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Tuesday, July 3, 2007This work/life leader really gets the message out about flex: About 65% of employees use some form of alternative work arrangement, and most have been supplied with the computers, software and remote access they need to work from home. The firm encourages job-sharing or part-time options when staffers ...Read More >>AccentureAbout 60% of its staffers flex their hours or telecommute, and they only need to work an hour a week to earn health-care benefits. In response to recent staff surveys, the firm reduced overtime work, shortened business trips and added more opportunities for employees to adjust their daily schedules. ...Read More >>Aflac Inc.Renowned for its popular talking-duck commercials, this insurance leader is a favorite among working parents. Staffers are given lots of flexibility to adjust and compress their hours and to work off-site. In fact, employees in the customer call center regularly submit their "dream schedules" for approval. ...Read More >>Allstate Insurance Co.Employees are in good hands with this top financial services firm, where innovative work/life policies help them maintain balance in their lives. More than half of staffers flex their hours, a quarter telecommute, and a tenth compress their schedules. Job-shares and part-time work are also popular. ...Read More >>American Express Co.This family-friendly company allows employees to take advantage of flextime, compressed weeks, telecommuting and job-sharing. To ensure fairness, it provides managers with detailed selection criteria, user guides and a sample case study of successful flexible work arrangements so they can assess whether a flexible schedule is the right fit ...Read More >>Arnold & Porter LLPRole models for women abound, from the firm's female executive director to its part-time advisor, a partner and mom who counsels other employees who work part-time. Women also benefit from the firm's networking, mentoring and career development programs, which are open to all employees. ...Read More >>AstrazenecaAn on-site day-care center at headquarters provides full-time and backup care to infants, toddlers and kindergartners. A summer camp is open to their school-age siblings. Discounts are available at regional and national child-care chains, and all employees get ten days of in-home or center-based backup care, subsidized at 90% ...Read More >>Avon Products Inc.Avon's long history of serving women has fostered a truly inclusive culture. Women make up 72% of the staff, and their career advancement is supported by a variety of mentoring, leadership training and executive succession programs. More than half (54%) of the firm's top-earning employees are women. ...Read More >>Bank of AmericaThe company subsidizes 65% of the cost of care at its three on-site day-care centers at headquarters and in Jacksonville, FL. Employees in ten cities can take advantage of the Snowy Day backup-care program when nasty weather keeps their kids out of school, and staffers who earn less than ...Read More >>Baptist Health South FloridaStaffers rave about the summer leave policy, which allows them to take off for 12 (unpaid) weeks. All new parents are eligible for at least 12 job-guaranteed weeks off after they adopt or give birth; four of those weeks are partially paid for birthmothers. Workers may also take ...Bayer Corp.Its parent company may be 143 years old, but this firm's policies are remarkably progressive. Staffers can share jobs, work off-site or reduce their hours while still receiving health benefits, pending a manager's approval. Employees in the Consumer Care Division in Morristown, NJ, work summer hours — allowing them ...Read More >>Bon Secours Richmond Health SystemRecognizing that at-home concerns can translate into obstacles at work, Bon Secours offers discounted tutoring services for kids with learning difficulties, while children with weight issues may sign up for nutrition classes, and self-defense classes help keep girls safe. ...Read More >>Booz Allen HamiltonAbout a quarter of the employees at this busy consulting firm have children under the age of 12, and they depend on alternative work arrangements to maintain balance in their lives. Flex is endorsed at almost all levels, with nearly 80% of workers occasionally changing their hours and 54% ...Read More >>The Boston Consulting GroupThe company takes care of employee families by paying 100% of their health and dental costs, with a low copay of just $5 per office visit. There's unlimited coverage for in-vitro fertilization treatments and full coverage for children's speech and physical therapy. ...Read More >>Bristol-Myers Squibb Co.Four on-site day-care centers (located in New Jersey and Connecticut) look after kids 8 weeks to 6 years old and offer gardening activities, music lessons and field trips to toddlers and preschoolers. Older kids use the facilities during school holidays and sign up by the dozens for their summer ...Read More >>Bronson Healthcare Group Inc.Alternative work arrangements form the backbone of this health-care system: 30% of all employees compress their schedules, while 16% flex their hours. A smaller number telecommute, work part-time or job-share. ...Read More >>Capital One Financial Corp.Expectant parents got a big break in 2005, with more time off. New moms now have 16 weeks of job-guaranteed leave (up from 12), with eight weeks fully paid (up from six). New dads and adoptive and foster parents get 12 weeks off (two paid for fathers and ...Read More >>Carlson CompaniesCarlson's employee assistance program is extremely comprehensive, offering help with everything from finding tutors for children facing learning challenges to locating aid for elderly parents and guiding teens through the college application process. ...Read More >>Children's Healthcare of AtlantaQuarterly baby showers provide moms-to-be (and dads, too) with information on breastfeeding, returning to work and finding the best child care. ...Read More >>Children's Memorial HospitalWorking parents feel right at home at this child-friendly Midwestern hospital, where flexible schedules--including staggered shifts, telecommuting, compressed workweeks and part-time hours--are simply a part of "the way we work." An impressive 50% of employees use flextime on the job. ...Read More >>Citigroup Inc.Working parents aren't lacking assistance: The firm boasts seven on-site child-care centers and recently broke ground on an eighth. In addition to full-time and backup care, most offer extended hours and summer camp programs, with deeply discounted rates for low-income families. This year, a new ...Read More >>CJW Medical CenterTo help employees keep their skills current, the hospital reimburses school tuition and fees for certification classes. Full-time employees receive up to $5,000 per year, while part-time employees get $3,000. ...Read More >>Colgate-Palmolive Co.This global manufacturer of toothpaste--among many other products--keeps employees smiling with its flexible scheduling policies. With the approval of their managers, staffers can come in late or leave early, telecommute, job-share, work a compressed week or arrange sabbaticals. A uniform application process for flex schedules ensures equity. ...Read More >>Cornell UniversityStudents aren't the only ones learning at this Ivy League university: As of 2005, all supervisors are trained to manage their employees' alternative work arrangements. The school's casual atmosphere tends to promote flexibility: Many staffers adjust or reduce their hours on a regular basis, and it takes just ...Read More >>Covington & Burling LLPA brand-new day-care center across the street from headquarters accommodates 96 children from infancy through age 4. Employees in New York City, San Francisco and Washington have access to subsidized in-home and center-based backup care, at prices ranging from $3 per hour to $25 per day per child. Teens ...Read More >>Credit Suisse Securities LLCNew moms receive 20 job-guaranteed weeks off as maternity leave, with 12 weeks fully paid. Fathers and adoptive parents also get 20 weeks off, with up to six of them paid. There's a $4,000 reimbursement for those who adopt. Staffers with the firm for five ...Read More >>DaimlerChrysler Corp.The cornerstone of the company's benefits is its work/family account that allocates $5,000 to eligible salaried employees for child care, adoption costs, dependent education costs and elder care. The program allows employees to decide how to use their funds based on their individual needs. ...Read More >>Deloitte & Touche USA LLPWhen an emergency crops up, parents can send their children to one of 69 backup-care centers across the country. If they need alternative arrangements, the company offers reimbursement for child care provided outside these centers. ...Read More >>Deutsche BankA women's network was formally relaunched in 2005 as Women on Wall Street. Its goal: to address the issues female employees care about most and help them advance in their careers. Networking opportunities, business lunches, conferences and workshops are sponsored by the network. Approximately 15% ...Read More >>Discovery Communications Inc.Here's a global company that has discovered the value of allowing employees to flex their schedules. About 60% of staffers made use of the media company's liberal flextime policy last year, which allows them to set their own hours or telecommute with the approval of ...Dow Corning Corp.The company has spent hundreds of thousands of dollars building community-based day-care centers that employee parents may use. When a child or elderly relative is sick, staffers may hire in-home care subsidized by the company--or, if they prefer to stay home for a day or ...Read More >>Dupont Co.The company proved its strong commitment to its employees last year when hurricanes Katrina and Rita severely damaged nine plants and left hundreds of employees homeless. DuPont donated more than $1 million to the relief effort, plus food and supplies, mobile homes and essential services ...Read More >>Eli Lilly & Co.This leading drug company gives employees a wide berth to create their own schedules (with supervisor approval), asking only that they structure them around the core hours of 9:00 a.m. to 3:00 p.m. Flexible work arrangements are encouraged: Nearly half of all staffers telecommute, while ...Read More >>Ernst & Young LLPThe company's leave program gives employees ample time to adjust to a new child, retirement or a career hiatus. New moms with one year of service receive eight weeks of maternity leave beyond the 12 weeks offered by FMLA, six of which are fully paid; ...Read More >>Fannie MaeParents considering adoption can use the firm's resource and referral services to investigate their options. If they decide to adopt, they can take four paid weeks off to spend with their child and have $10,000 of their costs reimbursed. ...Read More >>First Horizon National Corp.With 609 U.S. sites, this large financial firm relies on flexible schedules to meet its employees' work/life needs, such as four-day workweeks, job-shares and reduced "prime-time" schedules of 20 to 32 hours a week, with full benefits. In 2005, 46% of employees flexed their hours ...Read More >>First National BankHelping employees stay fit is a priority at First National. An on-site fitness center at headquarters doubled in size this past year, and class offerings increased to 20 a week (up from five). ...Read More >>Ford Motor Co.In 2005, Ford launched a formal internal mentoring program, the Ford Senior Women's Initiative, to pair high-potential women with vice presidents who serve as their mentors, offering advice and advocating for their best interests. ...Read More >>GenentechConvenience is key: A hair salon and dental services on-site keep working moms looking good. A full-time concierge helps busy employees knock some items off their to-do list--from waiting for the cable guy to planning a child's birthday. Other on-site services include laundry and dry cleaning, plus massages--to make ...Read More >>General Electric Co.GE's thriving Women's Network connects senior-level women to leadership opportunities. The network has successfully brought women together and made them more visible to senior leadership. ...Read More >>Previous 1 2 3 4 5 6 7 8 9 10 Next© Copyright 2007, Working Mother Media Inc. All Rights ReservedNew York, NY (September 24) — Despite a business culture troubled by economic downturn, smart companies are carrying on their efforts to compete for the talent of the nation's 26 million working mothers, Working Mother magazine announced today.With the release of the 17th annual list of the "100 Best Companies for Working Mothers," Working Mother laid out three basic trends among applicants: no rollback of work/life benefits during the recent recession, a post-9/11 increased emphasis on flexible scheduling, and augmented use of family leave by employees.Editor-in-Chief Jill Kirschenbaum explained that "we're also seeing more and more working dads demanding work/life benefits, which turns out to be good news for working moms. The more it becomes the norm for both parents to stay involved with their kids, the less women's family obligations will negatively affect their advancement — or their paycheck."Carol Evans, CEO of Working Mother Media, adds that "post-September 11, work/life initiatives have taken on even greater significance, with programs from employee assistance to telecommuting. Employees want to have flexibility to deal with family needs on a day-to-day basis, as well as in an emergency. Companies are winning the loyalty of employees who get the work done, wherever and whenever they do their jobs."In compiling the "100 Best Companies for Working Mothers" list, the editors focused on how well companies provide their employees with particular benefits like flexible schedules and leave for new parents. Programs for women's advancement also assumed greater importance this year.The complete list appears in the October issue of Working Mother (on newsstands today and at A CNBC television special will spotlight some of the best of the "100 Best" at 8PM EST this evening. Working Mother magazine will honor the companies at a gala awards ceremony at the WorkLife Congress in New York October 1 & 2, 10Working Mother gives special kudos to the ten companies that rank the highest (listed alphabetically):Abbott Laboratories, IL (1st time on Top 10; 2 years on list)American Express, NY (1st time on Top 10; 13 years on list)Bank of America, NC (9th time on Top 10; 14 years on list)Booz Allen Hamilton, VA (1st time on Top 10; 4 years on list)Bristol-Myers Squibb, NY (2nd time on Top 10; 5 years on list)Colgate-Palmolive, NY (1st time on Top 10; 3 years on list)Computer Associates, NY (1st time on Top 10; 3 years on list)Fannie Mae, DC (4th time on Top 10; 9 years on list)General Mills, MN (1st time on Top 10; 7 years on list)IBM, NY (15th time on Top 10; 17 years on list)Industry LeadersCompanies that shine as BEST IN INDUSTRY include Booz Allen Hamilton (Financial & Professional Services), Baptist Health South Florida (Health Care), IBM (Information Technology), General Mills (Manufacturing), Discovery Communications (Media & Advertising), Abbott Laboratories (Pharmaceuticals), and Carlson Companies (Travel & Hospitality).Best in ClassUsing company survey scores, this year Working Mother also highlights as BEST IN CLASS those companies excelling in specific categories: DuPont (Flexibility), CIGNA (Representation of Women), Bristol-Myers Squibb (Child Care), S.C. Johnson & Son (Advancement), Citigroup (Family-Friendly/Corporate Culture), and Arnold & Porter (Leave for New Parents).Family ChampionWorking Mother singles out Steve Sanger, CEO of manufacturing giant General Mills (Minneapolis, MN) as this year's FAMILY CHAMPION for thinking outside the (cereal) box with regard to family-friendly programs. Ever since CEO Steve Sanger's two year-old daughter locked herself in the hotel bathroom moments before a Wall Street analyst presentation six years ago, nobody has to explain to him how work and family obligations can collide. Flexible work arrangements make up one piece of the work/family puzzle assembled under Sanger that includes on-site child care and health care, time-saving employee perks, backup child-care, and programs to advance women through the ranks. Parent-friendly offerings reflect the complex needs of working mothers, such as emergency-care for kids on school holidays, on-site mammograms for time-crunched working moms, as well as a variety of yoga and exercise classes for stressed-out employees.Small Business ChampionWorking Mother also recognizes the efforts of America's small businesses, which employ more than half of the workforce but lack the resources of large organizations. "Every company strives to lure — and keep — the best people by finding the right mix of pay and perks, and this challenge looms large, particularly for small companies," says Kirschenbaum.Saluted for his above-and-beyond commitment to employees, this year's SMALL BUSINESS CHAMPION, Noel Group CEO John Noel, began the Wisconsin-based travel insurance agency — and his quest for work/life balance — over a decade ago in his basement. Noel's fervent dedication to staff shows in work/life initiatives like on-site child care and flexibility. And when Noel adopted a "no-downsizing" policy post 9/11, employees returned the loyalty by volunteering for 24-hour shifts, providing back-up child care, and taking on new roles in short-staffed departments.Companies To WatchAcknowledging those companies improving work-life benefits but have yet to achieve "100 Best" status, Working Mother points to three COMPANIES TO WATCH: Pitt County Memorial Hospital (NC), Heller Ehrman White & McAuliffe (CA), and Forest Laboratories, Inc (NY).About Working MotherWorking Mother magazine, founded in 1979, reaches more than 3 million readers and is the only national magazine for career-committed mothers. Its 17-year signature "100 Best Companies for Working Mothers" serves as a benchmark for work/life practices in corporate America. The magazine is part of Working Mother Media (WMM), which also owns the National Association for Female Executives (NAFE), Executive Female, and the annual 100 Best Companies Work/Life Conference. In 2002, WMM launched a new initiative, Best Companies for Women of Color.2002 "100 Best Companies for Working Mothers"* first year on the listABBOTT LABORATORIES ILABN AMRO NORTH AMERICA, INC. ILACACIA GROUP* MDAFLAC INCORPORATED GAAGILENT TECHNOLOGIES* CAALLSTATE INSURANCE COMPANY ILAMERICA ONLINE* VAAMERICAN AIRLINES TXAMERICAN ELECTRIC POWER* OHAMERICAN EXPRESS COMPANY NYARNOLD & PORTER DCARNOLD WORLDWIDE* MAASTRAZENECA* DEAVENTIS PHARMACEUTICALS, INC.* NJAVNET, INC* AZBANK OF AMERICA, N.A. NCBANK ONE CORPORATION ILBAPTIST HEALTH SOUTH FLORIDA FLBAYER CORPORATION PABAYFRONT HEALTH SYSTEM FLBLUE CROSS BLUE SHIELD OF MASS. MABON SECOURS RICHMOND HEALTH SYSTEM VABOOZ ALLEN & HAMILTON VABP AMERICA INC* ILBRISTOL-MYERS SQUIBB COMPANY NYBROWN BROTHERS HARRIMAN* NYBRYANLGH MEDICAL CENTER NECARLSON COMPANIES MNCIGNA CORPORATION PACINERGY OHCISCO SYSTEMS, INC. CACITIGROUP NYCOLGATE-PALMOLIVE COMPANY NYCOMPUTER ASSOCIATES INTERNATIONAL, INC. NYCORNING INCORPORATED NYCROSS COUNTRY TRAVCORPS FLDAIMLERCHRYSLER CORPORATION MIDELOITTE & TOUCHE CTDEUTSCHE BANK NYDISCOVERY COMMUNICATIONS, INC. MDDUPONT DEEASTMAN KODAK COMPANY NYELI LILLY AND COMPANY INERNST & YOUNG LLP NYFANNIE MAE DCFIRST NATIONAL BANK * NEFIRST TENNESSEE NATIONAL CORPORATION TNFLEETBOSTON FINANCIAL MAFLEISHMAN HILLARD* MOFORD MOTOR COMPANY MIFREDDIE MAC* VAGANNETT CO., INC. VAGENENTECH CAGENERAL MILLS MNGENERAL MOTORS MIGLAXOSMITHKLINE NCHOFFMANN-LA ROCHE NJHOUSEHOLD INTERNATIONAL ILHP CAIBM CORPORATION NYINTEGRIS HEALTH, INC.* OKINTEL CORPORATION* CAJFK MEDICAL CENTER FLJOHNSON & JOHNSON NJJPMORGAN CHASE NYKPMG LLP NJKRAFT FOODS INC ILLINCOLN FINANCIAL GROUP PALUCENT TECHNOLOGIES INC NJMARRIOTT INTERNATIONAL, INC. DCMASTERCARD INTERNATIONAL * NYMBNA AMERICA BANK, N.A. DEMERCK & CO, INC. NJMERRILL LYNCH & CO., INC. NYMETLIFE NYMORGAN STANLEY NYMORRISON & FOERSTER LLP CANEW YORK LIFE INSURANCE COMPANY NYNORTHERN TRUST CORPORATION ILNORTHWESTERN MEMORIAL HEALTHCARE ILNOVANT HEALTH, INC. NCNOVARTIS PHARMACEUTICALS CORP. NJPATAGONIA, INC CAPEARSON EDUCATION NJPFIZER INC. NYTHE PHOENIX COMPANIES, INC. CTPRICEWATERHOUSECOOPERS LLP NYPROCTER & GAMBLE OHPRUDENTIAL FINANCIAL, INC. NJREPUBLIC BANCORP INC. MISAS INSTITUTE NCS. C. JOHNSON & SON, INC. WISCHERING-PLOUGH CORPORATION NJSUN MICROSYSTEMS, INC. CATEXAS INSTRUMENTS TXTIAA-CREF NYUSAA TXVERIZON WIRELESS* NJWACHOVIA CORPORATION NCWYETH NJ# posted by YASH KUMAR @ 11:05 PM 0 Comments Saturday, June 30, 2007 INSURANCE NEWSCAST5th Annual Report of the “INSURANCE INDUSTRY 100 MOST POWERFUL (NORTH AMERICA)” LIST01/09/06 -- " is pleased to announce our 5th annual list of the 100 most powerful people in the insurance industry (North America)" commented Walter B. Podgurski, CEO."We understand the subjectivity of this type of ranking, but stand by our five year premise. The people below are the 100 we think who have the most resources available to them and who would have the most ability (as a group) to successfully accomplish any goal or directive of the insurance industry. What better list of 100 people exists that could exert more collective influence over the insurance industry?"We have a simple methodology of measuring power. This is not a list of the largest 100 insurance company CEO's, or designed to recognize past achievement, longevity, or decide who is the most effective businessperson, or determine who has been the most innovative, or who is on the fast-track to the top. It is an attempt to express who controls the most insurance industry resources (people, capital, intellectual knowledge, technology, etc.) or has the most influence on those resources.Here is the methodology we chose to support our choices.The person with the most power is the person at the top of the organization.Power is diverse.Power controls or influences resources.Our list is weighted by current control of power.Each year we receive a certain amount of criticism and critique. In an industry as large and segmented as the insurance industry, 100 people is an incredibly small number of people to single out and recognize, ensuring at least some degree of debate.We publish this list to provoke thinking and discussion, and to provide a better perspective on our industry. It is a serious list, but it shouldn't be taken that seriously. We do take pride in our annual list and are honored to name these people to our list of the 100 most powerful.As we mention each year, it is important to note that no one asked to be on the list, and many might even be a bit uncomfortable to be on a "power" list. The term "power" in today's society can make people uncomfortable, with words like leadership or stewardship preferred. My personal belief is that the people on this list would be the first to give credit to others. Most likely they have worked hard and have great integrity and management skills, and the reason they have power is that they have been given that power by others because they are "trusted." I believe they believe that their power is a reflection of the confidence and faith others have in them, and their power is viewed by them as a guardianship, duty and charge to serve others.We received many nominations of people with great credentials that we were just unable to fit onto a list of only 100. The difficulty is easily understood by asking yourself who you would remove from the list below to add your favorite. We also have categorized the names to look at who was selected from a specific niche of the insurance industry. The names are listed alphabetically within each category. No effort was made to rank the list as #1, #3, etc.Let us know what you think ( - we will report back all the comments, good or bad, in a future edition of INSURANCE NEWSCAST.SincerelyWalt PodgurskiChairman & CEOwww.InsuranceBroadcasting.comINSURANCE NEWSCASTSPECIAL REPORT - "INSURANCE NEWSCAST 100 INSURANCE INDUSTRY MOST POWERFUL - NORTH AMERICA” LIST FOR 2005 - 2006SUPER-ICON STATUS RATINGS AGENCIES P&C COMPANIES LIFE COMPANIES HEALTH INSURANCE / HEALTHCARE RE-INSURANCE AGENT ORGANIZATIONS & DISTRIBUTION INSURANCE REGULATION / LEGISLATION INSURANCE BROKERAGE INSURANCE EDUCATION & RESEARCHINSURANCE LAW CONSULTING INDUSTRY ORGANIZATIONS INSURANCE ANALYSTS INSURANCE, CANADA INSURANCE TECHNOLOGY INSURANCE INDUSTRY VENDORS BANK INSURANCE MARKETING WORKSITE MARKETING NICHE LEGAL PLAN NICHE ONLINE DISTRIBUTION INSURANCE MEDIA STRUCTURED SETTLEMENTSDIRECT MARKETING RISK MODELINGINSURANCE NEWSCAST - STORIESINSURANCE NEWSCAST'S 2005 - 2006 LIST OF THE 100 MOST POWERFUL PEOPLE IN THE INSURANCE INDUSTRY - NORTH AMERICASUPER-ICON STATUSWarren E. Buffett, CEO, Berkshire Hathaway Inc. - 4th AppearanceMaurice R. Greenberg, C.V. Starr & Company, Inc. (C.V. Starr) - 5th AppearanceBack To TopRATINGS AGENCIESKeith M. Buckley, Managing Director, Fitch's North American Insurance Rating Group - - 5th AppearanceTed Collins, Managing Director, Moody's Investors Service - - 5th AppearanceSteven J. Dreyer, Managing Director, North American Practice Leader for Standard & Poor's Financial Services. - 5th AppearanceRobert L. Riegel, Managing Director, Life & Health Insurance Team, Financial Institutions Group, Moody's Investors Service - - 5th AppearanceArthur Snyder, President & Chairman, A.M. Best - 5th AppearanceMartin D. Weiss, Ph.D., Chairman Weiss Ratings, Inc.- - 5th AppearanceBack To TopP&C COMPANIESAxel Lehmann, CEO, Zurich North America - 1st AppearanceRamani Ayer, Chairman & Chief Executive Officer, The Hartford Financial Services Group, Inc. - 5th AppearanceJay S. Fishman, Chairman, President & Chief Executive Officer, The St. Paul Companies - 5th AppearanceEdmund F. Kelly, Chairman, President & Chief Executive Officer, Liberty Mutual Insurance - 5th AppearanceEd Liddy, Chairman and Chief Executive Officer, The Allstate Corporation - 5th AppearanceStephen W. Lilienthal, Chairman and Chief Executive Officer, CNA Insurance - 3rd AppearanceGlen Renwick,, President & CEO, Progressive - 5th AppearanceEdward B. Rust Jr., Chairman and CEO, State Farm Insurance Companies - 5th AppearanceMartin J. Sullivan, President And Chief Executive, AIG - 1st AppearanceMark R. Thresher, President and Chief Operating Officer, Nationwide Financial - 3rd AppearanceBack To TopLIFE COMPANIESHerbert M. Allison, Jr., Chairman, President, and Chief Executive Officer, TIAA-CREF - 3rd AppearanceRobert H. Benmosche, Chairman and Chief Executive Officer MetLife - 5th AppearanceDonald J. Shepard, Chairman of the Executive Board of AEGON N.V., Chairman of AEGON USA - 4th AppearanceSy Sternberg, Chairman Of The Board, President, & Chief Executive Officer, New York Life Insurance Company - 5th AppearanceArthur Ryan, Chairman & Chief Executive Officer, Prudential Financial, Inc. - 5th AppearanceEd Zore, President & CEO, Northwestern Mutual Insurance - 5th AppearanceBack To TopHEALTH INSURANCE / HEALTHCARELarry C. Glasscock, Chairman, President and Chief Executive Officer, Anthem, Inc. - 3rd AppearanceH. Edward Hanway, Chairman & Chief Executive Officer, CIGNA Corporation - 5th AppearanceKaren Ignagni, President & CEO, AAHP-HIAA - 5th AppearanceEvelyn F. Ireland, CAE, Executive Director, National Association Of Dental Plans - 1st AppearanceDavid A. Jones, Chairman of the Board & Co-Founder, Humana Inc. - 5th AppearanceWilliam W. McGuire, M.D., Chairman & Chief Executive Officer, UnitedHealth Group - 5th AppearanceJohn W. Rowe, M.D., Chairman, President and Chief Executive Officer, Aetna Inc.- 5th AppearanceScott P. Serota, President & Chief Executive Officer, Blue Cross and Blue Shield Association - 5th AppearanceThomas R. Watjen, President and Chief Executive Officer, UnumProvident Corporation - 3rd AppearanceBack To TopRE-INSURANCEJacques Aigrain, Chief Executive Officer, Swiss Re - 1st AppearanceDr. jur. Nikolaus von Bomhard, Chairman, Munich Re Group - 3rd AppearanceFranklin W. Nutter, President, Reinsurance Association of America (RAA) - 5th AppearanceBrian O'Hara, President & Chief Executive Officer, XL CAPITAL - 2nd AppearanceRon Pressman, Chairman, President & CEO, GE Insurance Solutions - 4th AppearanceBack To TopAGENT ORGANIZATIONS & DISTRIBUTIONJessica M. Bibliowicz, President and Chief Executive Officer, National Financial Partners - 1st AppearanceLeonard Brevik, Executive Vice President & CEO, National Association Of Professional Insurance Agents (PIA) - 2nd AppearanceKen A. Crerar, President, The Council of Insurance Agents & Brokers Officers (CIAB) - 2nd AppearanceBernd G. Heinze, Esquire, Executive Director, American Association of Managing General Agents (AAMGA) - 5th AppearanceFred H. Jonske, President and Chief Executive Officer, M Financial Group - 5th AppearanceKevin Merz, 2005 Chairman, National Association of Independent Life Brokerage Agencies, (NAILBA) - 2nd AppearanceStephen O. Rothschild, CLU, ChFC, President, Million Dollar Round Table (MDRT), - 1st AppearanceRobert A. Rusbuldt, Chief Executive Officer, Independent Insurance Agents & Brokers of America, Inc. (IIABA). - 5th AppearanceJanet Trautwein, Executive Vice President and CEO, National Association of Health Underwriters (NAHU) - 1st AppearanceDavid F. Woods, CLU, ChFC, Chief Executive Officer , The National Association of Insurance and Financial Advisors (NAIFA) - 4th AppearanceBack To TopINSURANCE REGULATION / LEGISLATIONAlessandro Iuppa, NAIC President, Maine Insurance Superintendent - 1st AppearanceSusan Nolan, Executive Director, The National Conference of Insurance Legislators (NCOIL) - 2nd appearanceCatherine (Cathy) J. Weatherford, Executive Vice President and CEO, The National Association of Insurance Commissioners (NAIC) - 3rd AppearanceBack To TopINSURANCE BROKERAGEJ. Hyatt Brown, CPCU, CLU, Chairman, President, & Chief Executive Officer, Brown & Brown - 4th AppearanceMichael Cherkasky, Chief Executive Officer, Marsh Inc. - 2nd AppearanceMartin P. Hughes, Chairman and Chief Executive Officer, HUB International Limited - 4th AppearancePaul Karon, President and COO, Benfield Inc. (US Division) - 1st AppearanceJoe Plumeri, Chairman & Chief Executive Officer, Willis Group Holdings Limited - 5th AppearancePatrick G. Ryan, Chairman & Chief Executive Officer, Aon Corporation - 5th AppearanceDave Zuercher, Chairman & Head of International and Insurance Services, Acordia Inc. - 1st AppearanceBack To TopINSURANCE EDUCATION & RESEARCHLaurence Barton, Ph.D., President & CEO, The American College - 3rd AppearanceJoseph M. Belth, Ph.D., professor emeritus of insurance at the Kelley School of Business at Indiana University (Bloomington),Thomas P. Donaldson, FLMI, CLU President & Chief Executive Officer LOMA - 5th AppearanceGordon Stewart - President - Insurance Information Institute - 1st AppearanceWilliam T. Hold, Ph.D., CIC, CPCU, CLU, President, The National Alliance For Insurance Education And Research - 3rd AppearanceRobert A. Kerzner, President & Chief Executive Officer LIMRA International - 2nd AppearanceJames R. Marks, CAE, CPCU, AIM, Executive Vice President, CPCU Society - 5th AppearanceBack To TopINSURANCE LAWBrian Casey, Partner, Lord, Bissell & Brook - 4th AppearanceThomas A. Player, Partner, Morris, Manning & Martin, LLP - 4th AppearanceBack To TopCONSULTINGPatricia Guinn, Managing Director of Tillinghast - Towers Perrin and Towers Perrin Reinsurance - 5th AppearanceJohn Haley, President and Chief Executive Officer, Watson Wyatt Worldwide, Inc. - 1st AppearanceBack To TopINDUSTRY ORGANIZATIONSBrian K. Atchinson, Executive Director, IMSA - - 5th AppearanceRobert M. Beuerlein, President, Society of Actuaries - 1st AppearanceCharles M. Chamness, President, National Association of Mutual Insurance Companies (NAMIC) - 3rd AppearanceErnst N. Csiszar, President & CEO, President & CEO, Property Casualty Insurers Association of America - 2nd AppearanceGary Hicks, Executive Director, Aviation Insurance Association - 2nd AppearanceDennis Jay, Executive Director, Coalition Against Insurance Fraud - 1st AppearanceFrank Keating, President and CEO, American Council of Life Insurers (ACLI) - 4th AppearanceJoseph P. Pomilia, Executive Director, Insurance Accounting & Systems Association, Inc. (IASA) - 3rd AppearanceJack Ramirez, President, CEO National Association of Independent Insurers (NAII) - 5th AppearanceGovernor Marc Racicot, President, American Insurance Association (AIA) - 1st AppearanceDavid F. Woods, CLU, ChFC, President, The Life and Health Insurance Foundation for Education (LIFE) - 1st AppearanceBack To TopINSURANCE ANALYSTSVincent J. Dowling, Insurance Stock Analyst, Dowling & Partners Securities - 5th AppearanceBack To TopINSURANCE, CANADAStanley I. Griffin, President and C.E.O. of the Insurance Bureau of Canada (IBC) - 5th AppearanceDominic D'Alessandro, President and Chief Executive Officer, Manulife - 5th AppearanceRaymond L. McFeetors, President & Chief Executive Officer, Great-West Lifeco Inc. (Lifeco) - 1st AppearanceBack To TopINSURANCE TECHNOLOGYMary Roth, Executive Director, Risk and Insurance Management Society (RIMS) - 2nd AppearanceJim Kellner, Chairman and CEO, Applied Systems - 5th AppearanceGregory A. Maciag, President & CEO, ACORD - 5th AppearanceClare DeNicola, President & CEO, IVANS Inc. - 2nd AppearanceBack To TopINSURANCE INDUSTRY VENDORSJay F. Cook CEO & Chief Visioneer, MIB Group, Inc. - 5th AppearanceFrank J. Coyne, Chairman, President, & CEO, Insurance Services Office, Inc (ISO) - 4th AppearanceBack To TopBANK INSURANCE MARKETINGBeth L. Climo, Executive Director, ABA Securities Association, American Bankers Insurance Association (ABIA) - 5th AppearanceLarry Marsh, President & CEO, Marsh·Berry Companies - 5th AppearanceBack To TopWORKSITE MARKETING NICHEDaniel Paul Amos, Chairman & Chief Executive Officer, AFLAC Incorporated - 5th AppearanceBack To TopLEGAL PLAN NICHEAlec Schwartz, Executive Director, American Prepaid Legal Services Institute - 2nd appearanceBack To TopONLINE DISTRIBUTIONRobert S. Bland, Chairman and Founder, -2nd AppearanceBack To TopINSURANCE MEDIAAndrew L. Goodenough, President & CEO, Highline Media, LLC. - 1st AppearanceBack To TopSTRUCTURED SETTLEMENTS & VIATICALSMalcolm Deener, President, National Structured Settlements Trade Association - 2nd ApperanceDoug Head, Executive Director, Viatical and Life Settlement Association of America (VLSAA) - 2nd AppearanceBack To TopDIRECT MARKETINGDonald Jackson, Chairman, JCG Group, Ltd. - 3rd AppearanceBack To TopRISK MODELINGHemant H. Shah, Co-Founder, President & CEO, RMS. - 3rd AppearanceAmerican Express Co.This family-friendly company allows employees to take advantage of flextime, compressed weeks, telecommuting and job-sharing. To ensure fairness, it provides managers with detailed selection criteria, user guides and a sample case study of successful flexible work arrangements so they can assess whether a flexible schedule is the right fit ...Read More >>Bank of AmericaThe company subsidizes 65% of the cost of care at its three on-site day-care centers at headquarters and in Jacksonville, FL. Employees in ten cities can take advantage of the Snowy Day backup-care program when nasty weather keeps their kids out of school, and staffers who earn less than ...Read More >>Capital One Financial Corp.Expectant parents got a big break in 2005, with more time off. New moms now have 16 weeks of job-guaranteed leave (up from 12), with eight weeks fully paid (up from six). New dads and adoptive and foster parents get 12 weeks off (two paid for fathers and ...Read More >>Credit Suisse Securities LLCNew moms receive 20 job-guaranteed weeks off as maternity leave, with 12 weeks fully paid. Fathers and adoptive parents also get 20 weeks off, with up to six of them paid. There's a $4,000 reimbursement for those who adopt. Staffers with the firm for five ...Read More >>Deloitte & Touche USA LLPWhen an emergency crops up, parents can send their children to one of 69 backup-care centers across the country. If they need alternative arrangements, the company offers reimbursement for child care provided outside these centers. ...Read More >>Deutsche BankA women's network was formally relaunched in 2005 as Women on Wall Street. Its goal: to address the issues female employees care about most and help them advance in their careers. Networking opportunities, business lunches, conferences and workshops are sponsored by the network. Approximately 15% ...Read More >>Ernst & Young LLPThe company's leave program gives employees ample time to adjust to a new child, retirement or a career hiatus. New moms with one year of service receive eight weeks of maternity leave beyond the 12 weeks offered by FMLA, six of which are fully paid; ...Read More >>Fannie MaeParents considering adoption can use the firm's resource and referral services to investigate their options. If they decide to adopt, they can take four paid weeks off to spend with their child and have $10,000 of their costs reimbursed. ...Read More >>First Horizon National Corp.With 609 U.S. sites, this large financial firm relies on flexible schedules to meet its employees' work/life needs, such as four-day workweeks, job-shares and reduced "prime-time" schedules of 20 to 32 hours a week, with full benefits. In 2005, 46% of employees flexed their hours ...Read More >>First National BankHelping employees stay fit is a priority at First National. An on-site fitness center at headquarters doubled in size this past year, and class offerings increased to 20 a week (up from five). ...Goldman, Sachs & Co.This prestigious investment bank believes its greatest asset is its employees, so it allows them to work part-time, job-share and telecommute. To make the process easier, employees can submit their requests for flexible arrangements online to managers. ...Read More >>Grant Thornton LLPWith employees spread out over 50 locations, a single firmwide child-care solution wasn't possible. Still, technology (laptops, BlackBerrys and videoconferencing) and flexible arrangements allow parents to work from home if their regularly scheduled child care falls through or their child is home sick. ...Read More >>HSBC-North AmericaThis leading financial services firm, where more than half the employees are women, aims to help its working moms manage their professional and personal lives by offering a spectrum of flex programs to meet their needs, from telecommuting to job-sharing. Employees need to work only ...Read More >>JPMorgan ChaseThis leading global financial services firm allows employees to telecommute, job-share, flex hours or work compressed schedules. Part-time employees are eligible for health benefits, scholarships for their children and tuition reimbursement. ...Read More >>KPMG LLPThe firm is among the minority of U.S. companies offering backup child care. Several KPMG offices lease space in or near child-care facilities, where they have a contract for services. ...Read More >>Morgan StanleyEmployees are covered in the event of a child-care emergency, with 80 free hours of in-home backup care and space at 15 national backup facilities. Staffers can also locate full-time care through the firm's resource and referral service. A brand-new parenting network and a wealth of seminars help moms ...Read More >>Northern Trust Corp.Women represent 29% of executive VPs and above and 49% of managers. Half of all mentees in the Executive Networking and Mentoring program in 2005 were female. A leadership forum also regularly provides networking opportunities for women at the VP level and above. ...Read More >>PNC Financial Services Group Inc.From birth to college, employee children have access to programs designed just for them. Infants and toddlers whose mothers enroll them in the Great Start program receive eight consecutive weeks of deeply discounted ($6 a day) child care, while children up to age 13 receive ...Read More >>PricewaterhouseCoopers LLPTo help women be great moms and high-performing professionals, this global accounting firm offers a wide variety of flexible work options that employees can easily apply for online. There's also a 24/7 hotline for those who have questions. Thanks to a new Flexible Fridays policy, ...Read More >>Principal Financial GroupFlexibility is a way of life at this company, where more than half of all employees took advantage of flextime last year. Many who chose to work from home--more than 1,800 employees--were provided with computers, office equipment and software. ...
posted by uthan at 10:35 AM 0 Comments Sunday, July 1, 2007insurance Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a premium. Insurer, in economics, is the company that sells the insurance. Insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.Contents[hide]1 Principles of insurance2 Indemnification3 When is a Policy Really Insurance?3.1 Does the Contract Contain Adequate Risk Transfer?3.2 Is There a Brightline Test?3.3 "Safe Harbor Exemptions"3.4 Risk Limiting Features4 Insurer’s business model5 Gambling analogy6 History of insurance7 Types of insurance8 Types of insurance companies9 Life insurance and saving10 Size of global insurance industry11 Financial viability of insurance companies12 Controversies12.1 Insurance insulates too much12.2 Closed community self-insurance12.3 Complexity of insurance policy contracts12.4 Redlining12.5 Health insurance12.6 Dental insurance12.7 Insurance patents12.8 The insurance industry and rent seeking12.9 Criticism of insurance companies13 Glossary14 Quote15 References16 See also16.1 Lists17 External links//
[edit] Principles of insuranceCommercially insurable risks typically share seven common characteristics. [1]A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004. The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyds of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.Definite Loss. The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.Accidental Loss. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.Affordable Premium. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards (See FAS 113 for example), the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.Calculable Loss. There are two elements that must be at least estimatable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.Limited risk of catastrophically large losses. The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5%. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurers appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.
[edit] IndemnificationAn entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance 'policy'. Generally, an insurance contract includes, at a minimum, the following elements: the parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss events covered in the policy.When insured parties experience a loss for a specified peril, the coverage entitles the policyholder to make a 'claim' against the insurer for the covered amount of loss as specified by the policy. The fee paid by the insured to the insurer for assuming the risk is called the 'premium'. Insurance premiums from many insureds are used to fund accounts reserved for later payment of claims—in theory for a relatively few claimants—and for overhead costs. So long as an insurer maintains adequate funds set aside for anticipated losses (i.e., reserves), the remaining margin is an insurer's profit.
[edit] When is a Policy Really Insurance?“Insurance provides indemnification against loss or liability from specified events and circumstances that may occur or be discovered during a specified period.”— FASB Statement of Financial Accounting Standards No. 113, "Accounting for Reinsurance of Short-Duration and Long-Duration Contracts" December 1992An operational definition of insurance is that it isthe benefit provided by a particular kind of indemnity contract, called an insurance policy;that is issued by one of several kinds of legal entities (stock company, mutual company, reciprocal, or Lloyds organization, for example), any of which may be called an insurer;in which the insurer promises to pay on behalf of or to indemnify another party, called a policyholder or insured;that protects the insured against loss caused by those perils subject to the indemnity in exchange for consideration known as an insurance premium.In recent years this kind of operational definition proved inadequate as a result of contracts that had the form but not the substance of insurance. The essence of insurance is the transfer of risk from the insured to one or more insurers. How much risk a contract actually transfers proved to be at the heart of the controversy.This issue arose most clearly in reinsurance, where the use of Financial Reinsurance to reengineer insurer balance sheets under US GAAP became fashionable during the 1980s. The accounting profession raised serious concerns about the use of reinsurance in which little if any actual risk was transferred, and went on to address the issue in FAS 113, cited above. While on its face, FAS 113 is limited to accounting for reinsurance transactions, the guidance it contains is generally conceded to be equally applicable to US GAAP accounting for insurance transactions executed by commericial enterprises.
[edit] Does the Contract Contain Adequate Risk Transfer?FAS 113 contains two tests, called the '9a and 9b tests,' that collectively require that a contract create a reasonable chance of a significant loss to the underwriter for it to be considered insurance.9. Indemnification of the ceding enterprise against loss or liability relating to insurance risk in reinsurance of short-duration contracts requires both of the following, unless the condition in paragraph 11 is met:a. The reinsurer assumes significant insurance risk under the reinsured portions of the underlying insurance contracts.b. It is reasonably possible that the reinsurer may realize a significant loss from the transaction.Paragraph 10 of FAS 113 makes clear that the 9a and 9b tests are based on comparing the present value of all costs to the PV of all income streams. FAS gives no guidance on the choice of a discount rate on which to base such a calculation, other than to say that all outcomes tested should use the same rate.Statement of Statutory Accounting Principles ("SSAP") 62, issued by the National Association of Insurance Commissioners, applies to so-called 'statutory accounting' - the accounting for insurance enterprises to conform with regulation. Paragraph 12 of SSAP 62 is nearly identical to the FAS 113 test, while paragraph 14, which is otherwise very similar to paragraph 10 of FAS 113, additionally contains a justification for the use of a single fixed rate for discounting purposes. The choice of an "reasonable and appropriate" discount rate is left as a matter of judgement.
[edit] Is There a Brightline Test?Neither FAS 113 nor SAP 62 defines the terms "reasonable" or "significant." Ideally, one would like to be able to substitute values for both terms. It would be much simpler if one could apply a test of an X% chance of a loss of Y% or greater. Such tests have been proposed, including one famously attributed to an SEC official who is said to have opined in an after lunch talk that a 10% chance of a 10% loss was sufficient to establish both reasonableness and significance. Indeed, many insurers and reinsurers still apply this "10/10" test as a benchmark for risk transfer testing.It should be obvious that an attempt to use any numerical rule such as the 10/10 test will quickly run into problems. Suppose a contract has a 1% chance of a 10,000% loss? It should be reasonably self-evident that such a contract is insurance, but it fails one half of the 10/10 test. It does not appear that any "brightline" test of reasonableness nor signifance can be constructed.Excess of loss contracts, like those commonly used for umbrella and general liability insurance, or to insure against property losses, will typically have a low ratio of premium paid to maximum loss recoverable. This ratio (expressed as a percentage), commonly called the "rate on line" for historical reasons related to underwriting practices at Lloyds of London, will typically be low for contracts that contain reasonably self-evident risk transfer. As the ratio increases to approximate the present value of the limit of coverage, self-evidence decreases and disappears.Contracts with low rates on line may survive modest features that limit the amount of risk transferred. As rates on line increase, such risk limiting features become increasingly important.
[edit] "Safe Harbor Exemptions"The analysis of reasonableness and signifiance is an estimate of the probability of different gain or loss outcomes under different loss scenarios. It takes time and resources to perform the analysis, which constitutes a burden without value where risk transfer is reasonably self-evident.Guidance exists for insurers and reinsurers, whose CEO's and CFO's attest annually as to the reinsurance agreements their firms undertake. The American Academy of Actuaries, for instance, identifies three categories of contract as outside the requirement of attestation:Inactive contracts. If there are no premiums due nor losses payable, and the insurer is not taking any credit for the reinsurance, determining risk transfer is irrelevant.Pre-1994 contracts. The attestation requirement only applies to contracts that were entered into, renewed or amended on or after 1 January 1994. Prior contracts need not be analyzed.Where risk transfer is "reasonably self-evident.""Risk transfer is reasonably self-evident in most traditional per-risk or per-occurrence excess of loss reinsurance contracts. For these contracts, a predetermined amount of premium is paid and the reinsurer assumes nearly all or all of the potential variablility in the underlying losses, and it is evident from reading the basic terms of the contract that the reinsurer can incur a significant loss. In many cases, there is no aggregate limit on the reinsurer's loss. The existence of certain experience-based contract terms, such as experience accounts, profit commissions, and additional premiums, generally reduce the amount of risk transfer and make it less likely that risk transfer is reaonably self-evident."- "Reinsurance Attestation Supplement 20-1: Risk Transfer Testing Practice Note," American Academy of Actuaries, November 2005. ...
[edit] Risk Limiting FeaturesAn insurance policy should not contain provisions that allow one side or the other to unilaterally void the contract in exchange for benefit. Provisions that void the contract for failure to perform or for fraud or material misrepresentation are ordinary and acceptable.The policy should have a term of not more than about three years. This is not a hard and fast rule. Contracts of over five years duration are classified as ‘long-term,’ which can impact the accounting treatment, and can obviously introduce the possibility that over the entire term of the contract, no actual risk will transfer. The coverage provided by the contract need not cease at the end of the term (e.g., the contract can cover occurrences as opposed to claims made or claims paid).The contract should be considered to include any other agreements, written or oral, that confer rights, create obligations, or create benefits on the part of either or both parties. Ideally, the contract should contain an ‘Entire Agreement’ clause that assures there are no undisclosed written or oral side agreements that confer rights, create obligations, or create benefits on the part of either or both parties. If such rights, obligations or benefits exist, they must be factored into the tests of reasonableness and significance.The contract should not contain arbitrary limitations on timing of payments. Provisions that assure both parties of time to properly present and consider claims are acceptable provided they are commercially reasonable and customary.Provisions that expressly create actual or notional accounts that accrue actual or notional interest suggest that the contract contains, in fact, a deposit.Provisions for additional or return premium do not, in and of themselves, render a contract something other than insurance. However, it should be unlikely that either a return or additional premium provision be triggered, and neither party should have discretion regarding the timing of such triggering.All of the events that would give rise to claims under the contract cannot have materialized prior to the inception of the contract. If this "all events" test is not met, then the contract is considered to be a retroactive contract, for which the accounting treatment becomes complex.
[edit] Insurer’s business modelProfit = earned premium + investment income - incurred loss - underwriting expenses.Insurers make money in two ways: (1) through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insureds.The most difficult aspect of the insurance business is the underwriting of policies. Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them. Data is analyzed to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure. Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. Of course, from the insurer's perspective, some policies are winners (i.e., the insurer pays out less in claims and expenses than it receives in premiums and investment income) and some are losers (i.e., the insurer pays out more in claims and expenses than it receives in premiums and investment income).An insurer's underwriting performance is measured in its combined ratio. The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net premium written) to determine the company's combined ratio. The combined ratio is a reflection of the company's overall underwriting profitability. A combined ratio of less than 100 percent indicates profitability, while anything over 100 indicates a loss.Insurance companies also earn investment profits on “float”. “Float” or available reserve is the amount of money, at hand at any given moment, that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out.In the United States, the underwriting loss of property and casualty insurance companies was $142.3 billion in the five years ending 2003. But overall profit for the same period was $68.4 billion, as the result of float. Some insurance industry insiders, most notably Hank Greenberg, do not believe that it is forever possible to sustain a profit from float without an underwriting profit as well, but this opinion is not universally held. Naturally, the “float” method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or "insurance" cycle. [2]Property and casualty insurers currently make the most money from their auto insurance line of business. Generally better statistics are available on auto losses and underwriting on this line of business has benefited greatly from advances in computing. Additionally, property losses in the US, due to natural catastrophes, have exacerbated this trend.Finally, claims and loss handling is the materialized utility of insurance. In managing the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, insurance fraud is a major business risk that must be managed and overcome.
[edit] Gambling analogyBoth gambling and insurance transfer risk and reward. The similarity ends there.Gambling transactions offer the possibility of either a loss or a gain. Gambling creates losers and winners. Insurance transactions do not present the possibility of gain. Insurance offers financial support sufficient to replace loss, not to create pure gain.Gamblers can continue spending, buying more risk than they can afford to pay for. Insurance buyers can only spend up to the limit of what carriers will accept to insure; their loss is limited to the amount of the premium.Gamblers create a risk that may have no link whatsoever to their personal and family situation. Insurance buyers must have an insurable interest in the insurance transaction. Insurance transactions are built around an exogenous relationship, usually economic or familial.Gamblers, by creating new risk transfer without regard to existing risk, are risk seekers. Insurance buyers are risk avoiders, creating risk transfer in terms of their need to reduce exposure to large losses.Gambling or gaming is designed at the start so that the odds are not affected by the players (their conduct or behavior). However, to obtain certain types of insurance, such as fire insurance, policyholders can be required to conduct risk mitigation practices, such as installing sprinklers and using fireproof building materials to reduce the odds of loss to fire. In addition, after a proven loss, insurers specialize in providing rehabilitation to minimize the total loss.Historically, gambling has been considered an uninsurable risk. Recent developments, however, have led to the invention and patenting of new types of insurance to protect against gambling losses. An example is United States Patent 6,869,362, "Method and apparatus for providing insurance policies for gambling losses."Insurance, the avoiding, mitigating and transferring of risk, creates greater predictability for individuals and organizations. Insurance enables risk to be handled intelligently to achieve stability and growth.
[edit] History of insuranceIn some sense we can say that insurance appears simultaneously with the appearance of human society. We know of two types of economies in human societies: money economies (with markets, money, financial instruments and so on) and non-money or natural economies (without money, markets, financial instruments and so on). The second type is a more ancient form than the first. In such an economy and community, we can see insurance in the form of people helping each other. For example, if a house burns down, the members of the community help build a new one. Should the same thing happen to one's neighbour, the other neighbours must help. Otherwise, neighbours will not receive help in the future. This type of insurance has survived to the present day in some countries where modern money economy with its financial instruments is not widespread (for example countries in the territory of the former Soviet Union).Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in which insurance is part of the financial sphere), early methods of transferring or distributing risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. Chinese merchants traveling treacherous river rapids would redistribute their wares across many vessels to limit the loss due to any single vessel's capsizing. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.Achaemenian monarchs were the first to insure their people and made it official by registering the insuring process in governmental notary offices. The insurance tradition was performed each year in Norouz (beginning of the Iranian New Year); the heads of different ethnic groups as well as others willing to take part, presented gifts to the monarch. The most important gift was presented during a special ceremony. When a gift was worth more than 10,000 Derrik (Achaemenian gold coin weighing 8.35-8.42) the issue was registered in a special office. This was advantageous to those who presented such special gifts. For others, the presents were fairly assessed by the confidants of the court. Then the assessment was registered in special offices.The purpose of registering was that whenever the person who presented the gift registered by the court was in trouble, the monarch and the court would help him. Jahez, a historian and writer, writes in one of his books on ancient Iran: "[W]henever the owner of the present is in trouble or wants to construct a building, set up a feast, have his children married, etc. the one in charge of this in the court would check the registration. If the registered amount exceeded 10,000 Derrik, he or she would receive an amount of twice as much."A thousand years later, the inhabitants of Rhodes invented the concept of the 'general average'. Merchants whose goods were being shipped together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage.The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called "benevolent societies" which cared for the families and paid funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late 17th century, "friendly societies" existed in England, in which people donated amounts of money to a general sum that could be used for emergencies.Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of contracts) were invented in Genoa in the 14th century, as were insurance pools backed by pledges of landed estates. These new insurance contracts allowed insurance to be separated from investment, a separation of roles that first proved useful in marine insurance. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed.Toward the end of the seventeenth century, London's growing importance as a center for trade increased demand for marine insurance. In the late 1680s, Mr. Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is not an insurance company) for marine and other specialist types of insurance, but it works rather differently than the more familiar kinds of insurance.Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office to insure buildings. In 1680, he established England's first fire insurance company, "The Fire Office," to insure brick and frame homes.The first insurance company in the United States underwrote fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732.Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire in the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin's company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses.In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual state insurance departments. Whereas insurance markets have become centralized nationally and internationally, state insurance commissioners operate individually, though at times in concert through a national insurance commissioners' organization. In recent years, some have called for a dual state and federal regulatory system for insurance similar to that which oversees state banks and national banks.In the state of New York, which has unique laws in keeping with its stature as a global business center, former New York Attorney General Eliot Spitzer was in a unique position to grapple with major national insurance brokerages. Spitzer alleged that Marsh & McLennan steered business to insurance carriers based on the amount of contingent commissions that could be extracted from carriers, rather than basing decisions on whether carriers had the best deals for clients. Several of the largest commercial insurance brokerages have since stopped accepting contingent commissions and have adopted new business models.
[edit] Types of insuranceAny risk that can be quantified can potentially be insured. Specific kinds of risk that may give rise to claims are known as "perils". An insurance policy will set out in detail which perils are covered by the policy and which are not.Below is a (non-exhaustive) list of the many different types of insurance that exist. A single policy may cover risks in one or more of the categories set forth below. For example, auto insurance would typically cover both property risk (covering the risk of theft or damage to the car) and liability risk (covering legal claims from causing an accident). A homeowner's insurance policy in the U.S. typically includes property insurance covering damage to the home and the owner's belongings, liability insurance covering certain legal claims against the owner, and even a small amount of health insurance for medical expenses of guests who are injured on the owner's property.Automobile insurance, known in the UK as motor insurance, is probably the most common form of insurance and may cover both legal liability claims against the driver and loss of or damage to the insured's vehicle itself. Throughout most of the United States an auto insurance policy is required to legally operate a motor vehicle on public roads. In some jurisdictions, bodily injury compensation for automobile accident victims has been changed to a no-fault system, which reduces or eliminates the ability to sue for compensation but provides automatic eligibility for benefits.Aviation insurance insures against hull, spares, deductible, hull war and liability risks.Boiler insurance (also known as boiler and machinery insurance or equipment breakdown insurance) insures against accidental physical damage to equipment or machinery.Builder's risk insurance insures against the risk of physical loss or damage to property during construction. Builder's risk insurance is typically written on an "all risk" basis covering damage due to any cause (including the negligence of the insured) not otherwise expressly excluded.Business insurance can be any kind of insurance that protects businesses against risks. Some principal subtypes of business insurance are (a) the various kinds of professional liability insurance, also called professional indemnity insurance, which are discussed below under that name; and (b) the businessowners policy (BOP), which bundles into one policy many of the kinds of coverage that a businessowner needs, in a way analogous to how homeowners insurance bundles the coverages that a homeowner needs.[3]Casualty insurance insures against accidents, not necessarily tied to any specific property.Credit insurance repays some or all of a loan back when certain things happen to the borrower such as unemployment, disability, or death. Mortgage insurance (which see below) is a form of credit insurance, although the name credit insurance more often is used to refer to policies that cover other kinds of debt.Crime insurance insures the policyholder against losses arising from the criminal acts of third parties. For example, a company can obtain crime insurance to cover losses arising from theft or embezzlement.Crop insurance "Farmers use crop insurance to reduce or manage various risks associated with growing crops. Such risks include crop loss or damage caused by weather, hail, drought, frost damage, insects, or disease, for instance."[4]Defense Base Act Workers' compensation or DBA Insurance insurance provides coverage for civilian workers hired by the government to perform contracts outside the US and Canada. DBA is required for all US citizens, US residents, US Green Card holders, and all employees or subcontractors hired on overseas government contracts. Depending on the country, Foreign Nationals must also be covered under DBA. This coverage typically includes expenses related to medical treatment and loss of wages, as well as disability and death benefits.Directors and officers liability insurance protects an organization (usually a corporation) from costs associated with litigation resulting from mistakes incurred by directors and officers for which they are liable. In the industry, it is usually called "D&O" for short.Disability insurance policies provide financial support in the event the policyholder is unable to work because of disabling illness or injury. It provides monthly support to help pay such obligations as mortgages and credit cards.Total permanent disability insurance insurance provides benefits when a person is permanently disabled and can no longer work in their profession, often taken as an adjunct to life insurance.Errors and omissions insurance: See "Professional liability insurance" under "Liability insurance".Expatriate insurance provides individuals and organizations operating outside of their home country with protection for automobiles, property, health, liability and business pursuits.Financial loss insurance protects individuals and companies against various financial risks. For example, a business might purchase cover to protect it from loss of sales if a fire in a factory prevented it from carrying out its business for a time. Insurance might also cover the failure of a creditor to pay money it owes to the insured. This type of insurance is frequently referred to as "business interruption insurance." Fidelity bonds and surety bonds are included in this category, although these products provide a benefit to a third party (the "obligee") in the event the insured party (usually referred to as the "obligor") fails to perform its obligations under a contract with the obligee.Fire insurance: See "Property insurance".Hazard insurance: See "Property insurance".Health insurance policies will often cover the cost of private medical treatments if the National Health Service in the UK (NHS) or other publicly-funded health programs do not pay for them. It will often result in quicker health care where better facilities are available.Home insurance or homeowners insurance: See "Property insurance".Liability insurance is a very broad superset that covers legal claims against the insured. Many types of insurance include an aspect of liability coverage. For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives, health, or property. The protection offered by a liability insurance policy is twofold: a legal defense in the event of a lawsuit commenced against the policyholder and indemnification (payment on behalf of the insured) with respect to a settlement or court verdict. Liability policies typically cover only the negligence of the insured, and will not apply to results of willful or intentional acts by the insured.Environmental liability insurance protects the insured from bodily injury, property damage and cleanup costs as a result of the dispersal, release or escape of pollutants.Professional liability insurance, also called professional indemnity insurance, protects professional practitioners such as architects, lawyers, doctors, and accountants against potential negligence claims made by their patients/clients. Professional liability insurance may take on different names depending on the profession. For example, professional liability insurance in reference to the medical profession may be called malpractice insurance. Notaries public may take out errors and omissions insurance (E&O). Other potential E&O policyholders include, for example, real estate brokers, home inspectors, appraisers, and website developers.Life insurance provides a monetary benefit to a decedent's family or other designated beneficiary, and may specifically provide for burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity.Annuities provide a stream of payments and are generally classified as insurance because they are issued by insurance companies and regulated as insurance and require the same kinds of actuarial and investment management expertise that life insurance requires. Annuities and pensions that pay a benefit for life are sometimes regarded as insurance against the possibility that a retiree will outlive his or her financial resources. In that sense, they are the complement of life insurance and, from an underwriting perspective, are the mirror image of life insurance.Locked funds insurance is a little-known hybrid insurance policy jointly issued by governments and banks. It is used to protect public funds from tamper by unauthorised parties. In special cases, a government may authorise its use in protecting semi-private funds which are liable to tamper. The terms of this type of insurance are usually very strict. Therefore it is used only in extreme cases where maximum security of funds is required.Marine insurance and marine cargo insurance cover the loss or damage of ships at sea or on inland waterways, and of the cargo that may be on them. When the owner of the cargo and the carrier are separate corporations, marine cargo insurance typically compensates the owner of cargo for losses sustained from fire, shipwreck, etc., but excludes losses that can be recovered from the carrier or the carrier's insurance. Many marine insurance underwriters will include "time element" coverage in such policies, which extends the indemnity to cover loss of profit and other business expenses attributable to the delay caused by a covered loss.Mortgage insurance insures the lender against default by the borrower.National Insurance is the UK's version of social insurance (which see below).No-fault insurance is a type of insurance policy (typically automobile insurance) where insureds are indemnified by their own insurer regardless of fault in the incident.Nuclear incident insurance covers damages resulting from an incident involving radioactivive materials and is generally arranged at the national level. (For the United States, see the Price-Anderson Nuclear Industries Indemnity Act.)Pet insurance insures pets against accidents and illnesses - some companies cover routine/wellness care and burial, as well.Political risk insurance can be taken out by businesses with operations in countries in which there is a risk that revolution or other political conditions will result in a loss.Pollution Insurance. A first-party coverage for contamination of insured property either by external or on-site sources. Coverage for liability to third parties arising from contamination of air, water, or land due to the sudden and accidental release of hazardous materials from the insured site. The policy usually covers the costs of cleanup and may include coverage for releases from underground storage tanks. Intentional acts are specifically excludedProperty insurance provides protection against risks to property, such as fire, theft or weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, inland marine insurance or boiler insurance.Purchase insurance is aimed at providing protection on the products people purchase. Purchase insurance can cover individual purchase protection, warranties, guarantees, care plans and even mobile phone insurance. Such insurance is normally very limited in the scope of problems that are covered by the policy.Retrospectively Rated Insurance is a method of establishing a premium on large commercial accounts. The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula. Under this plan, the current year's premium is based partially (or wholly) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date. The rating formula is guaranteed in the insurance contract. Formula: retrospective premium = converted loss + basic premium × tax multiplier. Numerous variations of this formula have been developed and are in use.Social insurance can be many things to many people in many countries. But a summary of its essence is that it is a collection of insurance coverages (including components of life insurance, disability income insurance, unemployment insurance, health insurance, and others), plus retirement savings, that mandates participation by all citizens. By forcing everyone in society to be a policyholder and pay premiums, it ensures that everyone can become a claimant when or if he/she needs to. Along the way this inevitably becomes related to other concepts such as the justice system and the welfare state. This is a large, complicated topic that engenders tremendous debate, which can be further studied in the following articles (and others):Social welfare provisionSocial securitySocial safety netNational InsuranceSocial Security (United States)Social Security debate (United States)Terrorism insurance provides protection against any loss or damage caused by terrorist activities.Title insurance provides a guarantee that title to real property is vested in the purchaser and/or mortgagee, free and clear of liens or encumbrances. It is usually issued in conjunction with a search of the public records performed at the time of a real estate transaction.Travel insurance is an insurance cover taken by those who travel abroad, which covers certain losses such as medical expenses, lost of personal belongings, travel delay, personal liabilities, etc.Workers' compensation insurance replaces all or part of a worker's wages lost and accompanying medical expense incurred because of a job-related injury.
[edit] Types of insurance companiesInsurance companies may be classified asLife insurance companies, which sell life insurance, annuities and pensions products.Non-life or general insurance companies, which sell other types of insurance.General insurance companies can be further divided into these sub categories.Standard LinesExcess LinesIn most countries, life and non-life insurers are subject to different regulatory regimes and different tax and accounting rules. The main reason for the distinction between the two types of company is that life, annuity, and pension business is very long-term in nature — coverage for life assurance or a pension can cover risks over many decades. By contrast, non-life insurance cover usually covers a shorter period, such as one year.In the United States, standard line insurance companies are your "main stream" insurers. These are the companies that typically insure your auto, home or business. They use pattern or "cookie cutter" policies without variation from one person to the next. They usually have lower premiums than excess lines and can sell directly to individuals. They are regulated by state laws that can restrict the amount they can charge for insurance policies.Excess line insurance companies (aka Excess and Surplus) typically insure risks not covered by the standard lines market. They are broadly referred as being all insurance placed with non-admitted insurers. Non-admitted insurers are not licenced in the states where the risks are located. These companies have more flexibility and can react faster than standard insurance companies because they don't have the same regulations as standard insurance companies. State laws generally require insurance placed with surplus line agents and brokers to not be available through standard licensed insurers.Insurance companies are generally classified as either mutual or stock companies. This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policyholders, while stockholders (who may or may not own policies) own stock insurance companies. Other possible forms for an insurance company include reciprocals, in which policyholders 'reciprocate' in sharing risks, and lloyds organizations.Insurance companies are rated by various agencies such as A.M. Best. The ratings include the company's financial strength, which measures its ability to pay claims. It also rates financial instruments issued by the insurance company, such as bonds, notes, and securitization products.Reinsurance companies are insurance companies that sell policies to other insurance companies, allowing them to reduce their risks and protect themselves from very large losses. The reinsurance market is dominated by a few very large companies, with huge reserves. A reinsurer may also be a direct writer of insurance risks as well.Captive insurance companies may be defined as limited-purpose insurance companies established with the specific objective of financing risks emanating from their parent group or groups. This definition can sometimes be extended to include some of the risks of the parent company's customers. In short, it is an in-house self-insurance vehicle. Captives may take the form of a "pure" entity (which is a 100% subsidiary of the self-insured parent company); of a "mutual" captive (which insures the collective risks of members of an industry); and of an "association" captive (which self-insures individual risks of the members of a professional, commercial or industrial association). Captives represent commercial, economic and tax advantages to their sponsors because of the reductions in costs they help create and for the ease of insurance risk management and the flexibility for cash flows they generate. Additionally, they may provide coverage of risks which is neither available nor offered in the traditional insurance market at reasonable prices.The types of risk that a captive can underwrite for their parents include property damage, public and products liability, professional indemnity, employee benefits, employers liability, motor and medical aid expenses. The captive's exposure to such risks may be limited by the use of reinsurance.Captives are becoming an increasingly important component of the risk management and risk financing strategy of their parent. This can be understood against the following background:heavy and increasing premium costs in almost every line of coverage;difficulties in insuring certain types of fortuitous risk;differential coverage standards in various parts of the world;rating structures which reflect market trends rather than individual loss experience;insufficient credit for deductibles and/or loss control efforts.There are also companies known as 'insurance consultants'. Like a mortgage broker, these companies are paid a fee by the customer to shop around for the best insurance policy amongst many companies .Similar to an insurance consultant, an 'insurance broker' also shops around for the best insurance policy amongst many companies. However, with insurance brokers, the fee is usually paid in the form of commission from the insurer that is selected rather than directly from the client.Neither insurance consultants nor insurance brokers are insurance companies and no risks are transferred to them in insurance transactions.Third party administrators are companies that perform underwriting and sometimes claims handling services for insurance companies. These companies often have special expertise that the insurance companies do not have.
[edit] Life insurance and savingCertain life insurance contracts accumulate cash values, which may be taken by the insured if the policy is surrendered or which may be borrowed against. Some policies, such as annuities and endowment policies, are financial instruments to accumulate or liquidate wealth when it is needed. See life insurance.In many countries, such as the U.S. and the UK, the tax law provides that the interest on this cash value is not taxable under certain circumstances. This leads to widespread use of life insurance as a tax-efficient method of saving as well as protection in the event of early death.In U.S., the tax on interest income on life insurance policies and annuities is generally deferred. However, in some cases the benefit derived from tax deferral may be offset by a low return. This depends upon the insuring company, the type of policy and other variables (mortality, market return, etc.). Moreover, other income tax saving vehicles (e.g., IRAs, 401(k) plans, Roth IRAs) may be better alternatives for value accumulation. A combination of low-cost term life insurance and a higher-return tax-efficient retirement account may achieve better investment return.
[edit] Size of global insurance industry
Life insurance premia written in 2005
Non-life insurance premia written in 2005Global insurance premiums grew by 9.7% in 2004 to reach $3.3 trillion. This follows 11.7% growth in the previous year. Life insurance premiums grew by 9.8% during the year, thanks to rising demand for annuity and pension products. Non-life insurance premiums grew by 9.4%, as premium rates increased. Over the past decade, global insurance premiums rose by more than a half as annual growth fluctuated between 2% and 10%.[citation needed]Advanced economies account for the bulk of global insurance. With premium income of $1,217 billion in 2004, North America was the most important region, followed by the EU (at $1,198 billion) and Japan (at $492 billion). The top four countries accounted for nearly two-thirds of premiums in 2004. The United States and Japan alone accounted for a half of world insurance premiums, much higher than their 7% share of the global population. Emerging markets accounted for over 85% of the world’s population but generated only 10% of premiums. The volume of UK insurance business totaled $295 billion in 2004 or 9.1% of global premiums. [1]
[edit] Financial viability of insurance companiesFinancial stability and strength of an insurance company should be a major consideration when purchasing an insurance contract. An insurance premium paid currently provides coverage for losses that might arise many years in the future. For that reason, the viability of the insurance carrier is very important. In recent years, a number of insurance companies have become insolvent, leaving their policyholders with no coverage (or coverage only from a government-backed insurance pool or other arrangement with less attractive payouts for losses). A number of independent rating agencies, such as Best's, Fitch, Standard & Poor's, and Moody's Investors Service, provide information and rate the financial viability of insurance companies.
[edit] Controversies
[edit] Insurance insulates too muchBy creating a "security blanket" for its insureds, an insurance company may inadvertently find that its insureds may not be as risk-averse as they might otherwise be (since, by definition, the insured has transferred the risk to the insurer). This problem is known to the insurance industry as moral hazard. To reduce their own financial exposure, insurance companies have contractual clauses that mitigate their obligation to provide coverage if the insured engages in behavior that grossly magnifies their risk of loss or liability.For example, life insurance companies may require higher premiums or deny coverage altogether to people who work in hazardous occupations or engage in dangerous sports. Liability insurance providers do not provide coverage for liability arising from intentional torts committed by the insured. Even if a provider were so irrational as to desire to provide such coverage, it is against the public policy of most countries to allow such insurance to exist, and thus it is usually illegal.
[edit] Closed community self-insuranceSome communities prefer to create virtual insurance amongst themselves by other means than contractual risk transfer, which assigns explicit numerical values to risk. A number of religious groups, including the Amish and some Muslim groups, depend on support provided by their communities when disasters strike. The risk presented by any given person is assumed collectively by the community who all bear the cost of rebuilding lost property and supporting people whose needs are suddenly greater after a loss of some kind. In supportive communities where others can be trusted to follow community leaders, this tacit form of insurance can work. In this manner the community can even out the extreme differences in insurability that exist among its members. Some further justification is also provided by invoking the moral hazard of explicit insurance contracts.In the United Kingdom The Crown (which, for practical purposes, meant the Civil service) did not insure property such as government buildings. If a government building was damaged, the cost of repair would be met from public funds because, in the long run, this was cheaper than paying insurance premiums. Since many UK government buildings have been sold to property companies, and rented back, this arrangement is now less common and may have disappeared altogether.
[edit] Complexity of insurance policy contractsInsurance policies can be complex and some policyholders may not understand all the fees and coverages included in a policy. As a result, people may buy policies on unfavorable terms. In response to these issues, many countries have enacted detailed statutory and regulatory regimes governing every aspect of the insurance business, including minimum standards for policies and the ways in which they may be advertised and sold.Many institutional insurance purchasers buy insurance through an insurance broker. Brokers represent the buyer (not the insurance company), and typically counsel the buyer on appropriate coverages, policy limitations. A broker generally holds contracts with many insurers, thereby allowing the broker to "shop" the market for the best rates and coverage possible.Insurance may also be purchased through an agent. Unlike a broker, who represents the policyholder, an agent represents the insurance company from whom the policyholder buys. An agent can represent more than one company.
[edit] RedliningRedlining is 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.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.An insurance underwriter's job is to evaluate a given risk as to the likelihood that a loss will occur. Any factor that causes a greater likelihood of loss should theoretically be charged a higher rate. This basic principle of insurance must be followed if insurance companies are to remain solvent. Thus, "discrimination" against (i.e., differential treatment of) potential insureds in the risk evaluation and premium-setting process is a necessary by-product of the fundamentals of insurance underwriting. For instance, insurers charge older people significantly higher premiums than they charge younger people for term life insurance. Older people are thus treated differently than younger people (i.e., a distinction is made, discrimination occurs). The rationale for the differential treatment goes to the heart of the risk a life insurer takes: Old people are likely to die sooner than young people, so the risk of loss (the insured's death) is greater in any given period of time and therefore the risk premium must be higher to cover the greater risk. However, treating insureds differently when there is no actuarially sound reason for doing so is unlawful discrimination.What is often missing from the debate is that prohibiting the use of legitimate, actuarially sound factors means that an insufficient amount is being charged for a given risk, and there is thus a deficit in the system. The failure to address the deficit may mean insolvency and hardship for all of a company's insureds. The options for addressing the deficit seem to be the following: Charge the deficit to the other policyholders or charge it to the government (i.e., externalize outside of the company to society at large).
[edit] Health insuranceHealth insurance, which is coverage for individuals to protect them against medical costs, is a highly charged and political issue in the United States, which does not have socialized health coverage. In theory, the market for health insurance should function in a manner similar to other insurance coverages, but the skyrocketing cost of health coverage has disrupted markets around the globe, but perhaps most glaringly in the U.S. See health insurance.
[edit] Dental insuranceDental insurance, like health insurance, is coverage for individuals to protect them against dental costs. In the U.S., dental insurance is often part of an employer's benefits package, along with health insurance.
[edit] Insurance patentsSee insurance patent for more details.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.Many independent inventors are in favor of patenting new insurance products since it gives them protection from big companies when they bring their new insurance products to market. Independent inventors account for 70% of the new U.S. patent applications in this area.Many insurance executives are opposed to patenting insurance products because it creates a new risk for them. The Hartford insurance company, for example, recently had to pay $80 million to an independent inventor, Bancorp Services, in order to settle a patent infringement and theft of trade secret lawsuit for a type of corporate owned life insurance product invented and patented by Bancorp.There are currently about 150 new patent applications on insurance inventions filed per year in the United States. The rate at which patents have issued has steadily risen from 15 in 2002 to 44 in 2006. [5]
[edit] The insurance industry and rent seekingCertain 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.
[edit] Criticism of insurance companiesSome people believe that modern insurance companies are money-making businesses which have little interest in insurance. They argue that the purpose of insurance is to spread risk so the reluctance of insurance companies to take on high-risk cases (e.g. houses in areas subject to flooding, or young drivers) runs counter to the principle of insurance.Other criticisms include:Insurance policies contain too many exclusion clauses. For example, some house insurance policies do not cover damage to garden walls.Most 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.
[edit] 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.
[edit] QuoteHank Greenberg told his board of directors, "You can't even spell 'insurance'"[2] (hearsay, April 2005)
[edit] References^ This discussion is adapted from Mehr and Camack “Principles of Insurance”, 6th edition, 1976, pp 34 – 37.^ 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 businessowners 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”^ (Source: Insurance IP Bulletin, December 15, 2006)
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