Latest Studies - August 2017

Each month the Insurance Information Institute compiles recent studies from industry, government, academic and other sources. Topics include consumer issues, industry trends, climate and environment, and studies covering individual lines of business like automobile liability and workers compensation.

1. World insurance in 2016. The China growth engine steams ahead
Swiss Re Institute. sigma 3/2017; Page N/A
July 1, 2017

According to this annual report on world insurance from Swiss Re Institute, global life insurance premium growth slowed to 2.5 percent ($2.6 trillion) compared to 2015's 4.4 percent growth. Nonlife growth slowed to 3.7 percent ($2.1 trillion) compared to 2015's 4.2 percent growth. Interest rates have been low for almost 10 years, but the life and nonlife sectors remain well capitalized. Life premium growth is expected to improve while nonlife growth will remain moderate. Both advanced and emerging markets slowed down, with the notable exception of China, which is the third-largest market in terms of total premiums after Japan and the U.S. Tables showing aspects of 2015 world premium volumes appear in a statistical appendix. A section on digital distribution concludes that while the use of digital technology is becoming common in both advanced and emerging markets, sales via intermediaries continue to dominate. The full report is available from Swiss Re. 


2. Counting the cost. Cyberexposure decoded
Lloyd’s of London; 56 pages
July 10, 2017

This report estimates that a major global cyberattack could result in economic losses averaging $53 billion, a sum that is similar to the impact of superstorm Sandy. To produce the report Lloyd's partnered with Cyence to generate two hypothetical attack scenarios and produce loss estimates. One scenario involves a cloud service provider hack and the other involves a mass software vulnerability attack. The cloud service disruption scenario could lead to economic losses ranging from $4.6 billion for a large event, to $53.1 billion for an extreme event. The insurance gap in this scenario is estimated at between $4 billion and $45 billion, which means that only approximately 17 percent of potential losses are covered. In the mass software vulnerability scenario, the losses range from $9.7 billion for a large event to $28.7 billion for an extreme event; the insured losses for this event range from $762 million (large loss) to $2.1 billion (extreme loss) and the underinsurance gap is between $8.9 billion (large loss) and $26.6 billion (extreme loss), meaning that just 7 percent of economic losses are covered. Full Report


3. Natural catastrophe review for the first half of 2017: A series of powerful thunderstorms in the USA causes large losses
Munich Re; Page N/A
August 18, 2017

Munich Re Group has released a review of catastrophe losses for the first half of 2017. Insurers paid out approximately $19.5 billion for disaster claims for the period, nearly 40 percent less than the $32 billion in payouts made during the same period last year. Approximately $21.5 billion of losses during the period were uninsured, compared with $79 billion in uninsured losses during the first half of last year. The primary source of damage in 2017 was thunderstorms in the U.S., which accounted for economic losses of $18.5 billion, with $13.5 billion of those losses being insured. Peter Hoeppe, head of Munich Re’s Geo Risks Research, said that unusual atmospheric conditions in the U.S…were ideal for the generation of powerful supercell thunderstorms that often lead to major hailstorms and tornadoes. Hoeppe said that the number of tornadoes recorded in the first three months of 2017 was twice the average over the last 10 years. Flooding in Peru in February and March was the single costliest catastrophe during the first half of this year, causing economic losses totaling $3.1 billion, with only $380 million covered by insurance. Cyclone Debbie, which hit the Queensland coast of Australia in late March, was the second-most expensive catastrophe, with overall losses of $2.7 billion and insured losses of $1.4 billion. Press Release.


4. Mapping the role of insurance in managing disaster losses. A study of low and low-middle income countries
Risk Management Solutions (RMS); Page N/A
July 1, 2017

This analysis, commissioned by Britain's Department for International Development, indicates that new types of insurance could cut the costs of natural disasters for poorer countries and reduce the amount of humanitarian aid needed. With many of the poorest countries situated in regions prone to earthquakes, hurricanes and typhoons, droughts and flooding, RMS calculated that the average annual asset loss from natural catastrophes in 77 low to low-middle income countries is equal to $29.1 billion, of which only 3 percent is covered by insurance. About 8 percent of the total is covered by humanitarian aid. On average, once every 10 years, these poor countries experienced economic losses of $47 billion due to natural disasters, with humanitarian impacts on 180 million people. This leaves $39 billion that must be met by the people directly affected or by their governments. It found that by the end of the next decade, insurance could have the potential to reduce the one-in-10-year disaster loss by 24 percent. The report concludes that funding insurance schemes is economically effective for donors and represents greater value to the taxpayer compared with aid expenditure; expanded insurance markets have strong benefits for poorer countries including increased speed and certainty of post-disaster finance and reduced financial burden of catastrophic events. Executive summary.


5. 2017 auto insurance study
J.D. Power; Page N/A
June 19, 2017

This annual study of auto insurance customer satisfaction shows an improvement in overall satisfaction accompanied by a decline in price satisfaction for the second consecutive year. The report also shows that the profitability of auto insurers in the U.S. has deteriorated because of increased frequency and severity of collisions. Researchers found that over the last four years, the number of customers facing an annual rate increase of more than $200 per vehicle has increased more than 100 percent and that these increases have had a broad effect on customer satisfaction. The price satisfaction scores of customers who faced price increases of $200 or more average 188 points lower than those whose price increases were $25 or less. The report concludes that auto insurers need to do more to remind their customers of the value of their services. The report identifies five factors making up customer satisfaction: interaction, policy offerings, price, billing process and policy information and claims. News release


6. The chaotic middle. The autonomous vehicle and disruption in automobile insurance
KPMG; 64 pages
June 1, 2017

This report is a follow up to KPMG's earlier paper, “Marketplace of change: automobile insurance in the era of autonomous vehicles.” Since the first paper was published in the fall of 2015, the marketplace has continued to change rapidly with carmakers and high-tech players invested in a race to be first on the road with self-driving cars. Current analysis by KPMG predicts that the personal auto insurance segment could see a 71 percent decline in losses by 2050. The move to new business models will not be smooth for personal auto insurers and the report anticipates a “chaotic middle” of a decade or more as companies adjust their strategies and operations. The report describes some of the changes taking place that would support a mass conversion to autonomous cars. including regulatory permissions and oversight. The emergence of cyberrisk as a new risk associated with autonomous driving is covered as well. Full report.


7. In car technology we trust. How tech is changing the cars we buy (and how we buy them)
CarFax. 2017 Car Tech Safety Study; Page N/A
July 31, 2017

This study investigates the impact of rapid technology integration in vehicles and how consumers are reacting to these changes. The study found that 9-in-10 people consider in-car safety technology important. However, just over half (54 percent) of respondents “fully” trust this technology, while only 4 percent do not trust it at all. The most common reason for apprehensiveness about new technologies was limited testing and time on the market. Less than half (42 percent) are interested in semi-autonomous driver override features and 32 percent are interested in fully autonomous vehicles, while 49 percent have no interest at all. The National Highway Traffic Safety Administration lists features such as rearview cameras, forward collision warnings and lane departure warnings as recommended safety technologies. Per the survey, only 43.2 percent of respondents believe cameras are a “must have” feature in the current car, while 56.6 percent believe they are a “must have” for their next car. The most significant increase in demand was for driver assist and driver override. Additionally, many people were found to over-rely on safety features, decreasing driver attentiveness on the road. One of the most difficult issues to combat in this regard, is cellphone usage. Car tech users are 16 percent more likely than their non-techie counterparts to engage with their smartphone devices while in the car. The study also discusses future safety features and the need for a greater level of education, as tech features become the standard. Full Report


8. Pedestrian traffic fatalities by state. 2016 preliminary data
Richard Retting
Governors Highway Safety Association; 38 pages
March 30, 2017

This report from the Governors Highway Safety Association (GHSA) found that the number of pedestrian fatalities in the United States increased 25 percent from 2010 to 2015, while total traffic deaths increased by about 6 percent. Pedestrian deaths as a percent of total motor vehicle crash deaths have increased steadily, from 11 percent in 2006 to 15 percent in 2015 and pedestrians now account for the largest proportion of traffic fatalities recorded in the past 25 years. The study, based on preliminary data from all states and the District of Columbia for the first six months of 2016, found an increase of seven percent in the reported number of fatalities compared with the first six months of 2015. More than twice as many states had increases (34) than had decreases (15 plus DC) compared with 2015. After adjusting for anticipated underreporting in the preliminary state data, GHSA estimates the number of pedestrians killed in 2016 increased by 11 percent compared with 2015. This was the largest annual increase in both the number and percentage of pedestrian fatalities in the 40 years that national records have been kept, with the second largest increase occurring in 2015. Contributing factors include alcohol and distractions (for both the driver and the pedestrian), more cars on the road and more miles driven, and vehicle speeds. Full Report


9. Providing drivers licenses to unauthorized immigrants in California improves traffic safety
Hans Luedersa, Jens Hainmuellera and Duncan Lawrencea
Stanford Graduate School of Business; Page N/A
April 3, 2017

Several U.S. states have implemented laws that provide drivers licenses to unauthorized immigrants. The authors examined the short-term effects of the largest-scale policy shift, California’s Assembly Bill 60 (AB60), under which more than 600,000 licenses were issued in the first year of implementation in 2015 alone. They found that AB60 has had no discernible short-term effect on the number of accidents. Although AB60 had no effect on the rate of fatal accidents, it did decrease the rate of hit-and-run accidents, suggesting that the policy reduced fears of deportation and vehicle impoundment. Hit-and-run behaviors often delay emergency assistance, increase insurance premiums, and leave victims with significant out-of-pocket expenses. To measure traffic safety, the authors used monthly data on accidents reported by the Statewide Integrated Traffic Records System (SWITRS) from the California Highway Patrol. Full article


10. Six trends poised to reshape homeownership demand
Mark Fleming
First American Financial Corporation; 26 pages
July 1, 2017

This report, developed by First American's Chief Economist Mark Fleming, explores the future of homeownership demand in the United States. The trends identified in the report are: likelihood of home ownership increases with educational attainment; Millennials will be the most educated generation in U.S. history; the decline in the rate of marriage is contributing to the drop in home ownership; the decline in birth rates is also contributing to the decline on ownership; positive trends in income growth in recent years should lead to an increase in ownership; improving economic conditions are helping a resurgence in ownership rates; and substantial differences remain in homeownership rates of different ethnic groups. Full report


11. More U.S. households are renting than at any point in 50 years
Anthony Cilluffo, Abigail Geiger, Richard Fry
Pew Research Center; Page N/A
July 19, 2017

The total number of households in the United States grew by 7.6 million between 2006 and 2016, but over the same period, the number of households headed by owners remained relatively flat, in part because of the lingering effects of the housing crisis. The number of households renting their homes increased significantly during that time, as did the share, which rose from 31.2 percent in 2006 to 36.6 percent in 2016. The current renting level exceeds the recent high of 36.2 percent set in 1986 and 1988 and approaches the rate of 37.0 percent in 1965. In 2016, 65 percent of households headed by people younger than 35 were renting, up from 57 percent in 2006. But rental rates have also risen notably among those ages 35 to 44. In 2016 about four-in-10 (41 percent) households headed by someone in this age range were renting, up from 31 percent in 2006. The article provides more details about the demographics of renters. It concludes that owning a home is still desirable to most renters, citing a 2016 Pew Survey which found that 72 percent of renters would like to buy a house at some point. Full article


12. America's opioid epidemic and its effect on the nation's commercially insured population
Blue Cross Blue Shield; Page N/A
June 1, 2017

As cases of opioid use disorder skyrocket among the commercially insured, this report from Blue Cross Blue Shield sheds new light on the prescribing practices and use that pose a significant threat to patient health. The report found that diagnoses of opioid-use disorder (addiction to opioids, including prescription painkillers and illegal narcotics such as heroin) increased almost 500 percent between 2010 and 2016. The study examined claims from 30 million people who had commercial insurance provided by Blue Cross Blue Shield insurers. It found that opioid-use disorder was 40 times more likely in patients prescribed high doses for a short duration, compared with low doses for a short duration. Opioid-use disorder was seven times more likely when patients were prescribed a high dose for a long duration, rather than a low dose for a long duration. In addition, 21 percent of Blue Cross and Blue Shield (BCBS) commercially-insured members filled at least one opioid prescription in 2015. Full Report


13. Residual market management summary
National Council on Compensation Insurance (NCCI); Page N/A
June 16, 2017

The NCCI's Residual Market Management Summary contains facts and figures about the workers compensation residual market plans and reinsurance pools that NCCI services. In 2016 for the fourth year in a row, residual market premium, market share, and operating results have remained stable—a notable achievement given the potential for volatility in the residual markets. Highlights from the summary include: projected ultimate residual market written premium for Policy Year 2016 is $1.1 billion; the residual market share of the overall workers compensation market is down to 7.7 percent in 2016 from 8.1 percent in 2015; the $71 million estimated 2016 operating deficit is higher than the 2015 estimated deficit but is still only 0.5 percent of voluntary workers compensation premium; and customer satisfaction is high. Full report


If you have a suggestion for a study to be included in this section please email info@iii.org.