Category Archives: Insurers and the Economy

Business Risk, Health & Safety, Insurers and the Economy, Market Conditions

CORONAVIRUS WRAP-UP: Data and Visualizations (4/20/2020)

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The coronavirus crisis continues to generate data that can be valuable for understanding and decision making. Below are just a few resources that may be of interest to insurers and the people and businesses they serve.

COVID-19 Mortality Projections for U.S. States
Graphs from the University of Texas COVID-19 Modeling Consortium show reported and projected deaths per day across the United States and for individual states.
The Verisk COVID-19 Projection Tool
The Verisk COVID-19 Projection Tool has been made available to enhanceunderstanding of the potential number of worldwide COVID-19 infections and deaths. It provides an interactive dashboard that leverages the AIR Pandemic Model.
How State Insurance Departments Are Responding to COVID-19
This interactive map from PC360 highlights bulletins and procedures released by state insurance departments as of April 15, 2020.
Tracking U.S. Small and Medium Business Sentiment During COVID-19
Small and medium-size businesses account for roughly 44% of the U.S. economy and provide employment to about 59 million people. McKinsey is tracking their sentiment to gauge how their views on economic activity, employment, and financial behavior—as well as their expectations about financial institutions and public authorities—change as a result of ongoing public and private interventions.
Auto Insurance, Business Insurance, Cyber Risk, Emerging Risks, Insurers and the Economy, Legal Environment, Regulation, Risk Management, Workers Compensation

CORONAVIRUS WRAP-UP: PROPERTY AND CASUALTY (4/17/2020)

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Auto Insurance
Stay-at-home Pandemic Orders Reduce Auto Claims Almost by Half
As Coronavirus Empties Streets, Speeders Hit the Gas
Business Interruption
UK Watchdog Orders Insurers to Pay Small Business Claims Quickly
Cannabis Insurance
Pandemic Could Shrink Cannabis Insurers’ Premiums, Market
Cyber Insurance
Preventing Losses Due to Growing Cyber Crime During Coronavirus Crisis
As Attacks Rise, Paladin Offers Cybersecurity Platform Free to Insurance Agencies
Disaster Preparedness
‘Uncharted Territory’ as Wildfire Fighting Adapts to Pandemic
Insurance-Linked Securities
Artemis Live: Interview with Tom Johansmeyer, Head of PCS
Litigation
Nashville Bar Sues Insurer Over COVID-19 Loss Claim. Experts Say It Won’t Be the Last
Businesses Warn Fear of Liability Lawsuits Could Stall Rebooting of Economy
P/C Industry Impact
Suddenly There is Big Demand for Pandemic Cover, Says Underwriter
Chubb CEO: Forcing Insurers to Pay Pandemic Loss Claims is ‘Plainly Unconstitutional’
Allianz CEO: Pandemic Hit “Like a Metororite”
From Hacker Attacks to Shareholder Lawsuits, Insurance Industry Braces for COVID-19 Fallout
Public Health and Safety
What FDA Says About Food Safety Amid COVID-19
Travel Insurance
Travelers Consider Their Risk Tolerance
HOLIDAY HELL How to Get a Refund on Your Holiday if it’s Cancelled and How Long Should it Take to Get Cash Back
Workers Compensation
Workers Compensation in Wake of COVID-19

From the Triple-I Blog:
INSURERS RESPOND TO COVID-19 (4/17/2020)
TRIPLE-I BRIEFING: SURPLUS IS KEY TO INSURERS KEEPING POLICYHOLDER PROMISES
PUTTING CAR INSURANCE PRICES INTO PERSPECTIVE
Auto Insurance, Business Insurance, Business Risk, Cyber Risk, Emerging Risks, Health & Safety, Insurers and the Economy, Legal Environment, Market Conditions, Regulation, Risk Management, Workers Compensation

CORONAVIRUS WRAP-UP: PROPERTY AND CASUALTY (4/16/2020)

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Legislation and regulation
Democrats Plan Legislation to Force Insurance Companies to Pay Out for Pandemic Losses
Thompson Introduces the Business Interruption Insurance Coverage Act
Lawmakers Advocate Stimulus Aid to Insurers on Business Interruption
SC Proposes Bill Over Coronavirus-related Business Interruption Claims
NJ offers grace period for insurance premium expenses
Coronavirus Regulations: A State-By-State Week In Review
Litigation
COVID-19, business interruption and bad faith litigation
P/C Industry Impact
No Evidence COVID-19 Industry Loss Will Match Large Catastrophe Years: Flandro
How Insurance Claims Pros Are Adjusting to Pandemic Complications
COVID-19 Response ‘Could Bankrupt the Insurance Industry’: Insurance Defense Lawyer
Coronavirus response: Short- and long-term actions for P&C insurers
Auto Insurance
Analysts: Auto Insurance Coronavirus Rebates a Solid Move in Short Term
Will Fewer Drivers on the Road Mean Lower Auto Losses? It Depends
Auto Insurers Offer Rebates as Traffic Abates During Pandemic
Business Interruption
Neglecting Idle Facilities Amid COVID-19 Will Cost Companies, Warns FM Global
Cyber
Working From Home? Don’t Let Cyber Criminals Break In
Hospital Hackers Seize Upon Coronavirus Pandemic
Workers Compensation
COVID-19 Comp Expansions Could Have Significant Impact on Industry
Auto Insurance, Business Insurance, Careers and Employment, Insurers and the Economy, Legal Environment, Risk Management, Workers Compensation

CORONAVIRUS WRAP-UP: PROPERTY AND CASUALTY (4/15/2020)

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Litigation
Legal Experts Prepare for Battles Over Business Interruption Cover
Travelers Sued Over Coronavirus Coverage
Meal Delivery Services Sued Over Restaurant Prices Amid Pandemic
Pandemic Relief
Swiss Re Donates CHF 5 Million to Support COVID-19 Relief Efforts
Axis Capital, Swiss Re Pledge Donations to Pandemic Relief
Australia’s QBE to Raise $825 Million to Counter Coronavirus Crisis
CA Workers Comp Fund Creates Virus Relief Programs for Policyholders
Coronavirus Litigation Against Nursing Homes Takes Off in Tennessee
Regulation and Legislation
AL Regulator Eases Process for Auto Insurers to Reduce Policyholder Premiums
CA Insurers Ordered to Give Refunds
Politicians Push Insurers to Resolve Mounting Disputes Over COVID-19 Losses

Related:
Risk Manager is Suddenly a Hot Job
How Homeowners Insurance Claims Have Changed During the Pandemic
Auto Insurance, Business Insurance, Business Risk, Cyber Risk, Insurers and the Economy, Workers Compensation

CORONAVIRUS WRAP-UP: PROPERTY AND CASUALTY (4/13/2020)

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Auto Insurance
Car Insurance Refunds Become Standard Issue
State Farm Rolls Out $2 Billion Consumer Financial Relief Program
The Landscape Has Changed Dramatically’: Donelon Calls for Lower Car Insurance Rates
Business Interruption Insurance
COVID-19, Business Interruption Coverage, and the ‘Physical Loss or Damage’ Requirement
S.C. Bill Would up Pressure on Insurers to Cover Business Interruption
Insurers Can’t Cover Everything
With Hollywood on Hiatus, Studios Bracing for Fights With Insurers Over Coronavirus Losses
Proposed Backstop Would Cover Pandemic Business Interruption
Claims
Best’s Insurance Law Podcast Discusses Impact of COVID-19 on Claims
Coronavirus comp claims present challenges: Experts
Cyber
State-Backed Hackers Taking Advantage of Outbreak: Officials
The Line Between Biological and Cyber Threats Has Never Been So Thin
Hackathons Target Coronavirus
Impacts by Industry
Shifts in Manufacturing Create New Exposures: Experts
6 Critical COVID-19 Risks Facing the Health Care Industry
Tracking U.S. Small and Medium Business Sentiment During COVID-19
Pharmacy Workers Are Coming Down With COVID-19. But They Can’t Afford to Stop Working
6 Critical COVID-19 Risks for the Construction Industry
Insurers and the Economy

Employment Trends in the Insurance Industry

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Dr. Steven Weisbart

By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute

On September 6, 2019, the U.S. Bureau of Labor Statistics announced that the U.S. economy had added 130,000 jobs (seasonally-adjusted) in August; and more than one-and-a-quarter million nonfarm jobs (actually 1,266,000) through the first eight months of 2019.[1]

Nonfarm employment has risen every month since October 2010—107 consecutive months and counting. Not every sector or industry has consistently added jobs in that span. Indeed, the diversity of the economy has seen robust job growth in some areas that offsets job losses in other areas. Job growth in the immediate wake of the Great Recession was to be expected but the trends in job growth and its persistence in recent years is surprising.

The insurance industry is a case in point. The insurance subindustry with the strongest employment gains in recent years is — not surprisingly—health and medical expense insurers, given the enactment and implementation of the Affordable Care Act. But other insurance subindustries have shown unusual employment trends. For example, as Table 1 shows, both the property/casualty (P/C) and the life/annuity subindustries have generally shed employees.

Source: U.S. Bureau of Labor Statistics

Perhaps the most surprising row in Table 1 is the Agents & Brokers line. Pundits have been predicting for years that the agent/broker distribution channel is about to be replaced by newer methods of distribution. Obviously, that time has not come yet.

As for the P/C and life/annuity carriers, one might assume that the reductions result from automating routine functions, as has been the case in non-insurance industries, such as manufacturing. If this is the explanation, it translates to increased productivity (more work done with fewer employees), which is obviously a good thing.

[1]Two caveats pertain to this number: first, the July and August numbers are preliminary and are likely to be revised—often slightly—up or down, in the coming two months. Second, the overall benchmark revision, to take effect next winter, is likely to trim half a million jobs from the count for 2019, based on data from the Census Bureau. Even with these adjustments, employment kept growing in 2019.

Insurers and the Economy

Bodily Injury Liability Prices and Overall Inflation

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By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute 

 

There is good news on the bodily-injury liability insurance front, but no one seems to have noticed. The cost of health care for severely-injured people has barely increased in the last year.

Primarily, bodily injury (BI) liability insurance pays for the medical bills of people who have been severely injured due to the negligence of the insured. As a result, the severity of BI claims would tend to track price changes for inpatient and outpatient hospital services, where severely-injured people would go to get treatment and recover. And lately, these price changes have been shrinking—big time.

The Bureau of Labor Statistics calculates a price component for each of these each month as part of the various versions of the Consumer Price Index (CPI).[1] On June 12 the BLS published its latest data for May 2019.

For inpatient hospital services, the change in prices was +1.2 percent, when compared to prices a year earlier, in May 2018. For outpatient hospital services, the change in prices was even smaller (+0.9 percent), when compared to prices a year earlier.

To put these numbers in some context, the Consumer Price Index for All Urban Consumers (CPI-U)—the most widely-used measure of inflation—rose by 1.8 percent in May 2019 vs. May 2018. Many economists prefer to measure inflation without the effect of price changes for food and energy, which are notoriously volatile. This measure is known as the core CPI. Its May 2019 vs. May 2018 change was 2.0 percent.

When was the last time that any healthcare costs—let alone for hospital services—rose at a slower rate than general inflation? Of course, many other factors affect claims for bodily injury liability, but this is a welcome trend for a significant element.

[1]The most familiar index is the Consumer Price Index for All Urban Consumers (CPI-U)—prices as experienced by all urban consumers, but BLS also publishes CPI-W (prices as experienced by urban wage earners and clerical workers).

Auto Insurance, Insurers and the Economy

Tariffs and Auto Insurance

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By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute 

 

Thursday’s announcement of escalating tariffs on Mexico could further squeeze auto insurers by making replacement parts more expensive.

In an action to deter the flow of asylum-seekers on the southern border, President Donald Trump announced that the U.S. would impose escalating tariffs on all Mexican imports beginning June 10 at 5 percent, growing steadily to 25 percent on October 1, if Mexico does not comply.

A tariff effectively acts as a sales tax on goods entering the country, so it drives up the price of those goods.

The property/casualty industry has previously noted a 25 percent tariff on Chinese goods could raise collision repair costs by 2.7 percent, or $3.4 billion. China is the No. 2 exporter of auto parts to the United States – about $20 billion worth in 2018, according to data AutomotiveAftermarket.org culled from federal databases. Mexico is No. 1. It sends us nearly three times as much – $59 billion last year. Together, the two countries make up just over half the $158 billion in auto parts imported.

Even before tariffs, the rising cost of repairs is already an issue for auto insurers. A headlight assembly can easily top $1,000; a bumper with anti-crash sensors can cost $4,000 to replace, as we discuss in this presentation on auto costs.

Insurers bear the immediate impact of the tariffs. If the tariffs remain, they will have to raise rates to cover the increased cost. Tariffs on Mexico would also increase the cost of new cars, as the higher cost of components is passed through to consumers. This could slow the economy, and – since new cars generally cost more to insure than used ones – retard growth in personal auto premiums.

A specialty insurance line, political risk, provides coverage and protection against some government actions such as expropriation, regulatory risk, and restrictions on cross border trade. U.S. companies routinely use this coverage to protect against actions by foreign governments such as the impositions of import and export tariffs sizable enough to be debilitating to their operations and profitability. However, this coverage is not yet available in the domestic U.S. market.

There could be implications for the larger economy. On August 1 the economy will likely set a record for the longest continuation expansion ever recorded in the United States, but it may be is limping across that finish line. The Federal Reserve Bank of Atlanta forecasts just 1.2 percent growth in the seasonally adjusted annual rate of real GDP for second quarter, down from 3.1 percent last quarter. Higher tariffs place a drag on the economy, the same way any tax increase would. Rescinding the tariffs could help rekindle the economy, the same way a tax decrease would.

 

 

Auto Insurance, Insurers and the Economy

Auto insurance prices and overall inflation

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By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute 

There is remarkable good news on the auto insurance front— auto insurance prices have been trending downward since February 2018, and are now below the general inflation rate, but no one seems to have noticed.

The vast majority of consumers in America buy auto insurance, so the Bureau of Labor Statistics calculates a price component for it each month as part of the various versions of the Consumer Price Index (CPI).[1]

But insurance, like many products and services, is a difficult product for which to calculate a price. Ideally, one would want to determine only the change in the amount a consumer would pay to buy the exact same thing today as he/she would have paid in a prior time period. The challenge, with auto insurance as with many other products, is matching “the exact same thing” from a prior period. With cars, BLS tries to remove the effect on price changes of changes in features in new models that differ from prior models.

With auto insurance, the main reason premiums change from one period to another is insurers expectations for claims in the policy period. Obviously, changes can also be affected by expected investment results and by expense issues such as reinsurance prices. BLS has no way to account for these effects. It does try to standardize its calculation by using a hypothetical group of policyholders applying for a specified set of coverages and asking a panel of insurers to provide quotes for them.

So when, in 2016 and 2017, claims frequency ended its long downward trend and spiked upward, it was not surprising to see the BLS auto insurance price index rise as well. Figure 1 shows what this looked like (comparing prices in the current month to the same month in the prior year, seasonally adjusted by BLS):

Figure 1

The peak price change reached 9.7 percent in February 2018. But the spike in frequency ended, and you can see in Figure 1 that year-over-year price changes for auto insurance started trending down, ending the year at an increase rate of 4.7 percent.

The downward trend has continued into 2019. Figure 2 shows the results through April:

 

Figure 2

BLS says that the April 2019 auto insurance price is only 1.4 percent above the price in April 2018. This is not only below the rate of general inflation which, depending on how you measure it, has been running at roughly 2 percent for several years, but it is also the lowest year-over-year increase in auto insurance prices in over a decade (the last time the rate of increase was this low was in March 2008—also 1.4 percent).

So where are the headlines?

[1]The most familiar index is the Consumer Price Index for All Urban Consumers (CPI-U)—prices as experienced by all urban consumers, but BLS also publishes CPI-W (prices as experienced by urban wage earners and clerical workers).

Careers and Employment, Insurers and the Economy

Making sense of the dip in property/casualty carrier employment

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By Dr. Steven Weisbart, Chief Economist, Insurance Information Institute

 

On a seasonally-adjusted basis, the number of people working for property/casualty (p/c) insurers has been dropping continually for two years (since February 2017), from 551,200 to 520,700 (the preliminary estimate for February 2019).

Seasonal adjustment plays a small part in determining these numbers. The not-seasonally-adjusted p/c carrier employment for February 2017 was 549,500, and the February 2019 preliminary estimate was 518,600.

What’s going on? Is this a trend? Based on the numbers alone, it’s hard to tell. Consider the following graph of seasonally-adjusted p/c carrier employment since January 2011 — 18 months after the official end of the Great Recession:

Source: Bureau of Labor Statistics

Don’t be misled by the spike in March 2015-March 2016. This is how the Bureau of Labor Statistics incorporates a change in classification—that is, in this case, some people who were previously not considered employed by p/c carriers were, as of March 2015, now considered as employed in this industry. Rather than an instant change, the adjustment is made over twelve months beginning and ending in March.

Since the data that begin in March 2016 also show a downtrend, it is easy to infer that, if there had been no reclassification in 2015-16, the downward trend that started (on the graph) in 2011 would in 2019 probably show p/c carrier employment at or below 500,000.

Although we don’t readily have policy counts over that span, it is reasonable to assume that, with growth in the population and the economy, p/c carriers are growing, and doing so with fewer employees. It is likely that at least some of this is due to the use of digital methods for activities that humans previously did. P/C carriers are becoming more productive.