Security risk

Chicago – Citing increased competition and falling rates, insurance brokerage Aon Corp., said yesterday that it will cut 2,700 jobs, or approximately 6% of its workforce, as part of a restructuring plan.The broker made the announcement as part of its release of its 3rd quarter financial results.

New Orleans — Carriers using advanced analytics in their underwriting, claims and marketing efforts will have a better chance of surviving the current and future state of a softening insurance market, Frank Coyne, chairman, president and CEO of ISO told the 800 attendees in attendance this week at the company’s ISOTech 2007 Connect Conference in New Orleans, La.

Armonk, N.Y. – In the past three years, 62% of enterprises with more than $5 billion in revenue encountered a major risk event, and 42% of these enterprises were not well prepared for the event, according to a study of more than 1,200 chief financial officers (CFOs) and senior finance executives from 79 countries worldwide. The study, from IBM, concludes that a surprising number of enterprises are not well prepared to handle the impact of a major risk event to their organization.

New York - Guy Carpenter & Co. LLC, a global risk and reinsurance specialist and a part of the Marsh & McLennan Cos., expanded its award-winning, Web-enabled i-aXs data management platform to include both workers' compensation and accident and health lines.

Wakefield, Mass. and Jersey City, N.J.– P&C policy and rating solutions provider ISO Insurance Technology Solutions (ISO-ITS) and consulting firm Edgewater Technology Inc. have entered into a strategic alliance.

Reston, Va.–Insurance regulators in eight states have granted written recognition to the straight-through processing (STP) standards initiative of NAVA, the Association for Insured Retirement Solutions.

Jersey City, N.J. — Extending its reach in healthcare market as a provider of data, analytics and decision-support solutions, ISO Properties Inc. confirmed the acquisition of Salt Lake City-based HealthCare Insight LLC (HCI), which provides solutions that enable healthcare claims payors to prevent fraud, abuse and overpayment. Terms of the deal were not disclosed.

WASHINGTON — The practice of insurers basing auto insurance premiums on a customer's credit rating was questioned at a House hearing yesterday, with critics asking whether it disproportionately hurts young people and minorities.

Washington — Gov. Marc Racicot, president of the American Insurance Association (AIA), made the case that the Federal Trade Commission's (FTC) credit study is the latest proof that credit-based insurance scores are fair, objective and beneficial to a vast majority of consumers. The American Insurance Association, Washington, represents approximately 350 major insurance companies that provide all lines of property/casualty insurance and write more than $123 billion annually in premiums. "There is no question that credit-based insurance scores are an efficient and accurate predictor of risk," stated Gov. Racicot. "Their use helps insurers refine their pricing to better reflect an individual's risk profile, resulting in most consumers paying less for insurance." In a statement to a U.S. House Subcommittee, Racicot responded to the FTC study, "Credit-Based Insurance Scores: Impact on Consumers of Automobile Insurance," (July 2007), which is the subject of a hearing today in the U.S. House Committee on Financial Services, Subcommittee on Oversight and Investigations. "It's a simple equation—the better your credit score, the lower your risk in the eyes of insurers— resulting in you paying less for your insurance," concluded Racicot. "The use of credit-based insurance scores has been in existence for more than a decade and has helped expand the availability of insurance in many markets, and increased competition among insurers." Opponents still contend that credit scoring tends to raise premiums overall, that it doesn't correlate directly with risk and that it may serve as a proxy for racial and ethnic discrimination, because some minority groups have lower incomes and are more likely to have credit problems. The FTC's study firmly validates the insurance risk assessment capabilities and consumer benefits of credit-based insurance scores. Most people pay less for insurance because of insurer use of credit, which the FTC's study, and numerous state studies have confirmed. According to the FTC, scores are 'predictive of the number of claims consumers file and the total cost of those claims,' and 'scores also may make the process of granting and pricing insurance quicker and cheaper, cost savings that may be passed on to consumers in the form of lower premiums.' Additionally, the FTC study directly refutes unfounded claims that insurers use credit-based insurance scores to 'unfairly target' minorities saying such scores 'have little effect as a "proxy" for membership in racial and ethnic groups in decisions related to insurance.' The FTC study shows there is no way to determine a person's race, ethnicity or economic status by simply looking at an insurance score. In August, the Federal Reserve also issued a report to Congress that evaluated the use of credit scoring and its effects on the availability and affordability of credit. The Federal Reserve's findings tracked closely with those in the FTC's study. Both clearly established that credit is a reliable risk predictor, and that credit scoring has little to no effect as a proxy for race or ethnicity, reports the government body. In urer use of credit is governed not only by the Fair Credit Reporting Act, which expressly allows for its use, but by dozens of state laws and regulations, including what is considered standard practice in the market, the National Conference of Insurance Legislators (NCOIL) Model Act on Credit. Introduced in 2002, the NCOIL model is law or regulation in 26 states, and it balances insurers' need to use an actuarially sound variable while enumerating certain consumer rights and protections, including not having credit be the sole determining factor for coverage or non-renewal, or allowing an exemption to insurer use of credit due to "special life circumstances" for things such as the death of a spouse or an unexpected medical emergency. The law also requires insurers to re-rate customers with corrected credit reports, notify applicants that credit information is being used in setting rates and let customers know if their credit information results in an adverse action—a higher premium, for example, or denial of coverage. It also is designed to protect consumers' privacy. Sources: PR Newswire, INN archives

Washington — A subgroup of the National Association of Insurance Commissioners (NAIC) is drafting a proposal to amend the existing regulatory framework to allow for single-state licensing of U.S. reinsurers, the insurance body reports. NAIC's Reinsurance Task Force is encouraging the NAIC to develop a reinsurance supervision review department (RSRD) to comprehensively modernize reinsurance regulation in the United States. "As state insurance regulators look at enhancements to reinsurance regulation in the United States," said NAIC President and Alabama Insurance Commissioner Walter Bell, "we are encouraged by supervisory developments in non-U.S. jurisdictions where robust regulation of reinsurance has recently been introduced." In the European Union, for example, member states are in the process of implementing a new reinsurance directive. The NAIC's reinsurance proposal could ultimately provide a framework for mutual recognition between the U.S. and non-U.S. jurisdictions. The RSRD would assist in the evaluation of the extent to which non-U.S. jurisdictions apply regulatory oversight that is "functionally equivalent" to U.S. regulation. Under the proposal, non-U.S. reinsurers domiciled in "functionally equivalent" jurisdictions would be allowed to access the entire U.S. market through a single port of entry state. "U.S. regulators believe that a reinsurance regulatory framework also must be sufficiently flexible to accommodate the rapidly changing reinsurance environment, while providing for appropriate levels of financial stability, solvency and predictability that are critical to a vigorous market, consumer protection and a strong and secure insurance regulatory system," Bell added. NAIC's Task Force will discuss this proposal during a meeting Nov. 7-8, 2007, held in conjunction with the NAIC Financial Summit in Atlanta. For more information, visit www.naic.org/committees_e_reinsurance.htm. Source: National Association of Insurance Commissioners

To find the wellspring of the insurance industry's reputation for being technologically backward, one need only follow the glow of green screens to the heart of carriers' data centers where "Big Iron" still holds sway.To get a countervailing view, one could visit Erie, Pa., where Erie Family Life Insurance Co., a member of Erie Insurance Group, is undergoing a platform consolidation of its policy administration systems.

Remember when Johnny Carson would become Karnack the Magnificent and answer the question before he opened the envelope holding the question? Well, here is the answer: You will save time and money and improve customer service as well as compliance. The question: What will Check 21 do for me?Congress enacted Check 21, or more formally known as Check Clearing for the 21st Century, in 2004 at the behest of the Federal Reserve. Recall that when 9/11 occurred, all aircraft were grounded and could not fly. The small planes that would fly checks from various cities to Federal Reserve locations as a part of the check clearing and settlement process were not exempt. As a result, the Federal Reserve decided to implement new processing rules and utilize technology, coining this process as Remote Deposit Capture (RDC), to digitize checks and remove the physical check from the clearing process.

New technologies and competitive pressures are gradually prying open the doors to carriers' rating systems, long locked away in the silos of proprietary or homegrown systems. These rule-driven systems, designed to evaluate potential policyholder risk and price policies accordingly, are increasingly being called upon to integrate with multiple channels, back-end systems and front-end portals to provide real-time or close to real-time pricing for customers.These changes are being driven by a number of factors, relates Craig Weber, an analyst with Boston-based Celent LLC. Rising customer and agent expectations, for one, are pressuring carriers to provider faster, more accurate and more flexible quoting. In addition, there is continuing pressure to keep a lid on IT spending, causing carriers to look for more efficient solutions.

Los Angeles - Citing the potential benefits of saving more than 300 lives and hundreds of serious injuries each year, Farmers Insurance Group Inc. announced its support of the new Federal motor vehicle safety standard #214 by the National Highway Traffic Safety Administration (NHTSA), which requires automakers to conduct new side-impact crash tests. "Farmers fully supports this effort as a means to protect our customers," noted Kevin Mabe, economist for Los Angeles-based personal lines carrier Farmers. Mabe explained that the standard mandates a new crash test for automakers that mimics a 20-mph impact at a 75-degree angle. Additionally, NHTSA has introduced guidelines for automakers to provide head protection for rear seat passengers. Vehicles under 8,500 pounds must provide safety measures to comply with the test by late 2012. Heavier vehicles, from 8,500 to 10,000 pounds, have an additional year to fully meet regulations.

Chicago — Arup, a global multidisciplinary engineering and consulting firm, has joined with Chicago-based Aon Corp. in a strategic alliance that brings to the marketplace a pre- and post-loss consulting service that offers clients an independent, global catastrophic risk management solution.

Manchester, N.H. – Physicians in New Hampshire are being offered a variety of incentives to participate in a statewide e-prescribing program, the latest initiative by the Blue Cross Blue Shield organization designed to improve patient safety, control costs and reduce medication errors. Anthem Blue Cross and Blue Shield in New Hampshire and the New Hampshire Citizens Health Initiative, created by Gov. John Lynch, launched a statewide electronic prescribing, or e-prescribing, program for every physician office in the Granite State, reports the insurer. This follows the announcement made in February by Blue Cross and Blue Shield (BCBS) of Illinois to expand its e-prescribing initiative throughout Illinois. In January, Anthem BCBS announced it would expand the effort in Ohio. Those efforts are ongoing. More than 3 billion prescriptions are written annually in the United States, with medication errors resulting in $77 billion in costs and 7,000 deaths per year (Institute of Medicine, 2006). Yet fewer than 22% of physicians nationwide use the basic capabilities of electronic prescribing, according to the Centers for Medicare and Medicaid Services (CMS). CMS estimates that the use of such technology could eliminate as many as 2 million harmful drug events each year. Electronic prescribing pilots have demonstrated that up to 2% of all prescriptions transmitted this way are changed before being administered to the patient because e-prescribing has alerted the physician to potential safety problems. E-prescribing enables a licensed practitioner to generate a prescription electronically, and then transmit it to a pharmacy. Through this new program, Anthem is offering physicians access to free e-prescribing software, a free mobile pocket PC and a discounted wireless telecommunication plan that will enable them to access real-time patient eligibility, formulary and medication history information from any Internet-enabled PC, or anywhere a cell phone signal is available. Physicians with these tools can write and renew prescriptions anytime, anywhere, for all of their patients, not just Anthem members. “Physicians will now have ample information at their fingertips to help them ensure the safety of their patients, to work more efficiently and to save their patients money on prescriptions,” says Lisa Guertin, president, Anthem Blue Cross and Blue Shield in New Hampshire. Last fall, Gov. Lynch announced his goal to make New Hampshire the first state in the nation where all prescribing health care providers are able to prescribe medication electronically. “Electronic prescribing will help ensure patients get the best possible medication to meet their needs. That will reduce medical errors, save lives and reduce health care costs,” he said. “That is why, working through the Citizens Health Initiative, I’ve made electronic prescribing a priority. This effort will help us meet our goals of making New Hampshire the first state in the nation where all health care providers are able to prescribe medication electronically.” The Anthem e-prescribing program, supported by Sprint and the National E-prescribing Patient Safety Initiative, will include access to a patient’s eligibility, formu aries, adverse drug event alerts and medication history, including medications prescribed by physicians outside of the practice. Most electronic medical record (EMR) systems have e-prescribing capability, however, to date, that technology has not been widely used, and often has not supported the ePrescribing process, reports the insurer. In addition to accessing e-prescribing via EMR systems, prescribers can use smart phone/personal digital assistant devices or stand-alone, Web-based applications. “Not only is this program expected to help reduce medical errors and improve patient safety by providing drug-specific information, it also will help eliminate confusion among drug names and improve communication between physicians and pharmacists,” says Elizabeth Malko, M.D., medical director, Anthem Blue Cross and Blue Shield in New Hampshire. The technology also will allow physicians to send new prescriptions to the pharmacy of the patient’s choice, as well as process refill requests from those same pharmacies. Anthem Blue Cross and Blue Shield in New Hampshire is working with a number of organizations to implement the program, including: The New Hampshire Citizens Health Initiative National E-prescribing Patient Safety Initiative Sprint RxHub LLC, which is providing the technology infrastructure that supports the secure exchange of patient-specific prescribing information between physicians and pharmacy benefit managers, and the transmission of the electronic prescriptions to mail-order pharmacies; SureScripts, operators of the Pharmacy Health Information Exchange, which facilitates the electronic connection between community pharmacies and physicians; and Anthem’s pharmacy benefit management company, which plays a key role by helping to ensure physician access to information, including benefits, eligibility, formularies and medication history. Information about the program was mailed to all New Hampshire physicians in late August. Those who adopt the program will be provided with orientation and training from Anthem. Participating providers who enter into a two-year service agreement with Sprint also will receive a free hand-held device courtesy of Sprint (The HTC 6800 Windows Mobile Device). Sources: Anthem Blue Cross Blue Shield, INN news archives

Washington–Insurance industry associations are giving mostly favorable reviews to the passage of H.R. 2761, legislation that would extend and expand the Terrorism Risk Insurance Act (TRIA). The bill, which passed the lower chamber yesterday by a vote of 312-110, aims to extend TRIA for 15 years, and expand the number of lines covered within it.

Washington – The Office of Management and Budget has released a “statement of administration policy” threatening a presidential veto of legislation aimed at extending the Terrorism Risk Insurance Act (TRIA).

Pearl River, N.Y.–Insurance standards association ACORD has chosen John Kellington as senior vice president.

Needham, Mass.–A new research report from TowerGroup Inc. says insurers should go above and beyond current regulatory requirements when dealing with the issue of annuity suitability.