Another Global Warming Danger

Insurance companies are now using the threat of global warming to rip its customers off. Evidently a group called Risk Management Solutions (RMS) supplies the models insurance companies use to get an idea of what their risks and liabilities are in hurricane prone areas. Well, last spring threw out its old models based upon 100 years worth of empirical evidence in favor of a guess; a guess real life hurricane experts call "actually unscientific." From the Tampa Tribune:

The leading computer model used by the insurance industry to justify huge rate increases in coastal areas nationwide relies on faulty science, says an expert credited with helping develop it.

"I think it points to a problem with the way these modeling groups are operating," said Jim Elsner, a professor of geography at Florida State University.

Elsner was one of four experts on a panel assembled in late 2005 to provide input for the computer model by Risk Management Solutions of Newark, Calif.

He said the results, details of which were brought to his attention by the Tribune, contain assumptions that are "actually unscientific."

The flaws identified by Elsner and another panelist have nationwide implications. The expert input was used to justify loss estimates that have prompted major insurance companies to request homeowners rate increases of up to 40 percent.

The problem: RMS took a consensus of experts that there will be more storms across the Atlantic, then added its own projections about which U.S. regions would be most affected.

In an interview Saturday, Gov. Charlie Crist called RMS's actions "apparent misrepresentations" that are stunning and appalling, but in a way, part of a pattern.

"It almost doesn't shock me because this industry has been taking remarkable advantage of our people," Crist said. "Big insurance is about to face a new day in Florida."

...

In March, RMS surprised the insurance industry with a dramatic change in the benchmark catastrophe software model it sells access to. Instead of using historical models based on more than 100 years of storm data, RMS announced a "medium-term" five-year model for 2006 through 2010.

The models contain specific data on tens of millions of homes, allowing insurers to estimate risk based on computer simulations of possible storms.

Based on the new model, RMS said hurricane losses would increase by 40 percent over the Gulf Coast and 25 percent to 30 percent in the other regions.

Consumer advocates tried to raise alarms at the time, with little success.

Robert Hunter, a former Texas insurance commissioner now with the Consumer Federation of America, said the primary reason for the change to the five-year model appeared to be pressure from the insurance industry.

Thomas R. Knutson, a research meteorologist with the National Oceanic and Atmospheric Administration in Princeton, N.J., and another RMS expert panelist, said the five-year timeline didn't come from the experts.

"I think that question was driven more by the needs of the insurance industry as opposed to the science," he said.

In March, RMS said the five-year model was developed in cooperation with the expert panel that included Elsner and Knutson, and that based on their perspective: "Increases in hurricane frequency should be expected along the entire U.S. coast, but will be highest in the Gulf, Florida, and the Southeast, while lower in the Mid-Atlantic and the Northeast."

"I didn't make any such statement of that type," Knutson said Friday.

Ah, put publications like Time magazine have, which is part of the "climate change" (sorry about the pun) that allowed this fraud (what else could you call it?) to occur.

Actually, in this day and age of governmental oversight into many areas of the insurance industry there is a certain amount of undeserved trust being given to them.

Long-term historical data are still the most credible, given the sparse data available for projecting the next five years, Karen Clark, chief executive officer of AIR Worldwide, said in a speech in the summer. Her company is an RMS competitor. Clark encouraged insurance companies not to replace the long-term model with the short-term one. Still, AIR has launched its own version of a five-year program for customers.

The details of how RMS arrives at its projections are considered a trade secret.

"We have never been able to get what they call the information out of the black box to review their models," said Bob Lotane, a spokesman for Florida's Office of Insurance Regulation. He said a public modeling system the state is working on should provide a way to verify the RMS projections.

I think it is absolutely outrageous that the amount people are expected to pay for insurance is based upon a secret formula. "Trade Secret" my ass. There is no indication that the possibility that insurance companies might "tweak" the numbers in such a way as to boost their bottom lines has been addressed.

Unreal.

(Gleaned from Prometheus)