# Irrational Exuberance

Tomorrow is Pi Day, and a very special one writes I.I.I. chief actuary Jim Lynch.

For one second the date and time will represent pi’s first 10 digits (3/14/15 9:26:53), a moment both trivial and mnemonic.

Pi is an important number in insurance, as any actuary who has reflected on the matter will tell you.

Actuaries grapple with the mathematical discipline known as statistics, the heart of which is the normal distribution. The normal distribution is famous for its bell-curve shape, but relevant on March 14 is that the number pi appears in the formula for the normal distribution:

If I may be a bit hyperbolic, the mathematical foundation of insurance balances upon the number pi.

Pi is famously irrational, its digital expression neither ending nor repeating, but it is not the only irrational number in the normal equation. There’s the square root of 2 (1.414213562 . . .). There’s also the number e (2.71828 . . .), which you might remember if you studied logarithms in precalculus, but probably not.

So irrational numbers play an important role in insurance as elsewhere. Some, like pi, help us understand the world better. Others, like the irrationally small percentage of homeowners who purchase flood insurance, are less honorable, and the I.I.I. notes them in this infographic.

# Insurance Facts at Your Fingertips, 50 Years On

Hot off the press, the latest edition of the Insurance Information Institute’s  flagship publication Insurance Fact Book is now available. I.I.I. chief actuary Jim Lynch reflects on this  comprehensive resource:

It’s not important why, but the other day I needed to look up auto insurance written premiums for 1963.

My source: Insurance Facts 1964, an Insurance Information Institute publication that was forerunner to the  Insurance Fact Book, our one-stop property/casualty almanac whose 2015 edition went on sale this week.

I.I.I. has been printing some version of the Fact Book for more than 50 years, and we have earned a reputation for scrupulous accuracy.

This excursion was where I saw how well-deserved that reputation is.

Auto written premiums were \$6.839 billion in 1963, according to Insurance Facts. I wanted to verify the number. To do that, I was stumped for a minute — who else would have this bit of information?

First stop: the federal government. That’s the sort of minutiae that would fill up the Statistical Abstract of the United States, the Census Bureau’s collation of the nation’s vital signs. And it was there — but the government got the information from I.I.I. — that same Insurance Facts 1964. I shouldn’t have been surprised; we continue to provide information for the Statistical Abstract and similar works.

So I went back to where I.I.I. got the data all those years ago — A.M. Best’s Aggregates  & Averages, another statistical compendium with a peerage. (We get much of our data now from SNL Financial.)

In those days before the PC, Excel and Big Data, Aggregates  & Averages was much simpler. For the most part, it resembled a bound computer printout, with most information divided among three types of insurers: stock companies, mutuals and reciprocals. To calculate an industry total, you had to pick out numbers from each section.

That’s what I did, 50 years after the fact. Sure enough, all Best’s parts added to \$6.839 billion, just like our old Insurance Facts said it would.

I was reassured, but I shouldn’t have been surprised. I got to see firsthand how much double-checking and questioning every line of the 242-page book received. Our editing is scrupulous, now, just as it was in 1964, when the first Mustang rolled onto the street and some band named the Beatles put out some records.

You can buy this year’s Fact Book at www.iii.org/store or by emailing publications@iii.org or calling (212) 346-5500.

# How To Get To Sesame Street

For many children and their parents Sesame Street is synonymous with childhood as characters like Big Bird, Elmo, Ernie and Bert deliver education and entertainment to the pre-school set.

So the launch of an early literacy education initiative for underserved children via a partnership between the Insurance Industry Charitable Foundation (IICF) and Sesame Workshop, the nonprofit educational organization, is a notable development.

The IICF has pledged \$750,000 to Sesame Workshop over the next three years, to create a literacy skills program that helps parents and caregivers support young childrenÃ¢â‚¬â„¢s development of conversation, reading and writing.

The program will launch in the fall of 2013 and will include video segments, downloadable materials and a dedicated section on the Sesamestreet.org website and mobile site.

This is the IICFÃ¢â‚¬â„¢s largest single grant pledge to-date since the organization was established in 1994.

The initiative will target low income communities within IICF’s four regional divisions; Midwest, Northeast, Texas/Southeast, and the Western United States and will also engage volunteers in all of these regions.

William Ross, chief executive officer of the IICF, says:

ItÃ¢â‚¬â„¢s an honor and privilege to be working with the Sesame Workshop, an organization that is passionate about making an educational impact for children in the communities in which we work and serve. Through this program, we are hoping to create a meaningful difference by creating an impactful literacy foundation for the underserved children in this country.Ã¢â‚¬ 

# Financial Strategies for Victims of Domestic Abuse

October is Domestic Violence Awareness Month and while providing shelter and security for victims is often the first priority, helping them attain financial or economic security is just as important.

Financial security and access to resources is the number one predictor of whether domestic violence victims will stay in or leave an abusive relationship. And insurance is a key component of financial planning that helps survivors prepare for a better life, according to the Insurance Information Institute (I.I.I.).

Loretta Worters, vice president, I.I.I. says:

The financial cost of leaving an abusive partner can be crushing. Once you decide to leave your partner, you may be solely responsible for providing for yourself and your family and insurance can play a critical role in gaining your financial freedom and self-sufficiency.Ã¢â‚¬ 

To mark Domestic Violence Awareness Month, the I.I.I. suggests the following financial
strategies for anyone who is leaving or has left an abusive situation:

1. Secure your financial records: ItÃ¢â‚¬â„¢s essential to prevent identity theft or damage to your credit. Birth certificates, drivers licenses, passports, bank and credit card information needs to be kept with a trusted family member or friend, or in a bank safety deposit. ItÃ¢â‚¬â„¢s also a good idea to set up a P.O. Box to conceal all your important mail from your abuser.

2. Know where you stand financially: Knowledge is power, and it is critical that you understand where you stand financially. That means knowing your main sources of income, bank account balances, property owned and debts owed.

3. Build a financial safety net: Once you have a good idea of your financial picture, you are in a better position to plan your exit. Begin with estimating your income and expenses to see if the money you earn right now will allow you to meet your basic needs. Also, start a savings plan and create an emergency fund so you have a safety net if things get difficult financially once you leave.

4. Make necessary changes to your insurance plans: If you plan to take a car with you when you leave your abuser, you will need to get separate auto insurance coverage immediately. Also, when you move out of the house, it is likely you will be renting a place to live and will need to purchase a renters insurance policy. If a life insurance policy on your own life is payable to the abuser, and you own the policy, you have the right to change the beneficiary, and probably should.

5. Maintain good credit: Having a good credit report is going to be essential when it comes to starting your new life, as it can help you more easily rent an apartment, get a new credit card and get better rates on your insuranceÃ¢â‚¬”it can even affect your ability to get a job. Take care of your current debts and avoid missing any payments. Obtain a copy of your credit report and monitor your credit often.

6. Seek assistance: If you are in a precarious financial situation, or have limited money management skills, it may be difficult to implement some of the steps mentioned above so it is important that you use all the assistance available. Local domestic violence programs, libraries, the Internet and faith-based organizations are all places that you can go to get assistance, and many offer free workshops and seminars that can help you with money management.

# Stormstruck? There’s An App for That

IÃ¢â‚¬â„¢ll huff, and IÃ¢â‚¬â„¢ll puff, and IÃ¢â‚¬â„¢ll blow your house in. No, IÃ¢â‚¬â„¢m not talking about the Three Little Pigs.

The Federal Alliance for Safe Homes (FLASH) is launching StormStruckÃ‚ ®, a new 3D animated app from the USA Science and Engineering Festival in Washington, DC today.

This new app allows users to create an intense windstorm with a simple swipe of a finger and see in 3D the kind of damage it can do to an average home.

Users then choose from a variety of upgrades that protect the home and enable it to withstand damage. Everything from garage doors to roof connections can change the fate of the home and increase its chance of survival.

The aptly-named StormStruck app is free and compatible with the iPhone, iPad and iPod touch.

Once you’ve seen how severe weather has the potential to damage your house, you might want to make a home inventory of your personal possessions. The good news is that the Insurance Information Institute (I.I.I.) has a new home inventory app for iPhone to make the process even easier.

The I.I.I.Ã¢â‚¬â„¢s Know Your StuffÃ‚ ® – Home Inventory is Web-based software that can be found at KnowYourStuff.org. If you have an iPhone, you can also download theÃ‚  free Know Your StuffÃ‚ ® – Home Inventory app in the iTunes App Store.

# The Fourth of July 2011

Before you head off to enjoy the barbecues and fireworks, itÃ¢â‚¬â„¢s time for our annual Independence Day fact file. HereÃ¢â‚¬â„¢s this most American of holidays by the numbers, courtesy of the Census Bureau:

2.5 million: In July 1776, the estimated number of people living in the newly independent nation.

311.7 million: The nationÃ¢â‚¬â„¢s estimated population on this July Fourth.

\$98.3 billion: Dollar value of trade last year between the United States and the United Kingdom, making the British, our adversary in 1776, our sixth-leading trading partner today.

\$190.7 million: The value of fireworks imported from China in 2010, representing the bulk of all U.S. fireworks imported (\$197.3 million). U.S. exports of fireworks, by comparison, came to just \$37.0 million in 2010, with Japan purchasing more than any other country (\$6.3 million).

81 million: Number of Americans who said they have taken part in a barbecue during the previous year. ItÃ¢â‚¬â„¢s probably safe to assume a lot of these events took place on Independence Day.

Have a safe and happy holiday!

# Ready For Zombies, Hurricanes, Floods?

Preparing for hurricane season? Or for an invasion of zombies? Either way, the Centers for Disease Control and Prevention (CDC) has you covered.

In a blog post earlier this week, the CDC did what many emergency preparedness messages fail to doÃ‚  Ã¢â‚¬“ it got our attention:

There are all kinds of emergencies out there that we can prepare for. Take a zombie apocalypse for example. ThatÃ¢â‚¬â„¢s right, I said z-o-m-b-i-e a-p-o-c-a-l-y-p-s-e. You may laugh now, but when it happens youÃ¢â‚¬â„¢ll be happy you read this, and hey, maybe youÃ¢â‚¬â„¢ll even learn a thing or two about how to prepare for a real emergency.”

The CDC went on to adviseÃ‚  us to have an emergency kit on hand at home:

This includes things like water, food, and other supplies to get you through the first couple of days before you can locate a zombie-free refugee camp (or in the event of a natural disaster, it will buy you some time until you are able to make your way to an evacuation shelter or utility lines are restored).”

Once you’ve made your emergency kit, the CDCÃ‚  wisely suggests youÃ‚  sit down with your family and come up with an emergency plan. This includes where you would go and who you would call if zombies started appearing outside your door step. You can also implement this plan if there is a flood, earthquake, or other emergency.

WhileÃ‚  the Insurance Information Institute (I.I.I.)Ã‚  may not have tips for managing zombie risk,Ã‚  we doÃ‚  recommend you have an up-to-date home inventory to be prepared for any disaster. To help you create this inventory, check out our free online home inventory tool Know Your Stuff.

# Cyberbullying: Prevention and Response

The problem of school bullying was the subject of a recent postÃ‚  here at Terms + Conditions. In it we noted that with increased access to and use of technology, cyberbullying is a growing concern.

An article in the New York Times over the weekend reports that as bullies go digital, parents are struggling to know the best way to respond. As the NYT states:

It is difficult enough to support oneÃ¢â‚¬â„¢s child through a siege of schoolyard bullying. But the lawlessness of the Internet, its potential for casual, breathtaking cruelty, and its capacity to cloak a bullyÃ¢â‚¬â„¢s identity all present slippery new challenges to this transitional generation of analog parents.Ã¢â‚¬ 

According to the NYT, itÃ¢â‚¬â„¢s not just about parents being technologically a step behind or failing to acknowledge the issue. Many struggle with how to supervise their childrenÃ¢â‚¬â„¢sÃ¢â‚¬â„¢ Internet activities, and how to proceed in the event their child is the victim of an attack.

Part of the problem is also that schools may be reluctant to get involved when the behavior occurs off-campus, and going the law enforcement route may involve a protracted process.

What about the legal environment? According to the Cyberbullying Research Center, at last count 44 states had laws regarding bullying, and 30 of those included some mention of electronic forms of harassment. Almost all of these laws direct school districts to have a bullying and harassment policy, though few delineate the actual content of such policies.

The Center advises educators, parents and law enforcement officers to carefully review and understand the statutes in their own state to understand the formal legal implications of participating in cyberbullying.

# Halloween Safety

Because Halloween falls on a Sunday this year the usual costume parties and trick-or-treating may extend over the weekend. While this makes for a fun time, it also means this Halloween has the potential to be particularly hazardous.

Luckily, insurers have some tips to help make the holiday a little less spooky:

Geico reports that with so many people enjoying the holiday, itÃ¢â‚¬â„¢s necessary to be cautious whether trick-or-treating on foot or behind the wheel of your car. The U.S. Department of Transportation notes that the most dangerous time on Halloween for young pedestrians is between 4 and 8 p.m., prime trick-or-treating time. Geico urges drivers to watch for young children running in the streets, keep driving distractions such as cell phones out of reach, and toÃ‚  slow down.

The number of people in California hit by cars jumps 25 percent on Halloween vs. the rest of October, according to Allstate Insurance Co. The insurer asks Californians to keep their eyes on the road whether driving or on foot during Halloween. It offers the following three safety tips: donÃ¢â‚¬â„¢t text and walk; donÃ¢â‚¬â„¢t text and drive; donÃ¢â‚¬â„¢t drink and drive.

Anyone hosting a Halloween party should take steps to limit their liquor liability and make sure they have the property insurance, according to the Insurance Information Institute (I.I.I.). I.I.I. vice-president Loretta Worters notes that depending on the jurisdiction, violations of social host laws can lead to civil or criminal fines, imprisonment and monetary damages awards. So, if youÃ¢â‚¬â„¢re throwing a party where alcohol is served, be a responsible host.

Have a safe and happy Halloween!

As many of you know, our mission at the Insurance Information Institute (I.I.I.) is to improve public understanding of insurance Ã¢â‚¬“ what it does and how it works.

WeÃ¢â‚¬â„¢re constantly looking at new ways to demystify what can be a complex topic to a broad range of constituents. Social media tools can help us in that effort.

In addition to our two blogs (Terms + Conditions and Straight Talk), I.I.I. has a Facebook page and a YouTube channel, as well as numerous Twitter feedsÃ‚  (@iiiorg @Bob_Hartwig @JeanneSalvatore @LWorters @III_Research).

But this week the actuarial profession took us to a new level by showing how a catchy theme song and YouTube can work to powerful effect.

As of this morning, there have been more than 3,200 views of the What is An Actuary Song below.

(Hat tip to @reinsurancegirl for spreading the news via @Actpub)

Just imagine what Ã¢â‚¬Å“An insurer is your heroÃ¢â‚¬  theme tune could do to show the important role the insurance industry plays in taking risk.

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