TSUNAMI AND THE INDUSTRY – Despite the horrific devastation from the tsunami, it is unlikely to have as dramatic an impact on the insurance industry as the U.S. hurricanes of earlier this year. The reason is simple and unfortunate...most of the areas hit by the tsunami were underinsured. "Many of the people who have died appear to have been from the poorer sections of society, who are typically not insured," said S. Venkateshwaran, a spokesman for Life Insurance Corp. of India. "In some cases, entire families appear to have been washed away, so there may be no one left to claim any insurance." 

FITCH ON THE TSUNAMI - Fitch Ratings expects insured losses stemming from the recent Southeast Asian earthquake and tsunami to affect the Asian primary insurance market and the worldwide reinsurance market, including markets centered in Singapore, London and Bermuda. While U.S. primary insurers are not likely to incur material losses as the result of this event, some U.S. primary insurers may have modest exposure on property owned by multi-national companies insured through policies issued by US carriers. Alastair Corera, Fitch VP in Sri Lanka, believes only major hotels in the country's coastal areas and the urban elite who visit them would have had any coverage.

TSUNAMI ECONOMC COST – An early report by Munich Re put the economic damage at $13 billion, but others have predicted as much as $105 billion. From what we have seen, we expect the latter number to be much closer to the actual final cost. Munich Re says that the total economic losses for 2004 were more than $130 billion...second to 1995 when an earthquake in Japan spiraled the losses to $172 billion. 

TSUNAMI HUMAN COST - The Indian Ocean tsunamis were more deadly than all the year's other natural disasters put together, which claimed about 15,000 lives.

TOP PRIORITY - President Bush stressed at a recent economic conference his desire to make the passage of legislation limiting class action, medical malpractice and asbestos lawsuits a "priority issue." The conference was called to spotlight Bush's domestic agenda, but the president only appeared at the panel on lawsuit abuse to express his determination to change the system that he says costs the economy more than $250 billion a year and drives many "fine, competent" people out of the field of medicine.

OTHER PRIORITIES - Word is that the White House is backing off of earlier statements that "mass changes to the tax code were likely by the end of 2005."  Instead, it appears that tax code changes will be delayed another year, in favor of promoting tort and Social Security reform.  As to the latter, Bush is facing a tough sell.  Not only are powerful interests already lining up against the proposed Bush reform, but the public is also skeptical of the President's plan to allow workers to invest a portion of their Social Security taxes in the stock market.

UAL DEFAULT - The cash-strapped Pension Benefit Guaranty Corp. has moved to assume responsibility for United Airlines pilots' pensions, saddling the pension agency with another huge financial burden.  Already operating at a $23 billion deficit, the PBGC estimates it will be responsible for about $1.4 billion of the plan's underfunded assets.
 

FANNIE MAE, FREDDIE MAC AND CEOs – Just in case you haven't heard, the government supported mortgage company, Fannie Mae, has turned up an accounting loss approaching $9 billion and the CEO, Franklin Raines' retired last week after regulators exposed the accounting errors. Raines was with the agency for just 5 years and is expected to receive an annual pension of $1.37 million, $5.8 million in stock options and $8.7 million in deferred compensation. Fannie Mae's regulator, the Office of Federal Housing Enterprise Oversight, is said to be reviewing the severance terms for Raines. Just two years ago a federal court ruled that the Oversight group could not freeze the final pay package of more than $50 million for Freddie Mac's CEO Leland Brendsel, who was also ousted after an accounting scandal. Why aren't these bureaucrats who are mismanaging taxpayer money not facing the same press outrage as CEOs with similar track records in the private sector?

SPITZER VS. INSURANCE INDUSTRY – Despite announcing his intention to run for the governor of New York and rumors that he will soon turn his investigations over to the feds, apparently Attorney General Eliot Spitzer will expand his investigation of the insurance industry in January. No word on the direction of the probe or which companies will be targeted. 

FINAL REGS ON ACCESS TO GROUP HEALTH COVERAGE - The Department of Health and Human Services announced a final regulation under the provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) law on health insurance portability that gives workers greater access to group health plan coverage.  The provisions set limits on preexisting condition exclusions that could be imposed and require group health plans and group health insurance issuers to offer "special enrollment" upon certain life events.  More information is available here.

PROPOSED CALIFORNIA PRODUCER COMPENSATION REGULATION CONFUSING, UNNECESSARY AND OVERREACHING - The Association of California Insurance Companies (ACIC) strongly criticized a proposed California Department of Insurance regulation on insurance agent and broker practices because the measure is overly broad, poorly drafted, and fails to deliver meaningful information to the consumers who need it most. The proposed regulation would require insurance brokers and agents to disclose the amount and methods for computing their compensation to clients and prospects. ACIC believes the disclosures are unwieldy and that any new disclosures should be focused on brokers, not agents. Insurance brokers, by law, represent the client in the insurance transaction and can be paid by both the client and the insurance company. Insurance agents, on the other hand, represent one or several companies and are compensated by the insurer.

MORE DISCLOSURE - In a hurry to adopt at least portions of a proposed compensation disclosure amendment before 2005 so that state legislatures can consider it this year, the NAIC adopted Section A of the draft, which proposes that a producer receiving any compensation from a customer shouldn't also accept compensation from an insurer or other third party unless the customer gives permission to do so.  More information can be found at http://www.naic.org.  The ACLI, NAILBA and NAIFA had opposed Section B of the amendment and the NAIC decided to defer a decision on Section B for 90 days.  Section B would require producers to disclose to customers how their compensation arrangements might differ depending on the products sold or the companies involved.

WRONGFUL TERMINATION OF INDEPENDENT INSURANCE AGENT – In a case that the plaintiff attorneys believe could cause major changes in the relationship between insurance companies and agents, an eight-person jury in the U.S. District Court in Connecticut awarded $2.3 million in compensatory damages to an Independent Insurance Agent. The case, which had been pending for seven years, marked the first time an independent contract agent had been held to be a franchisee and therefore covered under franchise law. The typical industry contract with an Independent Contract Agent contains a clause that says it can be terminated at any time "with or without cause" and, according to the plaintiff's attorney, "This jury decision is groundbreaking in that it is the first in the United States to apply franchise rules to the Insurance business, in effect invalidating the 'without cause' provision." 

EXECUTIVE LIFE ACTION NETWORK - The Executive Life Action Network, an activist group of former Executive Life policyholders, has filed a California Public Records Act (CPRA) request with Insurance Commissioner John Garamendi urging him to release documentation of more than $4 billion in policyholder losses that resulted from the largest financial fraud in California history. "We've waited 13 years for our losses to be acknowledged," said Sue Watson, co-founder of the Executive Life Action Network, and mother of Katie, an annuitant who suffered brain damage as an infant due to hospital error. "The Commissioner knows the facts but has declined to make them public for the entire world to see. Our losses must be acknowledged so we can receive full restitution and justice from Credit Lyonnais and the other defendants."  For a recap of the long running case, go to http://www.executivelife.org.
 

SALES TAX DEDUCTION - The sales tax deduction tables released by the IRS are available at http://www.irs.gov/pub/irs-pdf/p600.pdf.  Primarily of benefits to residents of those states without a state income tax, the sales tax deduction that itemizers can claim depends on income and family size.

EARLY RETIREMENT NOT EASY – The New York Times reports that many people who have decided to retire early as a result of attractive buyout offers or other reasons are finding things to be more difficult financially than they anticipated. Reasons range from problems in acquiring health insurance to the cost of caring for aging parents to bad and/or overly optimistic financial decisions. 

DIVIDEND STOCKS VALUED – Many investors, particularly late Boomers and Seniors, are putting an increased premium on stocks that pay significant dividends. Several experts expect this trend toward dividend stocks to continue.

MOLD CONTINUES TO GROW - Mold claims cost homeowners more than $1 billion last year - about five times as much as it cost in 2000 according to The Insurance Information Institute.
 

GOOGLE VS GEICO - A federal judge ruled that there was not enough evidence of trademark violation to bar Google from displaying rival insurers when computer users search the word "GEICO." This apparently made Google happy but GEICO put out a press release saying "Trademark Decision Favorable to GEICO" since the judge also ruled that "the use of GEICO trademarks in paid advertisements on Google violates federal trademark law." The GEICO Gecko was unavailable for comment.

INCOME GAP WIDENS - The rich are getting richer, while most low-income earners in the U.S. continue to struggle, economists say. Although the economy is benefiting in some ways from the wealthy having even more disposable income, the widening gap between rich and poor is a growing social concern, many say.

MILLIONS LOST - Employees forfeit an estimated $210 million of money each year by not using all of the funds they contribute to health care flexible spending accounts, according to new research. The seven million Americans who are enrolled in flexible spending accounts put an average of about $1,000 into the accounts per year, but Mercer Human Resource Consulting shows about 3% of the funds are forfeited due to employers' "use it or lose it" policies. 

"LIFE-STAGE" PRODUCTS - Mutual fund companies are increasingly offering 401(k) investors and other people who save for retirement so-called "life stage" products that automatically slice the money into stocks, bonds and cash depending on age and willingness to take risks. These products, which can appeal especially to people with little time or interest in dealing with their retirement plans, are now offered by 55% of large-company plans, up from 35% in 2001.

100% INCREASE IN DIABETES CLAIMS - More employees are taking time off from work to deal with health concerns related to diabetes, according to a study by UnumProvident. The nation's leading provider of disability insurance reports a 100% increase since 2001 in the number of workers filing disability claims for type 2 diabetes. The research also shows that an employer's annual costs associated with these claims average $33,495 per claimant.