Archive for the ‘insurance and risk’ Category

Improved Interactions Drive Gen Y Increase in Auto Insurance Satisfaction

July 17, 2015 Comments off

Improved Interactions Drive Gen Y Increase in Auto Insurance Satisfaction
Source: J.D. Power

Gen Y[1] customers are the driving force behind an increase in overall auto insurance satisfaction due to improvement across all customer service interaction channels, the largest contributor to the customer experience, according to the J.D. Power 2015 U.S. Auto Insurance StudySM released today.

The study examines customer satisfaction in five factors: interaction; price; policy offerings; billing and payment; and claims. Satisfaction is measured on a 1,000-point scale.

Customer interaction preferences are changing. Gen Y’s preference to interact exclusively through digital self-service (Web or mobile) has increased to 27 percent in 2015 from 21 percent in 2011. A similar pattern of preference is found in other generational groups (Gen X: 23% vs. 19% in 2011; Boomers: 12% vs. 10%; and Pre-Boomers: 6% vs. 4%). Among the interaction channels, satisfaction with the website experience receives the lowest average score, most notably among Gen Y customers (816, compared with 826 for Gen X, 841 for Boomers and 861 for Pre-Boomers).

7 In 10 Insurers Unprepared For Potential Disruption Caused By Autonomous Vehicles: KPMG Survey

June 30, 2015 Comments off

7 In 10 Insurers Unprepared For Potential Disruption Caused By Autonomous Vehicles: KPMG Survey
Source: KPMG

Although the automotive and technology industries are moving swiftly to bring autonomous vehicles to market, the vast majority of insurers believe the potential impact is too distant in the future to begin preparing, according to the results of the Automobile Insurance in the Era of Autonomous Vehicles Survey conducted by KPMG LLP, the U.S. audit, tax and advisory services firm.

In surveying senior U.S. insurance executives whose companies, in aggregate, account for almost $85 billion in personal and commercial auto premium, KPMG found skepticism about the potential transformation autonomous vehicles will bring in the near-term. Few carriers have taken action—not due to doubts about the possible ramifications, but rather because most believe the change will happen far into the future, if at all. In fact, 84 percent of executives don’t expect autonomous vehicles to have a significant impact on their business until 2025, while 42 percent expect a significant impact in six to 10 years. Nearly three quarters of insurers (74 percent) feel they are unprepared for autonomous vehicles today. In addition, more than half of respondents (55 percent) believe that regulators will impede the adoption of autonomous vehicles, which may help to explain why they anticipate a more distant effect on their business.

The 10 percent problem: Future health insurance marketplace premium increases likely to reach double digits

June 25, 2015 Comments off

The 10 percent problem: Future health insurance marketplace premium increases likely to reach double digits
Source: Deloitte

Health plans setting their premiums for the public health insurance marketplaces have faced one of the most challenging pricing scenarios in recent history. A new set of rating rules, a competitive environment, and ambiguity around enrollee populations collided to create unprecedented uncertainty.

While the Affordable Care Act (ACA) established three programs – risk adjustment, risk corridors, and reinsurance – to address some of this uncertainty, two of the programs will expire after 2016. How might these expirations and other policy levers influence health plans’ strategies for setting their marketplace premiums?
This report presents a forward-looking view for health plans participating in the marketplaces, with modeling by Deloitte Consulting LLP’s health actuarial practice estimating the effect of the risk corridors and reinsurance program expirations on health plan premiums. Among key observations:

  • Premium increases of 10 percent or more could be likely over the next three years as health plans prepare for the end of the risk corridors and reinsurance programs and try to reach or maintain profitability in 2017.
  • Certain policy levers are influencing health plans’ options for premium increases and their decisions around insurance marketplace participation. Among these are pressures to not exceed the 10 percent rate increase threshold, to offer broader networks, and to discontinue other strategies to keep prices down.
  • Health plans should consider a multi-year strategy for setting their marketplace premiums and test its execution by modeling different scenarios.

U.S. Financial Services Credit Ratings Are Resilient To Cyber Security–For Now

June 17, 2015 Comments off

U.S. Financial Services Credit Ratings Are Resilient To Cyber Security–For Now
Source: Standard & Poor’s

It seems not a week goes by without a high-profile cyber-attack against a major U.S. corporation or government agency. A sampling of past corporate targets includes giant retailers (Home Depot, Target, Sony), banks (JPMorgan Chase, Citibank), and health insurers (Anthem, Premera Blue Cross). Clearly, no entity is safe from a cyber-attack. But what are the credit implications of this onslaught of data breaches? Although the many successful cyber-attacks have not yet resulted in any changes in Standard & Poor’s Ratings Services’ ratings on financial services companies, we view cyber-security as an emerging risk that we believe has the potential to pose a higher credit risk to financial services firms in the future, although we cannot predict the timing. It’s not difficult to envision scenarios in which criminal or state-sponsored cyber-attacks (for credit implications, we don’t differentiate the sources of intrusion) would result in significant economic effects, business interruption, theft, or reputational risk. One key point is that cyber-attacks may not be discovered immediately: It can take weeks or months before an intrusion is discovered.

Cyber-attacks appear random but could be highly correlated thanks to contagion caused by global interconnectivity. Data interconnectivity exists among banks, merchants, data owners (health care providers, telecom companies, etc.), and other sources (vendors, distributors, suppliers). So, hackers have many paths to breaching company data and disrupting business operations. Published reports note that data breaches have been going on long enough for cyber-criminals to have collected substantial data on a large number of individuals.


  • So far, we have not downgraded any companies because of the damage resulting from a cyber-attack.
  • Although company disclosures about cyber-risks remain limited, we’re starting to explore the issue in the context of management governance and enterprise risk management.
  • Although still too small to draw robust statistical conclusions, our analysis provides insights into how and when cyber-attacks can affect creditworthiness.
  • Our credit opinion takes into account a balanced view including other risk factors concerning the effects of a cyber-attack.

CBO — Federal Reinsurance for Terrorism Risk in 2015 and Beyond: Working Paper 2015-04

June 12, 2015 Comments off

Federal Reinsurance for Terrorism Risk in 2015 and Beyond: Working Paper 2015-04
Source: Congressional Budget Office

The reauthorization of the federal government’s terrorism risk insurance program in January 2015 helps ensure that private insurance for commercial property and casualty losses caused by terrorism remains widely available both before and after an attack. CBO projects that the insurance program will increase federal spending by $3.1 billion and boost net revenues by about $3.5 billion over the next 10 years on an expected-value basis, but those average amounts incorporate a wide and unevenly distributed set of possibilities. Before the program’s reauthorization in January 2015, CBO analyzed a variety of options for federal support of terrorism risk insurance.

This paper examines in more detail some options that might be considered in the future: shift more risk to insurers by raising their deductibles and copayments or by narrowing the scope of the program; strengthen policyholders’ incentives to mitigate losses by charging risk-based prices for the government’s support; and improve private insurers’ ability to offer coverage by changing the tax treatment of catastrophic reserves.

The Rise of Alternative Capital

May 24, 2015 Comments off

The Rise of Alternative Capital
Source: Insurance Information Institute

A new Insurance Information Institute white paper examines the impact of alternative capital on reinsurance, says I.I.I. chief actuary and paper co-author Jim Lynch.

What sounds like a dry topic actually may in the long run significantly affect the entire insurance industry, right down to the humble buyer of a homeowners policy.

It’s a dry phrase, so let’s parse the phrase alternative capital on reinsurance by starting at its back end. Reinsurance is the insurance that insurance companies buy. Insurance companies accept risk with every policy. They work hard to ensure they don’t have too much risk in one area, like too many homes along Florida’s Atlantic coast.

When they do, they protect themselves by buying reinsurance. Instead of buying a policy that covers one risk, the insurance company enters into a treaty that can cover thousands in case of a catastrophe like a hurricane.

2015 Global Cyber Impact Report

May 15, 2015 Comments off

2015 Global Cyber Impact Report
Source: Aon and Ponemon Institute

Ponemon Institute global study, sponsored by Aon, identifies the relative financial statement impact of cyber incidents compared to tangible asset vulnerabilities.

Key findings:

  • Information technology assets are 39 percent more exposed than property assets on a relative value to insurance protection basis
  • Proliferation of mobile devices and Internet of Things to send cyberrisk skyrocketing over next five years
  • The report’s findings act as a roadmap for risk managers and finance, helping them take a broader look at their organization’s overall risk profile

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