Archive for the ‘Insurance’ category

Monday Morning Dolan News Fix


Sorry to have been such a quiet poster the past few days…been under the weather.

Here are a few stories from Dolan Media I wanted to get out of bed for.

The state-run Healthcare Group Arizona was supposed to be a self-sufficient health insurance plan for small businesses. Instead, “it’s in financial meltdown,” according to a state rep quoted in Arizona Capitol Times.

And the Department of Insurance seems to agree with(Rep. Kirk) Adams’ assessment. Preliminary results from a report that will be finalized in February show Healthcare Group does not collect the data needed to predict health care trends and adjust its premiums accordingly, said Director Christina Urias.

If Healthcare Group was a private insurer, she told the panel Nov. 27, her department would have shut it down.

“In my view, this is a situation…very, very similar to an insolvent insurer operation because it’s relying on subsidies from the Legislature to keep itself going,” Urias said.

Even Kevin Nolan, deputy director of Healthcare Group, told the committee the program may be entering the beginning stages of what is known in the insurance world as a “death spiral,” in which recently increased premium costs drive healthy people from the system, leaving only those with serious illnesses.

Another state Rep. thinks the situation is salvageable — that restrictions on eligibility and on marketing the service could get the program “back on good footing.” The full story is available to subscribers….

If you’re on top of the global warming issue, you’ve doubtless heard the litany of environmentally-friendly sustainable sources of energy: Solar power, wind energy, geothermal…and now “wave parks.” The Daily Journal of Commerce in Portland surveys the seascape, and reports that Oregon’s bid to be the world’s leader in commercializing the technology faces a surge in competition from Nova Scotia, British Columbia and neighboring Washington state.

Oregon… is working to expand Oregon State University’s wave research to a national in-water wave energy research center where companies around the world can bring their technologies for testing. And the state already has two test devices in the water – Canada-based Finavera Renewables’ Aquabuoy and OSU’s wave energy buoy – with six more permit applications on file at the Federal Energy Regulatory Commission.

Finavera suffered a setback last month, however, when the Aquabuoy off the coast of Newport began leaking and sank to the ocean floor. And public perception of wave energy parks as threats to ocean life and fishers could set back the state, energy consultant Justin Klure said.

“Oregon needs to accelerate our efforts for community outreach and education,” Klure said, “so wave energy projects are seen as positive instead of a threat.”

Also on the water… If you’re in Baltimore today or tomorrow, you can catch a glimpse of a very cool-looking high-speed Navy ship, on display in the Inner Harbor as part of the Army-Navy game festivities.  Go to On the Record to see it….

Slow home sales in New Orleans have some owners resorting to auctions, writes Deon Roberts in New Orleans City Business. But it seems like the auctions are serving to illustrate that sellers and buyers remain far apart on what they think properties are worth.

(David) Gilmore, president of Sperry Van Ness/Gilmore Auction, said New Orleans-area home auctions are attracting fewer buyers than for commercial properties or lots. Also, many sellers have not been satisfied with residential auction bids, he said.

“There are still buyers in the market,” Gilmore said. “We had bidders at every one of our auctions for 12 different sales three weeks ago. But I’ll tell you, on the residential homes, there was a price differential between which the sellers were wiling to accept and the buyers are willing to give, and that tells you we have market issues.”

Of the 12 properties Gilmore’s firm featured three weeks ago, three homes did not sell because the sellers rejected the offers, he said. There was a 30 percent average difference in what the sellers wanted and the buyers offered.

What one word comes to mind when you think of New York? Did you say “politeness?”  Me too!  But apparently the Long Island Railroad has concerns about its passengers hogging seats with their bags and gabbing on the cell phone, so they’ve launched an anti-rudeness campaign, according to LI BizBlog….

Three thousand gallons of chicken fat from a Perdue poultry plant. An unlatched tanker. Twenty miles of Virginia highway. Yuk.  And a few auto accidents, according to the VLW Blog…. Talk about rude….


Insurers and the California Wildfires


satellite-of-fire.jpgI’ve been in California for most of the past 40 years, and although hyperbole is a statewide character flaw, I believe I’m on solid ground in saying this week’s wind-driven wildfires are, collectively, the worst ever.

Keep in mind that SoCal’s topography and natural ground cover is made to burn. When the region was nothing but ranches and a few scattered Indian settlements, there were wildfires. It’s part of the ecosystem. Many of the native plants require smoke or fire to germinate their seeds. Attempts to suppress wildfires to protect suburban homes just increase the fuel load for the inevitable next fire to come.

But California suburbanites whose homes cling to the sides of canyons are fatalistic, just like the shoreside people in Florida and South Carolina. Most of the time, these home sites are just spectacular, with vertiginous rural views and air sweetened by fennel and sage. Big fires in specific areas are separated by years, even decades, because once it happens, it takes a long time for the ground cover to regrow.

The fires usually come after a warning — the arrival of the hot, dry and powerful Santa Ana winds. Firefighters are prepared to do brave battle, as we’ve seen over the past few days.  (Not everyone agrees California was so prepared.)  And, of course, assuming the worst — at this writing, more than 1,000 homeowners have experienced the worst — the homeowners all have insurance.

So what is the insurance industry facing?

Here’s what Goldman Sachs analyst Thomas Cholnoky says:

Lloyd’s of London and non- traditional insurers may have higher costs from the California wildfires than companies that protect most homes in the state, including Allstate Corp., according to Goldman Sachs Group Inc.

“Most of the traditional writers have explicitly avoided” areas of the state prone to wildfires said analyst Thomas Cholnoky in a note to investors today. “The one exception may be fires around the San Diego area, which appear to have jumped from brush areas to non-brush areas.”

…due to winds blowing up to 90 miles per hour.

The fires have burned more than 283,000 acres (115,000 hectares) and destroyed about 700 homes and 100 businesses, making them among the worst in the state’s history, said Steve Turner, a spokesman for the State Joint Information Center. The average home in the areas struck by the fires costs $500,000, Cholnoky said, meaning that for every 100 homes lost, the insurance industry would pay about $50 million.

Actually, as of right now, 9:22 p.m. Tuesday, the LA Times reports 1,155 homes gone, so the bill will be at least $575 million, with containment “days away.” Other news reports give even higher numbers.

The LA Times reports that insurance adjusters and company executives “began hitting Southern California in full force today,” minding their public images as much as their potential liabilities.

By early afternoon, the state’s biggest home insurer, State Farm General, and No. 2 Farmers Insurance Group said they’d received more than 2,100 claims from calls to toll-free numbers, contacts with agents and visits to field offices.

To better serve its customers, Farmers rolled a “mobile claims command center” to an evacuation center near Qualcomm Stadium in San Diego and served 1,000 breakfasts to evacuees this morning. “We want people to see that their insurance company is out here,” said Paul N. Hopkins, Farmers’ chief executive officer.

State Farm spokesman Bill Sirola said his company also was moving in mobile units and “is well into the process of mobilization.”

A third insurer, American International Group Inc, was taking an even more proactive stance. It’s Private Client Group subsidiary dispatched six special trucks to spray retardant on the vegetation and wood portions of policyholders’ multimillion-dollar homes threatened by fast-moving fires.

That’s now. In the near future, Times’ reporter Marc Lifsher writes, insurance premiums for California homeowners will almost certainly go up, and some insurers may stop writing new policies altogether — as Allstate already has done.

I said earlier that this week’s fires were “the worst ever.” Not from insurers’ perspectives. According to Business Week,

The most expensive fire in recent history was in October, 1991, in Oakland and other parts of Alameda County. That cost $1.7 billion at the time, or $2.5 billion in 2006 dollars, according to the Insurance Information Institute. The blaze started from a grass fire in Berkeley Hills and spread across more than 1,000 acres, destroying more than 3,000 homes.

The next two most expensive fires occurred from Oct. 25 to Nov. 4, 2003. In San Diego County a blaze caused $1.1 billion in damages. Over roughly the same period, San Bernardino County suffered $975 million in damages. Eight of the most expensive fires in the U.S. have taken place in California, according to the insurance institute, with the other two in New Mexico and Arizona.

Business Week adds that estimates of the current fire could skyrocket based on the course of the fire in Malibu, where homes owned by the likes of “Bob Dylan, Mel Gibson, Pamela Anderson, and Britney Spears” cost a lot more than $500,000. However, latest reports indicate the Malibu fire is approaching containment, so that was probably the last time those four names will appear in the same sentence.