Insurance Claims and Bad Faith Law Blog

Sigma 2005 and 2006 Results From Swiss Re.

    Swiss Re has released "sigma" results for 2005 and, tentatively, for 2006 to date.  "Sigma" is the Greek codeword used by Swiss Re to identify its computer-based reports.  A link to both reports, released separately by Swiss Re, is here.   The information is revealing.  Here is some of it.

2005

    Total Insurance Policy Premiums in 2005 were $3,426,000,000.00 or 7.7 % of the World's "Gross Domestic Product".  About 56 percent of Insurance Premiums are for Life Insurance.  There is a definite link to commerce here.   Swiss Re notes further that "the growing loan market generated more mortgage-related life insurance policies."  The rest of the Premiums went to pay for what Swiss Re categorizes as "non-life" Insurance Policies.

2006

    So far in 2006, Swiss Re's computer results reveal the third-lowest "insured losses" in the last 2 decades.  The "loss events" studied by Swiss Re's computers show that this year, typhoons and earthquakes predominated among the Catastrophe list and they "hit mainly newly industrialising countries where insured losses are relatively low."  The irreplaceable loss of Life to Catastrophes appears to be proportionately higher than Property Losses to date.  The role of Insurance available to relieve worldwide Catastrophes in 2006 is not necessarily great, it appears.

    Economic losses worldwide in 2006, Swiss Re says, total $40,000,000.00 and so far $15,000,000.00 or 37.5% "were actually covered by insurance."  There is no word on how if at all, the remaining 62.5% or $25,000,000.00 of economic losses is and are addressed in the countries where this year's Catastrophes have struck.

    Remembering to give thanks for our blessings, and remembering to remember those who may not be as fortunate,  Happy Holidays to All!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

 

 

   

Spin Life: Is it "Insurance?"

                    "You Can't Call This Living, 'cause It Ain't."

    A front-page headline leads today into an article about "spin-life" Insurance Policies.  That stands for speculator-initiated Life Insurance Policies.   One type apparently consists of, first, a loan to a potential Policyholder to pay Life Insurance Premiums and obtain a Policy, followed by sale and assignment of the Life Policy proceeds to the speculator-investor.   Charles Duhigg, "Late in Life, Finding a Bonanza in Life Insurance" (Sunday New York Times,  December 17, 2006, page A1, col. 3.)

    On October 27, 2006, my post addressed the issue of "life settlement" agreements.  Those are arrangements in which people with great pain, or who are near death, sell the proceeds of their life insurance policies in exchange for money to pay current medical and other bills to continue daily life.  Today's linked article, above, lumps "life settlement" agreements with "spin-life" premium arrangements .

    Public Policy issues are many here.  However, one highly practical Insurance issue deserves immediate focus.  It is driven by economics and it is this:  Life Insurance Companies depend on historical evidence, like other Insurance Companies, to determine whether they will accept a risk and if they accept the risk, what kind of Policy they will issue and what Premiums they will charge the Policyholder.  The historical evidence summarized very well in today's article displays the fact that many Policyholders cancel their Life Insurance Policies.  That is a fact and Life Insurance Companies plan on this fact.  They include it in their basis for charging Premiums.

    If instead all or nearly all Life Insurance Policies now in effect will produce payouts rather than Policyholder-cancellations, there may not be any Life Insurance available over the course of time, or what Life Insurance is made available will carry a very high Premium, because of the great increase in risk.  The issues are addressed further in today's linked newspaper article.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

One-Stop Shop Insurance Sales: Returns?

    Premiums Accepted For Life, But Not For Property Insurance.   

    Huge CatClaims in 2004 and 2005 and large profits in 2006 have been the subjects of previous posts here.  One possible approach to the combination of these twin facts involves two steps.   Proponents see the two steps together as leading to even greater profits in the Insurance Industry.

    The first step these persons see is to eliminate risk.  This involves  eliminating all CatClaims Coverage such as in Florida.  Steps to eliminate CatClaims Coverage include cancellation of existing Homeowner's Policies where permitted, or issuing renewal Policies with what are in effect total CatClaims Exclusions where authorized, or not issuing Homeowner's and other First-Party Property Policies at all.

    The second step is to divert resources from the eliminated risk to  a different  source of profit.  Financial planning products for targeted prospects make a favored source for proponents of this method.  Targeted prospects are not limited by geographical location under this plan.  Prospects for financial planning products can live anywhere.  So long as prospects possess the capacity for Life Insurance Policies or for such other financial products as annuities, they qualify as targets under this approach.  Some label this second step as the much-attempted 'one-stop shopping' goal for selling Insurance.  One of the major Insurance Companies reportedly chooses this double approach, reported for example in this Subscription Required Article by Liam Pleven, "Hurricane Losses Prompt Allstate to Pursue New Path" (Wall Street Journal, Friday, November 24, 2006, page A1, col. 1)(Subscription Required).

    Consider something else, however.  If a prospect for Life Insurance is not a prospect for CatClaims Coverage -- because she or he cannot obtain Homeowner's Insurance for example -- then that prospect cannot live just anywhere if they want to be protected against CatClaims.  Businesses have their own issues obtaining CatClaims Coverage in Hurricane or Earthquake or other Catastrophe prone areas, but businesses cannot locate to any geographical area where employees are not available to staff that business.  Florida is not alone in bracing for these effects although the double approach to Insurance Profits outlined above hits Florida very hard.  Other States and their locales which will feel the effects of a double approach of the kind outlined in this post include the Gulf Coast -- Texas, Louisiana, Mississippi, Alabama, and Florida -- and also the Atlantic Coast from Florida north to Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, New Jersey, New York, Connecticut, and Rhode Island.

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

Pay Me Now, Pay You Later

     So-called "life settlement" agreements involve Policyholders and Buyers, in broad and general terms.  The Policyholders are often ill or elderly or both, and they are going to die later from the illnesses they are suffering through now.  Their incentive is to pay the bills, now, rather than to have Life Insurance Companies pay on account of their death in the future.

    The Buyers in such cases are generally willing to buy a later payout on the Policyholder's Life Insurance, if the later payout they receive in exchange for current cash is larger than the money they give the Policyholder now.

    According to a suit filed by the Attorney General of the State of New York, some of these Buyers may be willing to buy more than "life settlements" with Policyholders.  Some of these Buyers may be willing to pay money to save their place in line, so to speak, according to a news report published today by Charles Duhigg & Joseph B. Treaster, "Spitzer Accuses a Company of Bid-Rigging and Other Types of Fraud" (New York Times Nat'l ed. page C3, col. 1, Friday, October 27, 2006) click here for online access.

     It is also noted in this news report that some involved in this 'industry' of buying life settlements are fretting that the public perception of their kind of business is not good.  Public relations may not be an answer here, however.  You just cannot make a silk purse out of a sow's ear.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

An Interactive Graphic is Worth A Thousand Words!

    To see how well many sectors of Insurance are doing, click here and engage the Interactive Graphic:  Sector Snapshot, Insurance.  Or see the print edition in today's New York Times, on page C9 (Nat'l ed. Friday, October 27, 2006).  It is worth a thousand words!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.