The Treasury Department is considering buying equity stakes in insurance companies, a sign of how the government’s $700 billion rescue program could turn into a piggy bank for a range of beleaguered industries.The availability of U.S. government cash in the middle of a global credit squeeze is drawing requests from insurance firms, auto makers, state governments and transit agencies. While Treasury intended for the program to apply broadly, the growing requests could put a strain on the $700 billion, a sum that only last month stunned lawmakers.

MetLife Inc. and Prudential Financial Inc., two of the nation’s largest publicly traded life insurers, are interested in exploring a sale of equity stakes to the government, according to people familiar with the matter.

On Sunday, a spokesman for New York Life Insurance Co., one of the highest-rated insurers in the U.S., said, “The Treasury has asked the life-insurance industry for help in developing solutions for strengthening the financial system. We agreed to work with other industry leaders and Treasury so we could play a constructive role in helping shape this important discussion.” He said the insurer, which is mutually owned, doesn’t require additional capital and has “not made any decision to accept capital, if offered.”

In September, the government extended an $85 billion rescue loan to giant insurer American International Group Inc. in exchange for an 80% stake.

Insurers are critical to market stability. Signs of eroding confidence at life insurers could further dent fragile business and consumer confidence. Insurers are among the biggest holders of the nation’s corporate debt, with $1.3 trillion on their books. They are long-term investors, holding the securities for years, even decades.

Most insurance companies are financially sound but have seen their long-term investments and stock prices fall in value. Some have holdings of riskier alt-A and subprime-mortgage backed securities. Insurers have suffered losses in bond and preferred-stock holdings from the collapse of companies including Lehman Brothers Holdings Inc. Insurers also have been hit with billions of dollars in unrealized losses as corporate bonds of all stripes suffered big declines. Low interest rates have damped interest income and a prolonged economic slump could dent the variable-annuity business and even hurt sales of core life-insurance policies.

Insurers would normally tap capital markets to raise money. But many are loath to attempt selling common stock because their share prices have been so battered. That’s one reason many insurers have been pushing the expansion of Treasury’s equity-stake program to raise capital.

Treasury had already envisioned insurance companies using one element of its rescue program: selling bad assets, such as mortgage-backed securities, to the government. But Treasury officials are considering whether to buy equity stakes in certain firms, according to people familiar with the matter.

Under the terms of Treasury’s program, eligible insurers must be operated by either a financial institution holding company or a savings and loan holding company. The holding companies must also be regulated by a federal agency.

Treasury Secretary Henry Paulson asked Congress for wide discretion in the program. That’s prompting requests from myriad industries. Some want capital injections. Others want to sell troubled assets, such as bad loans, to the government.

For most of this year, the insurance industry seemed to be weathering the credit crisis. The industry has plenty of capital to pay policyholders, according to insurance regulators in two big states and senior executives at credit-ratings firms. But in recent weeks, the stocks of some of these firms have been slammed. More bad news is expected next week, when many of the large publicly traded life insurers report third-quarter earnings.The big ratings agencies have the life-insurance sector on “negative” outlook, anticipating a round of one- to two-notch downgrades, as companies brace for additional investment losses, weaker earnings and reduced financial flexibility. Many life-insurance products are pitched to consumers on the basis of an insurer’s financial strength, so moving to a lower rating can have an impact on sales.

Auto insurance rates continued to rise throughout the third quarter this year, according to a study by Insurance.com, the largest online auto insurance agency in the United States.

Insurance.com’s RateWatch for Car Insurance found that the lowest car insurance quotes, on average, were up 3% over the previous quarter, rising from $1893 per year to $1949 per year. This 3% hike follows a 3.4% increase in the second quarter.

RateWatch is based on real-time auto insurance quotes from more than a dozen insurance companies given to consumers at Insurance.com during the third quarter. It marks the third consecutive quarter of rate increases, causing concern among cash strapped drivers who are already struggling in this challenging economy.

“The increase in rates this quarter represents a trend that will most likely continue into 2009,” said Sam Belden, VP – Strategic Alliances at Insurance.com. “Drivers should take some time to understand how the type of car they drive, and their driving habits, affect their rates.”

Car insurance rates vary by state, and some locales experienced rate quote increases in the third quarter that were greater than the average. For example, Washington, D.C. had an 8.3% increase in rates, while Nebraska and Rhode Island saw rates jump 8% and 7.4%, respectively.

“There are many things consumers can do to save on car insurance, like comparing rates from several companies before they renew a policy, driving more carefully, and never letting a current policy lapse,” said Belden. “When a driver does not have continuous coverage, he or she may not qualify for the best available rates, and may be placed in the same risk category with drivers who have violations and accidents. This can cost a driver significantly more money for years.”

Consumers in 16 states saw rate increases greater than the 3% national average. In addition to the top 5 states listed below, rates were up more than 3% in Arkansas, Delaware, Maryland, New Mexico, North Carolina, Ohio, South Carolina, South Dakota, Texas, Utah, and Washington. There were 10 states with decreases and 9 states where the change was less than one percent.

Our study of 5,259 drivers who switched car insurers at our site showed annual savings ranging from hundreds to thousands of dollars. The national average savings reported was $595 a year. Savings vary by state.

Elderly drivers are paying more for their car insurance because they fail to source the cheapest deals online, new research suggests.

Reluctance to use online comparison websites which find the cheapest deals means those aged 65 and over have seen the biggest rise in their car insurance premiums.

They have seen an average rise of 10 per cent in the last 12 months.

The findings showed average premiums rose 5.8 per cent between July 2007 and June 2008.

Younger drivers under the age of 25 pay the highest premiums but the increase for this age group has only been 2.47 per cent in the last 12 months.

A total of 60 per cent of car insurance is bought through comparison websites which can search for the cheapest deals. The older generation are less likely to use such sites.

Fraudulent motor insurance claims have soared by more than 70 per cent in the past four years, making the car the No 1 insurance fraud target.

Insurance companies and fraud experts say that the credit crunch has forced families struggling to meet their hire purchase payments to take desperate measures.

Motor insurance scams add about $60 a year to the premiums of law-abiding drivers.

After falling or remaining flat through 2007, average auto insurance premiums rose an average of 1.05% during the first quarter of this year, a new survey by Insurance.com, a website that lets consumers compare insurance quotes, found.

Fortunately, there are steps you can take to lower your insurance rates:

•Drive Safely. Just 1 speeding ticket could raise your insurance premium. Conversely, many insurers will lower your rate if you haven’t had an accident or been ticketed in the past three to five years.

•Raise your deductible. Raising your deductable from $200 to $500 could reduce the cost of collision and comprehensive coverage by up to 30%. Raising your deductible to $1,000 could lower your premium by 40% or more. Just make sure you have enough money put aside to cover the higher deductible amount in case you’re in an accident.

•Take advantage of discounts. Many insurers provide a discount of up to 15% for teenage drivers with a B average or higher in school. Some also offer a 5% to 10% discount for policyholders who take a defensive driving course.

•Driving less often (if you use public transport to go to work for example) could reward you with a low-mileage discount. You’ll probably need to provide documents to support the change in your driving habits.

•Consult your insurance agent before you buy a car. Premiums vary significantly from one type of vehicle to another as insurers review several factors (repair costs, model’s safety record…).

•Shop around and fill in a comparison quote. Switch for a new policy well before your current policy comes up for renewal if possible as many insurers provide an “early shopping” discount of up to 12%.

A read a great article today by Jason Bordoff about a new model for car insurance which would see the cost of car insurance link to the amount of miles (or kilometers) the owner drives in the year.

Here’s an extract of his article:

Drivers who are similar in all respects – age, gender, driving record – pay roughly the same premiums whether they drive 5,000 or 50,000 miles per year, even though the likelihood of a collision increases with each mile. This “all you can drive” pricing scheme is inequitable, as low-mileage drivers, particularly low-income people and women, subsidize high-mileage drivers.

A better approach is simple and obvious: pay-as-you-drive (PAYD) auto insurance. With insurance costs that vary with miles driven, people would have an incentive to drive less, thus decreasing the harm that more miles have on society – from greenhouse gas emissions to wear and tear on our roads. Under this system, higher-risk drivers – for example, the 25-year-old with a sports car and a DWI record – would still pay more per mile than lower-risk drivers.

What a great idea which should see most people premium reduced and use todays technology to assess risk more fairly.

To read more, visit the website: http://www.dallasnews.com

Car theft in the US has dropped in the recent years. For once you can’t blame Grand Theft Auto IV coming out in a few weeks and actually maybe it helped by keeping thieves inside acting it out on the console instead of stealing for real

So here it is…

The Top 10 Worst Car Thief cities in the US:

1. Modesto, California

2. Las Vegas/Paradise, Nevada

3. San Diego/Carlsbad/San Marcos, California

4. Stockton, California

5. San Francisco/Oakland/Fremont, California

6. Laredo, Texas

7. Albuquerque, New Mexico

8. Phoenix/Mesa/Scottsdale, Arizona

9. Yakima, Washington

10. Tucson, Arizona

Allstate car insurance has been ordered to cut car insurance rates by 15.9% for residents in California. The news is likely to have a big effect on Allstate’s bottom line with the company insuring about 10% of the states cars. The rate cut comes into effect on April 14 and will result in average savings of $124 per vehicle.
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Esurance car insurance has announced that it has signed a six-year agreement with AutoWatch. Tech savvy customers of the direct-to-consumer personal auto insurer will now be able to monitor their vehicle’s repair progress online.
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Conning Research has made a study on the nonstandard car insurance market. Nonstandard generally refers to drivers that are considered as high-risk.

They have some interesting findings, including;
- Increasing use of technology in the insurance market gives car insurance companies the ability to track the actual risks of insuring motorists previously considered as high-risk.
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