Wednesday, August 27, 2008

Six Ideas for Insuring Your Deposits


As consumers continue to be rattled by a seemingly bottomless pit of bad financial news, they're looking for ways to ensure their entire bank deposits are covered by the Federal Deposit Insurance Corp.

It's not difficult to exceed the $100,000 limit on individual accounts, or the $250,000 limit on certain retirement accounts. In fact, the FDIC says that less than 62 percent of the $6.88 trillion on deposit in FDIC-insured banks was covered at the end of 2007. That leaves more than $2.5 trillion unprotected in the event of bank failures.
Fortunately, there are many ways you can have excess deposits covered, and you should take the trouble to use one of these methods or, through your own research, find other ways. Uninsured depositors receive an average of 72 cents on the dollar when their bank fails. Imagine having excess money in a bank and losing more than a quarter of it. In addition, it can take years for the FDIC to settle a bank failure.

The six examples of excess deposit coverage that we'll highlight here primarily involve accounts at community or state-chartered banks. Some larger institutions carry their own excess deposit insurance, so if you prefer banking at larger institutions, ask if they have it. Companies such as BancInsure and Progressive Casualty Insurance provide excess deposit insurance to financial institutions. Excess share insurance is available to credit unions. But don't assume you're covered -- always ask.

Saturday, August 23, 2008

Aggressive male ostriches not the same as locked garage


If an insurance policy stipulates a vehicle must be kept in a locked garage at night, not even chaining the insured vehicle, several dogs, a locked gate and aggressive male ostriches, can substitute as suitable security measures.


Abrie Burger found that several measures he had taken to protect his off road vehicle which was parked in his yard outside at night were not good enough for his insurance company when he submitted a claim for theft of the vehicle.

The insurance company rejected the claim on the basis that the vehicle had not been parked in a locked garage at night, as was required in the policy.

Burger, a sales representative from Sasolburg, complained to the FAIS Deputy Ombud that he was not aware of the requirement to keep the vehicle in a locked garage as he did not receive the policy schedule and policy wording from his broker, Heritage Insurance Brokers (Pty) Ltd of Sandton.

He said that on the day of the theft, his and his friend’s vehicles were chained and locked together and left outside for the night because they had been washed and he had arrived home late that afternoon.

He said there were several dogs on the premises but they had been poisoned during the night of the theft and one died as a result.

Outside the fence there were five ostriches of which three were “very aggressive males”. Entry to the yard by the burglar/s was gained by breaking or cutting off the lock on the gate.

The issue for determination before Ms Noluntu Bam, the Deputy Ombud for Financial Services Providers, was whether the respondent was negligent in not making the complainant aware of the condition of insurance which was breached, thus leading to the insurer rejecting the claim for theft of the vehicle.

During investigation, it was found that the complainant had stated in his own handwriting in the proposal form dated 24th February 2005 that the vehicle would be kept in a locked garage at night.

The respondent said a letter dated 2 March, 2005 accompanied by the policy schedule and policy wording was sent to the complainant shortly after inception of the policy to the postal address furnished by him in the proposal form.

The letter stated that “unless otherwise provided for, overnight theft from the permanent place of residence is EXCLUDED unless the ATV/Off road vehicle is kept in a fully enclosed garage or carport and both any door and any gate leading to the garage or carport is kept locked at all times and there is proof of visible, violent or forcible entry/exit”.

This condition is also mentioned in the policy “confirmation of cover,” which was sent to the motor dealer, as well.

Ms Bam said when motor vehicles are financed, the credit supplier requires insurance cover to protect its interests.

The insurer on the other hand, seeks to minimise its exposure to the risk materialising. To this end, the question is asked in the proposal form “where is the vehicle kept at night? – not address”. In this case, Burger answered “locked garage”.

A further clause in the form states: “I agree that this proposal shall be the basis of the contract between the insurer and myself.”

Ms Bam said that in the circumstances, it cannot be said that the complainant was unaware of the relevant condition that was breached and which led to the rejection of the claim, even assuming the complainant did not receive the policy schedule and wording as alleged by him.

“In any event, I note that two letters were posted to the complainant regarding non-payment of premiums. He thereafter paid the premiums. The probabilities seem to favour the conclusion that he did in fact receive the letter with the policy schedule and wording as well.

“There rests a duty on a broker to draw the insured’s attention to material clauses in the insurance contract.

“However, in the matter before me the complainant himself stated the vehicle would be kept in a locked garage at night and then failed to do so when it was stolen.

“It, therefore, cannot be said that in this case the respondent was negligent in rendering the service to the complainant.”

Ms Bam said it was clear that had the complainant abided by the condition about keeping the vehicle in a locked garage at night at his premises as he had warranted in the proposal form, the theft may have been avoided.

“That he had dogs and ostriches on the premises do not detract from his warranty,” she added, in dismissing the complaint.

Monday, August 18, 2008

Morgan Stanley updates lending systems: report


(Reuters) - Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) and Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) are responding to the credit crisis with a system that uses the market's view of their own creditworthiness as a basis for lending decisions, the Financial Times reported.

Wall Street's second-largest investment bank Morgan Stanley is essentially tying its promise to provide financing to hedge fund clients to the price of credit insurance on its own debt, it said.

If the cost of the protection rises to a certain level, that would trigger a reduction in Morgan Stanley's commitments to hedge funds, the quoted people familiar with the situation as saying.

The message is that "if our firm is in trouble, we would rather fund ourselves than fund you (hedge funds)," the paper quoted a brokerage executive with knowledge of the arrangements as saying.

Goldman Sachs, which has largely avoided the credit losses hobbling its rivals, is understood to have a similar arrangement that uses its bond prices as a reference point for credit commitments to hedge fund clients, the paper said.

Morgan Stanley and Goldman Sachs did not immediately return calls seeking comment.

Last week, Morgan Stanley and JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) agreed to buy back billions of dollars of illiquid auction-rate securities and pay fines to settle charges that they misled investors about the debt's risk.

Morgan Stanley had agreed to buy back $4.5 billion of debt and pay a $35 million fine to settle the charges.

In June, it reported a 57 percent drop in quarterly earnings on weak trading, investment losses and a slowdown in investment banking, even after it realized $1.43 billion in one-time gains.

Tuesday, August 12, 2008

Govt for commissioner for finance code of practice


The Government is backing a proposal for a commissioner to develop a code of conduct and set up a disciplinary body for finance advisers and institutions.

A select committee considering legislation to regulate the industry made the recommendation in an interim report.

Commerce Minister Lianne Dalziel said the approach would give strong central supervision while using the experience and knowledge of industry participants.

"It will help ensure that the Securities Commission can act as both the statutory enforcer and the professional regulator."

The committee also suggested a two-level approach to imposing obligations on financial advisers depending on the complexity of the financial product involved.

"The industry and officials have been grappling with the problem of defining who should be captured by the new rules regulating financial advisers. By focusing on the actual product rather than financial decisions or occupations we are able to provide certainty about who is covered by the bill."

Category 1 would include advice on complex securities or investment and savings planning. Anyone providing category 1 advice woul have to be individually authorised by the Securities Commission.

Category 2 would cover advice on credit, general insurance or simple securities such as bank term deposits or call accounts. Individuals would not need to be individually authorised to provide these services.

In addition, the committee is considering adopting a model whereby the Securities Commission can certify financial institutions which meet the standards under the bill.

Certified Financial Institutions would then be responsible for financial advice offered by their staff on simple products.

Sunday, August 10, 2008

Irish bus pass is ‘identity card by stealth’


When John Welford fumbles in his pockets for change as he boards the bus, fellow passengers often nod sympathetically at the pensioner and ask him if he has forgotten his free travel pass. Those who strike up a conversation with Welford will come away thinking that he is either paranoid or has discovered an unsettling plan by the authorities to introduce a national identity card by stealth.

Welford, an Edinburgh pensioner, is interested in the introduction of the Irish public services card, a seemingly innocuous travel pass to be distributed to the country’s 640,000 free travel recipients next year. He sees a parallel between the introduction of the card in Ireland with the rollout of the travel pass in Scotland.

Two years ago, Welford returned his bus card and asked for it to be destroyed. His fear is that the apparently benign identity card, which contains a name, photograph and unique number, is a Trojan horse, the first step by the Scottish government to usher in a national ID by the back door.

There are echoes of his suspicion in the comments of privacy campaigners last week in Ireland. They claim that although the public service card will be introduced as a free travel pass, it may gradually form the basis of a national identity card.
“In 2005, a majority of Scottish members of parliament rejected a national ID. So instead they’ve issued a unique card to the most vulnerable members of society that can be expanded into what they call an ‘entitlement card’,” Welford said. “This will eventually be used for all interaction with state agencies. Because it has been introduced incrementally, there has been little debate.”

In Ireland, the “soft” introduction of the public services card has caused barely a stir. The legislation to introduce the card in Ireland was included in the 2007 Social Welfare and Pensions Act, with scarcely a mumble in the Dail or Seanad.

But what is there to be afraid of? The Department of Social and Family Affairs (DSFA) claims that the card technology will cut bureaucracy, offer improved security and reduce the potential for welfare fraud. There are an estimated 5m identity cards in circulation in Ireland, including the garda proof-of-age card, medical card and free travel pass, so would it not be convenient to create a single, universal ID card?

Civil liberties groups disagree. Privacy International, a civil rights lobby group, claims that once a national ID card is introduced, citizens’ rights will be steadily eroded.

“In Greece and Argentina, for example, being caught cardless could land you at the local police station, where your identity will be established using other means, such as fingerprinting,” the group warns.

But what have the innocent to fear?

In AUSTRALIA a proposal for a national identity card in the 1980s to combat welfare fraud initially met with enthusiasm in polls. But when the Australia card was debated by government, it was blocked by opposition parties and the Senate and public enthusiasm cooled.

In Ireland, welfare fraud is cited as the chief reason a public services card is needed. The DSFA claims to have uncovered more than 1,000 examples of people trying to collect welfare using bogus identity papers in the past four years.

The public will most likely see the public services card for the first time next year when they are given to the 640,000 recipients of free travel. The first cards will include only a photograph and name, but they will be capable of storing far more information.

When the department tendered for a company to create the cards, it stated that they should be “designed to evolve over time” so that “eventually any service provider will be able to use it”.

It should also be suitable for storing biometric data, such as fingerprints, and should be capable of being easily turned into a chip and pin card.

Radio frequency technology will also eventually be integrated to allow the card be used in a similar fashion to Transport for London’s Oyster card. The card’s specifications were drawn up in conjunction with Consult Hyperion, an IT consultancy that has worked on the introduction of national ID cards in Malaysia and Hong Kong. The card developed in Malaysia, the MyKad, contains a thumbprint and must be carried by all citizens over 12.

The department says that it is judicious to design a card that can be adapted. But privacy campaigners suggest that now is the time to debate the card, before it becomes part of the fabric of everyday life.

“Nobody is going to raise an issue about a bus pass. And when it eventually doubles as your medical card, or as garda proof of age ID, it will seem very convenient. But the more information linked to the card, the more possibility there is for function creep — when data collected for one reason is used for another — or for information to be shared between agencies, however trustworthy they may be,” said Tanya Ward, a director of the Irish Council for Civil Liberties (ICCL).

Few will be reassured by the recent audit of the DSFA carried out by the data protection commissioner. It found serious weaknesses in the protection of the personal data of more than 300,000 people. Ward is also concerned by Ireland’s “piecemeal privacy and data protection laws”.

“We want to know what safeguards are being put in place for the operation of this new system. Who will have access and how will it be used? Can we trust the DSFA to keep our data safe?” she said.

Niall Barry, the DSFA’s project director, said the public services card would be secure because of the paucity of information contained on it. “It will contain as little information as possible. Sensitive data will be held on a secure server than can be linked to the card using an ID number or, eventually, chip and pin. The card is just a key to the information,” he said.

In a book called The Internet Galaxy, the sociologist Manuel Castells argues that it is not Big Brother, an omnipotent government, that we should be afraid of but his legion of “little sisters” — the hundreds of databases that store the details of our lives.

“There is no need to worry about a card,” Welford said. “But what is the card linked to?”

He argues that in Germany, for example, confidentiality legislation prohibits the allocation of unique ID numbers to citizens. This prevents hundreds of databases being linked together to form a rounded picture of a person’s interaction with the state. In Belgium and Austria, instead of identifying numbers, people are recognised through encrypted codes.

In Ireland, though, the roll-out of the PPS (Personal Public Service) number has already paved the way for every citizen to have a personal identification number. First introduced as the RSI (Revenue and Social Insurance) number in 1993, the PPS came into being in 1998. In the intervening decade, it has gone from being used by just two bodies — the Revenue and Department of Social Welfare — to 63, including An Post, the Garda Siochana and the Legal Aid Board.

Micheal O’Dowd, who was commissioned by the European Commission to write a paper on the public services card, said that the new card would “link a person unequivocally to their PPS number”.

“There are currently restrictions on the gardai and defence forces using the PPS number. But how long the government is able to resist the temptation to lift what restrictions remain on the use of the PPS number is anyone’s guess,” he said. “At present, we have the peculiar anomaly whereby PPS numbers of non-nationals, and ID cards also, one must assume, may be examined and used by the gardai. With increased demands from Britain for an Irish ID card that more closely resembles their own proposals, one can only conclude it is matter of time before the new public services card will be used for purposes far broader than interacting with the public service.”

Barry argues that such “usage progression” would require legislation and would almost certainly stimulate debate. He concedes, though, that there is no reason the card envisaged could not be used in the medium term as a proof-of-age ID, to cite one example. Another obvious private sector application would be to use it to buy credit for a transport company, such as the purchase of electronic tokens for the Luas.

He claims it will differ from the national identity card being introduced in Britain because it will not be mandatory. Welford disagrees. “The bus pass here in Scotland is not mandatory either but the only alternative for someone who doesn’t want to use it is to pay on the bus. As it is gradually rolled out to become a library card or medical card, it becomes, in effect, compulsory,” he said.

Welford argues that identity cards were last introduced in Scotland during the second world war when there was a serious risk of German occupation. “We’ve managed fine since then without them, as has Ireland. What has changed in recent years?”

The ICCL argues that the Irish people have never been polled about their opinion towards a national identity card. While there is presumably strong opposition to welfare fraud, would we follow the Australian example by rejecting an ID card, or follow the lead of Britain, where polls show a majority support the introduction of one next year?

The arrival of the public services card only came under scrutiny because of the data protection commissioner’s audit of the DSFA, the ICCL says.

“It has come into the public sphere almost by accident. We are not aware of any privacy impact statement to date in relation to the card and we don’t know how much it costs,” Ward said.

She claims that the appetite for introducing the card is coming from government, not the users of public services. “Where does the motivation lie?”

In Britain, ID cards have been pushed as a crucial weapon in the fight against terrorism. Their introduction could be the factor that forces the Irish government to introduce a comparable card here. In 2005, Michael McDowell, then justice minister, admitted that the government may have to introduce “some form of national ID” because of our shared border and common travel area.

McDowell said he believed that a fundamental philosophy of our common law system is that citizens should not be obliged to carry documentation. “Historically, identity cards have been used to discriminate against minorities,” he said.

Despite his philosophical opposition, he admitted that Ireland must respond to Britain’s decision.

“If it becomes mandatory in the UK, how can Irish people travel into Britain without some form of ID?”

Will that form of ID be the public services card?