News & Events
Profax 6/14/2010 - 6/14/2010
STATE FARM PULLING OUT OF FLOOD PROGRAM: Because the NFIP has fallen victim to negative political and
congressional attitudes, State Farm has decided to pull the plug on administering the program for 800,000 customers.
State Farm is the largest administrator of such policies, known as WYO [write your own]. Repeated lapses for reauthorization
of the NFIP and Congressional demands for more coverage, while others want premium relief, have
become too burdensome for agents, lenders and companies to support the program. State Farm has said that
eliminating the work required to write a flood policy will allow the company to focus its resources on the risk
management policies they do best—their own.
INSURANCE INDUSTRY WINS ROUND #1 OF CHINESE DRYWALL SUIT: On June 3, a US District Court Judge in Virginia
ruled that a homeowners insurance policy is not liable for damages to a home caused by Chinese-made drywall. The
judge said the policy excludes damage cause by “latent defect, faulty materials, corrosion and pollution” and does not
cover the removal or replacement of the drywall or any damages caused by the material. Chinese drywall has been
linked to corrosion of wiring, air conditioning units, computers, doorknobs and jewelry, along with possible health
effects. The case is being carefully watched by other homeowner and property insurers.
CROP INSURANCE UPDATE: PIAND has been working on several crop insurance issues over the past several weeks.
Members should have an Update on the Manager’s Bulletin on Controlled Business and a Summary of the GAO Report
on fraud, waste and abuse. The most current issue is the release by RMA of the SRA Draft #3 last Thursday. RMA will
be meeting with the industry this week for technical questions and corrections. Agents have a number of unanswered
questions concerning the new definition of “compensation” in Draft #3. For the first time in the 30-year history of the
Federal Crop Insurance private/public partnership, “agents’ compensation” has been defined, negotiated, included and
regulated via the SRA [Standard Reinsurance Agreement]. This was done without agent input, involvement or
participation! It appears to be “take it or leave it”! Whose idea was it? Where did it come from? We can only say it is
a good thing that USDA/RMA does not “negotiate” our standard Property/Casualty, Life/Health, and Flood insurance
contracts with our other agency insurers!
WILL MEXICAN TRUCKS TRAVEL NORTH? Since 1995, the North American Free Trade Agreement [NAFTA] allowed
trucks registered in Mexico to operate on US roads and highways. However, Congress nixed that part of NAFTA because
of allegations that Mexican trucks were unsafe, had unqualified drivers, were not adequately insured, and not
inspected. DOT followed with a pilot program which used monitoring and inspections that generally earned high marks
but Congress shut down the pilot program also. Last month, Mexican President Calderon was in DC meeting with the
Transportation Secretary to resolve some of the NAFTA trade issues, including trucking. US truckers and their unions
are strongly opposed to any Mexican trucks competing for their market share. Made and shipped from Mexico by
Mexicans would bring heavy competition to goods from China, Taiwan, Korea, Japan, Viet Nam and made in the USA.
ANOTHER TAX PROPOSAL: In an effort to raise revenues for the Obama Administration, the House Ways & Means
Committee has proposed tax legislation [H.R.3424] aimed at offshore reinsurers. The idea is to tax offshore reinsurers,
which would be an advantage to US domestic insurers. But reinsurance is worldwide and about 50% of the US
reinsurance comes from the offshore markets. Who gets stuck paying the tax? American consumers -- to the tune of
about $15-$17 billion annually. The bill will limit the US insurance capacity and is intended to punish foreign
competitors but if passed will do nothing but harm US consumers and place billions of tax revenue in unallocated
Obama Administration coffers.
OVERSOLD AND UNDERPERFORMED! That is the statement directed at the one-time popular cellulosic-ethanol
technology promoted by presidential candidates, congressmen and farm groups. The hundreds of news stories touted
commercial cellulosic plants to be producing millions of gallons of ethanol by 2008. These promises are 4-5 years old.
The technology was supposed to use wood and other biomass to make enough ethanol to replace fossil fuels. Puff goes
the magic dragon!
