Monthly Archives: January 2013

Red Light Cameras – Problem or Solution

You can pretty much count on the fact that one person’s good idea is another person’s big problem. Red light cameras are another of those disputes we seem to have to work our way around. Cities seem to like red light cameras. They look like they may generate revenue from tickets at a relatively low cost; systems run around $50,000 with installation and sensors adding about $5,000 to the tab.

Motorists pretty much do not like red light cameras. They seem, well, a little unsportsmanlike. After all sooner or later almost all of us will speed – just a little – and roll a stop sign or two. If there’s a policeman there on the corner and we get caught it’s sort of like part of the game of driving. You get to explain to the policeman that a high heel got caught under the accelerator pedal or that you were headed for the hospital to be there in time for the birth of your first child.  On the other hand, cameras are impersonal and they are always on; you don’t get to argue the merits of why it was necessary to go through the light – it feels like big brother really is watching you.

Just a few days ago the Insurance Institute for Highway Safety released the results of a study that suggest red light cameras do a lot to reduce the incidence of running red lights – at least at high-risk intersections.  The research, conducted in Arlington VA showed that red-light running violations went down at intersections with cameras; an earlier 2011 study of large U.S. cities determined cameras reduced the rate of fatal red-light running collisions by 24 percent.

Red light cameras are not widely used in Washington auto law enforcement.  A map of locations available here shows none on the Olympic Peninsula and only a handful scattered in Eastern Washington – the bulk are in the Seattle-Tacoma corridor.  Opponents of the systems have tried alternatives to barring or removing them but this seems difficult if a local jurisdiction wants to put them in place.  The Washington State Supreme Court ruled last year that cameras cannot be banned by local initiatives – the state legislature put local governments in charge. 

While there seems to be increasing evidence that red light cameras reduce the incidence of the problem, there isn’t general agreement about their value.  The National Motorists Association opposes them and says they cause an increase in accidents; the NMA promotes engineering solutions as the best fix for intersections with high accident rates.  In a 3 month span last year articles on the effectiveness or cost effectiveness of red light cameras delivered opposite conclusions.  A CNBC report in October 2012 concluded that these systems were helping “cash strapped cities” and there was evidence for their effectiveness, citing some of the same IIHS data mentioned above. In November of 2012 The Atlanta Journal Constitution published an article on a moderated discussion that presented evidence for and against;  by January 2013 the Lakeland Ledger was publishing a reader’s report of research that purported to show that they were neither cost effective nor necessarily safety enhancing.  

It may take a while longer before all the data sort out neatly both on the safety and the financial side of the argument.  Till that happens, we hope we don’t need to see any out here on the Peninsula.  We have plenty of other things to occupy our attention.

Insurance Fraud – A Look At Some Real Bad Guys

From the outset, insurance was a way to manage an individual’s risk by asking others to participate. The early underwriting of vessels and their cargo – the earliest form of insurance – has evolved into many different risk management scenarios. Fraud has probably been a part of insurance for as long as the idea has been around. We know, for example, that in the early days of Marine insurance unscrupulous owners would hide a vessel in another port and claim it as lost; probably the earliest form of insurance fraud.

It seems likely that every advance in the insurance marketplace has been accompanied by a corresponding advance in people trying to figure out how to take advantage of the insurance for their own gain. Some of the stories of early insurance fraud make for a pretty compelling reading as the perpetrators of fraud have sometimes not been simply “white collar criminals” but really bad people who ventured far afield from simply scamming an insurance company into murder and mayhem.

In the life insurance arena for example, we can look at the case of one William Udderzook who in 1868 worked with his brother-in-law, Winfield Goss, to collect on a $25,000 life insurance policy. Udderzook and Goss staged a fire in Goss’s workshop.  A body was found in the aftermath that was was burned beyond recognition. Goss’s widow claimed against the policy, but insurance investigators became suspicious and launched an investigation.  With the scheme beginning to fall apart, Udderzook killed Goss for real in a manner most gruesome.  When Goss’s body was found, it had been dismembered, disemboweled, and repeatedly stabbed.  In fact, the case opened the door a bit for forensic science because the identification of the body was made possible by a photograph of Goss and the finding of a “seal ring” with the corpse.  Udderzook was found guilty of the crime and hanged in 1874.

An even more bizarre series of fraud cases involved one H. H. Holmes who may be America’s first known serial killer (discounting tales of the wild west).  Holmes, actually one Herman W. Mudgett of Gilmanton, New Hampshire, studied in Vermont and at the medical school of the University of Michigan at Ann Arbor. Not just a student, he had a preoccupation with cadavers, the will to create them and a penchant for using them in fraud schemes. He stole corpses, which he used to make false insurance claims and may have used the bodies for experiments as well.  

Holmes moved to Chicago in 1886 and began working in a pharmacy where he acquired the title “doctor.” He was known then as Dr. Henry H. Holmes. The owner of the pharmacy disappeared under mysterious circumstances and Holmes took over the business.  He began the construction of a three-story building constructed, supposedly to house people visiting the 1893 World Columbian Exposition.  In fact, what he built was a house of horrors with many small rooms where he tortured and killed his victims. Some rooms had gas jets to asphyxiate victims and there were trapdoors and chutes that enabled Holmes to move bodies down to the basement where he could burn the remains in a kiln or dispose of them in other ways – including the sale of skeleton and body parts to medical schools. 

It was an insurance fraud scheme that finally exposed Holmes.  Philadelphia police found the body of a man who had been the victim an explosion. While decomposition and fire made positive identification difficult, two men – Dr. H. H. Holmes and Jephtha Howe – arrived in Phildelphia to identify the remains as one Benjamin F. Pitzel a person whose life was insured by the Fidelity Mutual Life Association of Philadelphia for $10,000.  The scheme worked well enough for the insurer to pay the claim – and even reap benefits as the widow’s thank you letter was used for promotion purposes.  However, there was a problem.  A convict in St. Louis had news of the plot and informed on Holmes and Pitzel which not only ended the fraud, but exposed H.H. Holmes as a mass murderer.  

Holmes eventually confessed to 27 murders but the actual number is not known and it is believed he may have killed as many as 200 people; not all as parts of insurance fraud. He was executed by hanging in Philadelphia on May 8, 1896. 

A Public Health Approach to Gun Violence

We have written earlier on this blog about how to look at insurance through a medical risk management model. The medical risk management model is one basically developed out of public-health. It is the product of people who have responsibility for looking at entire populations and drawing that down to an individual level.

Many people have suggested changes to gun laws to limit access to certain types of weapons, accessories or ammunition; other people have suggested that increased emphasis on mental health may make a difference. A lot of this pits second amendment rights to bear arms against rights to privacy both for people who are concerned about registering guns with the government and people who are concerned about the rights of people with mental health problems. Virtually everyone agrees that it is a complex problem without a single obvious solution. Following the tragedy in Newtown, Connecticut, three public-health physicians from Harvard have suggested a different approach to curbing gun violence.

In an editorial article in the Journal of the American Medical Association, these doctors suggest approaching the problem of gun violence in ways similar to those we have used in reducing the risks from smoking and motor vehicle accidents.  They point out that, as a society, we have reduced cigarette smoking from over 40% of the population to less than 20% of the population in about 40 years. This is had a great impact on diseases that are associated with cigarette smoking such as lung cancer and heart disease.  The story with motor vehicle this is even more dramatic vehicle deaths per mile of driving have dropped by 90% over time. 

Both these reductions have come from a combination of public health efforts that included public education, efforts to change perception, establishing safety standards and enforcing laws. It was popular 50 years ago to say “you can’t change human nature” or “you can’t legislate morality” but these don’t seem to be so true anymore as we realize how much our cultural outlook contributes to the way we see things. There was a time when smoking was “cool;” today it is as likely to be viewed as “gross.” Once, leaving a party or a bar “a little under the weather” might not have been a cause for concern but as the public has grown increasingly aware of the possible consequences of this behavior there is a real reduction in drinking and driving and a greater willingness to prosecute offenders.

There are even corresponding notions developing today in the law enforcement community where police strategies are shifting from reactive to proactive. Although these ideas are just beginning, the notion that violence can be reduced by focusing “efforts targeted on high risk places, behaviors, and actors” is pretty similar in concept to alcohol enforcement programs that set up checkpoints near drinking establishments.

It seems at least possible that it is not necessary to challenge the second amendment to the Constitution by making significant changes to gun laws or to expose people with mental health issues to increased government scrutiny if we worked at strategies that change the public perception of gun violence. A lot of patience is required for this kind of strategy, but getting a start on it could at least get us going in the right direction. After all, who among us who saw Paul Newman with a cigarette hanging from his lip in the 60s could have predicted what the reaction to that same vision might be today.

Washington Carbon Monoxide Detector Law Starts January 2013

This past week we received a flyer in the mail that advertised in big letters “new Washington state law” and went on to indicate that Washington law now required carbon monoxide detectors in homes. This wasn’t a surprise, since we knew about the law but it is easy to forget the time for implementation while laws passed but doesn’t go into effect immediately. In fact, carbon monoxide detectors have been required in all new homes, apartments, condominiums, hotels and motels since January 1, 2011.

Although the flyer seems to indicate that every homeowner needs to run out and purchase a carbon monoxide detector, it appears the law is a bit more complicated than that. Carbon monoxide poisoning is a serious problem that claims the life of 400 people are more every year in the United States and sends thousands to emergency rooms for the treatment of carbon monoxide poisoning. Several years ago here in Washington we had a number of well-publicized deaths in the Seattle area that stemmed from attempts to heat homes during a power outage. The legislature, quite appropriately, looked at this as a public health issue that could be helped, if not completely cured, by the use of carbon monoxide detectors.

The law is authorized in Washington RCW 19.27.074 and RCW 19.27.530 and defined in WAC 51.51.0315 which states that “existing dwellings shall be equipped with carbon monoxide alarms when alterations, repairs or additions requiring a permit occur, or when one or more sleeping rooms are added or created.”  It also requires that carbon monoxide detectors be installed before a house is sold to a new owner. 

co2detector.jpg  Out here on the Peninsula, we have a lot of people who use forms of heating that may generate carbon monoxide. Fuels such as propane, gasoline, kerosene, wood, coal, and charcoal and natural gas or derivative products such as fire logs or pellet fuel can all generate a carbon monoxide risk when burned in an unsafe manner.  Unsafe manner covers a lot of ground.  Blockages can cause improper ventilation in enclosed spaces where fuel is burned, faulty chimneys, fireplaces space heaters can circulate carbon monoxide into living space and gasoline engines running in a garage or other enclosed space can circulate into a house.  

Carbon monoxide is a colorless and odorless gas (unless you can smell what is producing it, like wood smoke or exhaust fumes).  Breathing carbon monoxide blocks oxygen from getting into the body, which in turn damages tissues and can result in death.  The reason for buying a carbon monoxide detector is similar to those for buying a smoke detector – the safety of you and your family.  Even if you are currently exempted from Washington law, it is a good idea to purchase one just as insurance.  Carbon monoxide detectors cost from $20 to $70 dollars and are a good investment for your household risk management plan.
    

Life Insurance In Many Variations

Life insurance in the US has been around since the late 18th century and over the years it has evolved into a number of forms – accidental death and dismemberment, whole life, term life, level term and decreasing term are common forms.  More recently, the life insurance concept has been incorporated into a range of insurance products that are becoming increasingly unrecognizable to the consumer as life insurance.  

Even so, we were stunned recently to see a recent Fox Business article that proclaimed “Car Insurance is Not Life Insurance.”  Well, not much of a surprise there.  The article went on to note that there could be some compensation available under an auto insurance policy, any return if an insured person died in their car would be limited to the amount of their medical liability insurance after any medical expenses. In the absence of medical expenses this residual might pay for a funeral, but the benefit was limited and could be consumed by expense prior to death. Several other options were explored before concluding that it might be wiser to buy life insurance. Now that’s an idea we can get behind as a Washington insurance agency.

Some other areas where the notion of “life insurance” needs a bit of examination include some forms of mortgage insurance and some forms of “credit card insurance.” Mortgage insurance comes in several varieties. If you buy a house and take out a mortgage, your lender may require you to obtain mortgage insurance.  This is often referred to as lenders mortgage insurance (LMI) or private mortgage insurance(PMI). In either case it is insurance taken out on your life in favor of your mortgage holder is a beneficiary.  It may protect the interest of a spouse or partner in a home, but it does little for their general security.  As a form of insurance required by your mortgage holder your choice may be as narrow as accepting the insurer they recommend or seeking your own. It might be wise to choose the latter option as there are differences in premium.

The second type of mortgage insurance usually goes by the name mortgage life insurance.This type of policy is pegged to the mortgage value of your house and may offer to pay the full value – not a declining amount as your mortgage is paid down.  There are some things to recommend here as the beneficiary is not your mortgage holder, but the person or persons you designate.  Because it is typically sold by mail – and may be recommended by your mortgage holder –  there may be added incentives such as guaranteed acceptance and minimal underwriting.  It also may be more expensive than a term life policy with a similar level of benefit.  If the concept is one that appeal to you, at the least look to obtaining competitive quotes; premiums can vary substantially.  

Finally, credit card companies are also getting in on the life insurance act.  You can purchase “credit card insurance”  that offers, among other benefits, to pay off your balance in the event of death or disability.  Often the beneficiary of this policy is the card issuer.  As a rule, it doesn’t make sense to buy insurance for narrow reasons — to insure against a specific disease or a single calamity or to provide funds to pay off a single liability, like a credit card or mortgage. You should be better off insuring yourself against death by purchasing regular life insurance instead of credit insurance. 

Insurance that will pay off card balances or mortgage amounts if you die may make sense only if you have a lot of credit card debt or a mortgage and have little or no other life insurance and you are concerned about underwriting.  You can expect to pay somewhat more for this type of insurance because the offering companies must take into account the possibility of adverse experience in their underwriting.  For the most part, if you are an average, healthy American, you are better off investing in a traditional life policy suitable to your age and circumstances. Call us if you need help sorting this out.

Mark Twain – Insurance Man

Our country has a long history of comedy and our constitution and the first amendment right to freedom of speech has combined to give wide latitude to people who want to voice their opinion about all sorts of diverse subjects from politics to sports, religion and business.  Before the days of David Letterman and Johnny Carson skewering American culture and politics on late night television, we had radio and vaudeville personalities like Will Rogers to do the job of bringing this special form of American humor before the public.  

Looking even earlier, there were threads of stand-up social comedy in the nineteenth and early twentieth centuries.  The Friars Club, now famed for its “roasts” was founded in 1904 and, while the roasts didn’t start under that name till the 50’s, as early as 1910, the group was famed for sending up its members: .” ‘FRIARS KID MR. HARRIS: Veteran Theatrical Manager Butt of Jokes at Dinner,’ read the headline of the December 10, 1910 issue of the New York Tribune.”

During the nineteenth century the fine art of lampooning an audience was largely left to smaller venues – vaudeville houses like the Rose Theater in Port Townsend, social halls and fraternal organizations.  A few of these acts received sufficient exposure through writing in newspapers or magazines to make them renowned.  One of the best known was Mark Twain a humorist known as much then for his appearance on the lecture circuit as for his books.  Indeed, it appears that despite Twain’s success in selling books, he hit the lecture circuit to bail himself out of some bad investments.  He also seems to have invested widely and one of his investments was in the Hartford Accident Insurance Company where he became a Director.  That was why on October. 12, 1874 he found himself in Hartford, Connecticut addressing a number of insurance people at a dinner for an insurance dignitary from London.  Hartford at the time was a growing industrial and service center.  In addition to the insurance industry – Hartford Accident Insurance was there along with Travelers Insurance and it was the home of the Colt Arms Company and a major gravestone and monument business owned by the Batterson family.  

Mark Twain was the speaker at an insurance company dinner in honor of their London visitor and in the nature of comedians everywhere, he seized the opportunity to create a memorable evening in praise of the industry.  Given the nature of Mark Twain, we can be reasonably sure they knew what they were getting into.  What follows is the full text of Mark Twain’s introduction of Mr. Cornelius Walford of London:

GENTLEMEN: I am glad, indeed, to assist in welcoming the distinguished guest of this occasion to a city whose fame as an insurance center has extended to all lands, and given us the name of being a quadruple band of brothers working sweetly hand in hand–the Colt’s Arms Company making the destruction of our race easy and convenient, our life insurance citizens paying for the victims when they pass away, Mr. Batterson perpetuating their memory with his stately monuments, and our fire-insurance comrades taking care of their hereafter. I am glad to assist in welcoming our guest first, because he is an Englishman, and I owe a heavy debt of hospitality to certain of his fellow-countrymen; and secondly, because he is in sympathy with insurance and has been the means of making many other men cast their sympathies in the same direction.

Certainly there is no nobler field for human effort than the insurance line of business–especially accident insurance. Ever since I have been a director in an accident-insurance company I have felt that I am a better man. Life has seemed more precious. Accidents have assumed a kindlier aspect. Distressing special providences have lost half their horror. I look upon a cripple now with affectionate interest–as an advertisement. I do not seem to care for poetry any more. I do not care for politics–even agriculture does not excite me. But to me now there is a charm about a railway collision that is unspeakable.

There is nothing more beneficent than accident insurance. I have seen an entire family lifted out of poverty and into affluence by the simple boon of a broken leg. I have had people come to me on crutches, with tears in their eyes, to bless this beneficent institution. In all my experience of life, I have seen nothing so seraphic as the look that comes into a freshly mutilated man’s face when he feels in his vest pocket with his remaining hand and finds his accident ticket all right. And I have seen nothing so sad as the look that came into another splintered customer’s face when he found he couldn’t collect on a wooden leg.

I will remark here, by way of advertisement, that that noble charity which we have named the HARTFORD ACCIDENT INSURANCE COMPANY–[The speaker is a director of the company named.]–is an institution which is peculiarly to be depended upon. A man is bound to prosper who gives it his custom.

No man can take out a policy in it and not get crippled before the year is out. Now there was one indigent man who had been disappointed so often with other companies that he had grown disheartened, his appetite left him, he ceased to smile–life was but a weariness. Three weeks ago I got him to insure with us, and now he is the brightest, happiest spirit in this land has a good steady income and a stylish suit of new bandages every day, and travels around on a shutter.

I will say, in conclusion, that my share of the welcome to our guest is none the less hearty because I talk so much nonsense, and I know that I can say the same for the rest of the speakers.

Mr. Walford was actually a highly regarded member of the English insurance world.  His obituary included the following observation:  “His (Walford’s) name was even better known in America than here in connexion with insurance questions; and during a business visit to America several years ago he was presented with a handsome testimonial from members of insurance societies on the other side of the Atlantic. “  It was a handsome testimonial indeed.

DUI and New Washington Marijuana Law

When voters approved Initiative 502 in November they made Washington the most permissive state in the nation regarding marijuana. There has been a lot in the news about the difference between Washington’s approach and the federal law as it emanates from Washington DC. While there has not been a definitive answer, it looks as though the federal government is going to take a laissez-faire attitude and will not be sending in legions of FBI agents to arrest tokers in Washington State.

Before anyone takes this as general permission to sit out on the front steps with a joint in hand, it would be wise to check out some of the provisions of the law and for certain consider what can happen in the context of your Washington auto Insurance or Washington home insurance.  

Initiative 502 allows persons aged twenty-one and over limited possession of marijuana – up to one ounce – or more if infused into liquid or other forms.  The initiative also established licensing rules and creates a 25% excise taxes on wholesale and retail sales of marijuana.  There are a lot of specifics to be worked out in the law and there is a one-year phase in period that gives the state time to establish appropriate regulations. The fact that marijuana has become legal does not affect the policies of businesses, schools or stores and in fact marijuana cannot legally be consumed in any public place. You can smoke in the privacy of your own residence or someone else’s residence with their permission. If your workplace or school has a zero-tolerance policy for drug use, you can still be disciplined or fired for consuming marijuana.  

You can be in possession of a small amount of marijuana while you are driving, but don’t even think about lighting up.  Having a lit marijuana cigarette while driving is viewed exactly the same way as having an open container of alcohol in your car. You can expect to be stopped and subject to an examination for driving under the influence. If there is reasonable suspicion, and certainly being observed with a marijuana cigarette while driving would be considered reasonable suspicion, you can be required to have a blood test. Just as with alcohol, there is a threshold for driving under the influence of marijuana and that threshold is 5 nanograms (ng) of THC (the active ingredient in marijuana) per milliliter of blood.

While we understand a lot about the metabolization of alcohol, it is not so easy to understand the relationship between taking a couple of puffs of marijuana and being over or under the 5 ng limit. Marijuana smokers reach a high concentration of THC shortly after inhaling. When they stop smoking, the concentration declines quickly but THC can remain at levels of 1 to 2 ng/ml for eight hours or more. Frequent smokers can expect that residual amounts of THC can remain for 24 to 48 hours.

This has some serious implications for drivers and for anyone whose job has a zero-tolerance policy for drugs. Hypothetically, you could attend a party in a private home where marijuana was being consumed legally and inhale enough “secondhand smoke” to be over the legal limit or at least to be beyond a zero-tolerance test. 

It appears that driving under the influence of marijuana is likely to be treated both by the courts and by your auto insurance company just like driving under the influence of alcohol with some variance due to the different testing methods available. For example, there is no “breathalyzer” test for cannabis so there is not an opportunity to put an ignition interlock on a car. How the course will choose to enforce these infractions has not yet been determined. Another issue that may arise fairly quickly is the liability responsibility of people who serve marijuana to others or allow it to be consumed in their residence. We can guess that in the event of suit brought against someone who caused an accident while under the influence of marijuana, a plaintiff may consider looking to the source for compensation in the same manner they might go after a party host who “overserved” alcohol. These are going to be tricky future questions for the courts and while they may be informed by their experience with alcohol-related issues, it may take some time to build up a body of precedents to help understand the likely outcomes in court cases.

In the short run, the best advice is probably to bend every effort to not becoming a test case.  If you use marijuana, even medicinal marijuana, do not use it while driving and wait as long as reasonably possible after smoking to drive. Recognize that if you are a frequent user, you may be legally “impaired” or close to it at almost any time – avoid actions that might give police officers probable cause to request an evaluation.  If you are convicted of a DUI expect the sentencing to be similar to an alcohol infraction and expect that there will be insurance consequences. These may involve increased premiums and the requirement to file an SR-22 form — an insurance company’s guarantee to the state that you are carrying the mandatory coverage. 

If you are tempted as a homeowner to have a party where marijuana will be served or even allowed to be consumed, consider your guest list carefully. The last thing you need is to become a test case for the responsible consumption of marijuana.