Wednesday, August 20, 2008
Notes
This discussion is adapted from Mehr and Camack “Principles of Insurance”, 6th edition, 1976, pp 34 – 37.
^ "Insured cars by state". Insurance Information Institute.
^ C. Kulp & J. Hall, Casualty Insurance, Fourth Edition, 1968, page 35
^ However, bankruptcy of the insured does not relieve the insurer. Certain types of insurance, e.g., workers' compensation and personal automobile, are subject to statutory requirements that injured parties have direct access to coverage. Ibid, page 35
^ Ibid, page 35
^ Fitzpatrick, Sean, Fear is the Key: A Behavioral Guide to Underwriting Cycles, 10 Conn. Ins. L.J. 255 (2004).
^ Insurance Information Institute. "Business insurance information. What does a business owners policy cover?". Retrieved on 2007-05-09.
^ U.S. Patent Application 20060287896 “Method for providing crop insurance for a crop associated with a defined attribute”
^ Margaret E. Lynch, Editor, "Health Insurance Terminology," Health Insurance Association of America, 1992, ISBN 1-879143-13-5
^ http://www.ifsl.org.uk/upload/CBS_Insurance_2007.pdfPDF (365 KB) page 16
^ Gregory D. Squires (2003) Racial Profiling, Insurance Style: Insurance Redlining and the Uneven Development of Metropolitan Areas Journal of Urban Affairs Volume 25 Issue 4 Page 391-410, November 2003
^ "Strauss and Hollis, 2007, Insurance Markets When Firms are Asymmetrically Informed: A Note" (HTML).
^ "Hollis and Strauss, 2007, Privacy, Driving Data and Automobile Insurance: An Economic Analysis" (HTML).
^ (Source: Insurance IP Bulletin, December 15, 2006
^ "Insured cars by state". Insurance Information Institute.
^ C. Kulp & J. Hall, Casualty Insurance, Fourth Edition, 1968, page 35
^ However, bankruptcy of the insured does not relieve the insurer. Certain types of insurance, e.g., workers' compensation and personal automobile, are subject to statutory requirements that injured parties have direct access to coverage. Ibid, page 35
^ Ibid, page 35
^ Fitzpatrick, Sean, Fear is the Key: A Behavioral Guide to Underwriting Cycles, 10 Conn. Ins. L.J. 255 (2004).
^ Insurance Information Institute. "Business insurance information. What does a business owners policy cover?". Retrieved on 2007-05-09.
^ U.S. Patent Application 20060287896 “Method for providing crop insurance for a crop associated with a defined attribute”
^ Margaret E. Lynch, Editor, "Health Insurance Terminology," Health Insurance Association of America, 1992, ISBN 1-879143-13-5
^ http://www.ifsl.org.uk/upload/CBS_Insurance_2007.pdfPDF (365 KB) page 16
^ Gregory D. Squires (2003) Racial Profiling, Insurance Style: Insurance Redlining and the Uneven Development of Metropolitan Areas Journal of Urban Affairs Volume 25 Issue 4 Page 391-410, November 2003
^ "Strauss and Hollis, 2007, Insurance Markets When Firms are Asymmetrically Informed: A Note" (HTML).
^ "Hollis and Strauss, 2007, Privacy, Driving Data and Automobile Insurance: An Economic Analysis" (HTML).
^ (Source: Insurance IP Bulletin, December 15, 2006
Glossary
'Combined ratio' = loss ratio + expense ratio. Loss ratio is calculated by dividing the amount of losses (sometimes including loss adjustment expenses) by the amount of earned premium. Expense ratio is calculated by dividing the amount of operational expenses by the amount of earned premium. A lower number indicates a better return on the amount of capital placed at risk by an insurer.
'URIE' = unincorporated reciprocal inter-insurance exchange.
'SSA' = subscriber savings account.
'AIF' = attorney in fact.
'URIE' = unincorporated reciprocal inter-insurance exchange.
'SSA' = subscriber savings account.
'AIF' = attorney in fact.
Criticism of insurance companies
Insurance policies contain too many exclusion clauses. For example, some house insurance policies do not cover damage to garden walls.
Many insurance companies now use call centres and staff attempt to answer questions by reading from a script. It is difficult to speak to anybody with expert knowledge
Many insurance companies now use call centres and staff attempt to answer questions by reading from a script. It is difficult to speak to anybody with expert knowledge
The insurance industry and rent seeking
Certain insurance products and practices have been described as rent seeking by critics. That is, some insurance products or practices are useful primarily because of legal benefits, such as reducing taxes, as opposed to providing protection against risks of adverse events. Under United States tax law, for example, most owners of variable annuities and variable life insurance can invest their premium payments in the stock market and defer or eliminate paying any taxes on their investments until withdrawals are made. Sometimes this tax deferral is the only reason people use these products. Another example is the legal infrastructure which allows life insurance to be held in an irrevocable trust which is used to pay an estate tax while the proceeds themselves are immune from the estate tax
Insurance patents
New insurance products can now be protected from copying with a business method patent in the United States.
A recent example of a new insurance product that is patented is telematic auto insurance. It was independently invented and patented by a major U.S. auto insurance company, Progressive Auto Insurance (U.S. Patent 5,797,134 ) and a Spanish independent inventor, Salvador Minguijon Perez (EP patent 0700009).
The basic idea of telematic auto insurance is that a driver's behavior is monitored directly while he or she drives and the information is transmitted to the insurance company. The insurance company uses the information to assess the likelihood that a driver will have an accident and adjusts premiums accordingly. A driver who drives great distances at high speeds, for example, might be charged a different rate than a driver who drives short distances at low speeds. The precise effect on charges is not known as it is not clear that a high speed long distance driver incurs greater risk to an insurance pool than the slow around-town driver.[citation needed]
A British auto insurance company, Norwich Union, has obtained a license to both the Progressive patent and Perez patent. They have made investments in infrastructure and developed a commercial offering called "Pay As You Drive" or PAYD
A recent example of a new insurance product that is patented is telematic auto insurance. It was independently invented and patented by a major U.S. auto insurance company, Progressive Auto Insurance (U.S. Patent 5,797,134 ) and a Spanish independent inventor, Salvador Minguijon Perez (EP patent 0700009).
The basic idea of telematic auto insurance is that a driver's behavior is monitored directly while he or she drives and the information is transmitted to the insurance company. The insurance company uses the information to assess the likelihood that a driver will have an accident and adjusts premiums accordingly. A driver who drives great distances at high speeds, for example, might be charged a different rate than a driver who drives short distances at low speeds. The precise effect on charges is not known as it is not clear that a high speed long distance driver incurs greater risk to an insurance pool than the slow around-town driver.[citation needed]
A British auto insurance company, Norwich Union, has obtained a license to both the Progressive patent and Perez patent. They have made investments in infrastructure and developed a commercial offering called "Pay As You Drive" or PAYD
Redlining
the practice of denying insurance coverage in specific geographic areas, purportedly because of a high likelihood of loss, while the alleged motivation is unlawful discrimination. Racial profiling or redlining has a long history in the property insurance industry in the United States. From a review of industry underwriting and marketing materials, court documents, and research by government agencies, industry and community groups, and academics, it is clear that race has long affected and continues to affect the policies and practices of the insurance industry.[11]
In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, credit scores, gender, occupation, marital status, and education level. However, the use of such factors is often considered to be unfair or unlawfully discriminatory, and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used
In determining premiums and premium rate structures, insurers consider quantifiable factors, including location, credit scores, gender, occupation, marital status, and education level. However, the use of such factors is often considered to be unfair or unlawfully discriminatory, and the reaction against this practice has in some instances led to political disputes about the ways in which insurers determine premiums and regulatory intervention to limit the factors used
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