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FAIR Innovation In Insurance: Pay-Per-Mile Auto Coverage

The Future of American Insurance & Reinsurance (FAIR) campaign is highlighting the importance of risk-based pricing and the innovations happening in the insurtech space.

This fall, the Insurance Information Institute (Triple-I) attended Insuretech Connect—the world’s largest insurtech event. The annual meeting in Las Vegas showcases the new technologies which are lowering costs and creating efficiencies for both insurers and policyholders.

The growing amount of data available to insurers, for instance, is not only reducing the amount lower-risk policy holders pay for insurance coverage. It also incentivizes all policyholders to adjust their driving behaviors in exchange for lower premiums.

We’ve all heard, “you get what you pay for.” Now insurtech innovators are letting policyholders only pay for what they use when it comes to auto insurance. Technology is also speeding the claims-settlement process, so insurers and policyholders are completing transactions digitally.

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FAIR Video Series: Ensuring Policies Are Priced Fairly and Accurately

Risk-based pricing — the practice of insurers charging policyholders different rates depending on their different risk characteristics — incentivizes policyholders to reduce the chance of financial harm not only to themselves, but to those around them.

For example, through risk-based pricing, policyholders are more likely to engage in safer driving practices or invest in fire prevention measures for their homes in exchange for lower monthly premiums.

The Future of American Insurance & Reinsurance (FAIR) campaign is educating stakeholders on the importance of risk-based pricing in its five-part video series.

In this final segment, Dr. Charles Nyce, Associate Professor of Risk Management and Insurance at Florida State University, explains how incentives created by risk-based pricing will lead to safer behaviors and fairer premiums.

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FAIR Video Series: Risk, Insurance, and the Future of Big Data

The availability of data for insurers has not only reduced the amount that lower-risk policy holders have to pay, it also incentivizes existing high-risk policy holders to adjust their behaviors in exchange for lower insurance costs.

Moreover, if today’s insurers are restricted from using certain risk characteristics or rating variables, large tech companies that already collect large amounts of data may make moves to enter the insurance market, leaving current insurers at a competitive disadvantage.

The Future of American Risk & Insurance (FAIR) campaign is educating stakeholders on the importance of risk-based pricing in its five-part video series.

In this segment of Triple-I’s five-part video series, Dr. Charles Nyce, Associate Professor of Risk Management and Insurance at Florida State University, explains how the democratization of big data in insurance now will lead to safer behaviors and preempt higher insurance premiums down the line.

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FAIR Video Series: Market Competition Breeds Innovation

Insurance is a market just like any other good or financial product — firms compete to provide the best “product” and offer the lowest price to attract consumers.

Innovation plays the same role for insurance as it does for any other market. Restrictions on insurers’use of data will hinder risk-assessment ability and lead to artificially high premiums.

The market inefficiency created by restrictions on insurers’ ability to analyze risk data reduces the incentive for policyholders to engage in lower-risk behavior and leads to higher premiums.

Earlier in the summer, the Future of American Risk & Insurance (FAIR) campaign released a five-part video series educating stakeholders on the importance of risk-based pricing.

In this latest segment, Dr. Charles Nyce, Associate Professor of Risk Management and Insurance at Florida State University, discusses the importance of innovation in insurance markets, and how advances in data analytics for insurers will benefit society overall.

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ICYMI: Policyholder Loses Federal Appeal of Business Interruption Ruling

Business Insurance was one of the few media outlets to cover a federal appeals court’s ruling earlier this month in favor of an insurer in a COVID-19-related business interruption (BI) insurance coverage dispute. The first two paragraphs of the trade publication’s story (Policyholder loses federal appeal of BI ruling) are below:

“In what may be the first federal appeals court ruling on the issue, the 8th U.S. Circuit Court of Appeals on Friday [July 2] ruled against an oral surgeon’s practice as to whether a policyholder can recover for COVID-19 losses under its business interruption coverage.

In its ruling in Oral Surgeons, P.C. v. The Cincinnati Insurance Co., a three-judge panel of the St. Louis-based appeals court agreed with the U.S. District Court in Des Moines, Iowa, that the practice’s policy required ‘physical loss’ or ‘physical damage’ to trigger business interruption and extra expense coverage.”