Archive for January, 2011

North Carolina Beach Plan to Reclaim $16 Million Distribution

January 31st, 2011 by | Comments Off | Filed in hurricane insurance, insurance news, wind insurance

Wayne Goodwin, the North Carolina Insurance Commissioner recently announced a settlement agreement that will require the North Carolina Insurance Underwriting Association, also known as the “Beach Plan,” to reverse the payments of more than $16 million it made to its member companies in 2009.

The Beach Plan is North Carolina’s “insurer of last resort” for coastal policyholders who cannot find coverage elsewhere. Most of them purchase coverage for damage from hail and windstorms. Under the previous operating guidelines for the Beach Plan any surplus premiums have been allowed to be returned to the member companies. However, in 2009, the North Carolina legislature passed a law stipulating that the Beach Plan’s surplus funds must actually be retained from year-to-year, and be used to cover reinsurance costs, losses, and other expenses. The change in the law was a response to hundreds of thousands of coastal homeowners seeing their insurance premiums increase by an average of up to thirty percent.

Commissioner Goodwin ordered that an examination be conducted by the Insurance Department’s Financial Evaluation Division, which found that in December, 2009 the Beach Plan had distributed about $16.4 million to its member companies, which put it out of compliance with state law, which had taken effect on August 26th of that year. After negotiating with the Beach Plan officials, it was agreed that no wrongdoing would be admitted, but that the funds would be returned.

Goodwin told the press, “I am pleased that we came to an agreement that this money will be returned to the Beach Plan where it can help protect coastal property owners.”

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Friday Filmstrips: Open for Questions

January 28th, 2011 by | Comments Off | Filed in friday filmstrips, health care reform, health insurance

This week’s video is long – very long. In fact it’s more than half an hour long. But we’re sharing it because we think it’s important. After Tuesday night’s State of the Union speech from President Obama, the White House asked YouTube users to submit questions about health care.

This video is a response to those questions, from Secretary of Health and Human Services Kathleen Sebelius.

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Income Taxes and Employer-Owned Life Insurance

January 27th, 2011 by | Comments Off | Filed in insurance news, life insurance

It’s almost February, which means everyone should be receiving their w-2s and 1099s if they haven’t already. While we don’t cover tax issues as a general rule, we think it’s worth mentioning the way death benefits from corporate- or business-owned life insurance are handled.

Before 2006, death benefits from the types of life insurance mentioned above were usually tax-free. After August 17th of that year, however, tax law changed to allow income taxation of death benefits on policies issued from that day forward.

The legislation affected businesses of all types and sizes where life insurance policies were purchased by the company on the lives of its employees, and where the employer was the owner and beneficiary of the policy. The law included – but wasn’t limited to – buy-sell arrangements, key-person coverage, and non-qualified deferred compensation plans. It was enacted to address the concerns of members of Congress with regard to large corporations purchasing life insurance coverage on the lives of their “rank and file” employees who were generally unaware of these policies, and which benefits were paid to the corporation.

Basically, this law reversed the rule that corporate or business-owned life insurance death benefits are generally received without being subject to taxation, but there are exceptions to the newer law, if certain criteria are met:

* A Notice and Consent form must be signed and submitted to the insurance carrier for an employer-owned life insurance policy before the policy is issued. Failure to comply will mean that part of the death benefit may be taxed as ordinary income.
* One of the four safe harbors as specified in the law must be in place to keep the death benefit income tax free:
1. The insured is a key person at policy issue.
2. The insured was an employee any time in the 12-month period before death.
3. The death benefit is paid to the Insured’s heirs.
4. Buy-Sell funds. The death benefits remain income tax free if they’re used to buy the Insured’s interest in the employer from someone listed in Safe Harbor 3.

Unfortunately, until the covered employee actually dies, there’s no way to know if Safe Harbors 2-4 are applicable, and until that is determined, the employer won’t know if the death benefit is taxable or not.

Note: This post is meant as a synopsis of the law, and is not meant as tax advice. Please consult with your CPA before entering into any of the arrangements mentioned here.

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Fargo Resident Told To Brace for Flooding

January 26th, 2011 by admin | Comments Off | Filed in flood insurance, homeowners insurance, insurance news

Officials in Fargo, ND informed residents earlier this week that it’s time to begin preparing for another major flooding along the Red River. It is anticipated that this will be third such spring flood in a row.

On Monday, during the first public planning session for possible flooding, Mayor Dennis Walaker said, “I don’t think anybody is ready for this. Not three in a row.”

A recent flood outlook report from the National Weather Service shows a 20% chance of the river surpassing the record crest in Fargo, ND and it’s sister city Moorhead, MN set in 2009, and a 50% chance it will beat last year’s crest, which was the sixth-highest on records.

Fargo officials said that beginning next month they’ll be spending time in a local warehouse nicknamed “Sandbag Central, filling sandbags. The city currently has about 370,000 filled, shrink-wrapped sandbags in storage, but in mid-February there will likely be a call for volunteers to fill an additional 2 million of them, according to Bruce Grubb, who is coordinating the sandbagging effort. Between March 1st and 15th last year, volunteers filled a million sandbags, just in time for the river to crest on March 20th.

Over the last several years, the city of Fargo has bought and removed dozens of homes from flood-prone parts of the city, and officials are currently in negotiations to acquire about ten more houses before the river has a chance to flood this year, said city administrator Pat Zavoral.

Zavoral explained, “It’s up to the property owners to decide. None of these are condemnations. It’s all volunteering.”

The record crest of 2009 came in at almost 41 feet. This year, city officials are preparing to protect structures below 44 feet with sandbags, levees, and other flood-control methods. Some neighborhoods are requesting help with the construction of “hescoes,” interlocking steel-framed containers filled with sand. April Walker, the city’s senior engineer said that residents in one neighborhood had no objections when informed that hescoes would make a worse mess of their yards than sandbags.

She added, “They’re just darn tired of bagging.”

Fargo city officials plan to meet with the U.S. Army Corps of Engineers later this week, to review the technical aspects of levee construction, according to city engineer Mark Bittner. He said, ““Is it time to make some decisions? I’m not sure. But it’s certainly time to plan.”

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Landscaper Insurance???

January 25th, 2011 by | Comments Off | Filed in business insurance, insurance news

Okay, we know there is insurance out there for almost everything. I mean, just last Christmas we learned that you can get insurance in case you fall out of a sleigh. But a lawmaker in Rhode Island has recently filed a bill that would require landscapers to register with the state and carry at least $100,000 in public liability and property damage insurance.

The bill was sponsored the earlier this week by Rhode Island state Senator John J. Tassoni, Jr. (D-Smithfield) who says that the point of it is to “level the playing field” between reputable, upstanding landscaping companies and “fly-by-night” companies that don’t pay taxes. He also claims that since the latter sort of landscaper has no overhead they have a big advantage.

Tassoni also said his state is losing a lot of revenue from income and sales taxes.

A spokeswoman for a taxpayer and business advocacy group known as the Rhode Island Statewide Coalition said that she was concerned that smaller landscaping businesses could be hurt by the bill’s requirements.

What I want to know is, what are they defining as a “landscaping business?” Will the teenager who mows someone’s lawn for $20 have to find the cash to buy $100,000 in insurance if this bill passes?

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Oregon Re-Rating Law Working for Consumers

January 24th, 2011 by | Comments Off | Filed in auto insurance, homeowners insurance

Thousands of residents of Oregon are happy about their lower insurance premiums, thanks to a year-old law about credit scoring, say the results of a survey by the Department of Consumer and Business Services (DCBS).

The law allows policyholders to request that their insurance company re-rate or re-price their homeowners or auto insurance policy once a year, if credit scores were used to price the policy when it was originally issued. If the customer’s current score qualifies them for a better rate, the insurer must lower the price, but if their credit score has worsened, the premiums cannot be increased.

The survey looked at data from several key homeowners and auto insurance providers, and found that there were more than 8,000 cases of discounts being given since the law went into effect on January 1, 2010. Those who requested re-rating received a collective discount of more than $800,000 – roughly $100/request.

Oregon Senator Suzanne Bonamici, a Democrat from the Portland/Beaverton area who chaired the Senate Consumer Protection and Public Affairs Committee in the 2009 legislature which passed the law (then known as Senate Bill 377) said, “The law is working as intended and people who have improved their credit profiles are being rewarded with better rates.”

Credit scoring is used by many insurance companies to help determine whether or not to issue a policy, or how much to charge. Once a policy is purchased, however, insurers are prohibited from using credit scores to raise premiums. The new law, however, allows customers to request re-rating once a year.

The data for the DCBS survey came from the eleven insurers that write the bulk of Oregon’s homeowners/auto insurance business. Based on the numbers, the average policyholder with good credit and multiple policies (example: a home and two cars) could save several hundred dollars over the term of their policies, generally a year for homeowners insurance and six months for auto insurance. The survey also showed that about 30-50% of the policyholders who asked for rerating qualified for lower premiums, though there was a lot of variance between insurance companies.

The law does not require insurers to inform policyholders of their right to request their annual re-rating, though some insurance companies do so voluntarily.

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Friday Filmstrips: The Young Turks on Health Care

January 21st, 2011 by | Comments Off | Filed in friday filmstrips, health care reform, insurance news

If you’ve been following national news this week, you know that the Republicans in the House want to repeal health care reform (they, in fact, consider this more important than creating jobs). This week’s video is a response to one Republican’s words, and it’s a bit provocative. It’s also not safe for work – an expletive is used – we post it here for the purpose of debate.

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