Butler University Inspires With Student-Run Captive Insurer

If you’re looking for inspiration to join the insurance sector, look no further than this story of student innovation and enterprise out of Indiana’s Butler University.

The University’s live mascot bulldog Trip, rare books, fine art, and observatory telescope are just some of the items that will be insured by MJ Student-Run Insurance Company, the brainchild of risk management and insurance majors at Butler’s Davey Risk Management and Insurance Program.

MJ Student-Run Insurance Company, a captive insurer, just received licensing approval from the Bermuda Monetary Authority and will officially open for business August 1.

Note: A captive a special type of insurance company set up by a parent company, trade association or group of companies to insure the risks of its owner or owners.

Butler newsroom blog reports that the insurance company was created as a way to give students hands-on experience to prepare them for an industry that anticipates needing 400,000 new employees by 2020.

While 1,900 American universities have accounting programs, and 900 have finance programs, only 82 offer insurance and risk programs, noted Zach Finn, clinical professor & director of Butler’s Davey Risk Management and Insurance Program.

Finn drove the creation of the Butler program back in 2012 to promote his search for a mix of textbook and experiential learning.’

Bernews.com reports:

“This is entrepreneurship at its best. MJ Student-Run Insurance Company Ltd is believed to be the first such captive created, paving the way for future innovation.”

Butler’s captive insurance company was funded by a gift from MJ Insurance and Michael M. Bill.

Check out I.I.I. information on captive insurers and other risk-financing options here.

Small Business Insurance Is Going Digital

The way in which small business owners buy insurance is changing, as the number of ventures owned by Millennials/GenXers increases.

Up to 25 percent of total small business insurance premium could be digitally underwritten by 2020, Willis Towers Watson Securities reports.

“Small businesses are expected to grow an average of 6 percent annually through 2020, at which point over 60 percent of businesses are expected to be owned by Millennials/ GenXers who are much more likely to favor digital management of insurance coverages.”

Traditional insurers are embracing new technologies, both by creating proprietary platforms and partnering with small business insurance distribution focused start-ups.

Here are some recent examples of digital innovation in the $100 billion small business insurance market, via Willis Towers Watson Securities inaugural Quarterly InsurTech Briefing:

Whether a start-up or an established company, disruptions can devastate a business. Small business week is the perfect time to tune up your insurance coverage, the I.I.I. says.

Are You Living The Dream?

Insurance may not be the first place you’d look for a feel-good Friday moment, but American Family Insurance just showed how it can be done.

In the latest phase of its “Insure Carefully Dream Fearlessly” marketing campaign, American Family shows that with the right support, any dream is possible, and there’s no better insurance than that.

As busker Alex Guthrie sets down his guitar and starts singing to the crowd in an Atlanta Park he is surprised by Academy Award- and Grammy Award-winning actress and recording artist Jennifer Hudson.

What follows is a heartwarming rendition of Bill Withers’ “Lovely Day.”

Props to American Family for reminding us that insurance is about so much more than policies, price and contracts.

North American Insurers Lead In Tech Spending

North American insurers lead the way in IT spending globally and will invest $73 billion in tech areas such as data analytics, cloud, and insurtech in 2017.

Digital Insurance reports that global IT spending by insurers is slated to reach $185 billion by the end of this year, according to the Celent “IT Spending in Insurance 2017” report.

After North America, insurer technology spending by region is as follows: Europe ($69 billion); Asia ($33 billion); Latin America ($5 billion); then a group of territories comprising Africa, the Middle East and Eastern Europe (around $5 billion collectively).

Three overarching trends – digitalization, data analytics, and legacy and ecosystem transformation – still dominate investment, Celent said.

“In a few markets globally, we have seen a slight reduction in IT spending this year. Generally, the more mature markets remain under pressure to demonstrate value through efficiency,” said senior vice president Jamie Macgregor.

Long Road To Better Data On Drowsy, Drunk, Drugged And Distracted Driving

States are underreporting critical data from crash scenes that could make a big difference in efforts to prevent help prevent traffic fatalities and injuries.

A National Safety Council review of motor vehicle crash reports found that:

  • All 50 states lack fields or codes for law enforcement to record the level of driver fatigue at the time of a crash;
  • 26 state reports lack fields to capture texting;
  • 32 states lack fields to record hands-free cell phone use;
  • 32 states lack fields to identify specific types of drug use if drugs are detected, including marijuana.

States are also failing to capture teen driver restrictions (35 states), and the use of advanced driver assistance technologies (50 states) and of infotainment systems (47 states).

Excluding these fields limits the ability to effectively address these problems, NSC said.

“Collecting data from a crash scene may be seen as merely “filling out accident reports” for violation and insurance purposes. Data collection efforts immediately following a crash provide a unique opportunity to help guide prevention strategies. Currently, some states are recording this type of data and others are not. When data of this kind is requested to be reported on a crash report and is entered, prevention professionals will have the data to better understand driver and non-motorist behaviors. When this data is not recorded, prevention professionals are left guessing.”

The call for better data collection follows the release of NSC figures showing that in 2016 there were more than 40,000 traffic fatalities in the U.S. for the first time in 10 years.

A recent I.I.I. white paper found that in the past two years, both the accident rate and the size of insurance claims have climbed dramatically. These are the largest and most volatile components of auto insurance.

Check out additional I.I.I. facts and statistics on highway safety.

Selfies And Life Insurance

Today’s selfie may already be posted on Instagram, but consider this: one day it could be part of your application for life insurance.

NerdWallet reports that several life insurers are testing technology that uses facial analytics and other data to estimate life expectancy.

The tech company in focus, Lapetus Solutions, says its product Chronos, would enable a customer to buy life insurance online in as little as 10 minutes without taking a life insurance medical exam.

NerdWallet explains that state regulatory approval would be required for an insurer to be able to use Chronos in the underwriting process. Once approved, here’s how it would work:

“You’d upload a selfie to the insurer online and answer health and other questions. The facial analytics technology would scan hundreds of points on your face and extract certain information, including your body mass index, physiological age (in layman’s terms, how old you look) and whether you’re aging faster or slower than your actual age.”

The facial analytics angle is just one example of how life insurers are exploring the use of data, statistical models, artificial intelligence and other innovative techniques in their business.

Time and testing will tell which new approaches prove effective, says Robert Kerzner, president and CEO of LIMRA: “This one may or may not meet the vetting process to make carriers comfortable.”

What do you think?

Check out I.I.I. facts and statistics on life insurance.

Stable And Buyer-Friendly Commercial Insurance Marketplace

As hundreds of risk professionals gather in Philadelphia, the birthplace of insurance, for the annual RIMS (Risk and Insurance Management Society) conference, here’s the latest take on corporate risk costs:

  • Businesses saw a 5 percent decline in the total cost of risk (TCOR) in 2016—the third year in a row that corporates have benefited from lower prices, according to the latest RIMS benchmark survey. The study defines TCOR as the cost of insurance, plus the costs of the losses that are retained and the administrative costs of the risk management department. CFO.com has more on the findings.
  • The commercial insurance marketplace remains buyer-friendly and stable for North American insurance buyers, even as it braces for potential changes from Washington D.C. That’s the outlook from Willis Towers Watson in its 2017 Marketplace Realities report which points to the fluidity of capital as a key driver of current market conditions. The report’s line-by-line commercial insurance price predictions for the remainder of 2017 show a mix of increases, decreases and flat rates, as follows:

 

Need For Political Risk Coverage Accelerates

Amid ongoing political upheaval in Venezuela and a volatile geopolitical landscape elsewhere, the need for political risk insurance is rising to prominence for multinational companies.

AP reports that General Motors just became the latest corporation to have a factory or asset seized by the government of Venezuela.

GM said assets such as vehicles were taken from the plant causing the company irreparable damage.

To protect themselves against loss or damage to physical assets caused by political action and instability, businesses should consider purchasing political risk insurance.

This specialty type of insurance can protect against a variety of risks, including:

  • Expropriation
  • Political violence (including terrorism and war).
  • Currency inconvertibility.
  • Non-payment.
  • Contract frustration due to political events.

Due to the accelerating pace of geopolitical uncertainty, the market for political risk insurance is pushing toward $10 billion in 2018, up from $8.1 billion in 2015, according to a KPMG LLP report published last year.

Willis Towers Watson advises multinational companies to buy political risk coverage on operations worldwide — particularly for select regions —while it is still available, Business Insurance reports.

Political risk insurance is available from both private insurers and from government-backed insurers, including the Overseas Private Investment Corporation (OPIC), an agency of the U.S. government.

Aon’s Political Risk Map 2017 captures changing risks for businesses and countries across emerging and frontier markets.

Last year an equal number of countries showed a reduction in political risk as showed an increase, a trend which highlights the persistence of political risk across the globe, Aon said.

Insurers Invest In Artificial Intelligence

About two-thirds of insurers use artificial intelligence-based (AI) “virtual assistants” to handle some customer calls and use of the technology is expected to increase, according to a just-published Accenture survey.

Today’s I.I.I. Daily, via Bloomberg, reports that 85 percent of the executives surveyed by Accenture indicated that they would invest “significantly” in the technology over the next three years.

Insurance companies will spend on average $90 million on artificial-intelligence technologies by 2020, according to research from Tata Consultancy Services.

The Bloomberg article “Insurance Customers Need to Get Used To Talking To Machines” is timely.

A new global study by software company Pegasystems Inc reveals that while consumers are optimistic about the benefits of AI, they are also confused about what AI really does and have misplaced fears that inhibit them from fully embracing AI devices and services.

In the survey of 6,000 customers in six countries, Pegasystems found that only one in three (36 percent) of consumers are comfortable with businesses using AI to engage with them—even if this typically results in a better customer experience.

Digital Insurance reports: “The irony in many cases is that consumers may be surprised to learn they are already exposed to much more AI than they realize.”

Only 34 percent of respondents thought they had directly experienced AI. But when asked about the technologies in their lives, the survey found that 84 percent actually use at least one AI-powered service or device such as virtual home assistants, intelligent chatbots, or predictive product suggestions.

“When asked separately to identify AI-powered devices, only 41 percent knew Amazon’s Alexa and Google Home run on AI.”

U.S. Thunderstorm Losses Add Up To Q1 Record

Topping $5.7 billion. That’s the record cost of insured losses from severe thunderstorms and convective weather in the United States in the first quarter of 2017.

The latest figures come via Steve Bowen, director and meteorologist at Impact Forecasting, the catastrophe risk modeling center at Aon Benfield.

Here’s the chart (via @SteveBowenWx):

Artemis blog offers this perspective:

“It’s the second year in succession that insurance and reinsurance markets have faced a heavy toll from severe thunderstorm related losses, which in turn means impacts to ILS [insurance-linked securities] funds and investors, as severe convective storm risk is a typical peril of many catastrophe reinsurance arrangements that ILS investments are linked to.

Beyond the first-quarter the expensive run-rate of losses from severe thunderstorms has continued, with some further outbreaks in the last fortnight.”

A recent Willis Re study found thunderstorms were just as costly to insurers as hurricanes.

Check out these resources (here and here) from the Insurance Institute for Business & Home Safety on how to protect your home and business from thunderstorms and tornadoes.

Register here for an April 27 Swiss Re and I.I.I. webinar on natural catastrophes.

I.I.I. facts and statistics on tornadoes and thunderstorms here.

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