News Briefs

MICHIGAN

Commissioner Appeals Credit Scoring Decision The state of Michigan has filed an appeal of a judge’s ruling that allowed insurance companies to continue using customers’ credit scores to determine their home and automobile insurance rates. Attorneys for the state, as expected, filed an appeal Monday with the Michigan Court of Appeals.

Barry County Circuit Court Judge James Fisher ruled last month that state Insurance Commissioner Linda Watters overstepped her authority when she filed new rules reducing base rates and barring insurance companies from providing discounts to policyholders with good credit ratings. The insurance industry filed a lawsuit to stop the new rules, which were to take effect July 1. Most large insurers in Michigan use some form of credit scoring. Generally, the better one’s credit score, the lower a customer’s insurance premium will be. One with a worse score usually pays a higher rate.

Agents Make Case Against Tax Hike on Insurers The Michigan Association of Insurance Agents said that Gov. Jennifer Granholm’s plan to revise the state’s Single Business Tax will penalize small businesses, diminish employment opportunities and raise insurance rates for Michigan consumers. According to the association, insurance companies and other job providers will likely see their SBT liability triple, causing negative consequences in the industry, including layoffs, reduced spending and investment, and an overall loss in employment.

Under the Democratic governor’s proposal, insurers would likely see their tax liability triple from $230 million to $660 million, according to industry estimates. Those increased costs to insurance companies will most certainly be passed on to consumers in the form of higher premiums. Carmel Roberts, MAIA’s vice president of government affairs, said the insurance industry employs more than 122,000 people in Michigan and claimed it was one of the few sectors to have increased its workforce in recent years. The industry’s payroll grew from 2000 to 2003 by 20 percent to more than $3 million.

Unlike the manufacturing sector, which Granholm’s plan aims to help and has outsourced and shipped jobs overseas, Michigan insurance agents work and live there, Roberts argued. More than 1,400 companies are licensed to do business in the state.

MISSOURI

Spitzer Subpoenas GE on Finite Risk Insurance General Electric has received a subpoena from the New York Regional Office of the Securities & Exchange Commission on Friday, April 29. The subpoena, which seeks documents relating to “certain loss mitigation insurance products,” is general in nature. GE said it will cooperate fully with the SEC.

GE said it understands that a number of other insurance and reinsurance companies have been subpoenaed by the SEC in relation to finite risk. One of GE’s businesses, Kansas City-based GE Insurance Solutions, has reportedly made limited use of reinsurance with finite characteristics to manage the risks of catastrophic events such as storms or hurricanes, and to protect itself and GE shareowners from the volatility that is inherent in its business.

GE, its corporate audit staff and its outside auditor, KPMG LLP, have reportedly conducted numerous reviews of these agreements during the past several years as part of the company’s intensive strategic reviews of Insurance Solutions’ operations, and the company said it is confident that Insurance Solutions’ risk transfer agreements have been properly structured, properly accounted for with appropriate risk transfer, and properly disclosed.

OHIO

House Bill Makes it Harder for Injured Employees to Sue As of April 6, 2005, injured employees will find it harder to have “their day in court.” Through the recent passage of Ohio House Bill 498, changes will occur to the current state of employee liabilities in the case of workplace injury. Ohio House Bill 498 redefined for employees and employers what injuries are “substantially certain to occur.”

Injured employees will now have to prove “actual intent from employer” if an employee plans to sue an employer. This bill also intends to eliminate double recovery from the same workplace incident, which prevents an injured employee from benefiting from both worker’s compensation and intentional tort actions.

Most employers’ liability coverage will exclude coverage if the act was committed with the deliberate intent to injure. Current policies will exclude coverage based on the new definition of “substantially certain to occur” regardless if the employer paid the premium.

The bill is likely to be challenged in the courts as many similar bills have.

SOUTH DAKOTA

Comp Rates to Drop 1.3% Most South Dakota employers will see their workers’ compensation rates fall this year, according to Gov. Mike Rounds. Efforts to improve workplace safety will result in a 1.3 percent drop, effective July 1, Rounds said. Only employers in the assigned risk pool will see their rates rise, by 6.1 percent, he said. The rate decrease for all other employers is happening in spite of a rise in medical costs, Rounds said.

State Insurance Division Director Gary Steuck said employers can expect rates to vary among insurance companies, so employers should shop around to find the best rates.

NATIONAL

Conning: Look for P/C Underwriting Profit Again in 2005 The property/casualty industry can look forward to another year of underwriting profits, assuming normal catastrophic losses of $13-$14 billion, according to a new study by Conning Research and Consulting Inc. However, the analysis by Conning Research suggests that 2006 may not be as kind.

“Higher prices, tighter covers and more effective deductibles are the key contributors to industry performance in the 2004-2005 period,” said Stephan Christiansen, director of research at Conning Research and Consulting. “Despite a softening market, we fully expect that the underwriting profits of 2004 will continue at least into 2005.”

The Conning Research report, Property-Casualty Forecast & Analysis by Line of Insurance: First Quarter 2005, presents a three-year forecast for the key lines of business and the P/C industry as a whole.

“Of course, despite the stunning performance of personal lines, led by

Homeowners, and the strong performance of a number of commercial lines, particularly Commercial Automobile, softening market conditions will ultimately begin to chip away at the industry’s record performance,” said Christiansen. “Our analysis suggests that 2006 will be the first year of deterioration.”

The Associated Press contributed to this report. To submit information for this department, e-mail: koreilly@insurancejournal.com.