Tag Archives: premiums

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.

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.

 

 

Robot insurance

Finding cost-effective robot insurance can be a difficult process.

Scott Eckert, CEO of Rethink Robotics thus suggests ways to obtain affordable robot insurance.

Understand the Difference

Insurance companies need to understand the difference between a traditional robot and the latest models.  Older robots are not able to analyse the environment.  This means high risk. Traditional industrial robots have to be cage-protected.  However, the latest robots are sensor driven.

Rethink Robotics created Baxter, a robot designed for use with human workers. Insurance agents were invited to a demonstration of Baxter at work.  He functioned alongside human co-workers. Baxter has human detection capabilities. Furthermore, he is also able to sense possible collisions in the workplace.

As a result of this demonstration, Rethink Robotics was able to therefore obtain secure,  liability insurance protection.

Regulations

Robotic makers and insurers should work together and thereby develop regulations for the industry. By developing rules, the industry will exercise certain risk management principles. The consequence is that the stricter the regulations, the cheaper the insurance premiums will be.

Risk Assessment

The evaluation of a risk depends on its frequency and severity. Thus assessing risks for robot insurance is difficult.
Robot insurance risk estimates are challenging due to: –

* the technical intricacy of these devices;
* insufficient data regarding risks and accidents;
* the unpredictability regarding liabilities of the manufacturer and end-user of robots.

Robot manufacturers have experienced problems obtaining robot insurance. A Europe-based company told Robotics Business Review that as a result, a project designed to test a humanoid robot in an urban environment had to be abandoned.

Certain insurance companies have voiced concerns about the size and type of risk a malfunctioning autonomous robot could pose. The result would be damage to property and hence people in an urban setting.

In conclusion, more and more robots will be in our work and home environments in the future.  These machines are going to present challenges for insurers in spite of efforts by designers and safety experts.

Collision Avoidance Systems reduces Insurance Claims

Prior Highway Loss Data Institute (HLDI) studies have indicated that some collision avoidance systems are reducing insurance claims.

Of the 2.63 million new cars registered in 2015, more than 1.5 million came with self-activating safety systems.

There are fewer bodily injury liability claims.  The systems are functioning as intended.  These systems are designed to stop the severity of front-to-rear crashes.

 More benefits were shown in systems that added autonomous braking systems. Thus autonomous braking reduced bodily injury liability claim frequency by 14-32 percent.

Sensing technologies are evolving. The price of the systems have dropped.  As a consequence, some non-luxury vehicles are now available with these technologies.

For example, the 2013 Honda Accord was offered with a camera-based front crash prevention system as well as lane departure system. The bodily injury liability reduction was a significant 40 percent. The Honda Accord is one of the best-selling cars in the United States.

The Honda Accord has high sales volumes.  Gross insurance losses will be reduced as a result of the front crash prevention system.

 Technologies take three decades to spread through the fleet. The current analysis focuses on collision avoidance features.   The feature either comes as standard equipment or is offered as an option.

Ninety five percent of all registered vehicles could have rear park assist by 2037.  Rear park assist was rolled out in the United States in 1995.  The crash avoidance technology will therefore not be available in 95 percent of registered vehicles until 2048. Federal mandates would accelerate the fitment of these features.

Federal and local government encourages the use of three currently available technologies (telematics, collision avoidance and automated traffic law enforcement.  These technologies will reduce traffic accidents and insured automobile losses. Consequently Property/Casualty insurers see a major reduction in their auto insurance premium revenues.

“In the near term, an auto insurer should be asking itself three questions,” says Donald Light, Senior Analyst with Celent’s Insurance group.

“ How is it monitoring technology-driven changes in insured losses, (i.e. the progress of the scenario)? Second, do scenario technologies provide new kinds of data?  And third, what should it do differently this year and next?”

How will collision avoidance technologies affect premiums? Karlyn Carnahan, principal of insurance at Novarica says:

“Theoretically, they should help to bring premiums down. As accident frequency drops, smaller claims are eliminated. But this has to be coupled with inflationary trends and the fact that medical costs are rising.  We can hope that technology will help costs remain stable.”

Greg Horn, vice president of industry relations at Mitchell, agrees that there will be a reduction in frequency of accidents.  However,  the cost of replacing some of these technology pieces, such as an adaptive radar sensor mounted in the grille of a car, will be expensive. “So the question is: Will the reduction in frequency outweigh the additional repair costs when these vehicles are in accidents”?

Over time, there will be a significant impact on insurance premiums. This will be augmented by telematics and automated traffic law enforcement.  Examples are red light and speeding cameras and, in 10-15 years, driverless cars.

Are these technologies sufficiently reliable and thoroughly tested.  Are we  headed for an increase in claims related to the technologies themselves.

“All technologies fail at some rate”, says Light. Yes, there will be greater exposure for auto manufacturers and manufacturers of the various collision avoidance technologies, but it is unlikely that those new sources of premiums (commercial) would come close to replacing reduced premiums, from personal auto insurance.”

While tested and ready for public consumption, there are several issues with some of the first-generation technologies. For example, blind spot cameras are prone to false alarms in heavy fog or rain. Autonomous braking systems can fail or be delayed if the sensor in the grille gets caked in mud.

Overall, however, Light believes accident avoidance technologies will become “increasingly important in terms of increasing auto safety.  Auto insurance losses will decrease.  Premium costs will be reduced.”

Carnahan also sees growth in these devices.   Manufacturers will therefore strive to make their vehicles smarter. They will  improve telematics. The latter will be enabled by better broadband technologies.
“Vehicles (in accidents) should diagnose themselves.  They should also automate claims notifications. This helps settle claims quickly, thus reducing expenses.”

Premiums in the 14 largest car markets in the world are  therefore expected to drop by $20 billion by 2020.

 

 

Stuntmen

Avoiding serious accidents on set is not always easy. High speed car chases and wrestling with crocodiles.  Fighting through a forest of flames may sound like your typical 007 movie. However for a cast of stuntmen, it is all in a day’s work.

Prepared for the most outrageous tasks, avoiding serious accidents on set is not always easy. During the filming of “Quantum of Solace”, a series of three separate incidents left three stuntmen badly injured.

Ari Comninos suffered serious head injuries when the Alfa Romeo he was driving in a chase scene ploughed into a truck. During another stunt, British engineer Fraser Dunn was at the wheel of an Aston Martin.   It skidded off the road.  Thereafter it plunged into icy waters, at high speed.  Hours later another stuntman was injured in a separate car chase.

As a result of these series of unfortunate incidents, Daniel Craig who plays action hero James Bond has reportedly insured his body for £5m. Not all insurers would want to cover stuntmen because when things go wrong, they usually go wrong badly.

Insurers want to see storyboards. In addition scripts, a full risk assessment and the stuntman’s CV.

Employer’s Liability insurance covers the producers for compensation damages to stuntmen in the event of an accident.  The legal limit for damages is £5m as standard but is often provided at £10m by most insurers. This would also normally cover any legal defence costs incurred by the producers in relation to any legal proceedings by the injured party.

On small productions general hazardous activities are excluded; this is because not all insurers are happy to provide cover for the likes of underwater work, free-jumping, pyrotechnics that are likely to be seen in a James Bond style film for a small premium. When stunts such as these are included in a script, premiums begin to increase significantly.

During an interview while at the German premiere of “Terminator”, “Collider Movie Talk” got an interview with David Ellison, the CEO of Skydance Productions. They got to talking about the famous Burj Khalifa stunt from “Mission Impossible – Ghost Protocol”. In the scene Tom Cruise hangs off of the tallest building in the world. While many actors would happily hand that sort of work over to a well-paid stuntman, Cruise is known for doing many of his own stunts and he wanted to do this one.

The insurance company, however, was far less interested in the idea. Cruise was so committed to doing the stunt himself that he told the production team to go and find a new insurance company who would still insure the film with the scene intact. The production team did exactly that.

As the film and entertainment industry often involves risky moments, movie producers or other employers such as theme parks will provide liability insurance for stunt artists. Production companies often get to pay lower premiums if they have highly skilled stunt artists. This means that the higher you are skilled, the more easily you will find a job and insurance coverage.

Some insurance companies provide special stunt coverage packages for film productions. The insurance company provides quotes per stunts performed during film shoots. Eligible declared stunts, precision driving scenes and animal stunts can sometimes be purchased as a buyback to existing stunt exclusions.

Many stunt artists buy supplemental policies to obtain extra coverage. This insurance could exclude extra health, death or permanent disability benefits.

 

 

Physicians’ and Surgeons’ Disability Insurance Plans

Preparation is extremely important in the life of a medical professional. Many physicians and surgeons do not enter their respective fields until their early to mid thirties. College years are spent preparing for examinations and the years in residency qualifying to learn how to manage patients. Many young medical professionals experience financial turmoil, accumulating loans and bills as they proceed through years of study. When they begin earning good incomes, most of the time any planning or preparing for disability, loss of income and/or retirement is least likely to be taken into consideration at that stage.

Physicians and Surgeons’ Disability Insurance Plans are designed to ensure that professionals working in the medical field will be able to maintain their standards of living in the event of an injury or illness which results in their inability to work. It is of primary importance that a physician or surgeon’s occupation or medical speciality is properly classified as this classification determines the premium rate. Premiums can vary greatly from one company to another, as different insurance companies may assign a different occupational class to the same occupation.

Some companies feel that if the above-mentioned medical specialists cannot practice their speciality, but decide to work in another capacity earning a similar income, he or she should not be entitled to receive disability benefits. It is wise to purchase a policy which is both Non-Cancellable and Guaranteed Renewable (i. e. contract that cannot be changed and premiums that cannot be raised). (Source: whitecoatinvestor.com)

“Own Occupation” coverage means that you continue to receive monthly income benefits until you are able to perform the specified duties of your speciality. It is not always available to Neurosurgeons, Orthopedic Surgeons, Anesthesiologists, Emergency Medicine Physicians and Thoracic Surgeons. Some companies feel that if the above-mentioned medical specialists cannot practice the specialty for which they were trained, but decide to work in another capacity earning a similar income, he or she should not be entitled to receive disability benefits.

“Loss of earnings” policy has become more common place in the industry today. It typically pays benefits if you are “unable to perform the substantial and material duties of your occupation and you are not working”. Unless your policy contains a residual disability rider, no benefits would be paid if you choose to work in another occupation or medical speciality.

Residual disability means that you are at work and not totally disabled under the terms of your policy, but due to sickness or injury, your loss of income is at least 20 percent of your prior income. This rider also states that if your loss of income were more than 75 percent of your prior earnings, the insurance company would regard your loss to be 100 percent and future benefits would be paid.

Residual disability:  Examples of information that may be required to obtain Residual disability could be tax returns for the past 5 years, monthly profit and loss statements for the past 3 years and perhaps even bank account statements. Basically, aside from all the details asked, if you were working 50 percent of the time that you used to work and you are making 50 percent of your pre-disability earnings, then you would receive 50 percent of your benefit because you had a 50 percent loss of income. In simple terms, Residual Disability Benefits typically begin when the insured is able to return to their regular occupation in a limited capacity but have incurred a loss of earnings of at least 20 percent.

Partial Disability benefits are paid to the insured person who experienced a loss of time or duties due to a partial disability. The person will be eligible for a flat percentage of their monthly benefit which typically works out to a maximum of 50 percent.  What if he/she no longer performs surgery? What if he/she had eyesight that started to fade or was confined to a wheelchair?

A disability is simply defined as an illness or injury that interferes with your ability to work. You want to have a contract that can never be changed or premiums that can never be increased. The definition of a good contract will read: if you cannot perform the material duties of your speciality, benefits will be paid.

With good disability insurance contracts if you could not perform your speciality because of an injury or illness and you engaged in any other occupation you would still receive your monthly benefit. Even if you were making a higher income in your new occupation, you would still receive your monthly disability benefit. Most good disability contracts will have extra policy riders you can purchase. Riders that would allow you to increase your coverage later in life regardless of your health. A residual rider that would pay benefits in the most realistic claim scenario of being partially disabled but still working in your own occupation. A cost of living rider ensures that if you were to go on to claim, your benefit would increase every year to keep pace with inflation. Insurance companies know from claims statistics that most claims involve partial disability where individuals are still working in their own occupation or in another occupation.