Latest Studies August 2014

1. LIFE ANNUITY INDUSTRY DISTRIBUTION FORCE GROWS IN PARALLEL WITH INDUSTRY’S SOCIAL MEDIA CONSUMER OUTREACH
Conning News Release; Page N/A
July 15, 2014

Insurers showed continued focus on bulking up distribution capabilities and diversity in the face of strong demand, while at the same time increasing social media and mobile technology capabilities to connect with consumers and differentiate their offerings in 2013 and early 2014, according to a new study by Conning, “Individual Life and Annuity Distribution and Marketing Annual.” The study examines key issues affecting distribution channels and highlights current marketing and advertising best practices in the life insurance and annuity industry. A detailed advertising expense analysis and details of sales by channel are included. It is available for purchase from Conning by calling (888) 707-1177 or from the company’s website at www.conningresearch.com.


2. STUDY FINDS MORE AUTO INJURY CLAIMANTS ARE HIRING ATTORNEYS
Insurance Research Council; Page N/A
July 8, 2014

A new study from the Insurance Research Council (IRC) found that the percentage of auto injury claimants represented by attorneys rose to 36 percent of personal injury protection  (PIP) claimants in 2012, up from 31 percent in 2007 and more than double the rate found in a similar study in 1977. The rate of attorney involvement among bodily injury (BI) claimants rose slightly, to 50 percent in 2012. The study also examined the factors associated with attorney involvement and found that represented claimants: were much more likely than those without representation to receive treatment in a pain clinic  and to undergo magnetic resonance imaging (MRI) for similar injuries; were more likely to be involved in apparent claim abuse; received, on average, lower net payments (total payments adjusted for claimed economic expenses and applicable legal fees) than those who did not hire attorneys; Waited longer for payment of claims. The rate of attorney involvement varied significantly by state. The highest rate among no-fault states was in Florida, where more than half of PIP claimants hired attorneys in 2012. The lowest rate was in Kansas, where just  12 percent of PIP claimants hired attorneys.  “The attorney involvement trends shown in this study undercut two of the envisioned benefits of no-fault auto injury systems: a less adversarial settlement process and more timely payments,” said Elizabeth Sprinkel, senior vice president of the IRC. “The role of attorneys is implicated in many of the factors driving up the cost of auto insurance.”  The study, Attorney Involvement in Auto Injury Claims, stems from continuing IRC research into the cost drivers behind increased auto injury claim severity. It is based on an analysis of more than 35,000 auto injury claims closed with payment under the five principal private passenger coverages. Twelve insurers, representing 52 percent of the private passenger auto insurance market in the Unites States, participated in the study. Copies of the study are available for $300 for an electronic version, or $315 for a printed copy. Visit IRC’s website, www.insurance-research.org, for more information.


3. DOCUMENTATION FOR THE 2014 UPDATE OF THE UNITED STATES NATIONAL SEISMIC HAZARD MAPS
Mark Petersen, Morgan Moschetti, Peter Powers, et al
U.S. Geological Survey; 255 Pages
July 1, 2014

The U.S. Geological Survey has updated its U.S. National Seismic Hazard Maps for the first time since 2008. The new maps reflect the best and most current understanding of where future earthquakes will occur, how often they will occur, and how hard the ground will likely shake as a result. The new maps show that 42 states are at risk, with 16 states that have experienced earthquakes with a magnitude 6 or greater and which are considered at high risk. Earthquake hazard is especially high on the West Coast, the intermountain west and in several active regions of the central and eastern U.S., including New Madrid, Missouri and near Charleston, South Carolina. Highlights by region include the East Coast, which has the potential for larger and more damaging earthquakes than considered in previous maps and assessments; the central U.S., where the New Madrid Seismic Zone has been identified to have a larger range of potential earthquake magnitudes and locations than previously identified; and the West Coast, where earthquake hazard in California extends over a wider area than previously thought. In California faults were recently discovered, raising earthquake hazard estimates for San Jose, Vallejo and San Diego. Full Report


4. GETTING IT TO CLICK! CONNECTING TEENS AND SEAT BELT USE
Allstate Foundation; 32 Pages
July 1, 2014

The Governors Highway Safety Association (GHSA) with the funding from the Allstate Foundation, has put together this report on state efforts to encourage teen seat belt use.  The programs listed can serve as road maps to other states and stakeholders concerned about keeping young drivers safe on our roads. Opportunities for improving the response to insufficient teen seat belt use are also identified, as well as recommendations for states to consider as they mobilize resources and programs to address this critical issue. Full Report


5. NEW EMERGING RISK INSIGHTS
Swiss Re SONAR; 34 Pages
July 1, 2014

The report analyses 26 emerging risks from an insurance perspective. Topics include the risks connected with cloud computing, such as data leakage and computer resource hijacking; neurotoxins in e-cigarettes and the possible health effects; and repeated contact sport-related concussions linked to degenerative brain disease, and the related lawsuits in the US. Action cams - small, lightweight and shock resistant video recorders designed for extreme action photography - and whether they incite riskier behavior among users, is also discussed, along with digital slander, secession risks in Europe and other issues. The potential impact for each risk examined in SONAR is designated high, medium or low and categorized according to insurance-related business area: property, casualty, life & health, financial markets, claims and operations. The risks are also divided among time frames. Full Report


6. 2014 CORELOGIC STORM SURGE REPORT
CoreLogic; 24 Pages
July 1, 2014

The 2014 CoreLogic storm surge analysis features estimates on both the number and reconstruction value of single-family homes exposed to hurricane-driven storm surge damage within the United States. Storm surge is a complex phenomenon that occurs when water is pushed toward the shore through the force of powerful winds associated with cyclonic storms.  The 2014 analysis concludes that the potential reconstruction costs of the more than 6.5 million homes along the Atlantic and Gulf coasts at risk of hurricane storm surge damage totals $1.5 trillion. Over $986 billion, or nearly two thirds of the total risk, is concentrated in 15 metropolitan areas, with the risk being highest in New York City, Miami, Tampa and Virginia Beach, Virginia. Full Report


7. 2014 RIMS BENCHMARK SURVEY
Risk Management Society (RIMS) and Advisen; 140 Pages
July 1, 2014

According to the latest RIMS Benchmark Survey, the average total cost of risk (TCOR) for all companies increased 2 percent in 2013 after increasing 5 percent in 2012 and 1.7 percent in 2011 – reflecting the influence of hardening insurance market conditions. The contribution of property premiums to average TCOR rose nearly 15 percent, from $3.09 per $1,000 of revenue to $3.54 per $1,000 of revenue. Rising prices are influencing companies’ retention of risk. The annual RIMS survey, produced with Advisen Ltd, is a single source of benchmark statistics with industry data for more than 52,000 insurance programs from almost 1,500 organizations. Highlights are posted here


8. TERRORISM RISK INSURANCE PROGRAM REAUTHORIZATION ACT OF 2014
U.S. Senate Report; 21 Pages
June 26, 2014

The Senate Committee on Banking, Housing and Urban Affairs proposes an extension of the termination date of the Terrorism Insurance Program set up under the Terrorism Risk Insurance Act of 2002 (TRIA). The Committee voted unanimously in favor of reporting the amended bill to the Senate. The program set up under TRIA provides a government reinsurance backstop in the event of foreign terrorist attacks. The program was reauthorized and reformed by Congress in 2005 and 2007, and the last reauthorization expires at the end of 2014. According to the President’s Working Group on Financial Markets and other experts, the private insurance and reinsurance markets have failed to show an ability to provide coverage without a backstop from the government. Legislation introduced on April 10, 2014, would, as amended by the Committee, extend TRIA for seven years until the end of 2021. The bill increases the copayments insurance companies must make from the current 15 percent to 20 percent and also increases the mandatory recovery threshold from $27.5 billion to $37.5 billion, changes that would be phased in during the next five years. The Committee acknowledged that terrorism has evolved since TRIA was first enacted and now includes cyberattacks, so the Committee also decided to extend the Treasury Secretary’s broad authority to designate a terrorist attack without regard to how the attack was carried out if certification criteria is met. During the Committee’s hearings on September 25, 2013, Robert Hartwig, president of the Insurance Information Institute, said, “The unambiguous success of TRIA demonstrates that the Act has become an invaluable component of the country’s national security infrastructure. The continued operation of the nation’s financial institutions, including its nsurers— during and throughout the aftermath of a major terrorist attack—is absolutely essential to ensure a smooth and expedited recovery from the massive economic and operational shocks of the sort that occurred after the 9/11 attacks and that are certain to accompany future such events, irrespective of where in the country they occur. Failure to institutionalize a permanent plan to protect the nation’s financial infrastructure leaves the country unnecessarily vulnerable to economic instability and risk of recession.” Hartwig then outlined eight layers of taxpayer protections provided by the existing TRIA program. The report provides a section by section analysis of the legislation as well as the cost estimate from the Congressional Budget Office.  Full Report


9. SEA LEVEL RISE AND NUISANCE FLOOD FREQUENCY CHANGES AROUND THE UNITED STATES
William Sweet, Joseph Park, John Marra, Chris Zervas, Stephen Gill
National Oceanic and Atmospheric Administration; 66 Pages
June 1, 2014

This report found that so-called “nuisance flooding” – which causes public inconveniences such as frequent road closures, overwhelmed storm drains and compromised infrastructures – has increased on all three U.S. coasts by between 300 and 925 percent since the 1960s, according to NOAA. Eight of the top 10 U.S. cities that have seen an increase in nuisance flooding are on the East Coast.  Annapolis and Baltimore, Maryland, lead the list with an increase in number of flood days of more than 920 percent since 1960.  New Jersey’s Atlantic City and Sandy Hook also made the top five with an increase in flood days of more than 600 percent, NOAA reports. Port Isabel, Texas, along the Gulf coast, showed an increase of 547 percent, and nuisance flood days in San Francisco, California, increased by 364 percent. The report concludes that any acceleration in sea level rise that is predicted to occur this century will further intensify nuisance flooding impacts over time, and will further reduce the time between flood events. Full Report


10. OPTIONS FACING CONGRESS IN RENEWING THE TERRORISM RISK INSURANCE ACT (TRIA): A QUANTITATIVE ANALYSIS
Howard Kunreuther and Erwann Michel-Kerjan
The Wharton School, University of Pennsylvania, Issues Brief; 8 Pages
July 1, 2014

“In determining the future of TRIA in the coming weeks and months, Congress and the Administration will be making important decisions on the nature of risk sharing arrangements between the public and private sectors. The authors perform an analysis of the exposure of 764 insurers to terrorism risk using the ratio of TRIA deductible over surplus as a proxy, and indicate how that exposure would change for different deductible levels. Using a terrorism risk model developed in collaboration with the modeling firm Risk Management Solutions, the authors also analyze how economic losses under different terrorist attack scenarios would be shared among key stakeholders, comparing the arrangements under the current TRIA program to alternative terrorism risk insurance designs articulated recently by the U.S. Senate and House. Renewing TRIA may limit the amount of disaster relief the federal government would contribute after a terrorist attack, but the different options under which TRIA might be renewed carry implications for how losses from any attack would be spread between commercial policyholders, insurers, and taxpayers.” Full Text