Hydraulic Fracking

The term “hydraulic fracking” is used to describe a drilling method. Quantities of water, chemicals and sand are injected into gas-producing shale rock beds.

The natural gas is trapped inside the shale rock. Pressure produced by this technique creates small cracks in the surrounding rock. Thus the natural occurring gas is released and captured. After the capture, waste water is released.

Environmental concerns

Hydraulic fracking has gained positive and negative attention over the past few years. This drilling method is highly contentious.  This is due mainly to environmental concerns. Methane gas is released.  It is dangerous because poses possible air and water pollution risks.

The amount of water used places strain on water supplies, especially in drought-stricken areas. Potential hazards include induced earthquakes as well as operational failures and traffic congestion.

Drilling operators should have the proper insurance coverage. Most drilling companies carry commercial general liability. This is protection against third-party bodily injury as well as property damage claims. Also carried by operators is extra expense liability coverage. This insures against well failures and closures.

Homeowners

Homeowners exposed to risks from fracking should be aware of coverage limitations. There are also exclusions in their homeowners insurance policy. Such policies exclude settling, cracking and shrinking. Pollution exclusions are also common in homeowners policies. These policies do not cover damage incurred by seismic activity. As a result,  individuals exposed to this risk should purchase earthquake specific cover.

Complicating matters, regulations over hydraulic fracking operators differ widely among the states.

Some U.S. Insurers have started excluding fracking activities from their policies because of pricing difficulties.

The rapid expansion of hydraulic fracking operations in the U. S. brings the need for insurance solutions.

Major global reinsurers, which traditionally pick up substantial parts of insurance exposure, remain unwilling to take on hydraulic fracking. The insurers and reinsurers are reluctant to participate if they can’t understand the risk. If they can’t understand the risk, they can’t price it. If an insurer can’t measure and quantify that, the choice would be to stay out of the business altogether.

Innocent auto drivers

Innocent auto drivers unexpectedly pay higher premiums. However, the guilty driver expects to pay an increase in premiums.

The Consumer Federation of America sourced quotes from five auto auto insurers.  Drivers pay the most in  New York City and Baltimore  They pay even if innocent. In addition, higher income drivers  pay less penalties. However, middle income bracket drivers are charged heavy penalties. Furthermore, innocent auto drivers in Chicago and Kansas City faced penalties as well.

The insurance industry disputed the above conclusions. They stated that  drivers should not be compared because some drivers had no previous insurance, whilst other drivers had prior insurance.

The CFA discovered the following: –

* Progressive surcharge drivers aggressively using the not-at-fault penalty except in states which ban this practice.
* Geico and Farmers raise rates by ten per cent at times.
* Allstate penalise drivers occasionally.
* State Farm do not increase premiums for these no-fault accidents.

The CFA compared two female drivers in each city. They lived at the same address. Both were 30 years old. They had been licensed for 14 years. They drove a 2006 Toyota Camry clocking up 10, 000 miles per year.

The upper income driver was married. She owned a home. She worked as a bank executive with a Master’s degree. The middle-income driver worked as a bank teller. She was single and rented an apartment. The middle-income driver had earned a high school diploma.

In comparison, the following was revealed: –

* Higher-income drivers pay $78 on average after a no-fault accident.
* Middle-income drivers pay $208 more on average after a no-fault accident.
* Higher-income drivers pay a 6.6 per cent  penalty after a no-fault accident.
* Middle-income drivers pay 9.6 per cent penalty on average after a not-at-fault accident.

Robert Hunter, a CFA director said that drivers should not be penalised if someone else hit them.

In conclusion, the CFA asked state lawmakers to forbid penalties on innocent drivers.

California and Oklahoma have such regulations in place. The American Insurance Association says consumers should shop around when buying auto insurance.

Global Warming

The earth is getting hotter today than at any time in history. Although the daily weather can’t be blamed on global warming, the overall direction is clear.

Over the past century we have experienced global warming. Also more intense precipitation. Furthermore ice caps are melting ad sea levels are rising. This is all due to increasing concentrations of heat-trapping gases.  This is as a result of the burning of fossil fuels.

The most recent Intergovernmental Panel on Climate Change (IPCC) projects that the global average temperature will increase by between 4 to 11 degrees Farenheit this century if our reliance on fossil fuels accelerates.

Many of the world’s preeminent climate scientists concluded that heat-trapping pollution has “very likely” caused most of the rise in global average temperatures since 1950.

Historically based insurance premiums don’t reflect the risk posed by global warming. Changing weather patterns will affect many insurance lines, including property liability, flood, crop, business interruption, vehicle, health and life.

Impacts of Global Warming on Insurance Industry

An increase in sweltering weather and heat waves will directly affect health, life, property, business interruption and crop insurance. Heat caused at least 700 deaths during a searing five-day heat wave in Chicago in 1995. The temperature reached 104 degrees Farenheit.

In January 2005 mudslides in California caused more than $150 million in damages.

Wildfire frequency and severity will affect crop, property, life and health insurance. The Department of Energy recently concluded that global warming is likely to increase the risk of wildfires.

Coastal erosion from rising sea levels will affect property, flood, business interruption and life insurance lines. Climate scientists conservatively predict that during this century global warming could cause sea levels to rise by up to 3 feet.

Increasing sea surface temperatures have been linked to increased hurricane intensity over the past 35 years. Since the 1970s the number of storms intensifying to category 4 or 5 hurricanes has almost doubled.

In conclusion, by developing new products and practices that help encourage reductions in global warming pollution, the insurance industry can play a major role in protecting against the dangers of global warming.

Driverless Car Insurance

The driverless car is going eventually  to cause great concern for the insurance industry.

A massive drop in premiums:

During 2015 car insurers collected $200 billion in premiums. Consultants fear a decrease of 80% in the future. This conclusion is based upon the basis that as driverless car technology become safer, this will thus cause changes in car ownership.

Different risks:

Risk factors will change. as a result, who is responsible when a driverless car collides with a driven car? Would insurance companies therefore have to extend existing policies or create new types of policies?

New Generation cars:

Consequently, each new generation vehicle is manufactured with more automated features than before. High-end cars and some mid-priced vehicles offer blind-spot monitoring.  They also offer  forward-collision warnings as well as lane-departure warnings. Crash avoidance technology will therefore become standard equipment.

Change is coming:

U. S. Insurance executives as a result are spending millions with car manufacturers. They are testing the technology themselves. Actuaries who decide on premium risks and rates are puzzled. Will there be fewer accidents? Who will be the insured? The drivers or computer code?

Arity Corporation:

A Chicago insurer founded a company called Arity. They employ more than 200 data scientists.  These tech experts perform research on new products and services. The experts therefore analyse billions of miles of driving data.  They provide insights and scores.  These help amongst other things such as deciding upon risk and furthermore change driver safety, connectivity and value.

The future of the driverless car:

Actuaries may thus have to recalculate details about people with issues such as: –

How often cars are hacked;

Which areas in the country have better satellite imagery;

Identify the safety differences across driverless cars, from Google to Tesla;

Be aware of the varying quality of safety features of all driverless cars.

Miles tested:

Google’s self-driving cars have racked up more than 1.5 million miles of testing. Furthermore Tesla says Autopilot has topped 130 million miles.

Road upgrades:

States and localities are already taking action.   They accommodate driverless cars and connected vehicles. These cars rely on cameras, radar and laser-mapping tools .  This helps them to determine their positions. They have to communicate with stop lights and pavement sensors. It has been reported that authorities are taking this new technology very seriously.

Insuring Carinata

The United States federal government has finalised procedures insuring carinata, a new crop that is being grown to produce jet fuel.

Last year farmers in North Dakota planted 6000 acres of the mustard seed variety known as carinata. However, insurance agents were unclear about how to go about insuring carinata.

As the new crop being grown for jet fuel becomes more popular, the U. S. Department of Agriculture officials have finalised procedures to insure it.

For 2016 and succeeding crop years, carinata is only insurable under the federal crop insurance program by written agreement under canola and rapeseed crop provisions.

Approved insurance providers (AIPs) and producers have raised questions regarding the insurability of Brassica carinata. Carinata is an inedible oilseed. These oil seeds mimic the attributes of its petroleum – derived counterpart. Carinata yields oil that can be refined into fuels. These fuels meet the specifications of petroleum-based fuels.  They work in ground and air transportation engines without blending. Engine modifications are also not required.

A common name for the crop is Ethiopian Mustard. Processor contracts are being promoted in both fall and spring-seeded canola counties for the 2016 crop year. The Risk Management Agency (RMA) became aware that carinata contracts were being offered earlier this year in Georgia, North Dakota and Montana.

One requirement for insuring carinata under the Mustard Crop Division is that the crop be in the family Cruciferae.   Carinata meets this requirement and was insurable under the Mustard Crop Provisions in the 2015 crop year.

Furthermore, a requirement for the insured crop is for the crop to contain at least 30 per cent of an industrial type of oil of high erucic acid in this case. Carinata’s oil profile contains more than 30 per cent high euricic acid, so meets this requirement. It can thus be insured under the Canola and Rapeseed Crop Provisions as a Rapeseed type.

The International Air Transport Association (IATA) wants to decrease net carbon dioxide emissions by 50%, compared to 2005 levels, by 2050.

Repeal and Replace Obamacare

Kevin McCarthy (R- Bakersfield) has  multiple doubts.   The Republican-led Congress my not be ready to repeal Obamacare by inauguration day. However, some members of President-elect Donald Trump’s transition team differ. They  have said that this could happen in a special session.

This could would be recipe for disaster if the “replace” part gets delayed.

Experts warned Congress of financial risks. These financial risks became key when Congress repealed parts of Obamacare. No replacement could disrupt the individual plan health insurance market.

Americans could lose healthcare insurance:

The American Academy of Actuaries said that insurers could exit that market. Thus millions of Americans could lose their health insurance.

Trump has proposed however expanding tax-free health savings accounts. He further suggested selling insurance across state lines. Mr. Trump also envisaged block-granting Medicard

Tax credits would be given to people which they can afford. Repealing Obamacare and the subsidies that come with it, would therefore increase costs for consumers who buy insurance individually.

A recent study by the Commonwealth Fund and Rand Corp finds that without repeal, an individual ACA policy would cost you $3,200 a year on average in 2018. However, repeal would increase the cost to $4,700.

Republicans risk provoking up to 30 million people while the replacement effort is ongoing. These individuals are covered by the law or buy policies with prices affected by its insurance marketplace.

FREOPP:

A plan that the Trump administration could look at is the one put out by The Foundation for Research for Equal Opportunity (FREOPP). This was devised by Avik Roy, a healthcare advisor to Mitt Romney’s 2012 presidential campaign.

The FREOPP plan creates a universal tax credit. This is deposited into a health savings account. It enables anyone to buy healthcare.   People currently enrolled in Obamacare’s Medicaid expansion would be included.

The FREOPP plan gets rid of most of the most gruelling regulations holding back innovation.

It repeals Obamacare’s “Cadillac Tax” on healthcare plans and replaces the employer-coverage tax break with a capped standard deduction.  More people are covered than on  Obamacare. It looks very close to a perfect Obamacare replacement.

Cyber Security

Information is stolen in the absence of cyber security protection

Information is stolen during a cyber attack.  This material can be used for ransom and circulation to the public. Your business network is therefore shut down.  Highly sensitive information is hijacked. This data may belong to employees and clients.

Malware includes Trojans, viruses and worms:

Anyone with a social media presence or website is a target therefore for a cyber security attack. The different types of attacks are known broadly as Malware. These include Trojans, viruses and worms.

Trojan-type malware is on the rise

Trojans are spread by some form of social engineering. For example,  a user is duped into executing an email attachment.  This email is disguised to be unsuspicious (e. g. a routine form to be filled in).  Also  by drive-by download (this is a download when visiting a website without a person’s knowledge. Trojan-type malware is on the rise. It accounts for as much as 83% of the global malware detected in the world.

Many modern forms act as a backdoor thereby giving a controller unauthorised access to the affected computer. Trojans do not generally propagate themselves.

Use the most up-to-date security to decrease your system’s weaknesses.

Phishing:

This appears as a request for data from a trusted third party. Most noteworthy users are asked to click on a link and enter their personal data.

Cyber Insurance:

Cyber security insurance covers notification costs, litigation costs, as well as  fines and penalties. Furthermore protection against an attack by an employee in the company.

Everyone is vulnerable to a cyber attack and should thus have cyber security insurance. It is also not expensive if you use CyberPolicy for price comparisons between well known cyber security agencies. If you request a discount, you are most likely to benefit from a discount. On average, a cyber attack costs individual businesses about $38,000 a year.

60% of data is stolen within the first few hours

 Many companies are not actively taking steps to prevent attacks, in certain instances  Cyber security firms can take up to 200 days to detect a breach in security.

A recent Cisco research found that 60% of data is stolen within the first few hours of a security breach.

Life Insurance Premiums Skyrocket

The Cook’s life insurance premiums skyrocket:

Mr and Mrs Cook paid $452 per month for life insurance.  They then were told last year that their premiums were to increase.

Life insurance premiums skyrocket when interest rates are low:

The policy they had was a universal life policy. This is a popular type that includes an investment account. The account accumulates cash when interest rates are high. When rates are low, cash is drained very quickly.

Many people build up a cash value in their Universal Life Insurance Policy. They then take out a policy loan against that cash value.  While this is a good theory, you cannot gain full access to the money you have saved.  You will generally only be able to take out a portion of the cash value in the form of a policy loan.

Since you have only gained limited returns on your investments in the first place, you can only take out a portion of the money. This significantly lowers the effective return.  It is basically like putting money into a savings account that does not earn interest.  Thus when you borrow money, you have to pay it back with interest in most cases.

Your other option to get your hands on the money is to cash out the policy.  If you do this, you will also have to pay surrender fees that will significantly cut into the amount of money that you get.

Worldwide, life insurers are facing the same dilemma. In some countries interest rates have turned negative. This is a critical time facing an industry that supports the retirement of millions.

Universal life insurance bought in the 1980s and 1990s, guaranteed annual returns of 4% or more. Now the premiums are skyrocketing.

As a result, about a dozen lawsuits are facing insurers. Many of the lawsuits are class-actin disputes. There are allegations that insurers are raising rates to force people to lapse their policies. At this time, many clients are too old to purchase replacement policies.

A lapsed policy results in the insurer keeping the premiums previously paid. Furthermore they do not have to pay a future death benefit.

Universal life insurance currently sold does not guarantee returns of 4%. Instead many policies are generally linked to the growth of the stock market.

However, in recent years, in spite of low interest rates, some companies are paying out high dividends to shareholders.

Usually, unless the insurer’s balance sheets are flush, shareholders do not get dividends.

The insurers have been using methods which involve shifting a company’s future obligations to policyholders into special financial vehicles. These do not appear on the insurer’s balance sheets.

Many of the ploys have had the approval of state regulators. In certain cases, accounting rules were waived and dividends to shareholders permitted.

 

 

Trump seeks help with Obamacare

Trump seeks help with Obamacare. Healthcare is one of his top priorities.  He had this in his campaign promises. He wants help therefore as details of his “repeal and replace Obamacare” plan have not yet been released

Especially relevant the President wants to expand healthcare savings accounts. Furthermore these are tax savings accounts. As Trump seeks help he said healthcare should be available across state lines. He said also that states should have more flexibility as well.

President Trump was unsure how these ideas would be carried out. He was unclear how Medicaid expansion would be changed. Tom Price was therefore chosen to ensure a smooth transition from Obamacare to a new plan.

Unfortunately Tom Price, confirmed as secretary of health and human services is setting off national alarm bells. Price has shown himself to be pro-big-business and disrespectful of human needs.

This is furthermore particularly true however when it comes to women’s and poor people’s needs.

Price is hostile to traditional to traditional Medicare. Paul Ryan and Tom Price pushed for “premium support”. This means that seniors would exchange their guaranteed health coverage under traditional Medicare for a lump sum. Seniors and poor people could use this lump sum to go out shopping for a healthcare policy in the private insurance market.

The Commander-in-Chief asked the nation’s governors to support him. Obamacare gave health insurance to 20 million Americans. It has been popular in many states. However, it has been criticised because of steep premiums.

Tom Price told Governors that the revised healthcare plan would be ready in three to four weeks. The main topic was Medicaid during the meeting with the Governors. Medicaid provides health coverage for the poor. Therefore the Governors hoped that Medicaid should be maintained.

The Republicans therefore realise how complicated it may be to repeal and replace the Affordable Care Act. There is fear that if the plan fails, Trump will blame Republicans.

Tom Price and Paul Ryan have a plan which would mean the beginning of the end.