As a longtime Madonna fan and as a parent of two young cape-wearing superheroes, I was concerned to read of the 56-year-old star’s fall on stage – view here – during the closing performance at the UK’s Brit Awards earlier this week.

The Queen of Pop apparently suffered whiplash in the incident as she was dragged backwards when the tightly tied Armani cape she was wearing wouldn’t come undone.

Madonna managed to go on with the show, but it’s good to know that if she hadn’t there’s insurance for that.

From providing appearance/event cancellation coverage, to insuring celebrity body parts, to writing death and disgrace policies, specialist insurers play a major role in providing protection to the stars – and the companies that promote and sponsor them.

For example, through the years the Lloyd’s insurance market has insured a long line of celebrities and celebrity body parts.

This Lloyd’s article notes that Rolling Stones guitarist Keith Richards’ hands were insured for $1.6 million, while Marlene Dietrich insured her voice for $1 million and actress Bette Davis once insured her waistline against expansion to the tune of $28,000.

More recently, in 2006, soccer giant David Beckham’s legs were insured for £100 million and in 2007, Ugly Betty television star America Ferrera’s smile was insured for $10 million.

Whether a musician, sports star, TV personality, or a top chef, each celebrity risk profile comes with its own unique set of risks, according to the individual’s occupation, health, lifestyle and associated risks.

Another type of celebrity fall from grace is covered by a recently launched product from AIG’s Lexington Insurance Company. Known as Celebrity Product RecallResponse, the new product covers companies in the event of a celebrity endorser’s public fall from grace, scandal or unexpected death.

Basically, the product covers certain costs incurred by companies to recall products bearing a celebrity endorser’s name and image.

AIG says the insurance is triggered when “significant news media coverage of an endorser’s actual or alleged criminal act or other distasteful conduct that results in (or is likely to result in) public contempt for the individual and a significant adverse impact on a company’s product.”

As Jeremy Johnson, president and CEO of Lexington Insurance Company, notes:

In this age of social media and instant news, reports of indiscretions by celebrities or high profile athletes can spread worldwide instantly, with swift, adverse implications for products or brands associated with the individual.”

Just another example of how innovative insurance can be.

Next week Jim Lynch will be in Boston for the annual conference of an I.I.I. subscriber, the Workers Compensation Research Institute (WCRI). Here’s his preview:

WCRI is known for its painstakingly objective analyses of workers comp trends in more than a dozen large states. Lately mainstream media have noticed WCRI, particularly this New York Times article, in which researchers found that when the prices of common dosages for back pain were capped, California doctors switched to dosages whose prices were not capped. This allowed them to charge about five times more per pill.

Physicians tend to charge considerably more than pharmacies when they dispense drugs, a phenomenon WCRI studies regularly. The costs and consequences of physician prescriptions is one of the main topics of the first morning of next week’s conference. (Registration and other details here.)

Day Two will feature a topic in which I’ve become more interested in recent weeks – the ability to opt out of the workers comp environment entirely.

For about a century workers comp has been a pact that has bound employers to employees in liability law. Workers give up their right to sue if they are injured on the job. Employers agree to pay for all injuries at work, regardless of how they occurred.

For decades Texas was the only state that didn’t follow these rules. Employers could opt out of the system, but they lost the considerable common law defenses employers usually enjoy. Workers’ Comp Insider has a nice overview of the Texas system.

In 2014 Oklahoma became the second opt-out state. Tennessee lawmakers have proposed their state become the third, even as Oklahoma’s law faces a constitutional challenge, as Business Insurance reports.

At the WCRI conference opt-out will get a hearing. A representative from retailer Nordstrom, which supports opt-out measures, will discuss the matter with an AFL-CIO representative and one from PartnerSource, a company that helps successfully opt-out.

Follow my live-tweeting of the conference @III_Research and check back for another blog post.

Update: Aw, shucks. I learned early Thursday that the opt-out session at the WCRI conference has been canceled. I’ll still be going to the conference.

I.I.I. offers facts and statistics on workers compensation.

The cost of claims paid by homeowners insurers has been increasing at twice the rate of inflation, despite significant declines in recent years, according to the 2015 edition of a report from the Insurance Research Council (IRC).

Average homeowners claims payments per insured home have been increasing at an annualized rate of 5.0 percent since 1997, the IRC said, compared to the inflation average of approximately 2.4 percent.

Volatility—a major characteristic of homeowners insurance claims trends—is reflected in this chart:

IRCHomeownersClaimsSeverity

The average claim payment per insured home countrywide rose to $625 in 2011, up from $229 in 1997, before falling to $442 in 2013.

What’s behind the increased costs?

All of the increase in average costs per insured home was due to growth in average claim severity, which rose at an annualized rate of 7.8 percent over the 17-year period—more than triple the rate of inflation, the IRC said.

The rise in claim severity more than offset a 2.6 percent annualized decrease in claim frequency, the report found.

That said, claim frequency trends were found to be significantly more volatile than claim severity trends, especially for experience identified by insurance companies as related to catastrophe events.

In the words of Elizabeth Sprinkel, senior vice president of the IRC:

Insurance companies face significant challenges in responding effectively to rapid growth in claim severity and in managing the extreme volatility of claim trends everywhere.

In addition, consumers will find it increasingly important to consider steps to control their personal exposure to risk and to mitigate the damages and costs associated with severe weather events.”

IRC analyzed data from the Fast Track Monitoring Service representing approximately 50 percent of the U.S. homeowners insurance market for the study.

I.I.I. has useful facts and statistics on homeowners insurance here.

A protracted labor dispute that continues to disrupt operations at U.S. West coast ports underscores the supply chain risk facing global businesses.

Disruptions have steadily worsened since October, culminating in a partial shutdown of all 29 West coast ports over the holiday weekend.

The Wall Street Journal reports that operations to load and unload cargo vessels resumed Tuesday as Labor Secretary Tom Perez met with both sides in the labor dispute in an attempt to broker a settlement amid growing concerns over the impact on the economy.

More than 40 percent of all cargo shipped into the U.S. comes through these ports, so the dispute has potential knock on effects for many businesses.

A number of companies have already taken steps to mitigate the supply chain threat, according to reports. For example, Japanese car manufacturer Honda Motor Co, among others, has been using air freighters to transport some key parts from Asia to their U.S. factories – at significant extra expense.

On Sunday Honda also said it would have to slow production for a week at U.S.-based plants in Ohio, Indiana, and Ontario, Canada, as parts it ships from Asia have been held up by the dispute.

Toyota Motor Corp. has also reduced overtime at some U.S. manufacturing plants as a result of the dispute.

A brief published by Marsh last year noted that a West Coast port strike or shutdown could have broad consequences for global trade, business and economic conditions.

Organizations with effective risk management and insurance strategies in place will be best prepared to manage and respond to situations that hamper their flow of goods and finances, Marsh noted.

In 2002, a similar labor dispute ultimately led to the shutdown of ports along the West coast costing the U.S. economy around $1 billion each day, and creating a backlog that took six months to clear.

Many businesses purchase marine cargo insurance to protect against physical loss or damage to cargo during transit. This type of insurance generally will not respond in the event that a strike or other disruption at a port delays the arrival of insured cargo, unless there is actual physical damage to the cargo, according to Marsh.

However, some policyholders may have obtained endorsements to their insurance policies, or purchased additional coverage to protect themselves from the effects of port disruption.

Trade disruption insurance (TDI), supply chain insurance, and specialty business interruption insurance may also provide coverage for the financial consequences of a port disruption, Marsh wrote.

A study by FM Global of more than 600 financial executives found that supply chain risk, more than any other, was regarded as having the greatest potential to disrupt their top revenue driver. FM Global’s Resilience Index can help executives evaluate and manage supply chain risk.

I.I.I.’s Jim Lynch brings us a timely reminder on why it’s important to buckle up:

I hate to write this: CBS newsman Bob Simon, who died February 11 in a Manhattan auto accident, was not wearing a seat belt, according to The New York Times.

Simon lately filled an elder statesman role on 60 Minutes, but his reporting career was one of globetrotting daredevilry. He covered America’s urban riots in 1968. He reported for six years from Vietnam and rode one of the last U.S. helicopters that left Saigon before the city fell in 1975. He was captured by Iraqi troops at the outset of the 1991 Persian Gulf War and was held prisoner for 40 days.

Simon died when the limousine in which he rode sideswiped a Mercedes in Manhattan, then hit a lane barrier.

Every death is a tragedy, an accidental death doubly so. Sadder still that a person who survived so much danger might well have survived this accident had he been wearing a seat belt. His driver had buckled up and survived; both of his legs were broken, as was an arm. The Mercedes driver was uninjured.

I.I.I.’s Facts and Statistics on highway safety points out that seatbelts saved more than 12,000 lives in 2012 and could have saved another 3,031, had everyone used them.

I ride in cabs and black cars fairly often and know it feels awkward to buckle up. The action seems to be a referendum against the driver, as if my action says I question the driver’s competence. And I feel weirdly invulnerable when I travel, as if tragedy can’t find me in the back seat.

Still, I always strap myself into the harness, and I wish Bob Simon had done so as well.

In 2011, 65 percent of New York taxi riders failed to buckle up, according to Taxi and Limousine Commission statistics reported in USA Today, vs. about 10 percent in private passenger vehicles. New York is one of 22 states that do not require cab riders to buckle up.

My own Valentine’s story is one of loss and finding, and how insurance helped.

Last April I lost my engagement ring. One minute it was on my finger, the next it wasn’t.

19308154_PT etoile stnd_tf_R1

 

It was late in the day when I felt the weightlessness of my fourth finger. The day had been full of preschool dropoffs and pickups, a grocery store run, a bank drive-thru, multiple loads of laundry, a music class and playtime with my youngest son.

Frantic, I retraced my steps, searched on my hands and knees every inch of the family room, fingered through laundry fresh and dirty, drove back to the bank, called the grocery store. Nothing.

The knowledge that the ring had become loose on my finger in recent months didn’t help. It could have slipped off anywhere.

My partner arrived home to find me a mess. When we got engaged back in 2004 the diamond rings we picked out at a well-known Fifth Avenue store were a significant purchase for us, but not excessive by any means.

Still, to lose the ring just a year shy of our 10th wedding anniversary gave me that ball in the pit of my stomach feeling. I emailed our insurance agent.

The next morning I broadened my search, retracing steps over the prior weekend. On my second empty-handed trip back from the bank drive-thru I followed our agent’s advice and called our insurer to report the loss.

Retelling what had happened to the customer service rep was cathartic actually. She asked for details: When did I last remember seeing the ring? Which bank drive-thru had I visited? How long had the ring been loose? When exactly had the ring been purchased? Had it been valued?

Luckily, we had filed away the valuation reports and diamond certificate given to us at the time of purchase. On re-reading, these words jumped out:

I have also included two copies of a valuation report which details the replacement value of your merchandise. One copy is provided for your personal records, the other may be supplied to your insurance company to protect you in the event of loss or damage.”

The report filed with our insurer, I was somewhat comforted by the fact that our standard homeowners policy covers our personal belongings, including jewelry up to a stated dollar amount (in our case just more than the value of the ring). Our decision to go for replacement cost coverage also proved prudent.

A day later I got a call from the insurer that the appraisal department had reviewed my case and a check would be issued to make good my loss. I thanked the rep for her efficiency, adding: “I’ll still keep looking for the ring.”

It was four or five days after the ring went missing that a strange thing happened. My eldest son was jumping up and down on the couch. Anyone with young boys knows they do this often.

Suddenly something round and glittering fell out from under it. My son picked it up and handed me none other than my engagement ring!

I don’t know who was more pleased, me or the customer service rep at our insurer. The insurance check (already in the mail) was cancelled. The original ring was back on my finger.

Soon afterwards on the advice of our insurer, we went back to the jeweler to get my ring re-sized. After 10 years, one dog and two kids the net reduction was 1.5 sizes.

Our modest jewelry loss ended in the best possible way, but if you own valuable jewelry or other items that would be difficult to replace, you might want to increase your coverage, as the I.I.I. advises here.

And remember, as the years go by it’s a good idea to get your jewelry resized if you want to hold on to the sentimental value.

With thanks to MetLife and Tiffany & Co.

Happy Valentine’s Day to all our readers!

Just in time for Valentine’s Day Jim Lynch brings us a heartfelt tale of love and insurance:

Last year I wrangled a review copy of Love Insurance, a century-old novel by Earl Derr Biggers, whose better known works created Charlie Chan in a spectacularly unsuccessful attempt to sweep away anti-Chinese stereotypes. The book was re-released by London’s Hesperus Press.

2015.02.03 PHOTO Love insurance

The story: A member of the British peerage buys a Lloyd’s policy that will pay him £75,000 if his impending marriage falls through. To protect his investment, the underwriter sends an earnest delegate to monitor the engagement. Earnest delegate falls in love with fiancée. They end up together despite several plot twists, most not memorable to me six weeks after finishing the book. So unfortunately I cannot recommend the work.

I do remember the insurance policy: £7,500 for a £75,000 limit. The cash-strapped lord can’t afford more cover – he’s marrying into an American fortune, a fact that addresses adverse selection.

Anyhow, as you can see above the policy is priced at 10 percent rate on line. Back then, the load for expenses and profit was a factor like 100/80ths or 100/75ths. Stripping that from the rate on line implies the underwriter and the lord implicitly agreed the probability the policy would pay was between 7.5 percent and 8 percent.

When you’re an actuary, you think like that.

These days wedding insurance covers calamities from the event, not of the heart, as the linked I.I.I. article and video explain.

Towers Watson just released its annual survey on predictive modeling with some notable results.

The percentage of U.S. property/casualty executives reporting a positive impact on profitability has dramatically increased over the past six years, while the breadth and depth of predictive modeling applications has grown.

Some 87 percent of property/casualty executives report that predictive modeling had a favorable impact on profitability in 2014, an increase of eight percentage points over 2013. The increase continues a pattern of growth over several years, and is up significantly from 57 percent six years ago.

A positive impact on rate accuracy helps explain the boost in profits, Towers Watson said.

In fact, the percentage of carriers citing a positive impact on rate accuracy has increased every year since 2010, when 70 percent cited a positive impact. By 2014, 98 percent of insurers reported that predictive modeling has improved their rate accuracy.

More accurate rates also positively impact loss ratios, which have improved in parallel, according to p/c insurance executives. In 2014, 91 percent cited the favorable impact of predictive modeling on loss ratios, an increase of 14 percentage points over 2013.

The survey shows the use of predictive modeling in risk selection and rating/pricing has increased significantly for all lines of business over the last year, continuing a long-term trend.

For personal lines, auto saw the largest increase with 97 percent of participants saying they used predictive modeling in underwriting/risk selection or rating/pricing in 2014, up from 80 percent in 2013 – a 17 percentage-point increase.

Even more noteworthy is the increased use of predictive modeling in commercial lines.

For commercial property/commercial multiperil (CMP)/business-owner peril (BOP) as well as commercial auto the use of modeling increased 19 percentage points – to 51 percent and 41 percent respectively, year-to-year.

But it was specialty commercial lines that saw the largest increase, where 44 percent of p/c executives said they use predictive modeling in risk selection and rating/pricing in 2014, up from 13 percent in 2013 – a 31 percentage point increase.

us-insurers-bottom-line-predictive-modeling-boosts-profits-fig1

While the survey suggests that insurers are increasingly comfortable with predictive modeling and using it in a growing number of capacities, more progress is still possible, according to Towers Watson.

Treating data as an asset and more effectively using predictive modeling applications to improve claim and other functional results could make a significant difference in the profitability of insurance companies, it suggests.

More on the survey results in this Insurance Journal article.

Towers Watson gauged the views of 52 U.S. insurance executives in personal lines and commercial lines carriers for the survey.

 

 

In what is being described as potentially the largest breach of a health care company to-date, health insurer Anthem has confirmed that it has been targeted in a very sophisticated external cyber attack.

The New York Times reports that hackers were able to breach a company database that contained as many as 80 million records of current and former Anthem customers, as well as employees, including its chief executive officer.

Early reports here and here suggest the attack compromised personal information such as names, birthdays, medical IDs/social security numbers, street addresses, email addresses and employment information, including income data.

On a website – www.AnthemFacts.com — set up to respond to questions, Anthem noted that there is no evidence that credit card or medical information, such as claims, test results or diagnostic codes were targeted or compromised.

Anthem said the breach was discovered on January 27 and that the company is fully cooperating with the FBI investigation. The health insurer has been praised for its initial response in promptly notifying the FBI after observing suspicious activity.

An FBI statement quoted in an LA Times article noted:

Anthem’s initial response in promptly notifying the FBI after observing suspicious network activity is a model for other companies and organizations facing similar circumstances. Speed matters when notifying law enforcement of an intrusion, as cyber criminals can quickly destroy critical evidence needed to identify those responsible.”

On the dedicated website, Anthem president and CEO, Joseph R Swedish, offered a personal apology to members. Anthem has also established a toll-free number – 1-877-263-7995 FREE – that both current and former members can call if they have questions related to the breach.

In 2014, the medical/healthcare sector accounted for 42 percent of data breaches – the largest among industry sectors – as reported by the Identity Theft Resource Center (ITRC).

In fact, breaches in the medical/healthcare industry have accounted for the largest percentage of data breaches by industry sector since 2012, which ITRC attributes primarily to the mandatory reporting requirement for healthcare breaches to the Department of Health and Human Services (HHS).

If the estimate of 80 million records compromised holds, this will put the Anthem data breach up there with recent mega breaches of 2014 such as eBay (145 million people affected), JP Morgan (76 million households and 7 million small businesses affected) and Home Depot (56 million unique payment cards).

While 2014 was dubbed the year of the mega breach, the Ponemon Institute recently warned that 2015 is predicted to be as bad or worse as more sensitive and confidential information and transactions are moved to the digital space and become vulnerable to attack.

As of January 27, 2015, some 455,377 records had been exposed in 64 breaches reported to the ITRC. This followed a record high of 783 U.S. data breaches exposing 85.6 million records tracked by the ITRC in 2014.

For an analysis of cyber risk and insurance, download this Insurance Information Institute (I.I.I.) white paper.

If you’re reading about the rising number of measles cases in California, you may also be thinking about pandemic risk.

First, let’s look at the status of measles cases and outbreaks in the United States.

The CDC notes that from January 1 to January 28, 2015, 84 people from 14 states were reported to have measles. Most of these cases are part of a large, ongoing outbreak linked to Disneyland in California.

On Friday (January 30, 2015), the California Department of Public Health released figures showing there are now 91 confirmed cases in the state. Of those, 58 infections have been linked to visits to Disneyland or contact with a sick person who went there.

At least six other U.S. states – Utah, Washington, Colorado, Oregon, Nebraska and Arizona—as well as Mexico have also recorded measles cases connected to Disneyland, according to this AP report.

What about last year?

The U.S. experienced a record number of measles cases during 2014, with 644 cases from 27 states reported. Many of the cases in the U.S. in 2014 were associated with cases brought in from the Philippines, which experienced a large measles outbreak, according to the CDC.

measles-cases-616px

Measles, which can be prevented by vaccine, is one of the most contagious of all infectious diseases. The virus is transmitted by direct contact with infectious droplets or by airborne spread when an infected person breathes, coughs, or sneezes.

Approximately 9 out of 10 susceptible persons with close contact to a measles patient will develop measles, the CDC reports.

This is an important point. A study published by Risk Management Solutions (RMS) last year compared the low transmissibility of Ebola (Ebola can only be transmitted through direct contact with bodily fluids), with other infectious diseases such as measles.

RMS noted that each person infected with measles can generate on average more than 10 additional cases in an unvaccinated environment.

What about mortality risk?

Measles is one of the leading causes of death among young children, the World Health Organization (WHO) says. In 2013, there were 145,700 measles deaths globally—about 400 deaths every day or 16 deaths every hour.

One or two out of every 1,000 children who become infected with measles will die from respiratory and neurologic complications, according to the CDC.

One dose of the Measles, Mumps, Rubella (MMR) vaccine is approximately 93 percent effective at preventing measles, CDC notes, while two doses are 97 percent effective. Measles vaccination resulted in a 75 percent drop in measles deaths between 2000 and 2013 worldwide, WHO reports.

A CDC-issued health advisory here provides guidance to healthcare providers nationwide on the multi-state measles outbreak.

The potentially devastating impact of the rapid and massive spread of infectious diseases was a risk underscored by respondents to the recently released World Economic Forum (WEF) Global Risks 2015 report.

This reflects the need for a higher level of preparedness for major pandemics at both the country and international levels, the WEF noted.

The I.I.I. has facts and statistics on mortality risks here.

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