implemented.”
Monday, February 11, 2008
Plymouth Rock Billing System Changes - Letter to Agents
Dear Greg:
We have recently implemented several enhancements to our direct billing system that apply to all policies, regardless of effective date.
In response to your requests, we have instituted a grace period of five calendar days from the payment due date. This grace period becomes effective today and applies to invoices only. A Notice of Intent to Cancel for Non-Payment of Premium will not be issued unless the minimum premium due is not received within the grace period. If a cancellation notice is issued, the effective date of the cancellation will not be extended by any grace period. While this will accommodate occasional delays in mailing time, we would recommend customers who make a payment on or near the actual due date use your agency web payment option to ensure their installment is credited and the policy does not fall into arrears. Next month, we will unveil the first phase of our consumer interface on PlymouthRock.com that will allow customers to access their bills and make payments online without going to the agency.
Also, the return coupon on the billing invoice now lists the payment mailing address on only one side, and has a new optical scan line to improve processing time. Our testing has shown this should reduce the amount of manual handling of payments that can delay proper posting of a payment.
We hope these new billing features will make it easier for you and your customers to do business with us. It’s one more way we can offer “More Than Just Insurance. AssuranceSM.”
Please contact your Marketing Representative with any questions. As always, we thank you for your business.
Bob Warren
Marketing Director - Massachusetts
We have recently implemented several enhancements to our direct billing system that apply to all policies, regardless of effective date.
In response to your requests, we have instituted a grace period of five calendar days from the payment due date. This grace period becomes effective today and applies to invoices only. A Notice of Intent to Cancel for Non-Payment of Premium will not be issued unless the minimum premium due is not received within the grace period. If a cancellation notice is issued, the effective date of the cancellation will not be extended by any grace period. While this will accommodate occasional delays in mailing time, we would recommend customers who make a payment on or near the actual due date use your agency web payment option to ensure their installment is credited and the policy does not fall into arrears. Next month, we will unveil the first phase of our consumer interface on PlymouthRock.com that will allow customers to access their bills and make payments online without going to the agency.
Also, the return coupon on the billing invoice now lists the payment mailing address on only one side, and has a new optical scan line to improve processing time. Our testing has shown this should reduce the amount of manual handling of payments that can delay proper posting of a payment.
We hope these new billing features will make it easier for you and your customers to do business with us. It’s one more way we can offer “More Than Just Insurance. AssuranceSM.”
Please contact your Marketing Representative with any questions. As always, we thank you for your business.
Bob Warren
Marketing Director - Massachusetts
Friday, February 8, 2008
Development, erosion keep coast at risk
By Rich Fahey
Globe Correspondent / February 7, 2008
Thirty years ago today the Blizzard of '78 was ravaging the South Shore. Wind gusts of more than 100 miles per hour combined with heavy snowfall to destroy thousands of homes and boats. Before it was over, more than two dozen people would be dead statewide.
What would happen if the same storm hit the South Shore today? Would the flooding, destruction of property, and beach erosion be as severe? Or would changes in building codes and in the way we respond to storms result in less property damage and fewer lives lost?
The answer: We might be better prepared, but the damage could be just as great - or greater.
Specialists say the almost continuous beach erosion from storms in the ensuing 30 years has created a new set of problems, should a storm like the Blizzard of '78 hit the South Shore again.
"The erosion shifts from previous storms have moved the flood plain, putting more homeowners in jeopardy," said Rebecca Haney, a coastal geologist for the state Office of Coastal Zone Management. "In addition, there has been a significant amount of construction in those flood plain areas."
Many of the summer cottages that were unoccupied in coastal towns during the storm 30 years ago have been converted to year-round residences, putting more families squarely in the bull's-eye of a sequel to '78.
"Those cottages are now year-round residences, many of them still vulnerable to a storm," said state Senator Robert L. Hedlund of Weymouth, who represents many of the coastal communities that were devastated in the Blizzard of '78.
Partly offsetting that vulnerability is the fact that homes along the coast, while more exposed, are better built than they were 30 years ago.
Neil Duggan, Scituate's building commissioner for the past 14 years, saw his home - a converted cottage on Lighthouse Road - heavily damaged during the blizzard. Duggan, like others, wanted to rebuild. By 1979, revisions to the state building code required that any rebuilt home in a danger area had to be elevated on 11-foot-high pilings or columns, said Duggan. In 1982, he said, improved federal maps were developed for Scituate, requiring higher elevations in some hazard areas.
Portions of the state building code are routinely refined; the most recent change is a requirement for high-impact windows in debris-borne areas and more stringent hurricane-resistant construction requirements.
Still, erosion is eating away at the buffer between the ocean and coastal communities. Communities such as Scituate and Duxbury have been losing on average a half-foot of beach each year.
While some emphasis has been on building sea walls, the beaches and dunes - not the walls - are the first line of defense against coastal flooding. Hedlund said he was able secure federal money for beach renourishment at Nantasket Beach in Hull, but not for sea wall construction, because "the federal government considered the beach more important when it comes to flood control."
Haney, the state coastal geologist, said the Massachusetts Wetlands Protection Act and subsequent regulations designed to protect beaches and dunes have helped, but storms have still wreaked havoc with the shoreline.
Towns and cities have taken it upon themselves to prepare for the worst. In Hull, which was devastated by floods in '78, an emergency operations center was built as part of renovations to Memorial Middle School.
Acting fire chief Robert Hollingshead, who is also in charge of Hull's emergency preparedness, meets with the heads of town agencies several times a year and whenever a major storm is forecast.
Hollingshead, who joined the Fire Department just after the 1978 storm, said that advancements in technology have improved communication with the public in emergencies. "We have cable TV and the Internet, and we can reach many people quickly."
The state has recognized the issues. In February 2006, Governor Mitt Romney created the Massachusetts Coastal Hazards Commission to review practices and policies, identify information gaps, and draft recommendations for improvements.
In May 2007, the commission released its final report, including a series of recommendations to help safeguard coastal areas. They included updating coastal maps to pinpoint risk and measure rising sea levels due to climate change; modeling potential damage from future storms to alert communities; and providing incentives, such as insurance discounts, for homeowners along the coast to retrofit their homes against storms.
Peter Judge, public information officer for the Massachusetts Emergency Management Agency, the successor to the Massachusetts Civil Defense Agency, said that after the '78 storm, Governor Michael Dukakis issued an executive order creating an emergency management team. It includes federal, state, and local officials, including liaisons from a dozen state agencies, and meets regularly.
"I think if there's two areas we've improved in since 1978, it would be in communication and coordination," said Judge.
In 1978, some people didn't believe the forecast or disregarded it, and thousands were trapped on roads or in makeshift shelters such as car dealerships and restaurants.
"We can't stop people from going out into the storm, but we can let them know what they're in for," said Judge.
Rich Fahey can be reached at faheywrite@yahoo.com
Globe Correspondent / February 7, 2008
Thirty years ago today the Blizzard of '78 was ravaging the South Shore. Wind gusts of more than 100 miles per hour combined with heavy snowfall to destroy thousands of homes and boats. Before it was over, more than two dozen people would be dead statewide.
What would happen if the same storm hit the South Shore today? Would the flooding, destruction of property, and beach erosion be as severe? Or would changes in building codes and in the way we respond to storms result in less property damage and fewer lives lost?
The answer: We might be better prepared, but the damage could be just as great - or greater.
Specialists say the almost continuous beach erosion from storms in the ensuing 30 years has created a new set of problems, should a storm like the Blizzard of '78 hit the South Shore again.
"The erosion shifts from previous storms have moved the flood plain, putting more homeowners in jeopardy," said Rebecca Haney, a coastal geologist for the state Office of Coastal Zone Management. "In addition, there has been a significant amount of construction in those flood plain areas."
Many of the summer cottages that were unoccupied in coastal towns during the storm 30 years ago have been converted to year-round residences, putting more families squarely in the bull's-eye of a sequel to '78.
"Those cottages are now year-round residences, many of them still vulnerable to a storm," said state Senator Robert L. Hedlund of Weymouth, who represents many of the coastal communities that were devastated in the Blizzard of '78.
Partly offsetting that vulnerability is the fact that homes along the coast, while more exposed, are better built than they were 30 years ago.
Neil Duggan, Scituate's building commissioner for the past 14 years, saw his home - a converted cottage on Lighthouse Road - heavily damaged during the blizzard. Duggan, like others, wanted to rebuild. By 1979, revisions to the state building code required that any rebuilt home in a danger area had to be elevated on 11-foot-high pilings or columns, said Duggan. In 1982, he said, improved federal maps were developed for Scituate, requiring higher elevations in some hazard areas.
Portions of the state building code are routinely refined; the most recent change is a requirement for high-impact windows in debris-borne areas and more stringent hurricane-resistant construction requirements.
Still, erosion is eating away at the buffer between the ocean and coastal communities. Communities such as Scituate and Duxbury have been losing on average a half-foot of beach each year.
While some emphasis has been on building sea walls, the beaches and dunes - not the walls - are the first line of defense against coastal flooding. Hedlund said he was able secure federal money for beach renourishment at Nantasket Beach in Hull, but not for sea wall construction, because "the federal government considered the beach more important when it comes to flood control."
Haney, the state coastal geologist, said the Massachusetts Wetlands Protection Act and subsequent regulations designed to protect beaches and dunes have helped, but storms have still wreaked havoc with the shoreline.
Towns and cities have taken it upon themselves to prepare for the worst. In Hull, which was devastated by floods in '78, an emergency operations center was built as part of renovations to Memorial Middle School.
Acting fire chief Robert Hollingshead, who is also in charge of Hull's emergency preparedness, meets with the heads of town agencies several times a year and whenever a major storm is forecast.
Hollingshead, who joined the Fire Department just after the 1978 storm, said that advancements in technology have improved communication with the public in emergencies. "We have cable TV and the Internet, and we can reach many people quickly."
The state has recognized the issues. In February 2006, Governor Mitt Romney created the Massachusetts Coastal Hazards Commission to review practices and policies, identify information gaps, and draft recommendations for improvements.
In May 2007, the commission released its final report, including a series of recommendations to help safeguard coastal areas. They included updating coastal maps to pinpoint risk and measure rising sea levels due to climate change; modeling potential damage from future storms to alert communities; and providing incentives, such as insurance discounts, for homeowners along the coast to retrofit their homes against storms.
Peter Judge, public information officer for the Massachusetts Emergency Management Agency, the successor to the Massachusetts Civil Defense Agency, said that after the '78 storm, Governor Michael Dukakis issued an executive order creating an emergency management team. It includes federal, state, and local officials, including liaisons from a dozen state agencies, and meets regularly.
"I think if there's two areas we've improved in since 1978, it would be in communication and coordination," said Judge.
In 1978, some people didn't believe the forecast or disregarded it, and thousands were trapped on roads or in makeshift shelters such as car dealerships and restaurants.
"We can't stop people from going out into the storm, but we can let them know what they're in for," said Judge.
Rich Fahey can be reached at faheywrite@yahoo.com
Tuesday, February 5, 2008
April 2008 MA Auto Insurance FAQ's
Thursday, January 31, 2008
Drivers should consider rental car insurance
Local repair centers juggle an influx of winter customers
By DEBBIE KELLEY
THE GAZETTE
January 31, 2008 - 12:48AM
Slick roads from a regular cycle of wintry storms have caused pileups at local auto body shops.
Red Noland Collision Center is booked until mid-February to repair wrecked cars that are drivable, said Dale Francis, body shop manager. It’s one of the city’s largest dealership-owned collision centers, with a 25,000-squarefoot shop, 30 employees and $6 million in revenues last year.
Vehicles that have to be towed to the shop are accepted immediately but can take a month to six weeks to get fixed, Francis said. “It’s unusual for us to be backed up this far, but we can only schedule so many cars — we can do 230 a month,” Francis said.
“You can just see customers’ eyes twitch — it’s already a negative situation — when we tell them we’re looking at six weeks. They just can’t believe it.”
That’s why motorists should have rental-car insurance to defray the cost, State Farm Insurance agent Mark Campbell said. About 75 percent of customers at Wilson’s Auto Collision Inc. have rental-car insurance, said Ray Wilson, owner of the shop founded 22 years ago Friday.
“We tell them to call their agent to see if they qualify, because out-of-pocket rental is expensive and rental-car coverage isn’t,” Wilson said.
Various roadblocks can delay restoring a vehicle to its pre-crash condition, whether it was involved in a minor fender bender or a rollover. For example, Campbell said the insurance claim process can stall if the insurance company has to order an accident report from the police to verify fault.
Securing an appointment at a local body shop and getting parts to make the repairs also can add time. Severely damaged vehicles sometimes need parts that can’t be found in local parts stores, Francis said.
Wilson said his 14 employees are working as fast as they can, but they also are running several weeks deep in appointments. It’s the same at Black & White Auto Body & Paint, said Rick Lujan, owner and general manager of one of the city’s largest independents.
“You don’t need a lot of snow — just a couple of inches on the ground make a huge difference for body shops,” he said.
This winter has been more treacherous for local drivers than last winter, which brought several major blizzards, because motorists tend to stay off the roads during blizzards but feel more confident to venture out when snowfall is lighter, Lujan said.
To handle his shop’s load, Lujan has added four technicians for a total of 20 employees. “People don’t like to wait too long,” he said.
But it’s hard for auto body shops to gauge business volume, Wilson said.
“Everybody seems to get in a wreck that morning of a storm. Customers don’t just trickle in — they come all at once, and all of a sudden you’ve got an overflow,” he said.
Along with having to endure longer wait times, many motorists needing body work have high deductibles that must be paid out-of-pocket. Higher deductibles lower auto insurance premium costs, and Francis said he’s seen deductibles as high as $3,000.
It doesn’t take much of an impact, said State Farm’s Campbell, for the repair bill to top $1,000.
Lujan said it’s not unheard of for his body shop to fix a vehicle with $12,000 to $15,000 in damage.
And though winter brings a flurry of business, it’s not necessarily the busiest season for collision centers. About 11,000 cars in the area were damaged in a hailstorm last summer, Francis said.
As Wilson said: “It’s the snow and ice now. It’ll be the wind and sand damage in the spring, hail in the summer, then back to snow. Being weather-related is just the nature of our business.”
By DEBBIE KELLEY
THE GAZETTE
January 31, 2008 - 12:48AM
Slick roads from a regular cycle of wintry storms have caused pileups at local auto body shops.
Red Noland Collision Center is booked until mid-February to repair wrecked cars that are drivable, said Dale Francis, body shop manager. It’s one of the city’s largest dealership-owned collision centers, with a 25,000-squarefoot shop, 30 employees and $6 million in revenues last year.
Vehicles that have to be towed to the shop are accepted immediately but can take a month to six weeks to get fixed, Francis said. “It’s unusual for us to be backed up this far, but we can only schedule so many cars — we can do 230 a month,” Francis said.
“You can just see customers’ eyes twitch — it’s already a negative situation — when we tell them we’re looking at six weeks. They just can’t believe it.”
That’s why motorists should have rental-car insurance to defray the cost, State Farm Insurance agent Mark Campbell said. About 75 percent of customers at Wilson’s Auto Collision Inc. have rental-car insurance, said Ray Wilson, owner of the shop founded 22 years ago Friday.
“We tell them to call their agent to see if they qualify, because out-of-pocket rental is expensive and rental-car coverage isn’t,” Wilson said.
Various roadblocks can delay restoring a vehicle to its pre-crash condition, whether it was involved in a minor fender bender or a rollover. For example, Campbell said the insurance claim process can stall if the insurance company has to order an accident report from the police to verify fault.
Securing an appointment at a local body shop and getting parts to make the repairs also can add time. Severely damaged vehicles sometimes need parts that can’t be found in local parts stores, Francis said.
Wilson said his 14 employees are working as fast as they can, but they also are running several weeks deep in appointments. It’s the same at Black & White Auto Body & Paint, said Rick Lujan, owner and general manager of one of the city’s largest independents.
“You don’t need a lot of snow — just a couple of inches on the ground make a huge difference for body shops,” he said.
This winter has been more treacherous for local drivers than last winter, which brought several major blizzards, because motorists tend to stay off the roads during blizzards but feel more confident to venture out when snowfall is lighter, Lujan said.
To handle his shop’s load, Lujan has added four technicians for a total of 20 employees. “People don’t like to wait too long,” he said.
But it’s hard for auto body shops to gauge business volume, Wilson said.
“Everybody seems to get in a wreck that morning of a storm. Customers don’t just trickle in — they come all at once, and all of a sudden you’ve got an overflow,” he said.
Along with having to endure longer wait times, many motorists needing body work have high deductibles that must be paid out-of-pocket. Higher deductibles lower auto insurance premium costs, and Francis said he’s seen deductibles as high as $3,000.
It doesn’t take much of an impact, said State Farm’s Campbell, for the repair bill to top $1,000.
Lujan said it’s not unheard of for his body shop to fix a vehicle with $12,000 to $15,000 in damage.
And though winter brings a flurry of business, it’s not necessarily the busiest season for collision centers. About 11,000 cars in the area were damaged in a hailstorm last summer, Francis said.
As Wilson said: “It’s the snow and ice now. It’ll be the wind and sand damage in the spring, hail in the summer, then back to snow. Being weather-related is just the nature of our business.”
Wednesday, January 30, 2008
Mass. Allows Rates and Commissions of 2 Largest Auto Insurers
By Andrew G. Simpson
Insurance Journal
The two largest auto insurance writers in Massachusetts have been given the green light to use the rates they filed for 2008 in rulings that characterize the state attorney general's objections as "irrelevant" in the state's new competitive marketplace.
The rulings also preserve contingent commissions for agents.
Massachusetts Insurance Commissioner Nonnie Burnes has ruled in favor of Commerce Insurance and Safety Insurance over the protests of Massachusetts Attorney General Martha Coakley, whose lawyers had tried to persuade Burnes that items contained in the two insurers' rate filings led to rates that were excessive even though they both filed for overall decreases.
The rulings mean the two insurers may proceed to market using their filings, which called for an average rate decrease of 8.1 percent by Commerce and an average 6.9 percent cut by Safety.
Commerce is the largest auto insurer with 31.6 percent market share, while Safety ranks second with 11.2 percent.
In declining to disapprove the insurers' rate filings, Burnes also handed independent agents' a victory by upholding the inclusion of contingent commissions as part of the rate filings. Coakley's team had argued that contingent commissions should not have been part of the rates.
Until this year, auto insurers had their rates fixed and established by the insurance commissioner. But beginning in April, 2008, insurers are being allowed to compete using their own rates under a new managed competition system. Insurers file individual rates which become effective unless the commissioner disapproves them.
The attorney general has the right to trigger rate hearings on individual insurer rate filings she deems excessive, which Coakley did in the cases of Commerce and Safety, but the final decisions rest with the commissioner.
Coakley objected to provisions for profit, expenses including contingent commissions, and loss trends used by the two insurers in their rates.
But Burnes dismissed the AG's entire analysis, ruling in favor of the insurers on each provision. Burnes suggested that while the AG's approach might have worked under the previous fix-and-establish system, it was irrelevant under the new managed competition system and that the AG "fails to recognize" that the rules have changed.
Burnes said that while the attorney general wants to challenge individual provisions of rates, as was done under the previous system, a competitive system requires a broader view.
"I do not set the rates under c. 175E [the rate statute]. My authority is limited strictly to disapproving a rate or, under very limited circumstances set forth in the statute, approving it. I look at the proposed overall rates generated by the rate filing viewed as a whole in determining whether a company's proposed rates are excessive for the insurance provided," Burnes wrote.
She further explained how her approach under managed competition differs from that taken in the past in her discussion of the Commerce profit provision:.
"It is not my task to look at aggregate industrywide data for the purpose of developing an underwriting profits provision that reasonably reflects the average financial needs of a mythical 'Every Company,' but is specific to none."
Her analyses of the expense and loss trends provision used similar language.
The attorney general had attacked the inclusion of contingent commissions for agents as "creating serious potential conflicts of interest and leading to anticompetitive effects such as the steering of business away from more cost effective carriers." Coakley's lawyers had also argued that because decisions fixing and establishing rates did not allow them to be included, contingent commissions should continue to be rejected in a competitive environment.
But Burnes said that such past decisions are immaterial to the current situation and since such commissions are legal, if insurers decide they want to pay them in a competitive market, they can.
"Contingent commissions now are one basis for legitimate competition in the industry. Indeed, that is why the Division's rate filing instructions explicitly provide for the possibility of such an expense. It is neither my role, nor the role of the Attorney General, to decide what expenses a company should incur in a competitive insurance market provided no such expenses violate the law. Companies that unwisely spend money will enjoy less success in the market, and this experience alone will alter future conduct," Burnes wrote.
Note: Plans submitted by all admitted carriers have now been approved. Contact us for more information.
Insurance Journal
The two largest auto insurance writers in Massachusetts have been given the green light to use the rates they filed for 2008 in rulings that characterize the state attorney general's objections as "irrelevant" in the state's new competitive marketplace.
The rulings also preserve contingent commissions for agents.
Massachusetts Insurance Commissioner Nonnie Burnes has ruled in favor of Commerce Insurance and Safety Insurance over the protests of Massachusetts Attorney General Martha Coakley, whose lawyers had tried to persuade Burnes that items contained in the two insurers' rate filings led to rates that were excessive even though they both filed for overall decreases.
The rulings mean the two insurers may proceed to market using their filings, which called for an average rate decrease of 8.1 percent by Commerce and an average 6.9 percent cut by Safety.
Commerce is the largest auto insurer with 31.6 percent market share, while Safety ranks second with 11.2 percent.
In declining to disapprove the insurers' rate filings, Burnes also handed independent agents' a victory by upholding the inclusion of contingent commissions as part of the rate filings. Coakley's team had argued that contingent commissions should not have been part of the rates.
Until this year, auto insurers had their rates fixed and established by the insurance commissioner. But beginning in April, 2008, insurers are being allowed to compete using their own rates under a new managed competition system. Insurers file individual rates which become effective unless the commissioner disapproves them.
The attorney general has the right to trigger rate hearings on individual insurer rate filings she deems excessive, which Coakley did in the cases of Commerce and Safety, but the final decisions rest with the commissioner.
Coakley objected to provisions for profit, expenses including contingent commissions, and loss trends used by the two insurers in their rates.
But Burnes dismissed the AG's entire analysis, ruling in favor of the insurers on each provision. Burnes suggested that while the AG's approach might have worked under the previous fix-and-establish system, it was irrelevant under the new managed competition system and that the AG "fails to recognize" that the rules have changed.
Burnes said that while the attorney general wants to challenge individual provisions of rates, as was done under the previous system, a competitive system requires a broader view.
"I do not set the rates under c. 175E [the rate statute]. My authority is limited strictly to disapproving a rate or, under very limited circumstances set forth in the statute, approving it. I look at the proposed overall rates generated by the rate filing viewed as a whole in determining whether a company's proposed rates are excessive for the insurance provided," Burnes wrote.
She further explained how her approach under managed competition differs from that taken in the past in her discussion of the Commerce profit provision:.
"It is not my task to look at aggregate industrywide data for the purpose of developing an underwriting profits provision that reasonably reflects the average financial needs of a mythical 'Every Company,' but is specific to none."
Her analyses of the expense and loss trends provision used similar language.
The attorney general had attacked the inclusion of contingent commissions for agents as "creating serious potential conflicts of interest and leading to anticompetitive effects such as the steering of business away from more cost effective carriers." Coakley's lawyers had also argued that because decisions fixing and establishing rates did not allow them to be included, contingent commissions should continue to be rejected in a competitive environment.
But Burnes said that such past decisions are immaterial to the current situation and since such commissions are legal, if insurers decide they want to pay them in a competitive market, they can.
"Contingent commissions now are one basis for legitimate competition in the industry. Indeed, that is why the Division's rate filing instructions explicitly provide for the possibility of such an expense. It is neither my role, nor the role of the Attorney General, to decide what expenses a company should incur in a competitive insurance market provided no such expenses violate the law. Companies that unwisely spend money will enjoy less success in the market, and this experience alone will alter future conduct," Burnes wrote.
Note: Plans submitted by all admitted carriers have now been approved. Contact us for more information.
Tuesday, January 22, 2008
LETTER: Industry could be winner on auto insurance
Industry could be winner on auto insurance
More on SouthCoastToday.com re: Rep. Koczera's concerns from the Legislative Director of MASSPIRG
"Rep. Koczera has good reason for concern about how the new deregulated auto insurance system will impact consumers.
While not completely final, here is what we know already:
First, average rates will be higher under the new plan vs. the current plan. Despite its flaws, our existing auto insurance system produced a 21 percent decrease in rates over the last three years and would have cut rates by at least 11 percent next year, according to both our analyses of rates over the last 10 years and the attorney general's office.
Under the new system, the average rate decrease is about 7 percent based on the insurers' estimates of the effect of their filings. Gov. Patrick's commissioner of insurance denied the attorney general access to information that could have determined whether these estimates are inflated, so even the 7 percent figure is suspect. In any case, the net result on the average premium under the new system compared to our regulated one, is an average increase in rates of at least 4 percent.
Second, while the commissioner did prohibit insurers from using unfair and socioeconomic factors like credit scores and education to set premiums, she did not prevent them from using proxies for those banned factors. And just last week the commissioner prohibited the attorney general from presenting evidence showing that certain rating factors proposed by the state's largest auto insurer were unfair to consumers.
Unfortunately, it does not come as a surprise that the real winners of the deregulated auto insurance industry are the insurers — not the consumers. When was the last time you saw an industry push for changes that would benefit the consumer over the industry? "
Deirdre Cummings
Legislative Director
MASSPIRG
Boston
More on SouthCoastToday.com re: Rep. Koczera's concerns from the Legislative Director of MASSPIRG
"Rep. Koczera has good reason for concern about how the new deregulated auto insurance system will impact consumers.
While not completely final, here is what we know already:
First, average rates will be higher under the new plan vs. the current plan. Despite its flaws, our existing auto insurance system produced a 21 percent decrease in rates over the last three years and would have cut rates by at least 11 percent next year, according to both our analyses of rates over the last 10 years and the attorney general's office.
Under the new system, the average rate decrease is about 7 percent based on the insurers' estimates of the effect of their filings. Gov. Patrick's commissioner of insurance denied the attorney general access to information that could have determined whether these estimates are inflated, so even the 7 percent figure is suspect. In any case, the net result on the average premium under the new system compared to our regulated one, is an average increase in rates of at least 4 percent.
Second, while the commissioner did prohibit insurers from using unfair and socioeconomic factors like credit scores and education to set premiums, she did not prevent them from using proxies for those banned factors. And just last week the commissioner prohibited the attorney general from presenting evidence showing that certain rating factors proposed by the state's largest auto insurer were unfair to consumers.
Unfortunately, it does not come as a surprise that the real winners of the deregulated auto insurance industry are the insurers — not the consumers. When was the last time you saw an industry push for changes that would benefit the consumer over the industry? "
Deirdre Cummings
Legislative Director
MASSPIRG
Boston
Driving Safely When the Snow Sticks
By Dan Zak
I learned to drive in wintry weather by growing up in Buffalo, which is the same thing as saying, "I learned to surf by growing up on the North Shore of Oahu." Freezing rain, fresh powder, whiteouts, downed branches coated with ice -- I've piloted a vehicle through almost every winter climatological situation.
Many Washington residents who are transplants from more temperate regions have not. Most of the area's snow falls during January and February, so get ready by considering the following advice from AAA's mid-Atlantic office and Car Guys in Rockville, which offers a semiannual course on hazardous driving geared toward teenagers ( http://www.decisivedriving.com).
Driving in winter is about physics and finesse, says John Townsend, manager of public and government affairs at AAA Mid-Atlantic.
"It's like a ballet," says Townsend, who lives in Prince George's County. "In other words, you almost have to become like an athlete: You don't want to be very tense, and you don't want to be overly confident. But you need to be in a zone. You need to be one with the vehicle. It has to be an extension of your limbs."
So read on. Keep it together. You'll be fine. But first and foremost: If you don't have to drive in wicked weather, stay the heck off the roads.
Before Hitting the Road
Have a snowbrush (with an ice scraper) in your trunk. I mean, obviously, right? But I've seen plenty of people trying to de-ice windshields with credit cards. Not effective.
Check your owner's manual, which may contain tips for driving your vehicle in snow and ice. "You will be surprised at the number of car owners who never look at those pages," Townsend says. "It is the last thing on their minds."
Pack an emergency kit and keep it in your vehicle throughout the winter: blankets, a sleeping bag, gloves, hats, wrapped nonperishable food (such as granola bars), bottled water, any medication you might need, a charged cellphone and the number for your insurance company's towing service or AAA. A sudden snowstorm can strand you, so be prepared for cold, hunger and the need to call for help.
Make certain your tires are properly inflated. Heck, do this regardless of the time of year.
Try to keep your gas tank at least half full to avoid running out of gas if you're snarled in traffic or stranded. (You need gas to keep the heat on, after all.) Also, this helps prevent a frozen gas line.
Practice. When it snows, find a nearby empty parking lot and get a feel for how your vehicle handles. Take note of how the brakes react on ice, how you need to alter or steady your steering on slick turns, and so on. "You have to learn it and feel it," says Aryan Azarsa, owner of Car Guys. "You can't sit behind a laptop and become a great driver. You actually have to do it."
Behind the Wheel
Slow down. Traction control, anti-lock brakes and ot her winter features are great, but they are no substitute for containing your speed. "People think anti-lock brakes are good for as fast as you go, but really it's only good up to 40 miles an hour," Azarsa says. "You may have traction control, but if you add too much speed, it's still rubber against asphalt."
Accelerate and decelerate slowly. Applying the gas gingerly is the best method for retaining traction and avoiding skids. Don't feel rushed to get going. Giving yourself more room to stop will allow you to brake more gently (and thereby avoid sliding).
Increase the distance between you and the car ahead. It should take at least eight seconds for you to pass the same spot on the road. That means no tailgating.
Use the threshold braking method, whether or not you have anti-lock brakes: Keep your heel on the floor and use the ball of your foot to apply firm, steady pressure on the brake.
Don't stop if you can avoid it. If you can slow enough to keep rolling until a stoplight changes, do it. There's a big difference in the amount of inertia it takes to accelerate from a full stop and the amount it takes to accelerate while rolling. It could be the difference between spinning your wheels and effortlessly resuming normal speed.
If you skid, always look and steer where you want to go. Don't try to rock the steering wheel or overcorrect.
Don't go all Chuck Norris on a hill. You'll spin your wheels if you apply extra gas on snowy roads. Try to get a little momentum before you reach the hill and let it carry you up. As you reach the top, reduce your speed and go down the hill as slowly as possible.
That said, don't be a nervous Nellie on a hill. If you get nervous, just keep moving. Don't brake on a hill unless you come to a stop sign or a light. If you must stop, tread tentatively. "The worst thing to do is step on the gas and break traction," says Lon Anderson, director of public and government affairs at AAA Mid-Atlantic. "You don't want to start by spinning. The best hope for getting going is a very, very slow and gentle beginning." If your wheels keep spinning, sometimes the only option is to reverse (if possible) back downhill, gain traction on level ground, then make another run at the hill. Or simply find another route.
Be doubly cautious in an SUV. Since they can weigh up to two to three times as much as a typical car, SUVs need more time to stop and have a higher center of gravity (meaning they're likelier than a sedan to tip over when negotiating a curve or a lane change on an ice-covered road). If you drive an SUV, brake earlier but gently and avoid jerky steering motions that can send the vehicle sliding.
If you drive a pickup truck or any other rear-wheel-drive car, place 60-pound bags of sand in the truck bed over the rear axles or the spot above the rear wheels to distribute the weight and prevent the back wheels from spinning.
Friday, January 18, 2008
Don't cut corners on insurance for your company
Scripps Howard News Service
BY STEPHEN WINDHAUS
Over the years, many of my clients have purposely excluded insurance expense in the business planning process. Most were seeking outside capital investment, and they wanted to keep startup costs as low as possible. They soon learned no banker or venture capitalist is going to invest in your business, regardless of how attractive it may be, unless insurance is included. Even if the company doesn't need capital, there are certain conditions you do not want to face without insurance. Property loss, business interruption and liability are three good reasons to consider coverage.
PROTECT YOUR PROPERTY
The first form of coverage that comes to mind is property insurance for your building, inventory, equipment, machinery and vehicles. However, you want to pay close attention to the coverage offered. Do not assume that simply because the company owns no building, machinery or product inventory, that this form of coverage is not necessary. Other forms of property include vehicles, office equipment, furniture and cash (in the case of robbery). There are two types of property insurance coverage — standard and special, or all-risk. Standard insurance will cover each particular class of property. In other words, you would have to secure a policy for each category of property. Special, or all-risk coverage is a comprehensive policy that addresses all categories of property in a broader range of loss conditions.
Property insurance begins with you creating a list of all tangible assets, the present, appraised value and salvage value of each item. Submit this list to the insurance agent for review to insure the best of coverage at the lowest possible premium.
And here's a "heads up" for home-based business, including sole proprietors. The cost of home insurance is rising in many parts of the country. Make sure your agent examines that policy to avoid over-insurance. The home policy just may cover part of your business property.
WHAT HAPPENS WHEN THE LIGHTS GO OUT — BUSINESS INTERRUPTION
I have written about preparing the business for natural and manmade disasters. There are many things you can do to protect property and company data, but what happens when the business is interrupted for days, weeks or months because of a wildfire, hurricane, tornado or some other form of disaster. Just ask the business owners in New Orleans how long it has taken to open the doors and generate sales after Hurricane Katrina. A solution to this cash-flow nightmare is business interruption insurance. You can be certain the flood (forgive the pun) of natural disasters in recent years, combined with some recent predictions, that lenders and entrepreneurs alike are taking a closer look at this form of insurance.
LIABILITY
Generally, it is a common decision at startup to incorporate the business to protect assets from liability loss. But what is one to do when faced with legal responsibility from harm caused to others. This can result from actions or inactions by you or your employees that result in bodily injury or property damage It could be due to defective products, bad service or installation actions. With all due respect to the legal system, there are times when one lawyer conducts a better job than another. Innocence is no guarantee of winning the case. And how many times has a lawyer decided to settle out of court to avoid excess legal expenses? Regardless of guilt or innocence, you want to consider liability coverage.
SHOP AND COMPARE
My insurance needs have been serviced by only one agent in the last 18 years. Fortunately, he has taken good care of me, but don't think I haven't gone out to compare prices and coverage. Loyalty is a wonderful character trait, but business is business. You need to insure getting the best bang for the buck. Shop around and compare the premium costs to the coverage provided. And please stay within your budget.
And talk with an insurance broker who carries commercial liability policies, to see if there are some tailored to your industry or profession.
Stephen Windhaus is a small business consultant based in Port St. Lucie. You can contact him at steve@windhaus.com or (772) 871-0585.
BY STEPHEN WINDHAUS
Over the years, many of my clients have purposely excluded insurance expense in the business planning process. Most were seeking outside capital investment, and they wanted to keep startup costs as low as possible. They soon learned no banker or venture capitalist is going to invest in your business, regardless of how attractive it may be, unless insurance is included. Even if the company doesn't need capital, there are certain conditions you do not want to face without insurance. Property loss, business interruption and liability are three good reasons to consider coverage.
PROTECT YOUR PROPERTY
The first form of coverage that comes to mind is property insurance for your building, inventory, equipment, machinery and vehicles. However, you want to pay close attention to the coverage offered. Do not assume that simply because the company owns no building, machinery or product inventory, that this form of coverage is not necessary. Other forms of property include vehicles, office equipment, furniture and cash (in the case of robbery). There are two types of property insurance coverage — standard and special, or all-risk. Standard insurance will cover each particular class of property. In other words, you would have to secure a policy for each category of property. Special, or all-risk coverage is a comprehensive policy that addresses all categories of property in a broader range of loss conditions.
Property insurance begins with you creating a list of all tangible assets, the present, appraised value and salvage value of each item. Submit this list to the insurance agent for review to insure the best of coverage at the lowest possible premium.
And here's a "heads up" for home-based business, including sole proprietors. The cost of home insurance is rising in many parts of the country. Make sure your agent examines that policy to avoid over-insurance. The home policy just may cover part of your business property.
WHAT HAPPENS WHEN THE LIGHTS GO OUT — BUSINESS INTERRUPTION
I have written about preparing the business for natural and manmade disasters. There are many things you can do to protect property and company data, but what happens when the business is interrupted for days, weeks or months because of a wildfire, hurricane, tornado or some other form of disaster. Just ask the business owners in New Orleans how long it has taken to open the doors and generate sales after Hurricane Katrina. A solution to this cash-flow nightmare is business interruption insurance. You can be certain the flood (forgive the pun) of natural disasters in recent years, combined with some recent predictions, that lenders and entrepreneurs alike are taking a closer look at this form of insurance.
LIABILITY
Generally, it is a common decision at startup to incorporate the business to protect assets from liability loss. But what is one to do when faced with legal responsibility from harm caused to others. This can result from actions or inactions by you or your employees that result in bodily injury or property damage It could be due to defective products, bad service or installation actions. With all due respect to the legal system, there are times when one lawyer conducts a better job than another. Innocence is no guarantee of winning the case. And how many times has a lawyer decided to settle out of court to avoid excess legal expenses? Regardless of guilt or innocence, you want to consider liability coverage.
SHOP AND COMPARE
My insurance needs have been serviced by only one agent in the last 18 years. Fortunately, he has taken good care of me, but don't think I haven't gone out to compare prices and coverage. Loyalty is a wonderful character trait, but business is business. You need to insure getting the best bang for the buck. Shop around and compare the premium costs to the coverage provided. And please stay within your budget.
And talk with an insurance broker who carries commercial liability policies, to see if there are some tailored to your industry or profession.
Stephen Windhaus is a small business consultant based in Port St. Lucie. You can contact him at steve@windhaus.com or (772) 871-0585.
Wednesday, January 16, 2008
LETTER: Koczera wrong on auto insurance
Courtesy of SouthCoastToday.com
January 15, 2008 8:40 PM
It is unfortunate that responsible state policymakers continue to rely upon scare tactics and misinformation to oppose the efforts of the Patrick administration to reform the antiquated and anti-consumer Massachusetts auto insurance system. Rep. Robert Koczera's recent op-ed piece ("Auto insurance reform discriminates," Jan. 11) disappointingly relies upon such arguments.
Rep. Koczera is simply wrong that good drivers with spotless records, who are assigned to a company by the Massachusetts assigned risk plan, will not receive the benefits of lower rates. It is illegal for a company to charge such an assigned good driver any more than their policy premium would be were they insured by that company voluntarily.
Rep. Koczera ignores the fact that good drivers in Acushnet, for example, have been subsidizing bad drivers in New Bedford, and vice versa, under the present system, but has not previously found this objectionable.
Driving record is, in fact, a significant factor in the decision all companies make in offering rates, but even staunch opponents of competition in the Legislature acknowledge the impracticality of an auto insurance system based upon a single factor. That said, all the objectionable socioeconomic factors listed by Rep. Koczera have, in fact, been banned for use in determining rates and in underwriting policies.
Real competition, with more companies, more products and more consumer choices, necessitates a regulatory playing field that resembles at least modestly the playing field in the other 49 states of the nation. It is no accident that other big states, like New Jersey and Texas, scrapped their state-set systems in favor of competition and saw more companies compete and better rate offerings across the board.
Consumers can anticipate the same results here in Massachusetts, so long as well-intended but wrong policymakers do not stand in the way of the meaningful reform that the Patrick administration is bringing to the commonwealth's auto insurance system.
James T. Harrington
Executive Director
Massachusetts Insurance Federation
The writer lives in Dartmouth.
January 15, 2008 8:40 PM
It is unfortunate that responsible state policymakers continue to rely upon scare tactics and misinformation to oppose the efforts of the Patrick administration to reform the antiquated and anti-consumer Massachusetts auto insurance system. Rep. Robert Koczera's recent op-ed piece ("Auto insurance reform discriminates," Jan. 11) disappointingly relies upon such arguments.
Rep. Koczera is simply wrong that good drivers with spotless records, who are assigned to a company by the Massachusetts assigned risk plan, will not receive the benefits of lower rates. It is illegal for a company to charge such an assigned good driver any more than their policy premium would be were they insured by that company voluntarily.
Rep. Koczera ignores the fact that good drivers in Acushnet, for example, have been subsidizing bad drivers in New Bedford, and vice versa, under the present system, but has not previously found this objectionable.
Driving record is, in fact, a significant factor in the decision all companies make in offering rates, but even staunch opponents of competition in the Legislature acknowledge the impracticality of an auto insurance system based upon a single factor. That said, all the objectionable socioeconomic factors listed by Rep. Koczera have, in fact, been banned for use in determining rates and in underwriting policies.
Real competition, with more companies, more products and more consumer choices, necessitates a regulatory playing field that resembles at least modestly the playing field in the other 49 states of the nation. It is no accident that other big states, like New Jersey and Texas, scrapped their state-set systems in favor of competition and saw more companies compete and better rate offerings across the board.
Consumers can anticipate the same results here in Massachusetts, so long as well-intended but wrong policymakers do not stand in the way of the meaningful reform that the Patrick administration is bringing to the commonwealth's auto insurance system.
James T. Harrington
Executive Director
Massachusetts Insurance Federation
The writer lives in Dartmouth.
Tuesday, January 15, 2008
Sunday, January 13, 2008
Mass. Insurance Chief, AG Differ Over How to Regulate Auto Rates
Massachusetts Insurance Commissioner Nonnie Burnes and Attorney General Martha Coakley are at odds over how best to regulate the state's new competitive auto rates.
Coakley thinks some insurers are being stingy with their rate cuts and wants to dig deeply into individual insurance company rate filings by obtaining background documents from the carriers.
Burnes say she's got everything under control and Coakley's tactics would only delay the day when consumers enjoy the fruits of a competitive system.
Burnes appears intent on keeping the rate approval process moving forward so carriers can begin marketing their new rates in time for the April 1 start date for competitive rating.
The rates for 14 of the 19 insurers writing private passenger auto have been approved after some review and revisions. But the rates for a few other insurers, including some of the larger writers, remain under scrutiny.
Hearings began this week into the rates of Commerce, the state's largest auto insurer. Hearings into the filings of Arbella Mutual Insurance Co., Safety Insurance Co., Premier Insurance Co. of Massachusetts, and Hanover Insurance Group are scheduled for later this month.
The insurance department has already approved the filings for Arbella and Safety but they are being further reviewed at Coakley's insistence.
Commerce has filed for an average decrease of 6 percent. Coakley claims the company could lower rates more than that.
The different approaches of the two public officials have been on display in recent legal moves and at a hearing on Commerce's rates this week in Boston.
At the hearing, Burnes oversaw questioning of Commerce officials by Assistant Attorney General Peter Leight. She appeared impatient with his lengthy questioning, at one point remarking that motorists are "never going to get decent rates" if the state prolongs the process.
The differences between the two also played out in legal maneuvering by Burnes, a former judge, and Coakley, a former prosecutor.
Coakley's office had wanted more ammunition to question officials of Commerce and the other insurers about their ratemaking. The attorney general had first sought to obtain background materials from Commerce by asserting the legal right of discovery. After Burnes, rejected that assertion, Coakley issued subpoenas to Commerce for certain documents. Burnes also blocked that move.
Coakley and consumer advocates say Burnes' moves could restrict her agency's ability to represent consumers in rate hearings.
"Our goal in calling for hearings on Commerce's and other insurers' rate filings was to bring transparency to the rate-setting process under the new managed competition system," Coakley said. "We are very concerned that our office's inability to acquire appropriate information is likely to render the hearings ineffective and does a disservice to consumers."
This is not Coakley's only attempt to expand her office's consumer advocacy reach. Legislation that included a provision to give the attorney general the power of discovery died in the Legislature last session, although it could be revived.
The Massachusetts Association of Insurance Agents, opposed that legislation. Frank Mancini, president and chief executive officer of the trade group, said the denial of discovery was a "victory for consumers and agents" for several reasons.
First, he said, the resulting delays brought about by discovery could have meant that the insurers with rates subject to hearings would not have been able to compete for business with their lower 2008 rates come April but would have had to use their higher 2007 rates. Given that the carriers under review represent almost 40 percent of the marketplace, that could have denied consumers the benefits of competition and put those carriers at a competitive disadvantage, he said.
Also, Mancini said, had Coakley been granted the right of discovery, he believes she would have gone hunting after agent commission data. "I have been telling our members that if that discovery had passed, every one of their commission agreements would have been on Coakley's desk," he told Insurance Journal.
Before the Commerce hearing began, the insurance department officially cleared the filings of four insurers, bringing the total now approved to 14.
"The rates on file have withstood the Division's extensive review process and mark the beginning of a new era of consumer savings and consumer choice in the state's auto insurance market," said Burnes.
The insurance department said it continues to review the proposed rates of the remaining insurers.
See comments on this article in The Insurance Journal
Coakley thinks some insurers are being stingy with their rate cuts and wants to dig deeply into individual insurance company rate filings by obtaining background documents from the carriers.
Burnes say she's got everything under control and Coakley's tactics would only delay the day when consumers enjoy the fruits of a competitive system.
Burnes appears intent on keeping the rate approval process moving forward so carriers can begin marketing their new rates in time for the April 1 start date for competitive rating.
The rates for 14 of the 19 insurers writing private passenger auto have been approved after some review and revisions. But the rates for a few other insurers, including some of the larger writers, remain under scrutiny.
Hearings began this week into the rates of Commerce, the state's largest auto insurer. Hearings into the filings of Arbella Mutual Insurance Co., Safety Insurance Co., Premier Insurance Co. of Massachusetts, and Hanover Insurance Group are scheduled for later this month.
The insurance department has already approved the filings for Arbella and Safety but they are being further reviewed at Coakley's insistence.
Commerce has filed for an average decrease of 6 percent. Coakley claims the company could lower rates more than that.
The different approaches of the two public officials have been on display in recent legal moves and at a hearing on Commerce's rates this week in Boston.
At the hearing, Burnes oversaw questioning of Commerce officials by Assistant Attorney General Peter Leight. She appeared impatient with his lengthy questioning, at one point remarking that motorists are "never going to get decent rates" if the state prolongs the process.
The differences between the two also played out in legal maneuvering by Burnes, a former judge, and Coakley, a former prosecutor.
Coakley's office had wanted more ammunition to question officials of Commerce and the other insurers about their ratemaking. The attorney general had first sought to obtain background materials from Commerce by asserting the legal right of discovery. After Burnes, rejected that assertion, Coakley issued subpoenas to Commerce for certain documents. Burnes also blocked that move.
Coakley and consumer advocates say Burnes' moves could restrict her agency's ability to represent consumers in rate hearings.
"Our goal in calling for hearings on Commerce's and other insurers' rate filings was to bring transparency to the rate-setting process under the new managed competition system," Coakley said. "We are very concerned that our office's inability to acquire appropriate information is likely to render the hearings ineffective and does a disservice to consumers."
This is not Coakley's only attempt to expand her office's consumer advocacy reach. Legislation that included a provision to give the attorney general the power of discovery died in the Legislature last session, although it could be revived.
The Massachusetts Association of Insurance Agents, opposed that legislation. Frank Mancini, president and chief executive officer of the trade group, said the denial of discovery was a "victory for consumers and agents" for several reasons.
First, he said, the resulting delays brought about by discovery could have meant that the insurers with rates subject to hearings would not have been able to compete for business with their lower 2008 rates come April but would have had to use their higher 2007 rates. Given that the carriers under review represent almost 40 percent of the marketplace, that could have denied consumers the benefits of competition and put those carriers at a competitive disadvantage, he said.
Also, Mancini said, had Coakley been granted the right of discovery, he believes she would have gone hunting after agent commission data. "I have been telling our members that if that discovery had passed, every one of their commission agreements would have been on Coakley's desk," he told Insurance Journal.
Before the Commerce hearing began, the insurance department officially cleared the filings of four insurers, bringing the total now approved to 14.
"The rates on file have withstood the Division's extensive review process and mark the beginning of a new era of consumer savings and consumer choice in the state's auto insurance market," said Burnes.
The insurance department said it continues to review the proposed rates of the remaining insurers.
See comments on this article in The Insurance Journal
Thursday, January 10, 2008
First auto insurance rate-setting hearing opens
By Jeffrey Krasner
Globe Staff / January 10, 2008
Insurance Commissioner Nonnie S. Burnes yesterday kicked off the first rate-setting hearing under a new auto insurance system that allows insurers to set their own rates, subject to government oversight. Attorney General Martha Coakley had called for the hearing to examine rates filed by Commerce Insurance of Webster, the state's largest auto insurer.....read the full article here.
Globe Staff / January 10, 2008
Insurance Commissioner Nonnie S. Burnes yesterday kicked off the first rate-setting hearing under a new auto insurance system that allows insurers to set their own rates, subject to government oversight. Attorney General Martha Coakley had called for the hearing to examine rates filed by Commerce Insurance of Webster, the state's largest auto insurer.....read the full article here.
Wednesday, January 9, 2008
R.I. firm offers policies on Cape, coastal areas
By Kimberly Blanton
Globe Staff / January 9, 2008
Globe Staff / January 9, 2008
Click here to read about the Narragansett Bay Insurance Company - an option for homeowners who live in coastal areas.
To obtain a quote from Narragansett Bay Insurance Company, contact The Howes Insurance Agency.
Tuesday, January 8, 2008
Mass. AG Sues Great American For Bid-Rigging
BY DANIEL HAYS
NU Online News Service, Jan. 7, 3:41 p.m. EST
The Massachusetts Attorney General’s Office has filed a lawsuit against Cincinnati-based Great American Insurance Group, alleging it rigged an insurance bid with a broker to defraud a Norwood, Mass.-based technology firm.
Reacting to Friday’s action--filed at Suffolk Superior Court in Boston against Great American and its Chicago-based subsidiary, Professional Risk Brokers--the insurer said it denied wrongdoing and would fight the charges.
The announcement of the action by Attorney General Martha Coakley said she was seeking a court order prohibiting the company from engaging further in unfair and deceptive business practices, along with restitution, attorneys’ fees and civil penalties up to $5,000.
The state’s complaint charges that in 2004, at the request of insurance broker Marsh Inc.--part of Marsh & McLennan Companies--Great American submitted a fake and intentionally uncompetitive quote to semi-conductor manufacturer Analog Devices.
According to the attorney general’s statement and complaint, Great American allegedly submitted a fake $450,000 bid to make a $400,000 bid from American International Group for a $25 million layer of insurance look competitive, and Marsh reciprocated by steering another one of Analog Devices’ insurance policies to Great American at a pre-determined price of $60,000.
The lawsuit cited as evidence internal Marsh e-mails, and e-mails between Marsh and Great American’s PRB unit.
Great American is the latest in a long list of insurance carriers accused of rigging bids with Marsh and paying the brokerage off with hefty commissions for business that was sent its way.
In 2005, the New York-based brokerage, following investigation by the New York Attorney General’s Office into Marsh’s commercial insurance business practices, agreed to pay $850 million into a restitution fund to repay injured clients and stop taking contingent commissions, which allegedly served as kickbacks.
Ms. Coakley’s office said insurers such as Great American paid Marsh lucrative contingent commissions based on the volume of business placed with them.
The state’s suit is being handled by attorneys for the attorney general’s Insurance and Financial Services Division and Health Care Division.
Great American representatives said the carrier was “disappointed” a suit was filed over “one quotation for insurance coverage made in the spring of 2004 and contingent commission payments made to the producer for the account.”
“Great American's conduct in issuing that quote was lawful,” the carrier added. "The Company has cooperated with the Attorney General's investigation and has tried for an extended period of time to reach resolution of the issue without litigation.”
The firm said it had “resolved and been released from any potential issue” with Analog Devices. However, the state’s complaint said the monies involved in that settlement “do not represent the full harm suffered by Analog Devices, nor the full ill-gotten-gains of Great American.” The settlement amount was not disclosed.
Great American said it “believes that the demands of the Attorney General's Office have been unreasonable. Thus, the Company intends to vigorously defend itself against the Attorney General's allegations."
Members of the Great American Insurance Group are subsidiaries of American Financial Group Inc., based in Cincinnati.
NU Online News Service, Jan. 7, 3:41 p.m. EST
The Massachusetts Attorney General’s Office has filed a lawsuit against Cincinnati-based Great American Insurance Group, alleging it rigged an insurance bid with a broker to defraud a Norwood, Mass.-based technology firm.
Reacting to Friday’s action--filed at Suffolk Superior Court in Boston against Great American and its Chicago-based subsidiary, Professional Risk Brokers--the insurer said it denied wrongdoing and would fight the charges.
The announcement of the action by Attorney General Martha Coakley said she was seeking a court order prohibiting the company from engaging further in unfair and deceptive business practices, along with restitution, attorneys’ fees and civil penalties up to $5,000.
The state’s complaint charges that in 2004, at the request of insurance broker Marsh Inc.--part of Marsh & McLennan Companies--Great American submitted a fake and intentionally uncompetitive quote to semi-conductor manufacturer Analog Devices.
According to the attorney general’s statement and complaint, Great American allegedly submitted a fake $450,000 bid to make a $400,000 bid from American International Group for a $25 million layer of insurance look competitive, and Marsh reciprocated by steering another one of Analog Devices’ insurance policies to Great American at a pre-determined price of $60,000.
The lawsuit cited as evidence internal Marsh e-mails, and e-mails between Marsh and Great American’s PRB unit.
Great American is the latest in a long list of insurance carriers accused of rigging bids with Marsh and paying the brokerage off with hefty commissions for business that was sent its way.
In 2005, the New York-based brokerage, following investigation by the New York Attorney General’s Office into Marsh’s commercial insurance business practices, agreed to pay $850 million into a restitution fund to repay injured clients and stop taking contingent commissions, which allegedly served as kickbacks.
Ms. Coakley’s office said insurers such as Great American paid Marsh lucrative contingent commissions based on the volume of business placed with them.
The state’s suit is being handled by attorneys for the attorney general’s Insurance and Financial Services Division and Health Care Division.
Great American representatives said the carrier was “disappointed” a suit was filed over “one quotation for insurance coverage made in the spring of 2004 and contingent commission payments made to the producer for the account.”
“Great American's conduct in issuing that quote was lawful,” the carrier added. "The Company has cooperated with the Attorney General's investigation and has tried for an extended period of time to reach resolution of the issue without litigation.”
The firm said it had “resolved and been released from any potential issue” with Analog Devices. However, the state’s complaint said the monies involved in that settlement “do not represent the full harm suffered by Analog Devices, nor the full ill-gotten-gains of Great American.” The settlement amount was not disclosed.
Great American said it “believes that the demands of the Attorney General's Office have been unreasonable. Thus, the Company intends to vigorously defend itself against the Attorney General's allegations."
Members of the Great American Insurance Group are subsidiaries of American Financial Group Inc., based in Cincinnati.
Monday, January 7, 2008
Social insecurity: Web sites teem with ID numbers
Many records posted online
By Bill Brubaker
The Washington Post
WASHINGTON -- Colin Powell's Social Security number is out there. So is Troy Aikman's. And that of Maryland Democratic Attorney General Douglas Gansler, among many others.
In an era when government officials from President Bush to local sheriffs warn of the growing dangers of identity theft, the full Social Security numbers of untold numbers of Americans can be found in file rooms and on Web sites run by, well, governments.
"This is very dangerous," Gansler said after learning that his number had been posted on a Maryland government-record site. "You know, a Social Security number is really the fingerprint to somebody's identification."
The Federal Trade Commission has estimated that 8.3 million Americans were victims of identity theft in 2005, the most recent for which data are available. But the crown jewel in identity theft -- the Social Security number -- can be mined easily in the government's own records, creating a measure of social insecurity for millions, according to identity experts.
Social Security numbers are readily available in many courthouses -- in land records and criminal and civil case files -- and also on many government Web sites that serve up public documents with a few clicks of the mouse. From state to state, and even within states, there is little uniformity in how access to the private information in these records is controlled.
A recent spot check found the nine-digit numbers -- introduced in 1936 to track employee earnings and benefits -- on hundreds of land deeds, death certificates, traffic tickets, creditors' filings and other documents related to civil and criminal court cases.
Old records spill secrets
Federal courts have banned the use of Social Security numbers from public documents since 2001. And in recent years, many jurisdictions have enacted laws or made rules barring various types of personal information from being filed with courts or government agencies. Most court Web sites in the Washington region list partial Social Security numbers or none at all.
However, millions of paper records were filed across the United States before the laws and rules took effect. Generally, such records are not covered by the prohibitions. And court clerks said it would be virtually impossible to redact all of the Social Security numbers.
"That's just plain nutty," said Wendy Jones, former acting clerk of Prince William County Circuit Court in Virginia. "I mean, we're talking about hundreds and hundreds of thousands of files in our court alone."
In Virginia's Loudoun County General District Court, Social Security numbers were found on documents filed in 38 of the 48 criminal cases heard by a judge on a recent day. The numbers were typed or written on summonses, arrest warrants, criminal complaints, and jail commitment and release orders, among other documents.
"I don't like it. I don't like it at all," said the court's clerk, Judith Waddell. "Would you like your Social Security number being disclosed to the public? I know I wouldn't."
A one-hour search of Maryland's land-record Web site found the Social Security numbers and signatures of two dozen property owners.
"It's alarming, because the government should be setting the example in really trying to protect people's private information," said state Sen. Jamie Raskin, D-Montgomery. "Look, there's a whole criminal underground now that thrives on stealing people's credit cards and usurping their identity for as long as they can."
4 numbers in 15 minutes
A 15-minute search on the Maryland Department of Assessments and Taxation Web site found Social Security numbers on statements filed by creditors who had financed purchases by four consumers in Waldorf, Cambridge, Bowie and Landover in 2003 and 2004.
A dozen more numbers, including former Secretary of State Powell's, turned up on a Fairfax County, Va., site that requires a $25 monthly subscription fee.
A Texas land-record site had the Social Security number of Aikman, the former Dallas Cowboys quarterback and now a Fox Sports analyst.
Identity fraud has been around for centuries. But widespread use of credit cards and the growth of the Internet have led to a plague that costs businesses and individuals billions of dollars a year. And the problem took a giant leap in the public consciousness after the Sept. 11, 2001, terrorist attacks, when it was revealed that several hijackers had used fraudulently obtained IDs to open bank accounts, rent apartments and board planes.
The federal government responded with a 2004 law that mandated prison sentences for people who use identity theft to commit other crimes and prohibited Social Security numbers from being displayed on newly issued driver's licenses.
Last spring a presidential task force called on federal agencies to "reduce the unnecessary use" of Social Security numbers, which it called "the most valuable commodity for an identity thief."
But with a few keystrokes, anybody can view the deed to Jamie and Sarah Raskin's house in Takoma Park, Md.
Jamie Raskin, a state senator, said that when he refinanced the house in 1994, he gave no thought to the two Social Security numbers printed on his deed. But last March, he got a call from Betty "B.J." Ostergren, an activist from central Virginia who pushes lawmakers and government agencies to take sensitive personal data off state-run Web sites.
"She said, 'Do you know I was able to find your Social Security number and other private information about you and your wife online?' " Raskin said. "I was shocked, and I briefly flipped out, because, you know, these are days when everybody's privacy is under assault."
Helping criminals out
Ostergren's site, thevirginiawatchdog.com, offers dozens of examples of public figures whose Social Security numbers have appeared in public records in recent years. They include former CIA Director Porter Goss.
"The government loves to spoon-feed criminals by putting these dern records on their Web sites," Ostergren said.
Raskin said he plans to call for legislation that would give Maryland residents the right to request redaction of their Social Security numbers from public records.
"The public certainly has the right to know who owns a particular property," he said. "But I don't think the public has the right to know what that person's Social Security number is."
Contact The Howes Insurance Agency for protection against identity theft
By Bill Brubaker
The Washington Post
WASHINGTON -- Colin Powell's Social Security number is out there. So is Troy Aikman's. And that of Maryland Democratic Attorney General Douglas Gansler, among many others.
In an era when government officials from President Bush to local sheriffs warn of the growing dangers of identity theft, the full Social Security numbers of untold numbers of Americans can be found in file rooms and on Web sites run by, well, governments.
"This is very dangerous," Gansler said after learning that his number had been posted on a Maryland government-record site. "You know, a Social Security number is really the fingerprint to somebody's identification."
The Federal Trade Commission has estimated that 8.3 million Americans were victims of identity theft in 2005, the most recent for which data are available. But the crown jewel in identity theft -- the Social Security number -- can be mined easily in the government's own records, creating a measure of social insecurity for millions, according to identity experts.
Social Security numbers are readily available in many courthouses -- in land records and criminal and civil case files -- and also on many government Web sites that serve up public documents with a few clicks of the mouse. From state to state, and even within states, there is little uniformity in how access to the private information in these records is controlled.
A recent spot check found the nine-digit numbers -- introduced in 1936 to track employee earnings and benefits -- on hundreds of land deeds, death certificates, traffic tickets, creditors' filings and other documents related to civil and criminal court cases.
Old records spill secrets
Federal courts have banned the use of Social Security numbers from public documents since 2001. And in recent years, many jurisdictions have enacted laws or made rules barring various types of personal information from being filed with courts or government agencies. Most court Web sites in the Washington region list partial Social Security numbers or none at all.
However, millions of paper records were filed across the United States before the laws and rules took effect. Generally, such records are not covered by the prohibitions. And court clerks said it would be virtually impossible to redact all of the Social Security numbers.
"That's just plain nutty," said Wendy Jones, former acting clerk of Prince William County Circuit Court in Virginia. "I mean, we're talking about hundreds and hundreds of thousands of files in our court alone."
In Virginia's Loudoun County General District Court, Social Security numbers were found on documents filed in 38 of the 48 criminal cases heard by a judge on a recent day. The numbers were typed or written on summonses, arrest warrants, criminal complaints, and jail commitment and release orders, among other documents.
"I don't like it. I don't like it at all," said the court's clerk, Judith Waddell. "Would you like your Social Security number being disclosed to the public? I know I wouldn't."
A one-hour search of Maryland's land-record Web site found the Social Security numbers and signatures of two dozen property owners.
"It's alarming, because the government should be setting the example in really trying to protect people's private information," said state Sen. Jamie Raskin, D-Montgomery. "Look, there's a whole criminal underground now that thrives on stealing people's credit cards and usurping their identity for as long as they can."
4 numbers in 15 minutes
A 15-minute search on the Maryland Department of Assessments and Taxation Web site found Social Security numbers on statements filed by creditors who had financed purchases by four consumers in Waldorf, Cambridge, Bowie and Landover in 2003 and 2004.
A dozen more numbers, including former Secretary of State Powell's, turned up on a Fairfax County, Va., site that requires a $25 monthly subscription fee.
A Texas land-record site had the Social Security number of Aikman, the former Dallas Cowboys quarterback and now a Fox Sports analyst.
Identity fraud has been around for centuries. But widespread use of credit cards and the growth of the Internet have led to a plague that costs businesses and individuals billions of dollars a year. And the problem took a giant leap in the public consciousness after the Sept. 11, 2001, terrorist attacks, when it was revealed that several hijackers had used fraudulently obtained IDs to open bank accounts, rent apartments and board planes.
The federal government responded with a 2004 law that mandated prison sentences for people who use identity theft to commit other crimes and prohibited Social Security numbers from being displayed on newly issued driver's licenses.
Last spring a presidential task force called on federal agencies to "reduce the unnecessary use" of Social Security numbers, which it called "the most valuable commodity for an identity thief."
But with a few keystrokes, anybody can view the deed to Jamie and Sarah Raskin's house in Takoma Park, Md.
Jamie Raskin, a state senator, said that when he refinanced the house in 1994, he gave no thought to the two Social Security numbers printed on his deed. But last March, he got a call from Betty "B.J." Ostergren, an activist from central Virginia who pushes lawmakers and government agencies to take sensitive personal data off state-run Web sites.
"She said, 'Do you know I was able to find your Social Security number and other private information about you and your wife online?' " Raskin said. "I was shocked, and I briefly flipped out, because, you know, these are days when everybody's privacy is under assault."
Helping criminals out
Ostergren's site, thevirginiawatchdog.com, offers dozens of examples of public figures whose Social Security numbers have appeared in public records in recent years. They include former CIA Director Porter Goss.
"The government loves to spoon-feed criminals by putting these dern records on their Web sites," Ostergren said.
Raskin said he plans to call for legislation that would give Maryland residents the right to request redaction of their Social Security numbers from public records.
"The public certainly has the right to know who owns a particular property," he said. "But I don't think the public has the right to know what that person's Social Security number is."
Contact The Howes Insurance Agency for protection against identity theft
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