I suspect insurers cringe everytime they hear one of their big corporate clients hands their data over to some criminal. Hartford Financial Services is thinking differently - they are starting ID theft coverage for small business owners, and I’ll bet it pays off. Small business generally care more about their clients, and while they also have less resources to deploy for protection, we all know that the companies with lots of resources haven’t done very much themselves.

CFOs, generally the top line decision makers on IT issues like security, are debating what to do, now that computer crimes have become a game for professionals. At least the head financial guys at smaller companies are going to get some help along the way.

Citizens in Florida should watch the latest insurers’ rate requests closely, as it is going to affect everyone. At least one large insurer (Allstate Floridian) has already been denied a rate increase - more denials are going to force carriers out the door, reduce competition, and result in higher rates anyway.

Allstate highlights the issue in the fine print:

It’s important to note that Allstate Floridian Insurance Company and Allstate Floridian Indemnity Company are separate and distinct companies from each other and from all other companies in the Allstate group.

Why? Because it gives them protection in case of more catastrophic losses - the option of walking out of the market is better than bankrupting the rest of the company.

Politicians in Florida may think they are doing a good thing for consumers by artificially keeping rates low. But, the less choice the citizen has, the less risk is spread around, and the more rate increases will flood in. Continued denial is just delaying the inevitable.

Markets work, given the leeway to. Players should embrace them, rather than try and control them. Meanwhile, Floridians need to come to grips with the fact that they live in a dangerous place, and they can’t expect someone to carry their risk, at below cost, forever.

I like the outdoors as much as the granola-eating types, but get a bit aggravated when I see folks pounding the tables over it. It is a product of short-term thinking. It takes decades to create climate change, but moments for markets to react. And markets do react.

Lumber, oil and other commodities whose harvesting affect the climate are already hovering around historical highs. Top-end costs drive down demand, and the harvesting shifts gears. But that is usually not enough.

Insurance industry, enter stage left.

The rash of hurricanes that hit land this year caused more that $200 billion in losses, and the property and casualty market is going to be reeling for years to come. How are they going to catch up? By raising premiums through the roof, that’s how.

Longer term thinking, enter stage right, and here’s how it could pan out:

1) Insurance industry raises premiums
2) Average Americans start screaming
3) Government provides a patch by setting some type of “casualty fund”
4) More storms hit, “casualty fund” gets drained
5) Government institutes across the board contribution increases to shore up fund (like they did in Florida this last year)
6) Average Americans continue screaming
7) More storms hit, “casualty fund” gets drained
Government gives up
9) Insurers raise rates 10X or more
10) Average Americans can no longer afford insurance
11) Politicians get blamed
12) Someone wakes up
13) Environmental policy change ensues

Yes, it sounds like it would take a while, and nobody on this planet is particularly patient. Fortunately for your impending anxiety attack, that very scenario is what many insurers are already thinking about. Insurers are not just pointing out the risk to the average American either - they are targeting industries - and holding the captains’ feet to the fire.

Raise a CEO’s D&O insurance rates though the roof because his company doesn’t have an environmental impact policy, and I guarantee you things will change.

There is no doubt that wealthy people tend to have lots of “stuff” (don’t you love how I state the obvious). Insurance companies are now trying to capitalize on that fact by offering specialized policies for the wealthy. What a brilliant idea.

Of course, a bunch of those wealthy folks are building (or already owning) big homes full of “stuff” in coastal areas, and these new offerings come just in time - property and casualty rates are definitely going to rise. And P&C isn’t the only product headed their way - there is also a policy coming out to protect against liability for screwing up the family trust. If hedge funds start heading south, those trustees are going to need it!

If you are a big business that has lots of money to throw at your IT infrastructure for the purpose of stopping online threats, then you can likely pay attention to your core operation without much worry. But if you are a small business trying to scrape by in our connected world, it can be much more of a pain. A recent survey by the Bank of Scotland suggests that small business are beginning to view threats as a serious financial risk.

Next up, an overpriced insurance policy to cover the damages (although it will take you ten years to file and collect on the claim).

I know a lot of stock brokers. The good ones are excellent sales people, but their skill sets usually end there. They generally have rudimentary knowledge of fundamental and/or technical analysis, money management principles, and even basic economics. I don’t know if they forgot all that subject matter right after they passed the Series 7 exam, or they are just plain stupid, but that matters little. If you can sell, you can make commission, and that is what brokers are concerned with.

The retail brokerage culling after the market debacle of 2000-01 has not been fully rejuvenated, and the replacements that are in are being called “advisors.” Unfortunately, most of these folks couldn’t advise their clients way out of a wet paper bag, and the firms they work for know it.

In From Traders to Tech Support, BusinessWeek outlines how the traders’ role is changing. Once the executor of the order, the trader now spends a growing portion of their time assisting customers with executing the order themselves. The advent of the internet, high-speed connections, and cinema quality displays have given the customer many of the advantages previously reserved for traders. Instant information and high resolution display of the data, at the customers’ desks, is the order of the day.

So the brokerage firms are providing those customers with front-end interfaces that take advantage of all the horsepower. Now that doesn’t mean that every person who owns or is interested in owning some stock is mentally equipped to deal with the markets, but the opportunity is there.

Where does that leave brokers? Well many brokers are moving to fixed fee business models, whereby they charge their clients based on a percentage of assets under management. The rest? Some have enough of a high-net worth client base to keep them busy for a while, but they will eventually be overcome by the RIAs and the software moves. Others will simply be selling used cars.

By the way, I know a lot of insurance brokers as well, and I think the same goes for them. A significant portion of that business is already being grabbed by CPAs and estate planning attorneys that know products like life insurance are complimentary to their hourly charges - and they likely know the client better than the broker does anyway. Picking up a life insurance policy is no more than a recognition of need, and participating in a data gathering exercise. Underwriters have enormous data crunching capabilities, and personal information on a prospective insured is readily available from a number of information brokers. It needs much less human intervention than it did even ten years ago. With all the goings on with large insurer price fixing, and insurance pricing that has been hyper-competitive (particularly in the life business) for too long, the need to maintain competitiveness will force wholesalers out the door, and only the big retail brokers will survive.