News Briefs

MASSACHUSETTS

Safe Driver Plan Revised: Massachusetts Insurance Commissioner Julie M. Bowler has approved changes in the way drivers receive discounts and surcharges to their auto insurance policies based on their driving history. The revised Safe Driver Insurance Plan will provide discounts for the state’s best drivers and offer incentives for bad drivers to improve their driving records and realize lower rates, according to Bowler. Scheduled to take effect January 1, 2006, the revised SDIP more closely resembles how insurers evaluate driving records in most other states. Beginning in 2006, the current SDIP steps of 9 to 35 will be replaced with a point system in which drivers will be assigned points based on at-fault accidents and moving violations incurred in the last five years. Point values for minor and major traffic law violations and minor and major at-fault accidents will remain unchanged. The “Clean-in-Three” provision approved in 2005 for experienced drivers with only one at-fault accident or moving violation in the past five years will be expanded to include all drivers licensed for at least three years. Drivers with five years of clean driving experience (formerly SDIP Step 10) will receive an Excellent Driver Discount and those with six or more years of clean driving experience (formerly SDIP Step 9) will receive an Excellent Driver Plus Discount. Also, bodily injury claims resulting from at-fault accidents will now be included as surchargeable incidents.

OneBeacon Leaving Boston for Suburbs: One Beacon Insurance Co. has decided to vacate its offices at its namesake address at One Beacon Street in downtown Boston and consolidate its Boston area operations in a building in suburban Canton, Mass. The insurer has purchased a building at 150 Royall Street in Canton for $23 million. OneBeacon will consolidate most of its greater Boston offices to the new site beginning in 2007.

“This will mark the first time in our company’s history that we will have our greater Boston employees working in the same facility,” said John R. Ferrari, vice president of real estate, OneBeacon. “We expect to realize a considerable reduction in real estate expenses over current costs, which is a tremendous benefit. Additionally, we will gain the natural efficiencies of having the employees collocated.”

OneBeacon, a wholly owned subsidiary of White Mountains Insurance Group, Ltd., expects to move employees from its Foxboro, Mass. facility at the end of 2007, followed by most of its downtown Boston employees in 2008. The new facility will be renovated.

Conn. Vows Job Development: Vowing to boost the state’s status as insurance capital of the world, Connecticut Gov. M. Jodi Rell is creating a special office within her Department of Economic and Community Development dedicated to retaining, creating and attracting insurance and financial services jobs. She said that creation of the Insurance and Financial Services Business Development Office underscores the importance of the insurance industry to the state’s economy. The IFS is being charged with helping the Governor and the DECD mobilize resources, shape public policy, engage state and local leadership and create a strategy to attract and retain insurance and financial services businesses.

A recent study found that several states, notably Iowa and Vermont, have created similar dedicated offices that have proven successful in increasing insurance and financial services employment and investment. “Recent restructurings and consolidations have shown us first-hand the impact these companies can have on the lives of our workers and their families, as well as on local and state economies,” Rell said. “If Hartford is to remain the Insurance Capital of the World we need to take action now.”

Rell and other public officials recently sparred with New York-based MetLife over keeping jobs in the state if MetLife’s proposed acquisition of Travelers Life & Annuity, which is based in Hartford, is approved. Rell and MetLife Chairman and Chief Executive Officer Robert Benmosche eventually announced an agreement to keep 1,310 Travelers jobs in Hartford. Rell said that the job losses, which stood at 1,200 when the talks began, would now total 490.

Conn. Dog Bill Would Muzzle Insurers: Led by Connecticut state Rep. Melissa Olson whose home insurance was cancelled because she owns a dog, the House of Representatives narrowly passed a bill that bans insurance companies from refusing coverage based only on dog breed. The bill passed on a 77-70 vote and is awaiting action in the Senate. The bill does allow insurers, however, to use breed when underwriting a homeowner’s or renter’s policy. For example, they could require owners of particular breeds to have their animals neutered or take the dogs to obedience training. It is part of an effort to reduce the possibility of the dogs biting someone.

Rep. Robert Megna, D-New Haven, the bill’s main proponent, said five of the top 10 homeowner’s insurance companies will not issue policies to people who own particular breeds of dogs, such as pit bulls and Rottweilers. Of the remaining five companies, some have breed-based underwriting criteria, such as requiring the dog to be contained in a secure, fenced-in yard. Megna said such breed blacklisting hurts the responsible dog owners. He said they are sometimes unable to obtain regular homeowners insurance and are forced to pay exorbitant rates in alternative insurance markets.

But many legislators said it is unfair for the Connecticut General Assembly to restrict private insurance companies from making decisions on who gets coverage and at what rates based on a risk evaluation. “If you have a pit bull versus a Chihuahua, or a floppy-eared beagle, you can make no distinction of that. That’s what this law says,” said Rep. Lawrence Cafero Jr., R-Norwalk. “It’s contrary, in my humble opinion, to every principle of insurance that we have allowed.”

VERMONT

NCCI Correction Lowers Comp Rates: Hundreds of Vermont employers may see reductions in their 2003 and 2004 workers’ compensation premiums as a result of adjustments to the data used in the 2003 and 2004 rate filings prepared by the National Council on Compensation Insurance, announced Commissioner John Crowley of the Vermont Department of Insurance.

NCCI discovered that payroll information used in calculating rates had been underreported for a limited number of employer class codes. Upon being notified, the department ordered NCCI to review its rate filings, which resulted in reduced workers’ compensation rates for 18 employer classification codes, including logging or lumbering; sawmill; concrete construction; carpentry; painting or paperhanging; trucking, local hauling only; grocery stores; machinery dealers; hotel employees, salespersons and drivers; fast food restaurants and garbage collectors. Crowley has ordered all insurers to recalculate 2003 and 2004 premiums for affected policyholders and to make appropriate refunds or premium adjustments.

The error does not affect NCCI’s 2005 rate filing. The department recently approved workers’ compensation insurance rate increases of 6.5 percent in loss costs for the voluntary market and 8.9 percent in the rates for the assigned risk market effective April 1, 2005.

NEW YORK

Workers’ Comp Rates Remain Unchanged: The New York Compensation Insurance Rating Board has withdrawn its proposed rate increase of 9.5 percent, which means that workers’ compensation rates will remain at their current levels through Oct. 1, 2005. NYCIRB originally sought last year a 29.3 percent increase in workers’ compensation insurance rates, which was rejected by the New York State Insurance Department in July 2004. The department rejected that filing. The insurers’ rating bureau subsequently reduced its request to 9.5 percent. That rate request was the topic of a public hearing earlier this year. The NYCIRB compiles and evaluates data from all of the state’s workers’ comp insurers in making its rate filings.

Workers’ Comp Guaranty Fund Saved: The New York Assembly and Senate have passed and Gov. George Pataki has signed into law industry-supported legislation that provides short-term rescue for the state’s workers compensation guaranty fund that had been in danger of running out of funds to pay injured workers. The measure authorizes the fund to borrow from the estates of liquidated insurers with the repayment of the loans covered by an increased assessment on workers’ compensation policies. This legislation should keep the fund solvent at least through the end of 2005.

“This bill provides a responsible short-term solution to keep the fund solvent, providing payments to injured workers who depend upon it,” said Gary Henning, American Insurance Association’s northeast assistant vice president.

AIA worked with the legislature and the National Conference of Insurance Guaranty Funds to craft a measure that would meet the short-term financial needs of the fund. The legislation also includes two provisions that are long-term in nature. There is an early access provision for the guaranty fund, as well as a provision providing for a change in the priority of distribution.

Senator Urges Restraint on Broker Scandal: New York State Senate Insurance Committee Chairman James Seward (R-Milford) told the Professional Insurance Wholesalers Association Inc. that New York policymakers should employ restraint as they look at “what, if anything” should be done to address the practices uncovered recently at some large national brokerages. Seward said that he understands the difference between large brokerage operations and the typical “Main-Street” agent, and that he is confident much of the New York State Senate does also. “The action of a few mega-brokers doesn’t speak for a need to have broad-based regulatory change,” Seward said. “Whatever is done legislatively, if anything, shouldn’t be disruptive to an otherwise well-functioning market.”

Greenberg Target of Stock Inquiry: The former CEO of American International Group Inc. is once again making headlines. According to the New York Times, federal prosecutors are looking into whether Maurice Greenberg reportedly was in charge of an effort to manipulate the stock price of AIG in his last weeks as CEO. Citing unidentified people briefed on the inquiry, the newspaper reported an executive with the company’s trading group informed the company that he had chatted with Greenberg about AIG’s stock price in February, when it had started to quickly decline. Federal prosecutors have subpoenaed all of AIG’s recordings from its trading group going back two years, according to the sources

NEW JERSEY

Mercer to Purchase Company: Mercer Insurance Group Inc. and Financial Pacific Insurance Group Inc. have signed a plan for Mercer to acquire all the outstanding stock of Financial Pacific for approximately $40.4 million in cash. The transaction will be effected through a merger of a wholly owned subsidiary of Mercer into Financial Pacific. The transaction is expected to be completed during the summer. Mercer Insurance offers commercial and personal lines products in Pennsylvania and New Jersey. The acquisition provides product and geographic diversification for Mercer. In 2004, Financial Pacific generated $107 million of direct premiums primarily in California, Nevada, Oregon and Arizona through 300 independent agents.

Chubb Subpoenaed on Finite Products: Chubb Corp. of Warren N.J. reported that it received a subpoena from the U.S. Attorney for the Southern District of New York as part of an ongoing investigation involving the use of finite-risk insurance and related products. The company said in a regulatory filing with the Securities and Exchange Commission that it feels this investigation involves a number of industry participants and that it hasn’t been singled out o offer such information. Finite-risk and other reinsurance products are normally used by insurance companies to share risk, but regulators have alleged that some deals were used simply to burnish company finances. New York Attorney General Eliot Spitzer, the SEC and state insurance regulators have also been investigating these types of specialty insurance transactions.

MARYLAND

Doctors Frustrated Over Subsidy: Maryland doctors may not see any medical malpractice insurance rate relief for several months, even though the General Assembly approved an emergency remedy more than four months ago. A series of delays has prompted finger-pointing between Democratic lawmakers and state insurance regulators and caused headaches for doctors.

“There’s extreme frustration,” said Philip Schneider, an orthopedic surgeon in Kensington. “Many of us went ahead and paid the higher premiums with the promise that there would be relief, and it hasn’t happened yet.”

The Democrat-led General Assembly passed legislation in December that was intended to limit increases in doctors’ medical malpractice rates to 5 percent this year, rather than the 33 percent increase planned by the state’s largest insurance carrier.

Sen. Brian Frosh, D-Montgomery, a leader in the malpractice reform effort, now says the Maryland Insurance Administration has worked “to throw sand in the gears'” of efforts to put money in the hands of doctors.

Insurance Commissioner Alfred Redmer denied that assessment and said he has no authority to release the money before July 1, when cash from a new state tax on HMO premiums – approved to pay for the doctors’ relief – will be allocated to the state subsidy fund. Democratic leaders and the Medical Mutual Liability Society of Maryland, the state’s largest malpractice carrier, both dispute that interpretation.

PENNSYLVANIA

Koken Says States Watching AIG: Responding to the announcement from American International Group that it was restating its financial statements for the years 2000 to present, and that the filing of its 2004 annual report would again be delayed, Pennsylvania Insurance Commissioner and President of the National Association of Insurance Commissioners Diane Koken maintained that states including her own are closely monitoring the insurer. She said her own department has been engaged in a “comprehensive financial exam” of AIG, which has remained open due to pending issues with the insurer.

Koken said she is encouraged by AIG’s management’s apparent willingness to cooperate with officials and address problems that have surfaced. “While I remain very disappointed at the improprieties being discovered at AIG, I am encouraged to see that the new management, under Martin Sullivan, appears to be taking steps to address the nature and extent of problems with past accounting practices and internal controls,” she said in a statement. In addition to the current financial exam of AIG by her department, Koken said she plans a “more accelerated exam schedule for this family of companies in the future as we continue our analyses.”

DELAWARE

State Farm Trims Homeowners Rates: Delaware Insurance Commissioner Matt Denn announced that State Farm Insurance, the state’s largest insurer of homes and second largest auto insurer, would cut its automobile and homeowners insurance rates by an average of 5 percent in the coming year. This reduction is the first significant rate cut in years by any major Delaware insurance company. Denn approved a State Farm auto insurance rate cut last month.

DISTRICT OF COLUMBIA

Mayor Anthony Williams has introduced legislation aimed at cutting back awards that drive up malpractice insurance. His legislation would expand the Good Samaritan law to provide immunity to all physicians, nurses and nurse midwives who provide free care. Currently, this law only applies to Ob/Gyns. The bill would also limit some types of exorbitant awards. The bill would not place any limit on economic damages.

“If the Council goes along with this plan, we will soon be able to make the city a better place for doctors to work and practice. This bill is all about ensuring that our residents and visitors always get top-notch care and that our medical community can practice without undue burdens,” Williams said.