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Saturday, January 27, 2007

Federal Judge Puts Part of State Farm Katrina Settlement on Hold

The federal judge who must sign off on a proposed $50 million class action settlement involving State Farm's handling of Hurricane Katrina claims has said he needs lots more information before agreeing to the deal affecting as many as 35,000 policyholders.

U.S. District Judge L.T. Senter of the U.S. District Court of Southern Mississippi on Friday declined to approve the widely-reported settlement and did so "without prejudice," but he also made it clear that the parties have a lot of explaining to do.

"In the absence of substantially more information than I now have before me, I am unable to say, even preliminarily, that the proposed settlement establishes a procedure that is fair, just, balanced, or reasonable," wrote Judge Senter.

The ruling affects the proposed settlement of a class action on behalf of an estimated 35,000 State Farm claimants who did not sue the company. The agreement promises that their claims and any denials will be reconsidered.

Read complete article online here-

Friday, January 26, 2007

S.D. Legislature Nixes Booster Seat Proposal for Older Kids

A bill to require booster seats for children from the age of 5 through 7 was killed this week in the South Dakota Legislature.

Supporters said many parents don't realize that older children often suffer serious injuries or are killed because seat belts and safety harnesses do not properly restrain them.

Most parents know they should use infant seats for the youngest children, but they don't follow through when those children get older, said Dick Tieszen, lobbyist for State Farm Insurance.

"The use of safety seats dramatically decreases for older children, and that as a result of that, the older children are experiencing injuries,'' he said.

But opponents of the bill said the governor has a good program that distributes booster seats and it could be hurt if state law is changed to require them.

They also said it would be difficult to enforce a law that would require booster seats for children ages 5 through 7 who are not yet 57 inches tall. Police couldn't tell their ages by looking at them or how tall they are, opponents of HB1134 said.

"I don't think the time has come when we want to arrest mothers and traumatize the kids when we don't know what we're doing as far as making arrests goes ... with a measuring stick,'' said Rep. Gordon Pederson, R-Wall.

The bill failed 6-7 in the House Transportation Committee.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Auto Insurance Fraud Crackdown Paying Off for Drivers


High-profile crackdowns on auto insurance fraud have resulted in dramatic savings for drivers in some Massachusetts communities.

The statewide average premium is scheduled to drop by nearly 12 percent on April 1, but drivers in some communities where antifraud task forces have been operating will see even greater savings, with premiums falling 24 percent in Lawrence and more than 15 percent in some Boston neighborhoods.

Drivers in Lawrence, the first Massachusetts community to target insurance fraud in 2003 following a case in which a grandmother died in what police called a staged accident, will see the average annual premium drop to $1,379 from $1,815.

In Boston's Dorchester section, drivers will see the average premium fall to $1,670 from $2,033, a reduction of almost 18 percent.

The new rates apply to what insurance companies call experienced drivers, who represent the most common category of insured driver.

The industry's calculations are based on a driver with six or more years of experience, a vehicle that is a couple of years old, an average driving record, and comprehensive and collision coverage with a deductible of $500.

"We've said that if we could take fraud out of the system, rates would come down,'' said Daniel Johnston, president of the Automobile Insurers Bureau of Massachusetts. "Now we finally have proof.''

The antifraud campaign has led to charges against or the arrest of 528 people, including lawyers and chiropractors, Johnston said.

Reduced fraud has also led to a reduction in claims filed with insurers, which allows regulators to cut premiums.

In communities where fraud is less of a problem, and where the average premiums are lower, the percentage reduction coming on April 1 is also less. For example, experienced drivers in Newton will see their average premium drop 8.6 percent.

"This is exactly how the system should work, and we can lower premiums even more in the future if we apply a similar approach to reducing accidents,'' said Stephen D'Amato, a consultant to the Center for Insurance Research in Cambridge.

Massachusetts is the only state where auto insurance rates are set by state regulators.

Some insurers say rates would drop even further if regulation was reduced and companies were allowed to compete for drivers' business.


Information from: The Boston Globe,

Thursday, January 25, 2007

Study: Many Teens Tired and Distracted While Driving


Teen drivers are often behind the wheel when they are tired or being distracted by cell phone chatter or others' behavior, according to a new national survey of high schoolers.

In the survey, 5,665 high school students said they are driving under extremely dangerous conditions -- fatigue, talking on cell phones, strong emotions, multiple passengers -- and many are still not wearing seatbelts. The National Teen Driver Survey, released by The Children's Hospital of Philadelphia and State Farm, represents 10.6 million 9th, 10th and 11th grade students in all public high schools in the United States.

"Research has told us a lot about which teens get into crashes, but we don't know enough about the why," says Flaura K. Winston, M.D., Ph.D., co- scientific director and founder of the Center for Injury Research and Prevention at Children's Hospital of Philadelphia and principal investigator of the National Teen Driver study. "With this survey, we asked teens directly: what is happening when your peers drive that is making them unsafe?"

Key findings about the teen experience in cars shows:
-- 75 percent of teens see peers driving fatigued
-- 90 percent see passenger behavior that distracts the driver
-- 20 percent of 11th graders report being in a crash as a driver in the past year

The survey also revealed the important role that the teens see for their parents:
-- 66 percent say that they care about their parents' opinion on cell
phone use while driving
-- 56 percent of them rely on parents to learn how to drive
-- 39 percent of their parents provide total financial responsibility for
their driving

"Teens described a driving environment that would be challenging even to experienced drivers," says Winston. "Combine this driving environment with lack of training and inexperience and you have a deadly mix."

In 2005, almost 7,500 15-to 20-year-old drivers were involved in fatal crashes according to the National Highway Traffic Safety Administration. The fatality rate for drivers aged 16 to 19 years, based on miles driven, is four times that of drivers aged 25 to 69 years.

"Our aim is to help young drivers make safe decisions," says Laurette Stiles, vice president for strategic resources at State Farm. "We want to give them tools to help them avoid hazards and ultimately to save lives and make our roads safer for all."

Parents and teens can learn more about safe driving for teens at

Ohio Nationwide Insurance Members' Data Taken in Theft from Vendor


Computer records containing medical claim information, health data and Social Security numbers of 28,279 Nationwide insurance customers were stolen from the office of a vendor in Massachusetts, the company said.

A lockbox that contained computer backup tapes was taken during a break-in Oct. 26 at Concentra Preferred Systems in Weymouth, Mass., Nationwide Mutual Insurance Co. said Tuesday.

A break-in of Concentra's office in Dayton happened the same day, with someone stealing a lockbox with backup tapes of medical claim data of about 130,000 Aetna Inc. health insurance members, Aetna said. Hartford, Conn.-based Aetna reported that break-in last month.

A message seeking comment on the thefts was left Wednesday at Naperville, Ill.-based Concentra.

When Aetna reported the break-in at Concentra, the vendor said accessing information from the backup tapes would require commercial equipment and special software packages. The company said the backup tapes could not be used on a standard personal computer.

Cash, DVD players and other items also were stolen in Dayton, making it unlikely the culprits were trying to obtain information needed to commit identity theft, authorities said.

Columbus-based Nationwide, informed of the theft two weeks after it happened, mailed letters last week to customers, most of whom live in central Ohio. The company delayed customer notification while it determined the risk of identity theft, which it believes is low, spokesman Mike Switzer said.

Nationwide said it would offer affected customers a free year of credit monitoring and identity theft insurance. Aetna said last month that it would make a similar offer.

Copyright 2007 Associated Press. All rights reserved. 

AIG Looks to Acquire Outstanding Shares of Auto Insurer 21st Century

January 25, 2007

American International Group, Inc. (AIG) has submitted a letter to the board of directors of 21st Century Insurance Group proposing to acquire the outstanding 38.1 percent publicly held shares of 21st Century for $19.75 per share in cash.AIG and its subsidiaries own approximately 61.9 percent of the outstanding shares of 21st Century. The aggregate cash consideration payable would be approximately $690 million. Following the transaction, 21st Century would become a wholly owned subsidiary of AIG.

Founded in 1958, 21st Century is a direct-to-consumer provider of personal auto insurance. With $1.4 billion of revenue in 2005, the company insures 1.5 million vehicles in 17 states (Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Minnesota, Missouri, Nevada, New Jersey, Ohio, Oregon, Pennsylvania, Texas, Washington and Wisconsin).

The proposed per share price represents a 19.0 percent premium to yesterday's closing price and a 25.5 percent premium to the average closing price during the last 12 months. The proposed per share price also represents a multiple of 19.6x the consensus estimates of 21st Century's 2007 earnings per share (based on a current First Call estimate of $1.01 per share).

"Our proposal represents an excellent opportunity for 21st Century's shareholders to monetize their investment at a full and fair value for their shares. For AIG, this is an opportunity to make a substantial additional investment in a business we know well," said Martin J. Sullivan, president and chief executive officer of AIG.

AIG contemplates that the transaction would be implemented through a merger agreement which would be negotiated and approved by a special committee comprised of directors of 21st Century who are independent of AIG. This proposal is subject to AIG's satisfactory completion of due diligence and satisfaction of regulatory requirements.

AIG has advised 21st Century that AIG's sole interest is in acquiring the remaining shares of 21st Century held by the public shareholders and that it has no interest in a disposition of its controlling equity stake in 21st Century.

Source: American International Group, Inc.

Saturday, January 13, 2007

More than 100 people charged with car insurance fraud in LA


LOS ANGELES - More than 100 people were indicted in what authorities say is one of the state's largest cases of auto insurance fraud for allegedly bilking companies out of hundreds of thousands of dollars, officials announced Wednesday.

In the scam, employees at a dozen San Gabriel Valley law firms would steer accident insurance claim cases to a chiropractic clinic, prosecutors said. The clinic in turn would overbill insurance companies by signing off on claims that inflated the number of visits for treatment, with payouts shared among clients, clinics and the firms.

Total losses were hard to estimate, but investigators said insurance companies were defrauded about $500,000 during the two-year probe.

Los Angeles County District Attorney Steve Cooley said the defendants were "fueled by greed."

"People who make a career out of defrauding insurance companies will be exposed and will suffer the consequences," he said.

The number of defendants - 101 in all - made it the largest auto insurance fraud case in Los Angeles County and one of the largest in California, authorities said. Thirteen are office administrators who allegedly worked as "cappers," two are attorneys and 86 are insurance claimants.

Indictments unsealed last week charged about 200 counts of insurance fraud, 64 counts of soliciting fees for referrals - known as capping - and three counts of unauthorized practice of law. One defendant, Jorge "JC" Yang, faces 117 counts alone.

The investigation itself was opened in September 2004 after an informant at a clinic complained to authorities about employees at law offices who allegedly referred cases in exchange for fees and kickbacks from chiropractic centers. Throughout the two-year probe, an investigator worked undercover as an office manager at a clinic in Alhambra.

At least 88 people have been arrested, with the rest either overseas or at large. All but a handful have posted bail. Arraignments were scheduled through next week.

According to state Insurance Commissioner Steve Poizner, insurance fraud of all types totals about $15 billion a year.

The investigation was conducted by the district attorney's office, the California Highway Patrol and the state Department of Insurance.