Sutherland insights insurance news flash july 01, 2014

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INSURANCE NEWS FLASH July 01, 2014


Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 9 Technology .......................................................................................................................... 13 Strategy .............................................................................................................................. 16

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Sales & Marketing How Demographic Changes Are Transforming the U.S. Personal-Lines Marketplace June 26, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/26/how-demographic-changes-are-transformingthe-us-pe Premium growth is closely linked to demographic changes, and while the U.S. will continue to see population growth, current trends will, over time, lead to significant changes in the personal-lines consumer base relative to what currently exists, a new report says. In its latest report, “Personal Lines Consumer Markets Annual,” Conning notes that the U.S. is projected to add its next 100 million sometime around 2050, a 33% growth from 2006 when the population hit 300 million. This represents the slowest growth at any time in the post World War II era, the firm notes. Conning says this slowdown in population growth will have a dampening effect on exposure and insured-value growth for personal-lines insurers. “An expanding population has fueled growth in exposure units in both personal auto and homeowners, but longer-term planning will need to reflect slower growth,” says Conning. The report adds, “All other things being equal, slower population growth is expected to slow demand, which will, in turn, exert downward pressure on asset values— personal property and vehicle.” The report also contends that competition will heat up as insurers fight for slices of a shrinking pie. Aside from the overall trend of slower population growth, other demographic shifts will change the way insurers market and sell insurance. Consumer Demographics Changes within the demographics of the U.S. population will impact all aspects of society — ranging from where people choose... Aging population The U.S. is experiencing an increasing proportion of elderly relative to younger persons, and as the “Baby Boom population bulge” migrates to their senior years, Conning says demand for both vehicles and housing will be negatively affected. Still, historical experience of seniors may not be reliable going forward, as better medicine, better nutrition and a lack of retirement savings means seniors will be working longer, and thus driving more. Expectations of reduced mileage among senior drivers, therefore, which has been a characteristic of this segment, may no longer apply. This new reality will come with risks of its own, as drivers aged 75 years or over pose a higher crash risk than any age group except for the most youthful operators.

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Conning estimates the size of the senior market as of 2013 at $43 billion. Moreover, Conning adds, few firms specialize in offering products and services aimed at this group. “The Hartford, with its longstanding AARP endorsement, is the most recognizable brand in the market,” says Conning. Socio-economic/geographic changes Consumer preferences and consumption patterns are changing, impacting what the traditional household looks like as well as general attitudes toward homeownership. Conning observes, “Because the household has been the cornerstone of personal-insurance marketing and product design for generations, these changes will be of increasing importance for personal-lines insurers.” In the shorter-term, new economic pressures such as declining real income and long-term unemployment are altering consumer expectations. Conning says, “For many, the American Dream of homeownership has slipped away, with clear implications for exposure growth in the homeowners line.” While rentals will pick up as a result, and renters will have insurance needs, Conning notes there is so far much less demand for personal property insurance protections among this group. “Of the estimated 115 million occupied housing units in the U.S., 35% are renter-occupied, but renters policies make up only an estimated 15% of total personal-property policies,” says Conning. In addition to impacting homeowners insurance, personal auto may also feel the strain. As fewer own homes, city populations are expected to grow, which will in turn reduce the need for owning a personal vehicle, Conning says. Households are seeing other changes that will impact how insurers market products to customers. Conning says there is a re-emergence of the grandparent as primary caregiver, and a decline in the traditional two-parent family as divorce rates, remarriages and single parenthood all increase. Geographically, Conning says population growth is strongest in the South and West, while the Northeast and Midwest are barely growing. “The differing growth rates and the emergence of highgrowth and slow-growth states will present insures with very different marketing opportunities on a state-by-state basis,” observes Conning. “Insurers with a regional focus in the Northeast and Midwest states will be particularly challenged.” Racial/ethnic diversity The U.S. is seeing strong immigration trends and a higher fertility rate for non-white immigrants, creating “an increasingly diverse consumer base, with differences that will be important for marketing and product development,” says Conning. The firm notes that minority groups, including Hispanic white, accounted for 87% of the national population growth from the 2000 census to 2010. Based on current projections, the U.S. will be majority-minority by 2042. Conning says, “The value of this information lies in understanding how these different groups behave as customs. The increasing diversity will bring with it different financial needs, channel preferences and attitudes toward insurance.” For example, the Hispanic market contains a high proportion of today’s youth, making it a segment of increasing importance to insurers. To illustrate the expected growth of the Hispanic personalinsurance market, Conning notes that, currently, the Hispanic personal-auto market size is between

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$18 billion and $21 billion. The potential Hispanic homeowners-insurance market segment is about $6.4 billion. By 2020, based on growth projections, the Hispanic personal-lines market could grow to nearly $41 billion. Overall, Conning states that for insurers to meet the needs of the evolving marketplace, they will need to increase points of contact with customers by broadening distribution capabilities. And it is not a matter of personal-lines moving to direct distribution. Conning in fact notes that while many carriers that once exclusively used the agency channel are in fact offering coverage direct now, other insurers that had been direct only, such as Geico, are expanding to storefront and agency outlets. “As insurers implement new customer touch points, they will notice that different types of transactions will develop preferences for one channel over the other—be it agency, web, mobile application or social media,” Conning concludes.

Auto-Insurance Satisfaction Reaches New High June 20, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/20/auto-insurance-satisfaction-reaches-new-high Auto insurance customer satisfaction has reached its highest level since J.D. Power launched its study on the sector in 2000, with satisfaction rising the most in the areas of price, and billing and payment. In J.D. Power’s “2014 U.S. Auto Insurance Study,” the firm says overall satisfaction among auto insurance consumers climbed 16 points to 810 on a 1,000-point scale. The study measures customer satisfaction in five areas: interaction, price, policy offerings, billing and payment and claims. Interestingly, J.D. Power notes the rise in satisfaction comes amid several years of price increases. However, while the number of customers receiving insurer-initiated rate hikes this year was about the same as last year, the amount of the increase was lower—$86 in 2014 compared to $153 in 2013. In addition, insurers appear to be doing a better job communicated the reasons behind the increases. “A premium increase often triggers shopping behavior, but we’re seeing fewer people shopping,” says Jeremy Bowler, senior director of J.D. Power’s insurance practice in a statement. “This indicates that insurers are more effectively communicating with their customers, making them aware of the premium increases when they occur and why they’re necessary, and demonstrating the value of their coverage.” This communication could be a reason why customer satisfaction in the “interaction” category—the biggest driver of overall satisfaction—climbed 13 points for auto insurers. The largest increases in satisfaction, though, were in the areas of price, up by 20 points, and billing and payment, up by 19 points. Smaller insurers made bigger gains than larger ones, says J.D. Power. The 20 largest insurers saw a 10-point improvement in 2014 while the smallest insurers—those outside the largest 30—improved by 41 points. J.D. Power says customer loyalty and advocacy are on the rise, with 51% of customers stating they

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“definitely will” renew their auto-insurance policy with their current provider, compared to 49% last year. Forty-nine percent say they “definitely will” recommend their insurer to family and friends, compared to 48% last year.

Flood insurance becomes a problematic issue in Canada June 19, 2014 | Live Insurance News http://www.liveinsurancenews.com/flood-insurance-becomes-problematic-issue-canada/ Flood insurance is about to undergo serious changes in Alberta, Canada. Last year, severe weather lead to widespread flooding throughout much of the province, causing an estimated $1.7 billion in insured losses. Severe weather throughout the whole of Canada caused more than $3 billion in financial damage to the country’s insurance industry. These losses are encouraging insurers to revise their approach to flood protection and the coverage they offer for severe weather disasters. Uncertain nature of climate change makes it hard for insurers to provide adequate protection While insurers are trying to change their policies to better suit changing weather phenomenon, they are finding it difficult to address issues relating to climate change. Climatic phenomena are leading to powerful storms becoming more frequent throughout Canada. These storms are costly and unpredictable in nature, making it difficult for the insurance industry to adequately gauge and mitigate certain risks. Because the impact of climate change is not fully understood, insurers are having trouble creating policies that address the issues that this phenomenon represents. Rates for flood protection in Alberta may rise by as much as 20% While the insurance industry tries to tackle the climate change problem, flood insurance rates are expected to grow. Higher rates are needed for insurers to recover from the losses they experienced last year. This could mean that many homeowners in Alberta will see their flood protection become significantly more expensive than it had been in the past. Rates for flood protection are expected to grow by an average of 20% throughout Alberta. Those in areas particularly prone to floods could see their rates rise by a more significant margin. Some insurers have managed to avoid significant insured losses Not all insurance companies suffered due to severe weather last year. Those that have managed to avoid significantly financial damage are not likely to raise rates on the flood protection they offer. These insurance companies may receive an influx of new customers in the coming months as people begin to shop around for affordable coverage that can protect their homes from natural disasters.

New auto insurance regulations in California target on-demand ride services June 17, 2014 | Live Insurance News http://www.liveinsurancenews.com/new-auto-insurance-regulations-california-target-demandride-services/ California insurance regulators are considering new rules that target on-demand ride services, like UberX and Lyft. These services represent a certain degree of risk when it comes to auto insurance

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and many insurers have expressed concerns regarding fraud and other issues that have yet to receive regulatory attention by the state. Similar services in other states have been subjected to the same regulatory focus recently, with some of these services actually being barred from operating in some states due to insurance issues. Regulations are meant to provide more protection to consumers and businesses Regulators aim to introduce new rules that would require on-demand ride services to hold $1 million in commercial liability auto insurance, which is meant to take effect the moment the service’s drivers turn on a smartphone application that indicates they are making use of the service. Current regulations stipulate that on-demand ride services must only provide coverage for the time a driver accepts a ride request and when they successfully drop off a passenger. Regulations could harm the on-demand ride service market State regulators are also looking to require on-demand ride services to hold $5,000 in medical coverage, $50,000 in collision coverage, and $1 million in uninsured/underinsured motorist coverage. These regulations are meant to protect businesses and consumers alike. Some ride service companies suggest that the new rules do not take consumer needs into consideration, however, and introduce a great deal of financial stress on companies that may not be big enough to comply with the state’s new regulations. Some companies may not be able to cope with the financial burden of new regulations UberX, one of the state’s most prominent on-demand driver services, argues that more stringent regulations will harm competition among similar companies. This competition forces businesses to price their services in ways that are attractive to consumers. If these businesses must comply with more costly regulations, they will have to raise the price of their services. Some companies may not be able to adapt, which means that they will not be able to engage consumers as they had been able to in the past.

Flood insurance enters the limelight as hurricane season begins June 17, 2014 | Live Insurance News http://www.liveinsurancenews.com/flood-insurance-enters-limelight-hurricane-season-begins/ The 2014 Atlantic hurricane season has started, and weather forecasters are predicting that this season may be quite active, but the storms emerging during the season may be modest due to the effects of El Nino. There is no certain way to tell whether or not the hurricane season will be free of any powerful storms, as 2012′s Hurricane Sandy was quite unexpected itself. The impact of an unexpected storm can be devastating, which is why there is a growing interest in insurance coverage that is designed to protect against such natural disasters. Unexpectedly powerful storms have caused serious problems for many homeowners in the US The insurance industry is well suited to manage the effects of powerful natural disasters, but understanding the type of coverage that is available and exactly what this coverage protects against is sometimes difficult to understand. Notably, most homeowners insurance policies provide coverage for a wide range of natural disasters, with some offering protection against wind damage. Most private insurance companies do not offer flood protection, however, which is not necessarily a

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well known fact among homeowners in areas that could be exposed to hurricane disasters. Many homeowners are lacking the insurance coverage needed to protect them from flood damage Flood protection for properties must typically come from the National Flood Insurance Program, which is managed by FEMA. Victims of Hurricane Sandy found out quickly that they properties were not protected against flood damage, which has become quite a controversial issue for the insurance industry over the past year. In the states that were most affected by Hurricane Sandy, many homeowners are still struggling to recover from the disaster due to the damage caused to their properties by floods. Homeowners are being encouraged to check their policies and ensure that they have adequate protection Insurers are encouraging homeowners to ensure that their property insurance is suitable to the risks they face. Those in hurricane prone areas are being encouraged to purchase flood protection from the National Flood Insurance Program in order to avoid the costly issues that are associated with flood damage.

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Finance Validus to Buy Western World Insurance in $690 Million Deal June 24, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/24/validus-to-buy-western-world-insurance-in690-mill Validus Holdings Ltd., the Bermuda- based reinsurer, agreed to buy Western World Insurance Group Inc. for $690 million in cash to expand in specialty lines of coverage in the U.S. Western World, based in Franklin Lakes, New Jersey, will operate as a separate business, Validus said today in a statement. Validus, led by Chief Executive Officer Ed Noonan, has used deals to expand in businesses such as crop and catastrophe coverage. Western World specializes in excess-and-surplus lines, or coverage that isn’t available from insurers licensed by a state. Western World offers an “excellent U.S. distribution platform, outstanding management and industry-leading technology,” Noonan, 56, said in the statement. The deal “creates a franchise that will provide compelling products and services for our customers.” The purchase price is 33 percent more than Western World’s book value of $518.3 million, according to the statement. The deal is subject to regulatory approval and will probably be completed by the end of the third quarter, Validus said. Validus has declined 8.5 percent this year, lagging behind the 6.2 percent gain of the Standard & Poor’s 500 Index. Greenhill & Co. is providing Validus with financial advice, and Skadden Arps Slate Meagher & Flom LLP is the legal adviser. Goldman Sachs Group Inc., Sullivan & Cromwell LLP and Morrison Cohen LLP advised Western World.

Lloyd's Pays $15M Claim from '12 N.Y. Marathon Cancellation June 24, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/24/lloyds-pays-15m-claim-from-12-ny-marathoncancella Lloyd's of London paid $15 million to cover the losses of the 2012 New York City Marathon, called off due to Superstorm Sandy. The event's parent organization, the New York Road Runners, had lost $18.9 million total, according to documents recently filed with the Internal Revenue Service and accessed by Runner's World. The payoff with Lloyd's came after more than a month of closed-door negotiations, Runner's World reports, and state officials had to step in to mediate.

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The world's largest marathon was canceled two days before it was scheduled to take place, and five days after Sandy severely damaged the city and surrounding areas, leaving roads and subways flooded and millions without power. About half of the more than 50,000 runners who were registered for 2012 requested refunds, accounting for almost all the $18.9 million in losses.

The Heavyweight Champs: NU’s Top 100 P&C Premium Rankings June 20, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/20/the-heavyweight-champs-nus-top-100-pcpremium-rank One might say it’s nice to be reminded of what the P&C insurance industry’s Top 100 looks like in a world with fewer catastrophes. With no major catastrophes in 2013, insurers had a comparatively easier time of making hay while the sun shone—and the favorable movement reflected both in combined ratio and overall net premiums written is significant, marking a positive turn for many carriers and groups. In NU’s annual rankings, based on data from SNL Financial, the average combined ratio among the top 100 insurance groups fell year-over-year to a respectable 96.64—a 6.37 improvement over last year’s numbers. Among the biggest gainers in the top 10 companies: Liberty Mutual Ins. Co., whose combined ratio fell more than 18 points to 102.20; State Farm Fire & Casualty Co., which improved more than 14 points to 90.57; and Chubb-owned Federal Insurance Co., which boasted a combined ratio of 82.70 after a 12.88-point improvement year-over-year. In group results, all boasted better combined ratios (at an average of 6.37 points of improvement among the top 100 and 5.59 among the top 10), but it was AIG—which some would argue had the biggest room for improvement among the most successful groups in the top 10—that saw the greatest improvement among the biggest players, shaving off 16.15 points to a more competitive 101.27. Yet, as insurers performed better in the past year in terms of results, there was little movement in the rankings of the top 10 companies or groups by net premiums written. The top 100 groups showed average growth in NPW of 4.3%, to a total of $422.4 billion; that average growth drops to 3.7% among the top 5 groups (State Farm, Berkshire Hathaway, Allstate, Liberty Mutual and Travelers, respectively), which still represent a sizable portion (roughly 37%) of the NPW among the top 100 insurance groups. State Farm’s $55.4 billion in NPW, which is up 4.6% compared to 2012, still far outpaces the competition. Second-place Berkshire Hathaway reports $28.4 billion, a 4.1% gain, while Allstate in third grew NPW by 3.6% to $26.5 billion. The top 10 groups were largely unchanged from 2012; USAA Insurance Group and Farmers Insurance Group of Companies switched spots at the bottom of the top 10, with USAA taking over No. 9 and Farmers dropping to No. 10. After the previously mentioned top 5 groups, AIG, Nationwide Mutual Group and Progressive Corp. filled in the 6-8 spots.

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San Diego-based ICW Group ranks the highest in our list of net premium growth Leaders, with 40.1% growth year over year among the top 100 insurance groups and has moved up the list from No. 100 to No. 97. Its gains are attributable to aggressive efforts in workers’ comp risk mitigation and leveraging its technology investment via its underwriting management system and agent portal, Snap, which has allowed it greater speed and efficiency in viewing, quoting and binding policies. Private mortgage insurance company Radian Group saw some traction in the top 100 groups list, moving up from No. 78 to No. 68 (a jump in the top 100 groups list mirrored only by California’s State Compensation Insurance Fund, which also moved up 10 spots to No. 60). Radian wrote 27% more new mortgage insurance business in 2013 versus 2012 ($47 billion vs $37 billion), expanding its customer base—particularly among small/midsized lenders, community banks and credit unions— and recapturing market share from the Federal Housing Administration, which offers governmentbacked mortgage insurance. Another big gainer: Starr International Co., which exhibited 36% growth in NPW and moved up the list from No. 87 to No. 72 thanks to its broad and diverse product portfolio, continued recruitment of industry talent, and office expansion, both in the U.S. and internationally. For company rankings, State Farm Mutual Automobile Ins. continues to lead the pack at $35.2 billion in NPW, followed by Allstate Insurance Co. at $25.1 billion, State Farm Fire & Casualty Co. at $15.3 billion and Nationwide Mutual Insurance Co. $14.6 billion. That top four is unchanged from 2012. Liberty Mutual Insurance Co. placed No. 5, switching places with Government Employees Ins. Co., which dropped to No. 6. Farmers Insurance Exchange moved from No. 8 in 2012 to No. 7 in 2013. Chubb’s Federal Insurance Co. also gained a spot to rank No. 8, as did CNA Financial Corp.’s Continental Casualty company, which improved to No. 9. USAA’s United Services Automobile broke into the top 10, moving up a spot from No. 11 to No. 10. Berkshire Hathaway’s National Indemnity was the only company to fall out of the top 10, dropping seven spots to place No. 14 in 2013. The top movers on the company list include two Liberty Mutual subsidiaries, Peerless Ins. Co. (which moved up the list from No. 33 to No. 12), and Employers Ins. Co. of Wausau (Wisc.), which moved up to No. 38 from No. 75. This can be attributed to Liberty Mutual’s termination of the longstanding Peerless Insurance Pool, after which the pool’s participants were added to the Liberty Pool, led by Liberty Mutual Insurance Co. Under the terms of the pooling agreement, effective Jan. 1. 2013, Peerless Ins. Co. and Employers Ins. Co. of Wausau (Wisc.) receive pooling percentages of 20% and 8%, respectively, driving the companies’ changes in rank year over year. Berkley Insurance Co. moved up a no-less-impressive 32 slots to No. 13 from No. 45, due in part to a large intercompany pooling arrangement introduced back on Jan. 1, 2013 in which previous insurer groups including Berkley Insurance Group, Berkley Regional Group, Admiral Group and Nautilus Group were collapsed and essentially all of Berkley’s U.S. subsidiaries were combined into one large pool.

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Moody's: Reinsurance Sector Outlook Negative; Capacity, Alternative Capital Take Toll June 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/18/moodys-reinsurance-sector-outlook-negativecapacit An overabundance of capacity, competition from alternative capital, low-interest rates and a buyer’s market are prime factors that led Moody’s Investors Service today to change its outlook on the reinsurance sector to negative from stable. “We believe reinsurers that are best positioned to cope with the sector's challenges are those that have already demonstrated their strategic relevance to clients and possess relevant size, superior claims service, whole-account capabilities, and a solid insurance platform,” says Kevin Lee, author of the Moody’s “Global Reinsurance Outlook Turns Negative” report, in a statement. Moody’s says the growing alternative-capital presence in the sector is causing disruption as it is primarily a factor in the catastrophe reinsurance product line, which, Moody’s explains, traditionally “drives industry results in big-loss years and no-loss years, dictates reinsurers' capital needs and capital structures, and subsidizes less profitable product lines.” Moody’s also says the current soft market for reinsurance line shows many of the traits of the late 1990s, such as the abundance of capital, pricing declines and predictions of consolidation. But the drivers are different. “One key difference is that reinsurance buyers today have greater incentives to improve capital efficiency, limiting their need for reinsurance,” Lee says in the statement. “Tighter regulatory oversight and the need for better internal governance have pushed insurers to get more mileage out of their capital.”

Marsh & McLennan to Buy Majority Stake in Panama Broker Semusa June 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/18/marsh-mclennan-to-buy-majority-stake-inpanama-br Marsh & McLennan Cos., the world’s largest insurance broker by market value, agreed to buy a majority stake in Panama-based Semusa to strengthen its position Central America and the Caribbean. Marsh & McLennan expects the transaction to be completed in the third quarter, the New Yorkbased company said today in a statement distributed by Business Wire that didn’t disclose terms.

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Technology Insurance industry must take the digital age seriously June 26, 2014 | Live Insurance News http://www.liveinsurancenews.com/insurance-industry-must-take-digital-age-seriously/ Improving digital engagement may be the key to success for the insurance industry, according to a new report from PwC. Consumers throughout the world are becoming more digitally oriented, relying on the online realm to conduct their daily lives. These people shop online, communicate with their loved ones online, and even work online, and if the insurance industry cannot cater to the changing needs of digital consumers, it may risk losing its ability to engage customers effectively. Consumers are favoring digital platforms when it comes to researching and purchasing insurance products The report from PwC notes that 70% of consumers now use digital platforms to research insurance products before they make a purchase. A quarter of all global consumers use these same platforms to actually purchase their insurance coverage. Social media is playing a major role in influencing the purchasing decisions of consumers, as people can easily access the opinions of a massive demographic. Online services that specialize in comparing the coverage offered by insurance companies are becoming particularly useful for digital consumers. Many people are willing to provide additional information about themselves in order to receive discounts The report also shows that a significant portion of consumers would be willing to have sensor technology installed in their homes and vehicles in order to take advantage of discounts offered by insurance companies. Approximately 70% of consumers would download mobile applications designed by their insurance provider in order to manage premiums and remain in contact with their company. Consumers have shown that they are particularly willing to provide additional information concerning themselves if this information would provide them with some sort of discount or special benefit. Insurers could risk losing relevance if they continue to ignore digital consumers Insurers that ignore the digital space could be crippling their ability to engage with consumers in the future. More people are relying on technology, particularly that of the mobile variety, and are not likely to respond well to traditional marketing or engagement endeavors. Modern consumers are showing that they are much more interested in dynamic engagement.

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GEICO Releases Mobile App Makeover June 26, 2014 | Insurance and Technology http://www.insurancetech.com/distribution/geico-releases-mobile-app-makeover/240168554 In an effort to improve the digital experience for its mobile customers, GEICO has redesigned its mobile app to provide easier access to capabilities previously only available on its desktop website. The new GEICO Mobile, which was created in response to customer feedback, allows policyholders to change their coverage, update their address, and add or remove drivers and vehicles. The app tailors information to suit each customer’s individual needs and provides access to improved claims features such as real-time roadside assistance and repair tracking. “Our customers are always on the move, so it’s important that they are able to have a unique digital experience from their mobile device,” said Pete Meoli, GEICO’s director of mobile and digital experience, in a statement. “Whether it’s an upcoming bill, filing a claim or a new set of ID cards, GEICO Mobile puts the most important information at your fingertips and easy to find.” The updated app is available on iTunes for iPhone and iPad, the Android Play Store for Android smartphones and tablets, and will soon be on the Amazon Appstore for Kindle Fire.

New York Life Selects SAP for Finance Transformation June 26, 2014 | Insurance and Technology http://www.insurancetech.com/architecture-infrastructure/new-york-life-selects-sap-for-financetr/240168541 New York Life has selected SAP Insurance Analyzer analytic applications to power an enterprise-wide financial transformation strategy that it hopes will enhance its overall business strategy. The insurer plans to merge its middle- and back-office functions into one integrated platform so it can better facilitate vital strategic business direction, including mergers and acquisitions, financing and capital market long-term strategies that support performance. "The insurance industry is evolving faster than ever before," said Randy Gonzalez, vice president and head of Finance Transformation, New York Life, in a statement. "In order to keep pace we must leverage technology that enables us to shift our mindset to effectively operate in the future state, break out of silos and make strategic decisions that can support the business." SAP partner MSG Global will help develop and implement the software, which is powered by the SAP HANA in-memory computing platform.

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Allianz France selects TomTom Telematics for new private motor insurance solution June 24, 2014 | Reuters http://uk.reuters.com/article/2014/06/24/tomtomidUKnBw245813a+100+BSW20140624?type=companyNews The Allianz solution helps French consumers to assess their driving by providing actionable insights via a new smartphone app. The app also lets policy holders easily request roadside assistance. TomTom’s telematics platform processes a range of vehicle and driving performance data for the app, recorded by the TomTom LINK 100 in the vehicle. Allianz France policy holders can self-install the LINK 100 device as it plugs directly into the vehicle’s diagnostics port of their car. Motorists benefit from valuable feedback on mileage, acceleration, braking and cornering. In addition, the system will automatically alert Mondial Assistance emergency services in the event of a vehicle crash. “As a world leader we are at the forefront of innovation and our aim was to bring new services to our clients that help them to be safe on the road. We have partnered with TomTom Telematics because it offers a market-leading technology platform with a proven track record for the highest standards of reliability and service,” said Delphine Asseraf, Head of Digital, Allianz France.” Thomas Schmidt, TomTom Telematics’ Managing Director, added: “This new insurance solution demonstrates the opportunities for developing innovative smartphone apps using actionable vehicle data. Our system empowers motorists to improve their driving style, helping them to reduce fuel and maintenance costs, accidents and their carbon footprint.

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Strategy Doubts Intensify over Potential ACP Re Acquisition of Tower Group June 30, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/30/doubts-intensify-over-potential-acp-reacquisition Tower Group International Ltd., the insurer that agreed to be bought by ACP Re Ltd., plunged to a record low amid doubts over whether the deal will be completed. Tower declined 19% to $1.65 at 9:52 a.m. in New York. The stock has lost half its market value this year, after plunging 78% in 2013 on higher-than-expected claims costs.“TWGP shares will likely be rife with speculation regarding the outcome of its merger with ACP Re,” Ken Billingsley, an analyst at Compass Point Research & Trading LLC, said in a research note today using Tower’s ticker symbol. The insurer disclosed late on June 27 a request that ACP Re affirm by 5 p.m. New York time today its commitment to buy Tower for $2.50 a share, as the company faces increased supervision from a Massachusetts regulator. Tower on May 22 said it hired Greenhill & Co., under pressure from the state watchdog, to provide advice on repaying debt if the takeover collapses. ACP responded June 27 that it “reserves all its rights under the Merger Agreement, with respect to the matters referenced in your letter or otherwise,” according to a copy of the letter in Tower’s filing. ACP Re is owned by a trust established by AmTrust Financial Services Inc.’s founder, according to a statement in January when the deal was announced. That agreement called for buying Tower for $3 a share, a price that was later lowered to $2.50.

Industry Groups Happy with TRIA Progress, if Not the Current House Version June 20, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/20/industry-groups-happy-with-tria-progress-ifnot-th The House has crafted a “backwards approach” to legislation providing a federal backstop to terrorism risk insurance, Sen. Charles Schumer, D-N.Y. said today. Schumer add the legislation reported out by the House Financial Services Committee will make it harder to insure and guarantee financing for job-creating building projects across the country. Moreover, it “fails to provide the long-term certainty that developers and business owners need,” Schumer says. Most of the insurance-industry reaction voiced strong support for the Senate version of the bill while applauding the House panel for at least moving the ball forward.

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Jimi Grande, senior vice president of federal and political affairs at the National Association of Mutual Insurance Companies, says, “At the beginning of this Congress, the question being asked was whether this program should even be reauthorized. Today’s favorable vote on a five-year TRIA reauthorization bill out of the Financial Services Committee shows just how far we have come.” Divided House Committee Advances Controversial 5-Year TRIA Extension A divided House Financial Services Committee advanced to the House floor today legislation that sets a path to phase out,... However, he says, NAMIC has “serious concerns” about some of the provisions in the House bill that, if not addressed, could severely curtail some companies’ access to the program and significantly disrupt the currently competitive marketplace for terrorism insurance coverage. In particular, according to Grande, the House bill dramatically increases the program trigger for nonNBCR events. “It has been suggested that this will further protect taxpayers and maximize privatesector capital in the market for terrorism insurance, however, this is simply not the case,” he says. “The result would be reduced competition and a greater concentration of risk as small- and mediumsized regional or single-state insurers are driven out of the terrorism insurance market.” Leigh Ann Pusey, president and CEO of the American Insurance Association, called the House FSC decision “a significant step forward,” and urged “the House to maintain its swift legislative pace on TRIA.” The Coalition to Insure Against Terrorism and the Independent Insurance Agents and Brokers made the same request. Nat Wienecke, senior vice president, government relations at the Property Casualty Insurers Association of America, called on Congress “to ensure that any increases to the trigger and co-share not be so high or so steep that they inhibit the availability and affordability of terrorism insurance.” The National Association of Professional Insurance Agents (PIA) says it will continue to advocate for a lower trigger level to ensure the widest possible availability and affordability of terrorism insurance for consumers. “It is important to keep the program at a point where all insurers, small and large, have an opportunity to participate and are not priced out,” says Jon Gentile, PIA national director of federal affairs. Katherine Lugar, president/CEO of the American Hotel & Lodging Association, says her members have “significant concerns with the bill in its current form,” and that, “Ultimately, we hope the final legislation will more closely reflect the bipartisan bill that was approved unanimously by the Senate Banking Committee.” Lugar cites the need to improve provisions related to federal recoupment from policy holders, program triggers, and the bifurcation of conventional and non-conventional attacks when the legislation comes before the full House of Representatives. Ken Crerar, president/CEO of the Council for Insurance Agents and Brokers, says in a note to members that CIAB “agrees with those who believe the government shouldn’t be in the business of providing insurance coverage that private industry can provide.” Crerar says finding the right mix of deductibles, co-pays and triggers “is tricky and sensitive,” and

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that “there will inevitably be back-and-forth actions in the coming weeks in both chambers, and we are encouraged that Congress will ultimately act to avoid the expiration” of the current TRIA law.”

Endurance Letter to Aspen Shareholders Asks for Support for Hostile Bid June 19, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/19/endurance-letter-to-aspen-shareholders-asksfor-su “The path forward is in your hands,” so says Endurance Specialty Holdings in a letter to Aspen Insurance Holdings shareholders urging them to take measures to support Endurance’s $3.2 billion hostile bid for Aspen. The letter, unveiled today, asks Aspen shareholders to support Endurance’s two proposals unveiled June 2 in an SEC filing. The first proposal calls for a Special General Meeting during with shareholders would consider a proposal to expand Aspen’s board from 12 to 19 directors, resulting in a majority of the current directors to stand for election at Aspen’s 2015 annual general meeting. In support of this action, Endurance again levels its charge that Aspen’s board and management are pursuing an “entrenchment” strategy in rejecting Endurance’s bid. The letter says, “Aspen’s entrenchment device of a classified board, coupled with its restrictive bye-law provisions, have necessitated this action to ensure Aspen’s shareholders have a voice in the direction of their company.” Endurance further asks shareholders to support its proposal for a Scheme of Arrangement, which calls for a court-ordered meeting of Aspen shareholders to directly consider and vote on Endurance’s acquisition proposal. “Your support for the authorization concerning the Scheme of Arrangement does not require you to vote for the Scheme if the court-ordered meeting is held,” the letter, signed by Endurance Chairman and CEO John R. Charman, says. “It merely expresses your support for such a meeting at which your voice can finally be heard.” Endurance Starts Offer for Aspen in $3.2 Billion Hostile Bid Endurance Specialty Holdings Ltd. began an exchange offer for shares of Aspen Insurance Holdings Ltd. as part of a $3.2... The letter includes a white authorization and consent card. “By voting for the two proposals on your white card, you will be endorsing actions that can provide you the direct opportunity to vote for Endurance’s proposal through a Scheme of Arrangement under Bermuda law, as well as the right to elect a majority of Aspen directors who will place the interests of Aspen’s shareholders first,” the letter says.

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Announcement of the letter comes a day after Aspen’s board unanimously rejected Endurance’s exchange offer, commenced June 9, of $49.50 per Aspen common share. Glyn Jones, chairman of Aspen’s board, said in a statement yesterday, “The Aspen board of directors is unanimous in its belief that the Endurance offer significantly undervalues Aspen and fails to reflect the value of our business and strong future prospects. We are highly confident that Aspen can achieve more value for its shareholders—and without the significant risks that are inherent in a merger with Endurance—by continuing to execute its strategic business plan.” The vote and statements prompted a response from Endurance accusing Aspen’s board and management of presenting “no credible plan to deliver value that can compete with what we are offering.” Aspen declined to comment on Endurance’s letter beyond its statements yesterday. Endurance claims it knows from “extensive engagement with Aspen shareholders” that many are frustrated by the response from Aspen’s board and management. That will likely be tested by the shareholder response to Endurance’s letter.

US government to investigate health insurance subsidy abuse June 18, 2014 | Live Insurance News http://www.liveinsurancenews.com/us-government-investigate-health-insurance-subsidy-abuse/ Hundreds of thousands of people throughout the U.S. are being contacted by the federal government. The government is questioning these people about their eligibility for the subsidies provided by the Affordable Care Act. According to the Obama administration, a large portion of those seeking coverage through health insurance exchanges may have provided misleading or false information concerning their incomes. This information does not match that which is stored with the Internal Revenue Service, which calls into question whether or not subsidies are being abused. 2 million people to be questioned by the federal government Approximately 8 million people signed up for coverage through insurance exchanges in the U.S. Of these, an estimated 2 million offered up financial information that does not match current government records. These people may have been looking for a way to take advantage of the subsidies being offered by the Affordable Care Act, but there is also a possibility that the technical flaws of state-based exchanges caused some problems while people were inputting their information online. Whatever the case may be, federal officials are currently seeking answers from the 2 million people with information discrepancies. Regulators are seeking more information from those receiving government subsidies Currently, regulators are asking those that have signed up for coverage through exchanges and received subsidies to submit more information in order to verify their income. Regulators are also looking for citizenship and immigration information, as well as Social Security numbers. Many of those that have enrolled in exchanges also already had health insurance coverage, but not through any federal program like Medicaid. This could hint as a person’s financial capabilities, especially if the coverage they had in the past was somewhat expensive. Subsidy issue may be difficult to resolve due to problems with insurance exchanges

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Those that are found to be abusing subsidies could face wide range of penalties, which may include criminal fraud charges. Repercussions may not be the same for everyone, however, as it will be difficult to determine whether or not people had been attempting to abuse subsidies on purpose. It is possible that the technical problems of exchanges contributed to this issue.

Ironshore Insurer Files for Public Offering Led by BofA, UBS June 18, 2014 | Property Casualty 360 http://www.propertycasualty360.com/2014/06/18/ironshore-insurer-files-for-public-offering-ledby Ironshore Inc., the insurer led by executives who left American International Group Inc. in the financial crisis, filed for a $100 million initial public offering so that its backers can reduce their stakes. Bank of America Corp. and UBS AG are managing the offering, Bermuda-based Ironshore said today in a regulatory filing. The $100 million figure is a placeholder used to calculate registration fees and could change. Ironshore provides specialty commercial insurance coverage, and said shareholders’ equity, a measure of assets minus liabilities, stood at $1.81 billion as of March 31. The insurer posted net income of $97.4 million last year, down from $131.7 million in 2012. Chief Executive Officer Kevin Kelley and President Shaun Kelly joined the property-and-casualty insurer from AIG in 2008. “The financial crisis of 2008, which had a material negative impact on several leading U.S. P&C insurers, created a unique opportunity for Ironshore to accelerate its hiring and growth strategy,” the company said in the filing. Ironshore was founded in December 2006 with more than $1 billion in private-equity backing. Irving Place Capital Management LP owns about 24% of Ironshore and Calera Capital Advisors LP has 19%, today’s filing shows.

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