CLASS ACTION FAIRNESS ACT GOOD FOR INSURERS – Not surprisingly, insurers facing claims resulting from lawsuits against companies they insure are expected to benefit from the passage of the Class Action Fairness Act. Some of the costliest claims have been related to asbestos but class actions from corporate scandals have also hurt profits. However, don't expect lower premiums until the bill becomes law...if then.

INDUSTRY ASSOCIATIONS PRAISE CLASS ACTION BILL - American Insurance Association (AIA), the Independent Insurance Agents & Brokers of America (the Big "I") and others hailed the Senate's passage of the Class Action Fairness Act and are hopeful that the legislation will become law quickly.

MIXED PICTURE – The insurance industry is reporting a mixed picture as fourth quarter earnings results are announced.  The John Hancock merger was apparently a good one for Manulife. Aided by the addition of Hancock, Manulife posted a 77% increase in profit for the fourth quarter.  AIG is reporting $3 billion in net income for the fourth quarter, compared to $2.7 billion for the same period in 2003.  Net flow into AIG's domestic annuity line is, however, down.  MetLife net income fell in the fourth quarter to $511, compared to $701 million for the fourth quarter 2003.  Prudential net income increased marginally from the fourth quarter 2003, as did Lincoln National's.

AARP SUES GOVERNMENT - AARP has sued the federal government to prevent finalizing rules that would allow companies to cut retirees' health benefits when they become eligible for Medicare. The suit will prevent the Equal Employment Opportunity Commission from implementing the proposed rules for at least 60 days. 

HALF OF BANKRUPTCIES FROM MEDICAL BILLS – According to a study printed in the journal Health Affairs and conducted by professors from Harvard, about half of personal bankruptcies are the result of big medical bills. Further, most of those people are middle class workers with health insurance, but who accumulated large co-payments, deductibles and "not covered" bills. The average bankrupt person surveyed had spent $13,460 on those items, even with private insurance.  Estimates are that medical bankruptcies affect about 2 million Americans every year, counting both debtors and their dependents.  Another survey from Northern Trust Corp. reveals that even millionaires - U.S. residents with at least $1 million in investable assets - are worried about health care costs, with 96% of millionaires under the age of 55 being somewhat or very worried about the impact of health care and long-term care costs on their retirements.

PBGC ACQUIRES US AIR PENSIONS - The Pension Benefit Guaranty Corp. has assumed responsibility for pension plans covering about 51,000 workers and retirees of bankrupt US Airways. The total cost of the US Air pensions are expected to be about $3 billion, second only to Bethlehem Steel at $3.7 billion. However, some retires may not get as much as they expect...in fact for plans canceled in 2005 a worker retiring at age 65 would receive a maximum of $45,613 per year.  The Bush administration is calling for legislative changes that would require employers to fully fund their pension plans.

HEALTH CARE COURTS - The New York Times has called on Congress to launch a "wide range of demonstration projects," including special health courts to solve the problem of unreliable medical justice.  A broad coalition of health care experts and patient safety advocates, spearheaded by Common Good, is working to create special health courts that would reliably compensate injured patients, weed out bad doctors, and protect doctors who did nothing wrong. More at http://cgood.org.

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RECORD CATASTROPHE LOSSES - P&C companies paid a record $27.3 billion for insured property losses in 2004, surpassing losses from 2001, which included the 9/11 attack.  Over 80% of the losses were caused by five hurricanes that make landfall in the U.S. along the Atlantic and Gulf coasts.

HMOS FINANCIALLY STRONG - According to Weiss, 50% of the nation's HMOs are financially strong. Based on second quarter 2004 data, the percentage of insurers receiving a Weiss rating of A (Excellent) or B (Good) has risen to 50%, a marked contrast from year-end 1998, when only 20.8% of HMOs received high ratings.

AMERICANS SUPPORT MEDICAL LIABILITY REFORM - A new survey released by the American College of Emergency Physicians (ACEP) found almost three-quarters of Americans support legislation to reform the nation's medical liability system that is driving up the costs of health care and forcing many good doctors out of practice. 85% of Americans believe the current legal system - with no consequences for pursuing frivolous lawsuits and publicity about large monetary awards - is responsible for rising medical insurance costs. 73% favor liability reform that includes placing limits on non-economic (pain and suffering) damages.

STATE MANDATES AND AFFORDABLE HEALTH INSURANCE - State laws known as "mandated benefits" continue to be a primary obstacle to affordable health insurance in many states. This month MedSave.com announced that the nation's largest issuer of student health insurance will discontinue selling policies in Montana because of the high cost of complying with state-mandated benefits laws. Many states have more than twenty of these mandated benefits, according to a 2003 report by the United States General Accountability Office. This most recent example in Montana is typical of a long-term trend working against firms like MedSave.com (http://www.medsave.com). MedSave.com is a national leader in online enrollment for low cost health insurance. 

CITIGROUP CUTS ABOUT 1,000 – To cut expenses and exit businesses not focused on consumer or corporate banking, Citigroup will cut about 2% to 3% of its corporate and investment bank unit's 48,000 employees. Apparently, the new CEO, Charles Prince, is moving away from predecessor Sanford "Sandy" Weill's vision of creating a one-stop financial supermarket.  In that same vein, American Express is spinning off its less profitable financial advisors division.

MASS. REGULATOR CHARGES CITIZENS BANK - Massachusetts has charged an affiliate of Citizens Bank with "unethical and dishonest conduct" in the sales of variable annuities to elderly customers. Tellers earned rewards for referring customers to stockbrokers who would then sell the investments. Top producing brokers could earn vacation trips. This doesn't sound that bad to us but the alleged sale of a variable annuity to an 80-year old man living on a small pension, social security and in a nursing home does. 

SOX COMPLIANCE COSTLY FOR ALL - Applying new requirements based on the federal Sarbanes-Oxley (SOX) law to non-public insurers could cost companies and policyholders $1 billion a year or more, according to the Property Casualty Insurers Association of America (PCI). A clue as to how SOX is working can be seen in the experience of public companies. "What's happening in the public world is anecdotal at this point, but we're hearing that accounting firms are routinely using non-audit staff to perform 404 attestation work, and that there is barely sufficient staff to perform this work for public clients." 

$20 MILLION INSURANCE SCAM - Matthew Wallace Schachter, aka Robert Lewis Brown, aka Matthew C. Rollins (Brown), collected over $20 million in fake insurance premiums over the last four years. Schachter/Brown/Rollins falsely represented that a pool of legitimate insurance companies backed the policies, including Nationwide and Globe.

SPEAKING OF CHAIRMAN THOMAS - National Underwriter reports on industry concern that Chairman Thomas and the GOP "might use a limitation on inside buildup in (life insurance) policies for the affluent in order to pay for making repeal of the estate tax permanent."

SOCIAL SECURITY DEBATE - While President Bush made Social Security reform a major part of his State of the Union address and followed that with a road trip to pitch his plan directly to the people in five states, substantial resistance to the plan to enact private accounts remains.  While many people appear to support the idea of private accounts in principle, resistance mounts as details begin to emerge.  The February AARP Bulletin has a couple of articles which pretty well sum up the type of resistance the Bush plan is facing:  Risky Business - What Americans Think of Social Security Private Accounts and Why Privatization Bombed in Britain. 

CO-PAYMENTS RISING – Weiss reports that more than 58% of consumers cite higher co-payments for prescription drugs and physician visits as the most significant change to their health insurance coverage during the past year.  Absent any real reform in truly managing care, it's going to cost more -- and that is being passed along to individuals.

PAYING MORE, GETTING LESS - A new survey by Reseach!America reveals that 60% of Americans do not believe that the U.S. has the best health care system in the world and 64% say most Americans do not get the health care they need.  Yet, according to the Centers for Medicare and Medicaid Services, the U.S. spends more on health care per capita - $5,700 - than any other nation.

STANDARD MGMT SELLS INDIANA LIFE - Standard Management, a financial services holding company, will sell its Standard Life Insurance Co. of Indiana unit to Capital Assurance for $82 million. Capital Assurance plans to keep operating Standard Life from Indianapolis and retain the most of the unit's employees.

MEDICARE COST DISPUTE - When the Medicare prescription drug benefit passed Congress, cost estimates were in the range of $400 billion over 10 years.  The latest 10-year estimate is a projected $724 billion, renewing calls in Congress to allow drug importation from Canada and government cost negotiation with drug companies.

PRESENTATION KIT ON INSURANCE CAREERS - InVEST, the only education program that strengthens the insurance industry by attracting a large pool of qualified insurance recruits, has released a new speaker's presentation packet to help insurance professionals and teachers interest students in pursuing careers in the industry. Additional details and ordering instructions can be found here.

NY TO AGENTS, REGARDING INCENTIVE FEES - New York officials say they will take a "measured approach" in considering changes to how the state regulates the incentive fees insurance companies pay agents and brokers. Acting Superintendent of Insurance Howard Mills and Sen. James Seward, chairman of the Senate Insurance Committee, told the Independent Insurance Agents & Brokers of New York Inc. last week that they would not seek "stringent" regulation governing how the fees are paid or disclosed to clients. However, Mills warned that, "If you're looking at contingent commissions that are just volume driven, there seems to be an obvious conflict with a fiduciary responsibility, and that's something we saw with the settlement yesterday," referring to the $850 million settlement involving Marsh & McLennan. This could eventually have a big impact on incentive compensation in both the P&C and life/annuity brokerage arena.

BIGGER MILITARY DEATH BENEFITS - The Pentagon is proposing to double the cash payments for families of U.S. forces killed in combat, to about $500,000. The increased payments would be made retroactive to the beginning of the Afghanistan war. Sounds like a good use of our money by the government.

"LIVING TRUST MILL" MAY PAY $110 MILLION - Acting to put an end to what is described as a "living trust mill" targeting vulnerable senior citizens, California has filed suit seeking more than $110 million in penalties, restitution and damages from the operators of the scam. An investigation by the California Department of Insurance Investigations Division found that the defendants targeted nursing home residents, tricking victims into purchasing tens of thousands of living trusts and related services and misleading them into buying annuities worth hundreds of millions of dollars. 

WHY PEOPLE SEEK CREDIT COUNSELING - The Cambridge Credit Counseling Corp. is releasing its monthly survey of people who have called in for credit counseling services over the past month. Here they are: 1. My income has been reduced from a lower salary, less overtime or layoff (35.2%); 2. I'm frustrated with high bank rates and fees (25.4%); 3. I want to improve my ability to achieve future financial goals like buying a house or saving for retirement (14.3%); 4. I got into too much debt by overspending (7.2%); 5. Other (8.1%); 6. Recently divorced or widowed, (4.3%); 7. Large medical expenses forced me to take on huge debts (2.9%); 8. My lack of financial education caused me to take on too much debt (2.6%).

CALIFORNIA'S INVESTMENT SCAMS FOR 2005 - California's securities regulator issued a list of its "Dirty Dozen" Investment Scams for 2005. The ones that should be of most interest to our readers are: #1. Senior Investment Fraud. Low interest rates, rising health care costs and an increased life expectancy have set seniors up as targets for con artists peddling investment fraud, including promissory notes, charitable gift annuities and viatical settlements. #2. Variable Annuities Sales. As sales of variable annuities have risen, so have complaints from investors -- most notably, the omission of disclosure about costly surrender charges and steep sales commissions. #7. Living Trust Mills and Other Pretext Solicitations to Seniors. Corporations' SAIF (Senior Against Investment Fraud) program regularly receives large numbers of complaints from the elderly on living trust mills. See them all at http://www.corp.ca.gov.

CSAs TO GET CREDIT TOWARD CASL - The American College has announced that individuals holding the CSA credential can receive a transfer of credit toward The College's prestigious Chartered Advisor for Senior Living designation. Some 4,500 financial and insurance professionals are expected to complete the CASL designation program by the end of 2005. "This represents the most successful launch of any designation in our (American College's) 79-year history."