INSURANCE NEWS FLASH February 17, 2014
Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 8 Technology .......................................................................................................................... 14 Strategy .............................................................................................................................. 22
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Sales & Marketing The Year's Worst Winter Property Loss Nightmare? February 14, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/14/the-years-worst-winter-property-lossnightmare Each of us may have a favorite “poor me” story from this winter, which seems never-ending, with hundreds of thousands of people left without power in icy and frigid conditions. But a Missouri family of nine probably takes the prize for the worst winter property loss nightmare. Sometime after the family left home for Florida, a pipe burst on the top floor of their Missouri home, and 44,000 gallons of water cascaded through the house before service was able to be shut off. The interior of the house was soaked, with ice oozing out through lower floor window frames and siding. Imagine a reverse ice dam of sorts. To make matters worse, the homeowners’ car broke down, so they couldn’t immediately drive home to check the damage. Moreover, none of them could fly home because yet another winter storm resulted in a swarm of canceled flights. The Missouri ice castle damage is on the far extreme of the damage that many home and commercial building owners are experiencing this year. One of the first questions this family will face in seeking insurance coverage is: What caused the pipe to burst? The unendorsed standard homeowners policy (HO-3) covers damage to both the building and personal property caused by an accidental discharge or overflow of water or steam from a plumbing device: in this case, the pipe. However, the insurance picture isn’t so happy if the family hadn’t maintained heat in the home during their absence and the pipe froze, causing it to burst and release the water. This provision in homeowners' policies voids coverage for damage to the building and personal property if heat is not maintained or the plumbing system drained. Therefore, the Missouri family could have coverage or not depending on this one fact. A Deluge of Coverage Questions Although the Missouri damage is just as extreme as this winter has been, the editors at FC&S Online® are flooded with similar situations each winter. For example, one agent posed not one, but two, commercial property damage questions: We have two insureds for whom we need your opinion on separate commercial property losses. Both are covered on the ISO commercial property form, CP 00 10, with special perils, CP 10 30. In the first case, the insured's building (both exterior and interior) and business personal property sustained loss from "ice damming." The company adjuster is trying to deny all coverage for external damages based on the exclusion for damage from the "weight of ice and snow." What's your opinion? Our second insured is a medical office. These doctors rent the entire building but occupy only the first floor of a three story building. During the winter, our insureds turned the heat off in the unoccupied portion of the building. As a result, the pipes in the unoccupied portion froze and burst, causing considerable damage.
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The insurer is denying all coverage based on the requirement that the insured must "do [his] best to maintain heat in the building." We believe that because the insured maintained heat in the occupied portion, the loss should be covered. In the first situation, there should be coverage. The current edition of the special perils form does not exclude damage caused by snow, rain, ice, or sleet except for personal property that is out in the open. There is, however, a clause in the form’s Limitations section that excludes coverage for damage to a building’s interior that results from rain, snow, sleet, or ice. There are two exceptions to this limitation: There is coverage if the building is first damaged by a covered cause of loss and that damage permits the rain, snow, sleet, or ice to enter the building, and there also is coverage if the loss or damage is “caused by or results from thawing of snow, sleet, or ice on the building or structure.” In the case presented, both the building and personal property were damaged, and the damage was caused not by rain, snow, sleet, or ice but, rather, by the thawing of ice that had built up under the eaves. This cause of loss is covered by the special causes of loss form and should be paid. In the second case, the insurance company is correct. The standard commercial property program excludes coverage for damage caused by freezing of plumbing, heating, air conditioning, or other such equipment unless heat is maintained in the building. In this situation the policyholder controlled the entire building even though part of it was not occupied. Since the policyholder turned off the heat in that part of the building, there is no coverage for the damage. These last two questions point out some of the insurance issues that the Missouri family will face. They also point out, once again, the importance of carefully reading the policy and not relying on adjusting rules that were learned when an earlier form was in popular use.
January Winter Weather Could Cause over $1.5B in Insured Losses February 6, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/06/january-winter-weather-could-cause-over15b-in-ins Insurers could see over $1.5 billion in losses stemming from “no fewer than four separate stretches of winter weather” in the U.S. in January, Aon Benfield says in its monthly wrap-up of global catastrophes. Roughly $1.4 billion in insured losses stems from one particular stretch of winter weather during the second week of the month, when the central and eastern U.S. dealt with the coldest temperatures in two decades. The Great Lakes and Ohio Valley saw more than 20 inches of snow during that week while the Northeast and Mid-Atlantic contended with freezing rain. The event caused over 150,000 claims. Other winter-weather events earlier and later in the month caused thousands more claims and more than $500 million in economic damages. Elsewhere around the world, Europe saw a continuation of an active windstorm season, with storms Anne and Christina hitting the western and northern sections of the continent.
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New Zealand’s lower North Island was struck by a 6.2 magnitude earthquake, causing just under 3,000 claims, which are expected to result in millions of dollars in payouts. Brushfires swept through multiple Australian states, the worst of which occurred in Western Australia’s Perth Hills region where insured losses are expected to top $13 million.
Workers' Comp, Auto Lead Moderating Commercial-Lines Rate Increases in January February 5, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/05/workers-comp-auto-lead-moderatingcommercial-lines Workers’ compensation and commercial auto risks saw the steepest rate increases in January at +4% compared to the same month in 2013, but the commercial-lines market overall continued its moderating trend, MarketScout says. MarketScout officially listed January’s composite rate at +3%, the same as December, but CEO Richard Kerr notes, If we were to post rate changes by fractional increments, you would see the actual increase at 2.55 percent, so the moderation trend continues.” Recapping the previous year, MarketScout notes that 2013 began with a composite rate increase of +5 percent, moderated slightly in July, and ended up at +3 percent at year-end. For January, Kerr says, “Rates for five coverage classes declined 1% as compared to one year ago. No coverage classifications had a rate increase. By account size, half the accounts measured enjoyed premium reductions of 1%. By industry class, four out of seven were down 1%.” He explains, “Additional capacity, insurance-linked securities and a more stable economic environment (despite recent stock-market adjustments) are partly responsible for the moderating rate environment.” Both workers’ comp and commercial auto saw 4% rate increases. BOP, general liability and umbrella/excess rates were up 3%. Commercial property, business interruption, professional liability and D&O rates were up 2%. Inland marine, EPLI, fiduciary, crime and surety risks all increased by 1%. Small accounts saw the steepest rate increases at 4%, medium accounts were up 3%, large accounts up 2% and jumbo accounts up 1%. By industry, risks in manufacturing, contracting, service and transportation all saw 4% rate increases. Habitational risks were up 3%, public entity and energy risks were up 2%. Personal lines Personal lines rates also moderated in January, up by 2% year-over-year compared to 3% in December. Kerr says, “2013 was a good year for personal lines insurers. We expect continued aggressive pricing, but that will be geographically modified as appropriate. Coastal homeowners continue to enjoy competitive rates because of the lack of windstorm activity in 2013, despite Superstorm Sandy.”
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For January, he adds, “Homes under $1 million in value were assessed a 2% increase, while highvalue homes paid an additional 4%. Both metrics were down 1 percentage point from December 2013.” Automobile and personal articles were both increased by 2%, a slight reduction for personal articles and the same rate for automobile.
Operation Flames and Floods’ Exposes $7.6M in Property Damage Scams February 5, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/05/operation-flames-and-floods-exposes-76m-inpropert For years, fraudsters have been staging auto accidents, giving way to elaborate organized crime rings and singular scams designed to siphon dollars from insurers. Now others are orchestrating fire- and water-related damages in properties with the same intent: to defraud p&c insurers. The growing incidence of these scams has led to the formation of multi-agency undercover operations, including “Operation Flames and Floods,” under which Florida authorities recently arrested 14 individuals. Under Operation Flames and Floods, which began in November 2012, the Florida Fire Marshal’s Office and the Miami-Dade police department’s arson unit jointly investigated a series of suspicious fires. They later exposed an extensive scheme executed by multiple parties to defraud insurers by staging fire and water damage claims to residential homes in Miami-Dade County, Lehigh Acres and Naples, Florida. Fires were set to 13 homes, and five other residences incurred extensive water damage. Insurance carriers paid $7.6 million for claims resulting from the fires, which were staged to resemble electrical, kitchen and vehicle-related fires occurring within the home or garage, while those involving water damage blamed flooding on water supply lines or clogged sewer lines. Following a federal indictment, authorities arrested Jorge Fausto Espinosa Sr., a public adjuster. The remaining arrests in connection with this case occurred yesterday. A second public adjuster and a plumber were also among those apprehended and charged for allegedly instructing homeowners about how to file fraudulent insurance claims. Upon their arrest, the following individuals were transported to Miami-Dade County Jail: •
Carolina Esponosa (public Adjuster)
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Roberto Suarez
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Pedro H. Lezcano, Sr.
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Argelio Menendez
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Jesus Martinez
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Lazaro Delgado
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•
Liset Corrales
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Francisco Pineiro-Gonzalez
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Daniel Perez
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Francisco Centurion
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Abel Gutierrez
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Daney Perez
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Ernesto O’Reilly
As a result of the fraud, the following insurance carriers paid out millions in reported losses: American Integrity Insurance Company, American Bankers Insurance Company, Citizens Property Insurance Corporation, Northern Capital Insurance Company, Northern Point Insurance, Gulf Stream Property & Casualty, Southern Oak Insurance Company, State Farm, and Universal Property & Casualty. These cases are being prosecuted by Miami-Dade County State Attorney Katherine Fernandez Rundle. “I am extremely proud of the work of our State Fire Marshall’s Office, and I am thankful for the support of the Miami-Dade Police Department’s Arson Unit and Miami-Dade County State Attorney Katherine Fernandez Rundle for helping us bring these individuals to justice," FLorida CFO Jeff Atwater said in a press release.
Solar Insurance Costs Drop by Half Since 2010 February 4, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/04/solar-insurance-costs-drop-by-half-since-2010 The cost of insuring a solar plant has dropped by 50% since 2010 because of cheaper photovoltaic panels that lead to lower project costs and reduced premiums, according to Bloomberg. Claims filed for projects reveal that few of the risks first feared such as module underperformance in hot climates, panel theft, and defunct warranties from manufacturer bankruptcies have been reported. Data compiled by Bloomberg also shows that the cost of crystalline silicon panels—the majority of a plant’s costs—fell 67% since 2010. The market for insuring renewable-energy projects is set to triple to $2.8 billion of premiums by 2020 as developers who seek money from new sources try to lure institutional investors such as pension funds, says a report by Bloomberg New Energy Finance funded by Swiss Re.
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Finance AIG Q4 Net Income Climbs; Plans Job Cuts in P&C Operations February 14, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/14/aig-q4-net-income-climbs-plans-job-cuts-inpc-oper American International Group president and CEO Robert Benmosche said he will focus on improving the company’s balance sheet and rewarding shareholders after the company reported strong earnings, although the company’s property and casualty business’ combined ratio remained over 100. Benmosche also used the occasion of an appearance on CNBC last night to say that the U.S. financial system is “safer than we’ve ever imagined,” and he praised retiring Federal Reserve Board Chairman Ben Bernanke for doing “an outstanding job of taking us through this crisis, and if you look at this trust test that banks are dealing with, the de-leveraging that’s happened.” AIG took a $265 million severance charge against fourth-quarter earnings -- the cost of cutting 3% of its workforce as part of a consolidation plan and a strategy to reduce the layers of management. Most of the cuts will be in property and casualty operations. Excluding that, AIG earned $1.15 as compared to analysts’ consensus estimate of 96 cents, and revenue of $4.62 billion vs. projected revenues of $4.56 billion. Year over year comparisons were also strong, with full-year after-tax operating income per share of $4.56, up from $3.93 last year. AIG reports net income of $1.97 billion, compared to a $3.9 billion net loss in 2012’s fourth quarter. For the year, net income was $9.1 billion in 2013 compared to $3.7 billion in 2012, however analysts note that Superstorm Sandy impacted the prior year’s results. A contributing analyst to Seeking Alpha says the results showed improvement in P&C results, “a unit that has struggled over the past 24 months,” but adds that, while underwriting standards are improving, AIG still lags peers. According to the company’s results, AIG Property Casualty had a combined ratio of 103.8, and took an underwriting loss of $330 million, its steepest underwriting loss so far this year, but well under the 2012 fourth-quarter underwriting loss of $2.2 billion. Pre-tax operating income at AIG Property Casualty was $1.1 billion. A Seeking Alpha update this morning notes that some investment analysts were honing in on “continued weakness” in P&C in premarket action this morning. In lauding Bernanke, Benmosche said he deserved recognition by CNBC as one of the 25 most influential business people over the last 25 years.
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“I think Ben Bernanke stood up, and what was most important is, we needed somebody to make decisions in ’08, however popular or unpopular, and make sure that we continued to stay focused on keeping this economy from stalling,” Benmosche said. He called Bernanke the “unsung hero” of the period, adding that he “deserves an enormous amount of credit for just quietly taking the abuse and leading us to where we are today.” As for AIG, Benmosche said he doesn’t believe the firm “poses any threat to the financial system.” He said the public negative sentiment about AIG “is down dramatically to levels lower than we’ve seen. And the positive is starting to move up, because people realize that AIG paid back America plus a profit, for about $205 billion.” Benmosche added, “Many people thought AIG was finished.” He also that AIG employs 30,000-plus people in America. “These are jobs, and all the jobs we have here at AIG, we create many more thousands of jobs for people who do business with AIG. Speaking to potential acquisitions going forward, Benmosche said, “If we could find a good business for the right price...we’ll use that money to buy a company that is something that will allow us to grow a little bit more rapidly in some of the countries we’re doing business in.” But other than that, Benmosche said, “We will just focus on good credit ratings, and then our shareholders.”
Nationwide Q4 Results Rise; CFO Discusses Distribution and Rate Environment February 13, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/13/nationwide-q4-results-rise-cfo-discussesdistribut Weather played a part in Nationwide’s big turnaround in fourth-quarter property and casualty operating income, but CFO Mark Thresher takes more pride in the company’s active initiatives to improve results. Nationwide, he says, has focused on improving efficiencies by reducing expenses so the insurer can offer better prices to customers, and also on centralizing more of the claims organization under one individual. “We want to provide the best customer service,” Thresher says, but also accomplish that in an effective and efficient manner. The insurer reports 2013 fourth-quarter net income of $499 million, up from $176 million in 2012’s fourth quarter. Total net operating income climbed to $347 million compared to $18 million over that same period, and P&C operating income swung to $181 million compared to a $90 million net operating loss in 2012’s fourth quarter. While stressing that Nationwide’s core fundamental business performance was stronger, Thresher notes that the absence of a major weather-loss event like Superstorm Sandy “clearly” benefitted fourth-quarter results.
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For the year, Nationwide reports net income of $1.9 billion, compared to $940 million in 2012. Net operating income was $1.3 billion, compared to $741 million, and P&C operating income rose to $707 million from $117 million. Thresher points to specific areas of business where he feels Nationwide had success in 2013. For example, the insurer wrote $1 billion in direct written premium in farm and agriculture, he notes, a line of business Nationwide has been involved in since its origins as Farm Bureau Mutual in 1926. Thresher notes that Nationwide does not write crop insurance, but does insure farms, farm equipment and large commercial co-ops. He says the insurer has relationships with a number of farm bureaus, and “has a great reputation for understanding loss control.” Speaking to the rate environment in 2013 and into this year, Thresher says that on the commercial side, “I think rate was available in 2013. We’ll see where that goes in 2014.” For specialty risks, Thresher notes there is flexibility in pricing for business written through Scottsdale. For personal lines, he says rate in homeowners was “necessary and available,” but says auto remains one of the most competitive lines, driven in part by the pricing from some monoline auto insurers. For this year, Thresher says he wants to continue to expand Nationwide’s direct capabilities in personal lines, and to continue to pursue a variety of distribution strategies for commercial risks -utilizing independent and exclusive agents, and even direct capabilities. Thresher points out that agents have been fine with the company’s direct capabilities, as the direct channel has actually acted as a potential source of leads for agents. Some customers come to Nationwide through the direct channel, but then decide they want an agent later in the process.
Radian Returns to Profit as U.S. Housing Market Recovers February 5, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/05/radian-returns-to-profit-as-us-housingmarket-reco (Reuters) - Radian Group Inc, the biggest U.S. private mortgage insurer, reported a quarterly profit after four straight losses as fewer homeowners defaulted on their loans in a recovering housing market. Mortgage insurers have been writing more profitable insurance policies as fewer people default on home loans, largely helped by a recovery in the U.S. housing market. Mortgage insurers cover losses when homeowners default on payments and foreclosures fail to recoup costs. Rival MGIC Investment Corp reported a smaller-than-expected quarterly loss last month due to fewer defaults, while Genworth Financial Inc on Tuesday said profit was boosted by strong performance at its mortgage insurance business. Radian more than halved its provision for losses to $137.6 million in the fourth quarter compared with the year-earlier period.
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"We expect that the size and credit quality of our MI (mortgage insurance) portfolio will fuel improved levels of operating profitability this year," Chief Executive S.A. Ibrahim said in a statement. Net profit was $36.4 million, or 19 cents per share, for the fourth quarter ended Dec.31, compared with a loss of $177.3 million, or $1.34 per share, a year earlier. Analysts on an average expected the company to break even on a per-share basis, according to Thomson Reuters I/B/E/S. Philadelphia-based Radian's risk-to-capital ratio was 19.4 to 1 as of Dec. 31, down from 20.8 to 1 at the end of 2012. Most U.S. states allow a maximum ratio of 25 to 1 after which the insurer must seek waivers in individual states to continue writing insurance. Radian's shares closed at $14.33 on Tuesday on the New York Stock Exchange.
Hartford Financial Profit Tops Estimates February 4, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/04/hartford-financial-profit-tops-estimates (Reuters) - Hartford Financial Services Group's quarterly profit exceeded analysts' average expectation as it benefited from lower disaster losses, and the insurer announced a new $2 billion share buyback plan. The company, whose shares rose 4 percent in extended trading, also said it would repay $656 million of debt over 2014 and 2015. Hartford said it expects 2014 core earnings of $1.65-$1.75 billion, excluding net favorable items. It earned $1.74 billion in 2013. The company's net income was $314 million, or 65 cents per share, for the quarter ended Dec. 31, compared with a loss of $46 million, or 13 cents per share, a year earlier. Hartford's losses from catastrophes fell to $28 million from $335 million a year earlier, when it was hurt by losses from superstorm Sandy that hit New York and New Jersey in October 2012. Hartford Financial earned 94 cents per share on an operating basis. Analysts on average had expected the company to earn 90 cents per share, according to Thomson Reuters I/B/E/S. The company, under Chief Executive Liam McGee, has been shifting its focus to the more stable and less risky business of property casualty from annuities. The Hartford, Connecticut-based company is the 11th-largest P&C insurer in the country with a market share of about 2 percent, according to a report published by National Association of Insurance Commissioners in April 2013.
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Shares of the company, which has a market valuation of about $15 billion, closed at $32.18 on the New York Stock Exchange on Monday.
Munich Re Boosts Dividend After Surprise 2013 Profit Rise February 4, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/04/munich-re-boosts-dividend-after-surprise2013-prof HANOVER, Germany (Reuters) - Munich Re, the world's biggest reinsurer, hiked its dividend after a surprise rise in 2013 profit, lifting hopes it can cope with an influx of new competitors and falling prices. However, the German firm said on Tuesday the profit increase was helped by one-off factors, such as low taxes and damage costs, and the release of buffers built up to cover past claims. Reinsurers, which help insurers shoulder risks in exchange for part of the profit, have had a buoyant few years, but are now facing one of the biggest market-wide price declines since the late 1990s as their customers press for a better deal. That pressure has been made worse by the entrance of new "alternative capital" investors into the market, attracted by high-margin business such as natural catastrophe insurance. Munich Re said on Tuesday it had largely been able to buck the downward price trend when renewing contracts with its insurance company clients at the start of the year. "Of more significance is that price competition has increased in the traditional reinsurance market," it added, referring to price cutting by rival reinsurers. These include Swiss Re andHannover Re. Munich Re saw its prices fall by about 1.5 percent when renewing the contracts in January, though premium volumes rose by nearly 3 percent to around 9 billion euros, it said. "This is in our view a good performance given the somewhat more difficult environment due to 'new' capital flowing into the U.S. natural catastrophe market and the lack of large losses in 2013," Equinet analyst Philipp Haessler said. Reinsurers will be fighting hard to keep alternative capital investors from cannibalising the market, said James Vickers, Chairman of Willis Re International. "The big, traditional reinsurers have played to their strength which is their capacity, technical underwriting capability and relationship management," he said. "They are doing the things that are difficult for capital market players to replicate," Vickers added. One-offs Munich Re hiked its dividend to 7.25 euros per share from 7.00 euros previously, after unveiling preliminary net profit of 3.3 billion euros ($4.5 billion) in 2013, which was above the highest forecast in a Reuters poll and defied an expected earnings decline.
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Full-year operating profit and the investment result were also ahead of the poll average, though both were down on their year-earlier levels. Munich Re said its 2013 tax burden was "particularly low," mainly due to the recalculation of tax for prior years and to the use of tax rules that carry forward the benefit of past losses. Fourth-quarter profit was also higher than expected due to favourable tax effects. Separately, low tax also helped UBS beat profit forecasts, underpinning a rise in the Swiss bank's announced dividend. Munich Re also reported its payouts on damage claims from major natural catastrophes and manmade losses slipped to 1.7 billion euros in 2013 from 1.8 billion in 2012. The company, which refrained from offering a forecast on expected earnings in 2014, said it walked away from about 1 billion euros worth of premiums in the January renewals because the price was too low for the risk. Prices, particularly for natural catastrophe cover, were likely to slide when contracts are renewed in Australia, Latin America and the United States in the next months, it said. "In the coming renewal rounds, we will be aiming to buck the general market trend with our tailormade risk-transfer solutions and with prudent portfolio management," Munich Re board member Torsten Jeworrek said in a statement. Munich Re, which is in the process of buying back 1 billion euros worth of its own shares by the end of April, had already purchased 520 million euros worth by early February.
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Technology Leap of Faith: Changing the Culture in Insurance Marketing to Reflect a Data Analytics Approach February 14, 2014 | Property Casualty 360 http://www.insurancetech.com/leap-of-faith-changing-the-culture-in-in/240166092 It’s one thing to talk about creating a marketing analytics foundation and turning data into insights, another to use those insights to make business decisions. But doing so is potentially a game changer. Insurance and other industries are starting to understand the role of Big Data analytics in marketing. A more information-driven approach certainly seems to be the ticket for reaching the right customers. However, marketing analytics -- the application of data and business intelligence to help target advertising platforms and make marketing spend more effective and efficient -- is still a young concept with personal lines insurers, and their cultures are not yet predisposed to rely on data for investment decisions. Michael Kim, CognizantRight now, marketing divisions don’t invest a lot of time and energy into collecting the right data and trying to make sense of it. The current model is to work with anecdotal information, and if it agrees with their intuition, they accept it. If not, they reject it and push forward nevertheless. So from the outset, there’s a mindset to overcome in transitioning to a data-driven approach, from reliance on intuition, however smart. In this new environment, intuition is replaced by a rational, albeit more “dry,” approach that relies on analysis and acting on what the data says. Now, for the first time, marketers have a data set against which to measure their return on investment. Getting Started With a Data Mindset: Three Preliminary Challenges While data may be readily available, the high volume of it can be overwhelming. Let’s face it: It’s a lot of work to filter through masses of it, deciding what’s useful and what’s not. It takes time and a certain mindset getting used to any new approach. In fact, it takes an investment in a research mentality of the number-crunching variety, which can be quite contrary to the creative, more intuitive approach. So the first challenge is for the marketing division to take a leap of faith and put some muscle into this process. Agil Francis, CognizantThere’s a lot of data out there. Every time someone uses the web, there’s data captured, but most of that data is not useful. You have to find the relevant pieces and connect them to figure out what information or insights can come out of that data. This second step is also a big challenge for insurers. It’s essential to have a framework for this search-and-connect phase -knowing what questions to ask, what metrics would be the most useful to measure the key performance indicators of effective and efficient marketing spend. The third step, equally challenging, is to take the insights gleaned from the data and actually change the way you make decisions, based on what the data says, not what your intuition tells you. This is not going to be an easy transition. It is very hard to suddenly ask people to trust data, when they have previously used several other criteria. It’s like asking them to switch off the right side of their brain. It is important to note, however, that while marketing is part science, part art, there will be a lot more science on which to base decisions that ultimately will better empower the more intuitive side of the marketer.
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What Will Change by Integrating a Marketing Analytics Function? We have previously laid out the difficulties of bringing the marketing department in line with the IT mindset. Admittedly, effecting change at this radical level is a bit like installing a new organ into a body. You have to know not only what you’re putting in, but what it does and what existing systems you need to link it to. And after all that, there’s still a chance that the body will reject the transplant. So what are you implanting into the marketing division? First, people -- certain types of people with certain types of skills that didn’t formerly fit with the marketing profile -- data analytics people. Then you are introducing data, lots of it, enough to filter out usable and actionable information based on your key performance indicators. And finally, you are bringing in the technology-based tools to use with this data -- database software, screens, programs -- “net new” things that didn’t exist in the old marketing organization. The linkages will be widespread too. Just about everyone, top to bottom, from the CMOs to their key lieutenants, then to the people below them, will be using the marketing analytics framework. They will all be looking for specific metrics and measurements that fit their needs. The CMO might use data to determine how smartly marketing dollars can be used and point to the ROI on those dollars. At a lower tier, an ad manager might use data to assess the value and efficiency of media placements. An integrated analytics base can begin to change the internal culture of insurers in such a way that everyone, from product designers to marketers to IT to management, is engaged to think more creatively to improve the entire insurance product and service offering. Changing the Culture Inside Out To return to one of our earlier hypotheses: Currently, P&C personal lines carriers are not getting reasonable returns on their huge marketing expenditures. What marketing analytics does is provide the opportunity to make changes and redirect marketing spend in a way that’s supported by what the data suggests. Hopefully, this will reduce ineffective marketing spend and redirect that budget to more productive places. The required cultural change starts with getting marketers to embrace the marketing analytics function, to trust the data. When you shake out these volumes of data, if you have taken this leap of faith, you will come up with some golden insights. But while many people talk about turning data into insights, the harder part is to act on it -- to put your company on the line -- and use those insights to make business decisions. That is an even bigger leap of faith. It will mean getting data analytics to the right decision-maker at the right time, which requires a new way of working. Collecting and filtering data and working with it to determine current issues, predict future needs, and see what has succeeded or failed in the past will allow companies to come up with more deliberate, focused solutions -- solutions that have a basis in fact, not in intuition or tradition. What marketing analytics can give is the ability to make smarter decisions.
Who's Using What: The Latest Insurance Software Implementations February 10, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/10/whos-using-what-the-latest-insurancesoftware-impl
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Millers Mutual Group selected Accenture Duck Creek Policy and Accenture Duck Creek Billing software as a means of streamlining operational transactions and create a simplified user experience. The upgrades to the company's policy administration and billing systems are part of Millers Mutual's continued technology modernization initiative. Risk Administration Services Inc. (RAS) and Tropics Software Technologies placed Tropic Breeze workers' compensation software system into live production. RAS is the first production client on the newly released version of the system, which provides efficient and detailed workers' compensation insurance transaction processing and reporting capabilities. Tropics Software Technologies completed the conversion and implementation of new policy, billing and claims software for Alabama Self-Insured Workers' Compensation Fund and Employers Claim Management. The system facilitates all aspects of policy, billing and claims administration and The Fund will use Tropics to offer its agencies enhanced online inquiry functionality, a web-based application submission and other self-service functions. Symbility Solutions Inc. announced that SGI CANADA renewed its multi-year contract to integrate Symbility's cloud-based claims settlement into its technology operations. As part of the contract, SGI CANADA will implement Symbility's Claims Connect, a property and casualty claims workflow management solution and Mobile Claims, the intuitive smartphone and tablet-enabled field estimating solution. The Motorists Insurance Group added Activity Notes download to deliver policy claims information to its agents using IVANS Insurance Solutions. Activity Notes is an ACORD XML data standard that can be used to generate and send various policy, billing, claims and policyholder-related messages to their agencies.
Where Insurance Meets Google, Opportunities and Challenges Exist February 10, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/10/where-insurance-meets-google-opportunitiesand-cha Google continues to ambitiously expand its capabilities in and beyond the digital and mobile realms, creating an environment that presents new opportunities and challenges for insurers, according to a Strategy Meets Action research brief. The SMA brief, “Google and Insurance: Far Reaching Implications,� authored by SMA Partner Denise Garth, notes that in the insurance world Google acquired a UK auto-insurance aggregator and launched its own comparison site shortly thereafter. While it might be more difficult for Google to launch a comparable aggregation site in the U.S. due to regulatory and business-model challenges, SMA notes that these moves highlight a strategic focus on the insurance industry by companies like Google that have traditionally been viewed as insurance-industry outsiders. Beyond its direct involvement in the insurance business, SMA says other products developed and contemplated by Google could significantly influence the insurance industry and the risks it protects. Google, for example, pioneered the driverless car, SMA notes, with automakers now getting involved and adding momentum to the concept.
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Google also announced that optical-health insurer VSP will offer subsidized frames and prescription lenses for Google Glass, and Google also said it is developing smart contact lenses that will monitor diabetics’ blood-sugar levels in real time. Another recent acquisition gives Google the capability to offer smart thermostats and smoke alarms with Wi-Fi connectivity, allowing for the management of heating and cooling homes while also providing data on the habits of the devices’ users. Google’s recent efforts, combined with its existing search and mapping capabilities, create “a whole new set of opportunities and challenges” for insurers, providing vast amounts of data about individuals, their cars and their homes, SMA says. SMA adds that Google’s rapid advances in technology create a paradox where an insurance industry that traditionally changes slowly meets a world that is changing rapidly. The briefing emphasizes that insurers must transform and innovate to become early adopters of innovation in order to decrease business risk and ensure competitive advantage. “No business, regardless of its size, has enough time, resources, money, or relationships to fully capture the potential,” SMA says. “Companies will need to be part of an innovation ecosystem that enables ideation and crowdsourcing to share trends, research, ideas and opportunities that can be operationalized uniquely within their organizations.” SMA also recommends that insurers look beyond their current business models based on “historical or point-in-time data to a model that embraces real-time data that can offer more relevant and customized products and services.” Privacy and security A potential speed bump on the road to this data revolution: privacy and security concerns. Speaking to PC360, Garth, the brief’s author, weighs these two risks, stating, “I think about the data breaches that happened with Target and other companies—a lot of this data is very private data, so, in my mind, protection is probably becoming a bigger issue for consumers and presents a market opportunity.” Concerning privacy, Garth says insurers, like others, must find a balance between the value of available data and making sure privacy is managed at appropriate levels. “In some cases, people are willing to give up privacy,” she notes, pointing to a younger generation that seems willing to share a lot of information. “It’s kind of amazing how much they share,” says Garth. “So in some ways it’s a cultural thing that customers and insurance companies can benefit from.” She also points out that users of Facebook and other social-media sites acknowledge that their data can be used and shared, understanding that anything they post becomes public information. But if consent is not given for certain data to be shared publicly, says Garth, then it brings privacy rights into question. “And I think those privacy rights are trying to catch up in some places,” she adds, noting that the European Union is looking at privacy issues arising from the use of telematics. Garth points out that when considering what data should be used for underwriting or any other process, companies need to capitalize on the wealth of data in order to innovate new products and services that can add value to customers.
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For example, Garth points to the smart thermostats and smoke alarms. Alerting a consumer who is away from home that the furnace is out means that the issue can be addressed before pipes burst, hence eliminating or decreasing the potential for loss, she says. Ultimately, technology will continue to evolve at a rapid pace. Garth concludes in the SMA brief, “Today, many insurers are accustomed to asking, ‘How can technology help run my business?’ The insurance leaders of tomorrow will be asking, ‘How can technology help reshape my business?’”
2014's Top 10 IT Imperatives for Insurers February 10, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/10/2014s-top-10-it-imperatives-for-insurers According to a recent report from Strategy Meets Action (SMA), analytics and mobile are the top priority for technologies this year. As commercial lines carriers rely on big data to improve underwriting claims, insurers continue to invest heavily in business intelligence and analytics. The report, “2014 Insurance Ecosystem: Insurer Technology Spending, Drivers and Projects” reveals optimism for the future of the insurance industry, as insurers are preparing for growth to adapt to the foreseeable changes in in the market. IT investments, in particular, will continue to grow, as more insurers are willing to leverage the benefits of business growth, optimization, customer service and cost containment drive the industry, and are necessary for maintaining a competitive advantage in the coming years. Through research and analysis, SMA compiled a list of the Top 10 Imperatives that insurers should consider when planning for the future. Taking a look at ways to implement innovation and become a next-gen insurer, and how the Top 10 Imperatives will drive business models for future success. Click through the following slides to learn more. Top 10 Imperatives for Insurers 1. Innovate to Become a Next-Gen Insurer. As the market rapidly evolves, insurers reinvent their products, services and processes to adapt to change. Understand the leverage points for change, and make wise moves and investments to confront that change. Becoming a next-gen insurer is an enterprise-wide endeavor. Even if change starts small, it is important to keep the big picture in mind. 2. Capitalize on the Consumer Experience. The consumer experience is becoming more and more critical. Insurers must use data, tools, process automation and user experience design across multiple capacity areas to deliver the service that policyholders and agents expect. With technology moving so quickly, insurers need to find new ways to engage their customer base and find innovative ways to service them. 3. Achieve Product Advantage through Configuration. Product configuration with strong rating capabilities is a top priority for efficiency in the market. Insurers must employ product configuration to drive growth, profit and differentiation. 4. Commit to Dynamic Distribution Capabilities. As agents, brokers, MGAs, prospects, policyholders and third parties all have different needs and expectation for distribution, a
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one-size-fits-all approach is not enough. Insurers need to commit to providing support for every type of submission, inquiry or service request through various channels and via any device. 5. Take Underwriting Differentiation to the Next Level. Take underwriting differentiation to the next level to drive more efficient business processes and improve decisions. Capitalize on data, analytics, and other advanced technologies to extend automation and create a collaborative underwriting environment that fosters growth. 6. Extend Analytics across the Enterprise. SMA predicts that analytics and data will continue to shape the competitive background for the next decade, and insurers need to apply analytics by extending them across the entire enterprise, bringing insight to every process, decision and interaction within the company. 7. Optimize Claims beyond the Transaction. Modern claims systems are able to integrate technologies, data and third party information to provide a valuable combination of insight, intelligence and customer care excellence. The results are new insights into operations and improved case management, superior fraud management and better severity control. Additional benefits will include productive adjuster assignments, more effective management of third party relationships and claims transparency for the agent and policyholder. 8. Develop a Unified Digital Platform. Firms have begun to bring communication capabilities into a single platform, which is vital for improving customer service, enhancing agent support, and providing a proactive level of service. A digital insurer can adjust operations and processes to respond to changing demands and new opportunities. 9. Embrace Core Transformation Power. Optimized systems will extend capabilities beyond the duplication or replacement of the function of older legacy systems to empower insurers with flexibility and efficiency. Combining modern core systems with enhanced business processes enables insurers to begin transforming the entire enterprise, becoming the foundation for leveraging Next-Gen technologies. 10. Leverage Next-Gen Technologies. Mobile technology and connectivity trends continually shape the way people and businesses interact, communicate, evaluate, shop and buy. New cloud options for IT delivery provide flexible alternatives. In the midst of a big data explosion, sophisticated analytics are the key for navigating the fluctuating trends and taking insurers into the future. The Innovation Journey Instead of fixing broken systems or addressing tactile issues within the company, many insurers are turning their focus to long-term solutions to stay competitive and differentiate themselves within the marketplace. While some are using innovation as a means to get ahead, others are transforming core capabilities first to position their business for growth and profitability. There are three main stages in the innovation journey: 1. Cultivate: In order to succeed, insurers must create a culture of innovation within the business by developing a long-term strategy and mobilize resources in order to cultivate innovation within the company. 2. Activate: In the activate stage, initiatives stemming from rethinking and reimagining the business demonstrate advantage and deliver benefits. 3. Accelerate: The process begins to pick up in the accelerate stage, as major initiatives converge, innovation is pervasive and the firm moves toward becoming a next-gen insurer.
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The Next-Gen Insurer Forward thinking insurers are beginning to define what it will look like to be a next generation insurer in the next 5 or 10 years. SMA defined four major dimensions of the next-gen insurer and the capabilities that will be necessary for a successful future. 1. Insurers must become customer-centric to be a next-gen insurer. Changing customer demographics and adaptation to new needs and expectations of the next-generation customer will be vital in the coming years. 2. Insurers must rethink and reinvent the way they develop, package, and deliver products and services. Technology allows insurers to learn more about the risks faced by their customers, and will provide the opportunity to customize and personalize offerings. 3. The next-gen insurer must have a culture of innovation and an adaptive business model. Modification to processes and technological infrastructure is not enough to support the next-gen environment. Building an adaptive business model that allows companies to achieve a new level of agility will allow businesses to thrive. 4. Insurers must transform their organization, culture and business models. By changing organization, culture, and business models to harness the expertise of the company, insurers will be able to survive and prosper in the evolving environment.
Towers Watson Releases DriveAbility 2.0 Score for Auto Insurers February 5, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/05/towers-watson-releases-driveability-20-scorefor-a Towers Watson has launched DriveAbility 2.0 Score, an analytical scoring model designed for application in the automobile insurance industry. This product offering includes a GPS version with location-specific factors in the risk model, as well as a non-GPS version. DriveAbility 2.0 Score GPS uses telematics data in conjunction with the actual insured losses to develop and validate the structure and weights of the algorithm for converting policyholders' driving data into meaningful metrics. According to Towers Watson, the resulting vehicle operation score leads to demonstrable price segmentation for the auto insurance industry. “The new scoring model enhances automobile insurers' knowledge about expected losses associated with insured vehicles,” explains Robin Harbage, Towers Watson’s global leader for its usage-based insurance (UBI) consulting practice. “The new offering also captures specific driver behaviors not previously available and adds predictive power to claims models.” The product uses granular, second-by-second data, which is designed to allow for a continuous study of driving behaviors rather than predefined events that occur at a single point in time. It also enables the use of historical data to study newly defined driver behaviors, as these behaviors can be programmed on top of the historically collected data, and maps insurance claims to the exact moment they occur, leading to scores reflecting driving behaviors that actually cause claims. Towers Watson developed DriveAbility 2.0 Score based on an analysis of pooled telematics and insurance data collected from its UBI program. The company has been aggregating these data since 2010, compiled from the enrolled insureds of multiple insurers in the United States.
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“By aggregating this large pool of data and using our proven analytic techniques, we have created a vehicle operation score that we believe has pricing segmentation more than three times greater than rating variables typically developed,” says Harbage. “This is the only vehicle operation score created by analyzing telematics data in conjunction with actual insured losses collected from multiple independent insurers. It provides a clear, cost-effective way for insurers to go to market with a UBI product and will benefit policyholders, too, by helping improve their driving habits.”
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Strategy House Agrees to Vote on Flood Rate-Hike Delay Bill, but Will Craft Its Own February 13, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/13/house-agrees-to-vote-on-flood-rate-hikedelay-bill In a breakthrough, the House Republican leadership has agreed to allow a vote on modifying flood insurance rate hikes imposed by a 2012 law. That effectively means Congress will enact legislation dealing with the issue in the foreseeable future, perhaps by mid-March. Realizing the political potency of the issue, House Majority Leader Eric Cantor, R-Va., announced Wednesday night that a vote on such legislation will take place after Congress returns from its Lincoln holiday recess the week of Feb. 24. The preferred House bill is one that limits rate increases across-the-board to no more than 15% annually, PC360 has learned. There is even the potential that some of those who have been paying the higher rates since bills started going out last October could get refunds because the preferred bill would be retroactive to Oct. 1, 2013, when the bills under the new law started going out. Cantor acted after the House leadership three times effectively blocked efforts by House Democrats to get a vote on the Senate’s bill, S. 1926, which effectively rules out any rate increases until the current NFIP authorization runs out Sept. 30, 2017. House Speaker John Boehner, R-Ohio, voiced opposition -- at the request of SmarterSafer.org, an industry group which opposes any substantive rollback in the current law -- to the Senate bill before it was even passed But in dropping opposition and bringing up a flood bill, the House leadership effectively ensured that some rate rollback is in the cards. The preferred House bill is one that limits rate increases across the board to no more than 15% annually, PC360 has learned. There is even the potential that some of those who have been paying the higher rates since bills started going out last October could get refunds because the preferred bill would be retroactive to Oct. 1, 2013, when the bills under the new law started going out. Cantor acted after the House leadership three times effectively blocked efforts by House Democrats to get a vote on the Senate’s bill, S. 1926, which effectively rules out any rate increases until the current NFIP authorization runs out Sept. 30, 2017. House Speaker John Boehner, R-Ohio, voiced opposition, at the request of SmarterSafer.org, an industry group which opposes any substantive rollback in the current law, to the Senate bill before it was even passed. Cantor said in a statement the Senate bill irresponsibly removes much needed reforms and imposes additional costs on taxpayers. “The House will act to protect the flood-insurance program but also protect homeowners from unreasonable and unrealistic premium increases,” he said.
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However, both House and Senate staffers pointed out that the House version of the Senate bill has more than 230 co-sponsors. Rep. Maxine, Waters, D-Calif., says the Senate bill passed by a huge margin and without controversy. “Today, a majority of House members have signed on as cosponsors – meaning we know with absolute certainty that this legislation will pass if brought up for a vote.” Insurance-industry officials voiced guarded support that the House will craft a bill they can support. They fear the huge and growing deficit in the NFIP that would be sustained based on recently-passed Senate legislation rolling back the 2012 rate hikes constitutes a long-term political problem for the industry. They want the 2012 law modified, but not repealed. The 2012 legislation, the Biggert-Waters Act, has stirred intense controversy and prompted a lawsuit pending in Mississippi Federal Court backed by 22 states that would bar the rate hikes until FEMA conducts an affordability study. B-W mandated imposition of actuarial rates for the NFIP over four years. Industry officials cringed when, during Senate-floor debate on the issue, Sen. Heidi Heitkamp, DN.D., cited the case of one woman homeowner in her state whose $60,000 NFIP policy was going to rise from the current $625 to $10,600 in one fell swoop. Eighty-four Write-Your-Own insurers are the public face of the program. They sell, service and administer the National Flood Insurance Program on behalf of FEMA. Insurers are concerned that any changes in the current law will require costly changes in billing software and that a poorly written bill will continue the uncertainty surrounding the program. “We commend the majority leader for acknowledging the need for reforms and protecting the NFIP, and look forward to working with members of the House to make appropriate changes that protect taxpayers, consumers and the long-term fiscally soundness of the flood-insurance program,” says Nat Wienecke, senior vice president, federal government relations for the Property Casualty Insurers Association of America (PCI). Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies, says NAMIC is glad that House leaders have recognized the Senate's “irresponsible approach” to flood-insurance reform is costly and excessive. “For far too long, common-sense policy on flood insurance has taken a back seat to political opportunism, and we hope the House will live up to its promises of taking a balanced approach that will not simply put the burden of flood risk back onto the taxpayers,” Grande says.
CNA to Sell Life and Group Insurance Business February 10, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/10/cna-to-sell-life-and-group-insurance-business (Reuters) - CNA Financial Corp said it would sell its life and group insurance business, on the same day that parent Loews Corp reported a bigger quarterly loss, hurt by impairment charges. CNA said it was selling the business, Continental Assurance Co, to a subsidiary of Wilton Re Holdings Ltd, and was expecting to book an after-tax charge of about $220 million in the first quarter of 2014.
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CNA said it expected net proceeds of about $615 million from the sale and a portion of this would be in the form of a dividend from Continental. The sale will reduce CNA's non-core life and group gross GAAP insurance reserves by $3.4 billion, or 25 percent, and dispose of most of CNA's payout annuity business. CNA said it expected the transaction to close in the second quarter of 2014. Loews' net loss widened to $198 million, or 51 cents per share, in the fourth quarter ended Dec. 31 from $32 million, or 8 cents per share, a year earlier. The company said it took goodwill impairment charges of $398 million in the quarter, primarily related to low market prices for natural gas and natural gas liquids in its HighMount Exploration & Production LLC unit. Loews, owned by the billionaire Tisch family, also booked a charge of $111 million, related to CNA's transfer of its asbestos and pollution liabilities to Berkshire Hathaway Inc's National Indemnity Co unit. Loews' revenue rose 5 percent to $3.89 billion in the quarter. Excluding charges, the company had an income of $356 million for the quarter, mainly due to higher earnings at CNA and increased investment income. CNA posted a profit for the fourth quarter compared with a loss a year earlier, helped by an improvement in its underwriting results and lower disaster-related claims. Shares of Loews, which has a market capitalization of about $17 billion, closed at $45.18 on Friday on the New York Stock Exchange. CNA's shares closed at $39.67 on Friday.
Allstate Eyes Bigger Share of Insurance Markets in 2014 February 6, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/06/allstate-eyes-bigger-share-of-insurancemarkets-in (Reuters) - Allstate Corp aims to grow its share of the U.S. home and auto insurance markets without the need for "abnormally large" rate increases, its CEO said, after the company's profit more than doubled in the fourth quarter. Shares of Allstate, the largest publicly traded home and auto insurer in the United States, rose 2% after the bell on Wednesday. The company, which posted a better-than-expected quarterly profit, has increased insurance premiums aggressively in the last few years without any significant loss to its share of the highly competitive home and auto insurance markets. This has allowed Allstate to compensate for uncertain catastrophe losses and low interest rates on its investments.
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Catastrophe losses fell sharply in the fourth quarter ended Dec. 31. This, along with higher premiums across all of its businesses, helped Allstate to race past Wall Street estimates for the period. With premiums already high after a series of "dramatic" price increases, Allstate would focus this year on attracting customers to boost its market share, Chief Executive Thomas Wilson told Reuters. "We do not expect to have to be taking abnormally large price increases in the homeowners business," he said. In the fourth quarter, Allstate's home insurance business benefited from the decline in catastrophe losses to record a combined ratio of 66.6 - an improvement of 27.3 points over the corresponding year-earlier quarter. An insurer's combined ratio is the percentage of premium revenue that the company must pay out in claims. The fourth quarter of 2012 included $1.12 billion in losses from superstorm Sandy. Losses from natural disasters fell almost 90 percent to $117 million for the fourth quarter of 2013. Wilson said it would be desirable for Allstate to maintain its underlying combined ratio in the homeowners business in the low 60s. Growth in Autos In the auto business, Allstate's existing policies rose versus both the previous quarter and the yearearlier quarter for the second reporting period in succession. The growth in auto policies, aided by strong increases in new issued applications and solid retention, would likely suggest acceleration of policy growth in 2014, UBS Investment Research analyst Brian Meredith wrote in a note to clients. Meredith has a "neutral" rating on the stock. Allstate's share of the U.S. auto insurance market in 2012 was about 10 percent, only slightly lower than it was in 2011, according to data from regulatory body the National Association of Insurance Commissioners. Wilson said the company, flush with about $1 billion in excess capital from the sale of its Lincoln Benefit Life unit last year, would look to return capital to shareholders and fund growth. He said the board would decide in the next two months how to deploy this cash. Share buybacks and dividend payouts were among the options being considered, he said. Allstate posted fourth-quarter net income of $810 million, or $1.76 per share. On an operating basis, the company earned $1.70 per share, easily beating the average analyst estimate of $1.38 per share, according to Thomson Reuters I/B/E/S. Shares of the company, which have fallen more than 8 percent this year, closed at $49.55 on Wednesday on the New York Stock Exchange.
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What TransUnion's Data Reveals About Auto Insurance Shoppers February 4, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/04/what-transunions-data-reveals-about-autoinsurance How often do auto insurance consumers desire to shop for a new policy? This is one of many questions TransUnion seeks to answer with its Auto Insurance Shopping Index. Focused on the general credit population, the index draws upon information from the agency's extensive database. TransUnion's database contains information concerning more than 430 million auto insurance shopping transactions dating from 2009 to 2013, providing a rich, unique data set. It also explores for a subset of the full data shopping rates for insurance policyholders. After analyzing this data, TransUnion has concluded that consumers who shop for insurance and receive a quote are 350 percent more likely to shop again in the next year compared to policyholders who did not receive a quote. The report authors also found that more than half—55 percent—of policyholders who do shop receive two or more quotes within an annual period. So what is motivating consumers to switch insurers, or at least look for greener pastures? Barring unsatisfactory claims experiences, some experts theorize that avid comparison shopping may be the result of robust marketing programs. "More than a billion dollars are spent each year on auto insurance advertising, most of which urges consumers to switch their policies to another carrier," says Mark McElroy, executive vice president of TransUnion's insurance business unit. "Our proprietary data is able to track actual trends in new business auto insurance since 2009, improving the industry's access to strategic information on auto insurance shopping.” TransUnion notes that overall shopping rates for auto insurance are down about 4 percent in the 12 months ending June 2013 relative to the full year of 2012. Moreover, rates decreased about 7 percent relative to a year earlier. While 15.1 percent of the credit-active population shopped for new auto insurance policies in the 12 months ending June 2013, this represented a decline from 15.7 percent for the full 2012 year, and 16.2 percent for the 12 months ending June 2012. The data also provides insight into the characteristics of auto insurance shoppers, as well as potential group-specific motivating factors. Among other characteristics, the information shows that younger drivers tend to shop for auto insurance more frequently, and auto insurance shopping peaks at age 25 for both men and women. The credit reporting agency also finds that younger women—those between 25 and 40 years old— are more active auto insurance shoppers than their male counterparts. However, that trend reverses at mid-life. After age 40, the percentage of women who shop for new policies wanes, while the shopping rate among men remains relatively stable.
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Movers and Shakers While auto insurance shoppers tend to be younger, those who are in the process of, or have recently changed their place of residence also tend to be heavy shoppers. Compared to non-movers, consumers who move residences are 200-percent more likely to shop for auto insurance before their move; 130-percent more likely during the month of their move; and 60 percent more likely one month after the move. "In the competitive auto insurance market, data and analytics can mean the difference between winning and losing, as a result of low retention and adverse selection," McElroy reports. "Auto insurance shopping data help insurers understand how their company is faring among insurance shoppers." "Among other things, our data can tell insurance companies if their customers are shopping more than the general market, which customers are quoting most often and when they are likely to shop," McElroy adds. Other findings of TransUnion's Auto Insurance Shopping Index include: •
Shoppers in previous years are much more likely to shop in the current period (350- and 300percent higher shopping rates one and two years after their original shopping year, respectively).
•
Higher risk auto insurance customers—those with lower credit-based insurance scores—shop most frequently. Consumers with the highest insurance scores are less likely than the general population to shop for new auto insurance.
•
On average, auto insurance shoppers solicit two quotes (2.04); nearly half (45 percent) of auto insurance shoppers solicit only one quote.
•
Spring months are the most active for auto insurance shopping, while December is the least active month.
The index excludes data from auto insurance customers in California and Massachusetts, where credit-based insurance scoring information is not used for auto insurance rating or underwriting.
U.S. Senate Passes Farm Bill, Sends to Obama for Signature February 4, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/04/us-senate-passes-farm-bill-sends-to-obamafor-sign WASHINGTON (Reuters) - The U.S. Senate gave final congressional approval on Tuesday to a nearly $1 trillion farm bill that trims food stamps for the poor, expands federal crop insurance and ends direct payments to farmers, and sent it to President Barack Obama for his expected signature. The Senate voted 68-32 to pass the sweeping bill, which is more than a year overdue after congressional negotiations bogged down on a host of issues, including the size of cuts to the food stamp program. Last week the House of Representatives passed the legislation by a wide margin.
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The White House has said Obama would sign the bill. The Congressional Budget Office says the $956 billion legislation will save $16.6 billion over 10 years compared to current funding. Using a different scoring, congressional leaders put the savings at $23 billion. About $8 billion in savings over 10 years comes from cuts to the Supplemental Nutrition Assistance Program, commonly known as food stamps, which accounts for nearly 80 percent of the bill's spending. The program provides funds to about 47 million low-income people to buy food. The food stamp cut was well below the $40 billion reduction advocated by the Republican-led House, but still double the amount originally supported by the Democratic-run Senate.
The Washington Report: Industry Fighting Two-Front War with Legislators February 3, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/02/03/the-washington-report-industry-fighting-twofront The property and casualty insurance industry should wake up and smell the coffee. That’s because the industry is now engaged in the worst of all possible worlds, a two-front war. And, equally important, there is no clear path out of the tunnel the industry currently finds itself in. The problems are the unexpected reopening of the issue of the high deficits facing the National Flood Insurance Program through legislation passed by the Senate last week -- an issue moving to a House apparently unwilling to rubber stamp the Senate action. Therefore, this emerging issue stands in the way of the second issue and the industry’s top legislative priority: reauthorization of the Terrorism Risk Insurance Act. That program expires Dec. 31. The P&C industry saw itself in relatively good shape as the current Congress started work in January 2013. While the nation would be led by a Democrat, there would be divided government, with a Republican-led House in perfect position to guard the industry’s flanks. That is, the industry would have in place an entity in a position to strongly counter any Obama-administration initiative for a broad federal takeover of insurance oversight (Indeed, that ability will be on stark display Tuesday, when the leadership of the House Financial Services Committee holds a hearing where it plans to signal the administration in unequivocal terms that the current state-based regulatory system, as dysfunctional as it is, will remain the status quo ante as long as they are in charge). Moreover, in the industry’s view, its greatest headwind had evaporated: the uncertainty created by the fact that a major safety valve, the National Flood Insurance Program, in limbo since its authorization expired Sept. 30, 2008, was finally reauthorized through legislation enacted in July 2012. That legislation supposedly cleared a path for a return to solvency for the NFIP. So in early 2013, the industry confidently laid out its plan for Job No. 1: prompt reauthorization of the Terrorism Risk Insurance Program ahead of its scheduled expiration date of Dec. 31, 2014. But last week’s passage by the Senate of legislation that would have the practical effect of delaying
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scheduled NFIP rate increases for up to four years reopens an issue the industry thought it had put behind it. But the situation is far worse than it was in 2012 before passage of the law that phased in actuarial rates for flood insurance for four years. That’s because any changes imposed by Congress will take no less than six months for the Write-Your-Own insurers who administer the program to implement, according to an official letter by the group. And there are three other factors involved: First, it will be costly for WYO insurers to rewrite the software used to implement the program, in other words, do the billing, etc. Second, the Congressional Budget Office says that the changes will potentially increase the NFIP deficit by $1.9 billion over 10 years, and that is before the virtual certainty that because of climate change there will be more Katrinas and Sandys creating an even bigger eyesore for a Congress already dealing with intense demands for lesser government. Third, Congress has yet to start dealing in detail with reauthorization of TRIA. The House Financial Services Committee had planned to take up the issue starting in March and the leadership of the panel has already signalled it wants to put its lesser-government stamp on the issue, i.e., more industry skin in the game in any legislation reauthorizing TRIA. The House is balking at accepting the Senate package rolling back the flood-rate increases, and, again, the House FSC wants to “put its own stamp on the legislation.” But, it will face intense political pressure. That pressure is coming from the Senate, from consumers and from powerful state interests, real estate interests, homebuilding interests and mortgage-banking industry interests, all of which have a huge stake in the issue. Effectively, the Senate legislation is an effort to adroitly camouflage the fact that Congress didn’t realize that, through passage of the 2012 bill mandating actuarial rates for flood insurance, it was exposing political deals going back to 1972. Industry officials grimaced when, during Senate debate on the flood bill last week, Sen. Heidi Heitkamp, D-N.D., cited the case of one woman homeowner in her state whose $60,000 NFIP policy was going to rise from the current $625 to $10,600 in one fell swoop. That will back up into the talks over TRIA, leaving House FSC conservatives with less room to manoeuvre on the TRIA legislation. And the pressure from conservative backers to hold the line is increasing, not receding. It also isn’t very helpful to the industry that the chief Republican sponsor in the House of the Senate flood bill, as well as the TRIA reauthorization legislation preferred by the industry, is Rep. Michael G. Grimm, R-N.Y. Grimm was the “star” of the State of the Union address, making a spectacle of himself by being caught on camera in the Capitol physically threatening a reporter, saying, “I’ll break you in half” and threatening to throw him off a balcony. Adding to the pressures on the conservative leadership of the House FSC is a campaign-finance report released late last week saying that conservatives seeking to pull the Republican Party to the right raised more money last year than the groups controlled by the party establishment. Members of Congress are skilled debaters. But they will be facing a variety of pressures dealing with
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critical issues whose resolution is needed to provide certainty to an industry providing basic services critical to the smooth functioning of the U.S. economy. Missteps could derail the fledging housing recover and impact the national security of our nation. And we will have to go back to the 1950s to find a Congress comparable to this one, and that analogy is not a positive one. As for the House FSC hearing, it will feature an appearance by Michael McRaith, director of the Federal Insurance Office. He will discuss the agency’s modernization report, released in December, and defend its conclusion that Congress and the states should work for a greater federal role in an industry that is becoming more global in nature. At the same time, the committee plans to have on hand witnesses aimed at making clear to the Obama administration that states should play a strong role in shaping the U.S. response to those pressures.
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