SYNOPSIS ALL INDUSTRY CONFERENCE CALL July 14, 2010

Since the call, the U.S. Senate voted on Thursday, July 15, to pass the U.S. Senate’s version of U.S. House Resolution 4173, the most significant overhaul of the U.S. financial regulatory system in decades.  The margin was 60-39, with three Republicans (Senators Collins and Snowe of Maine, and Senator Brown of Massachusetts) voting in the affirmative and one Democrat voting against the measure (Senator Feingold of Wisconsin).  Those with questions should contact Mike Barry, who has been following this issue.

U.S. House passes the Flood Insurance Reform and Priorities Act of 2010:

In another vote taken on Thursday, July 15, the U.S. House of Representatives approved House Resolution 5114, which reauthorizes the National Flood Insurance Program through 2015 and increases to $335,000 from $250,000 the maximum NFIP dwelling structure coverage, and to $135,000 from $100,000 the dwelling unit content policy limit.  The Property Casualty Insurers Association of America (PCI) issued on the same day this statement, expressing its overall support for the House action while criticizing the bill’s inclusion of a measure supported by Rep. Gene Taylor (D-Mississippi).  More details on the 329-90 U.S. House vote are here.  The Biloxi Sun Herald’s Thursday, July 15, story on the passage of HR 5114 focused on Rep. Taylor’s role in the flood insurance debate.

With the fifth anniversary of Hurricane Katrina approaching, Bob Hartwigand the I.I.I.’s Atlanta-based spokesperson Bill Davis met with Jeff Amy of the Mobile Press-Register and Anita Lee of the Biloxi Sun Herald in recent days, touting the importance of flood insurance in the wake of I.I.I. survey data indicating upwards of 30-plus percent of Gulf Coast homeowners believe a standard homeowners policy covers flood-caused damage.

Michigan Supreme Court affirms industry’s right to use credit-based insurance scores:

The Michigan Supreme Court’s 4-3 decision in favor of the Insurance Institute of Michigan, in a case brought against them by the Commissioner, Michigan Financial and Insurance Services, means that Michigan’s insurance commissioner does not have the authority to ban arbitrarily the use of credit-based information by insurers in pricing and underwriting.  The court’s decision was announced on Thursday, July 8, and generated this next-day story in the Detroit Free Press.  The American Insurance Association issued a same-day statement on the decision, too.  The editorial board of the Detroit News weighed in on Sunday, July 11, arguing the Michigan state legislature ought to look for other ways to reduce auto insurance premiums, rather than focusing repeatedly on credit-based insurance scoring.

But FICO’s Lamont Boyd told the I.I.I. that the Sunday, July 11, Associated Press story did generate some interest among FICO’s insurance clients.  Andy Jennings of FICO spoke to the AP reporter who wrote the story, and Jennings emphasized during the interview that FICO scores are not volatile and changes in national distribution have been quite small in recent years, despite the economic turmoil in the U.S.  FICO shared this trend score data with the AP.  The takeaway for readers of this AP article: nearly 26 percent of all Americans have FICO credit scores of 599 or lower, classifying them as a poor lending risk.

Driver error may have been a major factor in many of Toyota’s sudden-acceleration accidents, federal government is finding:

In its analysis of dozens of data recorders from Toyota Motor Corp. vehicles involved in sudden acceleration accidents, the U.S. Department of Transportation is reported to have found that throttles were wide open and brakes not engaged at the time of the accident. The initial stage of the investigation suggests that drivers who claimed their vehicles were out of control were mistakenly pressing down on the accelerator, thinking they were engaging the vehicles’ brakes, according to a front page story in the Wednesday, July 14, edition of the Wall Street Journal (subscription required). The inquiry, part of a broad federal investigation into Toyota’s various vehicle recalls, has not cleared Toyota for two other charges related to sudden acceleration problems: the “sticky” accelerator pedals and floor mats that can hold accelerators down.

The federal government’s almost 1,000 OTS employees, however, will still have jobs for at least the next four years, with most moving to the Office of the Comptroller of the Currency, according to this Wednesday, July 14, New York Times article.

The I.I.I.’s Mike Barry spoke on Wednesday, July 14, with WUSA 9 producer Delia Goncalves (email: dgoncalves@wusa9.com), the CBS affiliate in Washington, D.C., about which wind and water-caused damages are covered, and which are not, after severe thunderstorms hit D.C., Maryland and Virginia the previous evening, Tuesday, July 13.

USA Today readying piece on U.S. homeowners insurance trends, focusing on coastal states:

The I.I.I.’s Jeanne Salvatorespoke on Wednesday, July 14, with Virginia-basedpersonal finance reporter Sandy Block of USA Today for an upcoming story on home insurance, her primary interest being coastalinsurance issues. Ms. Block has just begun her research and will likely be reaching out to individual insurers. The article will run over the next few weeks.  Block also asked that Salvatore convey to the I.I.I. Communications Committee how she enjoyed meeting everyone at the dinner on Monday evening, June 21, in Washington, D.C., where she was one of the media guests.

Wall Street Journal story offers snapshot of Florida’s homeowners insurance market:

Florida’s homeowners insurance market may be put to the test this year if a major hurricane hits the state, according to this Saturday, July 10, Wall Street Journal article (subscription required). Florida has experimented in recent years with ways to keep insurance affordable even as private homeowners insurers have been cutting the number of policies they sell in the Sunshine State, reporter Leslie Scism writes. Florida Tax Watch, an independent, nonpartisan research institute, characterized in April 2010 the state’s insurance system as a “high stakes gamble [that] may be one major hurricane hit away from depending upon Federal relief or facing financial crisis.” In May 2010 the U.S. Government Accountability Office released a report saying Citizens Property Insurance Corp, the giant state-run insurer of last resort, may not be charging high enough premiums to cover coastal properties.  The I.I.I.’s coastal exposure and homeowners insurance premium figures for Florida are quoted in the WSJ article, as well.

South Florida Sun-Sentinel finds property insurance premiums are rising, despite governor’s high-profile veto of rate deregulation bill:

Last month Florida Governor Charlie Crist vetoed legislation that would have made it easier for insurers to increase property insurance premiums. Yet thousands of Florida residents are seeing significant rate hikes anyhow, according to reporter Julie Patel.  Florida’s regulators have the authority to approve or reject proposed premium rate increases and have approved the vast majority of the proposed rate increases, she wrote, in a front-page story in the Sunday, July 11, edition of the South Florida Sun-Sentinel.  Since the beginning of 2009, Florida’s Office of Insurance Regulation has approved approximately 140 residential property insurance rate increases, ranging from less than 1 percent to 29 percent, according to the story.

The I.I.I.’s Steve Weisbart spoke this week on background with Arielle McGowen, a researcher for nationally syndicated columnist Jean Chatzky, about the costs involved in converting a term life policy into a permanent life policy.  Weisbart counseled McGowen against having Chatzky write in an upcoming edition of More magazine that such a conversion would result in a premium rate increase of at least 20 percent, the number McGowen was working with, because the figure would likely be much higher.

Known as Initiative 1082, the measure would, if passed and enacted, open the workers compensation market to private-sector insurers in the state of Washington, according to this Wednesday, July 14, Associated Press story.  More details on the ballot item were posted at the Washington secretary of state’s website on Tuesday, July 13.

Former Georgia Secretary of State Karen Handel is former Alaska Governor Sarah Palin’s choice to be Georgia’s Republican gubernatorial nominee. Prior to Palin’s Monday, July 12, announcement Handel and Georgia Insurance Commissioner John Oxendine were vying for the top spot in the GOP polls as the primary election date, Tuesday, July 20, neared.

Louisiana Insurance Commissioner Jim Donelon said he plans to present a new nominee to lead Louisiana Citizens at the organization’s Monday, July 26, board meeting.  John Wortman, the current CEO of Citizens, announced his retirement on Friday, July 2.  The Times Picayune covered these developments in a Tuesday, July 13, online article.

Governor Bobby Jindal signed SB 595 following the state Senate and House of Representatives’ adoption of amendments to the legislation that diminished opposition from insurers. The amended version of the bill passed both legislative chambers unanimously, and the measure is scheduled to expire in 2013, A.M. Best reports.

The Washington Post with Bloomberg Business website launched this week:

The new content sharing arrangement can be seen here.