Interesting Tidbits

• Since 2001, premiums for PPO and indemnity plans have risen as much as 56%, according to the National Association of Dental Plans.
• Buying Long term care insurance soooner is better. Up to 33% of applicants over 60 are denied coverage.
• Dog bites now account for one-third of all homeowners claims costing over $350 Million annually.

Cyber Risk Increasing as Stolen Data Becomes a Commodity

Prices charged by cybercriminals selling hacked bank and credit card details have fallen sharply as the volume of data on offer has soared, forcing them to look elsewhere to boost profit margins, a new report says.

Researchers for Finjan, a Web security firm, said the high volumes traded had led to bank and credit card information becoming "commoditised" -- account details with PIN codes that once fetched $100 or more each might now go for $10 or $20.

In its latest quarterly survey of Web trends, the California-based company said cybercrime had evolved into "a major shadow economy ruled by business rules and logic that closely mimics the legitimate business world".

Finjan's Israel-based chief technology officer, Yuval Ben-Itzhak, said in a telephone interview that new types of stolen data were now commanding a premium, such as patient healthcare information that can be used for insurance fraud or to illicitly acquire and sell medicines.
Other premium data includes business information, company personnel files, and intercepted commercial e-mails.

MAFIA STRUCTURE
The Finjan report, partly based on contacts the company established with five groups trading online in stolen data, described a Mafia-type cybercrime hierarchy in which bosses operate as business entrepreneurs and typically leave the actual online attacks to underlings.

An "underboss", or second-in-command, provides the Trojaninfiltration software for launching attacks. The workforce that carries these out is paid according to the rate of infections achieved and the country of origin of the infected computers.

"Resellers" then trade the hacked financial data, in the same way that a criminal "fence" disposes of stolen goods.

In online exchanges with resellers, Finjan researchers were offered a menu of stolen data, with platinum, gold, and corporate card details commanding the highest prices.

Sellers promised the data was "fresh" and one even offered a 48-hour guarantee to supply new details if those originally bought were rejected by payment systems as stolen cards.
"It's like in the regular business world -- when you buy a good and it doesn't work, you go back and you want to replace it," Ben-Itzhak said.

"It indicates a competitive environment. ... They need to build reputation, they want to show they're providing high quality data for your money so you can go back and buy from them rather than go to the other groups."

Ben-Itzhak predicted banks, which until now have shouldered the burden of compensating people whose data are hacked, would seek to put some of the onus for security on the customer.
"So far the banks are not mandating the end-user to have some sort of security on their desktop. They're taking the risk, better to say they're paying the risk, when your account has been compromised," he said.

"However what we noticed recently is the volume increased significantly and the banks are starting to ask the question: did you install something or do you have something running on your desktop. ... The banks will start to ask questions of the end-users and put some responsibility at least on them."
By: Mark Trevelyan

Copyright 2008 Reuters. Click for Restrictions

FMLA Expanded For Leaves related To Family Members In The Milatary

In January Congress expanded the FMLA to require employers to provide unpaid leaves of absence for certain reasons related to family members serving in the Military. Under the new law, employees will be entitled to 12 weeks FMLA leave per year for certain "qualifying exigencies" related to a family member's active military duty. In addition, employees are entitled to take 26 weeks of leave during a single 12 month period to care for a covered family member who suffers a serious injury or illness while on active duty.

Individual Disability Insurance

Can You Afford Not to Have it?

Disability Insurance protects your most valuable assets and your ability to earn an income. Without this coverage, your financial means for continuing your daily financial lifestyle could be in serious doubt. Listed below are some interesting facts regarding individual disability insurance.
Each year 12% of the adult population suffers a long term disability.
1 out of 5 people age 35-65 will become disabled for 5 or more years before they reach age 65.
A worker who is 20 years old today has a 30% chance of becoming disabled before he or she ever reaches retirement age.
At age 32 your chances of suffering a 3-month or longer disability is 6 times more likely than death.
At age 35 your chances of suffering a 3-month or longer disability is 44%.
If you are 45, your chances of having a work disability are 3 times as high as a person in their 20’s.
On average 7 out of 10 claims for Social Security disability benefits are refused the first time requested.
About 110 million Americans do not have long term disability insurance.
About 8 million adults have some disability that limits or prevents them from working.
Disabilities are not just the result of accidental injury. Common chronic health conditions can cause disabilities that limit your ability to work. In fact, the top 3 chronic health conditions that can cause work limitations are back disorders, heart disease and arthritis.
If you pay the premium, the benefits are normally received free from income tax. If the premium is paid by an employer, the benefits are taxable as ordinary income

The Pigeons Come Home To Roost

Since 2004, we have warned Fiduciaries of ERISA Plans about the Plans’ Consultants wearing multiple hats and performing multiple responsibilities. We repeatedly said the way to avoid conflicts of interest is to only do one thing: actuaries be actuaries, investment advisors monitor investments, insurance agents sell insurance, etc.

On June 19, 2008 the U.S. Supreme Court sent out its own red flag in the monumental decision Metropolitan Life Insurance Company et. al. v. Glenn. This decision addressed the standards of conflict of interest for Plan advisors and the consequences to a Plan if it allows its consultants to engage in conflicts of interest. Although the decision is initially limited to insurance companies acting as disability plan administrators and providing benefits as well (which is huge by itself), the decision will have repercussions in the Pension and Health and Welfare industry for years and decades to come. How far down the totem pole the decision will go is not known, but as they say in the media, “here is what we do know:”

Any fiduciary or plan which doesn’t carry fiduciary insurance is at extreme risk.
Any fiduciary that allows its consultants to provide “other services” places the Plan and himself/herself at risk.
Any fiduciary who allows its consultants and insurance companies to combine in some sort of joint venture where denial of benefits accrue to the benefit of the consultants and insurance company puts the plan at risk.
Plan fiduciaries cannot waive conflicts of interest.

In other words the consultants and insurance companies must wear one hat and one hat only.

Here are a few words of wisdom from the “Supremes.”

· A benefit determination is a fiduciary act (i.e. an act which the … owes a special duty of loyalty to the beneficiaries.)
· Conflict of Interest is a “real or seeming incompatibility between one’s private interests and one’s public or fiduciary duties.”
· … the fact that a settler approves a … conflict does not change the need for a Judge to take account of that conflict in reviewing the Trustee’s decision making.”
· ERISA imposes higher-than-marketplace quality standards on insurers.

Next Time a Plan Consultant Offers to Place Your Plan’s Insurance – Just Call McLaughlin.

Large Pension Funded Status Rises

Defined benefit pension plans closed out 2007 with a median funded status of 94 percent, according to a Mercer analysis of 377 S&P 500 publicly traded U.S. companies. That figure is up from the 2006 readings of 89 percent. The plans reported having a total of $1.56 trillion in assets and $1.5 trillion in pension liabilities at the end of 2007. Sponsors invested 60 percent of their plan assets in stocks, achieving an average asset return of 9.6 percent, down from 13 percent in 2006.

More Bad News For Iowa

National Flood Insurance Program Spokesman Butch Kinerney said recently that the flood insurance program does not expect losses related to the flooding in the Midwest to be high. Kinerney noted, "The fact is we just don't have a whole lot of policies out in that area," with only about 700 flood policies in force in Cedar Rapids, Iowa, which was hit hardest by flooding. Insurance carriers have up to 60 days to file claims information with the program, and the program is not likely to have a total loss estimate soon. While the program continues to pay ongoing claims from the 2005 hurricane season, it is not expected to repay its debt or the interest on the $20 billion it borrowed from the U.S. Treasury. However, that debt could be eliminated once flood insurance program reforms are passed by Congress.

Isn't it worth a call to find out how much Flood insurance costs for your home or building?

More Reasons To Obtain Union Liability Coverage and an Individual Labor Leader Endorsement

Labor Organization Annual Financial Reports: Notice of Proposed Rulemaking and Request for Comments

The Office of Labor-Management Standards (OLMS) on May 12, 2008 published a Notice of Proposed Rulemaking (NPRM) to (1) make several revisions to the current Form LM-2 that will provide additional information on labor union sales and purchases of investments and fixed assets and disbursements to officers and employees (Form LM-2 Schedules 3, 4, 11 and 12), and add itemization schedules corresponding to categories of receipts, and (2) establish a procedure and standards by which the Secretary of Labor may revoke for a limited time a particular labor organization’s privilege to file the simplified Form LM-3, where appropriate, after investigation, due notice, and opportunity for a hearing. The proposed changes are made pursuant to section 208 of the Labor-Management Reporting and Disclosure Act (“LMRDA”). The proposed rule will apply prospectively.

Got an Extra $225 Million?

A former racing official has sued NASCAR, saying she was subjected to racial and sexual discrimination in her two years as an employee. The complaint lists 23 incidents of sexual harrassment and 34 incidents of racial and gender discrimination beginning in 2005 and ending when she was fired in 2007. The official is 32 years old and she alleges that her co-workers called he racially insensitive nicknames and that male collegues made sexual advances. Do you have $225 Million "in your wallet?" I do not think your Mastercard will cover this either. Might be time to "just call McLaughlin" about EPL coverage.

Insured Property Loss...Remains the Largest In the Last Decade

The number of Tornadoes in the U.S. during the first quarter of 2008 surpassed the previous four year average and ISO estimates insurers will pay $3.35 Billion in first-quarter catastrophe claims. Also, insured losses of $1 Billion and higher from single events are becoming more frequent as we approach Hurricane season.

Employment Related Practices Update

Still think Employment Related Practices Insurance is not necessary?

• EEOC Claims are at their highest volume since 2002.
• Cost of Defense alone averages $125,000.
• Plaintiffs are now winning at the rate of 63%.
• Age discrimination claims are up 15% last year and retaliation and third party claims are skyrocketing.

Subprime Liability Claims Could Reach $4B

Fitch Ratings reported that subprime mortgage-related liability litigation would reach between $3 billion and $4 billion in directors and officers' (D&O) and errors and omissions (E&O) losses. However, if credit woes continue to spread into sectors indirectly linked to the subprime mortgage market, loss claims could rise significantly and lead to a hike in the number of bankruptcies. Subprime investments, according to Fitch, will continue to decline in value throughout the year. The ratings agency stated, "Further, highly illiquid, volatile market conditions have spread somewhat to other asset classes, which could impact insurers' broader investment portfolio performance."

CyberRisk in the News

Two articles in today's business news stood out to me.

• TJX paid over $24 Million to MasterCard for a massive breach that exposed millions of payment card holders to hackers. This is on top of the $40.9 Million they paid to Visa.
• At least 8.3 Million records were breached in the 1st quarter of 2008.

39 states and DC have laws now requiring organizations to notify consumers of a data breach that jeopardizes their personal or financial data. That notification in itself can be very expensive; however, in many states businesses have to go further and pay for a years' worth of credit monitoring.

Several insurance companies have relatively inexpensive coverages to this growing risk. Today, many business and non-profit organizations keep financial and personal data on their employees, their customers, and their members. Don't become a Headline! Call your independent insurance agent.

Smaller Firms and Unions Face Data Theft Risks

Hackers try new targets as big companies tighten security.

Identity theft and data security breach incidents are on the rise, but many companies and unions are not prepared to deal with this risk. Small and mid size companies are the most vulnerable. Bigger companies have gotten the message and stepped up their security efforts. Now data thieves are working their way down the food chain.

The FTC estimates as many as 9 million Americans have their identities stolen each year. A 2007 FTC report estimates that identity thieves steal $48 Billion from businesses and $5 Billion from consumers annually.

Insurance companies are finally writing policies to cover this exposure. Contact your Independent agent today.

Long Term Care Facts From Unum

• 57% of LTCI Claimants are under 65
• The average age is 54
• More that 15% under 45
• Nearly 2/3rds of claims are paid to ages 55-65
• The leading causes of claims under 65 are cancer, trauma,stroke or neurolical disease
• More than 70 % of claimants received care at home.

Theft of Personal Data More Than Triples This Year

Theft of sensitive data from companies, government agencies, colleges and hospital more than tripled in 2007 to more than 162 Million in 2007. People's names, birth dates, account and Social Security numbers are highly coveted. The amount of such information generated as they convert from paper into digital records is swelling.

U.S. Supreme Court opens Floodgates to Retirement Plan Participants Lawsuits

Participants in 401(k) and other retirement plans can file lawsuits claiming their individual accounts were mishandled, the U.S. Supreme Court ruled in a decision that bolsters the legal rights of 70 million people.

The justices today unanimously allowed a suit by a man who says he lost almost $100,000 because his employer didn't make investment changes he requested. The court rejected business contentions that participants can sue only to enforce the rights of the entire plan, not to recover losses incurred by a single account.

The ruling affects participants in so-called defined- contribution retirement programs -- a category that includes 401(k), employee stock ownership and profit-sharing plans. Those accounts hold $3.3 trillion in assets.

In the case before the justices, James LaRue says he tried to change the investments in his 401(k) plan in time to avoid the brunt of the 2001-02 stock market plunge. LaRue claims his employer, Dallas-based management-consulting firm DeWolff Boberg & Associates, didn't follow his instructions, costing him almost $100,000.

The 4th U.S. Circuit Court of Appeals in Richmond, Virginia, barred the suit, saying it wasn't allowed under the 1974 Employee Retirement Income Security Act, known as ERISA.
The Supreme Court today rejected that reasoning, saying Congress intended to provide broader protection to participants in retirement plans.

"Whether a fiduciary breach diminishes plan assets payable to all participants, or only to persons tied to particular individual accounts, it creates the kinds of harms that concerned the draftsmen'' of ERISA, Justice John Paul Stevens wrote for the court.

DeWolff Boberg argued that ERISA entitles LaRue to a court order directing the plan to change his investments but not to recoup the money he says he lost.

LaRue's legal team, backed by the Bush administration, said that approach would leave participants in defined-contribution plans with no recourse in the event their accounts are mishandled by the fiduciaries who administer the plan.

LaRue no longer works at DeWolff Boberg. In 2006, he closed his 401(k) account and withdrew the $119,000 balance.

Offered by employers, 401(k) plans let workers put a percentage of their paychecks into a tax-deferred investment account.

The case is LaRue v. DeWolff Boberg, 06-856.

ERISA Claim

U.S. Department of Labor Sues Advisers to Pension Plan

Co-advisers of a Michigan pension plan were sued by the U.S. Department of Labor for alleged violations of their fiduciary duties under the Employee Retirement Income Security Act (ERISA) in connection with the sale of real estate held by an employee pension plan.

The Department of Labor alleged in its complaint filed in the U.S. District Court for the Eastern District of Michigan on December 28, 2007 (Case No. 2:07-CV15519), that Fifth Third Bank and Carrie Milestone Advisors, LLC violated their fiduciary obligations to their client, Operating Engineers Local 324 Pension in Troy, Michigan, by abruptly selling investment property held by the plan when they informed the plan they would be managing this real estate asset as a long-term investment. The complaint states that the advisors' fiduciary violations caused the plan to sell a $28-million property for $4.5 million.

The Department of Labor asked the Court to prevent the defendants from acting as ERISA fiduciaries in the future and to order compensation to the plan for its losses.

Eleventh Hour Authorization of TRIA

After much wrangling in the Senate and the House, just shy of the December 31, 2007 expiration date, Congress enacted legislation (H.R. 2761) and the President signed into law the Terrorism Risk Insurance Program Reauthorization Act of 2007 on December 26, 2007 extending the widely relied upon Terrorism Risk Insurance Act of 2002 (TRIA) until 2014. TRIA was enacted in 2002 to respond to the disruption in the insurance market created after the 9/11 terrorist attacks. TRIA requires commercial property and casualty insurers to offer clients insurance coverage for damages caused by terrorist attacks. In return, the federal government provides a backstop for the insurance industry against truly catastrophic aggregate terrorism losses that exceed $100 million. Since its inception in 2002, TRIA coverage has been widely accepted and used by many as a primary means of terrorism insurance.
This reauthorization significantly changed the definition of an "Act of Terrorism" removing the previous limitation that only acts of terrorism committed "on behalf of any foreign person or foreign interest" are covered under TRIA. Many insureds complained that TRIA's limitation in applying only to acts of terrorism committed on behalf of foreign persons or interests left insureds vulnerable to losses from "homegrown" terrorists such as those that masterminded the Oklahoma City bombings and the 2005 London bombings. With this limitation removed, TRIA now includes coverage for acts of terrorism committed by any "individual or individuals acting as part of an effort to coerce the civilian population of the United States or to influence the policy or affect the conduct of the United States government by coercion."
The revision of the definition did not, however, amend the requirement that only damages within the U.S. or outside of the U.S. to an air carrier, vessel or U.S. mission are covered under TRIA. This limitation may create an incongruous situation for those Sellers of SAFETY Act approved technologies that rely on TRIA to satisfy their SAFETY Act insurance requirement and deploy their technologies outside the U.S. For instance, under the SAFETY Act's definition of an Act of Terrorism, the Department of Homeland Security has concluded that the SAFETY Act applies extra-territorially and that Acts of Terrorism may be certified that occur on foreign soil "if it causes harm to a person, property, or an entity in the United States." Because TRIA's definition is narrower, a Seller could find that its SAFETY Act coverage protects it from an Act of Terrorism abroad but its insurance does not apply.
For certified Acts of Terrorism, the Reauthorization Act of 2007 maintains the annual liability cap of $100 billion for the U.S. and insurers meaning that neither the U.S. nor insurers are responsible for paying losses that exceed $100 billion in the aggregate unless Congress acts otherwise with respect to these losses. The Act has always contemplated pro rata payment to insureds when the aggregate losses exceed $100 billion and now requires insurers to "provide clear and conspicuous disclosure to the policyholder" of this annual liability cap in policies issued after the Reauthorization Act of 2007. In addition, instead of leaving the pro rata determinations to the Secretary of the Treasury, the Act now requires the Secretary to issue final regulations within 240 days for determining the pro rata share to be paid by insurers when the aggregate insured loss exceeds $100 billion.
While many had pushed for coverage of losses from terrorist acts involving nuclear, biological, chemical, or radioactive materials, this reauthorization does not require insurers to offer such coverage. The Government Accountability Office has been tasked to study and issue a report in the next year on the availability of terrorism insurance specifically for acts of terrorism using nuclear, biological, chemical, or radioactive materials.
TRIA was intended to provide a temporary mechanism, expiring at the end of 2005, to allow the marketplace to adapt after the economic dislocations caused by the 9/11 attacks. While the market for terrorism insurance has improved since 2002 when TRIA was first enacted, clearly this reauthorization until 2014 reflects the fact that doubts remain as to the capacity of the private sector to insure against large-scale terrorism risk in the U.S. With this reauthorization, insureds can breathe easier that they are covered for certain catastrophic terrorist losses, at least until 2014.

Confined Space Work Rule Upsets Small Contractors

The U.S. Occupational Safety and Health Administration extended the deadline for comments on a proposed rule for construction in confined spaces from Jan. 28 to Feb. 28 following vocal opposition from utility contractors and others in the construction industry. The proposed rules were issued unexpectedly on November 28, 2007, and establishes four classifications for confined spaces - isolated hazard, controlled atmosphere, permit required, and continuous system permit required. OSHA started work on the rule in 1993 at the behest of the construction industry; previous OSHA training and education offered little guidance. Contractors have been using the general industry standard as a result, and they say that the new classification system is confusing and that it is now unclear which category to use at particular sites. The proposed rule would also put all liability on the primary contractor and imposes onerous and costly mandates for work in trenches, manholes, and other confined spaces, say utility contractors. Ted Saito of the Engineering and Utility Contractors Association says that requirements such as early warning systems, reevaluation of procedures, and additional reassessments in the event of an emergency or ventilation failure will "cause an enormous amount of record keeping for training ... that will result in financial hardship to all employers without increasing employee safety." Another provision, that a rescue team be on standby in some cases, is cost prohibitive to smaller contractors, says George Kennedy, vice president of safety at the National Utility Contractors Association.