Insurance is everywhere. The longer you are “in the business”, the more you see it.

Here is a question for each of the individual States Departments of Insurance and the Federal Government: How do you regulate a carrier’s insurance operations when an unregulated portion of that same parent corporation can bring the whole company to the brink of bankruptcy? The AIG situation has brought up questions that I don’t anyone completed before September, 2008. Also, how much new business do you thing AIG has put on the books since Friday, September 12th?

During the past few weeks in the newspapers: I read in the NY Times an article about automobile insurance premiums stabilizing this year. (I still don’t see that market being anything but competitive.) When Geico and Allstate stop spending a fortune on advertising, I’ll know that the market has stabilized since the advertising won’t be giving the two companies an adequate return on their investment. Also, accident forgiveness will only last so long. The stockholders of each company will decide when the loss ratio doesn’t make sense.

I read in all of the papers that each of the presidential candidates has their own version of how to address health insurance. Obama would create a national health insurance program for people without employer-provided health care and who do not qualify for other existing federal programs. McCain, who opposes federally mandated universal coverage, proposes to reform the federal tax code to offer choices outside of employee-based health insurance coverage. Each family would receive tax credits ($2,500 single / $5,000 family) so they would be able to purchase health insurance nationwide, move their coverage from state to state and from job to job. It sounds good except, health insurance is regulated today mostly on a state by state basis. Each candidate should look at Massachusetts, which has been trying to manage state mandated medical coverage (thank you Mitt Romney.) The majority of Americans believe (according to a Quinnipiac University poll from May, 2008) that it is the responsibility of the government to make sure that everyone has adequate health care. I think everyone believes they should have adequate healthcare, we just haven’t figured out how to pay for it in either the public or private sectors.

Real estate is affecting every part of our industry. Did you have the experience of trying to place coverage for a home on a street when there are multiple houses in foreclosure?

AIG tried to defend its financial position. I don’t think anyone was afraid of AIG declaring bankruptcy a few weeks ago but it’s a serious situation when AIG, the largest insurance company in the world, has to depend on the Federal Government offering an $85 billion loan to maintain its solvency. This affects every person and business covered by AIG in the United States and across the world. It also affects the way the citizens of other countries view how the Federal government will manage our economy and support private companies.

The financial problems due to the write-downs of mortgaged backed securities continue to become more visible to everyone. With the decrease in real estate values and the subsequent stress on REITs (Real Estate Investment Trusts), I think we’re just about to see even more stress that this will put on the investment portfolios of some insurance carriers.

I have heard anecdotal evidence that local brokers are scaling back personnel and expenses because of the stresses in the economy and our industry. We are not immune to the economic downturn. If you are responsible for running a business, you are always vigilant about costs. When our clients have to review overhead, our products and services are some of the first to be evaluated for reduction in cost and coverage.

And finally, what about property coverage in the tri-state area? With hurricane season in full swing and at one point four storms lining up in the east Atlantic to begin their dance towards the United States, does anyone see the homeowners market opening up? Last I heard, many carriers are underwriting for a distance of three miles from water on the south shore of Long Island before they will consider covering a property. Tropical storm Hanna was like a teaser of potential damage to come. Gustav punched New Orleans and rained on the South. Hannah rained on the east coast. Nothing relatively major in the way of damage but plenty of flooding, downed trees, sporadic power outages, and a small amount of coastal erosion. This scenario can be magnified very quickly if a real hurricane marches up along a water route directly to NY and NJ instead of tripping along the coast from South Carolina.

Hurricane Ike hit in Texas but not as catastrophic as Federal and Texas State officials had warned. However, significant damage to property occurred. Initial estimates are over $20 billion dollars in property damage and, due to an interruption in gasoline refining, a spike in gasoline prices resulted. By the time this article appears, hopefully there hasn’t been much more hurricane activity this season.

Let’s talk about what TriCounty offers to our members: education, legislative involvement, a forum for interacting with your fellow insurance brokers and agents, resources to help you run your business. Not bad for a small annual membership fee as part of your State Association dues. As a first step, check out our website (www.tricountyagents.com.) Then go from there.

We had a great time at the softball game last month at Eisenhower Park. The weather cooperated, the food was good, the game was competitive enough to be interesting, no one was injured other than some overexertion and strained muscles, and the people who came all asked when we would schedule the next game. Since the seasons are changing, we are looking into a bowling outing for our next recreational function.

Upcoming events: Superintendent of Insurance, Eric Dinallo, was almost scheduled to meet with us on October 29th. However, with the uncertainty over the status of AIG, we will probably have to try to schedule with him for later this year or early in 2009. Our holiday party is at the Chateau Briand on Thursday, December 4th. There are some other interesting and educational meetings being scheduled. See our Website for more details.

Enjoy your families and your business.

Let me know what you’re thinking.

Evan Portnoy
eportnoy@rampartinsurance.com