Insurance statistics in Washington state

Each year, the Insurance Information Institute, an industry-backed research group, compiles data on the insurance industry in each state.

From this year's Washington edition:
  • Number of people working in the insurance industry in Washington state: 49,445.
  • Their payroll: $3.2 billion.
  • Premium taxes paid: $406 million
  • Premiums: About $19 billion.
The report includes a lot of other information, including details about which companies write the most insurance, losses incurred, etc.

Aetna fined $1 million for insurance violations

A Connecticut insurance company has been fined $1 million by Washington State Insurance Commissioner Mike Kreidler for multiple violations over several years.

Aetna Life Insurance Company has agreed to pay the fine. The violations include issuing unapproved insurance policies, failing to file legally-required documents with the state and charging unapproved rates.

“All insurers must comply with state law, and most of them do,” said Kreidler. “I hope that this fine and compliance plan resolves these problems with Aetna.”

Among the violations:

• Starting in 2005, Aetna issued health, disability or life insurance policies to more than 4,400 people that did not comply with state law. Among the violations: The policies had not been filed for approval with Washington state.

• Also starting in 2005, the company issued health policies that did not include all Washington state health care mandates. Nor did they describe Washington’s appeals and grievance process, as required by law.

• For more than three years, Aetna continued to sell a health policy that had been disapproved.

• Starting in 2009, Aetna issued other health, disability and life policies that had not been filed with the state. Some of those health policies that did not include all Washington state mandates. Nor did the company have an approved appeals and grievance process for those plans.

• In 2010 and 2011, Aetna issued medical and dental plans for more than 100 Nordstrom retirees that had not been approved by Kreidler’s office, as required by law.

The company has also agreed to a compliance plan designed to prevent similar problems in the future.

Fines issued by Kreidler’s office do not go to the insurance commissioner’s office. The money collected goes to the state’s general fund.

Yak insurance vs. yakking about insurance

Nepalese herders, tired of losing their livestock to snow leopards, have come up with an insurance plan to compensate them when a leopard kills a yak.

The herders pay about $1.50 a year to cover each yak, and are paid about $50 if the yak is killed by a snow leopard.

(On a side note, we're betting that this story is driving a significant amount of traffic to, which is a blog devoted not to yak insurance, but to yakking about insurance.)

Order approving Amerigroup WA acquisition by WellPoint

We've gotten a number of calls from analysts about this: Here's the final order approving acquisition of Amerigroup Washington Inc. by WellPoint, Inc.

For the full history and the rest of the documents, see this page and scroll down to "Amerigroup Washington Inc."

Buried Deep Within The Law

December is my busiest month. The majority of my business clients prefer to renew or change their coverages as of January 1st. New deductibles. New Benefits. New Year. So wasting forty-five minutes of my time by taking a meaningless class and test were not on my agenda. But there I was, staring at the computer screen, plowing through the mindless drivel that the federal government feels every agent needs to review annually. AML training – anti-money laundering for the uninitiated.

Long before then Speaker of the House Nancy Pelosi told her colleagues that they needed to vote for the Patient Protection and Affordable Care Act “we have to pass the bill so that you can find out what is in it, away from the fog of controversy”, we were given Uniting and Strengthening America by Providing Appropriate Tools Required To Intercept and Obstruct Terrorism Act of 2001. You know it as the USA Patriot Act. A reaction to 9/11, it was signed into law by President Bush on October 26, 2001. It wasn’t until years later that the American people and the Congressmen who voted for it learned about the government’s new ability to legally spy on US citizens and the provisions concerning torture. And for the financial services industry – AML, the anti-money laundering rules.

Section 352 of the USA Patriot Act includes the requirement that financial institutions establish anti-money laundering internal enforcement. Each company must:
  • Develop internal policies, procedures, and controls

  • Designate an AML compliance officer

  • Institute ongoing training

  • Install an independent audit function to test the program

  • The insurance industry regulations went into effect on December 5, 2005, over four years after the law’s passage. Some of the rules make sense. Some are the result of regulators gone amok. Let’s be serious. Prudential is not worried that I am going to take three non-sequentialed numbered money orders, each for $5,000, and open up a life insurance policy for some drug kingpin. Pru is petrified that a federal regulator would find an agent operating without an up-to-date AML certificate.

    Rome is burning and we are too busy inspecting the fire extinguishers to have time to use them.

    The Patient Protection and Affordable Care Act (PPACA) is a complex law. It has to be. You can’t rework a sixth of our economy with a short paragraph and an emoticon. The new fees (taxes) to give this a chance to succeed are just about to begin. Rules and regulations are being written and promulgated. The exchanges are to be up and running in less than a year. Everyday brings something new.

    One of the new taxes, creatively named the Health Insurance Tax (HIT) is designed to raise $100 billion over the next ten years. This is a tax on health insurance companies levied, in part, on market share. A study conducted by Oliver Wyman for the industry group America’s Health Insurance Plans (AHIP) predicts that this excise style tax will result in significantly higher premiums. This should come as no surprise to anyone who has been paying attention.

    Other new taxes and fees debut next month.

    The major insurers are trying to learn not just what the new rules will be, but when these rules will begin. Does your current policy, purchased under a different set of regulations, end on December 31, 2013? Or, will you be allowed to keep your current policy till its annual renewal or even longer? Do you care? YES!

    If you are young. If you are healthy. If you don’t need any of the new benefits required of all future individual (self-pay) policies such as maternity or habilitative care, you will want to hold on to your current health insurance with both hands. Will you be allowed to retain your current policy? For most of you the logical answer is “Not for long.” These are the issues I’m asked about daily.

    Over the next ten months we will get a clearer picture of the new health insurance market, the policies, the distribution system, and eventually, the pricing. This has always been, first and foremost, about paying for medical services, not about the practice of medicine. But the delivery of health care will change as the money changes.

    Look around you. It would be very crowded here in Greater Cleveland if our population grew at the same rate as our hospitals and clinics expanded. Kaiser Permanente, The Cleveland Clinic, and University Hospital must believe that they know how to make the Patient Protection and Affordable Care Act pay off for them.

    The potential to build health care empires must be buried deep within the law. We, however, are probably just working the mine.

    R in Insurance Conference, London, 15 July 2013

    The first conference on R in Insurance will be held on Monday 15 July 2013 at Cass Business School in London, UK.

    The intended audience of the conference includes both academics and practitioners who are active or interested in the applications of R in insurance.

    This one-day conference will focus on applications in insurance and actuarial science that use R, the lingua franca for statistical computation. Topics covered may include actuarial statistics, capital modelling, pricing, reserving, reinsurance and extreme events, portfolio allocation, advanced risk tools, high-performance computing, econometrics and more. All topics will be discussed within the context of using R as a primary tool for insurance risk management, analysis and modelling.

    The intended audience of the conference includes both academics and practitioners who are active or interested in the applications of R in insurance.

    The 2013 R in Insurance conference builds upon the success of the R in Finance and R/Rmetrics events. We expect invited keynote lectures by:
    We invite you to submit a one-page abstract for consideration. Both academic and practitioner proposals related to R are encouraged.

    Details about the registration and abstract submission are given on the R in Insurance event web site of Cass Business School.

    You can contact us via rinsuranceconference at gmail dot com.

    The organisers, Andreas Tsanakas and Markus Gesmann, gratefully acknowledge the sponsorship of Mango Solutions.

    Now I see it! K-means cluster analysis in R

    Of course, a picture on a computer monitor is a coloured plot of x and y coordinates or pixels. Still, I was smitten by David Sparks' posts on is.r(), where he shows how easy it is to read images into R to analyse them. In two posts [1], [2] he replicates functionality of image manipulation programmes like GIMP.

    I can't resist to write about this here as well. David's first post is about k-means cluster analysis. One of the popular algorithms for k-means is Lloyd's algorithm. So, on that note I will use a picture of the Lloyd's of London building to play around with David's code, despite the fact that the two Lloyds have nothing to do with each other. Lloyd's provides pictures of its building copyright free on its web site. However, I will use a reduced file size version hosted on wikimedia.

    The ReadImages package by Markus Löcher [3] allows me to load a jpeg-file into R. The R object of the images is an array, which has the structure of three layered matrices, representing the value of the colours red, green and blue for each x and y coordinate. I convert the array into a data frame, as this is an accepted structure by k-means and plot the data.
    url <- ""
    fn <- tempfile()
    download.file(url, destfile=fn)
    readImage <- read.jpeg(fn)

    dm <- dim(readImage)
    rgbImage <- data.frame(
    x=rep(1:dm[2], each=dm[1]),
    y=rep(dm[1]:1, dm[2]),

    plot(y ~ x, data=rgbImage, main="Lloyd's building",
    col = rgb(rgbImage[c("r.value", "g.value", "b.value")]),
    asp = 1, pch = ".")

    Running a k-means analysis on the three colour columns in my data frame allows me to reduce the picture to k colours. The output gives me for each x and y coordinate the colour cluster it belongs to. Thus, I plot my picture again, but replace the original colours with the cluster colours.
    Read more »

    High wind warning in south Puget Sound -- gusts up to 60 mph Sun and Mon

    The National Weather Service has issued a high wind warning for the south Puget Sound area, including south Tacoma, Olympia, the southern part of Hood Canal, Montesano, Chehalis and Centralia.

    A "southerly wind 15 to 30 mph will develop late this evening (Sunday)...then switch to southwest wind 30 to 40 mph with gusts to 60 mph late tonight and Monday morning," the NWS said. "Winds will slowly ease Monday afternoon."

    High winds -- especially when soils are soaked, as they are now -- can topple trees, cut power lines, etc. After winter storms, we often get a flurry of calls from folks wondering what their homeowners and auto insurance covers. Here are some of the most common questions we get, along with the answers.

    Update: (10 a.m. Monday) The winds have died down, although we might get a bit of snow tonight.

    Hole-in-one golf insurer extradited to face felony charges in WA

    From a news release we sent out today:
    OLYMPIA, Wash. – A Connecticut businessman who insures golf tournament hole-in-one prizes but has a history of failing to pay has been extradited to Washington to face charges.

    Kevin Kolenda, 55, of Norwalk, Conn., was flown from Connecticut to Washington under guard Thursday. He has been booked into the King County Jail. He’s expected to be arraigned Monday at King County Superior Court in Seattle.

    “It’s rare that we have to go to these extremes to rein in a scammer,” said Washington Insurance Commissioner Mike Kreidler. “But Mr. Kolenda’s been thumbing his nose at regulators for years. Arresting him seems to be the only way to get his attention.”

    In August, Kolenda was charged in King County Superior Court with five counts of transacting insurance without a license, a class B felony. His arraignment was slated for Sept. 5, but he failed to show up. A judge issued a bench warrant for Kolenda’s arrest.

    In addition to failing to show up in court, Kolenda also ignored a Washington cease-and-desist order in 2004 and a $125,000 fine in 2008.

    On Sept. 26, Kolenda was arrested on the Washington bench warrant by police in Norwalk. He has been held since then in jail in Connecticut, pending extradition. His transfer to Washington was approved in November by Connecticut Gov. Dannel Malloy.

    “I’m very grateful to everyone who’s helped us get Mr. Kolenda here to Washington to face justice,” said Kreidler. “He has a long history of selling illegal insurance and refusing to pay prize winners.”
    In some cases, charities have had to come up with the prize money that Kolenda refused to pay. In others, the prize winners agreed to forgo a prize.

    Kolenda in 1995 started a business called Golf Marketing, working out of a home his parents owned in Norwalk. Since then, the business’ name has changed several times, including: Golf Marketing Worldwide LLC, Golf Marketing Inc.,, and currently Worldwide. The company also has a regional office in Rye, N.Y.

    Kolenda has repeatedly failed to pay winning golfers in Washington. Among them:

    • In 2003, Kolenda illegally sold insurance for a tournament in Bremerton. But when a golfer got a hole in one and tried to claim the $10,000 prize, Kolenda wouldn’t pay.

    • In 2004, Kolenda sold insurance for a Vancouver tournament. Again, a golfer got a hole in one. Kolenda refused to pay the $50,000 prize. After a hearing at which Kolenda failed to appear, he was ordered in 2008 to pay a $125,000 fine. He never did.

    • In 2010, Kolenda sold coverage to pay $25,000 for a hole in one during a golf tournament in Snohomish. A player got a hole in one. His golf partners signed notarized forms attesting to the hole in one. The prize remains unpaid, despite numerous calls and emails from the partners and tournament officials.

    Similar allegations have been made against Mr. Kolenda and/or his business in numerous other states, including Montana, Ohio, Georgia, California, New York, Hawaii, Alabama, Massachusetts, Florida, Connecticut and North Carolina.

    Job opening: .NET developer

    We're recruiting to fill a position for an information technology specialist 4 (.NET developer) in our operations division in Tumwater, Wash.

    The successful applicant's duties will include software development of mission-critical agency systems, systems analysis, as well as software unit and quality assurance testing.

    For more specifics, duties, salary, timeline, etc., please see the full job listing.

    Guilty plea from man who hit car, then bought insurance

    A Blaine man who rear-ended another driver, rushed to buy insurance, then claimed that the crash happened afterward has pleaded guilty to insurance fraud.

    Mark Traxler, 51, let his auto insurance lapse in January because he didn't pay the premium.

    Two weeks after his coverage ended, he hit a car in Bellingham, causing more than $5,000 in damage.

    He immediately went to his insurance agent and paid for new coverage. By nightfall, the other driver had made a claim against his policy.

    The problem: Traxler said that the accident happened after he'd bought the coverage, when a 9-1-1 call placed by the other driver indicated that it happened before.

    Traxler today pleaded guilty in Whatcom County Superior Court. He was sentenced to 364 days in jail, but 354 were suspended on the conditions that he do 80 hours of community service, pay a $250 crime victim penalty assessment, a $200 filing fee and a $500 fine.

    Job opening: Market analyst

    We're recruiting to fill one permanent position for a market analyst in our Tumwater, Wash. building.

    The person will be responsible for conducting market analysis of regulated entities (e.g. insurance companies) under the direction of our chief market analyst. We provide regulatory oversight of market interactions between consumers and companies, in order to protect consumers and promote a healthy business environment.

    Please see the full job listing for a description of the job duties, salary, benefits, etc.

    Comparing regions: maps, cartograms and tree maps

    Last week I attended a seminar where a talk was given about the economic opportunities in the SAAAME (South-America, Asia, Africa and Middle East) regions. Of course a map was shown with those regions highlighted. The map was not that disimilar to the one below.

    mapByRegion( countryExData,
    joinCode="ISO3", nameJoinColumn="ISO3V10",
    regionType="Stern", mapTitle=" ", addLegend=FALSE,
    FUN="mean", colourPalette=brewer.pal(6, "Blues"))
    It is a map that most of us in the Northern hemisphere see often. However, it shows a distorted picture of the world.

    Greenland appears to be of the same size as Brazil or Australia and Africa seems to be only about four times as big as Greenland. Of course this is not true. Africa is about 14 times the size of Greenland, while Brazil and Australia are about four times the size of Greenland, with Brazil slightly larger than Australia and nine times the population. Thus, talking about regional opportunities without a comparable scale can give a misleading picture.

    Of course you can use a different projection and XKCD helps you to find one which fits your personality. On the other hand, Michael Gastner and Mark Newman developed cartograms, which can reshape the world based on data [1]. Doing this in R is a bit tricky. Duncan Temple Lang provides the Rcartogram package on Omegahat based on Mark Newman's code and Mark Ward has some examples using the package on his 2009 fall course page to get you started.

    A simple example of a cartogram is given as part of the maps package. It shows the US population by state:
    Read more »

    Coming soon: Our revamped website

    For more than a year now, we've been working hard behind the scenes developing an easier-to-use website. While insurance industry professionals -- agents, brokers and insurers -- are familiar with navigating our site, testing showed that consumers could only complete site-related tasks about a third of the time. That's a problem, obviously, when a key part of our mission is informing and protecting consumers.

    So we've revised the navigational structure of the site to make it a lot more intuitive. For years, for example, much of the navigational structure on the site simply mirrored the agency's organizational chart, rather than putting things where average users would expect them to be.

    Along the way, we've repeatedly tested the changes on both consumers and industry professionals to make sure that we really are improving things, rather than just changing them.

    The upshot: Successful task completion on the website for consumers, which is about 33 percent on our current website, rises to nearly 80 percent on our new prototype website, pictured below.

    We're also changing the look and feel of the site to update it. The site isn't live yet, but we're expecting to make the change in mid-January.

    There will inevitably be some hiccups and things we'll need to fix, but we think you'll like the new site better. And we know it will be easier to use.

    Still Stuck Inside

    Will you indulge me? Will you return with me to a post I wrote on August 21, 2009? That post, Stuck Inside, was about an insurance agent, me, trying to give a quick, off-the-cuff answer to the question, “So, what would you do?”

    What would you do? That is the real question. It is incredibly easy to shoot down everyone else’s ideas. All ideas, born from the minds of imperfect humans, have flaws. And the more complicated the ideas, the more potential there is for mistakes. All of our plans have big, gaping holes. So designing a solution to any problem opens you up to derision. It is easy to do nothing. It is even easier to do nothing but snipe at those flawed ideas and the people who created them.

    This blog has consistently held that the Patient Protection and Affordable Care Act (PPACA) is a poorly written law that lacks both transparency and logical goals. Either the eventual plan is to have us in a national health plan or our guys in Congress are getting directions from Moses’s map maker. Flaws? We got ’em. But most of the people fighting the PPACA have spent their time picking the low hanging fruit and defending the status quo.

    This blog has contended that the PPACA is not only the law of the land, but that it was never going to be overturned. Deal with it. Kathleen Sebelius, Secretary of Health and Human Services, is busily churning out new rules and regulations. Some of these edicts from on high will help the American people. Some are patently absurd and will, hopefully, be changed. No matter, we need to start to prepare for a future that will soon be upon us whether or not we want it or are prepared.

    My August 2009 post, seven months prior to the passage of the PPACA, laid out a program where health insurance would be guaranteed issue, would cover all preexisting conditions, and would be mandatory. My off-the-cuff solution also included the concept of creating a limited number of uniform plans that would be easier for the consumer to understand, easier to compare, and would include preventive care.

    The President’s plan includes many of these ideas. I may quibble with what is included in the standardized plans and what all was thrown in to the preventive care catch-all, but THEY DIDN’T ASK ME. And you might not be a huge fan of the specifics had I been the author of the plan.

    The Exchanges are currently designed to offer four levels of coverage – Platinum, Gold, Silver, and Bronze. We are still getting information on plan design and specifics. My last post covered the Essential Health Benefits that each plan must include. The difference will simply be the percent of coverage paid by the insurer and you.

    The Cunix option included the idea of Medicaid being opened up to people earning up to 300% of the poverty level, paid on a sliding scale. The PPACA provides premium support and/or tax credits through the exchanges for people who earn up to 400% of the poverty level. That would mean a family of four may receive a tax credit for purchasing a policy through the exchange even though they have a family income of $92,200 (2012). By pushing individuals to the exchanges and making the premium support federal money, Washington has eliminated any potential problems or fights with recalcitrant Republican governors.

    My program included a number of starting places to create cost controls. The PPACA is eerily silent when it comes to controlling costs. But then again, there is a lot of wishful thinking built into the PPACA.

    The HHS has been dropping new rules on an almost daily basis. Last week it was announced that the federal government will be charging user fees to the insurers who market policies through the exchanges. These (premium taxes) fees, approximately 3.5%, will be on top of the new taxes imposed on a national basis to all health insurers as determined by their market share, and any state and local insurance tax. Some of this makes sense. This is how the Obama administration expects to pay for this transition and the ongoing process.

    Here is the fun part as it appeared in the New York Times:

    Erin Shields Britt, a spokeswoman for Ms. Sebelius, predicted that insurers would not raise prices. “Exchanges will provide already profitable insurance companies with access to 30 million new customers while cutting down insurers’ marketing and advertising expenses,” Ms. Shields Britt said. “Exchanges force insurance companies to compete and drive down costs for consumers. The congressional Budget Office has estimated consumers will save up to 20 percent on their premiums.

    And J. R. R. Tolkien wrote non-fiction.

    But sniping on the sidelines isn’t going to help. Jumping up and down and threatening to repeal the PPACA (attn: Republican run House of Representatives) only made things worse. Now is the time to talk to your Congressional Representative. The course can’t be reversed, but it can be modified. The Patient Protection and Affordable Care Act is an open-ended medical spending spree guaranteed to make private insurance untenable. Will our elected officials, Democrats and Republicans, work together to create effective cost controls, common sense limitations, and robust fraud enforcement? Those are just for starters.

    Now, before we’re stuck.


    20,000 Washingtonians potentially affected by data breach at Nationwide Insurance

    An October data breach in a Nationwide Insurance computer network resulted in personal information for thousands of Washingtonians being stolen, according to company officials.

    "On October 3, 2012, a portion of our computer network that is used by Nationwide Insurance and Allied Insurance was criminally intruded upon by an unidentified perpetrator. We discovered the attack that day, and took immediate steps to contain the intrusion," Nationwide attorney Samuel Lee notified our office recently.

    The company has said that more than 1.1 million people's personal information may have been affected. Some of them are not Nationwide customers. Apparently, some people who might have just gotten quotes, etc. are on the list of those who may have been affected. We've been contacted by some of these people, and since they're not Nationwide customers, they initially think the letter is some kind of scam or sales pitch for ID theft services.

    "Although we are still investigating the incident, our initial analysis has indicated that the compromised information included individuals’ name and some combination of their Social Security number, driver’s license number and/or their date of birth and possibly their marital status, gender, and occupation, and the name and address of their employer," Lee wrote.

    The attack was reported to law enforcement, including the FBI, who are investigating. Nationwide is sending notification letters to 20,916 people whose personal information may have been compromised. The company says it is tightening network security. It is also offering a year of free credit monitoring and identity theft protection services to those 20,916 people.

    In the letter being sent out, the company apologizes for the data breach and says "we are not aware of any misuse of your information at this time."

    Nationwide customers should watch for a letter in the mail, or they can call a special hotline the company has set up: 1-800-760-1125.

    The state attorney general's office also maintains an excellent page with detailed tips on preventing and dealing with identity theft.

    Think you have flood insurance? Make sure.

    Again, we can't say it enough: Homeowners and businesses in flood-prone areas should make sure they have adequate flood coverage.

    “Standard homeowners or business policies do not cover flooding,” said Insurance Commissioner Mike Kreidler. “It’s tragic when people don’t discover that until it’s too late.”

    The federally-run National Flood Insurance Program ( is the first stop for most people seeking flood coverage. The program was created by Congress in 1968. It offers flood insurance to homeowners, renters and business owners in communities that have taken certain steps to help reduce the risk of flooding. There is a 30-day waiting period for most policies, so it’s important not to delay.

    Many insurance agents offer National Flood Insurance Program policies. The average NFIP policy costs about $600 a year.

    “Renters should also strongly consider flood coverage for their belongings,” Kreidler said. “That coverage, which starts at $49 a year, is inexpensive. Replacing your stuff is not.”

    Mortgage lenders in flood-prone areas typically require flood coverage. But homeowners often later let that coverage lapse.

    The National Flood Insurance Program website has online tools to estimate the flood risk at a particular address, as well as damage estimates from different flood levels.

    Changing colours and legends in lattice plots

    Lattice plots are a great way of displaying multivariate data in R. Deepayan Sarkar, the author of lattice, has written a fantastic book about Multivariate Data Visualization with R [1]. However, I often have to refer back to the help pages to remind myself how to set and change the legend and how to ensure that the legend will use the same colours as my plot. Thus, I thought I write down an example for future reference.

    Eventually I would like to get the following result:

    I start with a simple bar chart, using the Insurance data set of the MASS package.

    Please note that if you use R-2.15.2 or higher you may get a warning message with the current version of lattice (0.20-10), but this is a known issue, and I don't think you need to worry about it.
    ## Plot the claims frequency against age group by engine size and district
    barchart(Claims/Holders ~ Age | Group, groups=District,
    data=Insurance, origin=0, auto.key=TRUE)

    To change the legend I specify a list with the various options for auto.key. Here I want to set the legend items next to each other, add a title for the legend and change its font size: Read more »