Short-term Insurance Research Articles

Risk attitude toward on-demand insurance: an experimental study

AbstractOn-demand insurance products cover risks for short periods of time via a smartphone or other electronic device. Such insurance contracts give policyholders the freedom to choose when to be insured in a flexible way. On-demand contracts may change the way risk is perceived. Therefore, we conduct an experiment and show that individuals can become exceptionally risk-averse when offered short-term insurance. We show two main reasons for this result: first, the underlying risk is often overestimated by the subjects due to a miscalculation of the loss probabilities. Second, the shorter valuation horizon of on-demand insurance contracts leads to myopic loss aversion.

Research on China insurance demand forecasting: Based on mixed frequency data model.

In this paper, we introduce the mixed-frequency data model (MIDAS) to China's insurance demand forecasting. We select the monthly indicators Consumer Confidence Index (CCI), China Economic Policy Uncertainty Index (EPU), Consumer Price Index (PPI), and quarterly indicator Depth of Insurance (TID) to construct a Mixed Data Sampling (MIDAS) regression model, which is used to study the impact and forecasting effect of CCI, EPU, and PPI on China's insurance demand. To ensure forecasting accuracy, we investigate the forecasting effects of the MIDAS models with different weighting functions, forecasting windows, and a combination of forecasting methods, and use the selected optimal MIDAS models to forecast the short-term insurance demand in China. The experimental results show that the MIDAS model has good forecasting performance, especially in short-term forecasting. Rolling window and recursive identification prediction can improve the prediction accuracy, and the combination prediction makes the results more robust. Consumer confidence is the main factor influencing the demand for insurance during the COVID-19 period, and the demand for insurance is most sensitive to changes in consumer confidence. Shortly, China's insurance demand is expected to return to the pre-COVID-19 level by 2023Q2, showing positive development. The findings of the study provide new ideas for China's insurance policymaking.

System-Based Interventions to Address Physician Burnout: A Qualitative Study of Canadian Family Physicians' Experiences During the COVID-19 Pandemic.

Medical professionals experienced high rates of burnout and moral distress during the COVID-19 pandemic. In Canada, burnout has been linked to a growing number of family physicians (FPs) leaving the workforce, increasing the number of patients without access to a regular doctor. This study explores the different factors that impacted FPs' experience with burnout and moral distress during the pandemic, with the goal of identifying system-based interventions aimed at supporting FP well-being and improving retention. We conducted semi-structured qualitative interviews with FPs across four health regions in Canada. Participants were asked about the roles they assumed during different stages of the pandemic, and they were also encouraged to describe their well-being, including relevant supports and barriers. We used thematic analysis to examine themes relating to FP mental health and well-being. We interviewed 68 FPs across the four health regions. We identified two overarching themes related to moral distress and burnout: (1) inability to provide appropriate care, and (2) system-related stressors and buffers of burnout. FPs expressed concern about the quality of care their patients were able to receive during the pandemic, citing instances where pandemic restrictions limited their ability to access critical preventative and diagnostic services. Participants also described four factors that alleviated or exacerbated feelings of burnout, including: (1) workload, (2) payment model, (3) locum coverage, and (4) team and peer support. The COVID-19 pandemic limited FPs' ability to provide quality care to patients, and contributed to increased moral distress and burnout. These findings highlight the importance of implementing system-wide interventions to improve FP well-being during public health emergencies. These could include the expansion of interprofessional team-based models of care, alternate remuneration models for primary care (ie, non-fee-for-service), organized locum programs, and the availability of short-term insurance programs to cover fixed practice operating costs.

Premium Estimation of General Insurance Contracts Using Buhlmann Credibility Model

Insurance coverage is reliant on appropriate premium determination, a focus addressed in this study through the application credibility theory. The aim was to compute short-term insurance premiums by leveraging authentic data from general insurance contracts as published in the IRA annual reports spanning from 2013 to 2021. The study employed the Buhlmann credibility model to derive net credible premiums for 13 non-life insurance contracts, assuming constant changes in business volumes. The estimation of credibility premiums was conducted by initially calculating within and between-portfolio variance with an aim of determining these premiums through linear estimation approach with the help of the credibility premium formula. The results revealed consistent credibility factors across all contracts, although other influencing factors were neglected. Therefore, it was highly recommended that an appropriate credibility model alongside other factors that influence premium estimation be considered to enhance the accuracy of premium estimates. Moreover, embracing heterogeneity over homogeneity is advised to better reflect individual risk profiles. The research underscores the importance of effective premium determination in insurance firms, as premiums constitute their primary revenue. Stakeholders, including insurers and regulators, are encouraged to integrate this approach and other relevant factors to enhance pricing accuracy and overall sector practices.

Non-life insurance: The state of the art of determining the superior method for pricing automobile insurance premiums using archival technique

The pricing of insurance premiums in the non-life insurance sector remains a challenging and complex task. It demands a delicate balance between accurately estimating risk exposure and ensuring profitability for insurers. Generalised Linear Regression Models (GLMs) have become the preferred methods for premium price modelling in the motor insurance sector. While the approach of using a single superior model on which predictions are based ignores the use of robust estimator models. This paper examines various methodologies and sheds light on superiority of twenty-two models compared to each other for pricing automobile insurance. These methods vary from traditional actuarial methods to the modern statistical models such as machine learning algorithms. By using archival technique, their inferiority and superiority are explored, considering the ever-changing landscape of risk factors and market dynamics. Furthermore, it highlights the potential benefits of leveraging these methods and the mechanism for pricing short-term insurance, particularly in motor vehicle insurance. It also develops a framework that can be used in pricing to cater to risk analysis constituents to mitigate uncertainties and provide good services to clients. Our findings show that ANN, NN, XGB, random forest (RF) are superior models, and we conclude that the modern statistical methods can accurately estimate the risk exposure as compared to traditional methods such as the GLMs.

Investigating factors that affect the willingness to adopt peer-to-peer short-term insurance in South Africa

PurposeThis study aims to identify the propensity for clients (legal and natural persons) to adopt peer-to-peer (P2P) short-term insurance policies as opposed to traditional and/or centralized short-term.Design/methodology/approachIn this paper data was collected through a survey of 102 sampled short-term insurance clients using convenience sampling. The TAM2 questionnaire was adapted to evaluate the intention to adopt a P2P insurance policy.FindingsThe findings of this study shed light on the factors influencing the adoption and (dis)continuation of short-term insurance products, both traditional and digital, among South African consumers. The results demonstrate that perceived usefulness, ease of use, trust, risk perception and subjective norm play crucial roles in individuals' intention to use or (dis)continue the use of these insurance products.Practical implicationsThe study's findings provide actionable insights for practitioners in the short-term insurance sector, with a focus on marketers and e-commerce professionals. These insights emphasize the need to prioritize user-friendly design and trust-building measures in the development of P2P insurance systems. Additionally, practitioners should consider harnessing the power of social influence and carefully balancing innovative features with familiarity in their marketing efforts. These strategies are poised to enhance the adoption and competitive positioning of P2P insurance solutions amidst the evolving landscape of digital transformation.Originality/valueThis study makes a substantial contribution by employing the technology acceptance model (TAM) in a novel and unconventional manner. It not only explicates the intricate dynamics governing the adoption and discontinuation of short-term insurance products, encompassing both conventional and digital alternatives, within the South African consumer milieu but also extends its purview to infer the reasons behind the limited widespread adoption of the digital counterpart, despite its superior value proposition compared to the traditional offering. The findings elucidate the critical determinants shaping individuals' decisions in this dynamic market segment. This research enhances the global discourse on insurance adoption with a unique South African perspective and furnishes insurers and marketers with empirically grounded insights to optimize their strategies and cultivate substantive connections with their target demographic.

The Impact of Competition on Performance of Short Term Insurance Companies in Zimbabwe

The research analyzed the impact of competition on the performance of short-term insurance companies. To achieve this the authors looked at how different competitiveness factors influence profitability of a firm. Factors like availability of competitive rivals, availability of new market entrants , price where analyzed to establish how they affect profitability of any company which was measured by Return on equity. Data obtained from Ipec reports and financial statements of 24 insurance companies was analyzed using panel data regression. The research found a significant negative linear association between ROA and Threat from New Market Entrants and a significant negative linear association between ROA and Competitive Rivalry it also found a insignificant positive linear association between ROA and existence of Buyer Power and insignificant positive linear association between ROA and existence price competition.

Economic Growth and the Insurance Sector in South Africa: Toda-Yamamoto

Abstract. Introduction. The connection between the real economy and the financial sector continues to be a subject of debate amongst scholars. There is a plethora of studies dedicated to unravelling the relationship between economic activity and financial progress. However, a large share of those studies has concentrated on banking and the capital market industries; the studies that have undertaken to decipher the connection between the insurance industry and prosperity in the economy are insufficient. Purpose. This study attempts to explore the link between South Africa's insurance industry and economic growth. The study made use of secondary time-series quarterly data and employed the Toda-Yamamoto (non-Granger causality) test. Results. Firstly, the findings show a uni-directional causal relationship running from long-term insurance to GDP percapita. Implying that the South African long-term insurance sector is supply-leading. Secondly, the results revealed that GDP percapita and the short-term insurance sector are interdependent (bi-directional relationship). Lastly, the findings showed a unidirectional causal relationship between GDP per-capita and total insurance assets. Conclusions. The results imply that the South African total insurance sector is supply-leading.

Implementasi Manajemen Kinerja Pemasaran pada Asuransi

Businesses must retain their clients to remain profitable. The academic field of management marketing considers customer relationship management (CRM) to be best suited to achieve this, whereas communications management focuses more on public relations (PR). The aim of this study is to analyze theories in the two disciplines and derive a theory that integrates CRM and PR client retention frameworks. The framework was then tested in-depth interviews with short-term insurance clients and short-term insurance providers (brokers and direct insurance) in South Africa to obtain perspectives from both parties. The importance of some of the fundamental elements found in the literature is emphasized, the importance of two elements is questioned and it is established that there are three inconsistencies between what providers consider important for clients to retain and what clients consider necessary for them to remain in a relationship with the insurer. This probably explains the many failed client retention attempts of South African brokers and direct insurers. Six new CRM and/or PR elements, not found in the literature, are presented in the article for exploration in future research. To assist client retention in the highly competitive short-term insurance industry, the results are applied to the core principles of Niemann's (2005) SA strategic integrated communication (IC) implementation model. Finally, the authors present an integrated approach to client retention strategy in the South African short-term insurance industry, combining marketing and communication theory.
 Keywords: insurance, work management,

On hybrid tree-based methods for short-term insurance claims

AbstractTwo-part framework and the Tweedie generalized linear model (GLM) have traditionally been used to model loss costs for short-term insurance contracts. For most portfolios of insurance claims, there is typically a large proportion of zero claims that leads to imbalances, resulting in lower prediction accuracy of these traditional approaches. In this article, we propose the use of tree-based methods with a hybrid structure that involves a two-step algorithm as an alternative approach. For example, the first step is the construction of a classification tree to build the probability model for claim frequency. The second step is the application of elastic net regression models at each terminal node from the classification tree to build the distribution models for claim severity. This hybrid structure captures the benefits of tuning hyperparameters at each step of the algorithm; this allows for improved prediction accuracy, and tuning can be performed to meet specific business objectives. An obvious major advantage of this hybrid structure is improved model interpretability. We examine and compare the predictive performance of this hybrid structure relative to the traditional Tweedie GLM using both simulated and real datasets. Our empirical results show that these hybrid tree-based methods produce more accurate and informative predictions.

Short-Term Insurance Claims Payments Forecasting with Holt-Winter Filtering and Residual Analysis

Time series are essential for anticipating various claims payment applications. For insurance firms to prevent significant losses brought on by potential future claims, the future values of predicted claims are crucial. Additionally, the ideal parameter is chosen artificially. By using a genuine application, the proposed model’s utility is demonstrated. Additionally, the ideal parameter is chosen artificially. By using a genuine application, the proposed model's utility is demonstrated. Also, the single exponential smoothing model is used for prediction under the Holt-Winters’ additive algorithm.

소액단기전문보험회사의 발전방안

The digitalization of the insurance industry is accelerating as non-face-to-face recruitment is highlighted after the global spread of COVID-19 in 2020. This change is positive in that there is a need for an insurance recruitment method that fits the trend of young people in their 20s and 30s and MZ generations who are passive in insurance subscription. While platform-oriented Big Tech's mail-order specialized insurance company (digital insurance company) is gradually developing, Internet and mobile-oriented small- and short-term specialized insurance companies (mini-insurance companies) are expected to enter the market. As the reinforcement of non-face-to-face sales channels of existing insurance companies is also becoming a reality, the insurance sales market is expected to be diverse according to consumers' tendencies.
 Therefore, this article sought ways to revitalize mini insurance companies, and in particular, compared with digital insurance companies and analyzed the causes of activation of Japanese small and short-term insurance companies. At this point, since the mini insurance company that the financial authorities expected has not emerged, it was considered that innovative companies that can promote innovation and convergence by utilizing the regulatory sandbox system should be promoted in the short term. Ultimately, it was considered necessary to lower the entry barrier for the small and short-term professional insurance industry to innovate the insurance industry. It is necessary to actively attract the emergence of new insurance companies by properly reviewing measures to alleviate high-level human and material factors equivalent to comprehensive insurance companies, supplementary measures using parent company-subsidiary company relationships, and non-face-to-face insurance recruitment measures such as mobile apps.

ОСОБЛИВОСТІ ЗДІЙСНЕННЯ ІНВЕСТИЦІЙНОЇ ДІЯЛЬНОСТІ СТРАХОВИМИ КОМПАНІЯМИ В УКРАЇНІ

The article studies the essence and features of the investment activity of insurance companies. It was found that the investment potential of an insurer, measured as its ability to carry out investment activities, is a characteristic of the company. The main financial resources for investment by an insurance company are its own and borrowed funds. Special attention is paid to the matter that there are legislative restrictions on the investment of insurance reserves by insurers, because the unconscious use of insurance reserves belonging to a group of attracted funds of insurance companies may cause a lack of funds to cover insurance claims. The insurer may dispose of the funds raised during a certain period, the time limits of which depend on what type of insurance the company carries out – life insurance or non-life insurance. It is specified that a non-life insurer can form only short-term insurance reserves and invest them in current financial investments with high liquidity. The life insurance companies that accumulate insurance reserves for a sufficiently long period can carry out long-term investment activities. The general level of development of the insurance market in Ukraine in 2018–2022 was studied. Among the main reasons for the reduction in the number of insurance companies over this period are noted: the introduction of solvency standards in 2018, the introduction of a new regulator presented by NBU, the Covid-19 pandemic and the crisis caused by it, and the russian invasion of Ukraine. The dynamics of the main performance indicators of insurers in recent years have been considered. During the period under review, there was a drop in almost all key performance indicators of insurance companies, except for the value of assets and the volume of insurance reserves. Among the key factors that restrain the development of investment activities of insurance companies are the difficult political and economic situation in the country, imperfect legislation, outdated state regulation regarding the placement of insurance reserves, low level of capitalization of the stock market, and high investment risks, which only increase the conservatism of insurers regarding the implementation of investment processes.

디지털플랫폼 보험상품에 관한 법적 연구

Digital platform insurance market is expected to grow rapidly due to the rapid development of IT technology and the spread of non-face-to-face culture due to corona 19. Related regulations such as the revision of the Data 3 Act have also improved in favor of the development of the digital platform insurance industry. However, the provision of health care data, which is the most important to insurance companies, has not been implemented properly until now. This is presumed to be due to a combination of extreme sensitivity of healthcare data, social wave in case of leakage, and long distrust of insurance companies. Therefore, prior to the utilization of healthcare data, insurance companies should prepare a firm plan for the protection of information subjects, and based on this, they should lead to social trust. In order to activate digital platform insurance products, it is necessary to revise the current Financial Consumer Protection Act to alleviate ambiguous and extensive explanation obligations. In particular, it is desirable to impose a differentiated explanation obligation by subdividing insurance products subject to explanation obligation. For small and short-term insurance companies, it is necessary to promote the development and sales of various digital platform insurance products by encouraging the establishment of the regulations by applying more relaxed regulatory requirements than existing insurance companies.

THE REGULATION OF ADVICE WITHIN THE FINANCIAL SERVICES SECTOR*

The Financial Services Sector has undergone quite significant legislative changes in the last number of years. These changes were mainly facilitated through the Financial Advisory and Intermediary Services Act (37 of 2002, hereinafter “the FAIS Act” or “FAIS”) together with the Policyholder Protection Rules (Long-Term Insurance) 2001 (GN R165 in GG 22085 of 2001-02-23) and the Policyholder Protection Rules (Short-Term Insurance) 2001 (GN 164 in GG 22084 of 2001-02-23). These rules were promulgated in terms of section 62 of the Long-Term Insurance Act (52 of 1998). However, the content of these rules was to a large extent duplicated in the General Code of Conduct for Authorised Financial Services Providers and Representatives (BN 80 of 2003, hereinafter “the Code of Conduct”). One ofthe main purposes of this legislation is the regulation of advice in order to enable clients to make informed decisions with regard to financial products and to ensure that intermediaries (commonly referred to as “brokers”) and insurers conduct business honestly and fairly, and with due care and diligence. The Act is ultimately aimed at the protection of consumers. It can be regarded as market conduct legislation as it provides for the regulation of the conduct of specifically providers of financial services and their representatives. Although financial advisors are still playing the same game, the FAIS Act has effectively changed the rules of the game. Financial advisors are consequently faced with the following decision: Accept the new rule changes and adapt your business to be consistent with legislation, or decide that the rule changes are too drastic and stop playing altogether. The FAIS Act, however, also created the need for a referee to ensure that all the players play according to the new rules. In this regard, Part IV of the Act made provision for the establishment of the Ombud for Financial Services Providers. The Office of the Ombud became operational in 2005and has since received numerous complaints regarding the furnishing of advice and has made several determinations. (Determinations of the Ombud can be accessed www.faisombud.co.za.) This note will examine the relevant sections in the legislation dealing with the regulation of advice. The position of the FAIS Ombud will be considered and recent determinations made by the Ombud on the subject of the furnishing of advice will be discussed.

Enterprise risk management and company ethics: The case of a short-term insurer in South Africa

The aim of this study was to investigate the relationship between enterprise risk management (ERM) and company ethics, so as to understand the central role of risk management in improving company ethics. A 5-point Likert scale questionnaire was used to survey all 122 employees of an insurance organization. The level of ethics was measured by posing questions on the integrity, trustworthiness, and level of respect for top management, middle management, and non-management. The overall Cronbach’s alpha for the instrument measuring the level of ethics was 0.865, indicating that the instrument was highly reliable.The relationship between ERM controls and the level of ethics was determined using regression analysis, which produced a F value of 0.268 (p-value 0.607), which implied that there is no relationship between ERM controls and the level of ethics. It was also ascertained that ethics and compliance-related issues are not fully embraced by the organization. This implied that the insurance company is at a level of “nominal” risk management with uncoordinated, top-down risk management activities.Since ethics risk exposure resulting from poor corporate governance has been identified by the Institute of Risk Management as being a key contributor to many business failures in South Africa (and internationally), the exploratory findings can stimulate the leadership to institute polices to mitigate poor governance and risk as this will benefit all stakeholders.

CURE OR CURSE? REGULATIONS ON THE DEMARCATION BETWEEN HEALTH-INSURANCE POLICIES AND MEDICAL SCHEMES

In South Africa, private insurance policies are regulated by the Long-term Insurance Act and the Short-term Insurance Act. Medical schemes fall under the Medical Schemes Act (131 of 1998) and yet, despite the fact that there are three dedicated statutes that deal with the risks relating to ill health, it seems that the distinction between insurance products and medical-scheme benefits isnot so clear. On 2 March 2012 National Treasury published the proposed amendment of regulations made under section 72 of the LTIA and under section 70 of the STIA. These are jointly referred to as the “Demarcation Regulations”. This note provides an overview of these proposals against the background of the difference between insurance business and medical-schemes business. In addition, itinvestigates the policy principles that informed the Demarcation Regulations and comments on the impact of those on the insurance industry and on medical schemes.

SO MUCH OWED BY SO MANY TO SO FEW: HOW THE FINANCIAL ADVISORY AND INTERMEDIARIES ACT 37 OF 2002 ADDRESSES “CONFLICT OF INTEREST”

Winston Churchill delivered his famous speech entitled “The Few” after the Battle of Britain of 1940. This historical conflict saw 2353 young men from Great Britain and 574 from overseas, pilots and other aircrew fly at least one authorized operational sortie with an eligible unit of the Royal Air Force or Fleet Air Arm during the period 10 July to 31 October 1940. Although conflict on the scale of a world war cannot be equated to conflicts of interest between financial-services providers (FSPs), representatives and clients, the potential damage that can be caused by intermediaries and representatives who act in their own interest can be devastating to that particular client. In addition, it also has wider implications for the financial-services industry. It is consequently up to the FinancialServices Board (FSB) to ensure that conflict of interest between intermediaries and representatives and clients are managed in anacceptable way. As a matter of background: The FSB was established by the Financial Services Board Act (97 of 1990) and has as its main objective the supervision of financial institutions in order to achieve maximum consumer protection. As such, the FSB acts as statutory registrar of a variety of financial institutions. Hattingh and Millard explain that the FSB is currently in control of the Collective Investment Schemes Control Act, the Financial Services Board Act, Financial Institutions (Protection of Funds) Act , Financial Supervision of the Road Accident Fund Act, Friendly Societies Act, Inspection of Financial Institutions Act, Long-term Insurance Act, Pension Funds Act, Short-term Insurance Act, Supervision of the Financial Institutions Rationalisation Act, the Securities Services Act, and the Financial Advisory and Intermediaries Act. The FSB drafted the FAIS Act with the aim of creating a regulatory structure which regulates the way in which intermediary and advisory services in respect of financial products are rendered. Conflict of interests is but one of the issues that arise between intermediaries, advisors, financial-services providers and clients and the purpose of this note is to analyse a number of key issues introduced by Board Notice 58 of 19 April 2010. This note sets out to explain what the position was before the introduction of the new rules on the management of conflict of interest. It then proceeds to discuss the new definitions that now form part of the legislation. In addition, it discusses the detailed provisions pertaining to conflict of interest and explains what a conflict-of-interest management policy entails. Finally, the note evaluates the new regulations and asks whether they have thepotential to eliminate unfair dealings by advisors and intermediaries and thereby enhancing the professionalism of those who work in the financial-services industry.

An investigation of an overlap in penalty calculations: profit commission in reinsurance treaties versus profit commission in binder agreements for underwriting managers

Reinsurance treaties and binder agreements regulate penalty calculations in the event the insurer and underwriting manager is unprofitable and/or profitable. The formulae and different premium terminologies are investigated to calculate loss ratios and whether there is an overlap in sliding scale penalty calculations/formulae relevant to loss ratios of treaties and binder agreements. Treaties and binder agreements generally use sliding scale penalties to calculate reinsurance commission or sharing in the insurer’s profits by an underwriting manager and is in conflict with the Conventional Penalties Act 15 of 1962 of South Africa. The Conventional Penalties Act 15 of 1962 must guide reinsurers and insurers in their profit calculations formulae to prevent any form of sliding scale penalties relevant to loss ratios. It is therefore suggested that a standard template of profit calculations and terminologies should be used in binder agreements to prevent different calculations of loss ratios in the short term insurance landscape. This will guide the Financial Conduct Authority Services (previously the Financial Services Board) to understand loss ratios of affordable short term financial products when compared to loss ratios of other short term financial products in South Africa.
 Keywords: Reinsurance commission; loss ratio; risk premium; penalties; underwriting manager

Enterprise Risk Management Maturity Levels of the Insurance Industry in Botswana

Enterprise Risk Management (ERM) has become a necessity in the financial sector to fulfil stakeholder expectations. Studies confirm that ERM impacts positively on the performance of firms. The main objective of the study was to assess ERM maturity levels of the insurance industry in Botswana. This was achieved through first designing a framework to measure enterprise risk management maturity levels. The ERMMF incorporated elements from COSO’s ERM framework and the AON risk maturity model obtained through literature review. Data were sourced from four strata; 9 long term insurance companies (15 respondents), 11 short-term insurance companies (19 respondents), 3 reinsurers (5 respondents), and 44 brokerages (75 respondents). While all organisations in the population were used, a sample of 114 out of possible 134 respondents was used. Data were analysed using SPSS version 16. The findings revealed that the insurance industry in Botswana had somewhat implemented ERM. It is therefore recommended that the insurance industry in Botswana should take ERM as a continuous process for growth in ERM maturity levels as such an improvement is highly likely to enhance their performance.