I once took an Uber in Fairfield, Ohio. As we sat at a light, the driver pointed to an empty big box storefront.
“What’s that building look like?” he asked. I said it looked like an empty big box storefront.
“That’s right. You know where it went?” I said no, confused. He pointed down the street a few hundred yards away to a brand-new big box store.
“There it is. You know why they moved down the street? Taxes. Lower sales tax across the county line.”
I was reminded of that story of fiscal competition at its finest when reading about Apple’s recent decision to close two of its stores in the Dallas suburbs.
Or more accurately, as Ars Technica reported, Apple’s decision to close two stores within the federal court jurisdiction of the Eastern District of Texas. Rumor has it that Apple’s move could be in response to intellectual property litigation. Per Ars Technica:
The Eastern District is known for its extremely patent-friendly judges, and so for decades patent plaintiffs have set up shop there and sued defendants located all over the country. Prior to 2017, the law allowed a plaintiff based in the Eastern District of Texas to sue defendants there if defendants had even tenuous connections to the district. And, of course, a company of Apple’s size has business ties to every part of the country.
These plaintiffs are often called “patent trolls,” which the Electronic Frontier Foundation defines as companies or individuals that cheaply purchase patents (often “overbroad and vague” patents, at that) and then threaten expensive litigation against companies allegedly in violation of said patents:
These letters threaten legal action unless the alleged infringer agrees to pay a licensing fee, which can often range to the tens of thousands or even hundreds of thousands of dollars.
Many who receive infringement letters will choose to pay the licensing fee, even if they believe the patent is bogus or their product did not infringe. That’s because patent litigation is extremely expensive — often millions of dollars per suit — and can take years of court battles. It’s faster and easier for companies to settle.
The Eastern District has been a favorite venue for this kind of litigation – even after the Supreme Court sought to rein in so-called “venue shopping” in a 2017 decision. Ars Technica explains:
[U]nder the Supreme Court’s 2017 TC Heartland decision, a defendant can only be sued in a district where it “resides”—meaning where it was incorporated—or “has a regular and established place of business.”
Apple’s two stores in the Eastern District would likely count as “regular and established places of business” for patent-law purposes. So under the new rules, continuing to operate the stores makes it easier for patent plaintiffs to sue Apple in the Eastern District.
Apple has not confirmed that its move is related to patent-troll litigation. But, tellingly, the company is replacing its two shuttered stores with a new store…directly across the border of the Eastern District. Sometimes, the best offense is a good defense.
The adoption of smart city technology is altering the way municipalities manage critical services and infrastructure. Worldwide spending on technologies that enable smart cities is projected to reach $80 billion in 2018 and will grow to $135 billion by 2021.
There are as many as hundreds of thousands of connected systems embedded throughout a city’s critical infrastructure, which are used for things like traffic monitoring and emergency alerts. Researchers from IBM and Threatcare evaluated three smart city sensor hubs and uncovered vulnerabilities, including bugs that would allow hackers to access the systems.
The type of damage exploiting smart city technologies could cause includes: Causing disaster detection and alarm systems to report incorrect data; manipulation of law enforcement response (for example manipulating traffic control infrastructure to create gridlock and delay law enforcement teams from accessing the real scene of a crime); and the manipulation of farm sensors to cause irreversible crop damage.
Cybercrime tops the list of the most dangerous risks for insurers in Willis Re’s midyear review of issues likely to keep insurance executives up late at night.
Specifically, the most omnipresent cybersecurity problems to date are Meltdown and Spectre, two hardware vulnerabilities built into the chips of almost every server, computer and mobile device.
Not far behind is the threat of falling into the information technology gap. Most insurers surveyed by Willis have just completed, are in the middle of, or are planning a major IT systems overhaul. They report a concern surrounding the expense of constant updates and at the same time the risk of not being able to satisfy customer service expectations by falling behind on the latest upgrades.
Some of the other risks on the list include: Strategic direction and missed opportunities, particularly in homeowners insurance; pricing and product line profit; runaway frequency or severity of claims; and disruptive technology; and competition.
How might behavioral economics apply to the claims management process? Maria Sassian, research manager at the I.I.I., investigates:
A recent edition of Gen Re’s Claims Focus contains a fascinating article that explains some of the key principles of behavioral economics (BE) and demonstrates their application to claims management.
BE theory asserts that individuals make irrational decisions due to cognitive biases they are not aware of. These biases are so common that Dan Ariely coined the term ‘predictably irrational.’ BE has been a hot topic in insurance for some time and interest in it is not fading.
Clio Lawrence, the author of the article, studied a group of self-employed income protection insurance policyholders in the UK. Several BE principles were applied throughout the claims process. She concludes: “While our observations and investigations are ongoing, the anecdotal evidence and feedback has so far supported a link between the application of BE principles and claims outcomes. “
Insurance Information Institute research assistant Brent Carris authors today’s post:
In Gen Re’s Property Matters series, Tom Qiu reports that with the super high rise (SHR) construction rate growing each year, there is potential for large scale loss of life and significant property/casualty claims.
Per the Council on Tall Buildings and Urban Habitat (CTBUH) Year in Review: Asia recorded 107 of the 128, or 84% of the completed high rise constructions for 2016. China alone, accounted for 84 (67%) of the global total.
Incidents like the Grenfell Tower fire this year in London (see our prior post) and Address Downtown hotel fire of 2015 in Dubai, remind us of the fire risk and resulting huge claims surrounding high rises.
In order to properly rate SHR buildings, underwriters must carefully assess technical survey reports along with visual inspections. In addition to underwriting risks, claims management can be very difficult due to the numerous types of policies involved in a SHR building fire.
Consulting firm Milliman, in partnership with risk modeler KatRisk, looked at three states – Florida, Texas, and Louisiana – which combined account for 56 percent of NFIP insurance policies in-force nationwide.
Its analysis compared modeled private flood insurance premiums to those of the NFIP.
- Some 77 percent of single-family homes in Florida, 69 percent in Louisiana, and 92 percent in Texas could see cheaper premiums with private insurance than with the NFIP.
- Of the homes modeled, 44 percent in Florida, 42 percent in Louisiana and 70 percent in Texas, could see premiums that are less than one-fifth that of the NFIP.
- Conversely, private insurance would cost over twice the NFIP premiums for 14 percent of single-family homes in Florida, 21 percent in Louisiana and 5 percent in Texas.
A prior post discussed how private carriers are dipping their toes in the flood insurance market.