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Latest insurance industry news, with commentary.
NEWS OF THE DAY February 28, 2014
QUOTE OF THE DAY:

"Only those who risk going too far can possibly find out how far they can go."

T.S. Eliot


INSURANCE INDUSTRY LOSSES MASSIVE DUE TO DISASTROUS WINTER WEATHER

Live Insurance News

February 26, 2014

Extreme weather this winter has led to more than$1.4 billion.
With continual snow and below-average temperatures, the insurance industry is starting to feel the same winter blues that are being experienced by the cabin feverish residents of the icy and snowy regions of the country.
As much as snowplows and two truck drivers are frustrated, the losses \ by insurers are even greater.
According to the data that was issued by Impact Forecasting, the extra wave of severe winter weather that gusted its way across the natuib in January led to more than$1.4 billion in insured losses. This hit =was a direct result of the so-called "polar vortex" that blasted its freezing temperatures and seemingly never-ending snow and ice across the nation. Even cities that are farther south, such as Atlanta, were not immune to Jack Frost’s latest strike.
As the temperatures occasionally ease, the insurance industry is now seeing heavier snowfall than usual.
Although temperatures have been staying quite cold – lower than average – overall, the occasional milder day or two (relatively speaking) has been breaking the frigid trends on the mercury. However, instead of bringing weather relief and a chance to melt away the tremendous accumulation of snow that already exists, it has only opened up the door to even greater snowfall, leading to more need for exhausted snowplow and tow truck drivers, and further insurance claims from homeowners, motorists, and business owners.
Vehicle accidents – particularly those involving multiple cars and trucks e – have become commonplace in many areas that are experiencing treacherous highway conditions. Frozen pipes and falling trees have meant that property and building damage has skyrocketed.
The data taken into account by Impact Forecasting for its damage report is for a period that does not include the latest harsh winter blasts that made their way through many parts of the country last week, particularly in the areas of the Northeast and the Great Lakes.
With another possible full month of winter yet to come, the nation and the insurance industry are bracing for what's  to come. It's easy to believe that these were not the last storms of the season.

STUDY SHOWS P/C INSURERS PLAN TO HIRE, GROW SIGNIFICANTLY IN 2014

Insurance Journal

February 26, 2014

By Andrea Wells  

More than half of insurance companies responding to a recent survey say they plan to increase staff in 2014, although hiring for the most-in-demand positions may prove difficult.
That’s according to the latest Semi-Annual U.S. Insurance Labor Outlook Study conducted by The Jacobson Group and Ward Group.
Ward Group Partner Jeff Rieder says that when analyzing the historical pattern of the survey’s results the predictions for both increasing and decreasing employment levels at insurance companies are at record highs and lows, respectively.
Nearly 62% of companies polled intend to increase staff in 2014 — the highest rate in the history of the survey. While only 4% of carriers responding to the survey expect to decrease staff over the next 12 months — the lowest rate in the history of the survey.
Since April 2011, 26,400 jobs have been added by insurance carriers, the study says.
“There are not many people looking for work in the insurance industry right now,” says Gregory P. Jacobson, co-chief executive officer of Jacobson. In Jacobson’s view, the industry is seeing a return to its pre-recession state, bringing increased confidence, optimistic staffing and robust revenue forecasts.
According to Jacobson, there;s a widening gap between the general economy and the insurance industry, which appears to be outperforming the economy when it comes to job growth. The Bureau of Labor Statistics has reported the unemployment rate for the insurance industry is at 2%, the lowest since March of 2007. The overall U.S. employment rate stands at 6.6%, according to the BLS.
The survey also revealed that projections for increasing insurance company staff in the next 12 months directly correlates to the industry’s expectations to also increase total revenue.
Some 61.9% of insurance carriers responding to the survey plan to increasing staff in the next 12 months, while 87.3% of those carriers also expect to increase revenue during that same time.
The anticipated job growth in insurance companies is good news for the industry overall, but filling open positions also is proving challenging. The study shows that many carriers are experiencing difficulty recruiting for open positions.
“The war for talent is getting very, very hot,” says Jacobson. “With the diminishing unemployment rate and the severe skills gap throughout the industry, companies are struggling to find experienced individuals to fill their open positions.”
Though product line has a significant impact on the ease of filling positions, companies responded that most roles are still moderately difficult to fill.
According to Rieder, the two areas hardest hit during the recession were claims related positions and human resource positions.
“Dating back to the 2008 time frame there was a lot of reduction-in-force, particularly around the claims operations,” Rieder says. “We also saw many of the human resource training departments depleted. What this caused is that for certain positions, particularly insurance training and experienced claims adjuster roles, there are fewer of those [job candidates] because they found jobs in other industries.”
That has led to tough recruiting challenges for those sectors, he says.

National vs. Regional Carriers

When it comes to revenue growth in the next 12 months, national Property/Casualty carriers appear to be more confident in gaining market share, the study found.
“The difference between the national and regional carrier findings was pretty stark,” Rieder says.
The survey showed that 85% of all P/C companies surveyed expect an increase in revenue growth with less than 3% expecting a decrease in revenue. However, 73% of national/multi-national companies expect market share to drive revenue changes compared to 49% of regional carriers.
One important study trend that caught the eye of Rieder and Jacobson this year is the more aggressive plans by national carriers to boost revenue and hiring in the next 12 months. .
“We saw that generally the national carriers were much more aggressive in both their hiring expectations as well as their anticipated growth,” Rieder says. “Many of the national carriers are anticipating much larger growth when compared to their regional peers.”
That’s important when considering compensation plans, he says.
“It’s important for those regional companies to have compensation plans that are competitive and attractive to retain staff,” he says. “We are finding that many quality staff are being plucked away by their national counterparts.”

Other Findings

67% of Commercial P/C companies are expecting to increase staff during the next 12 months.
Of the companies who plan to add staff during the next 12 months, 92% expect an increase in
        revenue with almost 68% responding that it will be due to a change in market share.
Technology, underwriting, sales/marketing and claims positions continue to be the most in demand.
Actuarial, analytics, executive and technology positions continue to be the most difficult to fill.
If the industry follows through on its plans, overall the carriers will see a 0.89% increase in industry
       employment during 2014, creating new jobs.

GREAT STORY TO SHARE WITH COMMERCIAL LINES CLIENTS AND PROSPECTS

TARGET’S CYBER INSURANCE SOFTENS BLOW OF MASSIVE CREDIT BREACH

Insurance Journal

By Dhanya Skariachan and Jim Finkle 

February 26, 2014

Target Corp. shares made strong gains after it reassured investors that customers were beginning to return to its U.S. stores, suggesting that the impact of a massive data breach might not be as severe as some had feared.
The third-largest U.S. retailer said on Wednesday that customer traffic had started to improve this year after falling significantly at the end of the holidays when news of the cyber-attack and theft of payment card data spooked shoppers.
Chief Financial Officer John Mulligan said on a conference call he expected first-quarter sales at its established U.S. stores to be flat to down 2%; so far in February, they have been running within that range and nearly flat to last year.
Target shares, which had fallen 11% since news of the breach broke before Wednesday, were up 6.8% at $60.37, their highest level for almost six weeks.
It was the first time the Minneapolis-based chain had faced Wall Street since the breach, which led to the theft of about 40 million credit and debit card records and 70 million other records with information such as addresses and phone numbers of shoppers compromised.
Earlier on Wednesday, Target warned that costs tied to the cyberattack could hurt its results in the first quarter and beyond.
Still, its shares rose, as its full-year outlook was better than some investors had expected. Mulligan said on the call that the outlook did not include potential additional costs related to the data breach.
The retailer now sees 2014 buyback capacity at $1 billion to $2 billion as it sets aside money to cope with the breach and tries to stay away from borrowing more to preserve its credit rating. It had originally planned to buy back up to $4 billion of shares this year.
Target reported a 46% drop in net profit in the crucial holiday quarter and reported $61 million in costs related to the breach, much of which was covered by insurance. It did not provide an estimate on future expenses related to the cyber-attack, though it said they “may have a material adverse effect” on results of operations through the end of the current year and beyond.
“It‘s going to take some time for this to heal,” said Sean Naughton of Piper Jaffray, who estimates that transactions were down “in the high single digits” in the weeks after the breach was disclosed.
Target said it sees first-quarter profit of 60 cents to 75 cents, excluding expenses related to the data breach and other items. Analysts expect the company to report quarterly profit of 85 cents, according to Thomson Reuters I/B/E/S. For the full year, Target sees earnings of $3.85 to $4.15 a share on that basis, compared with the analyst forecast of $4.15 per share.
Naughton said that Target’s reputation for having a top-rate shopping experience had been tarnished by the fact that many customers have either had to have payment cards replaced or find themselves checking their monthly statements more closely, giving them a negative association with the retailer.
He noted that Target posted a 5.5% drop in transaction count during the quarter, the worst he had ever seen, even steeper than the 4.8% drop reported when the U>S>was in the midst of a financial crisis in the fourth quarter of 2008.
Sales fell 3.8% to $21.52 billion in the fourth quarter, missing the already lowered estimate of $22.37 billion, according to Thomson Reuters I/B/E/S. Sales at U.S. stores open at least a year, fell 2.5%.
The data breach “took the wind out of Target’s sails – and unfortunately sales,” said Sandy Skrovan, U.S. Research Director at Planet Retail.
Net earnings fell to $520 million, or 81 cents a share in the three months that ended on Feb 1, from $961 million, or $1.47 a share, a year earlier. Excluding its losses in Canada and a host of items, it earned $1.30 a share. That was at the high end of its lowered forecast from January.
The retailer had already lowered expectations for the fourth quarter. News of the breach has hurt its reputation and stock, and made many on Wall Street take down their profit and sales estimates on Target.

The Breach Effect

Target said of the $61 million in expenses related to the breach during the quarter, $44 million were offset by an insurance payment, bringing the impact to $17 million.
Mark Rasch, a former cybercrimes prosecutor who worked on some of the biggest U.S. payment card breach cases, said that it was too early to estimate how big the bill would be, but it would certainly be in the hundreds of millions of dollars and could top $1 billion. “We know it is going to be big. We just don’t know how big,” he said. [$1 BILLION PAYOUT]
Target has declined to discuss exactly what sorts of costs its cyber insurance will cover or identify its insurers.
Insurers offer cyber policies that cover costs for items such as investigating breaches and repairing networks, compensating credit card issuers for fraudulent activity, fighting lawsuits and responding to regulatory probes.
Target said breach-related expenses might include costs for reissuing cards, lawsuits, government probes and enforcement proceedings, legal expenses, investigative and consulting fees, and capital investments.

MARSH WEIGHS OBAMACARE IMPACT ON WORKERS COMP SYSTEM

By Phil Gusman, 

Propertycasualty360.Com 

February 27, 2014 

In the wake of the healthcare-reform law, cost shifting of non-work-related injuries to the Workers Compensation remains a potential issue, and potential stress on the healthcare system could lead to delays and drive up Workers comp costs says broker Marsh in a briefing.
However, the law’s focus on improvements in standards of care could reduce the use of costly procedures that produce questionable results, and employers could see premium refunds if they maintain better-than-expected performance in their healthcare programs, Marsh says.
In its analysis, “Health Care Reform and Workers Compensation Programs,” Marsh says, “Employers have long been concerned that injuries from non-work-related causes will be shifted to Workers Compensation” due to higher reimbursement rates for medical providers and the lack of deductibles and co-payments for employees. While some speculated that the greater access to health insurance under the Affordable Care Act would reduce cost shifting to Workers Comp, Marsh says it has “become clear that the law will not result in all Americans having health-insurance coverage.”
One in ten large companies plan to cut back on hours for at least a portion of their workforce to avoid providing coverage for employees working 30 or more hours per week, Marsh points out, citing a Mercer survey;  other employers are using higher co-payment and deductibles to help offset cost increases. “It appears, therefore, that the financial incentive for employees to shift treatment toward workers’ compensation will continue under the ACA,” Marsh says.
Regarding access to care, Marsh notes that the law is designed to increase the number of individuals in the U.S. with health insurance, which “could put additional stress on a healthcare system that is already short on doctors.”
Marsh says this could particularly impact specialists, leading to delays in obtaining diagnostic tests and scheduling elective surgeries and other procedures. “Longer periods of disability and complications as a result of such delays would ultimately drive Workers Compensation costs up,” says Marsh.
Employers, therefore, must develop medical networks “that focus on quality of care and outcomes—even if it means paying more on a fee-for-service basis.
Although the healthcare industry has traditionally focused on volume—more patient admissions, tests, and procedures to drive higher revenues—Marsh notes that post-reform, the industry has shifted focus to improving standards of care and achieving better patient outcomes.  Marsh says, “If this transition results in less emphasis on costly procedures, which often produce questionable results, Workers Compensation costs could be reduced.”
The law also “provides for insurers to rebate premiums to employers that have better-than-expected performance with their healthcare programs,” says Marsh, which employers can either pass on to workers or use to offset future premiums.
Marsh warns though, that the National Council on Compensation Insurance (NCCI) has already “indicated that if premium refunds are given to employees, this would be considered payroll under the workers’ compensation premium calculations.” As Workers Comp premiums are tied to payroll, costs could rise for employers that pass the refunds on to workers.

INSURANCE POLICY PURCHASED FOR KIM KARDASHIAN’S BACKSIDE

Live Insurance News

February 26, 2014

The celebrity feels that her bottom requires coverage worth $21 million.
The star of Keeping Up with the Kardashians has decided that her curves are worth protecting with an insurance policy, and has followed up by covering her derriere for $21 million. Kardashian is well known for her figure- hugging clothing which requires a fabulous fanny.
Apparently, it wasn’t Kim,herself who made the decision to buy insurance;. Instead, it was her fiancé, Kanye West, who though that her posterior was so important that it needed its very own protection. According to an insider quoted in a U.K. magazine publication Grazia, the star’s bottom has always been a matter of discussion and hype. For this reason, Kanye recommended that she take out the policy to make sure that its value is protected.
Between the two celebrities, this isn’t the only body part that will have its own insurance policy.
It has also been rumored that West has started the initial steps to purchase protection that will cover his voice. It looks as though the couple, who are going to be married later in 2014, feel that their bodies are worth quite a bit of money. The British magazine’s source stated that the coverage for West’s voice is a more challenging process than insuring Kardashian’s rear end.
The insurance process has been slow for West’s voice because he feels that his voice is worth more than any of the valuations that have been obtained,s o far. When Kardashian’s buttocks were insured, a number of factors were taken into consideration, including how much of her work is actually based on this part of her body, and the impact on her work if she should experience damage in that area.
These are far from the only celebrities who have purchased insurance for their body parts. As reported on Live Insurance News, Jennifer Lopez has insured her backside,for $300 million. Bruce Springsteen had covered his voice in the 1980s for $5.7 million (which would would be far more in today’s dollars).

Jack Nordhaus
Other articles by: Jack Nordhaus
Categories: General Information, Selling
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