Hot Insurance Reference

LIFE INSURANCE RISK CLASSIFICATION: FINDING THE BOUNDARY BETWEEN ANTITRUST AND UNFAIR DISCRIMINATION

2009-11-25T00:05:00.000-08:00

LIFE INSURANCE RISK CLASSIFICATION: FINDING THE BOUNDARY BETWEEN
ANTITRUST AND UNFAIR DISCRIMINATION
J. Daniel Perkins [FNa1]

Copyright © 2003 Connecticut Insurance Law Journal Association; J. Daniel Perkins

*528 Introduction
And so, this took me directly to the debit system, which as I say, I didn't want to get into problems with the folks from the Department of Justice in the Anti-Trust Division, so I didn't place on my computer here, for this conference, how I would rate this, but it's not hard to figure out. [FN1]
See, I didn't show you that for the purposes of this meeting, because it's been inbred into me that you've got to watch out for the anti-trust folks. [FN2]

The Home Office Life Underwriters Association (HOLUA) is one of the two major professional underwriter associations in the United States, which along with the Institute of Home Office Underwriters, has been unified into one organization, the Association of Home Office Underwriters, which held its first meeting in November 2002. [FN3] HOLUA has a policy statement that strictly forbids any activities on the part of its members that could be construed as violating the antitrust laws. [FN4]

*529 While HOULA itself, its members, as well as any other professional in the life insurance industry should be commended for attempting to play by the "rules of antitrust," two questions come to mind. First, is the antitrust policy used by underwriters/insurers necessary or sufficient? Second, where are the lines to be drawn as to when and what underwriters/insurers can and cannot do as it relates to antitrust and the sharing of life insurance mortality information for risk classification purposes? This Article will attempt to answer these questions, and in doing so, provide a framework by which those interested in life insurance risk classification can determine on which side of the antitrust line their actions or the actions of others fall.

Part I of this Article will provide a historical summary of federal statute and case law as it applies to insurance and antitrust. In addition, pertinent state statutes will be discussed. Part II of this Article will describe the risk classification process in enough detail to provide the reader with a frame of reference as to how the risk classification process is conducted in the life insurance industry. This framework will include the principles by which the risk classification process is governed, and a description of the role played by reinsurers. Part III will describe three activities engaged in by underwriters that have a possible impact on antitrust concerns: underwriting manuals, intercompany mortality studies, and professional papers and presentations. The antitrust implications of these activities will be discussed within the framework of the Antitrust Guidelines for Collaborations Among Competitors issued by the Federal Trade Commission and the United States Department of Justice. [FN5] By discussing the risk classification activities in this manner, this Article will attempt to *530 provide a determination as to what risk classification practices fall within the ambit of the Guidelines and which do not. The Article will conclude by summarizing the answers to the questions asked by the Article.

I. Summary of Federal Statute, Case Law, and Pertinent State Regulation

A. Evolution of Federal Regulation of Insurance

The mechanism by which the federal government exerts power over any business entity is found in the "Commerce Clause" of the United States Constitution, which states "[t]he Congress shall have Power . . . [t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." [FN6] Congress' power to regulate commerce was affirmed in Gibbons v. Ogden, [FN7] where the Supreme Court stated that "the power to regulate; that is, to prescribe the rule by which commerce is to be governed. This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the constitution." [FN8] As part of his analysis, Chief Justice Marshall stated that "[c]ommerce, undoubtedly, is traffic, but it is something more: it is intercourse. It describes the commercial intercourse between nations, and parts of nations, in all its branches, and is regulated by prescribing rules for carrying on that intercourse." [FN9]

It was not until forty-four years post-Gibbons that the Court first substantially addressed what power Congress or the several States had over commerce as it related to insurance. In Paul v. Virginia, [FN10] Paul, a resident of Virginia, was appointed an agent for several fire insurance companies incorporated in New York. [FN11] The insurers proceeded to offer and to issue at least one policy for insurance, without first depositing the bonds required by the State of Virginia to obtain a license to sell insurance. [FN12] *531 Consequently, Paul was convicted and fined, whereupon he brought suit against the State of Virginia for claims under both the Commerce Clause of the Constitution, as well as the Privileges and Immunities Clause of Article IV. [FN13] In ruling against Paul on both claims and upholding the State of Virginia's right to regulate insurance within its borders, the Court held that "[i]ssuing a policy of insurance is not a transaction in commerce. The policies are simple contracts of indemnity against loss by fire." [FN14] The Court went on to state that insurance contracts were "not articles of commerce," [FN15] were "not executed contracts-until delivered by the agent in Virginia," [FN16] and the insurance contracts "do not constitute a part of the commerce between the States." [FN17]

The Sherman Act was signed into law in 1890, and the objectives of the Act were twofold: enhance the welfare of consumers, and give the federal government a mechanism by which to combat and limit the development of supra-large corporations. [FN18] Section 1 of the Act makes illegal any act that restrains trade. [FN19] Monopolization or attempts to do so are deemed illegal under Section 2 of the Act. [FN20] Section 7 defines the term "person" to include corporations and associations existing or authorized by laws of the federal branch, a State, any United States Territory, or the laws of any foreign country. [FN21] The right of any person to bring a cause of action *532 under the Act is stated by Section 8 to be any person injured in his business or property by any other person or corporation. [FN22]

The insurance industry was brought within the ambit of the Sherman Act by the Court's decision in United States v. South-Eastern Underwriter Ass'n. [FN23] In South-Eastern, the 200 private stock fire insurance company members of the South-Eastern Underwriters Association (SEUA) controlled ninety per cent of the fire insurance and "allied" lines sold in six states. [FN24] The indictment stated that SEUA conspired to "not only fix premium rates and agents' commissions, but employed boycotts together with other types of coercion and intimidation to force non-member insurance companies into the conspiracies, and to compel persons who needed insurance to buy only from SEUA members on SEUA terms." [FN25] The Court framed the issue as:
not to uphold another state law, but to strike down an Act of Congress which was intended to regulate certain aspects of the methods by which interstate insurance companies do business; and, in so doing, to narrow the scope of the federal power to regulate the activities of a great business carried on back and forth across state lines. [FN26]

In finding that the "business of insurance" was subject to the antitrust laws under the Sherman Act, the Court explained its turnabout from its previous decision in Paul by stating "[i]t is settled that, for Constitutional purposes, certain activities of a business may be intrastate and therefore subject to state control, while other activities of the same business may be interstate and therefore subject to federal regulation." [FN27] In addition, the Court found it inconclusive as to whether Congress specifically intended to exempt insurance companies from the all-inclusive scope of the Sherman Act. [FN28] It held that states could continue to regulate insurance companies, but that a state could not authorize combinations of insurance companies to coerce, intimidate, and boycott competitors and consumers. [FN29] It is notable that the *533 dissenting opinions by Stone, [FN30] Frankfurter, [FN31] and Jackson [FN32] all agreed with the majority that insurance is interstate commerce, but that insurance had never been treated as such by either Congress or the courts.

Nine months after the South-Eastern decision, the McCarran-Ferguson Act was signed into law. [FN33] Section 1011 of the Act states:
Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several states. [FN34]

Section 1012(a) of the Act states that "[t]he business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business." [FN35] Section 1012(b) states:
No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business, unless such Act specifically relates to the business of insurance: Provided . . . the Sherman Act, . . . the Clayton Act, and . . . the Federal Trade Commission Act . . . shall be applicable to the business of insurance to the extent that such business is not regulated by State law. [FN36]

Finally, Section 1013 of the Act states that "[n]othing contained in this chapter shall render the said Sherman Act inapplicable to any agreement to *534 boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation." [FN37]

With almost the same speed exhibited by Congress in passing the McCarran-Ferguson Act following the decision in South-Eastern, the Court was asked to interpret and apply the McCarran-Ferguson Act in Prudential v. Benjamin. [FN38] For a number of years, the State of South Carolina had levied only on foreign insurance companies a tax required before that insurer could carry on the business of insurance within the state. [FN39] Prudential did not argue that commerce was not involved, [FN40] but instead that the tax was a discriminatory exaction forbidden by the Commerce Clause since it was only levied on foreign insurance corporations. [FN41] In finding for the State of South Carolina, the Court first remarked that in passing the McCarran-Ferguson Act that "Congress must have had full knowledge of the nation-wide existence of state systems of regulation and taxation; of the fact that they differ greatly in the scope and character of the regulations imposed." [FN42] The Court then stated that with the McCarran-Ferguson Act "Congress intended to declare, and in effect declared, that uniformity of regulation, and of state taxation, are not required in reference to the business of insurance by the national public interest, except in the specific respects otherwise expressly provided for." [FN43]

Having affirmed the constitutionality of the McCarran-Ferguson Act in Benjamin, the Court was then asked in Group Life & Health Insurance Co. v. Royal Drug Co. [FN44] to define the meaning of the phrase "business of insurance." Group Life & Health, better known as "Blue Shield of Texas" had contracted with pharmacies across Texas to offer prescription drugs to Blue Shield's policyholders at a reduced cost. [FN45] Owners of several independent pharmacies brought suit accusing Blue Shield of entering agreements to fix the retail prices of drugs and pharmaceuticals. [FN46] In turn, Blue Shield argued that its actions were exempt from antitrust laws under *535 section 1012(b) of the McCarran-Ferguson Act because the agreements were within the meaning of the "business of insurance." [FN47] In finding against Blue Shield, the Court held that the contracted agreements between Blue Shield and the pharmacies were not within the meaning of the term "business of insurance." [FN48] In so doing, the Court stated that the insurance exemption under McCarran-Ferguson Act "is for the 'business of insurance,' not the business of insurers." [FN49] The Court also remarked that "[t]he primary elements of an insurance contract are the spreading and underwriting of a policyholder's risk," [FN50] and that the McCarran-Ferguson Act was concerned with "[t]he relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement-these were the core of the 'business of insurance."' [FN51] Therefore, the Court held that the pharmacy agreements were not the "business of insurance" because they did not involve any underwriting or spreading of risk. [FN52]

As part of its Royal Drug analysis, the Court also further clarified its interpretation of the McCarran-Ferguson Act. The Court noted that the Act did not overrule its South-Eastern decision; [FN53] instead it "freed the States to continue to regulate and tax the business of insurance companies, in spite of the Commerce Clause . . . [but] [i]t did not, however, exempt the business of insurance companies from the antitrust laws." [FN54] Finally, the Court suggested that "Congress understood the business of insurance to be the underwriting and spreading of risk," [FN55] and that "Congress . . . recognized the necessity for concert of action in the collection of statistical data and rate making." [FN56]

Shortly thereafter, the Court used its Royal Drug analysis to determine what should be considered within the business of insurance. In Union Labor Life Insurance Co. v. Pireno, [FN57] the Plaintiff, a chiropractor, sued the insurer claiming that the insurer's use of peer review by chiropractors to *536 determine reasonable fees for services was restraint of trade in violation of section 1 of the Sherman Act. [FN58] Union Life countered by arguing that its actions were exempt under the McCarran-Ferguson Act. [FN59] Citing Royal Drug, the Court identified three criteria relevant in determining whether a particular practice is part of the "business of insurance" exempt from the antitrust laws by section 1012(b):
[1.] whether the practice has the effect of transferring or spreading a policyholder's risk;
[2.] whether the practice is an integral part of the policy relationship between the insurer and the insured; and
[3.] whether the practice is limited to entities within the insurance industry. [FN60]

Applying these three criteria to the facts of the case, the Court held that insurer's use of the Peer Review Committee did not play a "part in the 'spreading and underwriting of a policyholder's risk,"' [FN61] "use of . . . [the] Committee is not an integral part of the . . . relationship between insurer and insured," [FN62] and "the challenged peer review practices are not limited to entities within the insurance industry." [FN63] As to the third criteria, the Court did hedge by stating that "practices need not be denied the [section 1012(b)] exemption solely because they involved parties outside the insurance industry . . . [b]ut the involvement of such parties, even if not dispositive, constitutes part of the inquiry mandated by the Royal Drug analysis." [FN64]

As it did in South-Eastern, [FN65] the Court once again confronted the extent to which states should regulate insurance in Federal Trade Commission v. Ticor Title Insurance Co. [FN66] In Ticor Title, the Federal Trade Commission alleged horizontal price fixing against the six largest title insurance companies in the nation. [FN67] Two principal defenses raised by the companies were exemption from antitrust under the McCarran-Ferguson Act, and *537 state-action immunity from antitrust, citing the line of cases beginning with Parker v. Brown, [FN68] which held that anticompetitive conduct has state-action immunity if the activity is authorized and supervised by state officials. [FN69] The Court brushed aside the McCarran-Ferguson defense since the uniform rates set through rating bureaus and used by the title insurers were not the result of pooling risk information, but instead were based upon profitability studies. [FN70] In analyzing the state-immunity argument, the Court relied upon the two-part test enunciated in California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., [FN71] which states that a state law or regulatory scheme cannot be the basis for antitrust immunity unless:
1. the State has articulated a clear and affirmative policy to allow the anticompetitive conduct; and
2. the State provides active supervision of anti-competitive conduct undertaken by private actors. [FN72]

The Court noted from the facts of the case that several of the States used a "negative option" system by which to approve rate filings by the bureaus. [FN73] Under this system, the rates filed by the bureaus became effective unless the State rejected them within a specified period, and the rate filings were subject to minimal scrutiny by state regulators. [FN74] The Court found against Ticor Title since there was no evidence of substantial state participation in the rate-setting scheme. [FN75] In addition, the Court held that "[a]ctual state involvement, not deference to private price-fixing arrangements under the general auspices of state law, is the precondition for immunity from federal law." [FN76] And as a roadmap for possible future actions on the part of insurers and state regulatory agencies, the Court stated:
This case involves horizontal price fixing under a vague imprimatur in form and agency inaction in fact. No antitrust offense is more pernicious than price fixing . . . . Our decision should be read in light of the gravity of the antitrust *538 offense, the involvement of private actors throughout, and the clear absence of state supervision. We do not imply that some particular form of state or local regulation is required to achieve ends other than the establishment of uniform prices. [FN77]

The impact by foreign reinsurers [FN78] on the United States insurance industry was examined by the Court in Hartford Fire Insurance Co. v. California. [FN79] In Hartford Fire, several domestic and foreign insurer and reinsurer defendants were alleged to have violated the Sherman Act by use of a boycott, in order to force other primary insurers to change the terms of their standard commercial general liability (CGL) insurance contracts. [FN80] The scheme was instigated by four domestic primary insurer defendants who approached domestic reinsurers, as well as several key actors in the London reinsurance market, about using their positions as reinsurers to affect changes in the wording of the standard CGL contract. [FN81] The leverage in the scheme was that all the reinsurers participating in the activity would withhold reinsurance from the marketplace unless the demanded changes in the standard CGL contract were incorporated into the form. [FN82] The harm of noncompliance with the demanded changes would be the loss of protection for a primary insurer from catastrophic loss, and decreasing the ability of a primary insurer to sell more insurance than its own financial capacity might otherwise permit. [FN83] The defendants argued their activities were exempt under the McCarran-Ferguson Act, and the foreign reinsurers also argued that the principle of international comity precluded the Court from exercising jurisdiction over them. [FN84] The Court stated that its prior cases had "confirm[ed] that the 'business of insurance' should be read to single out one activity from others, not to distinguish one entity from another," [FN85] and "that the McCarran-Ferguson Act immunizes activities rather than *539 entities." [FN86] Therefore, the domestic insurers did not lose their McCarran-Ferguson Act exemption simply because their transactions were with foreign reinsurers, [FN87] but the Court also stated "it is well established by now that the Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States." [FN88] The Court did, however, state there were sufficient allegations that the defendants engaged in an illegal boycott, which violated the Sherman Act by way of section 1013(b) of the McCarran-Ferguson Act. [FN89] However, in so finding, the Court distinguished between the term "concerted agreement" to seek particular terms, [FN90] which is "a way of obtaining and exercising market power by concertedly exacting terms like those which a monopolist might exact," [FN91] and a "conditional boycott," which was the "expansion of the refusal to deal beyond the targeted transaction that gives great coercive force to a commercial boycott: unrelated transactions are used as leverage to achieve the terms desired." [FN92] The Court held that if the reinsurers' activities were determined to be a concerted agreement to seek particular terms, then the reinsurers' activities were not a form of boycott under the Sherman Act, and would therefore be exempt as lawful under the McCarran-Ferguson Act. [FN93]

The interplay of federal statute and state law laid at the center of the Court's analysis in Humana Inc. v. Forsyth. [FN94] The group health policy at issue stipulated that Humana would pay 80% of the policy beneficiaries' hospital charges at Humana Hospital, while the beneficiaries paid the remaining 20%. [FN95] However, in a concealed agreement between the insurer and the hospital, the hospital granted large discounts on the insurer's portion of the hospital charges, with the effect that the beneficiaries paid significantly more than the 20% contracted. [FN96] The plaintiff beneficiaries sued alleging violations of the Racketeer Influenced and Corrupt *540 Organizations Act (RICO) by way of mail, wire, radio, and television fraud, while the defendant insurer and hospital moved for summary judgment citing section 1012(b) of the McCarran-Ferguson Act. [FN97] The Court noted that:
[t]he McCarran-Ferguson Act thus precludes application of a federal statute in face of state law "enacted . . . for the purpose of regulating the business of insurance," if the federal measure does not "specifically relate to the business of insurance," and would "invalidate, impair, or supersede the State's law." RICO is not a law that "specifically relates to the business of insurance." [FN98]

However, the Court then proceeded to formulate the meaning of section 1012(b): "When federal law does not directly conflict with state regulation, and when application of the federal law would not frustrate any declared state policy or interfere with a State's administrative regime, the McCarran-Ferguson Act does not preclude its application." [FN99] Using this formulation, the Court found against Humana by concluding that the RICO causes of action, and those of the applicable Nevada statute, [FN100] were not in direct conflict since both statutes advanced the state's interest in combating insurance fraud. [FN101]

While not involving insurance, some mention must be made as to whom and in what circumstance a party can bring a cause of action for an antitrust violation. In Associated General Contractors of California v. California State Council of Carpenters, [FN102] the court enunciated three factors that should be used to determine if a private party may bring a private antitrust action. These factors are:
1. is there a causal connection between the antitrust violation, harm to the plaintiff, and the defendant's act; [FN103]
*541 2. in each case, the "alleged injury must be analyzed to determine whether it is of the type that the antitrust statute was intended to forestall"; [FN104] and
3. "the directness or indirectness of the asserted injury." [FN105]

B. Pertinent State Regulation

By necessity and design, the review of state regulation will focus only on the state statute versions of insurance antitrust law, including a description of statutes addressing "unfair practices." In addition, only those statutes from the states of California, Texas, New York and Florida will be discussed, since these four states are the largest in the United States both in terms of population and total life insurance premiums written. [FN106]

As to state versus federal antitrust oversight for the insurance industry, all four states have statutory sections that reflect the language promulgated by the NAIC. [FN107] This language states that its purpose is:
to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed [in the McCarran-Ferguson Act] by defining, or providing for the determination of, all such practices in this State which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined. [FN108]

Incorporating the language of section 1013 of the Sherman Act, California, Florida and Texas include NAIC language in their definitions of unfair trade practices by insurers by prohibiting the "[e]ntering into any agreement to commit, or by any concerted action committing any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance." [FN109] *542 On the other hand, New York simply applies its general business code to declare illegal and void any attempt to establish or maintain a monopoly, or conduct activity that restrains trade or commerce, [FN110] but provides an exception as to those activities regulated by its insurance code. [FN111]

All four states also have statutes that prohibit unfair discriminatory practices relating to the setting of premium rates among individuals of the same risk classification, except where the discrimination is based on "sound actuarial principles" or is related to "actual and reasonably anticipated experience." [FN112] Each of these statutes provides a private cause of action for unfair discrimination involving the risk classification process. None of the statutes nor the NAIC give a direct definition of either term, but by examining the definition of the individual words that constitute each term, "sound actuarial principles" can be described as "basic assumptions as to the computing of insurance risks and premiums, based upon valid reasoning," [FN113] and "actual and reasonably anticipated experience" can be defined as "knowledge gained in accordance with sound thinking as to existing facts and those facts expected in the future." [FN114] These conjoined definitions imply that in order for a life insurer to discriminate in its risk classification process, the discrimination must be based upon current, statistically valid mortality information.

C. Summary of Regulatory Guidelines for Antitrust Violations

At this point, it is perhaps helpful to summarize the federal case law and state regulations reviewed into "rules" that can be used when making a determination as to whether an insurer is engaged in an activity that violates antitrust laws. These "rules" would require an assessment as to:
1. Does the activity engaged in by the insurer fall within the "business of insurance?" An activity would meet this criteria if:
*543 a. it involved the transfer or spreading of the policyholder's risk, or statistical data and rate-making; and
b. the activity or practice is an integral part of the policy relationship between the insurer and the insured. [FN115]
2. Does the insurer's activity involve a third party? If yes, and the third party is within the insurance industry, the activity probably falls within the ambit of the business of insurance. If the third party is outside the insurance industry, this does not automatically disqualify the activity as not being within the business of insurance, but it requires a more in-depth analysis on the part of the court. [FN116]
3. Activities conducted by an insurer or insurers that cause boycott, coercion, or intimidation are not exempt under McCarran-Ferguson; therefore, these activities are subject to action under the full range of antitrust laws. [FN117]
4. The antitrust laws apply to insurers and reinsurers, and includes both United States domestic insurers and foreign insurers, whose insurance activities affect the United States market. [FN118]
5. Activities that are considered the business of insurance are exempt from federal antitrust laws only if the activity is regulated by the state and that state:
a. has articulated a clear and affirmative policy to allow the anticompetitive conduct; and
b. provides active supervision of anticompetitive conduct undertaken by insurers. There must be active state supervision and not deference to private agreements to maintain immunity from federal law. [FN119]
6. If an activity is subject to both federal and state law, and application of the federal law does not interfere with a state's supervision of the activity, then the activity is subject to both federal and state causes of action. [FN120]
*544 7. State regulation of insurers does not allow a state to sanction activities of private insurers that would coerce, intimidate, and boycott competitors and consumers. [FN121]
8. State laws require insurers to use statistically valid information when insurers classify risks for coverage. [FN122]

9. An individual applying for insurance coverage cannot bring a private cause of action for alleged antitrust violations by an insurer because the antitrust laws only apply to injuries to competition among competitors. [FN123]
10. An individual applying for coverage can bring a private cause of action under state law for unfair discrimination involving the risk classification process. [FN124]

II. Methodology of the Risk Classification Process
Risk classification is a discriminatory process in which individuals are included in different risk classes according to the mortality expected. The persons in each class are expected to experience similar mortality; the expected mortality for each class is different. In this way each person pays his fair share and equity is achieved. [FN125]

This part of the Article will begin by describing the "risk classification process" as it applies to life insurance risk classification and selection. Subsequent discussions will focus on how the risk classification process is conducted at the primary insurer level, and then, the effect reinsurance companies have upon the same process.

*545 A. Description of the Risk Classification Process

As an introduction to the risk classification process and why insurers deem it necessary, it is perhaps best to analogize the methodology with something more familiar to most individuals. A prime example is the determination of how large a payment an individual wants to make on his house mortgage. A mortgage payment has four components-the amount of the mortgage, the interest rate, the payment cycle (generally monthly), and the duration or number of payments-that results in a monthly payment amount of X. If the number of payments is lowered from 360 months to 180 months, leaving the amount of the mortgage, the interest rate, and the payment cycle the same, the amount of the monthly payment increases to compensate for the shorter payment period. Equating this to a life insurance policy, if the face amount of the policy remains constant, at a given interest rate, with payments on a monthly basis, a monthly payment of X amount is required to pay for the policy. However, if the insurer determines that the proposed insured's medical history is such that there is a strong likelihood that he will not survive to his normal life expectancy (shorter duration of payment), then the monthly payment must be increased greater than X to pay for the policy.

The determination of individual risks acceptable to the company is called risk selection; the separation of groups of insurance risks into categories of standard, and the degrees of substandard, is called risk classification. [FN126] The object of risk classification is to protect the insurance company and control mortality experience by declining the severest risks and charging an extra premium commensurate with the expected extra mortality for insurable but substandard risks. [FN127] Each person must pay a premium in proportion to the risk in order to maintain equity among all policy owners. [FN128]

When insurers engage in risk classification and risk selection, they are primarily attempting to differentiate standard mortality risks from excess risks, and stratify the insurability of the latter. [FN129] Risk classification creates risk classes of comparable mortality. [FN130] Risk selection (i.e., underwriting) *546 then involves looking at a proposed risk (an applicant at risk of dying and the death benefit at stake), sizing up the nature and severity of the mortality risk involved, and assessing the proper risk class and premium. [FN131]

"In insurance parlance, 'standard' connotes an applicant with an acceptably normal or average profile of mortality risks: health history, risk factors, family history, avocations and the like." [FN132] Substandard lives have mortality risk profiles that predispose an individual to premature mortality. [FN133]
[T]he key variable affecting each life insurance decision is mortality risk, and the extra ratings applied to substandard business chiefly reflect the mortality costs associated with specific impairments. Quantifying excess mortality and the factors governing it, and anticipating the pattern[s] of mortality over time (loss distribution), are what the rating of substandard lives addresses. [FN134]

The "numerical rating system" used by life insurance underwriters is a methodology that quantifies the risk classification and selection process. "[T]he standard risk is assigned a value of 100 percent (i.e., one unit of risk)," [FN135] and an individual is charged the "standard premium." "Unfavorable risk factors, conditions, or impairments expected to produce excess mortality risk are added to that baseline . . . ." [FN136] If an unfavorable risk factor is expected to produce excess mortality that can be quantified as 50 (read as "plus fifty"), this 50 is added to the 100 percent standard premium to produce a substandard premium of 150. [FN137] This excess mortality of 50 is also referred to as a "debit" since it results in an extra premium being charged. [FN138] By the same token, if an applicant has some characteristic associated with unusual longevity, then a "credit" might be considered (e.g., -25 or "minus twenty-five"). [FN139]

*547 For most insurers, the standard premium takes into consideration the risk factors of age, gender, and smoking or tobacco habits. [FN140] While:
standard risk is the basic unit risk, or 100 percent, it should be understood that this is the implicit central risk for the standard class-a class that is a mixture of some risks whose mortality is less than 100 percent (80 percent or 90 percent of standard) and some whose mortality is more than 100 percent (110 percent or 120 percent of standard). "Just how broad the standard class can be and still meet standard actuarial pricing assumptions is a matter each company decides. . . . The vast majority (93-94 percent) of applications for life insurance in the [United States] are accepted as standard risks[,]" while 4-5 percent are offered coverage on a substandard basis, and the remaining 2-3 percent are not offered coverage on any basis (referred to as "declined"). [FN141]

"The primary factor in classifying risks that are not standard is state of health." [FN142] "Medical impairments account for the substantial majority of substandard and declined risks, particularly at the older ages." [FN143] "The appropriate ratings for impairments may be developed from the results of previous intercompany mortality studies, from studies of a company's own experience, from studies published in medical literature, and from current clinical opinion on prognosis in the light of developments in medical treatment and surgical procedures." [FN144] Most substandard ratings are calculated either upon a "table rating" basis (mortality ratio) or a "flat extra' basis (excess death rate). [FN145]

In its simplest terms, table ratings are derived from the ratio of the observed or actual deaths for those members of a study population cohort with the studied impairment (e.g., heart disease), as compared to the expected deaths for those members of the study population cohort without the studied impairment. [FN146] For example, if the observed number of *548 deaths in a study population cohort was 175 lives, and if the expected number of deaths was 100 lives, the mortality ratio would be 175% (the standard risk of 100 and 75). [FN147] A common scheme is to organize risk classes or table ratings in increments of 25%. [FN148] Table ratings are traditionally considered permanent increases in premium, and are most useful for impairments with a level or slowly increasing percentage of standard mortality. [FN149] However, the substandard applicant may be charged an extra premium lower than 1.75 times the standard premium, depending upon the type of insurance product, as well as the insurer's costs for substandard acquisition, maintenance, reconsideration, lapse, and reinsurance arrangements. [FN150]

Whereas table ratings represent a ratio of the observed mortality to the expected mortality, a flat extra represents the excess number of deaths for a study population cohort, and it is calculated by subtracting the expected deaths from the observed deaths. [FN151] For example, if 20 deaths were observed in a group of 1,000 individuals, and only 10 deaths were expected, the excess death rate would be 10 deaths. Since it is not known in advance which of the 1,000 individuals would produce the 10 excess deaths, every member of the group of 1,000 would be charged the flat extra premium to compensate for the excess deaths. Flat extras are most useful for impairments with a level number of extra deaths or rapidly decreasing percentage extra mortality. [FN152] Flat extras may be temporary, as in the case of initially high risk decreasing with time (such as treated cancer or attempted suicide), or permanent if the risk is constant or ongoing, as in the case of accidents related to a chosen occupation or avocation. [FN153]

Now armed with insight into the risk classification process, it is time to return to the mortgage example that started this section and convert it into a risk classification example. Two males, both age thirty years, apply for life insurance company. One is considered a standard risk, which projects to a probable remaining life expectancy of forty-seven years to age seventy-seven. [FN154] The second individual is a well-controlled Type I diabetic, with *549 no complications, which requires a substandard rating of 250. [FN155] The probable remaining life expectancy for the diabetic is reduced from the forty-seven years of the standard risk, to only thirty-eight years to age sixty-eight. [FN156] Equity is achieved if each of the two individuals pays the premium that properly reflects his expected mortality or life expectancy.

B. Risk Classification at the Primary Insurer Level

Upon receipt of a completed application for life insurance, the insurer's underwriter is responsible for the determination as to whether the proposed insured will be selected for coverage and on what basis. Life underwriting can be defined as:
the process of assessing an individual's anticipated mortality-that is, the relative incidence of death among a given group of people . . . in order to determine (1) whether to approve that person for insurance coverage and, if so, (2) the risk classification to which the proposed insured should be assigned. [FN157]

The primary resource used by underwriters to classify risks is the "underwriting manual," which provides background on the impairment in question, and gives the underwriter guidance as to how to assess the appropriate rating for the risk or risks involved. [FN158]

For an underwriting manual to accurately and statistically reflect expected mortalities for impairments, the producing entity must have access to an extensive database of mortality information for a large number of impairments; therefore, the production of these manuals is generally limited to reinsurers and some of the larger primary or direct insurers. [FN159] With the extensive amount of statistical data necessary to appropriately classify risks, as well as the required professionals to interpret and analyze the data, sometimes the rapid pace of medical advances causes the underwriting manual guidelines to lag behind in its statistical accuracy as to expected mortality. [FN160]

*550 If it can be shown that an insurer cannot make a risk classification decision based upon statistically valid and current mortality information, that insurer may be found to violate state unfair discriminatory practices laws. [FN161] Of the two unfair discriminatory practices prongs that could be violated, the prong that requires the insurer to discriminate based upon actual and reasonably anticipated experience can be violated in one of two ways: where the insurer either has not utilized the most recent mortality data available from the results of medical studies, or where the insurer has not incorporated into its insurance policy data processing system the capability to store, accumulate, and analyze its own policy records as it pertains to specific medical impairments. As to analyzing its own data, it is not enough that the insurer is able to calculate mortality information for the entire block of insurance policies that are either active or have resulted in death claims, but instead, the level of detailed analysis should at a minimum be at the level for each impairment that is insured, and where possible for each impairment, subcategorization and analysis based upon the degree of severity of the impairment. Of course, it must be recognized that some impairments occur so infrequently that it may be impossible for one insurer to gather enough statistical data to make valid mortality assumptions for all impairments. The prong requiring that sound actuarial principles be used to discriminate insurance risks would be violated if the insurer failed to use reasonable assumptions and methodology in its risk classification process.

C. Reinsurer's Effect on the Risk Classification Process

"The fundamental principle of reinsurance is that a transfer of risk occurs." [FN162] "Reinsurance refers to insurance purchase[s] by an insurance company to cover all or part of certain risks on insurance policies issued by that company." [FN163]
Reinsurance is the process whereby one insurance company, referred to as the reinsurer, for a consideration, agrees to indemnify another insurance company, referred to as the ceding company or the reinsured, against all or part of a loss which the ceding *551 company may incur under certain policies of insurance which it has issued. [FN164]

There are three uses of reinsurance directly pertinent to the underwriting process. An insurer's "retention" is the maximum amount of risk that the insurer wants to be responsible for paying in the event of a claim. [FN165] Reinsurance allows an insurer to issue a policy on a single life for an amount in excess of its own retention, with the reinsurer assuming the risk on the excess amount above the insurer's retention. [FN166] This activity allows smaller insurers to compete for applicants against larger insurers that have larger retentions without the danger that the smaller insurer will suffer a claim that exceeds its financial ability to pay the claim. An insurer may also seek reinsurance for underwriting needs. [FN167] Not only do most reinsurers provide underwriting manuals to client insurers, but also it provides the underwriting expertise of a reinsurance underwriter for those applications involving complex medical and financial risks. [FN168] Finally, reinsurance is often used to finance the acquisition costs and statutory reserve requirements associated with the writing of new business. [FN169]

One frequent method of transferring insurance risk from the insurer to the reinsurer is through the use of "automatic" reinsurance. "Automatic reinsurance is a contractual arrangement whereby an insurance company is allowed to cede insurance issued in amounts over its retention limit, subject to certain criteria, to a specific reinsurer at a predetermined cost without submitting underwriting papers [to the reinsurer]." [FN170] "This process saves the ceding company much time and administrative expense, and allows it to issue the majority of its policies on a timely basis." [FN171] In return, "the reinsurer anticipates receiving quality business because the ceding company is retaining its full retention," and the reinsurer "does not have to compete on underwriting decisions with other reinsurers, which saves each reinsurer time as well as the expense of underwriting." [FN172]

*552 "Facultative reinsurance is an arrangement whereby the ceding company submits its underwriting file on an [applicant] to the reinsurer for the reinsurer's decision." [FN173] This method of reinsurance "is utilized when a cession does not meet the requirements for automatic reinsurance, or when the ceding company voluntarily requests that the reinsurer underwrite an application" involving a questionable risk or impairment. [FN174] The offering of facultative insurance by a reinsurer to a client insurer allows the client insurer the opportunity to offer insurance coverage to applicants where the insurance risk is either too large in size or too questionable a mortality risk for it to accept itself. [FN175] The reinsurer gains from the transaction as well. First, insurers wishing to use the reinsurer's facultative service must agree to cede a portion of its new business to the reinsurer on the more profitable automatic basis. [FN176] Second, the reinsurer uses this service as a quality control device to allow it the opportunity to gauge the degree of skill and knowledge on the part of the client insurer, which affects the terms of the agreement between the reinsurer and the insurer. [FN177] Finally, the review of questionable risks by the reinsurer allows it to gather data from several insurers on the same type of questionable risk, with the objective of determining how these risks should be underwritten in the future so that both the reinsurer and insurer can do so profitably. [FN178]

III. Underwriting Activities and Antitrust Implications

A. Purpose and Overview of Collaborative Guidelines

As previously discussed, the purpose of the Sherman Act of 1890 and its progeny, both statutory and case law, is to enhance the welfare of consumers, and give the federal government a mechanism by which to combat and limit the development of supra-large corporations. However, it is recognized by both the Federal Trade Commission and U.S. Department of Justice (the "Agencies") that competition in modern markets sometimes requires collaboration among competitors to achieve goals such as expanding into foreign markets, funding expensive innovation efforts, and *553 lowering production and other costs. [FN179] Therefore, the Agencies issued the Antitrust Guidelines for Collaborations Among Competitors (the "Guidelines") as an analytical framework to be used by competitors to evaluate proposed collaborative transactions with one another. [FN180] The Agencies believe the Guidelines "enable businesses to evaluate [these] proposed transactions with greater understanding of possible antitrust implications, thus encouraging procompetitive collaborations, deterring collaborations likely to harm competition and consumers, and facilitating the Agencies' investigations of collaborations." [FN181] The analytical framework of the Guidelines is structured along the "[t]wo types of analysis . . . used by the Supreme Court to determine the lawfulness of an agreement among competitors: per se and rule of reason." [FN182]

Agreements that are considered per se illegal include "agreements among competitors to fix prices or output, rig bids, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce." [FN183] "The courts conclusively presume such agreements, once identified, to be illegal, without inquiring into their claimed business purposes, anticompetitive harms, procompetitive benefits, or overall competitive effects." [FN184]

Analysis under rule of reason is a flexible inquiry that focuses on the state of competition with, as compared to without, the relevant agreement among collaborating competitors. [FN185] "The central question is whether the relevant agreement likely harms competition by increasing the ability or incentive profitably to raise price above or reduce output, quality, service, or innovation below what likely would prevail in the absence of the relevant agreement." [FN186] "If the nature of the *554 agreement and the absence of market power together demonstrate the absence of anticompetitive harm, the Agencies do not challenge the agreement." [FN187] "Alternatively, where the likelihood of anticompetitive harm is evident from the nature of the agreement, or anticompetitive harm has resulted from an agreement already in operation, then, absent overriding benefits that could offset the anticompetitive harm, the Agencies challenge such agreements without a detailed market analysis." [FN188]

"If the initial examination of the nature of the agreement [under rule of reason analysis] indicates possible competitive concerns, but the agreement is not one that would be challenged without a detailed market analysis, the Agencies analyze the agreement in greater depth." [FN189] "The Agencies typically define relevant markets and calculate market shares and concentration as an initial step in assessing whether the agreement may create or increase market power or facilitate its exercise and thus poses risks to competition." [FN190] Additional factors examined by the Agencies include whether the collaborating competitors still have the ability to compete independently, what effects the agreement has on the ability of other firms to enter the market, and any other market circumstances that may foster or impede anticompetitive harms. [FN191] "If the examination of these factors indicates no potential for anticompetitive harm, the Agencies end the investigation without considering procompetitive benefits." [FN192] "If investigation indicates anticompetitive harm, the Agencies examine whether the relevant agreement is reasonably necessary to achieve procompetitive benefits that likely would offset anticompetitive harms." [FN193]

B. Underwriting Manuals

1. Anticompetitive Harm

As previously discussed, underwriting manuals are the primary tool by which life insurance risks are classified, and the majority of underwriting manuals are developed by reinsurers and large primary or direct insurers. [FN194] *555 A reinsurer uses its own underwriting manual not only to classify which risks it wants to insure, but more importantly, the reinsurer provides its client, direct insurers, with the manual as well. In addition, the mortality results experienced by the reinsurer, and on which the reinsurer bases its ratings for various impairments, come from the policies it reinsurers from its clients. The underwriting manual facilitates the transfer of life insurance on an automatic basis by providing the reinsurer's client the criteria by which the reinsurer will accept a given impairment risk, and the rating or price that the reinsurer expects the direct insurer to charge the applicant. On its face, this transaction would appear to violate antitrust laws as a vertical price fixing scheme. [FN195] If it is assumed that insurers would deny that this arrangement is price fixing, but instead, has procompetitive benefits, the Agencies inquiry will probably be on a rule of reason basis.

Initially, one has to determine the relevant markets for both direct insurer competitors and reinsurance competitors. The Guidelines define a relevant market as:
a product or group of products and a geographic area in which it is produced or sold such that a hypothetical profit-maximizing firm, not subject to price regulation, that was the only present and future producer or seller of those products in that area likely would impose at least a "small but significant and nontransitory" increase in price, assuming the terms of sale of all other products are held constant. A relevant market is a group of products and a geographic area that is no bigger than necessary to satisfy this test. [FN196]

The Guidelines then require that market shares be assigned both to firms currently in the relevant market and to firms that are able to make "uncommitted" supply responses. [FN197]

As of 2001, there were 1,663 life and health insurance companies licensed in the United States. [FN198] Focusing once again on the four states previously identified, 579 (34.8%) insurers are licensed or domiciled in *556 California, 628 (37.8%) in Florida, 217 (13.0%) in New York, and 770 (46.3%) in Texas. [FN199] State rankings in terms of an insurer's market share for each state was not available, but with the number of insurers involved, it is instructive to look at rankings for the entire United States life insurance industry. Based upon the amount of "admitted assets," the top ten insurance companies in the industry owned 33.4% of all admitted assets, with 1,642 insurers having admitted assets shares of less than one percent each. [FN200] Based upon life insurance inforce (active policies), the top ten insurance companies in the industry owned 31.1% of all life insurance inforce, with 1,635 insurers having life insurance inforce shares of less than one percent each. [FN201] It should also be noted that only four insurance companies made both top ten lists, therefore, signifying even greater dispersion of market share.

The relevant market for firms specializing only in reinsurance entails a much smaller number of companies than does the direct market. Only sixteen companies in the United States provide primarily only reinsurance. [FN202] More importantly, the amount of reinsurance assumed by these sixteen reinsurers was $933.101 billion, which represented 58.4% of all United States ordinary individual life insurance sales for the year 2001. [FN203] In addition, it should be noted that of the twelve reinsurers with market share of at least two percent, only four are owned by United States interests, while the remaining reinsurers are owned by Swiss, Dutch, German, Italian, and Bermudan interests. [FN204]

*557 With the stage now set, let us re-state the above information, as it could be perceived from an antitrust perspective. We have a flat, two-tiered industry, with the bottom tier (direct insurers) extremely wide, and the top tier (reinsurers) extremely narrow in relation to the bottom tier. As a natural by-product of transferring insurance risks to the reinsurers, the direct insurers are providing the reinsurers with competitive mortality information. In turn, the reinsurers are analyzing this mortality data, and sending back to its clients the ratings the reinsurers expect these clients to use when they assess an applicant for insurance. This scheme could be considered a restraint of trade, analogous to vertical price fixing, which violates Section 1 of the Sherman Act. [FN205] If it can be shown that this activity caused boycott, coercion, or intimidation, the activity would not be exempt under McCarran-Ferguson. [FN206] In addition, the reinsurers owned by foreign interests would be subject to United States antitrust laws since their activities would affect the United States market, primarily at the reinsurance level. [FN207]

A direct insurer's cause of action for an antitrust violation would entail proving that this scheme directly injured its ability to compete vis-a-vis other direct insurers. The direct insurer's best argument would be that in order to compete in the market, its retention required it to use the facilities of a reinsurer. As part of the agreement between the direct insurer and reinsurer, the direct insurer had to share mortality information with the reinsurer. In turn, the reinsurer combined this information with that from other direct insurers, and used this aggregation of statistical information to develop the underwriting manual that all of the reinsurer's clients must use to retain their automatic agreement with the reinsurer. The direct insurer would argue that, in order to compete, it was coerced or intimidated into giving the reinsurer the mortality information, and that the direct insurer faced a possible boycott by the other reinsurers if it did not comply with the reinsurer's demands. As will be shown, the ability of an insurer to prove a claim of injury such as this is very remote.

*558 2. Procompetitive Benefits

By using the rule of reason criteria listed in the Guidelines as well as requirements specific to the Guidelines, it can be shown that the procompetitive benefits of this activity far outweigh the possible anticompetitive harm. The primary argument upon which an insurer/reinsurer can substantiate procompetitive benefits is whether the collaboration benefits the insurance-buying consumer. If the exchange and analysis of the combined mortality information enables the insurer/reinsurer to price impaired insurance risks more accurately, the individuals whose medical disease or disorder has experienced an improvement in mortality will be able to buy coverage at less expensive premiums rates, while those with medical impairments where mortality has not improved will continue to pay an equitable premium for the life insurance protection.

The relevant market for life insurance is a reasonable starting point for the insurer/reinsurer to argue the procompetitive benefits of sharing mortality information via underwriting manuals. With the relatively low market share of the majority of insurers and some of the reinsurers, [FN208] some insurer/reinsurer combinations can argue that the sharing of statistical information regarding mortality information falls within one of the Guidelines' safety zones. [FN209] As long as the competitor collaboration agreement was neither per se illegal nor subject to challenge without a detailed market analysis, the Agencies would not challenge the agreement when the market shares of the collaboration participants collectively accounted for no more than twenty percent of each relevant market in which competition may be affected. [FN210]

For those insurer/reinsurer combinations where the collective market share exceeds twenty percent, the Agencies would not automatically deem these agreements anticompetitive, but instead, use the factors involved in rule of reason analysis to assess the circumstances at play.

The insurer/reinsurer needs to argue that the competitive collaboration enables all of the participants to more quickly or efficiently research and develop or improve the insurance product. [FN211] This occurs if the insurer/reinsurer can show that the aggregate mortality data from all of the *559 direct insurer competitors provides statistical validity that mortality for given medical disorders has improved, lessening the need for substandard premiums.

One of the concerns for the Agencies when competitors collaborate is whether the collaboration reduces the independent decision making of the collaborators involved. [FN212] Insurers can confront this possible concern in at least two ways. First, as previously noted, the overwhelming majority of United States applications for life insurance are approved at standard premium rates. [FN213] This implies that either direct insurers are making risk classification decisions without the use of the reinsurance underwriting manual, or that the manual is pricing the majority of the insurance applicants at standard rates. Either way, the actual decision is being left to the discretion of the direct insurer and not the reinsurer for the majority of automatic reinsured business. Second, for some impaired risks, the direct insurer will use more than one reinsurer for those risks requiring facultative review by reinsurers-referred to as "reinsurance shopping." [FN214] Reinsurance shopping can be described as auction bidding to find the lowest price. The direct insurer "shops" the proposed risk to several reinsurers to see which one is willing to offer the lowest price, more correctly stated, which reinsurer will offer insurance on a standard basis or on a substandard basis as close to standard as possible. This competitive bidding reduces the probability that reinsurers are colluding to set a certain price for a certain medical disorder.

This competitive bidding process also operates at the direct insurer level. Often, an applicant for life insurance is shopped to more than one direct insurer to obtain the lowest possible substandard rating. If you use the simple example of three direct insurers, each with the help of three different reinsurers, the competitive bidding for the insurance coverage would be conducted among nine insurance companies. This process should alleviate the Agencies concerns as to exclusivity. [FN215] The Guidelines indicate that competitive concern likely is reduced to the extent that participants actually continue to compete, either through separate, *560 independent business operations or through membership in other collaborations. [FN216]

The Agencies also have concern if a collaborative competitor agreement occurs in an industry where the introduction of new competitors is mitigated by high entry requirements. [FN217] With over 1,600 life and health insurers in the United States market, [FN218] it is hard to comprehend that any increase in the price of the life insurance product can occur without competitors rushing in to "grab" the market of the insurer that raises its price above that in the marketplace.

Finally, the Agencies look at the duration of the collaboration under the theory that the shorter the duration of the collaboration, the more likely participants are to compete against each other and their collaboration. [FN219] Although direct insurers and reinsurers often maintain business ties with each other that stretch into decades, the relationship is not a static one. Periodically, whether every year or two, or when a new product is to be introduced into the life insurance market, direct insurers usually conduct a bidding process among its potential reinsurers to see which of these reinsurers will reinsure the product automatically and review cases facultatively. As with any business negotiation, each party is looking for terms that are most advantageous to itself. Insurers and reinsurers who are able to show that the continued relationship between each other is based upon criteria such as competitive product price, service, and customer support will be able to justify long duration relationships.

C. Intercompany Mortality Studies

Whereas the prior discussion about underwriting manuals focused on the established business relationship between reinsurers and their respective direct insurer clients, this section focuses on what could be considered pure research and analysis by insurers. An "intercompany mortality study" involves multiple insurers that pool their mortality data together for a specific impairment or impairments. Through the larger combined database of several insurers, it is hoped that the mortality results of the aggregate study is statistically more accurate than a study done by any one insurer, and that this increased accuracy of mortality data will *561 result in more accurate and equitable pricing of life insurance risk. Intercompany studies have been done by the life insurance industry since at least 1909. [FN220]

1. Anticompetitive Harm

On its face, intercompany mortality studies could be seen as an attempt to fix prices among competitors by establishing uniform rates to be charged potential applicants for life insurance, similar to the arguments raised with underwriting manuals. An insurer would have to prove that it was competitively harmed by this activity, either by boycott, coercion, or intimidation, as conducted by other competitor insurers, or that that insurer could bring a cause of action for the supposed injury. This argument, however, would appear to be "dead-on-arrival" unless the insurer could prove that insurers collaborating together to conduct mortality studies, actually intended to harm that insurer specifically.

2. Procompetitive Benefit

In keeping with the use of the Guidelines, the Agencies state "[i]nformation sharing . . . may take place through competitor collaborations." [FN221] The only caveat is the requirement that the information sharing does not facilitate collusion involving competitively sensitive variables. [FN222] Insurers should be able to meet this requirement as long as the information sharing only involves the aggregation of data records on insured lives, without any means of identify a particular individual, and more importantly and practical, no discussions concerning a particular insurer's costs, methods of doing business, marketing plan, etc.

The more fundamental argument to information sharing by insurers is the Supreme Court's interpretation of the McCarran-Ferguson Act through its various decisions. First, the Court has recognized that information sharing among insurers was necessary for determining appropriate premiums. [FN223] Then, when the Court established the criteria to determine whether a practice was part of the business of insurance, it included the transferring or spreading of a policyholder's risk, and whether the practice is an integral part of the policy relationship between the insurer and the *562 insured. [FN224] The determination of the appropriate premium to be charged to an applicant based upon his or her expected mortality goes to the essence of spreading the policyholder's risk, and since the insured will be charged a premium based upon his or her expected mortality, it is certainly integral to the policy relationship between the insurer and insured.

A recent example of an intercompany mortality study involved forty-seven insurers and analyzed insureds with histories of either alcohol abuse or elevated liver enzymes. [FN225] One primary finding of the study was that those individuals issued standard coverage (100% mortality), actually had a mortality of 147%. [FN226] Those individuals issued coverage on a substandard basis had actual mortality consistent with the substandard rating assessed. [FN227] Insurers should encourage these types of studies in order to show the insurance-buying public that active efforts are being made to classify life insurance risks as equitably as possible, and to establish an industry baseline for each impairment. In addition, each insurer should conduct its own mortality studies in connection with those on an intercompany basis, so that risk classification decisions that deviate from the industry baseline can be substantiated actuarially.

Possibly the most important argument to be raised by an insurer for intercompany mortality studies is to guard against lawsuits being brought by private individuals on a state action basis under unfair discrimination laws. A recent example of this is Chabner v. United of Omaha Life Insurance Co., [FN228] where the court held that the insurer's decision as to the insurability of Mr. Chabner was based neither upon sound actuarial principles nor related to actual or reasonably anticipated experience. [FN229] Mr. Chabner's impairment was a rare nervous system disorder called facioscapulohumeral muscular dystrophy. [FN230] The incidence of this impairment is so low that any one insurer probably would not underwrite enough of these type cases to have confidence that it mortality results were *563 statistically accurate. Pooling the resources of many insurers to produce data for mortality studies may provide the necessary number of insured lives to help make the statistical data more valid. This in turn, allows the insurer to charge a premium that is more equitable to the insurance applicant, and helps the insurer avoid any charge of unfair discrimination.

D. Professional Papers and Presentations

Most of the arguments as to whether individual insurance professionals either violate or adhere to antitrust concerns has been elaborated upon in the discussions on underwriting manuals and intercompany mortality studies. Therefore, this part of the Article will not bifurcate the arguments into anticompetitive harm or procompetitive benefits. Instead, some general comments will be made.

First, price fixing either through a professional paper or presentation does not occur when the discussion centers on information sharing of mortality information. Based upon the analysis presented in this Article, stating that an individual with moderate hypertension should be rated at 200% mortality (100 standard mortality with 100 extra mortality) simply reflects the mortality experienced by the insurer or reinsurer, and it should not be considered price fixing.

Second, price fixing would occur if several reinsurers combined together in a paper or presentation and informed their respective client insurers that all applicants with histories of hypertension must be rated at a minimum 200% mortality rating. And that failure to comply with this instruction would result in the loss of reinsurance capacity for any client insurer. This type of activity would violate federal antitrust laws as coercion or intimidation, as well as state antitrust and unfair discrimination laws.

Third, federal antitrust laws would be violated if an insurance professional from a United States insurer traveled to an insurance meeting outside the United States and discussed price fixing with other similar professionals. At the same time, an insurance professional affiliated with a foreign insurer, for example one domiciled in Canada, would violate United States federal antitrust laws if that individual-whether in the United States, Canada, or elsewhere-advocated price fixing.

Finally, to avoid violations of state unfair discrimination practices, insurance professionals in both papers and presentations, as well as in any other appropriate medium, should advocate that their own employer have in place the necessary resources to conduct detailed substandard mortality studies. In addition, there should also be advocacy by these same professionals for greater participation in intercompany mortality studies.

*564 Conclusion

The first question asked in the Introduction was, "whether the antitrust policy used by underwriters/insurers was necessary or sufficient?" As to its necessity, the answer is absolutely "yes." Insurance companies are liable for violations of federal antitrust laws. However, as demonstrated in this Article, insurers have a carved-out exemption to these type laws as it pertains to activities that come within the "business of insurance." But, this policy is not sufficient because it only tells an insurance professional what he or she cannot do, and gives no direction as to what activities are permitted.

The lack of direction brings us to the second question which asks, "where are the lines to be drawn as to when and what underwriters/insurers can and cannot do as it relates to antitrust and the sharing of life insurance mortality information for risk classification purposes?" The boundary line for risk classification appears to substantially extend outward. Absent attempts by one insurer or reinsurer to coerce, intimidate, or boycott another on this issue, insurers appear to have almost an unfettered ability to share information on risk classification. In addition, there is legal motivation to force insurers toward this boundary. The unfair discrimination laws of the states as they relate to insurance require insurers to statistically substantiate risk classification decisions with valid, current information. Information that is best obtained through the combined efforts of many insurers.

Although social policy for or against life insurance risk classification was not explored in this Article, it is perhaps best to conclude by quoting from the insurance perspective:
It is important that risk classification is based on real differences in mortality experience. That is, that unfair discrimination due to classification based on impressions that cannot be substantiated does not occur. Many states also prohibit (1) refusal, (2) limitation of coverage or (3) rate differentials based solely on physical or mental impairment unless such action is based on sound actuarial principles or actual or reasonably anticipated experience. Even when not required by law, it makes sound business sense to apply only fair discrimination practice to risk classification. Failure to exercise fairness and equity will cause the public, agents and *565 underwriters to lose respect for the risk classification process in particular, and for the institution of life insurance in general. [FN231]

[FNa1]. J. Daniel Perkins received his Juris Doctor in December 2002, from Texas Wesleyan University School of Law in Fort Worth, Texas. He has previously served as a Vice-Chair of the Tort Trial & Insurance Practice Section's (TIPS) Excess, Surplus Lines and Reinsurance Committee. While attending Texas Wesleyan, he was a Staff Member of the Texas Wesleyan Law Review, a member of the Texas Wesleyan Moot Court Honor Society, and participated as a member of a Moot Court Travel Team. He is a member of the Academy of Home Office Underwriters, he is a Fellow of the Academy of Life Underwriting, and during his reinsurance underwriting career, he served on several professional committees including the Life Underwriting Education Committee of the Academy of Life Underwriting, the Underwriting Experience Studies Committee, and the Mortality & Morbidity Liaison Committee. In addition, he has written extensively on life underwriting topics, primarily as a former Contributing Editor to On the Risk, and as author of several chapters of the ALU exam series.

[FN1]. Anthony Milano, M.D., The Underwriting Manual: An Evidence-Based Approach, Address Before the Home Office Life Underwriters Association (May 8, 2001), in Proceedings of the Home Office Life Underwriters Association, Vol. 82, at 274.

[FN2]. Id. at 280.

[FN3]. Id at ix, Foreword.

[FN4]. Id. at viii, Policy Statement of Anti-Trust Compliance:
The Home Office Life Underwriters Association (HOLUA) is a voluntary association of individual members. The object of the association is to advance the knowledge of sound underwriting of life and disability insurance risks, toward which end it holds meetings, publishes papers and discussions, and promotes educational programs.
Because of the nature of its business-bringing together competitors for the purpose of discussing important facts and issues in life and disability risk appraisal-HOLUA and its members must at all times be sensitive to both the spirit and letter of anti-trust laws, which broadly stated, prohibit any activities that might lessen or tend to lessen the desirable competition of the Association's constituents. It is the policy of HOLUA to avoid all activities which could or might appear to violate any anti-trust competitive law.
The HOLUA will not, through its programs, policies or practices, suggest price fixing. Pricing suggestions which are prohibited include suggested extra ratings or proposed business actions regarding individual applicants for insurance. "Price Fixing" can be broadly interpreted and any semblance of it must be absolutely avoided.

[FN5]. Antitrust Guidelines for Collaborations Among Competitors, Issued by the Federal Trade Commission and the U.S. Department of Justice (2000), available at: http://www.ftc.gov/os/2000/04/ftcdojguidelines.pdf (last visited Mar. 1, 2003) [hereinafter Antitrust Guidelines].

[FN6]. U.S. Const. art. I, § 8, cl. 3.

[FN7]. 22 U.S. 1, 203-04 (1824) (holding that Congress could regulate navigation on New York waterways to the extent that the navigation would be considered interstate commerce, and that when federal law and state law conflict, that federal law preempts state law).

[FN8]. Id. at 196.

[FN9]. Id. at 189-90.

[FN10]. 75 U.S. 168 (1896).

[FN11]. Id. at 169.

[FN12]. Id.

[FN13]. Id. at 170. Art. IV, § 2, cl. 1 of the U.S. Constitution states: "[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States." Paul claimed that a corporation was a "citizen" of a State within the meaning of the Constitution and that this citizenship prevented the State of Virginia from imposing its statutory requirements upon the New York insurers. Paul, 75 U.S. at 171-72. It is interesting to note that the majority of the Court's opinion concerned this argument, and not the Commerce Clause Claim.

[FN14]. Paul, 75 U.S. at 183.

[FN15]. Id.

[FN16]. Id.

[FN17]. Id.

[FN18]. Thomas D. Morgan, Modern Antitrust Law and its Origins 25-30 (2d ed. 2001) (discussing the history of passage of the Sherman Act).

[FN19]. 15 U.S.C. § 1 (2000) "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." Id.

[FN20]. Id. § 2. "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty . . . ." Id.

[FN21]. Id. § 7.

[FN22]. Id. § 8.

[FN23]. 322 U.S. 533 (1944).

[FN24]. Id. at 534-35.

[FN25]. Id. at 535.

[FN26]. Id. at 545.

[FN27]. Id. at 548 (citations omitted).

[FN28]. Id. at 560.

[FN29]. Id. at 562. The court partially based its analysis on this point on a decision it had made one year earlier in Parker v. Brown, 317 U.S. 341, 363, 368 (1943). In Parker, the Court upheld a law of the State of California that allowed the State to regulate the handling, disposition, and prices of raisins produced in the state. In so doing, the Court also held that "a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful." Id. at 351 (citation omitted).

[FN30]. South-Eastern Underwriter Ass'n, 322 U.S. at 563.

[FN31]. Id. at 583.

[FN32]. Id. at 585-86.

[FN33]. 15 U.S.C. §§ 1011-15 (2000) et seq. South-Eastern was decided on June 5, 1944 and the McCarran-Ferguson Act signed into law on March 9, 1945.

[FN34]. 15 U.S.C. § 1011 (2000).

[FN35]. Id. § 1012(a).

[FN36]. Id. § 1012(b).

[FN37]. Id. § 1013(b).

[FN38]. 328 U.S. 408 (1946).

[FN39]. Id. at 410.

[FN40]. Id. at 427.

[FN41]. Id. at 428.

[FN42]. Id. at 430.

[FN43]. Id. at 431 (internal citations omitted).

[FN44]. 440 U.S. 205 (1979).

[FN45]. Id. at 209.

[FN46]. Id. at 207.

[FN47]. Id.

[FN48]. Id. at 232-33.

[FN49]. Id. at 211.

[FN50]. Id.

[FN51]. Id. at 215-16 (quoting SEC v. Nat'l Sec., Inc., 393 U.S. 453, 460 (1969)).

[FN52]. Id. at 214.

[FN53]. Id. at 220.

[FN54]. Id. at 218-19 n.18.

[FN55]. Id. at 221.

[FN56]. Id. at 222.

[FN57]. Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982).

[FN58]. Id. at 122-23.

[FN59]. Id. at 124.

[FN60]. Id. at 129.

[FN61]. Id. at 130 (quoting Royal Drug, 440 U.S. at 205, 211 (1979)).

[FN62]. Id. at 131.

[FN63]. Id. at 132.

[FN64]. Id. at 133.

[FN65]. See United States v. South-Eastern Underwriter Ass'n, 322 U.S. 533, 562 (1944).

[FN66]. 504 U.S. 621 (1992).

[FN67]. Id. at 624.

[FN68]. Id. at 625; Parker v. Brown, 317 U.S. 341 (1943).

[FN69]. Ticor Title, 504 U.S. at 627; Parker, 317 U.S. at 350-52.

[FN70]. Ticor Title,, 504 U.S. at 628.

[FN71]. Cal. Retail Liqour Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97, 105 (1980) (invalidating a California statute forbidding licensees in the wine trade to sell below prices set by the producer).

[FN72]. FTC, 504 U.S. at 631.

[FN73]. Id. at 638.

[FN74]. Id.

[FN75]. Id. at 639.

[FN76]. Id. at 633.

[FN77]. Id. at 639.

[FN78]. Reinsurance defined as "insurance of all or part of one insurer's risk by a second insurer, who accepts the risk in exchange for a percentage of the original premium." Black's Law Dictionary 1290 (7th ed. 1999).

[FN79]. 509 U.S. 764 (1993).

[FN80]. Id. at 769-71.

[FN81]. Id. at 775.

[FN82]. Id.

[FN83]. Id. at 773; see infra text accompanying notes 155-57.

[FN84]. Id. at 769.

[FN85]. Id. at 781.

[FN86]. Id. at 783.

[FN87]. Id. at 784.

[FN88]. Id. at 796 (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 582, n.6 (1986)).

[FN89]. Id. at 810-11; 15 U.S.C. § 1013(b) (2000).

[FN90]. Hartford Fire, 509 U.S. at 802.

[FN91]. Id. (quoting L. Sullivan, Law of Antitrust 257 (1977)).

[FN92]. Id. at 802-03.

[FN93]. Id. at 810-11.

[FN94]. 525 U.S. 299 (1999).

[FN95]. Id. at 303.

[FN96]. Id.

[FN97]. Id. at 304.

[FN98]. Id. at 307 (internal citations and quotations omitted).

[FN99]. Id. at 310 (using some of the language from Brief for National Association of Insurance Commissioners (NAIC) as Amicus Curiae 6-7 (Sept. 18, 1998)).

[FN100]. Id. at 311 (citing Nevada Unfair Insurance Practices Act, Nev. Rev. Stat. § 686A.010 et seq. (1996)).

[FN101]. Id. at 314.

[FN102]. 459 U.S. 519 (1983).

[FN103]. Id. at 537.

[FN104]. Id. at 540.

[FN105]. Id.

[FN106]. LIMRA International, LIMRA's Market Trends: 2002 Trends in the United States 25 (2001).

[FN107]. Nat'l Assoc. of Ins. Comm'rs, Unfair Trade Practices, NAIC Model Laws, Regulations and Guidelines 880-1 § 1.

[FN108]. Cal. Ins. Code § 790 (2001); See Fla. Stat. ch. 626.951(1) (2001); NY Ins. § 2401 (2002); and Tex. Ins. Code art. 21.21 § 1(a) (2002).

[FN109]. Nat'l Assoc of Ins. Comm'rs, Unfair Trade Practices, NAIC Model Laws, Regulations and Guidelines 880-1 § 3, D; see Cal. Ins. Code § 790.03(c) (2001); Fla. Stat. ch. 626.9541(1)(d) (2001); and Tex. Ins. Code art. 21.21 § 4(4) (2002).

[FN110]. NY Gen. Bus. § 340, 1 (2002).

[FN111]. Id. § 340, 2 (2002).

[FN112]. See Cal. Ins. Code § 10144 (2002); Fla. Stat. ch. 626.9541(1)(g) 1, (1)(g) 2 (2001); NY Ins § 4224(a)(1), (a)(2) (2002); and Tex. Ins. Code art. 21.21-6 §§ 1, 4(a) (2002). See also Nat'l Assoc of Ins. Comm'rs, Unfair Trade Practices, NAIC Model Laws, Regulations and Guidelines 887-1 § 3.

[FN113]. American Heritage Dictionary (4th ed.) at 18 (actuary), 1395 (principle), and 1660-62 (sound).

[FN114]. Id. at 18 (actual), 77 (anticipate), 625 (experience), and 1457 (reasonable).

[FN115]. See supra text accompanying note 62.

[FN116]. See supra text accompanying notes 60-64.

[FN117]. See supra text accompanying notes 27-29.

[FN118]. See supra text accompanying notes 78-93.

[FN119]. See supra text accompanying notes 71-76.

[FN120]. See supra text accompanying notes 98-101.

[FN121]. See supra text accompanying notes 28-29.

[FN122]. See supra text accompanying notes 56.

[FN123]. See supra text accompanying notes 103-05.

[FN124]. See supra text accompanying notes 112-14.

[FN125]. Harry A. Woodman, Principles of Risk Selection and Classification, Medical Selection of Life Risks 25, 35 (R.D.C. Brackenridge & W. John Elder eds., 4th ed. 1998) [hereinafter Breckenridge & Elder]. Author's Note: The fourth edition will be used to describe the risk classification process. This text is used not because it provides the only or most definitive description of the process, but, instead, because its availability to the general public allows for a discussion of the process without infringing upon any insurer or reinsurer's proprietary methods for classifying insurance risks.

[FN126]. Id. at 25.

[FN127]. Id. at 29.

[FN128]. Id.

[FN129]. Michael W. Kita, The Rating of Substandard Lives, in Breckenridge & Elder, supra note 125, at 67.

[FN130]. Id.

[FN131]. Id.

[FN132]. Id. at 64.

[FN133]. Id.

[FN134]. Id. at 64-65.

[FN135]. Id. at 62.

[FN136]. Id.

[FN137]. Id.

[FN138]. Id.

[FN139]. Id.

[FN140]. Breckenridge & Elder, supra note 125, at 26.

[FN141]. Kita, supra note 129, at 63-64.

[FN142]. Breckenridge & Elder, supra note 125, at 27.

[FN143]. Id.

[FN144]. Id.

[FN145]. Kita, supra note 129, at 66-67.

[FN146]. Id.

[FN147]. Id.

[FN148]. Id. at 62.

[FN149]. Breckenridge & Elder, supra note 125, at 70 & 71, Table 5.5.

[FN150]. Id. at 71.

[FN151]. Id.

[FN152]. Id. at 71, Table 5.5.

[FN153]. Id.

[FN154]. Id. at 75, Table 5.6.

[FN155]. Robert L. Goldstone, Diabetes Mellitus, in Breckenridge & Elder, supra note 125, at 298, Table 20.8.

[FN156]. Breckenridge & Elder, supra note 125, at 75, Table 5.6.

[FN157]. Life Office Mgmt. Ass'n, Underwriting in Life and Health Ins. Cos. 1 (Richard Bailey ed. 1985).

[FN158]. Id. at 10.

[FN159]. Id.

[FN160]. Id. at 14.

[FN161]. See supra text accompanying notes 112.

[FN162]. John E. Tiller & Denise Fagerberg, Life, Health & Annuity Reins. 3 (1990).

[FN163]. Id.

[FN164]. Id.

[FN165]. Id. at 4.

[FN166]. Id.

[FN167]. Id. at 5.

[FN168]. Id.

[FN169]. Id.

[FN170]. Id. at 21.

[FN171]. Id. at 36.

[FN172]. Id.

[FN173]. Id. at 37.

[FN174]. Id. at 37-38.

[FN175]. Id. at 43.

[FN176]. Id. at 45.

[FN177]. Id.

[FN178]. Id. at 45-46.

[FN179]. Antitrust Guidelines, supra note 5, at Preamble.

[FN180]. Id.

[FN181]. Id.

[FN182]. Id. § 1.2 (citing Nat'l Soc'y of Prof'l Eng'rs v. United States, 435 U.S. 679, 692 (1978) (emphasis added)).

[FN183]. Id. § 3.2 (citing Palmer v. BRG of Georgia, Inc., 498 U.S. 46 (1990); United States v. Trenton Potteries Co., 273 U.S. 392 (1927)).

[FN184]. Id. § 3.2.

[FN185]. Id. § 3.3.

[FN186]. Id.

[FN187]. Id. (internal citations omitted).

[FN188]. Id. (citing Cal. Dental Ass'n v. FTC, 526 U.S. 756, 768-72, 778-80 (1999); FTC v. Ind. Fed'n of Dentist, 476 U.S. 447, 459-61 (1986); Nat'l Coll. Athletic Ass'n v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 104-08, 106-10 n.42 (1984)). This type of shortened rule of reason analysis is often referred to as "quick look" rule of reason.

[FN189]. Id. § 3.3.

[FN190]. Id. (citing Eastman Kodak Co. v. Image Tech. Serv., Inc., 504 U.S. 451, 464 (1992)).

[FN191]. Id. § 3.3.

[FN192]. Id.

[FN193]. Id. (citing NCAA, 468 U.S. at 113-15; Prof'l Eng'rs, 435 U.S. at 696; Bd. of Trade of Chicago v. United States, 246 U.S. 231, 238 (1918)).

[FN194]. See supra text accompanying notes 161-63.

[FN195]. See Dr. Miles Med. Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911); United States v. Parke, Davis & Co., 362 U.S. 29 (1960).

[FN196]. Antitrust Guidelines, supra note 5, § 3.32(a) (referencing Horizontal Merger Guidelines § 1.0).

[FN197]. Id. § 3.32(a) (referencing Horizontal Merger Guidelines §§ 1.31, 1.32).

[FN198]. Best's Ins. Rep., Life-Health United States A53-A74 (2001). This figure includes both direct insurers and reinsurers.

[FN199]. Id.

[FN200]. Id. at A75-A84. The actual shares for the top ten companies were (%): 6.1, 6.0, 3.7, 2.8, 2.8, 2.6, 2.6, 2.4, 2.3, and 2.1. The total amount of admitted assets for the industry was $3.2 trillion. Id. Admitted assets are defined as "cash and investments that meet criteria for liquidity and safety set by the NAIC and by the individual state commissioners. Only admitted assets are used in measuring the capacity and soundness of an insurer. Non-admitted assets, such as overdue receivables, are excluded from statutory assets and surplus." Life, Health & Annuity Reins. 485 (1990).

[FN201]. Id. at A65, A85-A90. The actual shares for the top ten companies were (%): 7.4, 5.0, 2.8, 2.7, 2.6, 2.6, 2.4, 2.1, 1.8, and 1.7. Id. The total amount of life insurance in force for the industry was $23.4 trillion. Id.

[FN202]. Market shares for amounts of reinsurance assumed in 2001 of (%): 26.4, 12.1, 11.1, 10.0, 9.2, 6.0, 4.7, 4.2, 4.0, 3.0, 2.8, 2.3, 2.0, 1.7, 0.3, and 0.1. James L. Sweeney & David M. Briggeman, Life Reins From The Munich Am. Survey, Reins. News, at 29, June 2002.

[FN203]. Id. at 31.

[FN204]. Id. at 12.

[FN205]. 15 U.S.C. § 1 (2000).

[FN206]. 15 U.S.C. § 1013(b).

[FN207]. Hartford Fire Ins. Co. v. Cal., 509 U.S. 764, 796 (1993).

[FN208]. See supra text accompanying notes 201-05.

[FN209]. Antitrust Guidelines, supra note 5, § 4.2.

[FN210]. Id.

[FN211]. Id. § 3.31(a).

[FN212]. Id.

[FN213]. See supra text accompanying notes 141-44.

[FN214]. Life Office Mgmt. Assoc., Underwriting in Life and Health Ins. Cos. 103 (Richard Bailey ed. 1985).

[FN215]. Antitrust Guidelines, supra note 5, § 3.34(a).

[FN216]. Id.

[FN217]. Id. § 3.35.

[FN218]. See supra text accompanying note 201.

[FN219]. Id. § 3.34(f).

[FN220]. R.D.C. Brackenridge & Arthur E. Brown, A Historical Survey of the Development of Life Assurance, in Breckenridge & Elder, supra note 125, at 8.

[FN221]. Antitrust Guidelines, supra note 5, § 1.1.

[FN222]. Id. § 3.34(e).

[FN223]. See supra text accompanying notes 55-56.

[FN224]. See supra text accompanying notes 57-63.

[FN225]. Clifton Titcomb, M.D. et al., Alcohol Abuse and Liver Enzymes (AALE): Results of an Intercompany Study of Mortality, 33 J. Insur. Med. 277 (2001).

[FN226]. Id. at 282, Tables 2, 3 & 4.

[FN227]. Id. at 282, Table 4.

[FN228]. 225 F.3d 1042, 1051-52 (9th Cir. 2000).

[FN229]. Id. at 1052.

[FN230]. Harrison's Principles of Internal Medicine 2533 (Eugene Braunwald et al. 15th ed. 2001) (stating that the incidence of this disease is approximately 1 in 20,000 (0.005%) persons).

[FN231]. Breckenridge & Elder, supra note 125, at 35.

END OF DOCUMENT

INSURANCE, RISK AND RESPONSIBILITY: TOWARD A NEW PARADIGM?

2009-11-24T23:51:00.000-08:00

INSURANCE, RISK AND RESPONSIBILITY: TOWARD A NEW PARADIGM?
Conference Report and Introduction
Tom Baker [FNa1]

Copyright © 1999 Connecticut Insurance Law Journal Association; Tom Baker

In April 1999, the Insurance Law Center at the University of Connecticut School of Law hosted a conference on "Insurance, Risk and Responsibility: Toward a New Paradigm?" The call for papers described the conference as follows:
For most of the 20th century, insurance in the United States expanded dramatically. On the private side, the 20th century witnessed the creation of automobile and health insurance, workers compensation, and private pensions, as well as growth in older forms of insurance such as life, liability, property and disability insurance. On the public side, this century witnessed the creation of an entirely new social insurance sector, beginning with the New Deal and followed by Medicare, Medicaid, and natural disaster insurance, as well as a host of ventures directed at business risks. Indeed, "more insurance for more people" is as good a sound bite as any summing up domestic social policy well into the Reagan/Bush years.
A series of developments suggests that this policy may be on the wane. These include:
• A shift of investment risk to consumers in return for the possibility of greater return in life insurance, annuities and pensions, including, possibly, a partial shift from a "defined benefit" to a "defined contribution" approach to U.S. Social Security retirement benefits;
• The failure of universal health insurance, a decline in health insurance participation, and the emergence of a "defined contribution" approach to employment-based health care;
•*II . The development and growth of alternative risk mechanisms such as captive insurance, third party administrators, catastrophe bonds, and finite risk insurance, and a trend toward larger deductibles, self insured retentions, and retroactive premiums among the entities that continue to use traditional insurance; and
• An increased focus on the need to manage incentives to curtail the growth of public and private insurance programs.

Significantly, these developments are occurring in both public and private forms of insurance, so that they cannot be attributed solely to a reexamination of the role of government.
At the same time, however, the vocabulary of risk has moved well beyond insurance institutions. Money managers develop portfolios at the risk, reward frontier. Social service agencies track at risk children. Community policing efforts are targeted at high-risk areas. Extreme sports enthusiasts rate climbs according to risk and climbers according to the risks they are qualified to take. Judges and law reformers debate accident law in terms of the allocation and spreading of risk. And some have suggested that all of the civil law and the administrative state is now directed at the allocation and management of risk. Thus, if we understand risk management as an insurance technology, we might challenge the apparent decline of "more insurance for more people." Perhaps more insurance - of a certain kind - continues to be pressed upon more people, even as the risk assumed by traditional insurance institutions shrinks.

Participants at the conference included law professors, historians, sociologists, philosophers and economists. Many of the participants had been meeting regularly since 1997 as the New England Insurance and Society Study Group, an informal faculty study group sponsored by the Insurance Law Center. Others had written significant books or monographs relating to risk and insurance that came to the attention of the Study Group. The conference featured seven panels, each addressing different aspects of the history and present of what we came to describe as the "embrace of risk." *III Many of the papers will appear shortly as chapters in the book Embracing Risk, edited by Tom Baker and Jonathan Simon. Several were adaptations of recently, or about-to-be, published books. [FN1]

* * *
This issue of the Connecticut Insurance Law Journal features three articles that were among the highlights of the conference: "Insurance: How it Matters as Psychological Fact and Political Metaphor," by Thomas Morawetz; "Moral Opportunity and the Politics of Insurance," by Deborah Stone; and "The Return of the Crafty Genius: An Outline of a Philosophy of Precaution," by François Ewald.

These articles continue the Journal's tradition of pushing the boundaries of what it means to be an insurance law journal. From Seth Chandler's analysis of the economics of moral hazard in the first issue of the Journal [FN2] through Pat O'Malley's use of industrial life insurance regulation to explore what it means to be a responsible citizen in the most recent issue, [FN3] the Journal has featured at least one significant, interdisciplinary work in every issue. [FN4] At the same time, the Journal has not neglected its core legal constituency. Each issue has also included significant doctrinal work, such as the article by *IV William Barker in this issue. In addition, beginning with Volume 4, every issue has featured Professor Jeffrey Stempel's Recent Case Developments, as well as abstracts of insurance-related articles published by non-specialty law reviews, prepared by Journal editors under the direction of Professor Jeffrey Thomas. Finally, the student notes and comments address significant recent cases and notable legislative or doctrinal developments in the field of insurance law. The goal is to provide our readers with an efficient means of tracking developments in the field of insurance law, as well as to challenge them to place insurance and insurance law in a broader perspective.

The three articles from the Risk conference each challenge our readers in different ways. The first article itself came about as a challenge. In planning the conference, we cast about for a film that would provide a break from the panel presentations and provoke a discussion on the image of insurance in popular culture. We decided on The Rainmaker and challenged Thomas Morawetz B University of Connecticut law professor, philosopher, advocate for law and literature, and connoisseur of detective novels and popular film B to comment on images of insurance in literature and film and to moderate the discussion of the film. As predicted, the film evoked strong reactions from the crowd of lawyers, law students, and insurance buffs. The result was a lively session that was one of the high points of the conference, as well as the wonderful meditation, "Insurance: How it Matters as Psychological Fact and Political Metaphor," that appears in this issue.

Our second author is Deborah Stone. She is a political scientist who writes about insurance, health care, and the political process, and she is an avid observer of the law and rhetoric of insurance. The co-founder of the New England Insurance and Society Study Group and a long time contributor to the Journal of Health Politics, Policy and Law, Stone has played an important role in conducting and promoting interdisciplinary research in the field of insurance. Her article, "Beyond Moral Hazard: Insurance As Moral Opportunity," identifies a new concept that helps explain the growth of insurance institutions. This concept, which she calls the "moral opportunity" of insurance, describes an expansionary social dynamic in insurance institutions that counters the individual-based forces of moral hazard and adverse selection that are of such concern to insurance and economic analysts. The moral opportunity of insurance is a social mechanism that tends to increase what gets perceived as insurable and deserving of collective support. Stone argues that moral opportunity is particularly strong in social insurance and that the moral opportunity of social insurance is a social and political *V dynamic that fosters progressive social policies that improve both the well being of individual citizens and the democratic health of the polity.

Our third author is François Ewald. He is a political and legal philosopher, a professor of insurance, and the director of public affairs for the French Federation of Insurance Companies. Before assuming his present positions, Ewald spent many years working with Michel Foucault. Widely published in France, the two short essays he has published in the United States [FN5] have earned him a devoted following on this side of the Atlantic as well. His article, "The Return of the Crafty Genius: An Outline of a Philosophy of Precaution," argues that Western societies are engaged in a fundamental paradigm shift in their approach to risk. If the 19th century approach to risk was characterized by ideas of providence and individual responsibility and the 20th century approach by ideas of prevention and solidarity, perhaps the late 20th and early 21st century approach to risk will be characterized by ideas of safety and precaution. Ewald describes the shift from providence/responsibility to prevention/solidarity as driven by utopian ideas about the ability of science to manage, contain and perhaps even eliminate risk. The contemporary shift to safety and precaution follows from a recognition of the limits of science. This shift challenges the idea of progress that has animated insurance (and risk management more broadly) and, perhaps, presages the end of the age of insurance.

[FNa1]. Connecticut Mutual Professor of Law; Director, Insurance Law Center, University of Connecticut School of Law; Faculty Advisor, Connecticut Insurance Law Journal.

[FN1]. See Geoffrey Clark, Betting on Lives: The Culture of Life Insurance in England, 1695-1775 (1999); Cathy Frierson, All Russia is Burning: A Cultural History of Rural Fire and Arson in Late Imperial Russia (forthcoming 2000); Michael J. Graetz and Jerry L. Mashaw, True Security: Rethinking American Social Insurance (1999).

[FN2]. See Seth Chandler, Visualizing Moral Hazard, 1 Conn. Ins. L. J. 97 (1994-95).

[FN3]. See Pat O=Malley, Imagining Insurance: Risk, Thrift and Industrial Life Insurance in Britain, 5 Conn. Ins. L. J. 675 (1998-99).

[FN4]. See Seth Chandler, The Interaction of the Tort System and Liability Insurance Regulation: Understanding Moral Hazard, 2 Conn. Ins. L. J. 91 (1996) (law and economics); John G. Day, Managed Care and the Medical Profession: Old Issues and Old Tensions, the Building Blocks of Tomorrow=s Health Care Delivery and Financing System, 3 Conn. Ins. L. J. 1 (1996-97) (law and history); Elizabeth O. Hubbart, When Worlds Collide: The Intersection of Insurance and Motion Pictures, 3 Conn. Ins. L. J. 267 (1996-97) (law and society); George M. Cohen, Legal Malpractice Insurance and Loss Prevention: A Comparative Analysis of Economic Institutions, 4 Conn. Ins. L. J. 305 (1997- 98) (law and economics); Jonathan Simon, Driving Governmentality: Automobile Accidents, Insurance, and the Challenge to the Social Order in the Inter-War Years, 1919-1941, 4 Conn. Ins. L. J. 521 (1997-98) (law and history); Jeffrey E. Thomas, An Interdisciplinary Critique of the Reasonable Expectations Doctrine, 5 Conn. Ins. L. J. 295 (1998-99) (law and psychology).

[FN5]. François Ewald, Insurance and Risk, in The Foucault Effect: Studies in Governmentality 197 (Graham Burchell et al. eds. 1991); François Ewald, Norms, Discipline, and the Law, in Law and the Order of Culture 138 (Robert Post ed., 1991).

Terms and definition : Insurance

2009-04-12T04:48:00.000-07:00

Insurance or Assurance is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a guaranteed small loss to prevent a large, possibly devastating loss. An insurer is a company which selling the insurance product; an insured is the person or entity who buying the insurance. The insurance rate is a factor used to determine the amount to be charged for a certain amount of insurance coverage, usually called the premium.

Insurance: An agreement by an insurer to provide compensation or another benefit upon the occurrence of a specified risk causing harm to property or the person of an insured (Webster's New World Law Dictionary)

Insurance: n. A contract in which one party (the insurer) agrees for payment of a consideration (the premium) to make monetary provision for the other (the insured) upon the occurrence of some event or against some risk. For such contracts to be enforceable, there must be some element of uncertainty about the events insured against and the insured must have an *insurable interest in the subject matter of the contract (Oxford Dictionary of Law)

TOP 10 WORLD INSURANCE COMPANY

2009-04-12T04:47:00.001-07:00

Rank	Company	Country	Profits (USD bil.)
1	ING Group	Netherlands	12.65
2	Allianz	Germany	10.9
3	AIG Group	USA	6.2
4	AXA Group	France	7.75
5	Generali Group	Italy	3.17
6	Zurich Financial Services	Switzerland	5.63
7	Munich Re	Germany	5.63
8	MetLife	USA	4.32
9	Manulife Financial	Canada	4.01
10	Aviva	United Kingdom	2.65

WHAT IS BODY PART INSURANCE?

2009-04-01T23:41:00.000-07:00

Body part insurance offer crucial financial cover, and protect your livelhood if you rely on a specific part of your body to earn a living. Performers (including musicians, singers and actors) as well as artists, surgeons, athletes and other sports people all commonly require this type of insurance. Body part insurance pays out financial compensation for any accidental damage or disfigurement caused to the insured body part, if the damage results in a loss of work.

From the most 'normal' types of body part insurance, such as cover for a model's limbs, to the more bizarre kinds, including insurance for a sommelier's taste buds, almost any body part can be insured if it can be proved that loss of use of this body part would lead to significant loss of work and income.

Body part insurance is usually relatively more expensive than other kind of insurances; it is often bought by experts in their field, or celebrities: some of whom even use it as a promotional gimmick. However, it is not only celebrities who may need protection in case of disability or loss of use of a vital limb. Models for example, have a career based almost entirely on appearance, and could lose out on significant income if disability prevented them from winning future contracts. As a result, a model might insure several parts of their body, for example their legs and even their smile. Body part insurance is not designed to insure your whole body: it is intended to cover only select body parts. If you wish to insure your whole body it may be more suitable for you to take out a comprehensive life insurance policy instead, than body part insurance.

Auto Insurance Quotes

2009-03-17T20:32:00.000-07:00

Auto insurance quotes have made buying auto insurance is similar to buying anything else. It is not typically an exciting venture but may require a good bit of time. Nothing helps more than shopping around, talking to friends, insurance companies and agents and educating yourself to get the best product.

You can get relevant quotes by using the Internet or directly from insurance agents and companies. While there are advantages and disadvantages to both scenarios, here are some important steps you can take to find the company and deal that are right for you, your vehicle and your pocket:

Getting the right quotes
Talk to friends and people you trust: It's good to seek recommendations of friends and relatives who have used the services of certain insurance agents / companies. Ask about how your experiences with the insurance procedure, making claims, getting questions answered, etc.

Get online quotes and make comparisons: There are a number of websites where you can undertake a quick comparison by getting quotes from different insurance companies and it only takes about five minutes. Here's how ‘comparison shopping’ works:

1. You fill out information about your car and driving record.
2. The website takes this information and analyzes it with the insurance companies they partner with.
3. The site gives you a list of their partner companies that will offer you the best deals keeping your information in mind.

Get multiple quotes – at least 3 or 4 quotes from different auto insurance companies to start with. Record as much information as you can about each firm.

Check the track records of the companies: If you don't want to spend time comparing prices from different companies, then, a renowned or a large company can be a good place to start. Undoubtedly it will be expected that they will be fair and provide decent service. If the agent / company is unable or unwilling to answer your questions, you would probably be better off buying your auto insurance elsewhere. And never buy from the first company you get a quote from.

Price is important but so is security: Ensure the fact that the insurance company is financially sound, reliable and reputed. You can learn how secure they are by checking the Standard and Poor lists (Check how the company is rated, whether A, AA, or AAA. It may be safer to stick to companies rated thus).

Educate yourself: The right information can always take you a long way. The more you know about auto insurance, the better prepared you will be to make the right decisions. Make a conscious decision to educate yourself on auto insurance. Auto insurance is mandatory in all of USA if you are keen on driving. There are two reasons for this:

1. Auto insurance helps protect you from financial loss.
2. Liability auto insurance helps protect other parties from financial loss in the event of you being at fault.

Check your credit profile: Some auto insurance companies consider your credit history when calculating their rates. Unresolved issues in your credit file can raise your premiums. Ensure a clean chit for your credit background when seeking insurance quotes.

Select your vehicle carefully: The worth of the car, the make and model, and even the color will affect your insurance rates. Clarify the insurance costs for the new car that you plan to buy. If you buy an older car and don't need financing you can get by with less insurance coverage and save a good amount of money

Ask about available discounts: A clean driving record can always get you some discounts. If you don't drive frequently inquire about a ‘low-mileage discount’. There is a list of commonly available auto insurance discounts that you can enquire about:

* No citations within the past two years
* Insuring more than one vehicle
* Joint auto and homeowners coverage
* Drivers over 50-55
* Completion of a driver training course
* Completion of a defensive driving course
* Anti-theft device
* Low annual mileage
* Air bag
* Anti-lock brakes
* Daytime running lights
* Student with good grades
* College students
* Long-time customer
* Other available auto insurance discounts

There are a number of discounts on auto insurance policies, which you may avail of, but many times you get them only if you ask. Create a checklist with the auto insurance discounts above for when you request your quotes. That way it will be easy to decide.

Reduce your auto insurance coverage amounts: If you are financing your car, you'll be required to purchase adequate comprehensive coverage, but when you pay off the loan you can lower your coverage amounts and save a lot a money on premiums. Inadequate insurance coverage means carrying more risk, but if you're a safe driver you can probably get by with liability insurance only. In which case remember, drive safely and control the urge to speed.

Understanding Business Vehicle Insurance

2009-03-17T19:01:00.000-07:00

Business vehicle insurance is different in its scope from the auto insurance you may have on your newly acquired vehicle. But as the name denotes, business vehicle insurance is for those amongst you who owns a home based business.

Does Your Business Need Business Vehicle Insurance?
Not every business needs business vehicle insurance. But if your home based business runs a fleet of vehicles, business vehicle insurance would be something that you would definitely need in case of emergencies. In fact, business vehicle insurance would also be required in cases where either you or your employees use the business vehicle for official purposes. So, it would do you well if you ran a thorough check on the options available in the market. For, commercial business vehicle insurance would be imperative to protect your business assets in case there is an accident.

Imagine a scenario in case your business doesn't require a vehicle for official purposes. Another scenario yet, is one where your business travel requirements can be met by car companies supplying motor vehicle for official purposes. In such cases, the personal insurance of your employees or that of the rental is enough to cover unforeseen damages or accidents.

It could, however, get a little tricky if one of your employees using their personal vehicle while on a business call gets into an accident. Though their personal claims could get bail them out of the trouble, someone else involved in the accident could claim compensation from your business. A hired and non-owned business vehicle insurance policy would help in such cases, thus ensuring your business doesn't suffer due to the accident. But additionally, it also ensures that your employees would be less anxious about using their personal vehicles, since they are assured that they wouldn't be personally liable in the event of an accident.

Purchasing your Business Vehicle Insurance
You can, in most cases, buy your business vehicle insurance policy from any insurer that sells motor vehicle insurance. Undoubtedly, that would make your search too wide and your options too complicated. But inevitably, a thorough search is essential and it should cover as many companies that offer business vehicle insurance. Thus, it would do you well, if you made quick analyses of all that you might need in your business vehicle insurance before you went in for the same with an insurer. This way you will have got as many options as possible, reduced your premiums to a certain extent and received comprehensive coverage as well.

Your commercial business vehicle insurance can cover various instances. One thing to bear in mind, however, is that the more covers you ask for, the more your premium would cost. In any case, whatever your call on it is, do ensure that it not only fits your business needs completely, but also that your business vehicle insurance suits your company constitution perfectly.

Health Insurance for Children: An Important Issue to Consider

2009-03-17T18:56:00.001-07:00

Did you know that there are millions of children in the United States who do not have health insurance coverage? While there are more adults than children without coverage, this is still a serious problem. Many parents who cannot afford health insurance for themselves feel the same way about their children. But guess what? This should not be the case. Although health insurance is important for everybody, this is more so the case when it comes to children.

Depending on the state in which you live, your child may qualify for free or low cost health insurance through a special state mandated program. Your child may or may not qualify for this sort of program, because eligibility is based on your income, but at the very least it is something that you should consider if they do not have coverage at the moment. As you can imagine, you can save a lot of money by getting health insurance for your child through a state program instead of paying on your own.

If you currently receive health insurance coverage through work or buy on your own, look into adding your child from day one. Your employer may pay for you dependants, or allow you to add them for a small payment each month. If you buy an individual health insurance policy, you may be able to convert this to a family policy easily enough.

Many people believe that the amount of children without health insurance in the United States is one of the biggest issues facing the country. And when it comes down to it, they are right. This is an issue that lawmakers and the next president will be addressing in the near future. Barack Obama is interested in ensuring that all children have access to health insurance, and John McCain is considering how offering tax credits to families could make coverage more affordable and available

The Importance of Health Insurance in Today's World

2009-03-17T18:53:00.000-07:00

It seems as if in today's world more and more people are getting sick and having accidents. While you never know what the future will hold, you should do what you can to protect against financial disasters. One of the best ways of doing this is to carry a quality health insurance policy. With so much danger lurking around every corner, you need to make sure that you always have coverage. This way, if something does happen you can seek the proper treatment to get back to normal sooner rather than later.

More than 47 million Americans do not have health insurance. Do they think that they can get away with this for much longer? The answer to this question is tough. Remember, a lot of these people would like to have a health insurance policy but cannot afford to purchase any sort of coverage. Although a shame, millions of Americans cannot afford health insurance because of costs that seem to increase as each year goes by.

Generally speaking, you cannot let anything hold you back from having health insurance. Even if you are low on cash and worried about your finances, you need to learn how to budget for this expense. If purchasing an individual health insurance policy has become too much, you may want to seek out a job that offers this coverage as a benefit. Although group health insurance is less common today, there are still quite a few companies that offer this sort of coverage.

In today's world, carrying health insurance is very important. You do not want to become one of the nearly 50 million Americans without any coverage. If you think that you can do without health insurance as a way of saving some money, you are making a huge mistake. This is one expense that you do not want to cut out of your life.

Get Health Insurance Quotes Online

2009-03-17T17:38:00.000-07:00

Over 40 million Americans are without health insurance. This number is increasing as many employers are shifting rising costs of health insurance on employees as to weather the economic impact of housing and financial crisis. With the rising cost of health insurance, hospital stays, medications, shortage of nursing staff and increased pressure on emergency care centers - God forbid you end-up in the emergency room with a major medical emergency and no health insurance policy.

While finding affordable health insurance is difficult, it's not impossible thanks to www.2insure4less.com, an independent family and individual health insurance comparison site that allows you to instantly compare quotes of all insurance carriers in your state to help you find affordable, quality individual health insurance coverage.

Here is how we can help you to get the most out of the buying process. There are many health insurance companies that offer individual policies. These companies are willing to work with any and every consumer, but will base their decision on coverage and price on several factors. Since we work with a large network of providers, we can instantly provide you with multiple quotes that will suit your situation. In the end, this allows you to find affordable, high quality policies in no time at all. However, you are never obligated to purchase a health insurance policy that we suggest. The choice is yours entirely.

What are you waiting for? If you do not have health insurance coverage you are taking a huge risk. Fill out our no obligation form now, and soon enough you will have free online health insurance quotes that can save you big money.

These health insurance information articles will help you to make educated desicions on your health insurance.

TYPES OF TRAVEL INSURANCE

2009-03-03T17:45:00.000-08:00

by Edward Hasbrouck

Travel insurance policies provide at least six types of coverage, intended for different types of travellers and trips:

1. Comprehensive travel medical insurance is for people who don't have any other medical insurance, even at home. Since most people who can afford it have health care coverage in their home country, often through their employer, comprehensive travel medical insurance is mainly of interest to long-term travelers who've left their jobs and lost their insurance coverage at home, or to those living and working outside their country of citizenship or permanent residence.
2. Emergency travel medical insurance is for people who have medical coverage at home, but whose health plan at home doesn't cover them while they are travelling. Emergency travel medical insurance only covers emergency services abroad; once you get home, you're on your own (or presumably, back under your regular home coverage) for any necessary follow-up treatment or continuing care. Most health insurance plans and health maintenance organizations in the USA include their own provisions for emergency care while abroad, at least for trips of less than 30 days. Check with your current insurer or HMO before you waste money on an emergency travel medical plan that duplicates your existing coverage.
3. Medical evacuation (medevac) insurance covers the cost of an air ambulance, attending physician and nurse, etc. if you are so badly injured, or become so ill, that you can't come home (or get to a suitable medical facility) on a scheduled commercial passenger flight. Medical evacuations can cost tens of thousands of dollars, but are rarely necessary. Even very badly injured travellers usually can come home on regular flights after no more than a couple of weeks of emergency treatment and stabilization abroad. Some of the activities most likely to lead to a need for medical evacuation, such as scuba diving and extreme sports, are often excluded from medevac coverage. Read the fine print.
4. Trip cancellation and interruption insurance covers the cancellation or refund penalties and the cost of getting home if you have to cancel your trip, or cut it short, for specified reasons. The covered reasons vary (read the fine print), but typically include injury or illness to you, a travelling companion, or a member of your immediate family. War and terrorism may or may not be included, or may be covered only at additional charge.
5. Supplier default insurance covers any money you lose because of the bankruptcy of an airline, cruise line, tour operator, or other provider of travel services. Supplier default coverage has been drastically cut back since 11 September 2001. Some travel insurance companies no longer offer it at all, while others pick and choose which travel suppliers they will insure. Read the fine print.

# Rental car insurance covers damage or theft to a vehicle you rent (usually referred to as "collision" insurance) and/or liability to other people or vehicles you injure or damage. Many credit cards include rental car collision insurance, but not liability insurance. If you own a vehicle, your insurnace may or may not provide liability coverage when you are dirving a rented vehicle. Read the fine print. Your liability if someone is killed or injured in an accident can be much greater than the value of the vehicle.

WHAT IS TRAVEL INSURANCE?

2009-03-03T17:42:00.000-08:00

By John Mussi

Travel Insurance is designed to protect your health, belongings, and your financial investment in your trip. It provides peace of mind for you and your family while on your vacation.

If you are travelling abroad, be it on business or pleasure it is a good idea to consider taking out travel insurance. Whilst it is not compulsory, most travel companies and tour operators usually insist on some form of insurance as a stipulation of their holiday product.

Travel insurance is an insurance product specifically designed to cover you when travelling abroad. We all think about the small things when considering whether to purchase travel insurance, such as loss of money or having luggage stolen. However there are many other factors to consider such as illness & accidents which can also be covered by travel insurance.

Travel insurance is designed to protect and cover against the possible risks you may encounter when travelling abroad. It is of crucial importance if you are travelling abroad, especially if you are likely to pay for any medical expenses that may arise. Other risks include the loss or theft of possessions, the cost of cancellations or claims made against you.

Travel insurance is designed to reimburse non-refundable trip deposits and payments, medical expenses, provide for emergency evacuation or repatriation, cover your personal belongings, baggage and travel delays.

The main reason you need travel insurance is that when you travel to different countries the healthcare services, among other things, can be very different. Sometimes you never know what to expect when you travel abroad, and depending on the particular country, services offered can vary greatly. You have to be prepared to handle any situation that might arise. If you happen to be hurt or become ill in a country that has expensive health care you could find yourself with a bill you did not expect and probably cannot afford to pay. If you are in this kind of trouble travel insurance fits the bill and ensures that you receive the treatment you need.

Travel insurance can cover the following expenses:

Non refundable fees & lost deposits due to cancellation of your trip

Worldwide sickness or accident medical expenses

Travel and Baggage Delays

Damage to or loss of luggage and personal belongings

Loss of Travel Documents

Additional expenses caused by health problems

Accidental Death & Dismemberment

Emergency Evacuation and Repatriation

24 hour Worldwide Emergency Assistance Services

As in all insurance market places, there are many different providers of travel insurance. Type of cover and options will vary according to the company and policy. There are different types of travel insurance policies which in the main can be annual policies or single trip policies. There also different levels of cover available where different activities such as skiing are covered. There are also regional differences such as Worldwide or European cover.

When choosing a travel insurance policy you will need to make a judgement between the level of coverage you require and the cost of the policy. Make sure your policy covers most of the following: Personal Belongings & Money, Personal Accident, Medical Expenses, Personal Liability and Legal Expenses.

But remember like all other forms of insurance look around and check out the options as you can save yourself a great deal of money.

You may freely reprint this article provided the author's biography remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

WHY YOU NEED HOME INSURANCE?

2009-03-03T17:35:00.000-08:00

Most mortgage lenders will not help you finance your home unless the property is covered by insurance.

In an event of a fire, or any other force that can cause structural damage, your home could cost thousands to repair. Home insurance will protect your investment, and cover the costs.

While your home is being repaired, you may need to shell out costs for accommodation. This alone can add additional costs up to the thousands, depending on how long it takes to repair your home. Home insurance can cover your living costs during this stressful time.

You can also cover the contents of your home, so everything inside your home can be accounted for. Insuring the content inside your home is usually optional with most insurance companies. You will need to assess whether your content is worth insuring. Once again, it’s important that you think about how much money you could save by covering your personal belongings.

Essentially, home insurance covers you when the unexpected occurs. And that usually occurs at the worst possible time, or so it feels. By being insured you can put your mind at rest, knowing that if your home is under threat, you won’t have to dig into your savings, or worst yet, lose your entire investment.

WHAT IS HOME INSURANCE?

2009-03-03T17:31:00.000-08:00

Home insurance is basically a policy used to protect your investment (home). You put a lot of time and money into your home; so it’s only sensible to protect your investment. Home insurance protects you from damages to your home; structurally, and even your contents.

There are plenty of home insurance policies out there, offering a range of coverage. A basic home policy covers perils, which is specifically covers risks such as lightning, fire, smoke, theft, wind and explosion. It’s important to remember, anything that isn’t mentioned in your policy will NOT be covered, so make sure you read everything carefully, and ask all the right questions.

It’s important you find a suitable home insurance policy to suit your needs. At the end of the day, it boils down to how secure you personally want to feel. Home insurance can help you fight off potential financial misfortune, and can essential save you thousands of pounds.

Every home insurance company offers different deals, and most policies can be tailored to your requirements, so it’s up to you to choose the right policy with the right company.

LIFE INSURANCE OR LIFE ASSURANCE

2009-02-28T00:05:00.000-08:00

Life insurance or life assurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount called a premium at regular intervals or in lump sums. There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise.

As with most insurance policies, life insurance is a contract between the insurer and the policy owner whereby a benefit is paid to the designated beneficiaries if an insured event occurs which is covered by the policy.

The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured.

To be a life policy the insured event must be based upon the lives of the people named in the policy.

WHAT IS TERM LIFE INSURANCE?

2009-02-27T23:54:00.000-08:00

Term is simple. You pay a premium for a period of time (the term) from one to thirty years and if you die during that time the insurance is paid to the person or persons you designate to receive it - called the beneficiary(ies).

Term life insurance usually has the lowest premium in the early years, making it the most affordable life insurance - initially. Term does not build cash value.

It covers you for a specified period of time (usually from 5 to 30 years, you choose). If you purchase a $1,000,000 term life insurance policy for 20-year period and you die in any of those 20 years, your beneficiary receives the million dollars.
Life Insurance Quote

If you are still living at the end of the term, your insurance policy is over unless you can renew the policy. When you renew (assuming your policy has that feature) it will renew at a higher price reflecting your now older age. Term insurance has no buildup of cash as with whole life insurance. Some term life insurance policies do offer a return of premium.

http://www.lifeinsure.com/lifeinsurance/termlife.asp

SMART GUIDE TO CHEAP CAR INSURANCE

2009-02-23T23:20:00.000-08:00

If you own a car, truck, or other vehicle you are required by law to carry some type of insurance coverage. At a minimum, you are required to carry liability coverage that will cover expenses related to personal injury or property damage. In other words, if you cause an accident and someone is injured or property is damaged, you are responsible for paying for damages.

An insurance policy guarantees payment of a certain amount to cover these expenses should an accident occur. The rates you pay for your car insurance policy are based upon many factors including: age, sex, driving history, credit history, and year, make and model of the vehicle being insured. Other cost factors are determined by the amount of coverage you want.

Comprehensive is the most expensive type of insurance coverage. This type of insurance can offer protection to you, your family, and your car. It covers other things that can happen to your car such as fire, vandalism, or acts of Mother Nature such as hail damage.

Liability is the cheapest car insurance; however, if you do not own your car outright, you cannot purchase liability insurance alone. Lenders require you to have comprehensive insurance covering the vehicle until the note is paid in full.

Liability insurance offers protection to people in other cars when you are at fault for an accident. Typically, liability insurance will cover medical expenses and car repairs, up to a certain dollar amount. In most cases, liability insurance covers you in any vehicle that you drive, whether it belongs to you or someone else.

It used to be that Americans had few choices when it came to car insurance. There were a few major players and they basically had the same rates. Today, there are hundreds of insurance companies eager to obtain your business. The best part is they are offering cheap car insurance rates.

The following tips can help you obtain the cheapest car insurance rates, while making certain you adhere to your state’s minimum insurance requirements.

1. Shop around. Conduct research via the Internet or by phone. Nearly every car insurance agent will provide you with a free quote. It’s a good idea to shop around for competitive rates on your current vehicle. If you’re thinking of buying a new vehicle, obtain quotes for the car you are interested in purchasing. Nothing stings more than to buy a car, only to discover you now have a $400 a month insurance premium. Know your insurance costs before you buy a car, and plan your budget accordingly.

2. Keep a clean record. Both your driving history and credit history are determining factors in the amount of your insurance premium. If you want to have cheap car insurance rates, keep your foot off the gas, obey traffic laws, and pay your bills in a timely fashion.

3. Bundle your insurance. Many car insurance companies offer other types of insurance such as homeowner’s and life. If you buy all your insurance coverage from them, chances are you will receive a significant discount on your premiums.

4. Increase your deductible. One of the biggest mistakes car owners make is to purchase a policy with a low deductible. By increasing your deductible to $1500, you can save up to 20 percent off your monthly premiums. A smart thing to do is to place $1500 in an interest-bearing savings account. The money can draw interest and you will have peace of mind knowing the deductible money is sitting in the bank should you ever need it.

5. Buy online. You can save up to 10 percent or more by purchasing car insurance online. Many insurance companies offer a discount to individuals who set-up automatic payments. This can be done by entering a credit card number or bank account. Each month the agreed upon amount will automatically be deducted from your checking account or charged to your credit card.

6. Buy a more economical car. Insurance rates are partially based on the type of car you drive. If the vehicle has low safety ratings, high theft rates, or high incidence of vandalism, you will pay a higher premium. It’s a good idea to research car ratings prior to purchasing one. Look for cars with high safety ratings and low maintenance costs.

ISLAM & INSURANCE

2009-02-23T17:29:00.000-08:00

As the essence of insurance could be seen in the system of mutual help in relation to the custom of blood money under the Arab tribal custom, Muslim jurists generally accepted that the concept of insurance does not contradict with the Shariah. In fact, the principle of compensation and group responsibility was accepted by Islam and the Holy Prophet. Muslim jurists acknowledged that the basis of shared responsibility in the system of `aqila', as practiced between Muslims of Mecca (muhajirin) and Medina (ansar) laid the foundation of mutual insurance.

As a complete religion, the teaching of Islam encompasses the essence of peace, economic well-being and development of the Muslim at the individual, family social, state and `ummah' levels.

To illustrate the importance of this relationship in a life of a Muslim, Islam calls for the protection of certain basic rights, viz.: -

* The right to protect the Religion.
* The right to protect the life.
* The right to protect dignity/honour.
* The right to protect the property.
* The right to protect the mind.

It is also a generally accepted view that Islamic insurance was first established in the early second century of the Islamic era. This was the time when Muslim Arabs started to expand their trade to India, Malay Archipelago and other countries in Asia. Due to long journeys/voyages, they often had to incur huge losses because of mishaps and misfortunes or robberies along the way. Based on the Islamic principle of mutual help and cooperation in good and virtuous acts, they got together and mutually agreed to contribute to a fund before they started their long journey. The fund was used to compensate anyone in the group who suffered losses through any mishap. In fact the Europeans copied this, which was later known as marine insurance.

In view of the above as well as the real need for insurance cover, Muslim jurists looked further into the Islamic system of insurance. Their conclusion was that insurance in Islam should be based on the principles of mutuality and cooperation. On the basis of these principles, Islamic system of insurance embodies the elements of shared responsibility, joint indemnity, common interest, solidarity, etc. According to the jurists this concept of insurance is acceptable in Islam because,

* the policyholders would cooperate among themselves for their common good;
* every policyholder would pay his subscription in order to assist those of them who need assistance;
* it falls under the donation contract which is intended to divide losses and spread liability according to the community pooling system;
* the element of uncertainty will be eliminated insofar as subscription and compensation are concerned;
* it does not aim at deriving advantage at the cost of other individuals.

The generally accepted view of the Muslim Jurists is that the operation of the conventional insurance as an exchange transaction under a buy and sell agreement does not in its present form conform to the rule and requirements of the Shariah as it embodies the following three elements :-

al-Gharar
There is the element of al-Gharar (unknown or uncertain factors in the operation of a contract) in both the life and general insurance policies. This arises due to the uncertainty of the subject matter of the contract or `ma'qud'alaih' of which one of the basic rules of contract in Islam is that the ma'qud'alaih must be clear. In such a contract the insured or the policyholder agrees to pay a certain sum of premium and in turn the insurance company guarantees to pay a certain sum of compensation (sum insured) in the event of a catastrophe or disaster. But the insured or the policyholder is not informed, for example, of how the amount of the compensation that the company will pay him is to be derived nor is he certain of the amount.

In addition, any form of contract which is lopsided in favour of one party at the expense and unjust loss to the other is also classified as Gharar. This is prevalent in both the life and general insurance policies. In the former, for example the loss of premium suffered by the policyholder if he would have to cancel his policy before the policy acquires the forfeiture status. Similarly the "double-standard" condition of charging customary short period in general insurance if the policyholder is responsible for the termination of the policy whilst a proportional refund of premium is applicable if the insurance company terminates the cover.

al-Maisir
There is the element of al-Maisir (or gambling) which arises as a consequence of the presence of al-Gharar, in particular in the case of life insurance. When a policyholder dies before the end of the period of his insurance policy after paying only part of the premium, for example, his dependents will receive a certain sum of money which the policyholder in the first place has not been informed and has no knowledge of how and from where it is to be derived.

al-Riba
There is the practice of al-Riba (or interest) and other related practices in the investment activities of the conventional insurance companies which contravene the rules of the Shariah.

http://www.takaful-malaysia.com/V5/index.php?option=com_content&task=view&id=25&Itemid=35

TAKAFUL: ISLAMIC INSURANCE

2009-02-23T17:13:00.001-08:00

Since the establishment of the first Islamic insurance company in 1979, the Takaful market, in line with other types of Shariah-compliant financial products, has experienced significant growth. Moody’s rating agency has identified that there are currently over 250 Takaful companies in existence worldwide and projections show that total Takaful premiums are likely to reach over USD 7 billion in ten years time.

Takaful models
“Wakala” and “Mudarabah” are the two main Takaful models. In each case, the operator is responsible for developing the products, underwriting the risk, collecting the contributions, investing such contributions and dealing with claims. There has also been a significant growth in the use of a “mixed” model, wh ich combines aspects of Wakala and Mudarabah. The main features of each model are set out below.

The Wakala Model
In the Wakala model, cooperative risk-shari ng occurs amon g participants who contribute to a general Takaful fund. The operator acts as the agent (or Wakeel) of the participants and is consequently entitled to a fee for the services provided. Such a fee is deducted from the general Takaful fund or the investment profits derived from investing the general Takaful fund, which may be performance related and for which the operator may charge a performance incentive fee. However, the agent does not share in any underwriting surplus or profits which will be distributed exclusively to the participants.

The Mudarabah Model
In the Mudarabah model, on the other hand, the operator is entitled to a fixed percentage of any investment profits or surplus, which will be paid i nto the participants’ Takaful fund. Generally, these risk-sharing arrangements allow the operator to share in the underwriting results from operations as well as the favourable performance returns on invested premiums. However, the operator’s fixed percentage is not guaranteed as there may be no surplus.

The Mixed Model
The mixed model is widely practiced by Takaful companies around the globe and is currently the dominant model in the Middle East. The mixed model combines elements of the Wakala and Mudarabah models and is structured so that the Takaful operator retains two funds; one for the shareholders and the other for participants. The underwriting activities are conducted by reference to the Wakala model, whereby the shareholders manage the funds as agent on behalf of the participants. In exchange for managing the funds, each participant is charged a Wakala fee, which is normally a percentage of the contribution paid by each participant. As an incentive for effective management, the operator is also entitled to earn a fee if there is a surplus in the participants’ fund. With regard to investment activities, the operator invests the surplus contributions in different Islamic compliant instruments based on the Mudarabah contract. The operator acts as the investment manager or Mudarib on behalf of the participants and the ratio of profit is fixed and agreed between the parties at the inception of the contract.
The Accounting and Auditing Organisation for Islamic Financial Institutions
recommends the adoption of the mixed model. Indeed, the Central Bank of Bahrain (formerly the Bahrain Monetary Agency) has only allowed Takaful operators in the Kingdom to adopt the Wakala and mixed models.

WHAT IS AUTO INSURANCE?

2009-02-23T00:42:00.000-08:00

Auto insurance protects you against financial loss if you have an accident. It is a contract between you and the insurance company. You agree to pay the premium and the insurance company agrees to pay your losses as defined in your policy.

Auto insurance provides property, liability and medical coverage:

* Property coverage pays for damage to or theft of your car.

* Liability coverage pays for your legal responsibility to others for bodily injury or property damage.
* Medical coverage pays for the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses.

An auto insurance policy is comprised of six different kinds of coverage. Most states require you to buy some, but not all, of these coverages. If you're financing a car, your lender may also have requirements.

Most auto policies are for six months to a year. Your insurance company should notify you by mail when it’s time to renew the policy and to pay your premium.

From: http://www.iii.org/individuals/auto/a/whatis/

WHAT IS COVERED BY A BASIC AUTO POLICY?

2009-02-22T22:54:00.002-08:00

Your auto policy may include six coverages. Each coverage is priced separately.

1. Bodily Injury Liability

This coverage applies to injuries that you, the designated driver or policyholder, cause to someone else. You and family members listed on the policy are also covered when driving someone else’s car with their permission.

It’s very important to have enough liability insurance, because if you are involved in a serious accident, you may be sued for a large sum of money. Definitely consider buying more than the state-required minimum to protect assets such as your home and savings.

2. Medical Payments or Personal Injury Protection (PIP)

This coverage pays for the treatment of injuries to the driver and passengers of the policyholder's car. At its broadest, PIP can cover medical payments, lost wages and the cost of replacing services normally performed by someone injured in an auto accident. It may also cover funeral costs.

3. Property Damage Liability

This coverage pays for damage you (or someone driving the car with your permission) may cause to someone else's property. Usually, this means damage to someone else’s car, but it also includes damage to lamp posts, telephone poles, fences, buildings or other structures your car hit.

4. Collision

This coverage pays for damage to your car resulting from a collision with another car, object or as a result of flipping over. It also covers damage caused by potholes. Collision coverage is generally sold with a deductible of $250 to $1,000—the higher your deductible, the lower your premium. Even if you are at fault for the accident, your collision coverage will reimburse you for the costs of repairing your car, minus the deductible. If you're not at fault, your insurance company may try to recover the amount they paid you from the other driver’s insurance company. If they are successful, you'll also be reimbursed for the deductible.

5. Comprehensive

This coverage reimburses you for loss due to theft or damage caused by something other than a collision with another car or object, such as fire, falling objects, missiles, explosion, earthquake, windstorm, hail, flood, vandalism, riot, or contact with animals such as birds or deer.

Comprehensive insurance is usually sold with a $100 to $300 deductible, though you may want to opt for a higher deductible as a way of lowering your premium.

Comprehensive insurance will also reimburse you if your windshield is cracked or shattered. Some companies offer glass coverage with or without a deductible.

6. Uninsured and Underinsured Motorist Coverage

This coverage will reimburse you, a member of your family, or a designated driver if one of you is hit by an uninsured or hit-and-run driver.

Underinsured motorist coverage comes into play when an at-fault driver has insufficient insurance to pay for your total loss. This coverage will also protect you if you are hit as a pedestrian.

http://www.iii.org/individuals/auto/a/basic/

WHAT IS CAR INSURANCE?

2009-02-22T22:36:00.000-08:00

Generally speaking, car insurance is any kind of insurance pertaining to the ownership, maintenance, or use of an automobile.

More specifically though, car insurance is protection people buy for basically two reasons: 1) To pay for damages they do to their own car by no fault of anyone else. 2) To pay for damages they do to other people and other people's cars by crashing into them.

The cost of the damage done to cars and property are usually limited and relatively easy to calculate or measure. However, by comparison, the cost of bodily injury inflicted on others by a speeding ton of steel is seldom limited and ordinarily very hard to calculate. How do you value the pain suffered from broken ribs, head trauma, internal bleeding, a broken leg, and a fractured hip? Thus, people should theoretically carry very high limits of liability insurance. (see Car Insurance Calculator)

In the example above about the 2 basic reasons people buy car insurance, reason number one is referred to as Physical Damage coverage. This is always required by lenders or banks who finance a car purchase in order to protect their financial interest in the subject property (the car) in the event the car is stolen or completely ruined and rendered worthless. Physical Damage coverage is normally subject to a Deductible.

A deductible is the first portion of the loss that the owner of the car is responsible for. Another way to look at it is this: The deductible is the amount of money which will be subtracted from the amount which the insurance company will pay for the total damage incurred.

Full Glass Coverage is an optional coverage offered by some insurance companies and refers to a clause in the insurance policy which basically says that the insurance company will waive the deductible (so another words, you would have a $0 zero deductible) for breakage of the car's glass, most commonly the windshield.)

Uninsured Motorist Coverage is an optional coverage in most states and generally varies by state, depending on the state's laws. But essentially Uninsured and Under-insured Motorist Coverage provides protection for the insured from losses suffered for bodily injury or property damage caused by someone without insurance, or someone with too little insurance.

Medical Payments Coverage is another optional coverage in most states and generally pays the medical expenses of the insured and any passengers injured in the car, regardless of who was at fault. It also pays medical expenses for the insured and the insured's immediate family members injured while passengers in any other car, or struck by a car whether they were in a car or simply walking down the street. In some no-fault states, medical payments insurance has been replaced by Personal Injury Protection (PIP); in other states it may supplement no-fault insurance. [Always consult your state's specific Department of Insurance website for complete and timely information about this and other insurance coverages.]

Personal Injury Protection, also known as no-fault insurance, provides coverage for medical costs, lost earnings, additional living expenses, and funeral costs for occupants of the insured vehicle, and pedestrians other than those insured under other policies.

Rental Car Coverage is an optional coverage that reimburses the car owner for the cost of a rental car generally while the wrecked car is being fixed or replaced. Beware: There are limits to the amount of this coverage.

Towing Coverage is an optional coverage that reimburses the car owner for the cost of towing the wrecked car generally from the scene of an accident to a repair shop. Again, beware: There are limits to the amount of this coverage.

Some states compel or require drivers to carry a minimum limit of liability insurance, so be sure to check with your state's Department of Insurance or a well qualified, licensed insurance agent in your state to learn about your requirements.

http://insirance.com/carInformation.asp
Labels: auto insurance, car insurance, insurance

VEHICLE INSURANCE

2009-02-22T22:30:00.000-08:00

Vehicle insurance (also known as auto insurance, car insurance, or motor insurance) is insurance purchased for cars, trucks, and other vehicles. Its primary use is to provide protection against losses incurred as a result of traffic accidents and against liability that could be incurred in an accident.

Public policy
In many jurisdictions it is compulsory to have vehicle insurance before using or keeping a motor vehicle on public roads. Most jurisdictions relate insurance to both the car and the driver, however the degree of each varies greatly.

A 1994 study by Jeremy Jackson and Roger Blackman[1] showed, consistent with the risk homeostasis theory, that increased accident costs caused large and significant reductions in accident frequencies.

Australia
In South Australia, Third Party Personal insurance from the Motor Accident Commission is included in the licence registration fee for people over 16. A similar scheme applies in Western Australia.

In Victoria, Third Party Personal insurance from the Transport Accident Commission is similarly included, through a levy, in the vehicle registration fee.

In New South Wales, Compulsory Third Party Insurance (commonly known as CTP Insurance) is a mandatory requirement and each individual car must be insured or the vehicle will not be considered legal. Therefore, a motorist cannot drive the vehicle until it is insured. A 'Green Slip,'[citation needed] another name CTP Insurance is commonly known by due to the colour of the pages the form is printed on, must be obtained through one of the seven main insurers in New South Wales.

Canada
Several Canadian provinces (British Columbia, Saskatchewan, Manitoba and Quebec) provide a public auto insurance system while in the rest of the country insurance is provided privately. Basic auto insurance is mandatory throughout Canada with each province's government determining which benefits are included as minimum required auto insurance coverage and which benefits are options available for those seeking additional coverage. Accident benefits coverage is mandatory everywhere except for Newfoundland and Labrador. All provinces in Canada have some form of no-fault insurance available to accident victims. The difference from province to province is the extent to which tort or no-fault is emphasized.[2] Typically, coverage against loss of or damage to the driver's own vehicle is optional - one notable exception to this is in Saskatchewan, where SGI provides collision coverage (less than a $700 deductible, such as a collision damage waiver) as part of its basic insurance policy. In Saskatchewan, residents have the option to have their auto insurance through a tort system but less than 0.5% of the population have taken this option.[2]

Ireland
The Road Traffic Act, 1933 requires all drivers of mechanically propelled vehicles in public places to have at least third-party insurance, or to have obtained exemption - generally by depositing a (large) sum of money with the High Court as a guarantee against claims. In 1933 this figure was set at £15,000. The Road Traffic Act, 1961 [1] (which is currently in force) repealed the 1933 act but replaced these sections with functionally identical sections.

From 1968, those making deposits require the consent of the Minister for Transport to do so, with the sum specified by the Minister.

Those not exempted from obtaining insurance must obtain a certificate of insurance from their insurance provider, and display a portion of this (an insurance disc) on their vehicles windscreen (if fitted). The certificate in full must be presented to a police station within ten days if requested by an officer. Proof of having insurance or an exemption must also be provided to pay for your motor tax.

Those injured or suffering property damage/loss due to uninsured drivers can claim against the Motor Insurance Bureau of Ireland's uninsured drivers fund, as can those injured (but not those suffering damage or loss) from hit and run offences.

South Africa
South Africa allocates a percentage of the money from petrol into the Road Accidents Fund, which goes towards compensating third parties in accidents.

United Kingdom
In 1930, the UK government introduced a law that required every person who used a vehicle on the road to have at least third party personal injury insurance. Today UK law is defined by The Road Traffic Act 1988, which was last modified in 1991. The act requires that motorists either be insured, have a security, or have made a specified deposit (£500,000 as of 1991) with the Accountant General of the Supreme Court, against their liability for injuries to others (including passengers) and for damage to other persons' property resulting from use of a vehicle on a public road or in other public places.

The minimum level of insurance cover commonly available and which satisfies the requirement of the act is called third party only insurance. The level of cover provided by Third party only insurance is basic but does exceed the requirements of the act.

Road Traffic Act Only Insurance is not the same as Third Party Only Insurance and is not often sold. It provides the very minimum cover to satisfy the requirements of the act. For example Road Traffic Act Only Insurance has a limit of £250,000 for damage to third party property and does not cover emergency treatment fees. Third party insurance has a far greater limit for third party property damage and will cover emergency treatment fees.

It is an offence to drive a car, or allow others to drive it, without at least third party insurance whilst on the public highway (or public place Section 143(1)(a) RTA 1988 as amended 1991); however, no such legislation applies on private land.

Vehicles which are exempted by the act, from the requirement to be covered, include those owned by certain councils and local authorities, national park authorities, education authorities, police authorities, fire authorities, heath service bodies and security services.

The insurance certificate or cover note issued by the insurance company constitutes legal evidence that the vehicle specified on the document is insured. The law says that an authorised person, such as the police, may require a driver to produce an insurance certificate for inspection. If the driver cannot show the document immediately on request, then the driver will usually be issued a HORT/1 with seven days, as of midnight of the date of issue, to take a valid insurance certificate (and usually other driving documents as well) to a police station of the driver's choice. Failure to produce an insurance certificate is an offence.

Insurance is more expensive in Northern Ireland than in other parts of the UK.

Most motorists in the UK are required to prominently display a vehicle licence (tax disc) on their vehicle when it is kept or driven on public roads. This helps to ensure that most people have adequate insurance on their vehicles because you are required to produce an insurance certificate when you purchase the disc.

The Motor Insurers Bureau compensates the victims of road accidents caused by uninsured and untraced motorists. It also operates the Motor Insurance Database, which contains details of every insured vehicle in the country.

United States
In the United States, auto insurance covering liability for injuries and property damage done to others is compulsory in most states, though enforcement of the requirement varies from state to state. The state of New Hampshire, for example, does not require motorists to carry liability insurance (the ballpark model), while in Virginia residents must pay the state a $500 annual fee per vehicle if they choose not to buy liability insurance.[4] Penalties for not purchasing auto insurance vary by state, but often involve a substantial fine, license and/or registration suspension or revocation, as well as possible jail time in some states. Usually, the minimum required by law is third party insurance to protect third parties against the financial consequences of loss, damage or injury caused by a vehicle.

Some states, such as North Carolina, require that a driver hold liability insurance before a license can be issued.

Arizona Department of Transportation Research Project Manager John Semmens has recommended that car insurers issue license plates, and that they be held responsible for the full cost of injuries and property damages caused by their licensees under the Disneyland model. Plates would expire at the end of the insurance coverage period, and licensees would need to return their plates to their insurance office to receive a refund on their premiums. Vehicles driving without insurance would thus be easy to spot because they would not have license plates, or the plates would be past the marked expiration date.[5]

Coverage levels

Vehicle insurance can cover some or all of the following items:

* The insured party
* The insured vehicle
* Third parties (car and people)
* In some States coverage for injuries to persons riding in the insured vehicle is available without regard to fault in the auto accident (No Fault Auto Insurance)

Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accident damage independently.

Excess
An excess payment, also known as a deductible, is the fixed contribution you must pay each time your car is repaired through your car insurance policy. Normally the payment is made directly to the accident repair "garage" (The term "garage" refers to an establishment where vehicles are serviced and repaired) when you collect the car. If one's car is declared to be a "write off" or "total loss"("write off" is commonly used in motor insurance to describe a vehicle the worth of which is less than the cost of repair), the insurance company will deduct the excess agreed on the policy from the settlement payment it makes to you.

If the accident was the other driver's fault, and this is accepted by the third party's insurer, you'll be able to reclaim your excess payment from the other person's insurance company.

Compulsory excess
A compulsory excess is the minimum excess payment your insurer will accept on your insurance policy. Minimum excesses vary according to your personal details, driving record and insurance company.

Voluntary excess
In order to reduce your insurance premium, you may offer to pay a higher excess than the compulsory excess demanded by your insurance company. Your voluntary excess is the extra amount over and above the compulsory excess that you agree to pay in the event of a claim on the policy. As a bigger excess reduces the financial risk carried by your insurer, your insurer is able to offer you a significantly lower premium.

Basis of premium charges

Main article: auto insurance risk selection

Depending on the jurisdiction, the insurance premium can be either mandated by the government or determined by the insurance company in accordance to a framework of regulations set by the government. Often, the insurer will have more freedom to set the price on physical damage coverages than on mandatory liability coverages.

When the premium is not mandated by the government, it is usually derived from the calculations of an actuary based on statistical data. The premium can vary depending on many factors that are believed to have an impact on the expected cost of future claims.[6] Those factors can include the car characteristics, the coverage selected (deductible, limit, covered perils), the profile of the driver (age, gender, driving history) and the usage of the car (commute to work or not, predicted annual distance driven)

Gender
Men average more miles driven per year than women do, and have a proportionally higher accident involvement at all ages. Insurance companies cite women's lower accident involvement in keeping the youth surcharge lower for young women drivers than for their male counterparts, but adult rates are generally unisex. Reference to the lower rate for young women as "the women's discount" has caused confusion that was evident in news reports on a recently defeated EC proposal to make it illegal to consider gender in assessing insurance premiums. Ending the discount would have made no difference to most women's premiums.

Age
Teenage drivers who have no driving record will have higher car insurance premiums. However, young drivers are often offered discounts if they undertake further driver training on recognised courses, such as the Pass Plus scheme in the UK. In the U.S. many insurers offer a good grade discount to students with a good academic record and resident student discounts to those who live away from home. Generally insurance premiums tend to become lower at the age of 25. Senior drivers are often eligible for retirement discounts reflecting lower average miles driven by this age group.

Marital Status
Drivers who are unmarried are often charged higher insurance premiums as opposed to married drivers.

Vehicle Classification
Owners of sports cars, muscle cars, some sport utility vehicles, and motorcycles would have higher insurance premiums as opposed to compact cars or luxury cars. However, in the case of motorcycles, the chance of causing extensive damage to other vehicles is relatively low (as opposed to damage to oneself) and thus liability insurance premiums are often lower.

Distance
Some car insurance plans do not differentiate in regard to how much the car is used. However, methods of differentiation would include:

Reasonable estimation
Several car insurance plans rely on a reasonable estimation of the average annual distance expected to be driven which is provided by the insured. This discount benefits drivers who drive their cars infrequently but has no actuarial value since it is unverified.

Odometer-based systems

Cents Per Mile Now (1986) advocates classified odometer-mile rates. After the company's risk factors have been applied and the customer has accepted the per-mile rate offered, customers buy prepaid miles of insurance protection as needed, like buying gallons of gasoline. Insurance automatically ends when the odometer limit (recorded on the car’s insurance ID card) is reached unless more miles are bought. Customers keep track of miles on their own odometer to know when to buy more. The company does no after-the-fact billing of the customer, and the customer doesn't have to estimate a "future annual mileage" figure for the company to obtain a discount. In the event of a traffic stop, an officer could easily verify that the insurance is current by comparing the figure on the insurance card to that on the odometer.

Critics point out the possibility of cheating the system by odometer tampering. Although the newer electronic odometers are difficult to roll back, they can still be defeated by disconnecting the odometer wires and reconnecting them later. However, as the Cents Per Mile Now website points out:

As a practical matter, resetting odometers requires equipment plus expertise that makes stealing insurance risky and uneconomical. For example, in order to steal 20,000 miles (32,000 km) of continuous protection while paying for only the 2,000 miles (3,200 km) from 35,000 miles (56,000 km) to 37,000 miles (60,000 km) on the odometer, the resetting would have to be done at least nine times to keep the odometer reading within the narrow 2,000-mile (3,200 km) covered range. There are also powerful legal deterrents to this way of stealing insurance protection. Odometers have always served as the measuring device for resale value, rental and leasing charges, warranty limits, mechanical breakdown insurance, and cents-per-mile tax deductions or reimbursements for business or government travel. Odometer tampering—detected during claim processing—voids the insurance and, under decades-old state and federal law, is punishable by heavy fines and jail.

Under the cents-per-mile system, rewards for driving less are delivered automatically without need for administratively cumbersome and costly GPS technology. Uniform per-mile exposure measurement for the first time provides the basis for statistically valid rate classes. Insurer premium income automatically keeps pace with increases or decreases in driving activity, cutting back on resulting insurer demand for rate increases and preventing today's windfalls to insurers when decreased driving activity lowers costs but not premiums.

GPS-based system

In 1998, Progressive Insurance started a pilot program in Texas in which drivers received a discount for installing a GPS-based device that tracked their driving behavior and reported the results via cellular phone to the company.[10] Policyholders were reportedly more upset about having to pay for the expensive device than they were over privacy concerns.[11] The program was discontinued in 2000.

OBDII-based system

In 2008, The Progressive Corporation launched MyRate to give drivers a customized insurance rate based on how, how much, and when their car is driven. MyRate is currently available in Alabama, Kentucky, Louisiana, Michigan, Minnesota, Maryland, New Jersey and Oregon. Driving data is transmitted to the company using an on-board telematic device. The device connects to a car's OnBoard Diagnostic (OBD-II) port (all automobiles built after 1996 have an OBD-II.) and transmits speed, time of day and number of miles the car is driven. There is no GPS in the MyRate device, so no location information is collected. Cars that are driven less often, in less risky ways and at less risky times of day can receive large discounts. Progressive has received patents on its methods and systems of implementing usage-based insurance and has licensed these methods and systems to other companies. Progressive has service marks pending on the terms Pay As You Drive and Pay How You Drive.

Auto insurance in the United States

Coverage available

The consumer may be protected with different coverage types depending on what coverage the insured purchases. Some states require that motorists carry liability insurance coverage to ensure that its drivers can cover the cost of damages to people or property in the event of an automobile accident. Some states, such as Wisconsin, have more flexible “proof of financial responsibility” requirements.[12]

In the United States, liability insurance covers claims against the policy holder and generally, any other operator of the insured vehicles, provided they do not live at the same address as the policy holder, and are not specifically excluded on the policy. In the case of those living at the same address, they must specifically be covered on the policy. Thus it is necessary, for example, when a family member comes of driving age they must be added to the policy. Liability insurance sometimes does not protect the policy holder if they operate any vehicles other than their own. When you drive a vehicle owned by another party, you are covered under that party’s policy. Non-owners policies may be offered that would cover an insured on any vehicle they drive. This coverage is available only to those who do not own their own vehicle and is sometimes required by the government for drivers who have previously been found at fault in an accident. Non-owners policies are also known as Named Operator Policies. The policies are useful for people whose drivers license has been suspended and they have to have insurance for their licensed to be reinstated.

Generally, liability coverage extends when you rent a car. Comprehensive policies ("full coverage") usually also apply to the rental vehicle, although this should be verified beforehand. Full coverage premiums are based on, among other factors, the value of the insured’s vehicle. This coverage, however, cannot apply to rental cars because the insurance company does not want to assume responsibility for a claim greater than the value of the insured’s vehicle, assuming that a rental car may be worth more than the insured’s vehicle. Most rental car companies offer insurance to cover damage to the rental vehicle. These policies may be unnecessary for many customers as credit card companies, such as Visa and MasterCard, now provide supplemental collision damage coverage to rental cars if the transaction is processed using one of their cards. These benefits are restrictive in terms of the types of vehicles covered.[13]

Liability
Liability coverage is offered for bodily injury (BI) or property damage (PD) for which the insured driver is deemed responsible. The amount of coverage provided (a fixed dollar amount) will vary from jurisdiction to jurisdiction. Whatever the minimum, the insured can usually increase the coverage (prior to a loss) for an additional charge.

An example of Property Damage is where an insured driver (or 1st party) drives into a telephone pole and damages the pole, liability coverage pays for the damage to the pole. In this example, the drivers insured may also become liable for other expenses related to damaging the telephone pole, such as loss of service claims (by the telephone company), depending on the jurisdiction. An example of Bodily Injury is where an insured driver causes bodily harm to a third party and the insured driver is deemed responsible for the injuries. However, in some jurisdictions, the third party would first exhaust coverage for accident benefits through their own insurer (assuming they have one) and/or would have to meet a legal definition of severe impairment to have the right to claim (or sue) under the insured driver's (or 1st Party's) policy.

In some jurisdictions: Liability coverage is available either as a combined single limit policy, or as a split limit policy:

Combined single limit

A combined single limit combines property damage liability coverage and bodily injury coverage under one single combined limit. For example, an insured driver with a combine single liability limit strikes another vehicle and injures the driver and the passenger. Payments for the damages to the other driver's car, as well as payments for injury claims for the driver and passenger, would be paid out under this same coverage.

Split limits

A split limit liability coverage policy splits the coverages into property damage coverage and bodily injury coverage. In the example given above, payments for the other driver's vehicle would be paid out under property damage coverage, and payments for the injuries would be paid out under bodily injury coverage.

Bodily injury liability coverage is also usually split as well into a maximum payment per person and a maximum payment per accident.

In the state of Oklahoma, you must carry at least state minimum liability limits of $25,000/50,000/25,000. If an insured driver hits a car full of people and is found by the insurance company to be liable, the insurance company will pay $25,000 of one persons medical bills but will not exceed 50,000 for other people injured in the accident. The insurance company will pay property damage not to exceed 25,000 in repairs to the vehicle that the insured hit.

Full Coverage
Full coverage is the name commonly referred to as Comprehensive and Collision. Insurers generally do not use this term because it implies broader coverage than actually exists.

Collision

Collision coverage provides coverage for an insured's vehicle that is involved in an accident, subject to a deductible. This coverage is designed to provide payments to repair the damaged vehicle, or payment of the cash value of the vehicle if it is not repairable. Collision coverage is optional, however if you plan on financing a car or taking a car loan, the lender will usually insist you carry collision for the finance term or until your car is paid off. Collision Damage Waiver (CDW) is the term used by rental car companies for collision coverage.

Comprehensive

Comprehensive (a.k.a. - Other Than Collision) coverage provides coverage, subject to a deductible, for an insured's vehicle that is damaged by incidents that are not considered Collisions. For example, fire, theft (or attempted theft), vandalism, weather, or impacts with animals are types of Comprehensive losses.

Uninsured/underinsured coverage

Underinsured coverage, also known as UM/UIM, provides coverage if an at-fault party either does not have insurance, or does not have enough insurance. In effect, your insurance company pays your medical bills, then would subrogate from the at fault party.

In the United States, the definition of an uninsured/underinsured motorist, and corresponding coverages, are set by state laws.

Loss of use

Loss of use coverage, also known as rental coverage, provides reimbursement for rental expenses associated with having an insured vehicle repaired due to a covered loss.

Loan/lease payoff

Loan/lease payoff coverage, also known as GAP coverage or GAP insurance,[14][15] was established in the early 1980s to provide protection to consumers based upon buying and market trends.

Due to the sharp decline in value immediately following purchase, there is generally a period in which the amount owed on the car loan exceeds the value of the vehicle, which is called "upside-down" or negative equity. Thus, if the vehicle is damaged beyond economical repair at this point, the owner will still owe potentially thousands of dollars on the loan. The escalating price of cars, longer-term auto loans, and the increasing popularity of leasing gave birth to GAP protection. GAP waivers provide protection for consumers when a "gap" exists between the actual value of their vehicle and the amount of money owed to the bank or leasing company. In many instances, this insurance will also pay the deductible on the primary insurance policy. These policies are often offered at the auto dealership as a comparatively low cost add on that can be put into the car loan which provides coverage for the duration of the loan.

Consumers should be aware that a few states, including New York, require lenders of leased cars to include GAP insurance within the cost of the lease itself. This means that the monthly price quoted by the dealer must include GAP insurance, whether it is delineated or not. Nevertheless, unscrupulous dealers sometimes prey on unsuspecting individuals by offering them GAP insurance at an additional price, on top of the monthly payment, without mentioning the State's requirements.

In addition, some vendors and insurance companies offer what is called "Total Loss Coverage." This is similar to ordinary GAP insurance but differs in that instead of paying off the negative equity on a vehicle that is a total loss, the policy provides a certain amount, usually up to $5000, toward the purchase or lease of a new vehicle. Thus, to some extent the distinction makes no difference, i.e., in either case the owner receives a certain sum of money. However, in choosing which type of policy to purchase, the owner should consider whether, in case of a total loss, it is more advantageous for him or her to have the policy pay off the negative equity or provide a down payment on a new vehicle.

For example, assuming a total loss of a vehicle valued at $15,000, but on which the owner owes $20,000, is the "gap" of $5000. If the owner has traditional GAP coverage, the "gap" will be wiped out and he or she may purchase or lease another vehicle or choose not to. If the owner has "Total Loss Coverage," he or she will have to personally cover the "gap" of $5000, and then receive $5000 toward the purchase or lease of a new vehicle, thereby either reducing monthly payments, in the case of financing or leasing, or the total purchase price in the case of outright purchasing. So the decision on which type of policy to purchase will, in most instances, be informed by whether the owner can pay off the negative equity in case of a total loss and/or whether he or she will definitively purchase a replacement vehicle.

Towing

Car towing coverage is also known as Roadside Assistance coverage. Traditionally, automobile insurance companies have agreed to only pay for the cost of a tow that is related to an accident that is covered under the automobile policy of insurance. This had left a gap in coverage for tows that are related to mechanical breakdowns, flat tires and gas outages. To fill that void, insurance companies started to offer the car towing coverage, which pays for non-accident related tows.

Personal Property

Personal items in a vehicle that are damaged due to an accident would not be a covered under the auto policy. Any type of property that is not attached to the vehicle should be claimed under a homeowners or renters policy.

http://en.wikipedia.org/wiki/Vehicle_insurance

What Is Car Insurance All About?

2009-02-22T22:28:00.000-08:00

The insurance, be it for the car, is the guarantee that a car insurance company promises upon the payment of a periodical premium. The car insurance company that insures the cars, trucks or any other vehicle that ply on the road provides a protection against any loss that may be incurred mostly as a result of the traffic accident.

The car insurance company offers its customers the flexibility to insure for the whole of the car or any part of the car. The company divides it into the insured party, the vehicle party and the third party. Car insurance companies may come up with a variety of insurance plans according to the convenience of the customer.

There is a liability insurance policy offered by most of the car insurance companies in the USA which covers claims against the one who owns the policy and any other operator who does not live at the same address and for those, who share the same residential address to the one with the policy holder. This liability insurance, however, may not cover the policy holder if he is driving a vehicle other than his own.

There are other non-owner policies that cover the holder for any vehicle he drives. The car insurance company also provides the liability facility which allows a fixed monetary amount of insurance that an insurer may become liable to pay for any damage or accident legally. Apart from the many other policies, one that is quite important is the collision coverage provided by car insurance companies. It is designed in a way that will cover the repair of the damaged car and if repair is not possible then reimburse the value of the car at the time of the accident. There are many car insurance companies offering a number of insurance policies in USA