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Main | April 2006 »

March 23, 2006

Life Insurance - Top Things To Know

1. All policies fall into one of two camps.

There are term policies, or pure insurance coverage. And there are the many variants of whole life, which combine an investment product with pure term insurance and build cash value.

2. Insurance is sold, not bought.

Agents sell the vast majority of life policies written in the U.S. because the life insurance industry has a vested interest in pushing high-commission (and high-profit) whole-life policies.

3. Whole life is expensive.

Policies with an investment component cost many times more than term policies. As a result, many people who buy whole life often can't afford an adequate face value, leaving themselves underinsured.


4. Whole life policies are built on assumptions.

The returns quoted by the agent come in two forms, guaranteed and non-guaranteed. The guaranteed return is fixed interest added to the policy's cash value, but the non-guaranteed are simply guesses based on projected investment returns -- not reality. And some companies keep these guesses of future returns on the high side to attract more buyers.

5. Keep your investing and insurance strictly separate.

There are better places to invest -- and without the high commissions of whole-life policies.

6. Buy enough term coverage to fill your needs.

Life insurance is no place to skimp, especially with rates at historic lows.

7. Match the term of the policy to your needs.

You want the policy to last as long as it takes for your dependents to leave the nest -- or for your retirement income to kick in.

8. Buy when you're healthy.

Older people and those not in the best of health pay steeply higher rates for life insurance. So buy as early as you can, but don't buy until you have dependents.

9. Tell the truth.

There's no sense in shading the facts on your application to get a lower rate. Be assured that if a large claim is made, the insurance company will investigate before paying.

10. Use the Web to shop.

Buying life insurance has never been easier, thanks to the Internet. You can get tons of quotes, and no pushy salespeople.

 

Posted by at 8:42 PM |

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March 21, 2006

Insurers charge the less-educated more

  Seeking new ways to separate good risks from bad, car insurers zero in on your job. The result? It's not ditch-diggers and waitresses getting the discounts.

Your driving records might be identical, but if your neighbor has the right job and you've got the wrong one, you could pay hundreds of dollars more for car insurance.

The safe drivers, according to insurers? Biologists, chemists, economists, judges, veterinarians, accountants, architects, lawyers, teachers, engineers and dentists. The worst? Clerks, long-haul drivers and "unskilled and semi-skilled blue- and gray-collar workers."$100? $200? $300? You can't save if you don't shop around.

In states where rating factors can legally include education and occupation, insurers such as Allstate and Geico are now charging drivers with the right kind of jobs much less for insurance.

Allstate discounts premiums by up to 10% for those in its favored jobs. Geico simply charges the less educated more.

Eric S. Poe, vice president of the nonprofit New Jersey Citizens United Reciprocal Exchange, suggests there is no correlation between education or occupation and the likelihood of an individual getting in an accident.

"The insurance industry is not concerned about whether you will have an accident or not," Poe said. "They are concerned as to whether you will want to be compensated for that accident."

Outcry in New Jersey
The Newark, N.J., Star-Ledger reported earlier this month that a 30-year-old single, male lawyer with a master's degree would pay $1,686 a year for coverage from Geico, but $2,880 if he were a janitor with a high school diploma. The newspaper quotes an internal Geico handbook: "Risks who have achieved at least a high school diploma or its equivalent are more favorable than those without a high school education. Bachelors, masters and other advanced degrees are considered most favorable."

"It is really unconscionable," Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, told the newspaper. "I would love to know who they are marketing themselves to. Are they writing letters to doctors and lawyers? Everybody should be putting down that they are Rhodes scholars."

Occupation appears to be a factor in all states where Geico -- it's the country's fourth-largest auto insurer -- writes policies. New Jersey Consumers United Reciprocal Exchange used the company's online Web quote service to check rates in 43 states for a white-collar professional and a janitor with a high school diploma. The average difference in rates was 40%.

A lawmaker now has introduced a bill that would make New Jersey the first state to prevent insurers from using education to determine auto insurance rates, according to the National Conference of State Legislatures, which searched a database of statutes.

Ten states prohibit the use of driver income, said Miun Gleeson, spokeswoman for the National Association of Insurance Commissioners in Kansas City, Mo.

A break for some
Allstate's study, released last week, looked at 10 million insurance policies over a three-year period and broke down accident claims by profession. The winners, at least in Hawaii, South Carolina, Alaska, Alabama and Idaho, are editors, health technicians and judges, among others. A smaller discount goes to secretaries, teachers, locksmiths, carpenters and artists. Illinois, Minnesota and Wisconsin will offer the discount to police, firefighters and paramedics.

"It's a great example of how Allstate provides consumers with competitively priced insurance based on an individual's risks," said a spokesman for the No. 2 auto insurer, Mike Siemienas. He said that the company had filed to introduce the discounts in other states as well.

A 2004 study, done by Quality Planning Corp., matched Department of Motor Vehicle records with its own database of 14 million auto insurance policies to match incidents, drivers and occupations. It found the worst drivers -- students, medical doctors, attorneys, architects and real estate agents -- had twice as many accidents as the safest -- homemakers, politicians, pilots, firefighters and farmers.

State Farm, the largest car insurer in the country, doesn't use education or occupation to set rates, said spokesman Dick Luedke. The No. 3 insurer, Progressive, also refrains, said spokesman William Perry.

Slicing and dicing
Of course, one man's discount is another man's penalty. It's all part of the game as insurers burn up computing power trying to gauge risk of a claim to the nth degree.

Use of credit histories to determine premiums is the most highly publicized result, but some insurers now track odometer readings, for example, because people who drive less crash less. Progressive is testing a discount to those who agree to have a transmitter record how often, how fast and when their vehicle is driven, along with information about acceleration and braking. Progressive and others are looking at pay-per-mile programs as well.

Each company adopts its own rating system, although there are general guidelines that all companies follow. Your location, marital status, gender, age and the make and model of your vehicle are the most common factors in calculating your likelihood of a claim.

The national average bill for insurance in 2005 was about $930.

Source: MSN Money
 

 

Posted by at 10:52 AM |

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March 18, 2006

Home Insurance - What is in a standard homeowners insurance policy?

A standard homeowners insurance policy includes four essential types of coverage. They include:

Coverage for the structure of your home.


Coverage for your personal belongings.

 Liability protection.


Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.

  1. The structure of your house

This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.

Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.

  2. Your personal belongings

Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.

This part of your policy includes off-premises coverage. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance you have for your possessions. You have up to $500 of coverage for unauthorized use of your credit cards.

Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for it's appraised value. Coverage includes “accidental disappearance,” meaning coverage if you simply lose that item. And there is no deductible.

Trees, plants and shrubs are also covered under standard homeowners insurance. Generally you are covered for 5% of the insurance on the house—up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease.

Liability protection

Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter or dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.

The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world.

Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 to $350 for $1 million of additional liability protection.

Your policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your family or your pet.

This pays the additional costs of living away from home if you can't live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other living expenses incurred while your home is being rebuilt. Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20% of the insurance on your house. You can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.

If you rent out part of your house, this coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.


 
© Insurance Information Institute, Inc. - ALL RIGHTS RESERVED


 

 

Posted by at 8:44 AM |

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March 16, 2006

Health Insurance - Top Things To Know

1. Insurance costs a lot but having none costs more.

There are sensible ways to save money on insurance, but skipping coverage isn't one of them. Medical bills from even a minor car accident can deplete your savings -- a major illness can push you into bankruptcy.

 2. If your employer offers insurance, grab it.

Group coverage, particularly when it's employer-subsidized, is almost always a better deal than anything you can get on your own, even if you're young and healthy. If you're NOT young and healthy, it's definitely a better deal.

3. Comparing plans is tough but necessary.

Unfortunately, there is no such thing as standard coverage. Benefits and costs vary widely from plan to plan. If you have choices, you'll have to examine each one closely to find the best deal.

4. The lowest premium isn't always the cheapest plan.

What your insurance covers is just as important as, and sometimes more important than, what you pay up front. Ultimately, the cheapest plan is the one with the best price for the benefits you're most likely to use.

5. Even good coverage can have big loopholes.

You can count on your health insurance to cover you for a hospital stay. Most policies cover doctor visits, but benefits for mental health, prescription drugs and dental care are strictly optional.

6. You'll pay more for freedom.

Plans with the most comprehensive coverage at the lowest out-of-pocket cost require you to use a specified network of hospitals, doctors, labs, and other providers. The more flexibility you demand, the more you'll pay, in either premiums or co-payments.

7. You can check out networks before signing up.

A growing number of public and private sources compile information on the track records of individual doctors, hospitals, and health plans.

8. You can keep your insurance if you lose your job.

State and federal regulations protect you from losing your health coverage just because you lose your job. Unfortunately, they offer little protection from high premium costs.

9. Working couples have more to think about.

If you and your spouse both get health insurance at work, you must sort out whether it makes more sense to have two policies or for one of you to cover the other. If you have kids, you need to decide who's going to cover them.

10. Tax breaks can help.

Ordinarily medical expenses, including insurance premiums, are not tax deductible until they exceed 7.5% of your income. However, if you're self-employed or your employer offers a flexible spending account, you can get a tax break without meeting the threshold.

 

Posted by at 10:06 PM |

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March 15, 2006

Auto Insurance Basics

Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy.

[Auto Insurance Quiz - Video]


Auto insurance provides property, liability and medical coverage:

  • Property coverage pays for damage to or theft of your car.

  • Liability coverage pays for your legal responsibility to others for bodily injury or property damage.

  • Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you're financing a car, your lender may also have requirements.

Most auto policies are for six months to a year. Your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium.

Your auto policy may include six coverages. Each coverage is priced separately.

1. Bodily Injury Liability

This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission.

It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.

2. Medical Payments or Personal Injury Protection (PIP)

This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

3. Property Damage Liability

This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.

4. Collision

This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you'll also be reimbursed for the deductible.

5. Comprehensive

This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.

Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium.

Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.

States do not require that you purchase collision or comprehensive coverage, but if you have a car loan, your lender may insist you carry it until your loan is paid off.

6. Uninsured and Underinsured Motorist Coverage

This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.

Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.

© Insurance Information Institute, Inc. - ALL RIGHTS RESERVED

 

Posted by at 8:25 PM |

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March 13, 2006

Wisconsin Health insurance proposal draws mixed reviews

Area businesspeople expressed interest and doubts Wednesday about a new proposal to provide health-care insurance coverage for most Wisconsin residents.

Roughly 80 people attended a public forum at Ashwaubenon High School about the new Wisconsin Health Plan, the latest attempt to provide universal health coverage for the state.

"We need to do something, but long term I'm not sure this would solve our problem because I think costs would still go up," said Karen Besaida-Hansen, president of Besaida Health Innovators.
Two Milwaukee-area legislators plan to introduce a bill soon to collect a flat percentage from all employers and use the money to pay for a health insurance voucher system for most residents under 65.

A primary difference between this plan and previous attempts is that the Wisconsin Health Plan would rely on the free market system to keep costs competitive.
 
Behind the plan are two former staffers in the administration of Gov. Jim Doyle — David Reimer, project director, and Lisa Ellinger, assistant director. They make up a new nonprofit, grant-funded organization called Wisconsin Health Project.

Reimer said the plan would provide a "floor benefit." If people wanted more than the basic plan, they could pay for it themselves.

The plan would assess each employee 2 percent of total Social Security wages and each employer 3 percent to 12 percent of total wages. Reimer said that is well below the average that most companies pay for health plans now, which is 15 percent to 16 percent.

In response to doubts raised about the cost of such universal care, Reimer said, "I've tried to look at the data, statewide and nationally, and I do think this model will bring costs down."

Besaida-Hansen said she employs about 55 people, and only 10 take her health plan because she can't afford very good coverage.

Paul Rauscher, president of small manufacturer EMT International in Green Bay, said his health care costs are 14 percent of total wages. "As an employer, I'm very skeptical of your numbers," he said.

He was particularly doubtful a statewide plan could deal with cost increases fueled by malpractice suits. Rauscher said he wanted to see how the money would be collected, something the proposed legislation will not address yet.

 

Posted by at 8:04 PM |

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How to Save on Car Insurance

Are You Still Paying Too Much for Car Insurance?

Everyone who owns a car needs auto insurance. This article will give you some tips on lowering your auto insurance costs. You will find a checklist of items to ask your insurance agent that may qualify for discounts. Keep in mind that not all discounts can be applied with all insurance companies in all states.


 

1. Shop Around

Go to your favorite search engine and type in "free car insurance quotes online". You'll see a long list of insurance companies that you may even be familiar with. Visit at least five car insurance websites and look for a link to free quotes. You will then be asked basic information about yourself, your driving history, and your car's make, model, and year. It just takes a couple of minutes, and shortly thereafter, they will email you a no obligation quote. Write down their website address, their toll free number, and customer service email address.

Each insurance company will ask you generally the same questions, and will give you options about how much coverage you will want. Find your current policy, if you have one, and take note of the coverage you currently have. Always provide the same information and ask for the same coverage at each company so you will be comparing apples to apples. Read the fine print and make sure nothing is excluded from the quote like Rental car coverage, towing, medical, etc...

For the purposes of the quote, the insurance company will not ask you your social security number, but keep in mind your actual cost maybe higher or lower depending on your credit history. If you're not sure about some of the terminology or coverage, take notes so that you can ask the insurance company about them directly.

Once you have at least five quotes emailed to you, take the lowest two or three quotes and see if they are less than what you are paying now. Most likely at least one of them is much lower. At this point you will want to call them directly to get the most accurate quote by providing additional personal information. For additional discounts, here is a checklist of things you should ask about.

[ ] $500 deductible
[ ] $1,000 deductible
[ ] Paying monthly, semi-annually, or annually
[ ] More than 1 car
[ ] No Accidents in 3 Years
[ ] No Moving Violations in 3 Years
[ ] Driver Training Courses
[ ] Defensive Driving Courses
[ ] Anti-Theft Devices
[ ] Low Annual Mileage
[ ] Air Bags
[ ] Anti-Lock Brakes
[ ] Daytime Running Lights
[ ] Student Drivers with Good Grades
[ ] Auto and Homeowners Coverage with the Same Company
[ ] College Students away from Home
[ ] Long-Time Customer
[ ] Other Discounts

2. Saving Insurance Premium on cars you own outright.

If you own a clear title to your car, meaning there is no bank loan on it, then you may want to consider dropping the collision/comprehensive coverage. As a rule of thumb, if the cars value is less than $3000, it may not make sense for you to pay for this additional coverage. Over time, the cost of the additional insurance premium will exceed the value of the car. It's pretty simple math.

Check the fair market value of your car either through Edmunds.com or even your local newspaper. See what other people are trying to get for the same car. Keep in mind your cars mileage, condition, and age. Has it been in an accident before? Does it have unusually high mileage in excess of 15,000 miles per year? Does it need new tires? You get the idea. Be realistic, because in the event that this car is in an accident and is damaged beyond repair, it is unlikely you will get the full value of the car.

3. Ask About Insurance Rates in Different Areas

Rates can vary widely even in the same state. Different locals have different accident rates, population, and crime. These all factor in to the final cost. If you are moving to a different area, ask about what the rates are for that town.

4. Ask About Getting Other Insurance Policies Together With Your Auto Insurance

Combining insurance policies with the same company can often give you additional discounts. If you own a home, ask about combining your homeowners insurance with your auto insurance. Also ask about other polices, such as life, health, and business insurance. Most insurance companies cover a wide range of policies and will give substantial discounts when you do business exclusively with them.

5. A Clean Credit History Can Reduce Car Premiums:

Having good credit can also lower your insurance costs. Many insurance companies will use credit information to price auto insurance policies. Drivers with good credit and a clean driving record may qualify as a "preferred" customer with lower risk and will be rewarded with lower premiums.

6. Low Mileage Discounts

Some companies offer discounts to drivers who drive a lower than average number of miles per year. If you car pool, take public transportation like the subway, or work from home, you will most likely drive few miles per year than the average driver.

7. Group Insurance

Some insurers offer discounts to drivers who work for certain companies or belong to professional associations, and alumni groups. Ask your employer, group or clubs that you belong to if they have any special arrangements with different insurance companies.

Using all of these tips can save you hundreds of dollars per year, especially when you have multiple cars and multiple drivers in the same household.


 

Posted by at 7:49 PM |

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March 12, 2006

Many Medicare Recipients Could Cover Premiums

 
Many Medicare Recipients Could Cover Premiums by Switching to Cost-Effective Drugs; Taxpayers Also Could Save Best Buy Drugs identifies affordable medicines; Alzheimer’s meds latest category
 
(Washington, D.C.) – Many seniors could save enough money to cover the cost of their Medicare drug benefit premiums if they consider switching to equally effective, lower-cost medicines identified by Consumer Reports Best Buy Drugs, according to the latest analysis by Consumers Union.
 

The report – released today at a symposium on using scientific evidence to identify effective and affordable drugs for consumers – also found that Medicare beneficiaries who take five common drugs could save between $2,300 and $5,000 a year by switching to lower-cost alternatives. Those savings could prevent seniors from falling into the ‘doughnut hole’ coverage gap, which requires beneficiaries to pay for drugs out-of-pocket once their total drug costs reach $2,250. The report looked at Medicare drug coverage in six markets throughout the country.
 
“Some seniors may not be signing up for Medicare drug coverage because they are uncertain about saving money,” said Gail Shearer, director of the Consumer Reports Best Buy Drugs program. “It’s important seniors know that they can significantly stretch their prescription drug dollars under Medicare if they first consider cost-effective medicines.”

Those savings also translate to taxpayers. For example, if all Medicare beneficiaries taking statin drugs to lower cholesterol switched to generics, the savings to taxpayers and consumers could be about $8 billion a year starting in 2007, or up to 10 percent of the Medicare drug plan’s estimated overall expenditures over the next decade.

“There are real savings for both patients and taxpayers if medicines are prescribed based on their effectiveness and track record, not on advertising campaigns and marketing,” Shearer said.

The symposium, featuring Sen. Hillary Clinton, Medicare administrator Mark McClellan and Michael McGinnis, senior scholar at the Institute of Medicine, is available to view by clicking here.

Consumer Reports Best Buy Drugs is a free, public education project that uses the available scientific evidence to identify effective and affordable medications. It was created in part to counter pharmaceutical industry marketing that promotes the newest – but not necessarily most effective – drugs. It identifies Best Buys to help consumers consult with their doctors about lowering their drug costs. Drug reports, as well as the Medicare drug analysis, can be found at www.CRBestBuyDrugs.org.

Twelve drug categories have been analyzed to date, including medicines to treat high cholesterol, arthritis pain, menopause, and migraines. The latest report on Alzheimer’s medications, released today, identifies three Best Buys based on evidence of their effectiveness, side effects, tolerability, flexibility of use, and cost.

The Alzheimer’s disease Best Buy Drugs are:

• Donepezil (Aricept) and Galantamine (Razadyne) – for people with early-stage Alzheimer’s disease

• Memantine (Namenda) – for people with middle-stage and late-stage Alzheimer’s disease

The new analysis found that medicines used to slow mental decline in people with Alzheimer’s disease are not particularly effective. When compared to a placebo, only 10 percent to 20 percent more people taking an Alzheimer’s drug seem to benefit. And it is the rare person who has a significant delay in the worsening of their symptoms over time.

The report concludes there is no way as yet to predict who will respond and who will get little or no benefit from one of the five drugs approved to treat Alzheimer’s disease. Thus, the decision to try one is a judgment based on whether the treatment is worth the cost and the risk of side effects. Alzheimer’s disease drugs cost an average $148 to $195 a month.

The Medicare savings analysis looked at five commonly used categories of medicines – those to treat high cholesterol, high blood pressure, post-heart attack care, arthritis pain, and depression. Seniors switching to Best Buys for these drugs could save from $2,300 to $5,000 a year, depending on what Medicare drug plan they buy and where they live. The report looked at plans in Arizona, California, Georgia, Maryland, Minnesota and Pennsylvania.

 

Posted by at 12:01 AM |

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March 11, 2006

Insurance Probe Defies Death

New York Attorney General Eliot Spitzer isn't finished with the insurance industry. Now, he's going after one of its more tawdry businesses -- life settlements.

Insurance broker National Financial Partners disclosed late Wednesday that it recently received a subpoena from Spitzer's office seeking "information regarding life-settlement transactions.'' The life-settlement business is a fast-growing corner of the insurance market in which hedge funds and other investors buy and sell unused life insurance contracts taken out by wealthy individuals and by corporations on top executives. In this somewhat morbid area of the financial world, speculators buy up these insurance policies in the hope that the insured will die before the pricey premiums eat up too much of the final payout.
The life-settlements business is a close cousin to the much-maligned viaticals industry, which specializes in buying life insurance policies from the terminally ill at discounted prices. That practice got a bad name in the 1990s, when a number of firms engaged in unscrupulous tactics and were accused of taking unfair advantage of the infirm.

To distinguish themselves from the viaticals crowd, life-settlement buyers mainly target rich people who are over 65 years old with insurance policies that carry high premiums. Buyers pay an upfront lump sum for these potentially lucrative policies, which the insured might otherwise have allowed to lapse or have sold back to the insurance company for a modest sum.

In 2004, TheStreet.com reported that American International Group (AIG:NYSE), Merrill Lynch (MER:NYSE) and Dallas-based HBK were some of the big investors in the then $4 billion-a-year life settlements business.

National Financial disclosed few details about the subpoena, which it received in March, in its 2005 annual report. The company said its dealings in the life-settlement business accounted for between 6% to 8% of its $891 million in revenue in 2005.

 

Posted by at 11:57 PM |

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Insurance Crime Bureau Lists Top 10 Cities for Staged Accident Scams

In a worst-case scenario of greed-driven criminal activity, Waurd Demolaire, 25, of Brooklyn, New York, was convicted Feb. 16 by a Queens County jury of killing a 71-year-old grandmother in 2003.
Advertisement

Demolaire intentionally struck a vehicle driven by Alice Ross. The contact caused Ross to lose control and strike a tree dying at the scene from her injuries. This intentional "accident" was to form the basis for submitting a series of fraudulent claims to insurance companies in a practice that is sweeping the nation.

The National Insurance Crime Bureau (NICB) is today releasing its list of the top 10 cities with the most staged accident activity in the nation. This information is derived solely from an analysis of pending NICB investigative files.
While only 10 cities are identified, staged accidents and related insurance fraud schemes occur in every state in the nation. The 10 cities ranked from most to least activity are:

1. Miami
2. Los Angeles
3. Houston
4. Chicago
5. Philadelphia
6. Tampa
7. Cleveland
8. Orlando
9. New York
10. Boston

Staged or "caused" accidents are but one of the numerous kinds of fraud committed daily around the country and they contribute to the $30 billion lost annually to fraud—a loss that is ultimately recovered through increased premiums.

Robert Bryant, president and chief executive officer of NICB, said today, "All of us need to be aware of staged accident scams because all of us are potential targets. NICB has investigators and analysts working around the country with their law enforcement and insurance industry counterparts to detect, prevent, and prosecute these people before they make you their next mark."

Scams of this type include the following:

•Panic stop is the most basic of the caused accidents. The suspect positions his vehicle in front of the victim's vehicle and slams on the brakes causing a rear-end collision. The victim driver has no warning that the accident is about to occur.

•Drive down occurs when you try to merge into traffic or pull out of a parking space. The suspect driver waves you to proceed, then intentionally smashes into you. The suspect driver denies waving you on.

•Hit and run occurs when a suspect driver uses a damaged vehicle, drives it to a public location and claims to be the victim of a hit and run. The police are often called to verify damage.

•Sideswipe occurs in a dual left turn lane of a busy intersection. The victim driver in the inside lane drifts into the outer lane and is intentionally hit by the suspect driver in the outer lane.

•Swoop and squat occurs when the vehicle you are following is suddenly passed by another vehicle which "swoops" in front of it. This causes the vehicle in front of you to stop abruptly, or "squat". As a result, you are unable to avoid colliding with the rear end of the squat vehicle. The swoop car races away, never to be seen again. The driver of the squat car submits vehicle damage and personal injury claims to your insurance company.

Be alert to these crimes and follow NICB's tips should you ever be involved in an accident that you sense is suspicious.

•Maintain sufficient distance from the vehicle in front of you to allow ample braking time if it stops suddenly (a favorite tactic of staged accident criminals).

•Avoid tailgating.

•Keep a disposable camera in your glove box and photograph vehicle damage and all passengers and witnesses at the scene.

•Call the police to the scene of an accident for a report

The NICB is a non-profit organization dedicated exclusively to preventing, detecting and defeating insurance fraud and vehicle theft through information analysis, investigations, training, and public awareness.

Anyone with information concerning auto theft and insurance fraud can report it anonymously by calling toll-free 1-800-TEL-NICB (1-800-835-6422) or by visiting www.nicb.org.

*Methodology—this report is derived from a review of all active NICB investigative files which identified staged or caused accidents as the primary fraudulent activity. However, the total number of NICB fraud investigations involving staged or caused accidents as a related activity is much greater as many cases are routinely categorized as medical fraud or other fraud investigations. # # #

Source: National Insurance Crime Bureau

 

Posted by at 11:47 PM |

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