Emerging Issues: New Risks & Trends Facing Personal Lines Insurers. October 13, 2015

Transcription

1 Emerging Issues: New Risks & Trends Facing Personal Lines Insurers October 13,

2 Agenda 1. Societal Trends 2. Flood 3. Other Emerging Risks Drones Fracking Solar Panels Medical/Recreational Marijuana Cyber Mozart Forms Composer 2

3 Societal Trends

4 Seniors (Over 65) Growth in Population over 65 (As a % of Total Population)* 25.0% 20.0% 15.0% 10.0% Fastest growing segment is 85+ From 1970 to 2050, this segment will have grown by 1200%! 5.0% 0.0% Age Age Age 85+ Fastest-growing age segment: Forecast to expand 40% by 2020** Baby Boomers are starting to enter this age group Group s risk profile is changing: Longer life expectancy Depleted retirement funds Higher retirement age Sources: * U.S. Census Bureau, Washington, DC ** Conning 4

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6 Societal Trends Annual Vehicle Miles Traveled (In Trillions)* Results through June 2015 Total vehicle miles traveled in US continued to increase through June Rise in gas prices ( ) resulted in decline in vehicle miles traveled Drop in gas prices (2015) has led to record high vehicle miles traveled Median Age at First Marriage** Average age at first marriage consistently increasing since 1950 Average age for men 29 and for women 27 (almost a 2 year increase for both since 2000) Sources: * Federal Highway Administration ** U.S. Census Bureau, Washington, DC

7 Young Adults (18-34) The second fastest-growing age segment Car ownership: 72% 66% from 2001 to 2011* Home ownership: Minimal Many young adults live with their parents or rent Possible reasons: Economic downturn Changing attitude towards ownership * Source: Conning 7

8 Socioeconomic Impact Effects of the Recession of 2007 Real median household income fell 7% in the 2000s * Mean duration of unemployment averaged 39 weeks in * Traditional two-parent family household: Less common ** * U.S. Census Bureau, as cited in Conning ** Brookings Institute s State of Metropolitan America, as cited in Conning 8

9 Potential Coverage Needs Senior segment: Travel Working past traditional retirement age Downsizing or selling homes Re-hab and assisted living Caretakers Medical equipment Young adults Rent Electronics Sports equipment Other specific property Ride sharing Non-owned cars 9

10 Potential Coverage Needs Non-traditional household Joint ownership coverage option Increased use Grandparents, parents, children Potential need to address various scenarios Additional insureds Unrelated co-habitant Nanny or other caretaker Shared Vehicles Employment related practices Household and service workers D & O Coverage 10

11 Societal Trends: Potential Approaches 1. HO-4 renter s policy that contains: Replacement cost coverage for certain electronics Coverage for use of non-owned autos 2. Personal Auto Policy with endorsement options for various exposures: Travel insurance Some personal property 11

12 Flood

13 Flood Option ISO Commercial Property coverage option Considering voluntary flood option for ISO Homeowners Program Potential insurer appetite Considerations relating to governmental subsidies and incentive 13

14 Water Back-up Option Water that: 1. Originates from within the dwelling and backs up through sewers/drains 2. Overflows or is discharged from a sump, sump pump, or related equipment Claims settlement considerations Potential enhancement: Flood coverage for minimal limits 14

15 Other Emerging Risks

16 Drones Technology and Design Fixed-wing Quad-rotors and octo-copters Micro air vehicles (MAVs) Kxd6Wg/0/M/Interpolitex2013part06-47-M.jpg 16

17 Drones Technology and Design Model or Hobby Aircraft can range in price from $50 to over $1200 Some models include cameras, radio transmitters and WiFi technology CAMERA-14-MP-EXTRA-BATTERY-/ #ht_8868wt_

18 FAA Guidelines Criteria published by FAA (9/2/2015) that must be met for unmanned aircraft to be considered model aircraft 1. Hobby or recreational use 2. Operates in accordance with community-based safety guidelines and within programming of nationwide community-based organization 3. No more than 55 pounds 4. Does not interfere with manned aircraft 5. When flown within 5 miles of an airport, the operator provides the airport with notice. Any unmanned aircraft that does not meet these criteria may not qualify as hobby or recreational and could be subject to additional regulations 18

19 Drones What Are Potential Exposures?

20 Homeowners Policy Coverage Considerations Model or hobby aircraft Property coverage Bodily injury and property damage liability coverage Personal injury coverage 20

21 Hydraulic Fracturing (Fracking) Process used to extract natural gas from shale rock 1. Wells drilled vertically and horizontally thousands of feet below the surface 2. Water, sand and chemicals injected under high pressure to extract the natural gas Homeowners lease their mineral rights Homeowners policy: definition of Business (Source: U.S. Environmental Protection Agency) 21

22 Solar Panels Increased growth of installations Potential Hazards/Risks ofirefighters unable to cut a vent through solar panel ofirefighter fear of electrocution oimpact on roof integrity 22

23 Medical/Recreational Marijuana: Legality of Marijuana by State (as of 9/1/2015)* 4 states and DC have legalized recreational and medical use of marijuana 25 states have legalized or decriminalized possession or some form of medical use Alaska Hawaii 21 states still consider all forms of use and possession of marijuana illegal Legal Medical & Recreational Medical use allowed, possession decriminalized Possession decriminalized, medical use not allowed Medical use allowed, possession is illegal All forms of use and possession are illegal While the federal government has allowed states to implement their own laws, possession and use are still illegal under federal law Sources: * National Conference of State Legislatures (ncsl.org) 23

24 Medical/Recreational Marijuana: Potential Exposure Considerations Marijuana Plant Full grown plant up to $6,000* Damage due to improper cultivation, weather related perils, theft Harvested Marijuana Improper disposal Could be considered personal property potential covered loss Minor s use of marijuana owned by insured Edibles including accidental ingestion by others Theft Inconsistent Laws Across the Country To date, 29 states have enacted laws that legalize, to various degrees, the use or possession of marijuana Potential conflict in state and federal laws Sources: * 24

25 Medical/Recreational Marijuana: Coverage Considerations The discrepancy between federal & state marijuana laws can potentially lead to differences in the application of coverage. Especially as to whether or not it exists at all. Current Policy Language: 1. No explicit exclusion for harvested marijuana, marijuana plants, related equipment 2. Liability arising out of use, sale, manufacture, delivery, transfer or possession of a Controlled Substance as defined by the Federal Food and Drug Law is excluded. o Does not apply if the controlled substance is prescribed by a licensed health care professional Possible Coverage Options: 1. Explicit exclusion regardless of legality or use 2. New endorsement to afford liability coverage for injury or damage arising out of the use or possession of marijuana (where legal) 3. New endorsement for increased limits to marijuana plants grown on the residence premises for personal use (subject to state requirements)

26 Potential Underwriting Considerations 26

27 What is Cyber for Personal Lines? Possible exposures insureds may face: 1. Identity Theft 2. Database Breaches 3. Hacking of: o Online accounts: banks/credit cards social media o Public or private wifi networks o Smart home technology o Vehicle technology Coverage afforded under various existing policy language may apply for some of the exposures. 27

28 Custom Forms 28

29 What Is Mozart? Patent pending software application that will allow companies to: Centralize ISO forms and proprietary forms in one place Provide smart search and sort capabilities for all of them See the impact a change in wording will have on other ISO or proprietary forms Edit and track changes to forms right from application View applicability information, manual rules and add company notes Share work with colleagues directly from application 29

30 Easily search through forms to find what you need Search by keyword, text or form # Refine searches w/ ISO s smart tags Filter by LOB, coverage, jurisdiction, company or edition Access to your and 1,000 s of ISO s forms Choose to view applicability and manual rules or open the form to view and edit 30

31 View and customize information about forms Applicability is easy to determine ISO Manual Rules are provided for your reference Add your own notes or instructions to the form View ISO defined tags (blue) or add your own tags (green) for further customization 31

32 View and edit policy wording From the form view screen, you can edit, print, or save the document. By simply highlighting text you can match language across all forms in the database and access the results from the side pane. 32

33 Next Steps Continue to monitor input/feedback on Beta version from development partners Expand LOBs to include CA, BOP and CU Currently available for GL, CP, CIM, EB and Personal Lines Version 1.0 release scheduled for end of summer Continue development partner process 33

34 Customer Engagement

35 What s Important to You? We d welcome a visit with your product team: Thoughts about ISO s insurance programs/deliveries Emerging risks and trends Areas where ISO may want to focus Re-fresh on ISOnet Other ISO services and tools 35

36 Ease of Use Potential Enhancements Annotated forms: Background information regarding coverage provisions Excel spreadsheets Easy access to underlying loss cost calculations Rating examples Example of a method to calculate premiums using the current edition of ISO manual rules ISONet improvements Quick fixes Circular alerts 36

37 How Can You Maximize/Leverage ISO? Access to ISO Staff Maintenance ISOnet: Circulars, circular alerts, forms libraries, manuals Emerging issues portal, legislative monitoring database Panel participation Personal Lines; Actuarial; Property; Auto; Emerging Issues Filing Access to other tools/solutions Monday Webinars 37

38 What emerging trends and risks are YOU, as an individual, concerned about? 38

39 Contact Information Sandee Perfetto William C. Schlager

40 No part of this presentation may be copied or redistributed without prior written consent of ISO. This material was used exclusively as an exhibit to an oral presentation. It may not be, nor should it be relied on as reflecting, a complete record of the discussion.