Latest Studies

Global Macro and Insurance Outlook: Q3 2019
Dr. Michel Leonard
Insurance Information Institute special report;
September 10, 2019

The Insurance Information Institute’s (I.I.I.) inaugural Global Macro and Insurance Outlook notes the growing volatility surrounding Brexit, the United Kingdom’s effort to separate from the European Union, and the protests in Hong Kong. Lower interest rates also are doing little to boost economic activity, the I.I.I.’s report says, with the International Monetary Fund (IMF) projecting global GDP growth at 3.2 percent in 2019. That figure stood at 3.6 percent in 2018. According to the report, the key issue for the global economy for the rest of 2019 will be whether the weak growth of the last three quarters turns around, slow growth continues, or the global economy slips into recession. The three quarters include the following nine months—October 2018 through June 2019. Full report

A World Without TRIA: Incalculable Risk
James Lynch and Lucian McMahon
Insurance Information Institute special report;
September 09, 2019

The Terrorism Risk Insurance Act (TRIA) and its successors have been an important support to efforts to supply terrorism insurance through the private market. Since the program was enacted, the percentage of companies purchasing terrorism insurance has risen to 80 percent, and the price of coverage has fallen more than 80 percent. The program expires at the end of 2020, but insurers are already grappling with the possibility of a world without TRIA. This white paper compares the current insurance climate with the two periods post 9/11 when there was no federal backstop and concludes that while the private market for terrorism insurance has grown, there are doubts whether the industry can write terrorism insurance without the backstop. Full report

Insurance Labor Market Study: 2019 Q3
The Jacobson Group;
September 05, 2019

This study by The Jacobson Group and Aon plc, shows positive staffing expectations with 62 percent of companies planning to increase staff. This is largely driven by the life/annuity and health sectors: 85 percent of these companies expect to expand their workforces. An increase in business volume was cited by 58 percent of total respondents as the primary reason to hire in the coming year. Seventy-nine percent of surveyed organizations foresee revenue growth during the next 12 months, the same percentage as in the January study, with 92 percent of life and health reporting an expected increase, 22 percentage points higher than six months ago. Insurers continue to face a challenging labor market compounded by mass retirements and low unemployment. According to the Bureau of Labor Statistics, the insurance industry’s unemployment rate was 1.6 percent in July, compared to 3.7 percent for the overall labor market. Additionally, the insurance carriers sector has added 116,100 new jobs since its employment low in April 2011. Insurance companies are experiencing the most difficulty in sourcing and attracting qualified technology, actuarial and executive talent. In addition, technology is the area most likely to see growth across the industry in the coming year. To stay competitive, insurance organizations may consider recruiting for skills rather than specific job experience, adjusting expectations around hiring to consider candidates’ perspectives and implementing flexible work environments. Full report

RIMS risk management talent 2025 report
Risk Management Society;
September 06, 2019

Organizations in every sector recognize the crucial importance of building and maintaining a strong pool of talent, something which is especially true for risk management, according to this survey. A vast majority of respondents (92 percent) recognize the importance of risk management professionals’ developing new skills, but various groups expressed different levels of confidence. For example, 53 percent expressed confidence that the profession would be prepared to handle challenges in the year 2025, but only 32 percent of those in executive positions saw today’s risk managers as prepared. However, students working toward a career in risk management were far more optimistic, with 76 percent saying they were adequately prepared. The report discusses the current state of risk management and its future as well as issues of diversity, inclusion and education in the profession. The report includes multiple exhibits, and the analysis is based on 1,170 surveys conducted through the internet from April 19 to June 8, 2019. Full report

A state-by-state examination of the economic costs of gun violence
U.S. Congress Joint Economic Committee Democratic Staff;
September 18, 2019

In 2017 nearly 40,000 Americans were killed by a gun including approximately 2,500 school-age children. Sixty percent of gun deaths each year are suicides. The report estimates that gun violence imposes $229 billion in total annual costs on the United States —1.4 percent of GDP. The report compiles estimates of the economic cost of gun violence in each state, based on data from the Giffords Law Center to Prevent Gun Violence and the Centers for Disease Control. It also includes data on the annual number of homicides, suicides, non-fatal shootings and accidental shootings in each state. Direct costs from gun violence are broken down into four categories:  lost income, employer costs, healthcare, and police and criminal justice. It also highlights two of the fastest-growing areas of gun violence – suicides and firearm deaths of young people under the age of 25. Rural states (Mississippi, Alabama, Arkansas, Louisiana and West Virginia) have the highest costs of gun violence measured as a share of their economies. States with high rates of gun ownership (Alaska, Arkansas, Idaho, Montana, West Virginia and Wyoming) have the highest rates of gun suicide. The three largest states (California, Texas and Florida) suffer the largest absolute costs. The five states with the highest rate of gun death in descending order are: Alaska, Montana, Alabama, Louisiana and Missouri. High youth death rates extend across region, with Alaska, Louisiana, Missouri, Alabama, and Delaware showing the highest rates. Full report

Behavioral economics: shaping optimal decision making, including fraud prevention, in insurance buying
Jessie Guo et al.
Swiss Re Institute: Economic Insights;
September 20, 2019

This article discusses how insurers can use the insights gleaned from the science of behavioral economics to reduce claims fraud and lapse rates and to improve sales. One of the key findings from the behavioral research unit of Swiss Re was that insurers can minimize fraud by moving the honesty declaration to the beginning of the claims filing form from the end. By identifying themselves as honest at the outset, insureds are more likely to maintain that personal projection as they progress through the whole form. This format of form leads to an average 3.4 percent increase in honest disclosure. Another way to minimize fraud is to explain that claims payouts come from a pool available to a larger group of policyholders, individuals may be dissuaded from submitting fraudulent claims given the realization that other insureds will be impacted by their actions through higher premium rates for all. Full text

Advanced analytics: unlocking new frontiers in P&C insurance
Swiss Re Institute. sigma 4/2019;
August 21, 2019

Property/casualty (P/C) insurers are increasingly looking to advanced analytics to gain a competitive advantage, according to this Swiss Re Institute report. While early signs of benefits have surfaced, most executives Swiss Re interviewed for the report cautioned against expecting large quantitative benefits in the near term, especially with respect to improvements in loss ratios. There is anecdotal evidence of the early benefits but it is difficult to quantify the overall impact. Pilots across several lines of business do indicate healthy loss ratio improvements but for various reasons, results in real-time trading conditions may vary. Most insurers seem to be targeting around 2 percent 5 percent improvement in loss ratios under real trading conditions. Full report

2019 Wildfire Risk Report
September 10, 2019

The CoreLogic Wildfire Risk report analyzes homes currently at risk of wildfire damage in the western United States, including Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada, Oklahoma, Oregon, Texas, Utah, Washington and Wyoming. The report also provides a breakdown of the significant wildfire events of 2017 and 2018. In western states nearly 776,000 homes with an associated reconstruction cost value of more than $221 billion are at extreme risk of wildfire damage. California metropolitan areas comprise a significant portion of the top 15 regions with the most homes at risk, with the Los Angeles, Riverside and San Diego metropolitan areas ranking as the top three high-risk areas, respectively. These regions are home to more than 42 percent of residences at high-to-extreme wildfire risk in the top 15 metropolitans and also claim more than 51 percent of the total reconstruction cost value in this group. California, Nevada and Oregon topped the list for most acreage burned in 2018, with a combined total of 3.72 million acres burned in the three states. In California, 2017 and 2018 caused more wildfire-related property damage than the state has experienced in any two consecutive years of its history. “The continuing presence of the factors responsible for recent wildfires are an ominous indicator that the coming years could see more of the same record-breaking destruction,” said Shelly Yerkes, wildfire senior product manager at CoreLogic. Full report

Chubb Cyber Risk Survey 2019
September 17, 2019

When it comes to cybersecurity, Americans express concern, but are not always prepared to take steps to protect themselves, according to the third in a series of annual surveys from Chubb. The 2019 survey found that 80 percent of Americans continue to be concerned about a cyber breach, yet only 41 percent use cybersecurity software and 31 percent regularly change their passwords. These numbers are virtually unchanged from 2018. And people also often do not recognize the value of individual pieces of personal data. For example, as just 18 percent of respondents are concerned about their email addresses being compromised and less than one-third of respondents regularly change online passwords, a single email address can be a gold mine for hackers. Only 27 percent of respondents are concerned about their medical records being breached. The survey found that a consistently large portion of older respondents employ better cyber practices than younger generations. Per the survey, 77 percent of those over 55 delete suspicious emails, compared to half (55 percent) of respondents between 35 to 54 and just one-third (36 percent) of respondents from 18 to 34. Similar patterns arise when looking at those enrolled in cybersecurity monitoring services. Businesses are not immune to the lack of progress around cybersecurity. While a consistent number of individuals (75 percent and 70 percent) say that their company has "excellent" or "good" cybersecurity practices in place from 2018 and 2019, many companies continue to fail to implement the most basics of safeguards. From 2018 to 2019, there was virtually no change in the percentage of companies who hold annual employee trainings (31 percent and 33 percent), deploy filters for online content (38 percent and 40 percent) and leverage social media blocks (32 percent and 33 percent). The survey also found that the wealthiest individuals tend to have a cyber insurance policy in place (19 percent vs. 9 percent average). Executive Summary

Your Driving Costs: 2019
September 12, 2019

Finance costs on new car purchases have jumped 24 percent in 2019, pushing the average annual cost of vehicle ownership to $9,282, or $773.50 a month, according to this annual AAA study. That is the highest cost associated with new vehicle ownership since AAA began tracking expenses in 1950. The spike in finance charges, which rose from $744 to $920 —a nearly $200 increase — was fueled by rising federal interest rates and higher vehicle prices. The study reviews nine categories of vehicles consisting of 45 models to determine the average annual operating and ownership costs of each. AAA focuses on top-selling, mid-priced models and compares them across six expense categories: fuel prices; maintenance/repair/tire costs; insurance rates; license/registration/taxes; depreciation; and finance charges. Annual average costs increased in each category. Average maintenance and repair costs climbed marginally to 8.94 cents per mile, up 8.9 percent over last year. The increase was aided by the growing complexity of vehicle systems and an updated methodology for calculating repair costs. Electric vehicles had the lowest maintenance and repair costs – 6.6 cents per mile – while medium-sized SUVs had the highest, at 9.6 cents per mile. The average full coverage insurance cost for medium sedans was $1,251. Full report

Blueprint for autonomous urbanism
National Association of City Transportation Officials;
September 09, 2019

In 2017 the National Association of City Transportation Officials (NACTO), which represents 81 North American cities, published its first planning guide to autonomous vehicles (AVs). The idea was if everyone moves around on electric-powered transit and robo-taxis, no one needs to own a car. This is NACTO's second version of the guide, which is a detailed 131-page blueprint to what some of the most influential cities in the country believe is the best way to prepare for AVs—even if it is unclear when the technology will be in widespread use. The report discusses public policy, infrastructure, law and social impact. Full report

2019 lawsuit climate survey: Ranking the states
U.S. Chamber Institute for Legal Reform;
September 18, 2019

This annual survey attempts to quantify the attitudes of the business community toward the legal systems in each of the states, by asking corporate attorneys about their perceptions of key elements of each state’s liability system. The worst system was in Illinois, in 50th place, down from 48th overall in the previous two surveys. Louisiana, California, Mississippi and Florida also ranked at the bottom of the list. Delaware was ranked as the best, a spot it has held all but one time in the 12-year history of the survey. A record 89 percent of respondents said a state’s lawsuit environment is likely to impact their companies’ decisions about where to locate or do business. Full report