Declarations

CEA Charges

“The idea was originally that the CEA (California Earthquake Authority) would have enough funds over time … and wouldn’t need that industry assessment layer. … Theoretically we should have let the layer go away. That was the original bill. Some didn’t want it to go away at all; the industry wanted it to go away entirely, but in the end we were able to reach a compromise.”

—Don Griffin, vice president of personal lines for the Property Casualty Insurers Association of America, reflecting on recently passed legislation in California that designates $1.3 billion from participating insurers to fund the CEA. He noted the industry assessment layer hasn’t been eliminated because not as many people have purchased earthquake coverage as anticipated, and the pricing has been stable because there hasn’t been a major earthquake in the Golden State in some time.

Pay Your Part

“Should we be building homes out on sandbars in the middle of unprotected bays? Probably not. But if you choose to live out there, should you pay a lot for your insurance? Absolutely.”

—Craig Weber, senior analyst for Boston-based Celent, indicating that homeowners bear some responsibility for living in risky areas, whether they are in coastal or earthquake-prone areas.

Federal Help Not Needed

“It felt like a threat. Because of that letter, I’m going to vote for the referendum.”

—Unidentified State Farm policyholder commenting that a letter sent by State Farm insurance that was designed to inform voters about Washington’s Referendum 67 “angered him.” The letter states that insurance rates could increase if the state allows the Insurance Fair Conduct Act to be implemented. The Act would allow consumers to collect triple damages if their insurer unreasonably denies a claim or violates unfair practice rules. Opponents say Referendum 67 would encourage frivolous lawsuits, clogging the court system. The policyholder, who spoke to the Seattle Post-Intelligencer, indicated the State Farm letter seemed less informative and more like a threat. (AP)

No Bogus Bids

“Insurance customers deserve to receive honest, competitive bids from insurance companies, not sham bids cooked up by insurance brokers and their insurance company buddies,”

—The District of Columbia’s Attorney General Linda Singer commenting on a settlement in which ACE Insurance agreed to pay $4.5 million to end a bid-rigging and price-fixing case affecting eight states and the District of Columbia. Florida’s Chief Financial Officer Alex Sink said the multi-state investigation revealed that ACE participated in fictitious quoting and steering of business and other schemes in the commercial insurance market, orchestrated by Marsh & McLennan of New York. In the process, large and small companies, nonprofit organizations, and public entities that purchased commercial lines of insurance from ACE were misled into believing they were receiving the most competitive commercial premiums available. This settlement marks the second agreement Florida has reached with insurance carriers involved with Marsh & McLennan and other insurance brokers using what it called “pay-to-play” tactics.