Top Regional Stories of 2008

West

California Passed Agent-Broker Law

The most notable bill affecting California agents was AB 2956, which clarifies the duties of an insurance agent versus a broker. Prior to the new law, confusion existed within the industry, with consumers, brokers, agents, and courts over what tests could be used to determine an agency versus broker relationship. Now, the law establishes four situations in which the broker presumption is presumed rebutted. Additionally, the law requires brokers to disclose their fees in a written agreement. “The entire insurance market benefits from clear standards on agency and brokerage,” said Steve Young, senior vice president and general counsel for IBA West.

Colorado Use of Credit Scoring to Continue

Colorado insurance agents celebrated the defeat of a 2008 bill that would have prohibited insurers from using credit scoring information as an underwriting factor for the acceptance, denial, renewal or rating of a potential insured. The insurance industry believes credit information helps match the price of insurance to the risk of loss, according to the Property Casualty Insurers Association of America. In Colorado, credit scores cannot be the sole criteria used to evaluate a customer; years of driving experience, previous crashes and vehicle age are among the other factors that help gauge risk. Despite the bill’s defeat, industry insiders expect more rounds of debate.

South Central

Louisiana Citizens: Rising From the Ashes?

Louisiana Citizens Property Corp. transferred around 65,000 policies to private insurers in 2008, but its former director faces allegations he fraudulently charged the company for personal expenses, and the state auditor said the insurance department unlawfully lowered Citizens’ rates to levels competitive with private insurers. Insurance Commissioner Jim Donelon said his department followed the rules, and former Citizens CEO Terry Lisotta, arrested on 14 counts of theft, denied any wrongdoing. Still, by all accounts the company is in good hands with its current CEO, insurance veteran John Wortham. Of around 50,000 Gustav claims, 30,000 were paid by mid-November; about 1,200 of 3,500 Ike claims also were settled.

Ike Costs ‘Fluid’ but Majority of Claims Settled

In late November, Texas Insurance Commissioner Mike Geeslin estimated insured losses from Hurricane Ike were in the $6 billion to $8 billion range, stressing the amount is “fluid.” The Texas Department of Insurance said by 90 days after the storm, some 730,000 claims had been filed, a number that is expected to rise. By mid-November, private insurers had settled between 50 percent and 80 percent of Ike claims. The Texas Windstorm Insurance Association reported 63 percent of its claims from Hurricane Ike, around 56,000, had been closed and more than $519 million had been paid to policyholders as of early December.

Midwest

Brooke Goes Bankrupt

The declaration of bankruptcy in 2008 by the Brooke Franchise Corp. was the ending chapter of a long, sad saga that left many former agents and owners broke, some with marriages ruined and most with a wiser attitude than ever before.

Kansas-based Brooke Corp., Brooke Capital and Aleritas Capital Corp. were part of a financial services lending and franchising enterprise that Robert Orr founded in 1986. The Brooke companies bought independent insurance agencies with Aleritas funds and repackaged them as Brooke agency franchises. After years of complaints from franchisees, Brooke filed for Chapter 11 in bankruptcy court in Kansas City on Oct. 28. At one time, there were as many as 900 Brooke franchise offices — now there are only 200 are left.

Disasters Take Toll on Midwest in 2008

In 2008, tornadoes and windstorms caused some of the biggest dollar losses. One catastrophic event hit Illinois and northern Indiana especially hard. It began raining on Sept. 13 and 14, and it didn’t stop until Monday morning, Sept. 15. When it was all over, six people were dead, expressways remained flooded in every direction, and more than 1,000 people were evacuated. Other Midwest states were hard hit. In June 2008, Kansas had serious storms and tornadoes that caused property and crop losses to exceed $396 million. Missouri received $11 million to help recover from flooding damage. and Iowa received $72 million in aid. Illinois, too, was awarded $17 million for its storm damages.

Southeast

Dangers Beyond Hurricanes

The 2008 hurricane season was nothing like 2005, but its more moderate storms did their damage. Fay took 15 lives and cost insurers $250 million in Florida alone. Tornadoes were even more destructive. Georgia was hit with 15 on Mother’s Day. On Super Tuesday, Feb. 5, 2008, 12 tornadoes hit Tennessee, Kentucky and Mississippi and 48 people lost their lives. Fifteen tornadoes pummeled South Carolina in one weekend in March. If hurricanes and tornadoes were not enough, North Carolina and Florida also battled wildfires. In addition, man-made catastrophes took a toll: A February explosion at a Georgia sugar refinery killed 13 employees and hospitalized 40 others.

Progress Along the Beach

There was progress in restoring coastal insurance markets in the Southeast. In Florida, there was a steady depopulation of state-run Citizens and a number of new carriers began writing. However, Cat Fund issues remained unresolved. Mississippi enjoyed success with its reformed wind pool and renewed focus on building codes. Consumers even got rate cuts. South Carolina basked in the reforms it passed in 2007. Alabama improved its Beach Plan’s rating and gave carriers the ability to build surplus. One sour note: North Carolina’s under-funded Beach Plan. The problem hasn’t been resolved yet, but at least lawmakers and the newly-elected insurance commissioner appear to be listening to industry warnings.

East

strong>Massachusetts Opens Up Auto Market

In a move designed to attract new insurers and reduce premiums, on April 1, the Bay State abolished its 30-year-old system in which regulators set all auto insurance rates. Under the new system, known as “managed competition,” carriers set their own rates while the state imposes maximum increases. The system has been controversial. Agents groups and carriers have sued the state’s Division of Insurance, claiming new rules unfairly give new companies two years before having to participate in a high-risk pool for risky drivers. However, the system has succeeded in attracting new carriers, such as Progressive Corp. and Peerless Insurance.

Maryland Court Ruling Leaves Agents in Limbo

Insurance agents in Maryland were left wondering “what now?” after an April court ruling that reversed the premise used to write condo policies in the state. That decision, known as the Tuckerman case, found unit owners — rather than condo associations — were primarily responsible for damage to a condo unit, reversing 26 years of insurance industry practice in the state. The problem has been exacerbated by the short legislative schedule of Maryland’s General Assembly, which is unlikely to make any kind of clarification on the ruling until January 2009 at the earliest. Agents, trade groups and a coalition of others say fixing the condo crisis remains a key priority.

Topics Florida Catastrophe Carriers Texas Agencies Legislation Hurricane Kansas Maryland Market Colorado