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November 2007

FRAUD UPDATE - FORMER INSURANCE AGENT SENT TO PRISON FOR $1.5 MILLION FRAUD SCHEME

LOS ANGELES ― Insurance Commissioner Steve Poizner today announced that a former Los Angeles insurance broker surrendered himself to authorities after being convicted of two fraud counts. The broker, 57, of Los Angeles, was sentenced on July 2, 2007 to serve one year and one day in federal prison after pleading guilty to two counts of mail fraud in connection with an insurance fraud scheme. The California Department of Insurance (CDI) collaborated with the Federal Bureau of Investigation and the United States Postal Inspection Service to uncover the broker’s illegal activity.

"As Insurance Commissioner, protecting consumers is my number one priority," said Commissioner Poizner. "I will not tolerate thieves who prey on honest Californians. My investigation teams are committed to stopping fraud perpetrators and will continue bringing criminals to justice."

Investigators discovered that the insurance broker, of West Hollywood, was hired to provide automobile liability coverage for approximately 100 Prime Time Shuttle fleet vans providing shuttle services to Los Angeles area airports. From August 2002 to January 2005, the broker provided shuttle drivers with fraudulent insurance identification cards supposedly from legitimate insurance companies. He failed to remit more than $1.5 million in premium payments from Prime Time Shuttle.

The insurance broker also admitted to falsely representing to victims that they were insured when, in fact, they were not. He also acknowledged that as a result of his scheme, 11 victims have suffered medical expenses and property damage resulting in at least $163,000 in unpaid losses. In addition to serving time in prison, the insurance broker was ordered to pay $169,979.79 in restitution. This case was prosecuted by the United States Attorney's Office-Central District of California.

Source www.insurane.ca.gov

U.S. DEPARTMENT OF LABOR'S OSHA PROPOSES $58,800 IN FINES AGAINST GAINESVILLE, GA.-BASED EXCAVATION COMPANY FOR SAFETY VIOLATIONS AT ATLANTA SITE

ATLANTA -- The U.S. Department of Labor's Occupational Safety and Health Administration (OSHA) has proposed penalties of $58,800 against AN excavation company in Gainesville, Ga., for four alleged safety violations. The inspection occurred at a company worksite in southwest Atlanta as part of OSHA's National Emphasis Program on trenching and excavation, one of the most hazardous operations in construction.

"Trench cave-ins occur quickly with little time for employees to react and often with deadly results," said Andre Richards, director of OSHA's Atlanta-West Area Office. "OSHA treats this problem as serious, and employers who continue to ignore safety standards will face increasingly stiffer penalties."

OSHA issued one willful violation with a penalty of $40,000 for allowing employees to work in a trench that was improperly sloped and lacked a protective system. OSHA issues a willful citation when an employer has shown an intentional disregard of, or plain indifference to, the requirements of the Occupational Safety and Health Act.

OSHA issued two repeat violations with penalties of $16,000 for failing to train employees on trenching and excavation hazards and failing to provide a ladder or other means for employees to climb out of the trench should a cave-in occur.

The agency also issued a serious violation with a $2,800 penalty for placing a spoil pile at the edge of the trench that could allow material to fall or roll back into the trench and onto employees.

The company has 15 working days from receipt of the citations to contest them and proposed penalties before the independent Occupational Safety and Health Review Commission. The site was inspected by staff from OSHA's Atlanta-West Area Office, 2400 Herodian Way, Suite 250, Smyrna, Ga.; telephone (770) 984-8700.

OSHA operates a vigorous enforcement program, conducting more than 38,000 inspections last year and exceeding its inspection goals in each of the last seven years. In fiscal year 2006, OSHA found nearly 84,000 violations of its standards and regulations.

Source: www.osha.gov

INSURANCE COMPANIES SHOULD CREATE HURRICANE RESERVE FUNDS
TO PAY CLAIMS IF THE BIG ONE HITS

Insurance Department Proposes Regulation Requiring “Very Rainy Day” Funds

Insurance companies providing homeowners, business and other property insurance in New York State would be required to create a catastrophe reserve fund to help pay claims caused by hurricanes and other natural disasters under a new regulation proposed today by the State Insurance Department, Superintendent Eric Dinallo announced.

“Most people probably think that the extra money they pay on their homeowners insurance for hurricane protection goes into a ‘very rainy day fund’ to pay claims when hurricanes hit,” Dinallo said. “In fact, because of current insurance accounting and tax rules, if there is no hurricane, the extra money goes to insurance companies’ profits. That leaves the companies with no reserves to pay huge claims from big hurricanes and consumers angry over ballooning profits and rising premiums.

“There are many proposals to have government take over or subsidize hurricane insurance, as it does with flood insurance. I believe it is better to find a private sector solution. That’s why we are proposing a new state regulation requiring insurance companies to set aside the portion of the premium they now collect for catastrophe protection. This reserve fund will help pay the claims if and when hurricanes and other disasters do hit,” Dinallo said. “Catastrophe reserves will provide increased transparency that will be good for the industry and consumers. Consumers will see where the money they pay for hurricane protection goes. They will see if it is not enough and there is a need for higher premiums. And they will see if the reserve is large and untouched and can then question the need for higher premiums.”

Insurance spreads risk over a large group. No one knows who will have an auto accident or house fire this year. But people are willing to pay a relatively small amount to ensure that whoever does have that loss is protected.

Insurance companies set aside reserves to cover claims for incidents that occur in a given year. For example, for auto insurance, a company can set aside what it will pay only for accidents that occur that year. That works with auto accidents because there is predictable historical data on the number of claims every year and the cost of those claims. It makes sense to have the people who drive in a given year share the cost of accidents in that year.

The problem for big catastrophes such as hurricanes is that there are a very small number of very costly events that are spread out over many years. So sharing risk in one year does not work. Effectively spreading the risk of hurricane losses requires not only sharing among many people, but also across several years.

Under current accounting and tax rules, insurance companies are discouraged from setting up a reserve to fund losses from events that have not yet occurred, such as those from future hurricanes. Companies can deduct from this year’s revenues money reserved for claims resulting from events that occur this year. That reduces this year’s taxes. Statutory accounting considers those reserves an operating expense. But if a company does not know when the event will occur, then money placed in reserve is not considered an expense in the current year by statutory accounting and is subject to federal and state taxes.

“I’m in favor of tax-deferred reserves for hurricanes, but the industry will only achieve that change if it acts first and gains credibility,” Dinallo said. “Meanwhile, we need to start building protection against the potentially huge costs of hurricanes now.”

The new reserve would cover losses related to natural catastrophes such as hurricanes, wind, hail, earthquake, winter storms (snow, ice, freezing) or tsunami. The regulation would require companies to reserve the amount they now charge policyholders for catastrophe protection, less any taxes paid and the cost of reinsurance.

The Insurance Department is conducting outreach by circulating a working draft of the proposed regulation to the insurance industry and consumers. It will then go through the formal proposal process, which includes publication in the New York State Register and a formal 45-day comment period for written comments.

“I believe a hurricane reserve fund is an important part of the solution. But I am happy to start a discussion with insurance companies, consumers and legislators about possible improvements to this proposed regulation and to develop other ideas. A decision to do nothing would be a bad decision. The current system doesn’t work for companies or consumers,” Dinallo said.

Source: www.ins.state.ny.us

AUTO INSURANCE RATES IN OHIO CONTINUE TO DECLINE

Ohio currently has the 13th lowest auto insurance rates in the country

COLUMBUS — Ohio auto insurance rates have declined for the second consecutive year, according to a report released by the National Association of Insurance Commissioners (NAIC). Ohio currently has the 13th lowest auto insurance rates in the nation. In 2004, Ohio was ranked 14th in the United States.

“Ohio has an extremely strong and competitive auto insurance marketplace, and Ohioans are benefiting from this competition,” said Ohio Department of Insurance Director Mary Jo Hudson. “Healthy competition drives prices lower, and we want to promote robust competition here in Ohio.”

Ohioans are paying on average $668.93 in premiums for auto insurance, far below the national average of $829.17. In 2005, Ohioans paid an average of $680.14 in auto insurance premiums.

Department analysts expect that rates for automobile insurance, overall, will not change significantly in 2007. Changes in automobile insurance rates can be attributed to repair costs, medical costs, weather-related claims, and the number of cars on Ohio roads.

Ohioans with questions about insurance can call the Department's consumer hotline at 1-800-686-1526.

Source: www.ohioinsurance.gov

OSHA ISSUES DRAFT ERGONOMICS GUIDELINES ON PREVENTING
MUSCULOSKELETAL INJURIES IN SHIPYARDS

WASHINGTON -- New ergonomics guidelines from the Occupational Safety and Health Administration (OSHA) could help employers and their employees in the shipyard industry prevent musculoskeletal injuries. The draft guideline, Ergonomics for the Prevention of Musculoskeletal Disorders: Guidelines for Shipyards, was released today by the agency. The public is invited to submit comments to the draft guidelines until Nov. 13, 2007.

"These new guidelines, when finalized, will help us continue to meet OSHA's commitment to publish industry-specific ergonomics guidelines." said Assistant Secretary of Labor for OSHA Edwin G. Foulke, Jr. "Many shipyards have made substantial proactive efforts in recent years to address work-related musculoskeletal injuries. These guidelines will be another resource to help them succeed in those efforts."

Bureau of Labor Statistics data show that in 2005, the injury and illness rate for the shipyard industry was 10.9 per 100 employees compared to an injury and illness rate of 4.6 per 100 employees for all private industry. In 2005, 31 percent of injuries and illnesses that resulted in days away from work for shipyard employees involved musculoskeletal disorders.

When finalized, the new guidelines will provide practical recommendations for employers to reduce the number and severity of workplace injuries in their facilities by identifying, evaluating and controlling hazards and using best practices that have been successful in shipyards.

In April 2002, Secretary of Labor Elaine L. Chao announced a comprehensive plan to reduce ergonomics-related injuries through a combination of industry or task-specific guidelines, enforcement, outreach and assistance, and research. The new guidelines will be the fourth in a series. In 2003 and 2004, OSHA published the final ergonomics guidelines for nursing homes, retail grocery stores and poultry processing industries.

The public is invited to submit comments on the draft guidelines until Nov. 13, 2007. They may submit comments electronically at http://www.regulations.gov, the Federal eRulemaking Portal; send three copies to the OSHA Docket Office, Room N-2625, U.S. Department of Labor, 200 Constitution Ave., N.W., Washington, DC, 20210, telephone (202) 693-2350; or FAX to (202) 693-1648. Comments must include the Agency name and the Docket Number for this draft guideline, Docket No. OSHA-2007-0030. See the Federal Register for more information on submitting comments.

Source: www.osha.gov

"Correction does much, but encouragement does more."
- Goethe