INSURANCE NEWS FLASH June 02, 2014
Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 9 Technology .......................................................................................................................... 14 Strategy .............................................................................................................................. 20
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Sales & Marketing DOT Report Calls for Higher Minimum Motor Carrier Limits; Market Impact Examined May 28, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/28/dot-report-calls-for-higher-minimum-motorcarrier?ref=rss Current required minimum liability limits for motor carriers are insufficient to cover the costs of rare but catastrophic crashes, the Federal Motor Carrier Safety Administration (FMCSA) says, adding that it plans to develop a proposed rule to address the issue. Industry observers acknowledge that catastrophic crashes can and do exceed current minimum limits, but wonder about the impact on rates and claims payments should those limits be raised. For its part, the FMCSA says its study did not assess potential premium increases as a regulatory cost, noting the lack of available information on underwriting and pricing practices from both insurers and motor carrier risk managers. The study, released last month, was conducted in accordance with the Moving Ahead for Progress in the 21st Century Act (MAP-21), which President Obama signed into law July 6, 2012. The act directed the Department of Transportation secretary to issue a report to Congress on the “appropriateness of the current minimum financial-responsibility requirements for motor carriers of property and passengers…,” which the secretary delegated to the FMCSA. The study reports that the function of insurance has been “effectively removed” in covering catastrophic crashes, as medical and other costs have increased over the years, meaning the “real value” of the minimum-liability limits has decreased. The current required minimum liability limits were established in the 1980s, stemming from the Motor Carrier Act of 1980 and the Bus Regulatory Reform Act of 1982. By 1985, after a phase-in period, limits for motor carriers of property (freight) were set at: • • •
$750,000 for the transportation of property. $5 million for the transportation of certain hazardous materials. $1 million for the transportation of other hazardous materials.
For motor carriers of passengers, minimum limits were set at: • •
$5 million for vehicles with a seating capacity of 16 or more passengers. $1.5 million for vehicles with a seating capacity of 15 or fewer.
The rare catastrophic claim For most claims, these limits are adequate. The study says catastrophic crashes resulting in injury, death and/or property damages that breach the current minimum limits constitute less than 1% of all commercial motor-vehicle crashes. But the few catastrophic and severe/critical injury crashes that do occur “can far exceed the minimum levels of financial responsibility,” the FMCSA says.
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And industry experts tend to agree. Steve Weisbart, chief economist for the Insurance Information Institute, says of catastrophic accidents that can surpass minimum limits: “Fortunately, they’re rare, but they do happen.” An insurance executive with knowledge of the transportation industry says, with respect to larger passenger motor carriers, the current $5 million limit is adequate on the vast majority of claims, but he adds, “Clearly on these larger claims, the $5 million is not enough.” That said, raising the minimum limits will have consequences for the insurance marketplace. Weisbart says it’s unclear exactly what the net effect of those consequences will be: “There would be increased revenue [for insurers] from people now buying minimum coverage, but also increased claims for people whose claims exceed the minimum,” he says. Presumably, he adds, actuaries would price the risks differently, in which case it would “probably be beneficial to the industry, but it’s hard to tell.” The insurance executive, though, says last time the limits were raised in the 1980s, insurers did not immediately reflect the change in their rates, as a soft market drove competition. For the larger passenger motor carriers, he says, pricing remained as it was under the older $1 million minimum limit, and by early 1986, the combination of low rates and higher claims nearly collapsed the market for these risks. Should limits be raised again, the executive says he believes it will again take time for insurers to react with rate increases, possibly three-to-four years as claims develop. When rates do increase, the executive says they could rise by 50-60%, given the new cost of limit losses (assuming the minimum limit is raised from $5 million to $10 million for larger passenger motor carriers) as well as the impact of “limits pull”—where settlement values are inherently pulled up as available limits increase. The executive says the impact of limits pull would be felt in addition to already-rising claims severity in the current environment due to, among other factors, a “dramatic rise in surgical procedures” and an active legal environment. A potential factor that could counter the rising cost of claims, Weisbart says, is the possibility that higher premiums will “provoke a little more interest on the part of motor carriers to identify issues that lead to accidents. And if they figure those out and implement strategies for mitigating or preventing loss, everybody’s better off.” Chances of action in Congress The FMCSA, in its study, says it has formed a rulemaking team to evaluate what the appropriate level of financial responsibility should be for the motor-carrier industry. The next step, the study says, will be to meet with stakeholders and develop a proposed rule. What Congress will do after that is unclear. Weisbart says if there is pushback, for example from motor carriers who would face higher premiums, then “this might be something that takes a while to get into legislative form.” He notes the issue doesn’t seem to have the kind of urgency that some other recent insurance issues have, in part because there is no deadline or expiration in play, as there was on the flood-insurance issue and with TRIA. Ultimately, Weisbart says he would not be surprised if Congress ultimately puts in place an “automatic escalator that recognizes the change in healthcare costs—the main driver of insurance payouts in these accidents—so they don’t have to do this again in 30 years.”
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Life insurance premiums will be rising for older vets May 27, 2014 | Live Insurance News http://www.liveinsurancenews.com/life-insurance-premiums-will-rising-older-vets/ According to a statement that has been released by Veterans Affairs Department officials, as of July 1, 2014, older vets will find themselves facing higher life insurance premiums for their Veterans Group Life Insurance policies. THE INCREASE WILL APPLY ONLY TO VETS WHO ARE AGED 70 YEARS AND OLDER AND IT WILL BE FOR 2.2 PERCENT. This life insurance rate increase is the first one to have been put into place for veterans in 21 years, said the department officials. This will mean that for every $1,000 of monthly coverage, affected policyholders will be paying 5 cents more. To illustrate the point, in the example of a veteran who is aged 70 or more and who has VGLI coverage for $50,000, he or she will be paying $2.50 per month more than the previous premiums, bringing it from $112.50 to $115. THE INCREASES FOR LIFE INSURANCE FOR VETERANS AGED 50 AND OLDER WILL BE SLIGHTLY HIGHER. In the same example of a monthly cost for coverage of 50,000, a veteran who is aged 75 or higher will be seeing a bill that is $5 more, bringing it from $225 to $230. The coverage available through VGLI is offered in increments of $10,000 up to a highest possible coverage of $400,000. The monthly premiums within this program are based on age, and they rise every five years up to the age of 75 years old. At that point, there is a cap on the rate and it will not increase any further, no matter how long the veteran lives. Veterans who have the maximum coverage of $400,000 and who are aged 75 more will find that their premiums will rise in July from having been $1,800 per month in order to become $1,840 per month. A fact sheet that was provided by the Department of Veterans Affairs regarding these life insurance rates explained that “Older veterans have been paying premiums at a rate that is below what it costs to provide coverage.” It then added that “In fairness to veterans of all ages insured under VGLI, and in order to keep the program financially strong and competitive, we have to bring the rates more in line with the cost of claims at those ages.”
The Impact of Insurance Fraud: Fraud is not only a problem for insurers May 23, 2014 | Live Insurance News http://www.liveinsurancenews.com/impact-insurance-fraud/ Insurance fraud is more common than people may think and it is one of the most serious problems facing the insurance industry today. Fraud causes an estimated $115 billion in financial damage in the U.S. alone and this damage is not only felt by insurance companies. Because insurers are pressured to recover from losses, the financial damage caused from fraud often trickles down to policyholders, who must pay for the fraudulent activities of others through increased premiums or fewer benefits being offered by their insurance provider.
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Fraud takes a variety of forms in the U.S., with fraudulent activity become particularly pronounced in the wake of a major natural disaster. In the aftermath of 2005′s Hurricane Katrina, the U.S. government committed some $80 billion to reconstruction efforts. It is estimated by the Federal Bureau of Investigation that approximately $6 billion of this sum was lost through fraudulent activities. Fraud also takes form in exaggerated claims coming from policyholders. In these cases, policyholders claim that the damage caused by a disaster, real or imagined, is significantly more severe than it actually is. AUTO INSURANCE IS A COMMON TARGET FOR FRAUD Auto insurance is another arena where fraud is currently thriving. Conservative estimate that auto physical damage fraud leads to approximately $3 billion in insured losses each year in the U.S. The majority of these losses are seen in states with no-fault insurance laws. These laws require insurance companies to provide benefits for medical care regardless of who is to blame in the event of a vehicular accident. Staged accidents are relatively common in these states, but there is some effort being made to revise no-fault laws to make them less prone to exploitation. Ultimately, the cost of insurance fraud affects insurers more than others. Insurers do, however, respond to fraud in a variety of ways. Because losses cannot be recovered immediately, insurers often the premiums on the coverage they provide. Rate hikes like this could be in place for years before insurance companies manage to overcome the losses they accrued from fraudulent activities.
Legislation Highlights Availability of Private Flood Insurance May 23, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/23/legislation-highlights-availability-of-privateflo?ref=rss Legislation has been introduced in Congress that would clarify that private flood insurance should be an option available to homeowners. The Flood Insurance Market Parity and Modernization Act of 2014, S. 2381, was introduced in the Senate by Sens. and Jon Tester, D-Mont., and Dean Heller, R-N.V., Thursday. The House companion bill, H.R. 4558 was introduced by Representatives Dennis Ross, R-Fla., and Patrick Murphy, D-Fla, May 1. The Property Casualty Insurers Association of America, whose members constitute two-thirds of the insurance companies that help administer the National Flood Insurance Program as Write-Your-Own companies, lauded the legislation and urged Congress to pass it. “This common sense legislation clarifies the intent of Congress that private flood insurance should be an option available to homeowners,� says Nat Wienecke, PCI senior vice president, federal government relations.
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Related Privatizing Flood Insurance Presents Opportunities, Obstacles While flood insurance might represent the biggest growth opportunity for private carriers in years, it’s no certainty the industry would The issue was first raised by commenters to a regulation proposed last year by federal bank regulators aimed at allowing mortgage banks to accept private flood insurance as an alternative to that provided through the National Flood Insurance Program. The rule was mandated by a provision of the Biggert-Waters Act of 2012. The commenters, groups representing mortgage banks as well as state insurance regulators, questioned whether existing law allowed them to accept private flood insurance. The issue is still pending. Heller and Tester explained that, when the National Flood Insurance Act of 1968 was passed, it was Congress’ intention that private insurers would provide flood insurance coverage in the United States. Unfortunately, due to a lack of clarity in existing law, lenders have not been accepted private flood insurance as meeting mandatory purchase requirements. Heller said that S. 2381 would resolve this issue by simply defining acceptable private flood insurance as a policy that provides flood insurance coverage issued by an insurance company that is licensed, admitted, or otherwise approved to engage in the business of insurance in the State or jurisdiction in which the insured building is located, by the insurance regulator of the State or jurisdiction. “This bill seeks to reassure lenders about the validity of privately issued flood insurance, despite the fact that this insurance has been issued and accepted in the past,” Heller said. SmarterSafer issued a statement in support of the bill's intent: "With the National Flood Insurance Program sinking under $24 billion in debt, we must start finding other means to cover those in harm’s way. This bill is a great way to start opening up the flood-insurance market to private insurers, who have more flexibility to offer policies that fit the true level of risk. Letting private insurers step in where NFIP has failed is a commonsense way to protect Americans who rely on flood insurance to keep their homes and families safe. By better informing policyholders of the growing risks they face, this bill will help people make more well-informed and cost-effective choices, ultimately lowering costs and better protecting lives and property."
House Bill Would Let Military Personnel Retain Auto Insurance When They Are Transferred May 22, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/22/house-bill-would-let-military-personnelretain-aut?ref=rss Legislation has been introduced in Congress that would allow members of the U.S. military to retain their auto-insurance policies when they are transferred to new bases. Reps. Ed Royce, R-Calif. and Tammy Duckworth, D-Ill., introduced the bill, the Servicemembers Insurance Relief Act (H.R. 4669) Monday in the House.
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Royce said he introduced it to make the current, state-based insurance regulatory system more accommodating to servicemembers that currently have to change auto-insurance policies every time they relocate across state lines. “This bipartisan legislation makes a simple but meaningful change to current law that will lessen the burden on servicemembers and their families during times of transition,” Royce said. The bill was prompted by a 2013 report by the Federal Insurance Office that said the office would work with stakeholders to develop personal auto-insurance policies for U.S. military personnel that would be enforceable across state lines. It would enable all members of the U.S. military, including the National Guard and Reserves, to keep their current auto-insurance policy when they receive Permanent Change of Station or Temporary Duty Assignment orders. The bill immediately picked up support from USAA. Robert Hartwig, president and CEO of the Insurance Information Institute, said he expects state insurance regulators as well as insurers would support it. “Insurers already have a lot of experience in this area because truck insurance reflects the fact that the insured vehicles travel interstate,” Hartwig said. The same applies for cars where the vehicle that is insured is operated outside the state where the insurance is issued, he added. “I think no one wants roadblocks to exist in the path of servicemembers who are frequently transferred from one state to another,” he said. The bill would require insurers who are notified of a military customer’s orders to move to inform the customer that they can continue with the same policy for their current state of residence or seek a new one. Insurers would be allowed to make rating adjustments to the existing policy to address changed risk factors based on the new location, such as a greater risk of a car being stolen or damaged by hail. “The men and women in our nation’s military regularly sacrifice in service of our country,” added Brian Conklin, vice president of federal government relations for USAA. “The hassle and confusion of changing auto insurance every time they move to a new state is one burden they don’t need. This bill would let servicemembers choose a single policy that could follow them throughout their military career. By giving servicemembers this choice, this bill can give them some peace of mind.”
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Finance Robust M&A Forecast for 2014 June 01, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/01/robust-ma-forecast-for-2014?ref=rss 2012 was a record-breaking year for the number of announced insurance brokerage mergers and acquisitions, principally due to the higher capital gains tax that became effective in 2013. It was a year in transition, culminating with active third and fourth quarters. However, first-quarter 2014 was the most active first quarter for transactions in the last 10 years. A telling trend is the rise and now dominance of the private equity-backed buyer group. In 2013, more announced deals were consummated by the private equity-backed segment than the heretofore most active private group and the relatively active public broker group. Not only are such large private equity-backed companies as Hub and USI very active, but Assured Partners also emerged into this category. Three of the most active acquirers in 2013 and in the last three years were private equity-backed buyers. Other smaller but active private equity-funded buyers included Acrisure, BroadStreet Partners and The Hilb Group. So what should we expect to see on the M&A front for the rest of this year and the future? Based on the recent past, I believe acquisitions will remain robust for a number of years to come. We have a strong and well-capitalized buy group. Private equity-backed firms will continue to hunt for deals, as one of the foundations of their business model is growth through acquisition. The public broker group also will remain active acquirers. Recent activity suggests their acquisitions have become more strategic, with a focus on larger targets. But if history is any guide, the public-broker sector will continue to be a major player on the M&A front. The sell community also will be active. Some will be strategic, looking for alignment with a larger player; others will be tactical, seeking transactions to capitalize on their value. However, the great majority during the next 10 to 15 years will be driven by necessity due to a convergence of two critical forces: the retirement of baby boomer agency principals age 55 and older, combined with the fact that many of those firms have not built the people and capital resources to perpetuate internally. For those who are acquisitive, I predict happy hunting, as inventory should be deep. For those who need an exit, it may be prudent to be proactive and sell ahead of the curve, as the buy group may turn selective as more acquisition targets become plentiful.
P&C Pricing Increases ‘Modestly Positive’ June 01, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/01/pc-pricing-increases-modestlypositive?ref=rss Insurers appear to have reported a year-over-year Q1 decline in earnings—and decelerating pricing across most lines, an inflow of third-party capital, reserve risks and volatile weather are creating a turning point for the property & casualty industry, according to recent reports.
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In a Q1 review, Moody's Investors Service says its rated P&C insurers reported 11% lower earnings in Q1 2014 compared to the same period last year. Moody's attributes the drop primarily to higher weather-related losses and elevated non-catastrophe losses. In its own Q1 recap, Keefe, Bruyette & Woods offers a mixed view of the perceived headwinds facing the P&C industry, and the firm says it is not taking a broad-brushstroke approach to the P&C sector, or even across personal lines, commercial lines, specialty, reinsurers or brokers. Regarding the inflow of third-party capital, KBW says concerns are justified that this phenomenon is significantly shifting property-catastrophe reinsurance market dynamics and questions the response by some reinsurers: “The attempts by a few reinsurers to stymie the premium pressure by loosening terms and conditions and coverages are a dangerous and underappreciated side effect of current pressure on property cat rates.” KBW expects pricing outside of property catastrophe to continue decelerating, justified by improving core-underwriting margins—but the firm says soft interest rates and inadequate return-on-equity levels should keep increases “modestly positive” over the next 12 months. Moody's likewise says it expects commercial-line rate increases to slow further, but to remain above the trend in loss costs for the rest of the year. “Based on commentary from the insurers’ quarterly earnings calls, commercial-rate deceleration is trickling down from large property accounts to middle market accounts as carriers push for greater retention, now that a majority of their business has achieved rate adequacy,” Moody's analyst Ji Liu says in a statement. “Still, the competitive environment remains rational as the most challenging lines such as commercial auto and workers’ compensation command further rate increases.” Drilling down into specific lines, KBW says rate increases in specialty appear to be more modest than in the recent past; homeowners’ rates appear set to decelerate at a faster pace over the next 12 months; and property catastrophe “is nearly in free fall.” Personal auto “feels more competitive within the independent-agency channel,” says KBW. Moody's says the line is experiencing competitive pressure as direct writers continue to gain market share and large agency writers compete on price to pursue growth again in 2014. On industry reserves, KBW says it believes 2013's “prominent reserve implosions” are companyspecific, rather than a broader shift in reserving practices. The firm says that in Q1 2014, commercial-focused insurers, excluding AIG, experienced a 13.4% year-over-year increase in netfavorable development. Looking at the reserve performance for these insurers from Q1 2011 to Q3 2013, a KBW chart shows a downward trend in the number of companies reporting less-favorable development and adverse development. In Q4 2013, the trend appeared to reverse, with the number of companies reporting less-favorable development climbing from 30% to 54%, and the number of companies reporting adverse development rising from 8% to 17%. But in Q1 2014, the numbers dropped again to 29% reporting less-favorable development and 10% reporting adverse development. KBW says, “While Q1 2014 is simply one data point, it's nonetheless a data point that's contrary to Q4 2013's brief trend departure—and one that perpetuates the longer-than-expected streak of favorable reserve development in light of what's been a remarkably benign loss-cost environment.”
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The Return of a Soft Market? Reinsurance Pricing Pressures Could Move to Primary Market May 29, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/29/the-return-of-a-soft-market-reinsurancepricing-pr?ref=rss A traditional soft market is coming as alternative capital-driven pricing pressure in the reinsurance market flows to the primary market, a recent Nomura report contends. Nomura analysts Clifford Gallant and Mathew Rohrmann say in the report—titled “The Evolution of Reinsurance: Soft Market to Spur M&A”—that one impact of the growing alternative-capital presence will be further price weakening in property/catastrophe reinsurance rates, followed by weakening across all reinsurance lines before finally affecting primary-commercial rates. “We have already seen a slowdown in primary-commercial rate increases despite the ongoing pressure of a low-investment-yield environment,” states the report. “Much as we have seen in generations of previous cycles, we expect that the availability of cheap reinsurance will exacerbate the fight for market shares at the primary level, leading to a traditional soft market.” Nomura then expects consolidation as the traditional reinsurance business model comes under pressure. “Many *reinsurers+ may need to merge to survive,” Nomura says. “Eventually, companies that we may not yet think of as buy/sell candidates will take part. The pressures of a bad soft market cannot be understated, in our view.” The report ties this outlook to Endurance Specialty Holdings’ attempt to buy Aspen Insurance Holdings, stating the attempt “makes perfect sense, by our view of the world. Endurance is small and, in our opinion, could end up on the selling side to survive unless it acts quickly to grow and diversify.” According the report, the reinsurance market is not just under pricing pressure, but is experiencing an evolution in the marketplace. “In the evolutionary process,” says the report, “things happen slowly before they happen very fast.” Nomura notes the first catastrophe bonds were issued in the mid-1990s, but only recently has the alternative market shaken up the industry. “Much like what happened in the 1990s to the publicly traded U.S. domiciled reinsurers (none is left), we expect that a more efficient business model will force change in the reinsurance industry,” states the report. The advantages for buyers are clear, according to the report. “As a risk-management product, cat bonds are less expensive than traditional capacity and are fully collateralized,” says the report. Alternative capital is currently pressuring property/catastrophe rates the most, with rates already down double-digit percentages since 2012 “in what appears to be a traditional soft-market free fall,” says Nomura. But it is quickly spreading to other lines, the report notes. “The establishment of Watford Re, by highly respected Arch Capital, will be a major alternative underwriter of casualty risks.” Nomura expects to see more players form similar vehicles, possibly eyeing liability lines such as auto or workers’ compensation as “potentially stable sources of assets” for asset managers.
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Potential “wild cards” that could change Nomura’s outlook include a major loss event, which “would open up questions of reserve and balance-sheet quality and could derail activity,” Nomura says. Asked if investors who are bringing all of this capital into the reinsurance market will stick around should a major loss event occur, Gallant tells PC360 that is the big question. "I think, yes," he says. "They seem to be sophisticated investors, aware of the risks they are taking." Nomura also cited rising investment yields and “entrenched management” that resists acquisition as potential wild cards.
Allstate insurance company announces catastrophe losses from April May 19, 2014 | Live Insurance News http://www.liveinsurancenews.com/allstate-insurance-company-announces-catastrophe-lossesapril/ According to Allstate’s newly released estimates, the April 2014 catastrophe losses came to a pre-tax amount of $280 million (or after-tax $182 million), which the insurance company is attributing primarily to six major events during that month. THOSE SIX EVENTS CAME WITH A PRE-TAX COST OF AN ESTIMATED $250 MILLION DURING APRIL. Also contributing to the losses experienced by the insurance company in April were the unfavorable re-estimates of the reserve for prior losses from catastrophes. Allstate is the biggest publicly held personal lines insurer in the United States and also does business in Canada. While these figures are based on estimates and are not yet considered to be solid data, they do help to provide a clearer image of the current situation being faced by the insurer as well as assist in projecting future developments. THE INSURANCE COMPANY RELEASED THIS DATA EXCLUSIVELY FOR THE MONTH OF APRIL. These figures don’t take into account the previous catastrophe loss data from earlier months in the year. It is clear that this insurer isn’t alone in this type of figures. Moreover, the insurance industry as a whole is bracing itself for what could be a catastrophic year, with reports already being issued regarding earlier than usual starts to the wildfire seasons in many states, as well as warnings being released regarding potential large earthquakes in states where fracking is taking place. As the hurricane season has not yet begin, those catastrophes have also yet to be seen, though it is not known whether or not this will be a season in which there will be a large number of powerful storms. The issue of climate change has been a subject that has been heavily discussed by the insurance industry. It has caused many events, such as storms (in both the summer and winter), to become more frequent and powerful. Now, all an insurance company can do is use as many tools and resources as are available to attempt to better understand the risks being presented in the near and longer term futures.
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Marsh & McLennan Agency Acquires VISICOR May 19, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/19/marsh-mclennan-agency-acquiresvisicor?ref=rss Marsh & McLennan Agency LLC acquired VISICOR, a full-service employee benefits brokerage and consulting firm based in Friendswood, Texas, expanding the company’s employee benefits capabilities in the Southwestern U.S. “I’m delighted to welcome VISICOR’s talented and experienced employee benefit specialists to MMA,” said Anthony Gruppo, CEO for Marsh & McLennan Agency’s Southwest region. “The addition enables us to offer greater resources and a broader platform to serve the employee benefit needs of our clients throughout Texas and the Southwest.” VISICOR provides employee benefits compliance, consulting, and administration and communication services to both public and private employers throughout the state of Texas, bringing in approximately $1.5 million in annual revenue. All of VISICOR’s leadership and employees will join Marsh & McLennan’s Southwest region, merging into the Agency’s existing office in Houston. “Becoming a part of Marsh & McLennan Agency is the next step in the evolution of VISICOR,” said Ed Oravetz, president of VISICOR. “Our clients will continue to enjoy the same high-quality service they’ve come to expect from VISICOR while benefiting from a broader array of capabilities and resources through MMA.” David Eslick, chairman and CEO of Marsh & McLennan Agency, added: “MMA continues to attract the best and brightest in the industry. I welcome Ed Oravetz and the rest of the VISICOR team to MMA as we continue to build one of the nation’s preeminent insurance agencies focused on the middle market.”
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Technology Software is making the insurance industry more efficient May 27, 2014 | Live Insurance News http://www.liveinsurancenews.com/software-making-insurance-industry-efficient/ IBISWorld, a global business intelligent organization, has released a new report concerning the effect that new technology is having on claims processing in the U.S. Claims are nothing new for the industry, but how insurers deal with the claims they receive has been evolving rapidly over the years. As new technology becomes available, insurance companies are finding better ways to manage claims and process these claims at a more rapid pace. Insurers are also become more adept at weeding out fraudulent claims that could lead to costly and unnecessary losses. CLAIMS PROCESSING IS BECOMING A LESS LABORIOUS PRACTICE THANKS TO NEW TECHNOLOGY Claims processing had once been a labor-intensive matter, but new technology has eased the burden associated with the process. Software specifically designed to manage the claims process has become quite popular in the property/casualty and life insurance sectors, where handling claims is often a very time-sensitive issue. Software products allow insurers to quicken their claims management process, expediting payouts for policyholders and allowing insurers to mitigate the costs associated with the labor involved in managing claims in a more traditional fashion. CLAIMS SOFTWARE INDUSTRY EXPECTED TO REACH $5.4 BILLION BY THE END OF THIS YEAR According to IBISWorld, the claims processing software industry is expected to see its revenue increase by an average of 4% every year. By the end of 2014, the industry is expected to reach a valuation of $5.4 billion. The demand for comprehensive software solutions is beginning to rise at a rapid pace among insurance companies, especially those within the property/casualty space. PROPERTY INSURERS ARE FIGHTING TO MANAGE THE IMPACT OF POWERFUL STORMS THAT ARE OCCURRING MORE FREQUENTLY Insurers are beginning to face significant challenge when it comes to the property/casualty market. Severe weather has become a serious and unpredictable problem that has lead to heavy losses throughout the insurance industry. Unpredictable and unusually powerful storms are becoming more common, which is placing pressure on insurance companies to process claims quicker than they had to do in the past. Without the appropriate software, insurers may be overwhelmed by the flood of insurance claims that come in the wake of natural disasters.
Telematics begins to have a major impact on auto insurance sector May 23, 2014 | Live Insurance News http://www.liveinsurancenews.com/telematics-begins-major-impact-auto-insurance-sector/ Reed Elsevier, a leading information technology company, is preparing to finalize the acquisition of Wunelli, a developer of telematics solutions for the auto insurance sector. Telematics is becoming
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very popular in the insurance industry because of how it can be used by insurers to price policies more accurately. Demand for this technology has been growing steadily over the past few years and has reached an all-time high as insurance companies continue to look for ways to mitigate losses while also providing high-quality services to consumers. WUNELLI TECHNOLOGY IS IN HIGH DEMAND AMONG INSURANCE COMPANIES Through its acquisition of Wunelli, Reed Elsevier will gain access to the company’s “black box” technology. This technology will can be used by insurance companies to monitor the driving habits of consumers throughout the United Kingdom, with permission, of course. Information concerning driving habits and consumer behavior are invaluable to the insurance industry, as this data can be used to price insurance products and offer policyholders ways to save money on their auto insurance coverage. TELEMATICS COULD PROVIDE CONSUMERS WITH A WAY TO SAVE MONEY ON THEIR INSURANCE COVERAGE Telematics allows safe drivers to take advantage of discounts on their insurance coverage. Those that drive infrequently can also benefit from these discounts, while those that drive often, such as those with long commutes, could be paying more for their insurance coverage based on whether or not they are safe while they are operating their vehicles. Ultimately, many insurers believe that a larger number of people will save money because of telematics than those that would have to pay higher premiums for their coverage. INSURANCE INDUSTRY IS EMBRACING TECHNOLOGY MORE READILY Telematics is beginning to have a major impact on the insurance industry and insurers are willing to make use of this technology in order to overcome some of the challenges they are beginning to face in certain markets. Customer service is one such challenge that could, in part, be mitigated through the use of telematics. The potential for saving money on auto insurance could be enough for many consumers to willing install telematics devices in their vehicles.
‘Wolf of Wall St.’ and Insurance Execs Agree: Analytics Needs a Human Touch May 21, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/21/wolf-of-wall-st-and-insurance-execs-agreeanalytic?ref=rss Speaking to risk managers and insurance professionals during a keynote address at the RIMS 2014 Annual Conference and Exhibition, Jordan Belfort, the real-life “Wolf of Wall Street,” spoke briefly about his time in the mortgage industry. He explained the first time he saw the rate for a subprime loan—just one point higher than the regular rate—he said to himself, “Wait a second, that doesn't really make sense. How can a person with perfect credit, equity in their home and a great job—how can that person only be one point less than this person? This person is a terrible risk.” His conclusion at the time: a smart person somewhere else must have it all figured out. After the real-estate market blew up in 2007, Belfort said he asked a friend who used to work at Goldman Sachs, “What were you guys thinking?” The friend, too, said he thought someone else had it figured out.
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“Everybody thought everyone else had it figured out,” Belfort said, “when in fact, as a risk manager, you have to take a look at the whole thing.” For the mortgage industry, Belfort said it all came down to a “lack of common-sense underwriting,” and an over-reliance on scores. It is not that the behavioral data that goes into these scores can’t be useful in determining whether someone is a good risk, but rather the process can’t rely solely on scores at the expense of a human touch. “The point is,” Belfort said, “the credit score means something so long as a human being who understands risk is looking at the credit report and seeing if the score is reflective of what’s really going on.” The mortgage industry, he said, imploded due to a lack of risk management. “And it typically comes down to human beings not using common sense when they underwrite something. They rely too much on models they have rather than looking deeply at situations holistically.” As the insurance industry moves further into the age of Big Data and analytics, perhaps there is a lesson to be learned from Belfort’s observations on the mortgage industry. Some insurance executives have begun making statements similar to Belfort's. The unforeseeable event During W.R. Berkley’s Q1 results conference call, Chairman and CEO William R. Berkley warned about the “certainty” of analytics, stating that the “unforeseen event” will end up throwing a wrench into insurers’ plans and expectations. Berkley said, “The unforeseen event is what changes the pattern of behavior, and the advent of Big Data and all kinds of analytics—and people’s belief in the certainly of such—is taking us down a particular path.” He added, “A lot of people have bet big amounts on the certainty of actuarial science and the mathematics of Big Data,” but he noted, “I think what’s going to surprise people is that unforeseen event when it comes.” The “unforeseen event,” as Berkley calls it, is exactly why some industry experts believe insurers will not become too reliant on analytics at the expense of the human touch of underwriters. Speaking to PC360 at RIMS, Corey Gooch, senior enterprise risk management consultant at Towers Watson, said he does not see the human factor fully going away in insurance underwriting in part because of recent events that have fallen outside of models’ results. “We’ve seen instances where we’ve had catastrophes that have occurred that never really happened before. The models were wrong,” he said. For property, he mentioned Superstorm Sandy. On the financial side, he pointed to the issues surrounding credit default swaps. Gooch also said because of over-reliance on models in the financial services industry, and the problems that resulted from that, people are now less likely to allow computers to make all of the decisions. “I think now people are more potentially hyper-sensitive to models being wrong,” he said. “We know what failed was people relied too heavily on models, and that caused the financial catastrophe we had six years ago.” He added, “Now people do want to take a step back and put a human touch on things.”
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A relationship business The nature of insurance also does not lend itself to a fully automated underwriting process. “It’s still a relationship business, and it’s always going to be a relationship business on the insurance side to some degree,” Gooch said. Jonathan Hall, executive vice president of FM Global, echoed the same sentiment: “Such a big part of this is relationships and understanding people,” he told PC360, adding that businesses are everchanging, and a model can’t necessarily say what a business’ risks will be for the year. “Analytics provides very powerful opportunities,” said Hall, “but to be managed by a person.” The degree to which analytics will be used in underwriting will also likely vary by line, both Hall and Ronald Kozlowski, director at Towers Watson, said. For personal lines, Hall said analytics will be a much bigger factor. With the volume of clients, he said insurers maybe do not develop a personal relationship with each one, and insurers could build predictive models to be more efficient. In commercial lines, by contrast, Hall says analytics will help insurers understand risk more and allow carriers and clients to react to the gained knowledge. “We’re looking at Big Data and analytics and we’re saying, ‘This will allow us to very deeply understand risk.’” He said when speaking with a client about 10 risk factors facing his/her business, analytics will allow for a better understanding of which of those risks the client should prioritize. Kozlowski likewise said pricing for personal lines, and even some smaller commercial risks, is more actuarially driven. “But for larger risks, it’s definitely more underwriter driven,” he said. Actuarial work assists in the process of assessing risks, he said, “but underwriters at the end of the day make the decision on what the price is going to be, and I don’t think that will change anytime soon.” Ultimately, Kozlowski said the role of analytics will be to provide another tool to underwriters to allow for more-refined pricing. And leveraging technology to achieve that end is something insurers have been doing for a while. “There’s definitely been a number of insurance companies that have used technology to their advantage,” Kozlowski said. “Those who used credit first had a better predictor than others. You’re always finding that companies are trying to find additional information that makes them more predictive than others. I think that’s going to continue.” Useful data vs. a lot of data He said the real trick will be leveraging all of the new data insurers have at their disposal into something they can actually use: Useful data versus just a lot of data. “How do you interpret that data?” he asked. “You have to build the right tools to store, condense and pull out the information you need.” Kozlowski noted companies like Towers Watson are looking at how best to create algorithms to store and pull out that useful information. How revolutionary, in the end, will Big Data and analytics be to the underwriting process? Kozlowski said he does not see it leading to the end of the traditional underwriting cycle. “I don’t think so,” he said. “We’ve been talking about how to decrease the underwriting cycle time for years.”
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He noted much of the cycle is a result of new capacity in markets and too much capital. “I think data analytics are another tool to help refine the pricing,” he said. “But I do not believe it is going to significantly impact the underwriting cycle.”
Insurance technology is changing the game, says Swiss Re May 20, 2014 | Live Insurance News http://www.liveinsurancenews.com/insurance-technology-changing-game-says-swiss-re/ A new sigma study released by Swiss Re has shown that insurance technology is considerably altering the way that insurers and customers interact, as each of those parties has been presented with considerable information and tools that had never before been available to either of them. INSURANCE COMPANIES ARE PARTICULARLY BENEFITING WITH THE AMOUNT THAT THEY CAN LEARN ABOUT THEIR CUSTOMERS. What the conclusion of the study suggested was that insurers use the insurance technology resources that are now readily available to them so that they can adequately adjust to the preferences of consumers. Swiss Re also pointed out that by doing this, it will help them to properly adapt to the current market and will not require them to have to replace all brokers and agents. THE INSURANCE TECHNOLOGY STUDY LOOKED AT MANY CHANNELS SUCH AS THE INTERNET AND MOBILE DEVICES. The report for the study was entitled “Digital distribution in insurance: a quiet revolution.” Within it, research from a number of different countries was analyzed. The report discussed the impact of the internet as a whole, as well as the use of mobile devices, and the ways in which those forms of tech are providing consumers with new capabilities for reviewing, searching, comparing, and purchasing their insurance policies. This allows many people to skip the “intermediaries” and shop directly from the insurer’s site. However, at the same time, these same resources, combined with Big Data developments, are providing the insurers with a considerable amount of information and understanding of consumers. This could be directly used to be able to shape and enhance marketing and sales strategies. In effect, said the report, it would give insurers – as well as insurance agents and brokers – the capability to become more focused on the consumer and what the individual or business wants most from the protection, and how he or she would like to obtain that coverage. The insurance technology report quoted the chief economist at Swiss Re, Kurt Karl, when he stated that “a quiet revolution is underway”. Though the premiums from online sales remains small in many countries, in continues to grow in every nation that was studied.
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Usage based technology may become mandatory in auto insurance May 20, 2014 | Live Insurance News http://www.liveinsurancenews.com/usage-based-technology-may-become-mandatory-autoinsurance/ Usage based technology is becoming increasingly popular in auto insurance, as a growing number of insurers start to offer policies that use these wireless telematics devices and a larger number of motorists sign up for these programs in the hopes of qualifying for lower rates. MANY ARE NOW PREDICTING THAT IN TEN YEARS FROM NOW, THESE POLICIES WILL BE THE NORM. In fact, some have forecasted that usage based technology will become nearly a requirement for auto insurance policies and that individuals who choose not to participate will be required to pay an inflated premium for their coverage. Though not the majority, there is also a group that feels that auto policies will involve the use of these devices and that other forms of tracking-free coverage will cease to be offered. IT ISN’T DIFFICULT TO BELIEVE THESE PREDICTIONS ABOUT USAGE BASED TECHNOLOGY IN AUTO INSURANCE, CONSIDERING THE TRENDS. Many major auto insurance companies in the United States, Canada, the United Kingdom, and other countries are already offering policies that use this wireless tech. They are saving a considerable amount for drivers with safe habits, and motorists that prove that they are a lower risk. These high tech mobile devices are record a considerable amount of data regarding the use of the vehicle, such as the number of trips that are made, the time of day that the vehicle is being used, and how it is being used (such as speed and hard braking). Although there have been some considerable concerns voiced regarding the protection of privacy and of data security, it is still believed that usage based technology in car insurance will soon become a program to which a driver will need to “opt out” instead of “opt in”. This was the opinion voiced at the British Insurance Brokers’ Association (BIBA) seminar. Tom Ellis of Gocompare spoke at the seminar and said that “In 10 years’ time there will still be customers who prefer not to have a telematics device installed, [but] it will be an opt-out situation, rather than an opt-in.”
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Strategy Military Coup in Thailand – What Does It Mean for Insurers? May 30, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/30/military-coup-in-thailand-what-does-it-meanfor-i?ref=rss On May 22, following months of unrest, Thailand’s military overtly seized power in a coup d’état. Thailand is used to such events – there have been 11 successful coup d'états since 1932, as well as seven attempted coups. What does this mean for insurers? The political situation in Thailand has been unstable for several years. Fires arising during the unrest of May 2010 triggered large claims against both the All Risks and Political Violence (PV) insurance markets, leading to still-unresolved litigation in the Thai Courts. For the All Risks insurers exposed to those claims, the question was whether fires’ proximately caused by rioting and looting were excluded because they were “occasioned directly or indirectly by or through or in consequence of civil commotion assuming the proportions of or amounting to a popular rising…*or+ insurrection.” In some cases it was argued terrorism exclusions should also apply, largely because the government of the day had described the demonstrators as such. Related questions arose, in reverse, in connection with claims against PV insurers. In contrast to All Risks covers, PV policies are underwritten on a named-perils basis. Accordingly, insureds need to demonstrate that a loss is proximately caused by one or more particular defined political-violence perils for coverage to be engaged. The PV market sells cover for the full range of perils, from riots and strikes up to war and civil war. Naturally, insureds tend to cover only the particular perils that they believe will be relevant to them. Insureds should however be aware that PV policies contain extensive exclusions for perils not specifically covered, and that such exclusions are expressed to apply where the loss was caused even indirectly by an otherwise covered peril. Where a PV policy covers, for example, loss proximately caused by “civil commotion,” it may still contain extensive exclusions for losses indirectly caused by other, non-purchased PV perils, such as “insurrection” or “civil war.” Thus, a “civil commotion” loss occurring against the backdrop of an insurrection may well be excluded. Similarly, during the Arab Spring, some standalone terrorism policies did not meet claims because outwardly “terrorist” incidents took place against the backdrop of insurrection and/or civil war which clearly had at least an indirect bearing on the acts of terrorism, excluding the claims. The risks of gaps in cover can be mitigated by erring on the side of caution and buying cover for a broad suite of perils. The standard All Risks policy exclusion in Thailand is Form “Or Kor Tor Sor 1.69,” which is modeled very closely on the London market’s NMA 2918. The NMA 2918 was adopted a few weeks after 9/11 as a combined war, political violence, terrorism and confiscation expropriation and nationalization exclusion, merging elements of much older exclusions, which in turn had been drafted on the backs of centuries of English case law.
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The NMA 2918 is in fact replicated in direct policies throughout the world because it reflects exclusions imposed by international reinsurers and in particular by the London Market. Thai Form 1.69 excludes loss “occasioned directly or indirectly by or through or in consequence of any of the following occurrences: mutiny, civil commotion assuming the proportions of or amounting to a popular rising, military rising, insurrection, rebellion, revolution, military or usurped power,” It should be noted that Form 1.69 is now under review in light of coverage issues arising out of the 2010 riots. Consideration is being given to deleting the exclusions for riot and civil commotion. It remains to be seen what losses, if any, may emerge in relation to the coup d’état. One can envisage damage directly caused by the military itself, as well as rioting and looting damage arising during anti-military protests. It can readily be seen that Form 1.69 excludes losses indirectly caused by “military rising” and/or due to “military or usurped power,” and may well be relevant to losses in due course. Disputes in Thailand will of course be decided under Thai law, but bearing in mind the standard exclusions are more or less entirely copied from London market wordings, it is always worth considering the approach of English law. The phrase “military or usurped power” is of very considerable antiquity in English law, and can be traced back to 14th century treason laws, and was considered in a reported insurance coverage dispute as long ago as 1767. The cases tend to concentrate more on the meaning of the “usurped power” part of the phrase, rather than on the meaning of “military power” however. One suspects that is because “military… power” has an easily understood natural meaning. Interestingly, the Thai exclusion for “military rising” does not appear in London’s NMA 2918, but must have been thought prudent to insert by the local market in light of the country’s recurring history of military coups d’état. It seems obvious enough that a coup d’état by the military must amount to a “military rising,” and that losses indirectly caused by the same will be excluded. This does however beg the question as to how one determines whether losses are “indirectly” caused by a particular peril. How far back in the chain of causation is an insurer able to reach back to invoke the exclusion? That question was considered in the leading English case in this field, by Mustill J who said: “Plainly there must be some limits on the application of the *indirect causation clause+, for the chain of causation recedes infinitely into the past. The draftsman must have intended to stop somewhere: and that place must be the point at which an event ceases to be a cause of the loss, and becomes merely an item of history. The draftsman has not explained how that point is to be identified, nor indeed do I believe that words can be found to do so. It is, essentially a matter of instinct …” Although this is clearly not a one-size-fits-all template for determining the scope of the exclusion, it confirms that such exclusions are valid, but will be circumscribed by common sense limits, under English law. Spinney’s has been cited to the Thai courts in connection with these questions. Given recent history, one can expect the military junta to be strongly opposed by the Redshirts and other movements, possibly violently. Although the military coup has introduced a new ingredient to be considered in relation to coverage analysis connected with Thai unrest that does not necessarily detract from the relevance of other perils (such as insurrection and rebellion) which will also need to be considered should violence again erupt.
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5 Ways Agents Can Hone Their Competitive Edge May 30, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/30/5-ways-agents-can-hone-their-competitiveedge?ref=rss On my way to address a room full of independent agents earlier this year, I heard the news that WalMart would begin selling auto insurance. The timing seemed appropriate. Auto, long the flagship product of many agencies, is becoming commoditized and that means big changes for independent agencies. That fact was a highlight of the 2013 McKinsey report, Agents of the Future, which examined how consumers are using the Web to purchase coverage and interact directly with carriers. The future for independent agents, however, is not dire. If they adapt, they still have a critical role in the property and casualty distribution system. Here are five ways agencies can build a bright future. 1. Take a holistic view of accounts. Now that auto has been commoditized, there is little differentiation in the market. In fact, agencies have lost seven percentage points of market share since 2003, according to the McKinsey report. Consumers today will purchase auto coverage wherever is most convenient, whether that is the Web, their agent or large retailers like Wal-Mart. As the travel industry illustrates, a new approach is needed. Consumers no longer visit travel agencies simply to book a flight, but they do use travel agents to organize large trips and cruises. And that’s an opportunity for travel agents to book their flights and make another sale. Similarly, insurance agencies must look holistically at customer needs and become customer-centric businesses. Auto may no longer be the product that leads consumers to their doors. Instead, that will be products like homeowners, RV, boat or a Business Owner Policy (BOP). Once you have secured a loyal customer, you can then cross-sell auto as part of a comprehensive insurance package that meets the insured’s individual needs. 2. Develop options for individual life and medical products. The Affordable Care Act and group medical plans continue to challenge the average consumer, which means they need a place to turn--like their trusted insurance agent—for advice. However, local property-casualty agencies do not often have the expertise or financial might to perform well in the life or individual medical insurance spaces. Agencies can gain the necessary scale by contracting with third-party service providers. This affords you the opportunity to cross-sell and, more importantly, create more value for your customers while keeping competitors outside looking in. 3. Become a resource for other small businesses. Commercial lines, especially small businesses, are under-utilized lines at many independent agencies, but they can become a lucrative book of business. Local businesses want to work with other local businesses. This provides an opportunity to sell a BOP and other coverage to customers who already trust you for their personal lines. On the flip side, when you write a commercial account for a new customer, the owner and their employees become potential personal lines customers.
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The challenge for many agencies is finding markets for their commercial accounts. That should be the first step so you don’t end up soliciting or trying to write policies for which you do not have a market. I liken this to a store that advertises men’s clothing but actually sells sporting goods. Yes, the store can get men’s clothes after a customer requests them, but it would be far more efficient to promote and sell what you have in stock. 4. Make the most of agency management systems and mobile tech. Agency management systems (AMS) have been helping agencies achieve greater efficiency by centralizing information, automating routine tasks and making it easier to cross sell. But you can also use your AMS and other technology solutions to support marketing and manage relationships with customers and prospects—particularly through mobile and social media. It’s important to communicate with customers and prospects in the way they prefer. More and more consumers prefer to be contacted via text message, but very few agents have yet taken advantage of this. Plus, consumers use their phones to browse the web and shop. If your agency’s website is not mobile optimized and/or if you do not have a mobile app, you may be missing out on leads and service opportunities to increase customer touches and efficiencies. 5. Cultivate a business development culture. Traditionally, insurance agents have taken orders. That is, a customer realizes an insurance need, brings it to an agent and the agent places the business. The relationship with customers is reactive, not proactive. For agents to succeed in the changing market, a different approach is needed. As carriers court their attention, customers are beginning to identify with carrier brands more strongly than with their local agents. In response, agencies need to adopt a business development mentFality. From this perspective, customer service goes beyond following up on a new policy. Agents need to stay in touch with customers, anticipating needs and offering as much product as possible to protect their assets and income. As Mark Twain might put it, reports of the agency’s death are greatly exaggerated. Independent agencies will continue to be valued as trusted advisors and intermediaries for insurers and insureds, but they will have to adopt a new holistic focus, broaden their product lines, keep up with technology and develop a culture of business development.
AIG Shifts Jobs to Philippines, Texas to Cut Costs May 29, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/05/29/aig-shifts-jobs-to-philippines-texas-to-cutcosts?ref=rss American International Group Inc., the largest commercial insurer in the U.S. and Canada, is shifting workers to locations including the Philippines and Texas to reduce costs. “We’re talking several thousand jobs migrating to these centers,” Peter Hancock, chief executive officer of AIG’s property and casualty business, said yesterday in an investor presentation in New York. “Initially that creates some labor-cost arbitrage, but over time, it gives rise to business process optimization and finally automation.”
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AIG is working to improve performance at the property and casualty business. In February, a person familiar with AIG’s plans said the company expected to cut about 1,500 jobs, partly in an effort to reduce management layers. The New York-based insurer had 64,000 employees at the end of 2013. Hancock didn’t say from where the jobs will move. CEO Robert Benmosche has warned employees against buying homes in the New York area, people familiar with the matter said last year. “We’re moving people out of some higher-cost cities into those lower-cost cities in America and some offshore as well,” Benmosche said in February in an interview on Bloomberg Television with Betty Liu. AIG is moving jobs to so-called shared-services centers in locations including Olathe, Kansas; Alpharetta, Georgia; Amarillo, Texas; Bogota, Colombia; Sofia, Bulgaria; the Philippines; and Malaysia, Hancock said. Seeking efficiency Moving jobs is “making us best in class in terms of efficiency,” he said at the conference, held by Sanford C. Bernstein & Co. AIG will probably relocate about 4,000 staff to lower-cost cities by 2015, Josh Stirling, an analyst at Bernstein, said in a May 15 research note, citing a presentation from AIG executives. The insurer is also introducing a new system for managing claims and using additional data in underwriting decisions, he said. “AIG is making progress fixing what was broken, and in time the company will benefit from the radical simplification of its legacy infrastructure,” Stirling wrote. AIG had gained 4.8% this year through yesterday in New York trading, beating the 3.3% advance of the Standard & Poor’s 500 Index. Hancock said keeping expenses under control can help AIG navigate insurance markets should policy prices decline in a so- called soft market. “The single biggest weapon for managing a soft market is focus on fixed costs,” he said. “If you have high fixed costs, the temptation is to try and write dumb business to try and cover your cost base, and you’ll regret it later.”
Overstock breaks into the insurance market May 22, 2014 | Live Insurance News http://www.liveinsurancenews.com/overstock-breaks-insurance-market/ Overstock.com is set to enter into the insurance market. The company specializes in discount retail, offering sales on a wide range of products and boasting of a massive inventory that grows by the day. The company has seen potential in the insurance market and has begun carrying insurance policies for those interested in shopping for such products online. These policies cover property, vehicle, and commercial insurance, with Overstock.com acting as a sort of insurance exchange.
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INSURITAS PROVIDES BACKBONE FOR OVERSTOCK INSURANCE INITIATIVE Visiting the retailer’s website, consumers will be able to find insurance products based on their interests. They will also be able to find quotes for the products that they are most interested in and will be able to manage the policies they buy through the Overstock.com website. The company has partnered with Insuritas, a developer of cloud-based services for insurance agencies, in order to make this initiative possible. MAJOR INSURANCE COMPANIES ARE OFFERING PRODUCTS THROUGH OVERSTOCK.COM Some major insurance companies are underwriting the policies being offered through Overstock.com. These insurers will be responsible for the policies that are purchased by consumers, with Overstock.com serving as little more than a sales platform. The initiative is part of Overstock.com’s ongoing goal of providing consumers with access to low-cost, yet high-quality products that cannot be found elsewhere at an affordable price. The company has seen great success in this endeavor over the years and expects to see a great deal of interest from consumers in regards to its entry into the insurance market. INSURANCE INDUSTRY IS BEGINNING TO TURN TO RETAILERS IN ORDER TO ENGAGE CONSUMERS MORE AGGRESSIVELY Retailers are beginning to play a larger role in the sale of insurance products. A growing number of retailers are beginning to sell these products as insurance companies continue to look for new ways to engage consumers in their chosen markets. Retailers may become one of the best ways for insurance companies to reach out to consumers due to their already expansive exposure. Retailers are serving as exchange marketplaces for insurers, but are cutting out insurance agents in some cases.
Climate change is forming a broadening insurance industry struggle May 21, 2014 | Live Insurance News http://www.liveinsurancenews.com/climate-change-forming-broadening-insurance-industrystruggle/ While the insurance industry has traditionally been a strong supporter of the principles and behaviors of free enterprise – as it is quite the business giant – as some major carriers start to evolve their positions as a result of climate change, this has generated some disagreements to build among many of their backers in congress. SKEPTICISM REGARDING THE SCIENCE BEHIND THE GLOBAL WARMING CLAIMS REMAINS AMONG MANY IN CONGRESS. When it comes to the insurance industry, the method chosen for dealing with this environmental trend doesn’t exclusively involve politics, but actually has a great deal more to do with the possible economic losses that could be suffered. Even if only some of the forecasts for global warming from the Intergovernmental Panel On Climate Change prove to be true, then there weather events will only become more extreme and will lead to more severe disasters as time goes on.
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THAT PANEL GIVES A 95 PERCENT CERTAINTY RATE TO THE CONNECTION BETWEEN CLIMATE CHANGE AND HUMAN ACTIVITY. This could mean that if humans continue in the same direction, the insurance industry will only see a larger number of damages, more frequently, and with higher payouts. Torsen Jeworrek, a board member for Munich Re stated that “The heavy losses caused by weather-related natural catastrophes in the USA showed that greater loss-prevention efforts are needed. Jeworrek said in 2011, there were $400 billion in weather related damages in the U.S., among which $119 billion were insured. That was a record breaking total. The next year, even without taking Superstorm Sandy into account, the losses experienced by the insurance industry were notably higher than the ten year average of $165 billion from which $50 billion was insured. Last year, $45 billion was paid out in claims by insurers, said Swiss Reinsurance. The U.S. portion of that was $19 billion. Climate change will also be affecting much more than the insurance industry. The Ratings Services at Standard & Poor’s has now released a report that indicated that global warming would be affecting sovereign country credit ratings, as well.
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