Conference 35.181::insurance

    A slowing developing story that will impact all of us centers around
    the future of the Glass-Stegall Act. A recent informal poll taken
    by Newsweek of financial industry (non-insurance) CEO's showed that
    nearly 90% of them favored the Act's repeal. Additionally, the new
    Federal Reserve Chairman Alan Greenspan has made no secret of his
    desire to do away with the regulation. It all hinges on who has
    the most bucks to throw at Congress...insurance industry, banking
    or investment brokerage.

    The Minimum Health Benefits for All Workers Act of 1987 would require
    all employers to provide minimum health insurance benefits to all
    employees and their families. It would also call for a Federal
    bureaucracy to dictate the distribution, design and content of all
    health plans.
    
    Specifically, this is known as bill S.1265 and was introduced by
    Senator Kennedy and Senator Weicker. There's a companion bill in
    the House (H.R.2508) introduced by Representative Waxman. The Bill
    states that the Secretary of Health and Human Services would divide
    the country into 6 to 8 "health insurance regions" for all small
    employers - 25 employees or less. Insurers would then bid for the
    right to be one of the few (2 to 5) carriers to market coverage
    in one of the regions. Each insurer would have to provide at least
    two standard indemnity types - fee for service and two managed care
    plans, i.e. an HMO and a PPO.
    
    The Secretary would select the insurer on the basis of:
    1. Price
    2. Quality and type of service
    3. Experience in managing health care
    4. Financial stability
    
    Each regional insurer shall fix premiums under a community rating
    system for all employers. An insurer may not set or adjust such
    premiums based upon the age or gender of employees (or their families)
    or on other factors relating to the projected or actual use of health
    services under the plan.

    
    A California court has held that a property insurer is liable for
    on-going damage that starts during the policy's limits, even if
    the insurer no longer insures the risk.  In the case of Home Insurance
    vs. Landmark Insurance, Home and Landmark had insured the Hotel
    del Coronado in San Diego.  Damage to balconies was discovered during
    the Home policy that extended into Landmark's policy.  They settled
    and the part that Landmark had to pay will be recovered from Home
    because they had the original policy.
    
    This ruling could have far reaching consequences on other cases,
    most notably the Shell polution case.
    
    

    
    The National Assoc. of Insurance Commissioners has proposed the
    abolition of Collision Damage Wavers (CDW) that rental car companies
    regularly sell to customers.  The Proposed NAIC law would be simple
    but powerful.  Basically, unless the renter acted in "a willful
    and wanton misconduct" or was speeding or under the influence, they
    wouldn't be liable for damages.  It would be for rentals under 30
    days on private passenger cars.
    
    The increased cost would be spread into the basic rates but this
    would result in only small increases.
    
    Congress is considering 4 bills to provide some kind of child care
    benefits to address this crying need.  Currently, only about 10%
    of employers have any kind of program.
    
    The new FLEX plans that many companies are offereing their employees
    are ending up mirroring the benefits already in place.  Employees
    are more or less buying with their plan dollars the same benefits
    they had without it.
    
    

    
    Business in America has breathed a collective sigh of relief now
    that the proposed "high risk notification" bill has been quased.
    This bill would have required employers to notify employees of
    potential hazzards of their jobs (such as insulation workers) and
    would be retroactive back either 30 years or forever.  And the
    employees would have had to be advised to get medical screenings
    of possible injury with the employers paying the expense.  This
    would really have been a problem for business.
    
    A trip related death of an employee was found to be not covered
    under trip insurance by a Louisiana court.  A man drowned at a Mexican
    resort while swimming in the surf.  He was on a trip paid for by
    his employer for a job well done.  The court found that he was not
    ordered or required to go and the primary purpose of the trip was
    not to do business.  
    
    Trade barriers for European insurers are to be dropped if a new
    draft bill is adopted.  This would allow insurers to sell across
    country boundaries even though they don't have an establishment
    in that country.  There are restrictions.
    
    Reinsurers are predicting bad underwriting results in 1989.  This
    due to competition among primary insurers will force premiums down.
     In addition, reinsurers will be hurt by increased retentions by
    primary insurers.  1988 is expected to be reasonable year but the
    market is getting cautious says paul Butler of St. Paul Re  in New
    York.                                         
    

    
    The three big fires out West may cost over $500 million in claims.
     The original estimate of the Los Angeles office tower fire which
    destroyed 5 floors, was estimated at $450 million but is expected
    to be reduced.  The Shell Oil fire at a refinery is expected to
    hit $200 million.  The Las Vegas rocket fuel explosion and fire
    will hit $100 million.  
    
    Hurrah for consumers..... Hertz is backing a proposal to kill collision
    damage waivers on rental cars.  The very controversial CDW is basically
    insurance a consumer buys at from 7 to 15 dollars a day to waive
    liability for car damage.  It is a big money maker for rental car
    companies and their elimination is being fought by the cut rate
    rental companies.  Hertz's contention is that accidental loss should
    be a cost of doing business of the company.  Two bills under
    consideration would either define CDW as insurance and put it under
    the jurisdiction of the insurance commissioner, or eliminate any
    responsibility on the part of the car renter.
    
    Nebraska governor Kay Orr has rejected a bill with a pocket veto
    that would have brought tort reform to the state.  It would have
    reduced damages in a case by the plaintiff contributory fault and
    would have abolished joint and several liability except in cases
    where it could be shown that several defendents knowingly acted
    to cause harm.  It probably will be taken up anew in the next session
    of the legislature.
    
    An earthquake consulting firm doing a study for the San Francisco
    fire department has concluded that none of the fire stations could
    withstand a major quake.  Recommendations to reinforce the stations
    are part of a plan to make the city "earthquake proof" by the year
    2000.  The federal Emergency Management Agency has stated that there
    is a better than 50% chance that a major quake will hit California
    before the year 2100.  A major quake centered on LA at rush hour
    could kill 13,000 and cause $60 billion in damage.
    
    

    A recent article in Forbes Magazine (May 16, 1988) highlighted problems
    at The Continnum Co. (TCC).  TCC bills itself as "the leading supplier
    of software and services to the life insurance industry."  The article
    calls into question TCC's financial health and its ability to complete
    work on their Client Contract Administration (CCA) system which
    has been under development since 1979 in conjunction with 108 life
    insurance customers including John Hancock, The New England, Farm
    Family Life, among others.  According to the article, one-third
    of the CCA customers have stopped funding the system and Continuum
    is under pressure from Electronic Data Systems (EDS) which has
    developed its own version of CCA, called the Insurance Machine.
    The Insurance Machine currently is up and running at nine large
    insurers.
    
    Customers that had been counting on CCA to provide a solution
    to consolidated customer-based administration may be starting to
    look for alternatives!
    
    If anyone wants a copy of this article, send me a mail message
    at:        Vaxmail          HPSVAX::KNOWLAND
    		Allin1		KNOWLAND @MRO
    

    INSURERS EXPECT CONTINUED HIGH COSTS, NEW COMPETITORS, PRICE WARS
      IN FUTURE.  (The Wall Street Journal  7/26/88)
    
    Intense pricing wars, new competition and continud high operating
    costs are seen as top threats to insurers' long-term profitability,
    according to a new survey of more than 150 executives at life, health,
    and property/casualty insurance companies.
    
    "More people will be going after the same premium dollar and companies
    will have to do business more cheaply to keep the same margins,"
    said Thomas J. Skelly, director of Arthur Anderson & Co.'s insurance
    industry consulting practice.  The New York accounting firm and
    the Life Office Management Association (LOMA), an Atlanta trade
    group, conducted the survey.
    
    One threat is already here.  The move toward self-insurance among
    utility, manufacturing, health care, energy and governmental concerns
    is taking business away from property/casualty companies.  The
    accounting firm estimates that between $35 billion and $55 billion
    in premiums were lost to self-insurance in 1987.  That's about 20%
    to 30% of the total U.S. property/casualty market.
    
    The liability crisis of a few years ago forced many companies to
    manage their own risks rather than insure them.  Some executives
    believe by making liability insurance more available and dropping
    premium rates they will draw some of this business back.
    
    Looking to 1995, industry officials see more competition coming
    from banks and investment firms as well as foreigners such as the
    Japanese and Canadian firms.  Sixty-six percent of the chief executives
    surveyed at large life insurers see banks as competitors or expect
    them to gain a foothold in their markets in the next seven years.
    About 45% of those surveyed see securities brokers as significant
    competitors in selling annuities.
    
    Further consolidation in the insurance industry is almost a given.
     Between 1983 and 1987, there were 170 mergers and acquisitions
    involving insurance companies according to research from W.T. Grimm
    & Co. that was quoted in the study.  The executives surveyed believe
    greater competition won't slow this trend as firms merge or agree
    to be acquired to survive.
    
    The flip side is that companies that can't compete will go out of
    business.  The survey said Best's Management Reports shows there
    were 160 insolvencies in the life insurance industry and 34 among
    property/casualty firms in 1986 and 1987.  About 56% of the chief
    executives at large life companies expect the number of insolvencies
    to stay high. 
    
    When Arthur Anderson checked in with industry officials four years
    ago, many were keen on diversification and eager to play with high
    technology.  They've since realized that it "becomes expensive to
    try to be all things to all people," said Lynn G. Merritt, LOMA's
    president.  In 1988, the notion that insurance firms should be
    financial services supermarkets has gone out of style.
    
    Executives today are looking inward, preferring to make the most
    of their current insurance products, the survey found.  That's where
    technology is becoming increasingly important to insurers.  It's
    no longer being regarded as a tool to help develop new products.
    Officials said high tech has to be used to drive costs down and
    control expenses.