Archive for May 10th, 2010

McAllen ISD to Hire Insurance Consultant Today

Monday, May 10th, 2010

After a lenghty Request for Qualification process, the McAllen ISD is to consider hiring an insurance consultant today at their 5:00 pm Board Meeting. Contenders for the position included the usual list of well known insurance consultants operating within the state.

It appears that for a fee of $50,000, the new consultant will provide turn-key services for all lines of coverage. This is a bargain price – will it set a precedent for other school districts to follow?

McAllen ISD Agenda Item

Willis Consulting Agreement

Who Does Your Broker Really Represent?

Monday, May 10th, 2010
May 3, 2010 Subscribe to
Business Insurance
Past
Issues

Broker violated law on contingent commissions: Court

 

Mr. Blumenthal

HARTFORD, Conn.—A Connecticut judge has ruled that insurance brokerage Acordia Inc. violated the law when it failed to disclose contingent commissions, a ruling a state official hails as setting precedent on brokers’ fiduciary duties.

Advertisement

 

The Connecticut Superior Court on April 21 ruled in favor of the state and Connecticut Attorney General Richard Blumenthal, stating that Acordia, now a unit of insurance brokerage Wells Fargo Insurance Services Inc., had the fiduciary duty to notify its clients that it received contingent commissions in exchange for placing business with “preferred” insurers.

Those preferred insurers included Travelers Cos. Inc., Hartford Financial Services Group Inc., Chubb Group of Insurance Cos., Atlantic Mutual Insurance Co. and RSA Insurance Group P.L.C., authorities said.

The court said Chicago-based WFIS should have disclosed accepting contingent commissions from insurers as those commissions are a conflict of interest.

Connecticut’s case is the first case to go to trial on the issue of whether an insurance broker owes a fiduciary duty to its clients to disclose contingent commissions, Mr. Blumenthal said in a statement.

“This decision confirms our hard-fought position (that) secret agreements and kickbacks are bad for businesses and bad for consumers,” Mr. Blumenthal said in the statement. “There can be no confusion that brokers owe a duty of honesty to their clients. Wells Fargo must now identify and eventually disgorge profits that it illegally earned at the harm of Connecticut businesses and consumers.”

Connecticut is one of several states that have brought cases against insurance brokers over contingent commissions since 2004. Mr. Blumenthal alleged that Acordia took in nearly $200 million in fees between 2000 and 2005 under an agreement it had with insurers.

In January 1999, Acordia initiated the Millennium Agency System Partnership to obtain financial support over a three-year period to offset costs associated with the launch of AMS Segetta, an agency management system to link its offices with its partner insurers on the Web. Mr. Blumenthal alleged that this provided partner insurers an “inside track” for future business with Acordia.

Under the partnership, the insurers were offered various ways to help Acordia meet its financial objectives, including paying a 1% commission, the attorney general said.

The court did not determine a dollar amount to disgorge, but ordered Wells Fargo to identify and disclose how much it earned from contingent commissions. Wells Fargo purchased Acordia in 2001.

Wells Fargo plans to appeal the ruling, a spokeswoman said.

According to a statement from Wells Fargo, the court’s ruling was based on an “incorrect interpretation of the Connecticut Unfair Insurance Practices Act.”

The brokerage added: “The court order specifically states Wells Fargo’s insurance brokers acted in the best interests of their customers, that no customer suffered any financial detriment and that all customer premiums were the same regardless of the contingent commissions….Since 2005, Wells Fargo has voluntarily been disclosing all compensation it receives, including contingent commissions.”


BI.com Community ToolsTell us what you think. Log in below to weigh in on this story.

Post a comment

You must be logged in to post a comment. Log in
You share in the Business Insurance community, so please keep your comments smart and civil; comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Please review the full rules governing the commenting and community tools. Use the “Report Abuse” button to make a difference.

Insured Value $560 Million – Lloyds Avoids the Bullet

Monday, May 10th, 2010
Subscribe to
Business Insurance
Past
Issues

Oil rig claims may top $1B

Massive spill follows blast, sinking

 

Oil skimmers last week aided efforts to clean up a huge oil slick caused by the explosion of the Deepwater Horizon rig in the Gulf of Mexico. PHOTO: THE TIMES-PICAYUNE/LANDOV

VENICE, La.—When cleanup is complete after the blast that sank the Deepwater Horizon oil drilling rig—leaving 11 workers missing and feared dead and a well gushing tens of thousands of gallons of oil a day into the Gulf of Mexico—insurers will have a loss of more than $1 billion, energy market sources say.

Advertisement

 

U.S. Coast Guard crews late last week began experimental burns on portions of the 600-mile oil slick as it drifted toward the Louisiana coast.

A well that erupted on the floor of the Gulf of Mexico after the rig began burning April 20 and sank two days later was gushing what the National Oceanic and Atmospheric Administration estimated was 5,000 barrels of oil a day.

Burning the crude was one way to keep the oil from reaching Louisiana’s coast, where experts feared significant damage to the seafood-rich region and wildlife, and reduce it to a waxy residue that could be skimmed from the water.

Energy market sources say insurance coverage that will respond to claims on the property loss, death and injuries, and environmental damage is spread throughout the London, Bermuda and U.S. markets.

The loss already is large enough that it should halt softening energy rates, sources say.

“People are talking about $1 billion to $2 billion,” said Simon Williams, head of marine and energy at Hiscox Ltd. in London. “There’s no question it will be $1 billion” and could go higher depending on the size of liability claims that are filed, he said.

The loss is almost certain to firm rates in the energy market, particularly because there have been several large losses in the sector during the past 18 months, sources said.

If the market doesn’t turn after this, it would be hard to imagine what it would take to convince underwriters to raise rates, Mr. Williams said.

The rig’s owner, Transocean Ltd., a Zug, Switzerland-based drilling contractor, said the insured value of the rig is $560 million. In its most recent annual report, the company said deductibles on the loss of any unit in its 139-rig fleet ranged from $500,000 to $1.5 million on coverage written by the commercial market and captive insurers (see related story).

Lloyd’s of London is expected to bear a sizeable portion of the property loss and some of the liability claims, sources say.

At least one lawsuit already has been filed against Transocean and BP P.L.C., which operated the rig. Allegations in the suit, filed in U.S. District Court in New Orleans by the wife of one of the missing workers, include negligence on the part of Transocean and BP for failing to properly train and supervise crews on the rigs. The April 21 suit seeks an undetermined amount of damages.

Transocean said in its 2009 annual report that it carries a $10 million per-occurrence deductible on personal injury liability and a $5 million per-occurrence deductible on other third-party noncrew claims.

Transocean also carries $950 million in third-party liability insurance exclusive of personal injury liability deductibles, third-party property liability deductibles and other retention amounts, according to the annual report. The company retains the risk for liability losses above $950 million.

The drilling company said it does not carry coverage for loss of revenue unless contractually required.

BP CEO Tony Hayward told Reuters Friday that the oil company will compensate anyone with damages from the spill. “We are taking full responsibility for the spill and we will clean it up and, where people can present legitimate claims for damages, we will honor them,” he said.

BP self-insures its risks except in cases where regulations require the company to purchase insurance, according to the company’s annual report. Its self-insurance program includes Jupiter Insurance Ltd., a Guernsey-based captive insurer.

Anadarko Petroleum Corp. holds a 25% interest in operation of the well, according to the energy market source. Anadarko, based in The Woodlands, Texas, purchased operators extra-expense insurance covering up to $62.5 million in costs the company incurs from the accident and cleanup, the source noted.

Transocean’s drilling contract with BP is written so that Transocean is not liable for costs related to seepage and pollution from the well, the source said, but is responsible for pollution that originated from the rig.

In its annual report, Transocean acknowledged that “pollution and environmental risks generally are not totally insurable.”

“There are going to be hundreds of millions in costs” in each of the categories of environmental damages, death and personal injury, and the loss of the rig, said Keith Hall, an attorney who represents energy companies with New Orleans law firm Stone Pigman Walther Wittmann L.L.C.

Environmental regulations have been tightened since the 1989 Exxon Valdez spill in Alaska, Mr. Hall noted, which could mean responsible parties in the sinking of the Deepwater Horizon could be assessed significant fines and other costs by the U.S. government.

Any oil that reached the U.S. coast could result in “material resources damage,” Mr. Hall said. “The government could put a dollar value on it” or force those found responsible to create new wetlands, he said.

The U.S. Coast Guard and U.S. Minerals Management Service were investigating to determine the cause of the explosion and whether criminal or civil offenses were committed.

Energy companies will pay more for insurance at their next renewals as a result of the loss, experts agree.

“Yes, we consider this event to be a market-changing event concerning energy rates,” said Thomas Artmann, Munich-based product line manager-marine at Munich Re. “Quotations in the last week already showed a trend of increasing prices,” he said in an e-mail.

Despite significant recent losses, energy rates have remained soft because coverage is well-distributed among global insurers, but the Deepwater Horizon loss will be large enough to affect the entire market, Mr. Williams said. “This loss involves so many different companies; very few haven’t incurred some loss from this event.”

“A significant amount of offshore business comes up (for renewal) this time of year,” said David Croom-Johnson, chief underwriter at AEGIS London, the U.K.-based subsidiary of Associated Electric & Gas Insurance Services Ltd. “I would expect rates in the market will start moving up in light of this loss.”


BI.com Community ToolsTell us what you think. Log in below to weigh in on this story.

Post a comment

You must be logged in to post a comment. Log in
You share in the Business Insurance community, so please keep your comments smart and civil; comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Please review the full rules governing the commenting and community tools. Use the “Report Abuse” button to make a difference.

The Coming Primary-Care Physician Shortage Under ObamaCare

Monday, May 10th, 2010

posted at 2:55 pm on April 5, 2010 by Ed Morrissey
printer-friendly

What happens when you take an existing system of care that already features long wait times and a declining number of providers — and add millions more to the plan?  The Business Courier of Cincinnati looks at the Medicaid expansion of ObamaCare and concludes that rather than improving access, the system will get strained to the breaking point — especially with the government encouraging a higher rate of access for preventive medicine:

The 32 million people who will become insured under the new health care reform act will place a major strain on the country’s health care system, including in the Tri-State, experts say.

“There are simply not enough primary-care providers available to take care of all these newly insured individuals,” said Dr. Peter Kambelos, an internal medicine physician who practices in Monfort Heights. …

Greater Cincinnati has a shortage of 595 primary-care physicians, according to December data from the Cincinnati MD Resource Center, a free physician recruiting service formed by the nonprofit Health Improvement Collaborative of Greater Cincinnati. The area’s 234 primary-care doctors per 100,000 residents compares to an “optimal” number of 261 per 100,000 that U.S. Department of Health and Human Services data would suggest.

The American Academy of Family Physicians has warned of an impending national shortage of 40,000 such physicians by 2020. About 140,000 will be needed in all to meet the needs of the aging population, the group has said, but current trends suggest there will be only about 100,000.The U.S. Census Bureau puts the current number of uninsured at 45 million.

“People can have all the insurance they want, but if they can’t get in to see anyone, it’s not going to do anyone much good,” Kambelos said.

That also prompts another question about the Medicaid system and the flight of providers.  If there aren’t enough providers willing to see patients, doesn’t that mean that nothing much has changed for the 32 million about to hit the rolls of the program?  The entire purpose of this expansion and massive government intrusion in the health-care system is to get patients out of emergency rooms and into clinics.  If patients have to wait months or years to get into a diminishing number of clinics, where will they end up?  In emergency rooms.

As noted last week, the Obama administration answer to this is to establish “medical homes” where patients get health care provided by people other than doctors: nurses, physician assistants, and others.  Kambelos isn’t impressed with the idea of recycling HMOs:

Kambelos doubts the medical home model is the answer to many of the health care system’s problems. He dislikes its focus on “physician extenders” such as nurses and assistants when, in his opinion, getting more doctors into primary care should be the focus. And he doubts that will happen until the government and private insurers commit to significantly closing the gap between reimbursement levels.

“As long as medical students look at primary-care salaries as noncompetitive and not consistent with the lifestyles they want to lead,” Kambelos said, “the supply is not going to be there.”

Kambelos puts his finger more on a symptom of the problem rather than the problem itself.  Reimbursement rates aren’t so much the problem as the reimbursement system itself — especially for standard health-care delivery.  The third-party payer system interferes with the normal pricing mechanism that allows supply to meet demand and on-time delivery.  The more that primary-care business depends on arbitrary reimbursement rates at all, the less likely that doctors will choose to meet that demand, instead selecting other disciplines where their services get compensated more honestly and appropriately.

We’re about to make the problem worse by creating an even greater artificial shortage of providers than we currently have.  That won’t help the people that ObamaCare purports to serve, and will only make it worse for the rest of us.

Quantcast