Commercial Automobile Remains Sore Spot in P/C: A.M. Best

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The performance of the commercial automobile segment continued to deteriorate through third quarter 2017, according to a new A.M. Best report.
Commercial auto has been a sore spot in the property/casualty for several years. Commercial auto insurers have tried to address unfavorable results by enhancing underwriting measures and aggressively raising rates to improve rate adequacy.

“After six straight quarters of rate decreases, insurers began responding to the negative underwriting pressure with rate increases in the third quarter of 2011,” the report said. “Stung by adverse reserve development at the end of 2011 (after five years of favorable development), companies recognized that the pricing levels were inadequate and began pushing average rates in the sector upward at a growing pace, which continued through third quarter 2017.”
Despite these changes, commercial automobile lags the overall commercial lines group and continues to underperform the P/C market as a whole, according to A.M. Best market segment report, “Commercial Automobile Sector Struggling to Keep Pace.”
“Adverse reserve development has contributed to consistent increases in net underwriting losses over the past six years, but insurers initially appeared slow to react as loss trends outpaced rate increases, and commercial auto underwriting losses grew from $744.8 million in 2011 to slightly over $2.9 billion in 2016,” the report revealed. “In addition, owing to the lag before results fully recognize premium price increases, profitability remains pressured, and, as loss costs rise, insurers are stuck playing catch-up.”
More vehicles on the road thanks to a rebounding economy and additional miles driven are adding to the troubling trend as well as the continued trend of distracted drivers on roadways today.
“The difficulties of underwriting commercial auto are being compounded by rising claims frequency owing to more commercial vehicles being on the road as the economy rebounded following the recession; the record growth in miles driven; and an increase in distracted driving,” A.M. Best said.
Rising vehicle repair and medical costs are also driving up claims severity.
“After lagging by several quarters, insurers have made concerted efforts to raise rates, but have been unable to stop the bleeding,” the report said.
Reversing the unfavorable results in commercial auto will be an uphill task for the industry. A.M. Best notes that to change the trend, the industry will have to be more discriminating when it comes to risk selection, prudent reserving, and appropriate pricing.
“On the positive side, the results of the aggressive rate increases — particularly over the last two years — should start manifesting over the near term,” the report said.
The commercial auto line continues to have a negative impact on the industry’s bottom line results, even as profitability and capital adequacy for the commercial lines overall remain intact, according to the report. To restore stability, companies have raised average rates each year since 2011.”
However, the report noted that while the rate increases over the last few years have been larger, it will take time before the impact is fully recognized in results.
“A discernible improvement in profitability, however, is unlikely until the severity and frequency of accidents decline, and underwriting improves,” the report said. “Frequency and severity may continue to rise in line with economic growth, which the use of more detail-focused underwriting (using effective loss control and risk management techniques), in addition to continued rate increases, could help mitigate.”
Expect more pain before relief, however. “[T]here will be more pain — owing to factors such as distracted driving and attorney involvement — before insurers realize any long-term gains from focused underwriting and pricing efforts.”
Report Highlights:
Accident year reserves for 2015 rose 5.8 percent from 12 to 24 months of development, which may have triggered rate increases in 2017, which were larger than in previous quarters.
The calendar year combined ratio increased sizably, to 110.4 percent in 2016 from 94 percent in 2007. The loss and loss adjustment expense ratio, which rose 27 percent in 10 years, due to both adverse reserve development and inadequate pricing, has been the main contributor to the deterioration in the combined ratio.
Average rates increased by 5.4 percent, 6.1 percent, and 7.3 percent in the first three quarters of 2017—the largest quarterly consecutive increases—as insurers worked to offset the rise in losses and improve profitability. A.M. Best noted that “whether the increases will be enough to reverse the trend in underwriting losses is still too early to tell.”
Source: A.M. Best

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Sioux Falls, S.D., Scores Record Year for Commercial Construction

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Commercial construction climbed to another record-breaking year in Sioux Falls.
Building permits issued in 2017 for commercial projects reached $739 million. City leaders say it’s the fifth year in a row that construction has reached record-breaking levels.

The city’s biggest project last year was the Win Chill building at Foundation Park, a refrigerated food warehouse with a price tag of nearly $33 million. The contractor, Gil Haugan Construction, is also working on a number of other projects in the city, including Lewis Drug and Pave patio where the Copper Lounge once stood.
The Argus Leader says nine other projects in Sioux Falls ranged from $25 million to $10 million.
Copyright 2018 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Drone Owners Warned Against Use near Oklahoma Air Force Base

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Officials at a northern Oklahoma air force base are asking the public to keep recreational drones away from aircraft after a near collision on a training flight.
Lt. Col. Eric Schmidt works at Vance Air Force Base. He told the Enid News & Eagle that an aircraft on a Jan. 9 training flight came within about 50 feet of a drone flying at an altitude of approximately 1,000 feet. The drone had a light on, but wasn’t immediately spotted, Schmidt said.

People who fly drones recreationally often don’t realize how dangerous a drone can be to an aircraft, Schmidt said. A drone colliding with an aircraft could structurally damage the aircraft and put the lives of crew and people on the ground in danger, he said.
“There’s somebody out there who has a toy, and it could cause us harm,” Schmidt said. “It could have killed those guys.”
Drone operators need permission to fly within 5 miles of an airport or military airfield, according to Federal Aviation Administration regulations. Military training routes also have drone regulations, Schmidt said.
Military aircraft typically fly at an altitude of 500 feet or higher when following training routes. Drone operators must not go higher than 400 feet when flying under training routes. They’re also required to notify the base in advance so pilots are aware and exercise extra caution.
“I’m concerned more about the safety impact to our aircrews than I am about prosecuting illegal drone activity,” Schmidt said. “I just want people to understand, if they are flying drones near Vance Air Force Base training aircraft, they are putting lives in danger.”
Copyright 2018 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Nationwide Chief Information Officer Keller to Retire

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Columbus, Ohio-based insurer, Nationwide, announced that Chief Information Officer Michael Keller will retire from his role later this year. Keller has been the CIO for Nationwide since 2001.
The company anticipates it will name Keller’s successor sometime in the second half of 2018. Keller will stay until the transition to his successor is complete.

Keller has served on the board of directors for Columbus 2020, a public-private partnership designed to leverage research companies, academic institutions and diverse industries to position Central Ohio as one of the nation’s leaders in economic development. He is a member of the board for the Columbus Collaboratory, a rapid innovation and insights partnership that focuses on delivering business value through advanced analytics and cybersecurity solutions. He is also a member of the IBM Board of Advisors and McKinsey’s Global Insurance COO Roundtable.
Prior to joining Nationwide, he served as chief technology officer at JPMorgan Chase (formerly Bank One), and several executive positions at IBM.
Source: Nationwide

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JLT Specialty USA Locating Headquarters in Chicago

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JLT Specialty USA, a U.S. subsidiary of Jardine Lloyd Thompson Group plc (JLT), the global specialist risk advisor and broker, has chosen Chicago as its U.S headquarters.
The company said it has seen impressive growth over the last three years and that Chicago has been a critical part of that growth and expansion. JLT Specialty USA will continue its investment in the city as the Chicago location is expected to become its flagship office and largest location in the U.S, according to the company’s announcement.

Chicago Mayor Rahm Emanuel joined the company in announcing the move. In a statement, Emanuel commented that JLT Specialty “chose Chicago because of the talent pool, infrastructure and stability our great city offers.” The company’s “American headquarters will be a strong addition to Chicago’s business community, and we look forward to their continued long-term investment and job creation in Chicago,” he said.
CEO Michael Rice said JLT Specialty USA envisions making long term investments in Chicago. “We continue to see value in making long term investments here,” he said.
The Chicago office is located at 225 West Wacker on the 5th Floor and is occupied by several JLT executives and approximately 60 specialists across key product and industries. The company plans to double the size of its workforce in Chicago over the next few years.
Source: Jardine Lloyd Thompson (JLT)

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INTEL SHAREHOLDER ALERT BY FORMER LOUISIANA ATTORNEY GENERAL: Kahn Swick & Foti, LLC Reminds Investors with Losses in Excess of $100,000 of Lead Plaintiff Deadline in Class Action Lawsuit Against Intel Corporation – INTC

NEW ORLEANS, Jan. 19, 2018 /PRNewswire/ — Kahn Swick & Foti, LLC (“KSF”) and KSF partner, former Attorney General of Louisiana, Charles C. Foti, Jr., remind investors that they have until March 12, 2018 to file lead plaintiff applications in a securities class action lawsuit against…

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CREDIT SUISSE SHAREHOLDER ALERT: CLAIMSFILER REMINDS INVESTORS WITH LOSSES IN EXCESS OF $100,000 of Lead Plaintiff Deadline in Class Action Lawsuit Against Credit Suisse Group AG – (CS)

NEW ORLEANS, Jan. 19, 2018 /PRNewswire/ — ClaimsFiler, a FREE shareholder information service, reminds investors that they have until February 20, 2018 to file lead plaintiff applications in a securities class action lawsuit against Credit Suisse Group AG (NYSE: CS), if they purchased…

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People with mental illnesses refused access to insurance cover

Mental health

Exclusive: Insurance firms deny discrimination, with 7/7 victim among those turned down

People who have suffered even mild depression have been refused life insurance, the Guardian has learned. (Picture posed by models). Photograph: AlamyInsurers have been accused of depriving access to life insurance and other kinds of cover to people with depression and anxiety, even for physical conditions unrelated to their mental health.
People who have suffered even mild mental health conditions or one-off episodes say they have been refused life insurance altogether, aggravating their financial insecurity.
Dozens of complainants have been in touch with the Guardian about the alleged discrimination. Charities and campaigners described the findings as “extremely worrying” and showed that insurers were operating based on an outdated understanding of mental illness.
In some cases, insurers appear to base their refusal on long-distant episodes of depression or anxiety, or when customers admit to having had suicidal thoughts or self-harming noted on their medical records. These customers are then allegedly deemed unsuitable to insure even for circumstances where death is not linked to a mental condition.
One refused applicant was a victim of the 7 July 2005 London bombings who experienced post-traumatic stress disorder. She described being turned down as “upsetting” and “worrying”, saying it showed ignorance about mental illness.
“I was never given a specific explanation as to why I had been rejected but I have not got any physical health issues,” said the woman, who did not wish to be identified.
“I can see it from the perspective of the insurance company; they are not going to want to provide cover for mental health related issues to someone who has had mental health problems. But I was surprised to be rejected for any coverage at all, particularly given my otherwise good health,” she added.
Others say they were penalised after attending one or two grief counselling sessions following a family death, leading to rocketing premiums.
Charities warned that gaps in the law mean customers have little protection against this form of prejudice.
“The difficulty is that the only protection available is to people who are disabled under the Equality Act and even then there are certain exemptions for insurance business,” said Michael Henson-Webb, head of legal at mental health charity Mind.
“The current definition of disability under that Act doesn’t cover everyone with a mental health problem and makes it difficult for individuals with mental health problems and their legal advisers to clearly determine their rights.”.
Laura Peters, advice manager at Rethink Mental Illness, said: “What is judged as ‘high risk’ seems to be based on an increasingly outdated understanding of mental illness. This viewpoint is resulting in people … being disproportionately penalised for their condition with eye-watering premiums or flat out rejection. Life and health insurance can be a vital safety net.”

Prince William, pictured at the Hyde Park memorial to victims of the 7 July 2005 London bombings, has spoken about ending the stigma surrounding mental illness. Photograph: Peter Nicholls/REUTERS
“It feels to me wholly inappropriate and discriminatory. This is something that the government needs to investigate as a matter of urgency. We need to get a fundamental review of these policies,” he said.
The Guardian heard from dozens of people about the matter. Many of them were rejected for life insurance but others had problems getting health or travel insurance. They said the reason for their refusal had not been made clear but many said the only probable cause was their mental health record.
Many believed they were turned down because of having suicidal thoughts or self-harming noted in their medical records, but others said they were told to apply again at a later date due to having had a recent diagnosis.
The suspicion is that insurers are cherry-picking customers to minimise risk and boost the bottom line.
Henson-Webb said: “Some insurers are operating with a total lack of transparency. That so many people seem none the wiser as to why they have been declined insurance means they aren’t being given information about how decisions have been made.
“It looks as though some insurers are making crude assessments such as the ‘three strikes’ rule, which could amount to discrimination.”
One insurance broker, who asked to be anonymous, said: “Some insurers target different markets and like ‘clean lives’. It sounds awful but they are hard-nosed businesses.”
He added: “My wife looked to apply for new cover recently and she had gone to her GP about work-related stress and the insurer automatically increase the premium. How many people go through work related stress? I thought that was ludicrous.”
Another respondent, 27-year-old Cara Lisette from Hampshire, said that she had been denied cover but at the same time her partner who had an eye condition had been accepted with exceptions put in place. “This seems unfair, that he can get cover that excludes his condition but I cannot get the same,” she said.
A lot of those who responded said that discrimination had made them wary of getting further treatment.
Insurers say applications for life insurance go through careful assessment and are evidence based. They say that when dealing with customer’s with mental health problems they ask questions such as how long it has lasted and how it has been treated. They also ask about any time off work or suicide attempts. Insurers acknowledge that in a small number of cases, mental health backgrounds may result in a premium loading or exclusion, or in the most severe cases, a refusal to offer cover.
A spokesman for Royal London said: “Most mental health conditions are mild or self-limiting, and as a result we are able to offer standard rates to more than 90% of customers who inform us of their condition.”
An Aviva spokesperson said: “We take our responsibility to comply with the Equality Act 2010 very seriously. The Act includes special rules that permit insurers to assess customers individually and to offer acceptance terms at the standard rate, at an increased premium or to refuse to offer cover based upon each individual applicant’s risk.
“We do not refuse to offer cover or offer cover on different terms to people with a disability, unless there is statistical evidence the condition presents a higher risk than for someone who does not have a history of the condition.”

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GE’s Credit Risk Rises After Insurance Charge Spooks Investors

The cost of insuring against potential losses on General Electric Co.’s bonds rose this week as a larger-than-expected charge and growing debt pressures spooked investors.

The premium on GE’s five-year credit-default swaps has jumped more than 20 basis points to 59 basis points since last Friday, which means that it would now cost $59,000 annually to protect $10 million of GE debt, according to data provider CMA. The cost of the swaps rose above a benchmark credit-default swaps index by the most in more than a year. The Markit CDX North America Investment Index was trading at 47.5 basis points.

That said, the jump hardly indicates that GE is in imminent danger of defaulting on its A rated debt. The cost of credit-default swaps on GE has risen from a five-year low earlier this month and is still a fraction of levels seen during the Great Recession in 2008.

A GE representative declined to comment on the trading.

The Boston-based company unnerved investors when it disclosed that it would take a $6.2 billion charge and set aside $15 billion in the coming years to add to reserves for a portfolio primarily of long-term care insurance policies. The announcement, along with comments from Chief Executive Officer John Flannery suggesting GE may break into separate companies, reignited fears over the problems GE still has to deal with across its industrial and financial businesses.
“It came with no prior announcement,” said Joel Levington, credit analyst at Bloomberg Intelligence. “It makes you wonder what other skeletons they have in the closet.”
The company’s bonds have also been hit in the past week to trade multiple notches below their assigned credit ratings, according to a report by Levington. Ratings firms were unfazed though, as the major U.S. credit graders affirmed their investment-grade ratings for the company.

— With assistance by Rick Clough

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