Mobile Apps, Pictures and Insurers

The Wall Street Journal today reports on the shrinking size of the global digital camera market as the number of photos being snapped with smartphones rises exponentially.

Research cited by the WSJ via IDC suggests the global digital camera market may shrink to as little as 102 million units this year, compared with a peak of about 144 million in 2010, even as the global smartphone market has skyrocketed.

Meanwhile, some say that smartphone pictures taken by policyholders of their homes and vehicles are going to play an increasing role in the relationship between insurers and their customers.

An article in the latest edition of Visualize, a quarterly magazine by Verisk Insurance Solutions – Underwriting, makes just that point.

John Cantwell, vice president, marketing and business development, at Verisk, explains that huge volumes of data support the insurance industry, but only a tiny fraction of data records have any picture or image associated with the information.

The bottom line is that pictures contain valuable information and  could be the next big insurance innovation if combined with mobile apps, Cantwell says.

While mobile apps developed to-date by insurers have offered functional capabilities, such as the ability to pay a bill or report a claim, or provided consumers with an optional sales channel in the form of a quoting app, Cantwell believes this is about to change.

For example, he suggests that the smartphone could offer an alternative to property insurance inspections:

Property inspections cost insurers about $100 million annually. You need to assess new methods to get the same information for less. Aerial imagery will soon be a viable alternative to exterior inspections, but if you need an internal inspection to complement an aerial image, how can you accomplish that without sending someone to the property? With smartphones.”

Verisk is currently developing mobile inspection applications designed to help insurance carriers connect with their customers and attract new customers. Such an innovation could also enable insurers to rate more accurately and help control fraud,  Cantwell says.

We should mention that the easy-to-use I.I.I. home inventory app, Know Your Stuff – Home Inventory, has a feature that allows you to upload a photo of your property and possessions.

Other mobile apps harnessing pictures and insurance are sure to follow.

Disparity Between Economic and Insured Loss Widens

Around 24 percent of global economic losses due to natural catastrophes during the first half of 2013 were covered by insurance, slightly below the 10-year (2003-2012) average of 28 percent, according to Aon Benfield Impact Forecasting.

In its 1H 2013 Global Natural Disaster Analysis, Aon Benfield says the larger disparity between the economic and insured loss is due to multiple significant catastrophe events occurring in areas where insurance penetration or specific peril coverage remained low.

The analysis shows that economic losses from global natural disasters during the first half of 2013 totaled $85 billion – around 15 percent lower than the 10-year average of $100 billion. Insured losses for the period reached $20 billion – some 20 percent below the 10-year average of $25 billion.

Roughly 50 percent of the insured losses resulting from natural disaster events were recorded in the United States, down from 83 percent in the first half of 2012.

In order of size the five largest economic loss events in the first half of 2013 were: the Central Europe floods during May/June ($22 billion); the China earthquake on April 20 ($14 billion); the Brazil drought ($8.3 billion); the U.S. severe weather outbreak from May 18-22 ($4.5 billion); and the China drought ($4.2 billion).

Meanwhile, the first half of 2013 comprised seven billion-dollar insured loss events, of which five were in the U.S.: the Central Europe floods during May/June (USD5.3bn); the U.S. severe weather outbreak of May 18-22 (USD2.5bn); the U.S. severe weather outbreak of March 18-20 (USD1.25bn); the U.S. severe weather outbreak of May 26-June 2 (USD1.20bn); the Australia floods during January (USD1.04bn); the Canada floods during June (USD1.0 billion); and a U.S. winter storm in early April (USD1.0bn).

*By the way, the latest edition of Cavalcade of Risk, a round-up of risk-related posts from around the blogosphere,  is  now live over at  Insurance Coverage Law in Massachussetts. It includes a link to our recent post New York MTA in Storm Surge Catastrophe Bond First.

All Hail the Data

A report from the National Insurance Crime Bureau (NICB) has revealed that insurance claims resulting from hailstorm damage in the United States increased by a whopping 84 percent from 2010 to 2012.

In 2010, there were 467,602 hail damage claims filed, but by 2012 that number had  jumped  to 861,597.

All told, over two million hail damage claims were processed from January 1, 2010 to December 31, 2012, the NICB said.

Perhaps not surprisingly the top five states generating hail damage claims during this period were Texas (320,823); Missouri (138,857); Kansas (126,490); Colorado (118,118) and Oklahoma (114,168).

“Personal Property Homeowners† (PPHO) was the policy type most affected by hail loss claims, with 1.3 million, or 64 percent of the total number of hail loss claims between 2010 and 2012.

On average, PPHO policies were represented more than twice as often as the next most popular policy type, personal automobile.

NICB points out that most of the hail loss claims occurred in the spring and summer months, between March and July, likely due to increased numbers of thunderstorms during this period.

So far, large hail reports posted to NOAA’s National Weather Service Storm Prediction Center site in 2013 appear to show that hailstorm activity is down from 2012. See below:


While the NICB report focuses just on hail claims, it’s worth adding that severe thunderstorms in the U.S., including tornadoes, resulted in $14.9 billion in insured losses in 2012, more than $25 billion in insured losses in 2011, and $9.5 billion in insured losses in 2010, according to Munich Re.

In the first-half of 2013, insured losses from thunderstorm events exceeded $6 billion, Munich Re said.

Wildfire Risk Potential Grows Amid Hot and Dry Weather

It’s mid-July and for many parts of the United States this means persistent hot and dry weather increases the risk of wildfires.

Some 46 percent of the contiguous United States is currently experiencing moderate to exceptional drought conditions, according to Tuesday’s report from the U.S. Drought Monitor.

The first monthly drought outlook from NOAA’s Climate Prediction Center recently warned that drought in the U.S. Southwest is exceptionally intense and unlikely to break completely, despite some relief from the summer thunderstorm season. Most of the already parched West will likely see drought persist or worsen, NOAA said.

Meanwhile, the Wall Street Journal reports that overgrown forest land poses fire risk to a growing number of communities.

It cites U.S. Forest Service statistics that 65 million to 82 million of National Forest lands are at a “high or very high risk of fire” and are in need of restoration.

Between 1960 and 1970, there was only one year, 1969, when wildfires burned more than five million acres in the U.S. In the last decade, it happened eight out of 10 years, the WSJ adds.

As of July 1, some 11 wildfire, heat and drought events have resulted in an estimated $365 million in insured losses in 2013, according to Munich Re.

Aon’s June Global Catastrophe Recap notes that the Black Forest Fire near Colorado Springs became the most damaging fire in Colorado’s history and left two dead. The fire charred 14,280 acres of land and destroyed at least 511 homes. Insurers received at least 4,500 claims with payouts in excess of $350 million. Due to dozens of destroyed uninsured or underinsured homes, the overall economic loss will approach $500 million, Aon added.

On June 30, 19 firefighters were killed while working to contain the Yarnell Hill Fire in Arizona. This is the deadliest event for firefighters since 9/11 and the third highest firefighter death toll attributed to wildfires.

More information is available via Insurance Information Institute (I.I.I.) facts and statistics on wildland fires and droughts and heat waves.

New York MTA in Storm Surge Catastrophe Bond First

Superstorm Sandy highlighted the enormous risk of storm surge along the Gulf and Atlantic coasts, so we’re interested to read that the captive insurer of the New York Mass Transit Authority (MTA) has accessed the capital markets to cover it in the event of storm surge resulting from a named storm.

Artemis blog reports that this is the first time in the history of the catastrophe bond market that a transaction has provided cover just for storm surge:

Hurricane and tropical storm induced storm surge is included in many U.S. wind cat bonds, so it is not particularly diversifying, but it has never been structured into a cat bond as the sole peril in this way and is an interesting addition to the market that could spur more issuance of storm surge cat bonds. It’s another sign of the increasing maturity and flexibility in the cat bond market, as well as the increasing appetite investors are showing for catastrophe risk.

Artemis adds that the sponsor, the captive insurer of the New York Mass Transit Authority (MTA), has significant exposure to storm surge, as evidenced by the losses it faced from last year’s hurricane Sandy:

The MTA suffered a loss in the region of $5 billion from the storm, predominantly from surge due to flooded transit tunnels and subways, so it is encouraging to see it turn to the catastrophe bond market for a new source of reinsurance protection.

The $125 million catastrophe bond will be issued by First Mutual Transportation Assurance Co. (FMTAC), the MTA’s captive insurer and sold via MetroCat Re Ltd, a Bermuda domiciled special purpose insurer.

Artemis says the deal offers protection against named storms that generate a storm surge event index that equals or exceeds 8.5 feet for Area A or 15.5 feet for Area B. Area A includes tidal gauges located in The Battery, Sandy Hook and Rockaway Inlet, while Area B includes tidal gauges in East Creak and Kings Point.

Business Insurance has more on this story.

Check out I.I.I. facts and statistics on catastrophe bonds.

Flood Losses Dominate First-Half Nat Cat Losses

Flood events in Europe, Canada and Australia accounted for three of the five costliest natural catastrophes for global insurers in the first-half of 2013.

On Tuesday Munich Re said inland floods in Germany, Austria and the Czech Republic in May/June this year had cost insurers an estimated $3.9 billion so far, while total economic losses will be more than $16 billion. The majority of the insured losses occurred in Germany.

This tally makes the European floods the most costly natural disaster in the first half of 2013.

Floods in the Calgary region of Canada June 20-23 caused more than $1 billion in insured losses and more than $3 billion in overall losses, Munich Re noted. This was the worst flood in documented Canadian history.

Loss estimates are still in progress on both the European and Canadian flood events. Munich Re said:

Around 47 percent  of the overall losses and 45  percent  of the insured losses derived from inland flooding that occurred in Europe, Canada, Asia and Australia.†

Two thunderstorm events in the United States also ranked in the top five costliest natural catastrophes for insurers in the first six months of 2013.

Altogether, worldwide insured losses from natural catastrophes totaled around $13 billion in the first-half, well below the 10-year average of $22 billion. At around $45 billion, total economic losses were also below the 10-year average of $85 billion.

The  Wall Street Journal has more on this story.

The complete overview of natural catastrophe activity for the first-half of 2013, jointly presented by Munich Re and the Insurance Information Institute (I.I.I.) is available here.

Check out I.I.I. facts and statistics on flood insurance and global catastrophes.

Lloyd’s: Global Business Leaders Worry about Taxes

High taxation has become the number one threat to global business, soaring up the rankings from 13th to 1st place in the last two years, according to the third Lloyd’s Risk Index.

Other top risks concerning more than 500 of the world’s most senior business leaders in 2013 are loss of customers/cancelled orders, cyber risk, increased material costs and excessively strict regulation.

Interestingly, the survey found that U.S. businesses feel even more unprepared to deal with the risk of high taxation than their European counterparts.

While both regions put high taxation as their number one risk, U.S. respondents rank their preparedness at 37 out of 50, compared to European businesses at 21 out of 50.

But does the increase in volume on the subject of corporate taxation reflect reality? Not necessarily, Lloyd’s says.

It cites data showing that corporate taxes have actually declined or remained static in the past few years, despite the financial problems of most major economies.

Still, personal tax rates in some economies have risen, which particularly affect global businesses competing for international talent, it adds. Indirect taxes are also on the increase.

Lloyd’s says:

The reality for businesses appears to be that government ambiguity about business taxes, whether about extending jurisdictions, amending legislation or changing rates, may actually be more damaging for business confidence than the reality.†

In a  press release  Lloyd’s chief executive Richard Ward warns that focusing on near-term issues at the expense of longer-term strategic decision making can leave organizations over-exposed to future business challenges:

With business tax in the spotlight and rising up the political agenda, executives are understandably concerned. Yet the danger is that an emphasis on near-term, operational issues comes at the expense of significant, strategic decisions that have previously exercised business leaders.†

First published in 2009, the Lloyd’s Risk Index is run in conjunction with Ipsos MORI.

Market Impact of Asiana Airlines Loss

While it’s too soon to know how the crash of Asiana Airlines’  Flight 214 may affect the market for airline insurance, it’s important to recognize that the loss comes at a time when the industry’s overall claims level was exceptionally low, reflecting its investment in safety.

In its latest Q2 2013 Airline Insurance Market News, Aon had reported on the extremely low level of claims the market had seen up to the beginning of May 2013. This followed a 40 percent reduction in the cost of major losses in 2012.

For the year to the beginning of May 2013, the loss figure, excluding minor losses, was $107.63 million, which while up from the $32.17 million recorded at the same point in 2012, was still some 67 percent below the five-year average, Aon said.

Adding an estimate for minor losses, the overall loss total stood at $357.63 million, compared to $282.17 million in 2012.

Passenger and third party fatality levels were extremely low, with only 23 up until the beginning of May, compared to 214 on average for the same point between 1995 and 2012, Aon added.

Major losses in 2012 totaled US$324 million, nearly 40 percent  less than the US$522 million recorded in 2011. Adding an estimate for minor losses, the overall estimated incurred claims total was US$924 million, down 20 percent against the US$1.13 billion total claims in 2011.

Despite the low level of claims and fatalities, Aon noted:

The airline industry still represents a considerable risk where a single loss could still mean that the claims statistics for 2013 overtake the long term average. Equally, as we have seen in the past, a string of incidents at the mid-point of the year can change the position significantly.†

Asia Insurance Review reports that the total insurance cover on the Boeing 777 aircraft owned by Asiana Airlines that crash landed at San Francisco international airport (SFO) on Saturday stands at $2.2 billion, according to the Financial Supervisory Service.

That amount includes coverage of $130 million on the aircraft hull and $3 million in crew liability coverage. Up to $2.2 billion may be paid out for facility damages and passenger casualties.

Some 291 passengers and 16 crew were on board when the aircraft crashed during its approach to the airport. The crash resulted in two fatalities and more than 180 injured.

Check out a summary of the incident by law firm Kreindler & Kreindler.

I.I.I. facts and stats on aviation are available here.

MarketScout: P/C Pricing Holds Steady

Online insurance exchange MarketScout reports that the composite rate for U.S. commercial P/C insurance increased by 5 percent in June 2013. This is the same level of increase tracked for the fourth consecutive month.

All coverages, industry groups and account sizes held within a plus 1 to minus 1 percent range as compared to last month, MarketScout noted.

Commercial auto and workers’ compensation led the way with rate increases of 6 percent in June.

Property, general liability, D&O and EPLI followed at plus 5 percent, with EPLI making the most significant upward rate adjustment in the last four months.

MarketScout CEO Richard Kerr said:

The market is steady right now. There were no big surprises in July 1 treaty renewals and even the impact of Superstorm Sandy seems to have been forgotten by most property insurers.†

Small accounts (under $25,000 premium) were assessed the largest rate increases at plus 6 percent in June. Jumbo accounts (those over $1 million premium) enjoyed the best composite rates at plus 2 percent.

Contracting and service segments saw the largest rate increases by industry class at plus 6 percent, MarketScout added.

The I.I.I. has latest information on financial results and market conditions.

New Jersey Tornado

Reports of a “small tornado† in New Jersey hit very close to home Monday morning as I was driving to an appointment when torrential rain and thunderstorms bore down.

The National Weather Service (NWS) has confirmed that the EF-0 tornado touched down in Union County, New Jersey, amid a band of thunderstorms that brought heavy rain and flooding to parts of the state yesterday.

The tornado touched down in Berkeley Heights and for eight minutes cut a path nearly 50 yards wide and 4.8 miles long northeast through New Providence and Summit.

Winds reached an estimated 85 mph and extensive tree damage was observed along the tornado path, the NWS said.

The NJ Star Ledger reports that New Jersey has experienced at least one tornado in each of the last five years, according to records from the National Oceanic and Atmospheric Administration. All of them were listed as EF-0, the lowest designation.

Here’s a visual of the tornado’s path, courtesy of and the NWS:

An EF-1 tornado is also confirmed to have touched down in Connecticut yesterday, causing property damage.

Check out I.I.I. facts and statistics on tornadoes and thunderstorms.