Monthly Archives: November 2010

Cybershoppers, beware

III reminds us that we need to be careful when shopping online:

Shopping online may be easier than braving the crowds of the mall, but it’s important to make sure that convenience doesn’t come at the price of your identity.

An annual survey by internet security firm Webroot of more than 2,660 individuals in the U.S., UK and Australia, found that some of consumers’ online habits – including using search engines and public WiFi for online gift buying – may put them at risk.

It also found that one in seven respondents has already become a victim of credit, debit or PayPal account fraud this year.


Snail explodes, ruins dinner

ABA Journal has the story online:

Two California men are suing a San Rafael restaurant, claiming a birthday celebration was ruined when escargot they ordered exploded, spewing hot butter on their faces and shirts.

They pursued a lawsuit after the restaurant’s insurer denied their claim. They should have optioned it to the Farrelly brothers.

The story also quotes a chef who says, yes, escargot occasionally explode, which explains why this dish rarely finds its way to the Thanksgiving table.

(h/t Business Insurance’s End Page)


The future of Social Security in one graph

Downhill all the way

Via Ezra Klein, this chart shows how the various Social Security proposals would reduce benefits (adjusted for inflation) for a family of modest ($40K) earnings. You may have to click on it to make it large enough to read.

The most famous plans are the burgundy line (Congress does nothing), the green line’s Bowles-Simpson proposal (Obama’s deficit commission) and the bright red line, Rep. Ryan’s “roadmap” (the wonky Republican proposal from this summer).

The plans are about the same till about 2020 when the heart of the baby boom (including yours truly) begins to retire.

More at the left wing Strengthen Social Security Campaign.


The medical loss ratio game

The Department of Health and Human Services largely rubber-stamped the NAIC’s recommendations for medical loss ratios. Recall these are the rules behind calculating that health insurers spend 80 cents of the premium dollar on providing medical services (85 cents for group health plans). Insurance Journal summarizes here.

Unhappy are the insurance agents. They wanted commissions left out of the formula, since that essentially caps their income. You can hear their complaints here. Though I wouldn’t be surprised if they find a way to, at least in some states, add placement fees. Agents routinely charge these in nonstandard auto markets (where the hard-to-insure find policies with low limits and low premiums).

Also, more people will be buying individual policies, so while commission rates may fall, agency revenues may actually increase.

You may think I am not too sympathetic to the agents’ plight, and you’d be right. Our health care system is so bloated that to fix it, everybody is going to have to take a financial hit – hospitals, doctors, insurers and, yes, agents.

How bloated? Well, yesterday the International Federation of Health Plans published its annual comparison of health care costs across countries. Here’s a typical slide from the pdf:

We pay twice the going rateYeah, we pay twice as much as anybody else for an appendectomy.

And passes along the latest Commonwealth Fund report showing, basically, that we have the worst health care in the world:

Americans are the most likely to go without health care because of the cost and to have trouble paying medical bills even when insured, a survey of 11 wealthy countries found Thursday.

“The US stands out for the most negative insurance-related experiences,” the New York-based Commonwealth Fund, the private foundation that carried out the study, said in an accompanying statement.

The study found that a third of US adults “went without recommended care, did not see a doctor when sick, or failed to fill prescriptions because of costs,” it said.

That compares to as few as five to six percent in the Netherlands and Britain, according to the study.

Just remember as the next phase of the health care debate rolls out – any repeal of Obamacare returns us to this status quo.


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Claim of the Week: Outrageous edition

Killer sues victim’s parents, via Claims Journal:

A Connecticut driver who’s serving a manslaughter sentence for striking and killing a 14-year-old boy is suing the victim’s parents, blaming them for their son’s death because they allowed him to ride his bike in the street without a helmet.

Of course he was going, no lie, 83 miles an hour in a 45 mph zone.


Attention, sports fans: player insurance

I don’t follow the sport closely, thus always wondered how soccer players could sign with a league team, then play for national teams. The answer: insurance. The insurance protects the team in case a player gets hurt playing for the country. Thus:

The UK’s Football [Soccer] Association’s insurers will pay compensation to Liverpool after midfielder Steven Gerrard sustained a hamstring injury on England duty.

The FA confirmed Friday it has a comprehensive voluntary insurance scheme that covers for injuries to England players during international matches.The organization said the scheme will cover the wages of Gerrard, who will be out for a month after limping out of Wednesday’s 2-1 defeat to France at Wembley with a grade two hamstring tear.

So next time you enjoy the World Cup, thank the industry.


RMS responds

Reader JN passes along the RMS response to the recent Sarasota Herald-Tribune articles on cat modeling I blogged about here.

Here’s the heart of RMS’ argument, which it sent to the paper as a letter to the editor:

As an independent catastrophe risk modeler, the aim of our models has always been to provide the best unbiased estimate of risk to help the insurance industry and policy-holders to recognize and manage, and where possible, reduce the risk through the application of risk mitigation programs and initiatives. There is no commercial advantage for us to overstate the risk.

A full pdf of the response is here.


Marsh: Commercial rates down 4.7%

Business Insurance quotes Marsh’s latest. I put it in a chart:

The trend is down.


U.K. considers changes to civil litigation fee rules

The rise of contingency fees (they call them success fees) has created a bit of a tort mess in the U.K. (via Business Insurance).

The United Kingdom government this week launched a public consultation on proposals to revise the rules governing civil litigation costs, including changes to success fees and so-called after-the-event insurance.

After-the-event insurance is purchased after a dispute begins. I’m not familiar with it, but from an actuary’s viewpoint, it would remove one layer of uncertainty (frequency – the probability that a claim could occur), leaving only severity – the size of the loss to be paid. As such it would be easier to price.

Of course, here in the U.S. we are expanding the contingency idea, as this New York Times article (which I linked to yesterday) documents.

Hard market by 2012?

Brokerage Stifel Nicolaus predicts that rates will climb by 2012, since insurers have drained off all of their excess loss reserves, National Underwriter reports:

As results worsen, Stifel Nicolaus said it expects carriers to either begin raising rates or dropping unprofitable business. These moves will result in 10 percent rate increases by the industry by mid-2012, the report said.

“Company by company, the industry seems to be slowly absorbing the fact that the gravy train of post-hard-market reserve releases is slowing down,” the report said.

Good luck with that. This dumb actuary does not agree with the underlying assumption – that companies set prices to drive a combined ratio. They set prices to be competitive in the marketplace, and that’s driven by good old supply and demand.

The supply is insurer capital, which is high right now. The demand is the need for insurance, which has been declining slightly for the past few years. So Adam Smith would seem to tell you that rates will keep falling, or at least not rise.

Reserve redundancy really doesn’t enter the equation. Insurers have set low prices and posted inadequate reserves to pursue market share in the past, and I have faith they can do so again.