Latest Studies - July 2015

Each month the Insurance Information Institute compiles recent studies from industry, government, academic and other sources. Topics include consumer issues, industry trends, climate and environment, and studies covering individual lines of business like automobile liability and workers compensation.

1. HIGH-RESOLUTION MAPPING OF TWO LARGE-SCALE TRANSPRESSIONAL FAULT ZONES IN THE CALIFORNIA CONTINENTAL BORDERLAND: SANTA CRUZ-CATALINA RIDGE AND FERRELO FAULTS
Mark R. Legg, Monica D. Kohler, Natsumi Shintaku, Dayanthie S. Weeraratne
Journal of Geophysical Research: Earth Surface; Pages 915–942
May 1, 2015

The latest research into two active fault zones off the coast of Southern California and northern Baja California has revealed that the zone is capable of producing large earthquakes. The faults may also be capable of generating local tsunamis that would impact Southern California coastlines, including populated regions in the Channel Islands. The article is available for purchase here.


2. THE 2014 INSURANCE DEPARTMENT RESOURCES REPORT — VOLUME ONE
The National Association of Insurance Commissioners (NAIC); 84 pages
June 1, 2015

The National Association of Insurance Commissioners (NAIC) released the first volume of the 28th edition of the Insurance Department Resources Report (IDRR). The report provides key statistics on the resources and regulatory activities of the 56 NAIC-member jurisdictions. The IDRR details how state insurance departments manage available resources to effectively regulate an increasingly complex and competitive industry. This volume contains information by state on the number of departmental staff and their functions, annual budgets, revenue flows, the number of insurers and insurance producers, and the number of consumer complaints and inquires. The volume is organized into five sections: Staffing; Budget and Funding; Examination and Oversight; Insurance Producers; and Consumer Services and Antifraud. There were 6,118 domestic U.S. insurers in 2014 and State insurance departments received nearly 280,000 official complaints and 1.9 million inquiries. The report can be downloaded at: IDRR Volume One.


3. IMPROVED INTERACTIONS DRIVE GEN Y INCREASE IN AUTO INSURANCE SATISFACTION
JD Power & Associates; Page N/A
June 19, 2015

Gen Y customers are the driving force behind an increase in overall auto insurance satisfaction due to improvement across all customer service interaction channels, the largest contributor to the customer experience, according to the J.D. Power 2015 U.S. Auto Insurance Study. The study examines customer satisfaction in five factors: interaction; price; policy offerings; billing and payment; and claims. Satisfaction is measured on a 1,000-point scale. Overall customer satisfaction with their auto insurer has reached an all-time high of 818, an improvement of 8 index points from 2014. Satisfaction among Gen Y customers has increased the most, compared with the other generations—Gen Y: +21 points; Gen X: +6; Boomers +4; and Pre-Boomers: -3. The interaction factor has the greatest impact on overall customer satisfaction and is also the largest contributor to the year-over-year improvement. Full Report


4. TEEN CRASHES DECLINED AFTER MASSACHUSETTS RAISED PENALTIES FOR GRADUATED LICENSING LAW RESTRICTING NIGHT DRIVING
Health Affairs; Page 963
June 1, 2015

“In 2007, as part of the Massachusetts graduated driver licensing program designed to allow junior operators (ages 16½ to 17 years) to gain experience before receiving full licensure, stringent penalties were introduced for violating a law prohibiting unsupervised driving at night; driver education, including drowsy driving education, became mandatory; and other new restrictions and penalties began. We evaluated the impact of these changes on police reported vehicle crash records for one year before and five years after the law’s implementation for drivers ages 16 to17, inclusive, and two comparison groups. We found that crash rates for the youngest drivers fell 18.6 percent, from 16.24 to 13.22 per 100 licensed drivers. For drivers ages 18 to 19, the rates fell by 6.7 percent (from 9.59 to 8.95 per 100 drivers), and for those ages 20 and older, the rate remained relatively constant. The incidence rate ratio for drivers ages 16 to 17 relative to those ages 20 and older decreased 19.1 percent for all crashes, 39.8 percent for crashes causing a fatal or incapacitating injury and 28.8 percent for night crashes. Other states should consider implementing strict penalties for violating graduated driver licensing laws, including restrictions on unsupervised night driving, to reduce the risk of sleep related crashes in young people.” Journal abstract.


5. 2015 PERSONAL LINES CONSUMER MARKETS ANNUAL: TRENDS SHAPING TOMORROW'S CLIENTS
Conning. News release; Page N/A
June 2, 2015

Insurers must actively plan now for the emerging changes in the U.S. consumer market brought on by significant demographic and behavioral shifts, according to a new study by Conning. “There are four major areas driving the demographic changes—population growth, population aging, a shift in the geographic distribution of the population, and ethnic/racial diversity. The confluence of these forces will dramatically change the personal lines market, both for national and regional insurers,” said Alan Dobbins, a director of property/casualty insurance research at Conning. The study, reviews the overall consumer demographic landscape and behavioral changes, and develops a view as to how these pressures may impact the personal lines market. The study reviews key niche segments as well, including high net worth, nonstandard auto insurance risks, seniors, the youth market, and the rapidly growing Hispanic market. “Behavior patterns of the U.S. consumer are also changing, driven by technological, economic, and cultural forces, with the potential to influence exposure growth and consumer spending patterns,” said Steven Webersen, Head of insurance research at Conning. “As consumer markets evolve and changing needs and preferences emerge, the large personal lines insurers have become more focused on individual customers than on the total market. Advancing technologies and the ability for insurers to identify preferences and purchase patterns have facilitated this shift in focus, and will eventually enable forward thinking smaller carriers to follow suit.” The study is available for purchase from Conning by calling (888) 707-1177 or by visiting the company’s website at www.conningresearch.com.


6. THE N FACTOR: HOW NURSES ADD VALUE TO WORKERS COMPENSATION CLAIMS
Helmsman Management Services; 4 pages
June 1, 2015

This report demonstrates the value nurses bring to workers compensation claims resolution. Using injury data, patient characteristics, diagnosis, medical treatment and claimant behavior characteristics to evaluate 42,000 claims, Helmsman Management Services, a subsidiary of Liberty Mutual Insurance, found that claims that involved nurses had: 18 percent lower future medical costs; 26 percent lower overall claim costs; and 15 percent faster claims resolution. The report also found that medical and total loss dollars showed double-digit percentage reductions with injured workers returning to work sooner. Additional benefits of using nurses included increased cost savings and productivity as well as improvements in morale. Full Report


7. CLIMATE CHANGE IN THE UNITED STATES: BENEFITS OF GLOBAL ACTION
The Environmental Protection Agency (EPA); Page N/A
June 22, 2015

This report from the Environmental Protection Agency (EPA) and the White House warns that without global measures now to cut greenhouse gas emissions, by the end of the century climate change could cost the United States up to $180 billion in economic losses because of drought and water shortages. The report analyzes the economic costs of a changing climate across 20 sectors of the American economy. It was conducted by the EPA in conjunction with researchers from the Massachusetts Institute of Technology and scientific laboratories run by the Energy Department. The research used existing scientific and economic studies on the projected impacts of unchecked global climate change emissions and compared those with a future in which global emissions are reduced enough to prevent a rise in average atmospheric temperatures of 2 degrees Celsius, or 3.6 degrees Fahrenheit. The report found that global policy to curb climate change could prevent 12,000 deaths from extreme heat and cold, or what it estimated as $200 billion in savings to the American economy by 2100. Full Text


8. THE VOYA RETIRE READY INDEX™
Voya Financial; Page N/A
March 1, 2015

The Voya Retire Ready Index was developed by Voya Financial based on two surveys of retirees and workers to access their preparedness and knowledge about retirement savings. The surveys confirmed that generally neither workers nor retirees are well prepared for retirement. Planning represents their biggest hurdle as well as the area that offers the most room for improvement. Despite scoring in the low to middle range on the index, both workers and retirees reported a high level of confidence in their financial preparedness to live securely throughout retirement. The study pointed to some gaps between the current perceptions many had about their retirement security and what they ultimately might experience. This included how long they expect to live in retirement and how long they expect the income from their personal assets to last. Full Report


9. STRONG CAPACITY DRIVES BUYER’S MARKET FOR POLITICAL RISK INSURANCE
Marsh Insights. Political Risk Market Update; 4 Pages
June 1, 2015

Strong capacity and competition are driving political risk insurance prices down despite global instability and creating a rare window of opportunity for insurance buyers. Globally, market capacity now exceeds $2 billion for a single policy, nearly double the available capacity just six years ago. This increased capacity reflects a shift away from traditional property/casualty lines toward more profitable specialist classes of insurance. Many traditional insurance lines, such as property and directors and officers liability, have become crowded with competitors, contributing to prolonged soft pricing and limited underwriting profits. Insurers have also not been able to generate much investment income because of low interest rates, which had led them to expand their product offerings to find new sources of revenue. A sidebar lists global political risk trends including: continuing low oil prices; the potential withdrawal of the UK from the EU; sanctions against Russia following the annexation of Crimea; Iran’s nuclear program; relations between China and Taiwan; and instability in North Korea. Full Report


10. CYBER ATTACK ON U.S. POWER GRID COULD COST ECONOMY $1 TRILLION: REPORT
No byline
Reuters; Page N/A
July 8, 2015

According to a July 8 report from the University of Cambridge Centre for Risk Studies and Lloyd's of London, a cyberattack that would shut down parts of the United States’ power grid could cost as much as $1 trillion to the U.S. economy. The report, “Business Blackout,” outlines a hypothetical scenario of an electricity blackout that leaves 93 million people in New York City and Washington D.C. without power. The scenario is deemed to be technologically possible and is assessed to be within the once-in-a-200-year probability for which insurers should prepare. The attack would result in a rise in mortality rates as health and safety systems fail, a drop in trade as ports shut down and disruption to transport and infrastructure. The losses come over a five-year period and result from damage to infrastructure and business supply chains. Said the report, “The total impact to the U.S. economy is estimated at $243 billion, rising to more than $1 trillion in the most extreme version of the scenario.” Since 2000, there have been 15 suspected cyberattacks on the U.S. electricity grid, according to U.S. energy department data. Full Report


If you have a suggestion for a study to be included in this section please email info@iii.org.