Florida Rejects State Farm 47% Homeowners Insurance Rate Hike

Florida Insurance Commissioner Kevin McCarty said he will disapprove the July 16 rate filing submitted by State Farm Florida for a 47.1 percent homeowners insurance rate increase.McCarty's Office of Insurance Regulation (OIR) said the insurer failed to prove that the net reinsurance costs included in the filing did not result in excessive costs in violation of the rating law. The OIR also questioned the profit and contingency factor and the additional retained hurricane risk load that State Farm used in the filing.

The retained hurricane risk load was previously allowed by law, but that provision was repealed in Senate Bill 2860, which became effective July 1 - before State Farm's filing was made.

State Farm now has 21 days, if it chooses, to petition the OIR for an administrative hearing. In the meantime, the company cannot implement the proposed rate increases. Senate Bill 2860 also prohibits companies from implementing rate increases through the "use and file" process, through Dec. 31, 2009.

Had the filing been approved, policyholders in certain parts of Florida could have seen increases of as much as 63 percent, or $8,300 more than their current rates, in Dade County; 70 percent, or $4,800 more per year, in Pinellas County, according to OIR. The smallest requested change was an increase of 19 percent, or an additional $1,376 per year, in Pasco County.

Source: Florida Office of Insurance Regulation
www.floir.com

Colorado Division of Insurance Recovers $7 Million for Insurance

The Department of Regulatory Agencies, Colorado Division of Insurance reported that it has recovered $7 million for consumers in the first half of 2008. The total represents premium savings and recovered benefits to consumers including:

•$4.7 million from insurers following 2,000 received written consumer
complaints that were in the first six months of 2008, including refunds and restored benefits from the life and health, property and casualty, and compliance and investigations sections;

•$2.2 million was saved for consumers following rate reviews by the
Division's Rates, Forms and Actuarial team -- the team had
the companies use lower rates after reviewing the initial
submissions for rate increases;

•$99,000 restored to consumers by six insurers in March 2008, after
being ordered by the Market Conduct Examinations section to
perform self-audits, which showed consumers were overcharged or had been denied covered benefits.

"Our staff has been diligent and aggressive about protecting consumer rights," said Marcy Morrison, Colorado's Commissioner of Insurance. "We encourage consumers to let us know when there is a problem they can't resolve with their insurance company. We'll review all the documents and help guide consumers through tough insurance questions."

The total recovered consumer money does not include other actions taken to benefit consumers, such as the Kaiser Permanente of Colorado agreement, HealthMarkets settlement, nor any fines and penalties assessed toward companies following market conduct or financial examinations and compliance investigations, the DOI said.

The $4.7 million in consumer savings and restitution represents more than 2,000 cases prompted by written consumer complaints that were opened in the first half of 2008, and represents refunds, restored benefits and other recovered monies that will directly impact consumers who initiated a complaint against an insurer. Analysts in the Consumer Affairs section review consumer complaints, request company responses to the complaints, and help interpret insurance policies and covered benefits so consumers understand their rights and responsibilities. The consumer recovery total also includes title transactions where agencies charged for services not provided or failed to follow closing instructions; and bail bond actions that included return of collateral, and refunds on overcharged premiums.

While the Division of Insurance can't resolve every complaint, most consumers complete the complaint process with a better understanding of the insurance industry. "Often, our role is to explain insurance law or help decipher a policy question for consumers," Morrison said. "While our process may not always result in a restoration of benefits or a refund to the consumer, we work to educate consumers so they make informed decisions in the future."

Between January and June, 2008, the Division's Rates, Forms and Actuarial team reviewed submitted rates and companies reduced their rates by more than $2.2 million. In some cases, the team had the companies use lower rates after reviewing the submissions for rate
increases. Of nearly 2,000 consumer complaints in the first half of 2008, the division said 639 complaints reflected concerns about life insurance, annuities, and health products. Those include HMOs and other medical insurance, as well as accident, disability and dental
insurance.

Another nearly 800 consumer complaints were directed at property-casualty insurance companies, including homeowners and car insurance, between January and June, 2008. Auto protests, which are tallied separately, accounted for another 501 consumer complaints. A consumer has the right to file an automobile protest if an insurer increases the rates, reduces the coverage, or cancels or non-renews the consumer's personal automobile policy.

Missouri Automobile Insurance Plan Opens Doors on September 1

The Missouri Automobile Insurance Plan (the Plan, the AIP) announced today that it has completed the transition from the Missouri Joint Underwriting Association (MJUA), and has commenced operations. The Plan began accepting applications on August 12, 2008 from eligible applicants seeking effective dates of September 1, 2008 or later.

The Plan is also announced the availability of EASi 2.0, the Electronic Application Submission Interface. Licensed producers can use this product to submit automobile insurance applications electronically to the Plan.

For more information, please visit http://easi.aipso.com. The Missouri Department of Insurance & Professional Regulation approved creation of the AIP to replace the MJUA as the state's automobile insurance residual market mechanism. The Plan provides access to automobile insurance to those eligible applicants who are unable to obtain coverage in the voluntary market.

For more detailed information on the Plan, please visit http://www.aipso.com/MX, or contact the Plan office at 888-706-6100.

Source: The Missouri Department of Insurance & Professional Regulation

Several Insurers Could See Big Fannie, Freddie Losses

A handful of insurers holding equity in U.S. home-funding giants Fannie Mae and Freddie Mac could see big losses if a federal takeover wipes out the value of the agencies' common and preferred stock, as some investors fear.

"There are a handful (of insurers) that have pretty decent exposure" to Fannie and Freddie equity, said Ed Keane, a senior financial analyst with Oldwick, New Jersey-based ratings agency A.M. Best Co Inc.

To be sure, figures compiled by A.M. Best show that, by and large, U.S. insurers are more heavily invested in debt issued by the mortgage giants and could benefit from a government helping hand.But for equity holders the picture is not as rosy. While it is far from clear how a government bailout could be structured, or when it would come, analysts say it could prove thorny for common and preferred stockholders because federal authorities would likely give debt holders seniority.

Such concerns have since the beginning of the month more than halved the value of Fannie and Freddie shares, which are down about 90 percent since the beginning of the year.

Among the insurers that own significant Fannie and Freddie- issued equity are life insurers Hartford Financial Services Group Inc. and Genworth Financial Inc, according to a research note by Fox-Pitt Kelton analyst Mark Finkelstein Thursday. Allstate Corp, the largest publicly traded U.S. home insurer, is another.

DEBT SENIORITY
Fannie and Freddie, government-sponsored enterprises (GSE) that own or guarantee almost half of all outstanding U.S. mortgages, count on debt markets to help them keep buying mortgages. Their ability to do so is crucial to helping stabilize the worst U.S. housing market since the Great Depression.

As such, if the government moves to shore up capital, it could benefit bondholders, since debt markets are a crucial source of funding for Fannie and Freddie.

Keane, an author of a recent A.M. Best report on the holdings of GSE securities by insurers, said the sector had poured close to $370 billion into fixed-income securities as of the end of 2007.

Insurers own a much smaller percentage of Fannie and Freddie equity -- about $4 billion in all, but that could still prove an issue for some since the holdings appear to be more concentrated.

Catherine Seifert, an equities analyst with Standard & Poor's, said that, for most insurers, losses from Fannie and Freddie are expected to be "manageable."

But she added: "We are probably going to see some outsize exposure company to company."

FKP's Finkelstein said Hartford's stake was about $500 million, or 2.9 percent of equity on a pre-tax basis. Genworth was a smaller 1 percent, according to the research note.

Neither Hartford or Genworth returned calls seeking comment. The shares of both fell Thursday, with Hartford losing 2.24 percent to close at $59.78, while Genworth fell 1.67 percent to $14.72.

Allstate is another insurer that had bought agency equity worth about $128 million at the end of June, according to a quarterly regulatory filing. Allstate shares lost 27 cents to close at $45.05.

By Lilla Zuill
August 25, 2008

New York Freezes Malpractice Insurance Rates

Gov. David Paterson is freezing medical malpractice insurance rates for a year as he seeks a broader solution to high business costs doctors claim are driving them out of New York.

The freeze heads off a scheduled surcharge due in June 2009 that could have increase some physicians' rates by as much as 30 percent.

The New York Public Interest Research Group says the freeze shouldn't affect patient care and that time is needed to work out the difficult problem of high rates.......LINK