Negative Frequency Trends? 2013 CAS Seminar on Reinsurance June 6-7,2013 Jill Cecchini FCAS, MAAA Vice President SCOR Reinsurance
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Negative Frequency Trends? 1 Liability 2 Auto 3 Property 3
Liability 2 Relative GL Frequencies by AY per $1m of Actual Subject Premium (AY 2001 Base) 1.8 1.6 1.4 1.2 1 GL Class A GL Class B GL Class C 0.8 0.6 0.4 0.2 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: AY s 2001+: ISO Size of Loss Matrix @12/31/11 (developed to ultimate using all year volume weighted average) -Actual underlying ground up occurrence counts (all years) range 147k to 976k -Actual subject premiums are prior to on-leveling AY s 2000 and prior: relativities from ISO Circulars 4
Liability Schedule P Other Liability Occurrence Per GDP Index 140.00 120.00 Inc Claim Count (000's) per GDP Index 100.00 80.00 60.00 40.00 20.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 Annual Statement (All Year Average) 2012 Annual Statement (3 Year Average) 2009 Annual Statement (All Year Average) Source: Bureau of Economic Analysis Real Gross Domestic Product, Quantity Indexes Schedule P Incurred Claim Counts Developed to Ultimate Straight Average 5
Liability Schedule P Other Liability Occurrence Per GDP Index 140.00 120.00 Inc Claim Count (000's) per GDP Index 100.00 80.00 60.00 40.00 20.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 Annual Statement (All Year Average) 2012 Annual Statement (3 Year Average) 2009 Annual Statement (All Year Average) Source: Bureau of Economic Analysis Real Gross Domestic Product, Quantity Indexes Schedule P Incurred Claim Counts Developed to Ultimate Straight Average 6
Liability 3.00 Schedule P Product Occurrence Per GDP Index 2.50 Inc Claim Count (000's) per GDP Index 2.00 1.50 1.00 0.50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 Annual Statement (All Year Average) 2012 Annual Statement (3 Year Average) 2009 Annual Statement (All Year Average) Source: Bureau of Economic Analysis Real Gross Domestic Product, Quantity Indexes Schedule P Incurred Claim Counts Developed to Ultimate LDF s - Straight Average 7
Liability Reasons for Decline Improved Risk Management Safer Premises Training Reevaluating Insurance Bought Larger SIR Coverage Restrictions Tort Reform 8
Liability Future Observations Tort Activity Increase in Case Load At the State Level Increased Potential Risks Aging Population Technology Economy Growth Increased Financial Risk Small Business Optimism Mixed NFIB Concerns with Tax and Regulation 9
Negative Frequency Trends? 1 Liability 2 Auto 3 Property 10
Commercial Auto 11
Commercial Auto Schedule P Commercial Auto Per Truck Units 35.00 30.00 Inc Claim Count Per 1000 Trucks 25.00 20.00 15.00 10.00 5.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 Annual Satement (All Year Average) 2009 Annual Statement (All Year Average) Source: Office of Highway Policy Information, FHWA Schedule P Incurred Claim Counts Developed to Ultimate LDF s - Straight Average 12
Commercial Auto Schedule P Commercial Auto Per Truck Units 35.00 30.00 Inc Claim Count Per 1000 Trucks 25.00 20.00 15.00 10.00 5.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 Annual Satement (All Year Average) 2009 Annual Statement (All Year Average) Source: Office of Highway Policy Information, FHWA Schedule P Incurred Claim Counts Developed to Ultimate LDF s - Straight Average 13
Commercial Auto Liability Improved Risk Management Safety Training Telematics Economy 14
Personal Auto 105.00 Relative PPA BI Frequencies by Calendar Year (AY 2002 Base) 100.00 95.00 90.00 85.00 80.00 75.00 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: ISO Circulars 15
Personal Auto 250.00 Schedule P Personal Auto Liability Per Car Units Inc Claim Count Per 1000 Cars 200.00 150.00 100.00 50.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2012 Annual Satement (All Year Average) 2009 Annual Statement (All Year Average) Source: Office of Highway Policy Information, FHWA Schedule P Incurred Claim Counts Developed to Ultimate LDF s - Straight Average 16
Personal Auto Liability Most of the Frequency Decreases for Auto Occurred in the 90s Vehicle Safety - Airbags, Anti-Lock Brakes Stricter Driving Laws Teen Driving Restrictions Over Reliance on Newer Improved Safety Features? Rearview Cameras Warning Sensors Lane Assistance Newer Cars Have More Techno Gadgets Full Internet Access Text Voice to Replace Cell Phone Texting Increase in Highway Deaths - NHTSA Highway Deaths Increased 5.3% in 2012 Ending 6 Year Trend of Decreases 17
Negative Frequency Trends? 1 Liability 2 Auto 3 Property 18
Commercial Property Relative Commercial Property Frequencies by AY (2004 Base) 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2004 2005 2006 2007 2008 2009 2010 2011 Excluding Cats Source: ISO Circulars 19
Personal Property 1.15 Relative Personal Property Frequencies by CY (2005 Base) 1.10 1.05 1.00 0.95 0.90 2005 2006 2007 2008 2009 2010 2011 Excluding Cats Source: ISO Circulars 20
Personal Property 120 Schedule P Homeowners and Farmowners Per Housing Units Inc Claim Count Per 1000 Housing Units 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Homeowners 2012 Annual Statement Homeowners 2009 Annual Statement Source: U.S. Department of Housing and Urban Development Schedule P Incurred Claim Counts Developed to Ultimate LDF s - Straight Average 21
Property With the Recession More Large Fire Losses from HO, BOP, and CMP Business Budget Constraints Not Maintaining Buildings (ex: electrical fire by neglecting to fix electrical problems) Less Staff (ex: kitchen staff doesn t clean as well leading to kitchen fire) Possible Arson Increased Catastrophe Exposure Minor Cats Commercial Flood Losses 22