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Dr. Jack Nordhaus – News of the Day

Latest insurance industry news, with commentary.

NEWS OF THE DAY February 7, 2014

Jack Nordhaus Jack Nordhaus , 2/7/2014
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"Catch someone doing something right."
Kenneth Blanchard and Spencer Johnson
Management Consultants



INN Breaking News,

February 6, 2014

Chris McMahon

Accenture survey finds that $400 billion in insurance premiums could change hands within the industry during the next 12 months.

A vast majority of insurance customers, (67%) , are open to the idea of purchasing insurance products from companies other than insurers, according to a multinational survey by Accenture, a management consulting company What’s more, nearly one in four  (23% )would consider buying from online service providers, such as Google and Amazon.

“Competition in the insurance industry could quickly intensify as consumers become open to buying insurance not only from traditional competitors such as banks, but also from Internet giants,” said Michael Lyman, global Managing Director for Management Consulting in Accenture’s Insurance industry practice. “Overall, there’s a significant switching risk, and we estimate that up to $400 billion in insurance premiums could change hands in the insurance industry during the next 12 months. The switching risk is important in Western markets, but even more so in emerging countries such as China and Brazil, where insurance customers are even more likely to change providers.”
On the multiple choice survey, 43 % of participants said they would consider buying insurance from banks, 23 % from online service providers, 20 % from home service providers, such as telecommunication or home security companies, 14 % from retailers ,and 12 % from car dealers, Accenture said.
Two in five (40%) of those surveyed said they likely would switch Auto or Homeowners insurers during the next year;  one in four (25 %) said they would likely cancel Life insurance contracts and 35 % said they likely would to switch carriers in the next 12 months. The top two reasons consumers would switch, Accenture said, are lower prices, cited by 87%, and more personalized service, cited by 80 %; 41 % said they would pay more for personalized advice when buying insurance.
.Personalization clearly emerges as a key driver in retaining existing customers and attracting new ones,” Lyman said. “Innovation in pricing strategy and the ability to make their customers feel that they are unique are thus critical to capturing share within the switching econom“y,” which offers opportunities for insurers to gain market share {POTENTIAL ADVANTAGE FOR INDEPENDENT AGENTS]
Most insurance customers, (67 %) said they’re interested in using mobile services, such as sending pictures of their car to report a claim or displaying proof of insurance; 46 % of mobile device owners have used tablets, and 37 % have used smartphones, to communicate with their insurers. More one in three  (35 %) said they would consider offering access to car-usage or lifestyle information  if it could give them better value for their insurance coverage, Accenture said; 47 % said it would depend on the information requested, and 18 % said they were not comfortable doing so.
Although Internet access using personal computers or laptops was the first step in enabling customers to use digital channels, the real game-changer has been the growth in mobile,” Lyman said. “The mobile channel offers insurers the opportunity to take customer experience to the next level, enabling them to become partners of their customers’ everyday life by tailoring offers and interactions to the physical context, as location-based services can be highly relevant in insurance. For example, Travel insurance- offers can be sent to customers’ mobile phones when they land in an airport abroad, or a claim can be submitted from an accident scene with supporting photos. Also, as consumers become more open to providing access to their personal data, adoption of usage-based insurance enabled by telematics technology will accelerate.”
Other highlights from the report:

  • More than seven in ten (71 %) said they’re ready to purchase Travel and assistance policies, extended warranty, Homeowners or Life insurance online.
  • More than half (54 %) are interested in gaming solutions to help them manage risk coverage better and lower premium rates.
  • Nearly half (48 %) said they would consider comments on social media in making their insurance-buying decisions.
The online survey was designed by Accenture and conducted by Lightspeed Research in July 2013; 6,135 people participated, including 1,012 from the United States; 520 from Italy; 516 from Brazil; 512 from Japan; 511 each from the UK, France, Spain, Canada, and South Africa; and 510 each from Germany and China, Accenture said


By Aman Shah, Reuters
February 6, 2014 • 

 (Reuters) - Allstate Corp aims to grow its share of the U.S. Home and Auto markets without the need for "abnormally large" rate increases, its CEO said, after the company's profit more than doubled in the fourth quarter.
Shares of Allstate, the largest publicly traded Home and Auto insurer in the U.S., rose 2% after the bell on Wednesday.
The company, which posted a better-than-expected quarterly profit, has increased premiums aggressively in the last few years without any significant loss to its share of the highly competitive Home and Auto markets.
This has allowed Allstate to compensate for uncertain catastrophe losses and low interest rates on its investments.
Catastrophe losses fell sharply in the fourth quarter ended Dec. 31. This, along with higher premiums across all of its businesses, helped Allstate to race past Wall Street estimates for the period.
With premiums already high after a series of "dramatic" price increases, Allstate would focus this year on attracting customers to boost its market share, Chief Executive Thomas Wilson told Reuters.
"We don’t expect to have to be taking abnormally large price increases in the Homeowners business," he said.
In the fourth quarter, Allstate's Home insurance business benefited from the decline in catastrophe losses to record a combined ratio of 66.6 - an improvement of 27.3 points over the corresponding year-earlier quarter. 
An insurer's combined ratio is the percentage of premium revenue that the company must pay out in claims.
The fourth quarter of 2012 included $1.12 billion in losses from superstorm Sandy. Losses from natural disasters fell almost 90 % to $117 million for the fourth quarter of 2013.
Wilson said it would be desirable for Allstate to maintain its underlying combined ratio in the homeowners business in the low 60s.
Growth in Auto
In the Auto business, Allstate's existing policies rose compared to both the previous quarter and the year-earlier quarter for the second reporting period in succession.
The growth in Auto policies, aided by strong increases in new issued applications and solid retention, would likely suggest acceleration of policy growth in 2014, UBS Investment Research analyst Brian Meredith wrote in a note to clients.
Meredith has a "neutral" rating on the stock.
Allstate's share of the U.S. auto insurance market in 2012 was about 10%, only slightly lower than in 2011, according to data from the National Association of Insurance Commissioners.
Wilson said the company, flush with about $1 billion in excess capital from the sale of its Lincoln Benefit Life unit last year, would look to return capital to shareholders and fund growth.
He said the board would decide in the next two months how to deploy this cash. Share buybacks and dividend payouts were among the options being considered, he said.
Allstate posted fourth-quarter net income of $810 million, or $1.76 per share.
On an operating basis, the company earned $1.70 per share, easily beating the average analyst estimate of $1.38 per share, according to Thomson Reuters I/B/E/S.
Shares of the company, which have fallen more than 8 % this year, closed at $49.55 on Wednesday on the New York Stock Exchange.


February 5, 2014 -

Business Insurance

Commercial Property/Casualty rates increased an average of 3% in January over those of a year earlier, MarketScout reported Wednesday.
The Commercial Automobile and Workers Compensation sectors reported the largest increases at 4%, according to the Dallas-based electronic insurance exchange.
But five lines of coverage — Crime, Employment Practices Liability, Fiduciary, Inland Marine and Surety — reported increases of only 1%.
Generally speaking, the larger the account, the smaller the increase. The largest accounts reported increases of only 1%, while the smallest reported increases of 4%, MarketScout said.
“Additional capacity, insurance-linked securities and a more stable economic environment (despite recent stock market adjustments) are partly responsible for the moderating rate environment,” MarketScout said in a statement.
Live Insurance News

February 6, 3014

Polar vortex sends snow to Georgia, causing serious damage to insured property and vehicles

Georgia became a victim of unexpected snow storms recently. The state is unaccustomed to experiencing such events and, as such, the snow caused a great deal of damage to homes and vehicles. The snowstorms that Georgia has been experiencing are linked to the so-called polar “vortex phenomenon “that has cause temperatures to plummet throughout the U.S. States that usually experience very mild winter seasons have seen heavy snowfall as a result of the polar vortex. In these states, insured losses are particularly high.
Snowfall caused an estimated $10 million in damage throughout the state
According to the state Department of Insurance, the recent snowstorm has caused damages to insured properties and vehicles. Insurance claims have been flowing in since the snow began to fall. As little as one inch of snow was enough to cause major highways to shut down due to various car accidents had been reported. Properties were also affected by the snowfall, which lead to significant water damage as well as other problems throughout the state.
Damage estimates to be affected as insurance claims are assessed
The damage estimates highlighted by the Department of Insurance are based on insurance claims being fielded by the state’s insurers. Insurance Commissioner Ralph Hudgens notes that estimates are based only on a small sampling of insurance claims. Insurers are still gathering and assessing claims that are coming in throughout the state. The estimates provided by the state agency are likely to change as more claims are assessed by insurers, but whether or not the estimated cost of damages will be significantly affected is unclear at this time.
Polar vortex sparks strange weather events throughout the U.S.
The polar vortex has been linked to strange weather conditions throughout the U.S. Nearly every state has experienced freezing temperatures as a result of the climatic phenomenon;  and snow has been reported in parts of the nation that have traditionally seen snowfall only very rarely during the winter months. The insurance industry is expected to suffer a financial blow from the polar vortex, which might translate into higher insurance rates in the future