P&C Insurance

Insuring Ride Sharing

Ridesharing has completely changed the transportation industry. In just a few short years, companies like Uber and Lyft have developed ridesharing into a multi billion dollar industry. With such popularity of these businesses, insurers are facing the unprecedented challenge of providing appropriate coverage to both drivers and passengers.

If you are a driver, your regular auto policy most likely will not cover you for ridesharing activities, which could leave you, and your passengers, unprotected or underinsured in the event of an accident. In fact, most personal auto policies specifically exclude using the vehicle commercially as a ride service. 

Developing appropriate coverage is tricky, because there is no way to determine when the car is being used personally vs. as a rideshare vs. in storage. Generally, coverage can be determined based on the average commute of the owner/primary operator and where they live or operate the vehicle; but when transporting passengers a vehicle can be driving any matter of distance, crossing city or even state lines.

Mark Maucere, senior vice president for AmWins Transportation Underwriters, Inc., says, “Our rate [for transportation classes] is based on a point A to point B mechanism, and the problem with these operations is we don’t know when the car is out or in the garage, we don’t know the experience of the driver, car maintenance or in what other ways it is used.”

Companies are searching for a solution, but since the business is so new, there is very little information to use in the underwriting, rate development process. Maucere says: “There is an opportunity here, and we would be interested in potentially looking at these classes of business if we could properly underwrite and put the rate around it...But it’s very difficult until you can grab that data and verify some of the things we can’t verify now.”

Most ride sharing companies provide some form of coverage for drivers. Excess and surplus lines insurer James River currently provides coverage for Uber. The policy has three main parts: 

1. the "Core"--contingent on the driver having his/her own private passenger auto policy; has a $1 million limit that drops down and covers the driver from when he/she is picking up a passenger all the way until the passenger is delivered to the destination. 

2. a lower limit applies when the driver is waiting for a new rider.

3. separate coverage for physical damage to the driver's vehicle occurring while performing ridesharing duties.

For now, insurance is expected to follow this model and remain a surplus lines risk, as it gives flexibility until more accurate data can be collected to establish other provider options.

To read more, check out the original article HERE.

Flooding causes destruction in North and South Carolina

Residents across the Carolinas have experienced catastrophic flooding due to excessive rainfall over the past few days. 16 inches of rain fell in Columbia, South Carolina, on Sunday alone, and multiple other places around the area experienced well over 20 inches of precipitation within the span of a few days. These heavy rains have severely damaged and destroyed dams, homes, businesses, roads, and have also taken lives. The National Guard was deployed to help in parts of South Carolina after the President declared a federal state of emergency on October 3rd. 

To make matters even worse, only about 10 percent of South Carolina homeowners have flood insurance, so many losses from this disastrous flooding will be uninsured. Flood and wind damage are often excluded from Homeowners policies, which many do not realize. 

The Insurance Information Institute says that as of July 31, 2015, there were 199,540 National Flood Insurance Program (NFIP) policies written in South Carolina totaling $133.4 million and covering $50.8 billion in property and contents. NFIP policies provide up to $250,000 in coverage for a residential structure and $100,000 for personal contents. Businesses have slightly higher limits with $500,000 for the structure and $500,000 for contents.

For pictures and more information click here.

Threats to the future of Workers' Compensation

While today's workers' compensation market is generally favorable, there are many demographic and medical factors that are threatening to upset these favorable conditions in the future. 

Medical challenges: 

  • The potential impact of the federal Affordable Care Act: This mandate may well increase workers’ compensation costs by increasing demand for medical services from a fixed number of providers. Simple economics dictates that if more Americans can buy medical services, the cost of those services will rise.

Beyond higher prices, greater demand will also lead to longer treatment and recovery times as claimants wait to get appointments, potentially impacting indemnity costs. This domino effect will certainly impact workers' compensation.

  • The growing use and cost of physical therapy: Fee schedules for physical therapy have increased over the past two years in nine states that have the greatest use of this service in workers’ compensation claims. California increased its fee schedule for all physical therapy billing codes by 5% to 6% in March of this year, while New Jersey increased its schedule by 3.6% last fall.
  • The variability of workers’ compensation costs and treatments among states: The cost for treating the same type of work-related injury differs significantly from state to state, but it shouldn't.
  • Pharmacy trends: There are disturbing pharmacy trends at the provider level. For example, some treating physicians appear to be trying to avoid fee schedules by dispensing prescriptions, compounding medications, or prescribing and filling common medications at uncommon strengths. Americans spent $392 billion on prescriptions in 2014, up 6% from the year before. Per-capita pharmacy spending in America is twice as high as the averages of other developed nations around the world. 

Demographic challenges: 

  • The birth of the “sharing” or “Labor on Demand” economy, driven by technology’s ability to enable people to develop a unique work-life balance: The on-demand economy is best exemplified by online taxi services such as Uber and Lyft. This new economy could impact the workers' comp market by significantly decreasing the number of employees in formal relationships with companies, and changing the definition of a workplace injury. 
  • The aging workforce: Today, roughly 20% of the workforce is aged 65 or older, double the rate in the 1990s. This group typically has fewer, but more expensive, workplace accidents and injuries. Their experience tends to make them safer, while their age often requires longer treatment when they do become injured. In fact, the number of days away from work for employees age 55 and older is nearly double that for other employees, according to the federal Bureau of Labor Statistics.
  • Obesity rates: Today, all 50 states have adult obesity rates of 20% or more. In fact, 35% of Americans are currently obese, and that figure could reach 50% by 2030. Workers' compensation costs are 5.9 times higher for obese employees. While the rate of obesity growth in American adults is beginning to slow, it still remains too high and will stay that way for the foreseeable future. 

Read more here.

 

The Risks of Buying Cheap Insurance

The saying you get what you pay for applies to many parts of life, including insurance. Wanting a great deal is understandable, but it is important that your insurer will be able to provide meaningful help when it is needed. Here are some reasons why cheap insurance might be worthless:

It might not be real. Numbers, especially recent numbers, are hard to come by, but an updated 2015 report from the National Association of Insurance Commissioners found that between 2000 and 2002, the U.S. Government Accountability Office identified 144 fake insurers nationwide that sold fake health insurance to more than 200,000 policyholders, resulting in more than $252 million in unpaid claims.

The NAIC's report also said there are still many fake companies that sell auto, homeowners, rental, life, disability, prescription drug and long-term care policies. And it's evidently a global problem. This year, in England, the Association of British Insurers warned consumers that unauthorized insurance adviser – also known as ghost brokers – were selling bogus car insurance policies.

You're likely underinsured. Sean Scott, a restoration and general contractor in San Diego and author of "The Red Guide to Recovery – Resource Handbook for Disaster Survivors," says many people have been burned by cheap homeowners insurance policies. That doesn't mean your insurance isn't the real thing; even if you have the most ethical insurer in the world, if your premiums are really cheap, your policy may feel fake because there are so many restrictions that barely anything is covered.

Scott offers the example of wildfires that swept through Southern California in 2003 and 2007. He worked with many of the homeowners, but he couldn't help several because of their lackluster insurance policies.

Your claims may be paid at a snail's pace. Granted, this can happen when you're paying big bucks for insurance. But if your payments are going to El Cheapo Insurance, it seems logical that the company specializing in getting the lowest possible premiums from its customers might be a little stingy when it comes time to return some of that money.

And if you do have a cheap insurance policy, here is what to do:

Research your insurer. This would save many a headache caused by bogus insurers. Go to your favorite search engine and start checking out your insurance company.

"Look for companies that have a strong rating with A.M. Best, Moody’s and S&P," O'Dell says, referring to some well-known businesses that have information, such as credit ratings, on financial services. A.M. Best, in particular, is geared toward the insurance industry.

Read the policy. Sounds logical, but plenty of smart people don't. "More than once, clients have shown me a policy they bought through the mail thinking it was a great deal on some life insurance, only to read the coverage and find it was only an accidental death and dismemberment policy. If you die of natural causes, it pays nothing," says David Hardin, president of Hardin Financial Group, a retirement planning firm based in Troy, Michigan.

In addition, be on the lookout for any language in your policy that you don't understand. True, every insurance policy, even the best, has complex language and legalese, but you want to look for a policy that, for the most part, offers fairly clear and straightforward language. And keep an eye out for weasel words – ambiguous phrasing that could mean anything.

Insurance, after all, is all about managing risk and trying to have a happy ending if something terrible happens. If you end up paying for a risky insurance policy, you're already losing.




Up in flames: Failing businesses think fraud is the answer

Arson remains one of the hardest major crimes to solve overall despite advances in forensic science.

Most business owners operate in highly competitive marketplaces. Odds of failure are high, thus compounding the pressure to cheat with insurance arsons. Generally, about nine of 10 startups fail and only about half of startup companies stay open past four years. At least 75% of venture-backed startups fizzle.

Most bankrupt entrepreneurs get back up and try again. Yet a small minority can’t stand the heat so they create their own: They seek the easy path back to solvency by incinerating their businesses for insurance payouts. An investigation of major-city fires by the Scripps Howard News Service reveals that up to 75% of arson cases overall go unreported. Lurking in that finding may be many unreported “scorchings” of businesses for insurance. Much of the $1.5 billion insurers paid out for arsons overall — including the business arsons for profit — thus remains uncontested.

Click here to read about arson cases for insurance money gone wrong.

5 major changes in P&C insurance since Hurricane Katrina

The single largest insured loss event in world history caused more than $41 billion in insured property damage.

In the early morning hours of August 29, 2005, Hurricane Katrina struck the Gulf Coast of the United States, resulting in more than $41 billion in insured property damage, with total economic damage topping $100 billion. The fallout from Katrina has led to significant changes within the insurance and risk management industry. 

According to the Marsh report, "10 Years After Hurricane Katrina: Lessons in Preparedness, Response, and Resiliency," changes over the past 10 years in the property and casualty insurance industry were all influenced by Hurricane Katrina, as well as Hurricane Ike and Superstorm Sandy. The report reviews how property insurance, claims, analytics, risk engineering, and crisis management have changed since Katrina—and explains what has been learned from Katrina and other disasters about protecting people, property, and profits.

Click here to read about the 5 major changes in the P&C insurance industry that are a direct result of Katrina's immense destruction and shocking aftermath.


ACE to acquire CHUBB

In a second major P&C insurance-industry M&A deal this week, ACE Limited and The Chubb Corporation announced today that the boards of directors of both companies have unanimously approved an agreement under which ACE will acquire Chubb. 

As a result of the acquisition, the new company will move up into the “elite” group of global P&C insurers, with a combined total shareholders’ equity of nearly $46 billion and cash, investments and other assets of $150 billion. The transaction is expected to close during the first quarter of 2016.

The combined company, which will assume the Chubb name, is expected to remain a growth company with complementary products, distribution and customer segments.

“We are thrilled to announce the acquisition of Chubb, a venerable company with a great brand,” Evan G. Greenberg, chairman and CEO of ACE Limited, said in a statement. “We are combining two great underwriting companies that are highly complementary. We will make each other better and create a unique company in a class of its own that has greater growth and earning power than the sum of the two companies separately.”

John D. Finnegan, chairman, president and CEO of Chubb, said, “The combination brings together two highly respected and successful companies with complementary capabilities, assets and geographic footprints. We are pleased that the combined company will adopt the Chubb brand and view this as an affirmation that both companies share a commitment to the attributes of quality and service the brand represents.”

ACE’s U.S. commercial lines business provides a broad range of product and services for industrial, commercial, multinational and upper middle market companies, and relies heavily on brokers for distribution. Chubb is best known in the U.S. primarily as a middle-market commercial, specialty and surety insurer with a broad product portfolio and a major agency network. Chubb may be best known in the U.S. for its personal lines coverage to high-net-worth customers—a market that ACE also has been targeting.

Click here to read the full article!