The Week in a Minute, 2/28/18

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights. 

Kentucky (three deaths), Michigan (one), and Arkansas (one) were the site of five fatalities on Sunday, February 25, due to strong winds and flooding.

Authorities are urging residents to evacuate parts of Santa Barbara County ahead of a winter storm expected to hit the area on Thursday, March 1.

U.S. consumers gave their home insurer on average a score of 860, on a 1,000-point scale, according to 6,572 property claimants J.D. Power surveyed between January and November 2017.


The “After Glow” of Tax Reform Politics Too Good to Pass Up for Anti-Insurance Crowd

By Sean Kevelighan, CEO, ‎Insurance Information Institute

After the Tax Cut and Jobs Act of 2017 passed late last year, the Insurance Information Institute received numerous queries about the impact on property/casualty insurers. Given our mission at I.I.I. is not rooted in direct lobbying advocacy, we consciously refrained from engaging in what was sure to be (and was, in fact) a political battleground in some areas during the legislative process. That said, the industry deserves credit for coming together in many ways to ensure insurance receives fair treatment — a lesson learned from 1986 when the industry was sidelined.

While the anti-insurance crowd (most often misleading themselves as “pro consumer” groups) has been quick to add political rhetoric in the form of baseless and wildly exaggerated claims the industry will receive a “windfall” of income, the I.I.I. will, once again, adhere to facts that are based on actuarial and economic soundness.

Objectively, the I.I.I. sees the overall benefits to tax reform for the insurance industry to be well under 1 cent for every premium dollar.

How do we get that estimate?

Equity analysts at J.P. Morgan estimate tax reform would be about 5 percent of industry earnings, which seems reasonable based on what we know. In 2016 – 2017 industrywide results aren’t out yet – net income was $42.6 billion. Five percent of that would be a bit over $2 billion – more than I have in my pocket, but only about one-third of 1 percent of the $600 billion the industry wrote that year.

Here are a couple of other things to consider about insurers and taxes:

  • Insurance companies pay a wide variety of rates. They pay one rate on underwriting profits, another on dividends from preferred stock, another on bond payments and yet another on municipal bond payments which are almost, but not quite, tax-free. The headline rate fell considerably, but many of the other rates didn’t change at all.
  • Some companies may get a tax increase. Foreign-based groups that have historically ceded a portion of their U.S. business to an offshore affiliate based outside the U.S. are now subject to the Base Erosion and Anti-Abuse Tax – call it BEAT. However, the reduction in the overall tax rate may offset the other changes, depending on each company’s circumstances.

It is important to understand that insurance costs will quickly adjust to the new tax reality. Insurers in the largest lines – personal auto and homeowners – adjust their rates annually – sometimes more frequently. The rate – by law – explicitly reflects every cost an insurer incurs, including taxes. When the tax law changes, insurers build the new rate into their models.

Much like any business in America, insurance will use some of the benefits to invest — in its employees, products and services — so as to improve and grow. Given the industry is the second largest financial services contributor to our economy (2.8% of GDP), employing nearly 3 million Americans, it is critical that insurers make their own decisions.  If not, then where does the line get drawn? Next, the anti-business crowd would (or perhaps already has) call on other industries to make uneconomic pricing decisions.

Update: This blog post has been changed to clarify information regarding the BEAT tax.

River flooding in Southern and Central U.S.

A deadly storm system pummeled the southern and central U.S. this weekend leaving many areas flooded. The weather system extended from the Canadian Maritime provinces to Texas, and brought gale force winds and widespread flooding from the northern Midwest through Appalachia.

Flooding will continue to be a threat this week, the Weather Channel reports, as more than 200 river gauges reported levels above flood stage from the Great Lakes to eastern Texas. Floodwaters on the Ohio River in Louisville and Cincinnati are at their highest level in about 20 years.

Flood damage is excluded under standard homeowners and renters insurance policies. However, flood coverage is available in the form of a separate policy both from the National Flood Insurance Program (NFIP) and from a few private insurers.

Below is a look at the National Flood Insurance Program’s flood insurance penetration rates in just a few of the affected areas. The table illustrates the low penetration rates of flood insurance.

(click on table to enlarge)



Effective communication, not speed matters most in P/C insurance customer satisfaction, new J.D. Power survey finds

According to a February 22 news release by J.D. Power & Associates, claims experience satisfaction among homeowners filing property insurance claims has reached an all-time high, despite record-high property losses following a spate of hurricanes, earthquakes and fires in North America.

The J.D. Power 2018 U.S. Property Claims Satisfaction Study found that insurers that have achieved the highest levels of customer satisfaction have also been the most effective at managing customer expectations for the time it will take to settle claims.

“The last two years of record catastrophic losses have put P&C insurers to the test, and many have risen to the occasion, driving overall customer satisfaction levels to new highs,” said David Pieffer, Property & Casualty Insurance Practice Lead at J.D. Power. “While that overall performance is a positive for the industry, there is wide variability in the ranges of performance among insurers in different regions of the country and between different service attributes. Particularly noteworthy, customer satisfaction in Texas and Florida—two of the areas hardest hit by hurricanes—show below-average results, spotlighting areas where there is still room for improvement among insurers.”

The time it took to settle a claim is the single lowest-rated attribute in the study, with 1 in 7 respondents indicating that the claim took longer than expected. However, when time frames are properly managed, even groups that experience the longest time-to-settlement still rate their experience above the industry average of 8.45 (on a 10-point scale). Time-to-settle satisfaction ratings are 1.9 points lower when insurers miss customer timing expectations, even when the time frame is relatively short.

Click here for the full J.D. Power release and rankings.

Insurance labor market growth continues; Automation cited as top reason for staff decreases

The unemployment rate for the insurance industry in January 2018 was 2.2 percent, significantly lower than the national average of 4.1 percent, according to the Bureau of Labor Statistics.  A study recently released by the Jacobson Group and Ward Group takes a closer look at the insurance industry labor trends.

 “Anticipated increases in business volume and expansion into new markets continue to drive hiring demands,” said Gregory P. Jacobson, co-chief executive officer of Jacobson.

Highlights from the study include:

  • 58 percent of insurance companies plan to increase staff during the next 12 months.
  • Technology, actuarial and analytic positions are the most difficult to fill.
  • The top 3 reasons for increasing staff were cited as: Expansion of business/new markets (51 percent); Anticipated increase in business volume (47 percent); And areas currently understaffed (41 percent).
  • Companies that are decreasing staff sited automation improvement (23 percent) as the top reason, followed by reorganization (17 percent) and areas currently overstaffed (8 percent).
  • Companies are requiring more temporary staff. Twelve percent of companies are planning to increase their use, up from 11 percent in January 2017.

The Insurance Information Institute tracks insurance industry employment statistics here

Dr. Bob’s Dos and Don’ts for Successful College Recruiting

By Robert P. Hartwig, PhD, CPCU 

As part of our Insurance Careers Month series, guest blogger Dr. Robert Hartwig gives us his best tips for successful college recruiting.



    1.  Articulate a Career Path

  • Students want to see opportunities for career advancement and that you’re planning to make an investment in them.
  • Suggestion: Include an experienced employee on recruiting trips (5-15 years of experience, though not necessarily all with the recruiting company), not just HR people.  Students can identify better with these individuals and experienced employees can share their personal experiences and career paths.  Students love this.

    2. Get an Early Start

  • With the unemployment rate hovering around 4 percent (2.6 percent for college graduates), the best students are getting jobs sooner and sooner.  Top students now have multiple strong offers in September of their senior year. By December, the “cream of the crop” has been recruited.
  • Get into classrooms!  Career fairs can be a zoo.  Getting into the classroom, usually when students are juniors and first-semester seniors can be very effective for recruitment of new grads as well as interns.

    3. Institute a Formal Training Program for New Hires

  • Students want to hit the ground running and a formal training program after hiring is one of the best ways to quickly acclimate new hires to their new work environment while also making them feel welcome and comfortable with their new duties as co-workers.

    4. Institute an Internship Program

  • Many employers today have internship programs, but not all.  An internship program—even if very small—gives you a leg up on recruiting and many of the top students accept positions with a company with whom they interned.

     5. Support RMI Education—Consistently

  • Students who major in RMI are already indicating an interest in an RMI career.
  • Support RMI programs and education through scholarships, internships, targeted contributions to a university’s RMI program, executive visits to classrooms, participation by industry executives in courses taught partly by faculty and partly by the executive (e.g., one week).  A larger step would include endowing a faculty chair or professorship dedicated to the study of RMI, which would then bear the name of that company.
  • Get to know a professor or two!  Nobody knows these students better.  This will give you an edge in recruiting new hires and interns.  This relationship can also help you get into classrooms when students are making key decisions related to careers and employers.


    1.  Don’t Fail to Recognize that Students Will Hedge Their Bets with RMI-Industry Recruiters

  • You’re not recruiting in a vacuum. Most business school students double major and will have had two internships.  In today’s tight job market, understand that you’re not just in competition with other insurers and brokers, you’re in competition with banks, investment banks, accounting and consulting firms, pension funds, investment advisory firms and increasingly technology firms—and many more.     

2. Don’t Pigeon Hole Students

  • Limiting entry level hires to a claims and underwriting track is costing you quality talent.  Consider more direct hiring into Accounting, Finance, Marketing, Data Analytics and other functions.  Exposing students to the core underwriting and claims functions is critical to learning the business, but if the student’s major (or second major or minor) was in another discipline, the attraction of a competing offer from a bank, investment firm, accounting firm or consulting firm may be too much to resist.  Help them apply and channel their skills, talents and interests while also training them in the “art” of insurance.

    3.  Don’t Be Parochial

  • An astounding number of insurers—even large ones—don’t look too far beyond their headquarters or primary bases of operation for talent.  This is true both for internships and entry level positions.  There is sometimes a bias to recruit at local universities (perhaps because it is easier and less expensive to do so) which can lead (inadvertently) to a bias against hiring quality talent from other institutions.


Dr. Robert Hartwig is special consultant to the Insurance Information Institute and is Clinical Associate Professor of Finance and Director of the Risk and Uncertainty Management Center at the Darla Moore School of Business, University of South Carolina.

The Week in a Minute, 02/16/18

The III’s Michael Barry briefs our membership every week on key insurance related stories. Here are some highlights. 

A snow system billed as Winter Storm Mateo by The Weather Channel, brought significant snowfall to the Great Plains, Midwest, and New England between Thursday, February 8, and Sunday, February 11.

Three people died after a helicopter crashed in Arizona’s Grand Canyon National Park on Saturday, February 10.

Florida’s insured losses from Hurricane Irma stood at $7.95 billion as of Friday, February 9, according to state’s Office of Insurance Regulation.  More than 900,000 Irma-related claims have been filed, and almost two-thirds of them were from homeowners (592,833).


Commentary by I.I.I. chief actuary published in law review

Commentary on workers compensation insurance by I.I.I Chief Actuary James Lynch is being published in the upcoming issue of the Rutgers University Law Review.

Lynch’s piece, “Comment to Economic Incentives in Workers’ Compensation: A Holistic International Perspective,” was written in response to an article by Stanford Professor Alison Morantz and others. The two spoke at a 2015 conference about the Grand Bargain in workers compensation.

Speakers discussed whether recent events were jeopardizing the so-called ‘Grand Bargain’ – workers forfeit their right to sue for on-the-job injuries in exchange for predictable benefits from a no-fault system. Professor Morantz’s article compared social safety net programs (including workers comp) worldwide and “discusses several mounting pressures that are jeopardizing the capacity of the U.S. workers’ compensation system to carry out its intended goals.”

In his response, Lynch noted that much of the current research in U.S. workers compensation “involves finding ways to reduce incentives that drive costs higher with no discernable benefit to the worker.” One example cited: When New York doctors book surgery for comp patients in New Jersey, they charge an average of $4,954, or 266 percent more than if the same surgery with the same surgeon took place in New York. (The I.I.I Blog featured this research two years ago.

Neither Morantz’s nor Lynch’s article was online as of February 16, but both should become available at the law review website soon.

Open call for Fundación MAPFRE Awards for Those That Make the World a Better Place

The Fundación MAPFRE has issued an open call for awards designed to appreciate and recognize the work being carried out by people and institutions around the world that seek to improve society through outstanding actions across a number of fields.

Each prize is worth 30,000 euros so that the recipients can continue with their important work. The call for submissions is global and applications can be submitted in English, Spanish and Portuguese by candidates themselves or by other people or institutions, both private and public.

Here are the categories:

    A recognition granted to a person who has led an exemplary professional lifetime career in the service of society and people.
    Further information
    This recognition goes to a person or institution that has undertaken an outstanding and effective social initiative for the benefit of those who are most disadvantaged.
    Further information
    This award recognizes an action taken by an individual or entity to promote good health and improve people’s quality of life.
    Further information
    This award recognizes a significant contribution by individuals or institutions towards preventing and reducing accidents.
    Further information
    This recognizes those initiatives and projects that have fostered economic stability and solidarity through Insurance and/or Social Protection.
    Further information


The Fundación MAPFRE is a non-profit institution created by MAPFRE, a member company of the Insurance Information Institute.

The Kids Are Alright: Top Performers Born, Made and Real

By guest blogger Lynne McChristian

Within mere weeks of joining the faculty at Florida State University in 2015, I chaperoned a student group to Gamma Iota Sigma’s annual conference. With my more than two decades of deep experience with millennials (having raised two of them), I had personal insight on the misplaced labels pinned on this generation. There’s nothing like going on a trip with a group of people you don’t know to break down stereotypes altogether.

Here’s something you don’t often hear about millennials: They are smart, polished, professional, savvy – and driven. That was my take-away from my first GIS conference, attended by hundreds of students from risk management and insurance programs, including actuarial science programs. My positive first impression gets reinforced each semester, and it is a good sign for the industry.

Collegiate RMI programs are focusing on curriculum – and much more. Faculty are practical folks and fully understand the need to integrate the textbook and the tactical with interpersonal skills. And, we do what we tell our students to do: keep learning, keep thinking, keep improving. Greater emphasis is placed on building a well-rounded individual; in other words, helping a student think of not only how they look on paper, with a solid GPA and a slate of internships, but also how they come across.

Florida State University was listed among the Top Performers in a Best’s Review research study on the College Standouts for undergraduate RMI programs. Illinois State University, Temple University and University of Georgia were also in the top tier.

At FSU, we encourage RMI students to do more than show up for class. Getting involved in things that appear optional, I tell them, is a test in which you give yourself the grade. For example, we have a mentor program that pairs students with industry professionals for a weekly phone conversation. It’s a guided conversation with a weekly topic list. Students connect with industry insiders, and the emphasis is on developing interview skills and pursuing professional designations. Additionally, nearly every RMI graduate has completed an internship by the time they graduate. They get class credit for this and so much more, such as a solid job offer months before graduation. Participating in the professional business fraternity, Gamma Iota Sigma, is another option that we tout as building your network on campus because your network is portable and travels well.

Integration and collaboration with the industry remains an imperative. In fact, FSU established a Center for Risk Management Education & Research with a mission to link constituencies.
Stereotypes get busted all the time, including the one about academics being in a bubble. Those of us teaching in RMI busted the bubble years ago. Partnerships and close ties with the insurance industry continue to help keep it real and make it work.

Lynne McChristian is a consultant with the Insurance Information Institute and a faculty member at Florida State University. She is also the executive director of FSU’s Center for Risk Management Education & Research.