Insurance Payouts Research Articles

Underwriting Decision Modeling Based on Regional Hazard Assessment and Urban Resilience

In recent years, frequent extreme weather disasters have posed serious challenges to the economic social, and post-disaster recovery capabilities of places such as the United States, and original insurance models and payout strategies are difficult to adapt. Scientific assessment and response to natural disaster risks have become a key topic. This paper presents the Urban Resilience Index (URI) derived from 18 indicators. The ability of the city itself is rationally assessed for disaster resilience, which better helps insurance companies predict the loss compensation caused by disasters. This study starts by analyzing the risk of disasters in various regions of the United States, takes the intensity and frequency of disasters and the toughness of the city's resistance to disasters into account, and uses nonlinear multi-objective optimization to derive the threshold value of the payout strategy in a certain region to be around 0.21 and 0.94, respectively, and at the same time, after the control of the scalar function of the number of iterations is between 10 and 15 times, the final determination of the insurance model that responds to the different regions and verifies. The insurance model to cope with other areas is finally determined and its feasibility is verified.

The economic potential for area‐yield crop insurance: An application to maize in Ghana

AbstractRainfall index insurance can enable farm households to manage production risk, but demand in developing countries remains low at market prices, in part because the insurance trigger may not correlate well with individual farm losses. Area‐yield crop insurance, which links payouts to average yield in a geographic zone, attempts to increase demand by more accurately targeting insurance payouts to production shortfalls. However, shifting from an exogenous weather‐based to an endogenous yield‐based index introduces concerns of asymmetric information, which can lead to market failures that constrain supply from providers. These features are inversely related: larger insurance zones inhibit index manipulation, but average yield is less informative about any individual plot. We quantify this tradeoff for maize in Ghana using a spatial yield model calibrated to match observed production. Insurers must demarcate zones of no more than 5000 farmers for area‐yield insurance to outperform weather insurance. The framework presented in this paper allows assessment of the relationship between index performance and asymmetric information in new crop insurance products.

Integrating rainfall index-based insurance with optimal crop management strategies can reduce financial risks for Australian dryland cotton farmers

Drought undermines the financial sustainability of farmers. While farmers have adopted various strategies to mitigate some drought impacts, they remain exposed to substantial drought risk. Insurance could be useful in managing climatic risks and for encouraging farmers to take sensible risks (e.g., changing their sowing date to increase yield), but it can be costly. Here, we tested whether the integration of a change in sowing date with rainfall index-based insurance could improve farmer profitability and income stability. We used the Agricultural Production Systems Simulator (APSIM)-Cotton model to simulate cotton lint yields for various sowing dates, taking into account different management strategies, across three dry-land cotton research farm sites – Dalby, Goondiwindi, and Theodore – from 1940 to 2022. We designed the index-based insurance payout when the average rainfall received during the growing season falls below a predefined level, such as the 5th, 10th, or 20th percentile of rainfall. Our study, which involved 3.9 million cotton lint simulations and 3,000 rainfall index-based insurance products, showed that combining a shift in sowing date with insurance can lead to an income improvement of up to 21.5% at some study sites. Additionally, in drought years, the income improvement for farmers who combined optimal sowing dates with rainfall index-based insurance was up to 48.0%. The framework developed in this study could aid in devising financial strategies to enhance farming resilience during climate extremes.

Drink…then drive away: The effects of lowering the blood alcohol concentration in Utah.

In March of 2017 Utah announced its intent to lower the legal blood alcohol content (BAC) for driving from 0.08 to 0.05g/dL. However, this change did not take effect until 2019. We employ a difference-in- differences strategy on Utah counties using neighboring states as controls to test whether this policy change significantly affected the number of traffic accidents or the severity of those accidents. Results show the policy appears to temporarily decrease the total number of accidents, limited primarily to property damage- only accidents. We believe these results may be partially explained by drivers who, after the policy is enacted, avoid reporting property damage-only accidents if possible. Using insurance claims data, we show there is no corresponding fall in insurance claims or payouts suggesting that the fall in total accidents likely comes from under-reporting.

THE IMPACT OF WAR ON THE INSURANCE MARKET OF UKRAINE: ANALYSIS OF OBSTACLES AND RESTRUCTURING OF THE FINANCIAL LANDSCAPE

The purpose is to carefully study and systematize the impact of the military conflict on the insurance market of Ukraine and provide practical recommendations for overcoming the challenges arising in this context. Method. The study is based on the use of statistical data to assess changes in the economy and the insurance sector during martial law, a detailed analysis of specific cases of insurance companies and regions that were affected by armed aggression. Theoretical and empirical methods, as well as economic and statistical methods of research, comparative analysis, strategic management, systematic approach and analysis were used in the process of research. The results. This study presents the influence of the state of war on the structure and dynamics of the insurance market in Ukraine, analyzes the opportunities of insurance companies, losses and risks associated with insurance in conditions of instability. A decrease in the number of registered insurance companies and companies providing life insurance services was determined, a decrease in the rates of gross insurance premiums and gross insurance payouts was recorded while maintaining positive dynamics, and it was noted that the majority of insurance premiums remain at the disposal of insurers. Restructuring and adaptation strategies for insurance companies are proposed in order to ensure their viability during the war and post-victory recovery period. Scientific novelty.This study can serve as a valuable contribution to the understanding of the relationship between the war situation and the insurance market, and also indicates possible ways for further development and reform of the insurance industry in accordance with the European integration of Ukraine. Practical significance. The dynamics of the main indicators of the insurance market in recent years are singled out, and the highlighting of obvious trends, which in the future can be used as a characteristic of this period of existence of the insurance industry.

Empirical causal analysis of flood risk factors on U.S. flood insurance payouts:Implications for solvency and risk reduction

This paper presents a regression model that quantifies the causal relationship between flood risk factors and the flood insurance payout in the U.S. The flood risk factors that have been considered in this research are flood exposure, infrastructure vulnerability, social vulnerability, and the number of mobile homes. Historical data for the annual flood insurance payout, flood risk factors, and other control variables were collected for six years between 2016 and 2021 and used in a Mixed Effects Regression model to derive the empirical relationships. The regression model expressed the natural logarithm of the annual flood insurance payout in a county based on the flood risk factors and control variables. The paper presents the regression coefficients that quantify the causal influence. It has been found that all four flood risk factors have statistically significant positive influence on the flood insurance payout in a county. However, the extent of the influence is different for different flood risk factors. Among them, flood exposure has the highest influence on the flood insurance payout, which is followed by the number of mobile homes, infrastructure vulnerability, and social vulnerability. Since the federal flood insurance program in the U.S. has a large debt to the U.S. treasury, the government should plan for effective risk reduction that can reduce the flood insurance payout in future to keep the program solvent. The outcomes of this research are expected to facilitate that decision-making process by providing the empirical relationship between flood risk factors and flood insurance payout.

Availability of the seat belt defense: Implications for auto liability insurance

AbstractA “seat belt defense” allows a defendant in a third‐party auto liability event to present evidence of seat belt nonuse to reduce a plaintiff's recovery. When successfully applied, the defense has a direct effect on reducing liability payouts by insurers for accidents. Our analysis reveals that seat belt defense laws are associated with a 10% reduction in auto claims costs, which equates to a reduction in loss costs of approximately $14 per insured vehicle. We find little evidence that the defense reduces accident frequency and no evidence that the defense affects seat belt usage. The lack of a deterrent effect on driving behavior suggests that the availability of the defense is not salient to drivers. The reduction in loss costs supports the notion that defense lawyers are aware of the defense and make use of it. The resulting effect of lowering insurance payouts may alleviate increasing auto insurance costs.

Analysis of provision of insurance services from property types of insurance

Introduction. In today's world, property insurance plays a key role in the financial stability of both individuals and businesses. It is an important element in the country's economic security system, which ensures the protection of assets and minimizes financial losses in case of unforeseen events. In the conditions of growing economic uncertainty and increasing influence of various risks, the effectiveness of property insurance takes on special importance. In this regard, research and analysis of the dynamics of the development of property insurance, its current state and trends in Ukraine is relevant. The purpose of the article is to determine the essence and types of property insurance, assess the features and dynamics of property insurance, as well as the main problems and directions for improving and increasing the level of effectiveness of property insurance in Ukraine. Research methods. The following research methods are used in the scientific article: induction, deduction - to analyze and determine the economic essence of property insurance and the main approaches to its classification; the synthesis method - to determine the main problems and obstacles that affect the effectiveness of property insurance in Ukraine, as well as when determining directions for improvement and increasing the level of effectiveness of property insurance; comparison - when assessing the features and dynamics of property insurance, as well as the researched structures of the main types of property insurance; tabular method - for displaying statistical indicators of the dynamics of insurance premiums and payments in terms of types of property insurance; modeling method – for displaying property types of insurance and the dynamics of insurance premiums and payments. The results. The economic essence of property insurance and the main approaches to its classification have been studied. An assessment of the features and dynamics of property insurance is provided, as well as the structure of the main types of property insurance is investigated. The main problems and obstacles affecting the effectiveness of property insurance in Ukraine are identified, in particular macroeconomic, such as the volatility of the economy and legislative changes, and microeconomic - the quality of service provided by insurers, the level of consumer awareness and their trust in insurance products. Directions for improving and increasing the level of efficiency of property insurance are proposed, including the development of new insurance products, optimization of risk assessment processes and insurance payouts, as well as the implementation of advanced IT solutions to increase the efficiency of insurance companies. In particular, it is recommended to focus on increasing the financial literacy of the population, expanding reinsurance opportunities and improving state regulation.

Disparities in property insurance relief among socially vulnerable Texas communities after Winter Storm Uri.

Property insurance is an important tool for resiliency from the accelerating impacts of climate-intensified extreme weather events. However, disparities in property insurance payouts may reduce their potential protective effects. The objective of this study was to quantify disparities in insurance payouts by Texas' insurers after the 2021 Winter Storm Uri, and to understand if any socioeconomic factors were associated with higher rates of declined relief. We extracted data from the Texas Department of Insurance on rates of denied insurance claims by zip code and county at 1 month and 13 months into the recovery period. We then linked these data to community-level socioeconomic information. Finally, we produced separate linear regressions for each predictor and covariate. Across both time points, communities with a higher proportion of Hispanic people, primary Spanish speakers, people who did not graduate high school, and people living below the federal poverty line were significantly more likely to experience denied claims. Communities with higher social vulnerability scores also experienced more denied claims. While financial security is a critical social determinant of health, findings suggest that insurers may be engaging in structurally discriminatory practices and failing to provide relief for people from socially vulnerable communities in the wake of climate-intensified events.

Statistical inference for mixed jump processes by Markov switching model with application to identify seismicity levels

Describing the non-stationarity of mixed stochastic jump processes presents a formidable challenge. This study employs a mixed compound Poisson process by Markov switching model (CPMSM) to address the issue of overdispersed data of random jumps. The Poisson rate is governed by a continuous-time Markov chain in this model. By assuming independence of the compound Poisson process and jump sizes, we present a generalized algorithm to estimate the parameters of CPMSM and try to predict the future behavior of this stochastic system. To investigate the potential application of this model and the accuracy of our algorithm, we provide a numerical simulation example in the context of the auto insurance payout scenario. The results suggest that CPMSM is an effective method of describing jump behavior controlled by random counts with mode switching via a Markov chain. Furthermore, we demonstrate a specific application of this model in identifying seismicity levels of Greek earthquake data and identify four hidden states. Finally, we compare its fitting effectiveness with the ETAS model using two public earthquake datasets in Japan and Iran.

A semiparametric spatio‐temporal model of crop yield trend and its implication to insurance rating

AbstractWe demonstrate the benefit of spatial smoothing for crop trend estimation with a deterministic spatio‐temporal trend model. The proposed model is semiparametric, where the parametric temporal trend is modeled with a two‐knot spline function for forecasting robustness, and the nonparametric spatially‐varying coefficients are modeled by the radial basis function method for flexibility. To select the smoothing parameter of our trend model, we propose a forward validation criterion tailored to meet the forecasting nature of rating crop insurance. This criterion is based on a rolling regression approach that adds one year of data at a time for validation. We also propose a new criterion for model comparison using relative mean squared error in forecasting insurance payouts. Our empirical results show that the proposed trend model is more efficient and capable of identifying profitable insurance policies than two competing models in most state‐crop combinations.

Measuring low-value care in hospital discharge records: evidence from China

Plenty of efforts have been made to reduce the use of low-value care (the care that is not expected to provide net benefits for patients) across the world, but measures of low-value care have not been developed in China. This study aims to develop hospital discharge records-based measures of low-value surgical procedures, evaluate their annual use and associated expenditure, and analyze the practice patterns by characterizing its temporal trends and correlations across rates of different low-value procedures within hospitals. Informed by evidence-based lists including Choosing Wisely, we developed 11 measures of low-value surgical procedures. We evaluated the count and proportion of low-value episodes, as well as the proportion of expenditure and medical insurance payouts for these episodes, using hospital discharge records in Sichuan Province, China during a period of 2016-2022. We compared the count and expenditure detected by different versions of these measures, which varied in sensitivity and specificity. We characterized the temporal trends in the rate of low-value surgical procedures and estimated the annual percent change using joint-point regression. Additionally, we calculated the Spearman correlation coefficients between the risk-standardized rates of low-value procedures which were estimated by multilevel models adjusting for case mix across hospitals. Low-value episodes detected by more specific versions of measures accounted for 3.25% (range, 0.11%-71.66%), and constituted 6.03% (range, 0.32%-84.63%) and 5.90% (range, 0.33%-82.86%) of overall expenditure and medical insurance payouts, respectively. The three figures accounted for 5.90%, 8.41%, and 8.38% in terms of more sensitive versions of measures. Almost half of the low-value procedures (five out of eleven) experienced an increase in rates during the period of 2016-2022, with four of them increasing over 20% per year. There was no significant correlation across risk-standardized rates of different low-value procedures within hospitals (mean r for pairwise, 0.03; CI,-0.02, 0.07). Despite overall low-value practices detected by the 11 developed measures was modest, certain clinical specialties were plagued by widespread low-value practices which imposed heavy economic burdens for the healthcare system. Given the pervasive and significant upward trends in rates of low-value practices, it has become increasingly urgent to reduce such practices. Interventions in reducing low-value practices in China would be procedure-specific as practice patterns of low-value care varied by procedures and common drivers of low-value practices may not exist. The National Science Foundation of China (72074163), Taikang Yicai Public Health and Epidemic Control Fund, Sichuan Science and Technology Program (2022YFS0052 and 2021YFQ0060), and Sichuan University (2018hhf-27 and SKSYL201811).

Relationship between residential house damage and flood characteristics: A case study in the Teesta River Basin, Bangladesh

The flood damage function model is indispensable for flood damage assessment as it can provide useful information for establishing flood protection strategies. For the assessment of residential house damage in different areas, flood damage function models have been traditionally proposed considering only the depth–damage curve. However, flood duration and flood may also have an influence on flood damage. Conventionally, the damage rate was estimated based on information about monetary losses collected from local people or insurance payout databases. This research proposes a new methodology to establish a flood damage function model that considers flood depth, flood duration, and flood velocity. Field surveys were conducted in the Teesta River Basin of rural Bangladesh. For each house, a questionnaire survey was conducted to identify the flood information (flood depth, flood duration, and the qualitative representation of flood velocity), household structure information (area, plinth height, and ceiling height), structural damage mechanism, and the required amount of material and labor to repair the damage after each flood event. Finally, a flood damage function model including the impacts of house types and different flood parameters was established through multiple regression analysis. The consistency of the model was verified through the estimation of different statistical parameters. It can serve as a flood loss estimation model as it correlates flooding with various parameters, such as building materials and their damage mechanism.

Parametric Insurance: A Mechanism to Finance Disaster Resilience and Transitioning to a Low Carbon Economy in the Caribbean

Caribbean small island developing states (SIDS) are being disproportionately affected by climate change. While no country wants to accept legal liability for their emissions, the Caribbean region faces an urgent need to mobilize financing to address loss and damage. This study proposed a voluntary insurance to address the loss and damage from climate change. Voluntary insurance can be used to pool risk across countries and make a payout to cover the loss from extreme weather events. The insurance payout could be parametric, which can eliminate the trouble assessing of losses in indemnity insurance. The key features affecting the trigger for the payout could be the occurrence of the named peril, and meteorological data such as precipitation. The size of the payout would be determined by estimating the loss and damage of Caribbean SIDS from extreme weather events. The premium could be based on solidarity and thus can be the average cost of the total payout per annum. Wavelet coherence could be used to measure the dependence between the precipitation and loss and damage estimate rather than correlation. Payouts to governments provide crucial financial resources for rebuilding infrastructure more sustainably.

Retrospective analysis shows the cost of Mohs surgery decreases when adjusted for medical inflation

Mohs surgery (MS) is the gold standard for treating nonmelanoma skin cancers in cosmetically sensitive areas. To investigate MS costs over time when adjusting for medical inflation while considering the perspective of patients, payers, and health care systems. A retrospective claim analysis using data from the International Business Machines MarketScanCommercial Claims and Encounters Database from 2007 through 2019 was performed. A query of the database for any instance of a MS-specific Current Procedural Terminology (CPT) code in adults (17311, 17312, 17313, 17314, and 17315) was conducted. Aggregate data per claim regarding coinsurance, total cost, deductible, copay, and insurance payout were provided for each CPT code annually. The total adjusted cost per claim decreased significantly (P<.001) for 4 of the 5 MS-specific CPT codes between 2007 and 2019: 17311 (-25%), 17312 (-15%), 17313 (-25%), and 17314 (-18%). The patient's adjusted out-of-pocket expense increased significantly (P<.0001) for 4 of the 5 MS-specific CPT codes: 17311 (33%), 17312 (45%), 17313 (34%), and 17314 (43%). Among the 4 most used MS-specific CPT codes (17311, 17312, 17313, and 17314), the total cost per claim decreased and the patient's out-of-pocket expense increased from 2007 to 2019.

Uncertainty in the drylands: Rethinking in/formal insurance from pastoral East Africa

Amidst climatic and economic volatility, agricultural development and climate adaptation policies have increasingly turned to weather microinsurance to manage uncertainties, particularly in dryland pastoral and agricultural settings. While the political embrace of insurance has been cause for concern amongst those who fear insurance will undermine embedded coping mechanisms and moral economies, economists have puzzled over low insurance adoption rates amongst target populations. This article argues for an approach that scrutinizes insurance in relation to dynamic social practices and norms for responding to uncertainty. We employ this approach to investigate pastoralists’ encounters with index-based livestock insurance in Northern Kenya and Southern Ethiopia. Drawing on interview, ethnographic, and survey data, we demonstrate how insurance is understood within larger moral economies and collective imaginaries for living with and managing uncertainty in the drylands. Relational understandings shape pastoralists’ participation in risk-sharing arrangements, collective and individual decisions about livestock insurance purchase, and eventual uses of insurance payouts. Payouts also support a broad array of social reproductive purposes and investments in social and political life. As we conclude, these findings upset the binary between formal and informal insurance, revealing how “formal” index insurance must be negotiated with embedded social affiliations, rights, obligations, and understandings of uncertainty.

The role of peer imitation in agricultural index insurance adoption: Findings from lab‐in‐the‐field experiments in Kyrgyzstan

AbstractFrequent climate shocks require farmers in developing countries to increase their resilience. Although index insurance is often discussed as a promising climate adaptation strategy, take‐up rates are still low. This study primarily explores the role of peer behavior as peer imitation in the demand for three marketable and unsubsidized crop index insurance options. Furthermore, the influence of trust and understanding is investigated. We collected data in lab‐in‐the‐field experiments among farmers in Kyrgyzstan, where index insurance is planned for imminent implementation. Applying ordered logit estimations, our results show significant and strong peer imitation effects. Imitation attitudes decrease with own insurance experience and received insurance payouts, but intensify with peer size, insurance trust and practical insurance understanding. While trust robustly increases index insurance adoption, understanding effects only gain significance in the dynamic perspective. These findings underline the importance of community‐based extension treatments and trust toward the uptake of innovative agricultural technologies in the first steps of dissemination.

INNOVATIVE METHODOLOGY IN FINANCIAL ANALYSIS OF INSURANCE ORGANIZATIONS

Insurance, as one of the main methods of distributing various risks that arise in an open market economy, is itself subject to certain risks. Its consistency, financial stability, as well as the sufficiency of financial results for the recovery of activities in the future are critical not only for insurance companies, but also for the regulatory body of financial bases and reinsurance subjects. It is important to ensure financial stability and confidence in financial markets, especially for countries with transition economies that have transformed from a closed economy to an open one. The article includes the analysis of the insurance organizations of Azerbaijan. Based on a systematic approach, analysis, synthesis, graphical and statistical methods, the main indicators of the insurance market and insurance organizations for the last time have been studied. The article examines the peculiarities of the formation and development of insurance relations in Azerbaijan, analyzes the stages of insurance development, assesses the impact of state decisions on the regulation of insurance organizations on their financial condition. The author has examined the dynamics of insurance premiums and insurance payouts in Azerbaijan over the past 11 years, the number of insurance organizations as the main participants in the insurance market, the number of concluded insurance contracts as the main indicator of the formation of insurance culture, and the prospects for the development of the insurance market. The main purpose of conducting financial analysis in the insurance sector is to maintain trust in the financial markets, assess the reliability of the insurer and comply with public interests. The second part of the article examines the peculiarities of this process, methods of analysis, financial indicators used in planning and analysis of the process. In the third part of the article, the main financial indicators of the life insurance companies operating in Azerbaijan for the last three years have been analyzed based on the financial statements, as well as financial indicators intended for use in the research process. Based on the analysis results, the recommendations have been given regarding directions for the development of the insurance market in Azerbaijan, improvement of financial reporting in insurance organizations, improvement of financial inclusion and strengthening of the stability of insurance companies’ activities.

The gendered impacts of index-insurance on food-consumption: Evidence from southern Ethiopia

Index insurance has been promoted as an innovative strategy for enhancing long-term resilience to climate-related shocks and providing financial inclusion, particularly to poor women farmers in developing countries. In this paper, we evaluate the gendered impact of an index-based livestock insurance product on food consumption among pastoral households in southern Ethiopia. We exploit intertemporal variation in household risk exposure and insurance payouts to evaluate the ex ante and ex post insurance impacts and use randomly distributed discount coupons to instrument the insurance purchase variables. We find that during the pre-drought period, a previous season insurance purchase and the intensity of insurance coverage significantly and equally reduces food expenditure in male- and female-headed households. In the post-drought period, we find that an insurance payout significantly increases food expenditure per adult equivalent among female-headed households.

Страхова діяльність в Україні на прикладі страхової компанії

Abstract. Introduction. The article analyzes the state of the insurance company PJSC «SK Arsenal Strahuvaniya», examines the economic processes directly related to the conduct of insurance activities. Institutions and organizations of which JSC "Arsenal Insurance" PJSC is a member have been considered, and its main competitors on the domestic insurance market have been singled out. Purpose. The purpose of the article is to conduct an analysis of the company, which is being studied according to the main economic indicators, and to develop practical recommendations for improving the efficiency of its activities on the market of Ukraine. Results. Analytical data reflecting the net financial results of the insurance company for 2017-2021 are given. The general dynamics of insurance payments received and insurance payments made by this insurance company were analyzed. The rating of Arsenal Insurance PJSC for the first half of 2022 among other insurance companies of Ukraine in terms of capital, retained earnings, gross insurance premiums and the amount of insurance payouts has been determined. The dynamics of retained earnings of the insurance company for 2017-2021, which characterizes the efficiency of the business entity, were analyzed. Conclusions. The strengths and weaknesses of the insurance company's activities are highlighted, as well as its potential opportunities and threats using a SWOT analysis. It was found that the insurance company "Arsenal Insurance" is a powerful player on the insurance market of Ukraine and has valid licenses to provide financial services for more than 30 types of insurance. The company works to be not just among the best, but to be a leader in the insurance market and provide the highest quality service.