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<title>The Post Covid Consumer: Buyers Unmask New Plans To Shave Costs And Shred Cares</title>
<link>https://www.insurance-advocate.com/2021/01/11/the-post-covid-consumer-buyers-unmask-new-plans-to-shave-costs-and-shred-cares/</link>
<dc:creator><![CDATA[Insurance Advocate]]></dc:creator>
<pubDate>Mon, 11 Jan 2021 15:37:16 +0000</pubDate>
<category><![CDATA[2021]]></category>
<category><![CDATA[January 11]]></category>
<category><![CDATA[cover]]></category>
<category><![CDATA[Cover Story]]></category>
<category><![CDATA[Covid-19]]></category>
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<description><![CDATA[<p>37,000 high income insurance clients of 150 high income agents Want “Fresh” when the Refresh Comes: Results of a survey by the Private Risk Management Association</p>
The post <a href="https://www.insurance-advocate.com/2021/01/11/the-post-covid-consumer-buyers-unmask-new-plans-to-shave-costs-and-shred-cares/">The Post Covid Consumer: Buyers Unmask New Plans To Shave Costs And Shred Cares</a> first appeared on <a href="https://www.insurance-advocate.com">Insurance Advocate</a>.]]></description>
<content:encoded><![CDATA[<h2 class="p1"><span class="s1">37,000 high income insurance clients of 150 high income agents Want “Fresh” when the Refresh Comes: Results of a survey by the Private Risk Management Association</span></h2>
<p class="p1">A December 2020 Private Risk Management Association survey documented the leading concerns of insurance consumers going into 2021. Understandably, the coronavirus, travel and family safety, weather, and the ability to retain insurance coverage top the list. More than one-hundred-fifty agents and brokers representing 37,000 clients found many feeling vulnerable about the future.</p>
<p class="p1">Some stats:</p>
<p class="p1">· 76-percent of risk managers responding to the survey said that family safety and financial concerns stemming from the pandemic are impacting their clients</p>
<p class="p1">· Nearly 54-percent cite catastrophic weather (hurricanes, floods & fires) worries keep their clients up and night</p>
<p class="p1">· 50-percent say travel and personal safety weighs on the minds of their clients</p>
<p class="p1"> · 30 percent of risk managers say that the ability to secure and keep insurance coverage is also an issue, ranking just above cybersecurity concerns.</p>
<p class="p1">This data underlies the importance of homeowners taking proactive measures now to prepare against potential losses, making their homes more flood, fire, and storm-proof.</p>
<p class="p1">Lisa Lindsay, executive director of PRMA, says risk managers can work with clients to lower their risk exposure as the survey’s results show that:clients are more actively renovating right now. Many said their clients are engaged in more high-risk activities like horseback riding and motorsports.</p>
<p class="p1"> Some want to make their homes more fire and flood-resistant, positioning themselves as a better insurance risk in a tightening market.</p>
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<title>Risk Retention Groups Report Financially Stable Third Quarter 2020 Results</title>
<link>https://www.insurance-advocate.com/2020/12/13/risk-retention-groups-report-financially-stable-third-quarter-2020-results/</link>
<dc:creator><![CDATA[Guest Author]]></dc:creator>
<pubDate>Sun, 13 Dec 2020 15:59:00 +0000</pubDate>
<category><![CDATA[2020]]></category>
<category><![CDATA[December 13]]></category>
<category><![CDATA[cover]]></category>
<guid isPermaLink="false">https://www.insurance-advocate.com/?p=12548</guid>
<description><![CDATA[<p>By Douglas Powell</p>
<p>A review of the reported financial results of risk retention groups (RRGs) reveals insurers that continue to collectively provide specialized coverage to their insureds while remaining financially stable. Based on reported financial information, RRGs have a great deal of financial stability and remain committed to maintaining adequate capital to handle losses. It is important to note that ownership of RRGs is restricted to the policyholders of the RRG. This unique ownership structure required of RRGs may be a driving force in their strengthened capital position.</p>
The post <a href="https://www.insurance-advocate.com/2020/12/13/risk-retention-groups-report-financially-stable-third-quarter-2020-results/">Risk Retention Groups Report Financially Stable Third Quarter 2020 Results</a> first appeared on <a href="https://www.insurance-advocate.com">Insurance Advocate</a>.]]></description>
<content:encoded><![CDATA[<p><strong>By Douglas Powell</strong></p>
<p class="p1">A review of the reported financial results of risk retention groups (RRGs) reveals insurers that continue to collectively provide specialized coverage to their insureds while remaining financially stable. Based on reported financial information, RRGs have a great deal of financial stability and remain committed to maintaining adequate capital to handle losses. It is important to note that ownership of RRGs is restricted to the policyholders of the RRG. This unique ownership structure required of RRGs may be a driving force in their strengthened capital position.</p>
<p class="p3"><b>Balance Sheet Analysis </b></p>
<p class="p1">From third quarter 2019 to third quarter 2020, cash and invested assets increased 4.8 percent and total admitted assets increased 5.4 percent. RRGs collectively reported a 3.2 percent increase to policyholders’ surplus. This represents a $167.8 million year-over-year increase to policyholders’ surplus. The level of policyholders’ surplus becomes progressively important in times of difficult economic conditions by allowing an insurer to remain solvent when facing uncertainty.</p>
<p class="p1">Liquidity, as measured by cash and invested assets to liabilities, for third quarter 2020 was 147.3 percent. A value more than 100 percent is considered favorable as it indicates that there was more than a dollar of net liquid assets for each dollar of total liabilities. In evaluating individual RRGs, Demotech, Inc. prefers companies to report leverage of less than 300 percent. Leverage for all RRGs combined, as measured by total liabilities to policyholders’ surplus, for third quarter 2020 was 144.8 percent.</p>
<p class="p1">The loss and loss adjustment expense reserves (loss reserves) to policyholders’ surplus ratio for third quarter 2020 was 94.7 percent. The higher the ratio of loss reserves to surplus, the more an insurer’s stability is dependent on having and maintaining reserve adequacy.</p>
<p class="p1">Regarding RRGs collectively, the ratios pertaining to the balance sheet appear to be appropriate and conservative. These reported results indicate that collectively RRGs remain adequately capitalized and able to remain solvent if faced with adverse economic conditions or increased losses.</p>
<p class="p3"><b>Premium Written Analysis </b></p>
<p class="p1">Since RRGs are restricted to liability coverage, they tend to insure medical providers, product manufacturers, law enforcement officials and contractors, as well as other industries with professional liability.</p>
<p class="p1">RRGs collectively reported over $3.1 billion of direct premium written through third quarter 2020, an increase of 5.7 percent over third quarter 2019. RRGs reported approximtately $1.8 billion of net premium written through third quarter 2020, an increase of 1.7 percent over third quarter 2019.</p>
<p class="p1">The direct premium written to policyholders’ surplus ratio for RRGs collectively for third quarter 2020 was 76.3 percent. The net premium written to policyholders’ surplus ratio for RRGs for third quarter 2020 was 42.6 percent. Please note, the premium written values for these ratios have been adjusted so they can be compared to year-end ratios. An insurer’s direct premium written to surplus ratio is indicative of its policyholders’ surplus leverage on a direct basis, without consideration for the effect of reinsurance. An insurer’s net premium written to surplus ratio is indicative of its policyholders’ surplus leverage on a net basis. An insurer relying heavily on reinsurance will have a large disparity in these two ratios.</p>
<p class="p1">A direct premium written to surplus ratio in excess of 600 percent would subject an individual RRG to greater scrutiny during the financial review process. Likewise, a net premium written to surplus ratio greater than 300 percent would subject an individual RRG to greater scrutiny. In certain cases, premium to surplus ratios in excess of those listed would be deemed appropriate if the RRG had demonstrated that a contributing factor to the higher ratio is relative improvement in rate adequacy.</p>
<p class="p1">In regards to RRGs collectively, the ratios pertaining to premium written appear to be conservative. Income Statement Analysis The loss ratio for RRGs collectively, as measured by losses and loss adjustment expenses incurred to net premiums earned, through third quarter 2020 was 80.1 percent. This ratio is a measure of an insurer’s underlying profitability on its book of business. The expense ratio, as measured by other underwriting expenses incurred to net premiums earned, through third quarter 2020 was 25.0 percent. This ratio measurers an insurer’s operational efficiency in underwriting its book of business.</p>
<p class="p1">The combined ratio, loss ratio plus expense ratio, through third quarter 2020 was 105.1 percent. This ratio measures an insurer’s overall underwriting profitability. A combined ratio of less than 100 percent indicates an underwriting profit and a ratio of more than 100 percent indicates an underwriting loss. In regards to underwriting results, collectively RRGs were unprofitable through third quarter 2020, and reported an aggregate underwriting loss of $68.9 million. However, RRGs collectively reported a net investment gain of $219.0 million and, as a result, a net gain of $137.3 million.</p>
<p class="p1">Despite the underwriting losses, the ratios pertaining to the income statement appear to be appropriate for RRGs collectively.</p>
<p class="p3"><b>Conclusions Based on Third Quarter 2020 Results </b></p>
<p class="p1">Despite political and economic uncertainty, RRGs remain financially stable while providing specialized coverage to their insureds. The financial ratios calculated based on the reported results of RRGs appear to be reasonable, keeping in mind that it is typical and expected that insurers’ financial ratios tend to fluctuate over time. The results of RRGs indicate that these specialty insurers continue to exhibit financial stability.</p>
<p class="p2"><span class="Apple-converted-space"> </span></p>
<p class="p5"><em><span class="s5">Douglas A Powell supports the formulation and assignment of Financial Stability Ratings® (FSRs) for Demotech by providing analysis of statutory financial statements and business information pertaining to insurance companies. He interfaces with clients to assist them in completing a rigorous financial analysis, while also providing insight regarding financial reporting practices and procedures. He also performs financial and operational and peer group analyses, as well as benchmark studies for client companies.</span></em></p>
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<title>Moral Markets: New Concerns Carry Ethics to Next Level</title>
<link>https://www.insurance-advocate.com/2020/10/20/moral-markets-new-concerns-carry-ethics-to-next-level/</link>
<dc:creator><![CDATA[Insurance Advocate]]></dc:creator>
<pubDate>Tue, 20 Oct 2020 15:18:58 +0000</pubDate>
<category><![CDATA[2020]]></category>
<category><![CDATA[October 20]]></category>
<category><![CDATA[cover]]></category>
<category><![CDATA[Cover Story]]></category>
<guid isPermaLink="false">https://www.insurance-advocate.com/?p=12520</guid>
<description><![CDATA[<p>Review</p>
<p>Do Markets Corrupt Our Morals?</p>
<p>By Virgil Henry Storr and Ginny Seung Choi<br />
296 pp.; Palgrave Macmillan, 2019</p>
The post <a href="https://www.insurance-advocate.com/2020/10/20/moral-markets-new-concerns-carry-ethics-to-next-level/">Moral Markets: New Concerns Carry Ethics to Next Level</a> first appeared on <a href="https://www.insurance-advocate.com">Insurance Advocate</a>.]]></description>
<content:encoded><![CDATA[<p class="p1"><strong><span class="s1">by G</span><span class="s3">eorge Leef</span></strong></p>
<p class="p1"><span class="s1"><b>Review</b></span></p>
<h3 class="p1"><span class="s1"><i>Do Markets Corrupt Our Morals?</i></span></h3>
<p class="p1"><span class="s1">By Virgil Henry Storr and Ginny Seung Choi<br />
</span><span class="s1">296 pp.; </span><span class="s1">Palgrave Macmillan, 2019</span></p>
<p class="p1">When humans exchange goods, they expect to better themselves. Over history, this simple act of voluntary trade—entering into market transactions—has faced a surprising amount of criticism. Aristotle, for instance, thought that those who earned their living by commerce were not righteous. St. Thomas Aquinas taught that it was sinful to profit unless trade took place at the “just price.” In the 18th and 19th centuries, critics such as Rousseau and Marx argued that markets were divisive and exploitative, bringing out the worst in people. And in the present, a host of scholars and politicians complain that markets prey on the weak and undermine human communities.</p>
<p class="p1">Although some scholars have defended the morality of markets, their defense has often been half-hearted, conceding that economic freedom may bring out bad human traits but arguing that the overall benefits of exchange make it worthwhile. We need an unapologetic defense of the morality of markets and this book by Virgil Henry Storr and Ginny Seung Choi provides exactly that. Storr is an assistant professor of economics at George Mason University and Choi is a senior research associate at the university’s Mercatus Center.</p>
<p class="p1">As they see the problem:</p>
<p class="p1">Even people who are typically sanguine about markets worry that we risk losing our souls when we engage in market activities. Specifically, the concern is that the more we engage in market activity, the more likely we are to become, at best, selfish and corrupt, and, at worst, rapacious and debased.</p>
<p class="p1">The truth, Storr and Choi argue, is the other way around: market activity makes people morally better. It rewards virtues and penalizes vices. They write:</p>
<p class="p1">We find that rather than corrupting our morals, the opposite is true. The evidence suggests that the market actually improves our morals. There are two main arguments that we advance in support of this claim. First, we argue that people can improve their lives through markets. People in market societies are wealthier, healthier, happier, and better connected than people in nonmarket societies…. Second, we argue that the market is a moral space that both depends on its participants being virtuous and also rewards them for being virtuous.</p>
<p class="p1">The debate over the morality of the market is usually carried out purely at the rhetorical level. Market opponents simply assert that market activity upsets their sensibilities, using loaded terms such as “commodification,” “exploitation,” and even “zombie.” Storr and Choi don’t reply to them with more rhetoric, but with evidence-based counterarguments. Enemies of the free market will face a tough challenge from the authors’ case.</p>
<p class="p1">Bettering lives / In their opening chapters, Storr and Choi run through the history of the dispute over the morality of the market, giving us a sampling of ancient and modern criticism, as well as some responses by defenders. Among the latter, Montesquieu argued that commerce was beneficial in that it cures destructive prejudices but conceded that it tends to make people inclined only to do things for the money. Adam Smith maintained that free markets do enrich people but found no particular morality in the conduct of investors and businessmen. In Smith, there’s a strong suggestion that the public benefits of market activity grow out of private vices. Milton Friedman wrote that a free market system “is the only one that allows people freedom to choose their own projects and paths,” but said that the market itself is morally neutral. Those and other market defenses are inadequate, say Storr and Choi, so they’ve endeavored to set forth a positive argument for the morality of the market.</p>
<p class="p1">For one thing, the free market is a means—and sometimes the only means—for people to better their lives. Desperately poor people have frequently managed to escape poverty by finding ways to profitably exchange what little they have in the market. That even applies to slaves. Storr and Choi give the interesting case of Bahamian slaves who were often able to substantially improve their lives because they were able to sell a few hours of their labor to willing buyers. Were the hapless slaves corrupted by entering into market contracts for their labor? Or were the people who paid them for their work? It’s almost impossible to imagine how anyone would object to the morality of such transactions, although we should never forget that 19th century defenders of slavery like Thomas Carlyle were angered by the arguments of free-market scholars against slavery and its traditional bonds.</p>
<p class="p1">Storr and Choi also make useful national comparisons. North and South Korea provide a striking comparison between a market and a nonmarket society. Before the nation was partitioned after World War II, the northern part was more prosperous than the south as a result of greater industrialization. Today, however, the people of North Korea are among the world’s poorest and most malnourished. The government of North Korea is against free markets. The economy is run according to government dictates and people are assigned to classes in a highly stratified society. The state provides for everyone, but those in the upper classes and the military receive far more than do the mass of workers and peasants. No one has to worry about those awful, corrupting “money bonds” the critics complain about, yet every year many North Koreans risk their lives to escape the country. By contrast, South Korea is a market society, the people are far more prosperous, and they are free to come and go as they please. How many market opponents would choose to live in North Korea rather than South Korea, despite their professed dislike for the “immorality” of free markets?</p>
<p class="p1">Peaceful, honest competition / What about competition, which market critics assail as divisive? Rather than dividing people, the evidence shows that it induces them to find ways to satisfy others. As the authors write:</p>
<p class="p1">Competition ensures that only those who serve others can maintain and accumulate wealth. Stated another way, the more competitive the market, the more becoming and staying wealthy depends on discovering what consumers (including poor consumers) want.</p>
<p class="p1">Competition is an inescapable component of life, but market competition leads to a search for ways of getting ahead by peaceful means. Where markets are absent, competition simply takes other forms, such as the violence and oppression in North Korea.</p>
<p class="p1">Once people have amassed wealth through their market activities, they are able and often quite willing to devote some of that wealth to helping the needy. Storr and Choi write, “At their core, successful market transactions require our recognizing how our actions or possessions can improve the lives of others.” Bill Gates, for one, has put billions of his fortune into programs in Africa to conquer disease and bring clean water to people. Markets therefore make it possible for people to afford to care about others; take exchange away and there would be far less altruism in the world.</p>
<p class="p1">Another morality-enhancing feature of free markets is the way they encourage honesty and punish dishonesty. Market competition not only spurs people to discover new and better ways of doing things, it also helps us to learn about the people we might want to deal with. According to the authors, “Markets are spaces where we not only discover profit opportunities, but also where we discover whether or not the people with whom we are interacting are good or bad people.” In the free market, reputation—whether as a seller or buyer—matters a lot. We want to find out if the firms from which we buy live up to our moral standards and the market provides such information. We also want to know if those to whom we might sell are apt to pay or not, and the market provides that information. Markets thus deter cheating and immorality. In short, they are, the authors argue, “moral training grounds.”</p>
<p class="p3"><b>Criticisms</b></p>
<p class="p1">There is much more to the case Storr and Choi present in favor of the morality of markets, but I’d like to focus on what I see as three weak spots in the book.</p>
<p class="p1">First, they note in passing that there are moral costs from curtailing market activity. Sadly, they don’t develop that point. The moral costs of interventionism against peaceful economic activity is one of the great problems with all nonmarket systems. At least several pages should have been devoted to exposing the villainy that inevitably erupts whenever we empower government to prevent market activity. A century ago, to cite one example, America embarked upon a supposedly noble experiment by outlawing the market for alcoholic beverages. Some people thought that Prohibition would make America a better country, but it led to massive violence and corruption. The same error is being made today with the “war on drugs.” Elitists who rail against markets always ignore the costs of government actions to prevent trade they don’t like. I wish the authors had made a big point of the moral costs of anti-market crusades. It’s crucial to the case against interventionism.</p>
<p class="p1">Second, again in the “missed opportunity” vein, the authors never attack the implicit assumption of market opponents that humans are naturally kind, cooperative, and altruistic in the absence of market competition. Relying on that hidden premise, it’s easy to blame the market for all the world’s greed, rapacity, and violence. Human beings, however, are not hardwired to be good; bad behavior occurs in settings that have no taint of market “corruption.” For thousands of years, people have fought wars over religion, stolen from each other, cheated at games and on spouses, lied and schemed to obtain favors, killed out of jealousy, and so on. Put children together and fights often break out over toys or clothing or something else. Human morality is pretty impure to start with and market competition isn’t responsible for that. The authors would have strengthened their book if they had made that point.</p>
<p class="p1">Finally, Storr and Choi concede too much when they confront the case of “noxious markets.” Such markets elicit “discomfort and revulsion” among some people, thereby providing “sufficient reason to regulate or block such markets.” What kinds of markets are these? According to philosopher Debra Katz, a noxious market is one where the parties are unable to interact as equals, where the transaction is rooted in desperation, humiliation, or begging. She and other interventionists have pointed, for example, to markets for human organs, blood, and sex as fitting the “noxious” description.</p>
<p class="p1">The authors have nothing to say about that. Instead, they write:</p>
<p class="p1">Once we as a society have resolved whether or not a particular market is noxious and have also established the source(s) of its noxiousness, we can then tailor a policy that addresses the particular problems with that market.</p>
<p class="p1">That just won’t do. If you’re really in favor of allowing people to trade peacefully, you can’t also say that it’s up to “society” to decide whether some kinds of peaceful trade should be limited or blocked. If two people want to transact for a kidney or blood or sex or anything else, that’s no business of others, unless they want to peacefully offer one party something better. Instead, market opponents insist that government step in—which is what Storr and Choi criticize in the rest of the book. In taking their muddled position on “noxious markets,” the authors embolden market opponents to say: Look, even these pro-market economists admit that society should decide to step in and stop markets that are unfair. And we have a list of what those markets are.</p>
<p class="p1">Despite my quibbles, this is an outstanding and timely book. The talk we hear constantly about the supposed evils of economic liberty is eroding the foundation of our society. Joseph Schumpeter was onto something when he prophesied that capitalism would be brought down by its very success, which makes it possible for grumblers like Marx and Bernie Sanders to live comfortably while pontificating about how terrible market society is. We can’t begrudge those complainers their comforts, but we must not let their complaints about capitalism deprive people of their freedom. This book is a big step toward restoring confidence in the morality of free markets.</p>
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<!--/themify_builder_content-->The post <a href="https://www.insurance-advocate.com/2020/10/20/moral-markets-new-concerns-carry-ethics-to-next-level/">Moral Markets: New Concerns Carry Ethics to Next Level</a> first appeared on <a href="https://www.insurance-advocate.com">Insurance Advocate</a>.]]></content:encoded>
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