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Evidently, not too much, according to the Bloomsberg article hyperlinked below. It's to be expected, I suppose, when you consider that the state insurance commissioners generally come from the insurance industry, and return to good jobs there. Furthermore, the National Association of Insurance Commissioners helps the states in writing the insurance laws. And since, according to the article, insurance companies sometimes pay for the foreign travel of state insurance commissioners, the insurance companies must be getting favors in return. That's generally how these things work: I'll rub your back, you rub mine. One may also wonder why state insurance commissioners would need to travel to other countries? A few "reasons" given in this article were that insurance companies need to expand overseas, and that the commissioners were trying to help some foreign governments to set up their own regulatory authority. There is no explanation as to how a state commissioner is going to be able help insurance companies expand overseas, or why the foreign governments who want help in setting up a regulatory authority for insurance in their countries do not pay the travel expenses of the people who are helping them? The other unknown about all of this is why doesn't the federal government regulate insurance companies, since most of the them conduct interstate commerce? A tremendous benefit to federal regulation would be the elimination of a lot of red tape and legal expenses that are no doubt generated by a patchwork of 50 state laws? The United States Supreme Court did rule, in 1944, that insurance was interstate commerce and was within federal jurisdiction. Then the following year, Congress passed the McCarran-Ferguson Act, which returned regulation to the states, with some federal oversight to monitor whether it is all working properly. Now, some members of Congress are, again, contemplating federal rule, but whether it will go anywhere or be any better remains to be seen.
Bribed Regulators Deceiving FBI Over Payoffs Roil U.S. Insurance Customers
If Only Illinois Citizens Could Have Lawmakers' Insurers-Paid Stadium Perk
According to this Bloomsberg article (9/2007), The Insurance Hoax, property and casualty insurance companies have been making record profits in the current millennium, even during a time of major natural catastrophes, such as Katrina and the California wildfires, by reducing claims payments. Insurers are offering lowball settlements, and if the property owners refuse, then they take it to court. Central to their method of reducing claims payments is the use of software for estimating the costs of claims. Colossus, developed by Computer Sciences Corporation, estimates the cost of auto accidents, including the cost of pain and suffering, and permanent disability. Xactimate, by Xactware Solutions, Inc., has developed software that estimates the cost of rebuilding a home. However, many are contending that these programs are underestimating the true costs of claims. Farmers Group, a subsidiary of Zurich Financial Services AG, has stopped using Colossus because of a class-action lawsuit that claimed that Colossus was underestimating the true costs of injuries.
Other ways that insurance companies have been reducing claim payouts is by changing policies, with the changes applying retroactively, and altering the engineering reports of the people who had actually inspected the damage. Many of these engineering companies depend on the business from the insurance companies, and, so when the insurance companies pressure the groups to lower cost estimates, they tend to comply.
In the 19th century, firefighters often were paid, not by tax dollars, but by the owner of the burned property, either out of pocket or by the owner’s insurance company. So firefighters were inclined to fight fires only on property that was insured, or where the owner had the financial wherewithal to pay for their services. To save money, some insurance companies in Richmond, VA gave homeowners plaques to indicate that the property was insured, so that firefighters would be motivated to try to save the property—it was a cheap way to prevent a total loss at least sometimes.
Nowadays, insurers aren’t handing out plaques, but some people, notably the wealthy, still get better services than others. With wildfires raging in Southern California, American International Group’s (AIG) Private Client Group is saving itself money by protecting the homes of the wealthy. AIG has a Wildfire Protection Unit which employs firefighters working specifically for AIG to protect people’s homes by applying the fire retardant Phos-Chek, which is also used by the U.S. Forest Service. However, only those whose homes are worth at least $1,000,000 and pay at least $10,000 in annual premiums get the special treatment, although some people with standard policies also got the special treatment if they happened to be nearby. Many people resent this special treatment for the wealthy, but it makes economic sense for AIG, since saving even 1 home pays for the program, especially since many of these homes are worth 3 to 5 million dollars, or more. While not every home is saved, it stills saves a significant sum of money for AIG.
AIG has a similar service for hurricane-prone Florida. AIG sends pre-disaster consultants to assess well-insured properties for possible damages and sends teams of workers to help restore properties even before claims are filed.
People evidently like the good service. AIG’s Private Client Group started providing insurance in 2000 and has already collected more than $1 billion of premiums.
Another Way the Rich are Different: 'Concierge-Level' Fire Protection
Progressive Corp. and GMAC Insurance are offering discounted rates to drivers who drive fewer miles. GMAC offers the discount of as much as 54% in 34 states, but only with GM cars that have OnStar navigation where mileage is verified by comparing the odometer mileage at the beginning and end of the term. Progressive's TripSense plan is offered only in Minnesota, Michigan, and Oregon, but is available for any car model. The driver must install a small device that will verify mileage, and, to receive the 5% - 25% discount, the driver must download and report their miles.
Drive Less, Pay Less for Auto Insurance
Bad Credit? Insurers Will Make You Pay!
Many, if not most, insurers are using insurance scores in determining what premium to charge a customer. Like the credit score, the insurance score is based on information in credit files, but the score is based more on payment history and total debt than other factors that influence the traditional credit score. This is because insurance companies believe that someone in financial trouble is more likely to file a claim. They may get the score from Fair Isaac, ChoicePoint, or they will calculate their own score based on data in 1 or more credit files. However, some companies weigh the score more heavily than others. The Supreme Court decided a case in June, 2007, involving Geico and Safeco, that companies do not need to inform consumers if they are charged higher premiums because of a low credit score.
You can raise your insurance score by making payments on time and lowering your debt load. Although late payments can stay on a report for 7 years, only the last 2 years influence the score, with older information being less important. When shopping for insurance, it doesn't matter much what's affecting your score, since the best way to find the lowest price is to shop around. For more info, see Credit Scores and Credit-Based Insurance Scores.
Insurance Scores — a brochure by Fair Isaac, explaining the advantages of using credit-based insurance scores for the insurance business.
NAII Statement to the National Conference of State Legislatures — Arguments presented by the National Association of Independent Insurers as to why the state of Michigan should allow the use of insurance scores in helping companies to determine who they will insure and at what price.
BUSINESS AND INDUSTRY OPPOSITION ARGUMENTS BY COMPANY OR ASSOCIATION — Arguments sorted by company or association for the use of insurance scores in Michigan.
Higher Deductibles Sting Homeowners
Many insurance companies are now using percentage deductibles in 17 states vulnerable to such natural disasters as wind, flood, hail, and earthquake—that range from 1% - 15% of the insured value of the home—instead of the traditional dollar deductible, such as a $1,000 deductible, for instance. Percentage deductibles usually result in higher deductibles that help insurance companies limit their losses in a major disaster. For instance, a house insured for $500,000 with a 5% deductible is equal to a $25,000 deductible. Although the deductible is higher, insurance premiums are generally lower with percentage deductibles. However, some states, such as North Carolina and Georgia, don't allow percentage deductibles. Some states give consumers a buy-back option that allows them to have a dollar deductible in exchange for higher premiums.
New financial products—structured products and equity-indexed annuities—are being marketed that promise an investor possible good returns, but no losses.
Structured products and equity-indexed annuities are basically contractual derivatives that an investor purchases in exchange for returns based on the terms of the contract, which is predicated upon other financial assets or derivatives. (Structured products are sometimes called structured notes, because they are much like bonds or notes—contracts that promise to pay according to the terms of the contract, and have a maturity date, when the investor will get back the principal.)
Structured products are issued by brokerages and trade on the American Stock Exchange. An example of a recently issued note—a type of note called an indexed-linked note—is the Morgan Stanley Capital Protected Notes (GBI);(Prospectus for GBI). This note derives its value from 3 indexes, equally weighted: the Dow Jones Euro Stoxx 50 Index, the Standard & Poor's 500-stock index, and Japan's Nikkei 225. The original issue date was February 28, 2007 for $10 per share, it pays a small dividend, and matures in 2011. These notes are senior unsecured obligations of Morgan Stanley.
A drawback to the notes is that it is difficult to currently ascertain the liquidity of the products.
Equity-indexed annuities are issued by insurance companies and also have a no-loss guarantee, and are based on stock indexes. However, they have severe drawbacks:
An important caveat for both of these products is that the guaranteed return, like bonds, depends on the financial status of the issuer. If the issuer becomes insolvent, then these financial instruments could become worthless.
As people live longer, there is a danger that they will outlive their income. At least 20% of people aged 65 will live at least another 30 years. Longevity insurance is like a single-payment deferred annuity that is typically purchased by the annuitant around retirement age to receive guaranteed monthly payments for the rest of the annuitant’s life, starting at around age 80-85. It differs from a deferred annuity in that the payment schedule is determined at the time of purchase, whereas the payouts of a deferred annuity are determined when the payments start, and will vary depending on how well the invested money performed. Thus, one advantage of longevity insurance is that the annuitant knows exactly how much she’ll be getting, but the disadvantage is that the payout remains the same even if the markets do well over the years.
The main advantage is the much larger payouts of longevity insurance over a deferred annuity for the same investment—more than 4 times greater—which is possible because most people will die before receiving any payout, leaving more for those who survive. If the annuitant dies before receiving any payments, then the insurance company keeps the money. Another advantage is that since the payout is known, estate planning is easier.
Because only a few insurance companies are offering this coverage—MetLife, Hartford, and the New York Life Insurance Company—costs are high, especially the sales commission, which can be as high as 5%-7%. And although some options can be added, such as a death benefit, inflation protection, or a return of premium, this can greatly increase the cost. Also, the inflation protection doesn’t start until the payouts start—inflation until then is not covered.
One good reason to buy travel insurance is for medical coverage outside of the country, since many health insurance policies do not cover treatment outside of the United States, or may not cover you in a particular country.
You can compare the coverage and exclusions of many policies at http://www.totaltravelinsurance.com and http://squaremouth.com. Another site to check is http://InsureMyTrip.com.
Texas, Pennsylvania, and New York have the highest rates, costing about $1,400 for $180,000. $1,100 is an average price across the country.
The title insurance industry pays about 4% of its collected premiums in claims, compared to a 75% payout for auto insurance. It is argued that a good deal of the premium is used for research to prevent later losses. But considering that much of this research is stored in online databases, how much can it cost, really? Even the premiums for boiler insurance, where part of the premium is spent for inspections and risk analysis, pays out 25%.
Most consumers get sucked in because they usually don't choose the title insurance company, but is chosen for them by the mortgage provider or the real estate agent. Naturally, the title insurance companies market heavily to them. Since they're not the actual purchasers, the price will usually not be an option.
Iowa is the only state that does not allow the sale of title insurance. Iowa has a state-run Title Guaranty Program that costs the home buyer just $385 for up to $500,000 of coverage—$110 for the coverage, $150 for an abstractor who does the research, and $125 for a review by a lawyer.
Home Buying Tip: Obviously, in other states, the best way to save money is for the home buyer to buy her own insurance, and to get prices well before closing.
Fixed Annuities, Variable Annuities - A complete, but concise, tutorial about fixed and variable annuities in a one-page format with sidebars, illustrations, formulas, examples, and clear definitions of basic terms.
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