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65.12 Non-Life Insurance Developing a new industry index
Susanna Tåg
15.5.2014
Agenda
Background Classification Definition About the industry Different approaches Methods Situation in some other countries Data collection and weights Challenges
Background
Developing industry-specific indices for K Financial and insurance industry
Direct banking: calculating, not yet publishingFISIM: following, from NA, not yet published
Next starting to develop the index for insurances, firstly for non-life insurances
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Classification
65 Insurance, reinsurance and pension funding, except compulsory social security65.1 Insurance
65.11 Life insurance 651165.12 Non-life insurance 6512
65.2 Reinsurance65.20 Reinsurance 6520
65.3 Pension funding65.30 Pension funding
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Definition
… according to ESA2010:
” Insurance is an activity whereby institutional units or groups of units protect themselves against the negative financial consequences of specific uncertain events.
Two types of insurance can be distinguished: social insurance and other insurance.”
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About the industry (1/4)
The insurance policy defines the roles of the parties involved, which are as follows:
(a) the insurer providing cover;
(b) the policyholder responsible for paying premiums;
(c) the beneficiary who receives compensation;
(d) the insured person or object that is subject to the risk
The most common form of insurance is called direct insurance, which can be divided into life insurance and non-life insurance
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About the industry (2/4)
The output of 65.1 Insurance in 2010: €1.9bn euroFrom which the output of 65.12 non-life insurance
€1.0bn
BtoB €584M, BtoC €420M
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About the industry (3/4)
Non-life insurance: premiums written (BtoAll)- Premiums written include
reinsurers’ part, not credit losses
- Premiums written (BtoAll) were in 2012 €3.6bn. (The Federation of Finnish Financial Services)
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Fire and other damage to property
Motor liability
Motor vehicle
Workers’ compensation
Other accident and health
General liability
Marine, aviation and transport
Legal expenses
Other direct insurance
Credit and suretyship
About the industry (4/4) Non-life insurance: premiums written (BtoB)
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Workers’ compensation
Fire and other damage to property
Motor vehicle
General liability
Motor liability
Other accident and health
Marine, aviation and transport
Other direct insurance
Credit and suretyship
Legal expenses
- Premiums written (BtoB) were in 2012 €1.7bn (The Federation of Finnish Financial Services)
Different approaches
Activity-based premiums + invested income - claims
Assumption of risk premiums + invested income
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Methods
Model pricingDifficult to maintain?
Unit value Quality changes?
PremiumsMethod in CPI; claims (compensations paid) are
deducted from the value weight of insurance premiumsInconsistencies between nominal value and production
volume? (NA)
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Situation in some other countries
The Czech Republic Motor damage insurance, fire insurance, theft or robbery insurance,
agriculture insurance Method: combination of model pricing/direct use of repeated services
Japan Voluntary motor vehicle insurance, compulsory motor vehicle
insurance, fire insurance, marine and other transportation insurance services
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Situation in some other countries
USA Direct Health and medical insurance carriers, direct property and
casualty insurance carriers Methods: model pricing (estimated premiums for “frozen” policies) or
actual premium charged Canada
Direct Life, health and medical insurance carriers, direct insurance (except life, health and medical) carrier, reinsurance carriers
Methods: model pricing or unit value
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Data collection and weights
Sample4 largest companies cover over 90 % of the insurance
market
Administrative data Questionnaire response burden
Weights Statistics on Insurance Activities
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Challenges (1/2)
“It is widely recognised that the insurance industry is one of the most difficult parts of the national accounts to deal with “
(Chessa, 2010)
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Challenges (2/2)
Definition of outputpremiums + investment income earned - the expected
claim = margin (ESA 2010) Use as a deflator?
“Given that the premiums are set with the future expected claims and investment earning in mind; a deflator constructed from premiums data alone, though not ideal, may be sufficient” (Yocom et al. 2011)
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Thank you for your attention!
Questions?
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Susanna Tå[email protected]
tel. +358 9 1734 2991
Anna-Riikka Pitkänen
[email protected]. +358 9 1734 3466
Sources
Chessa, A.G. 2010. A new method for price and volume measurement of non-life insurance services for the Dutch national accounts. Statistics Netherlands.
European System of National Accounts (ESA 2010) Yocom, J., Opsitnik, L. and Neofotistos, S. 2011. ”Direct
Insurance Carriers Services in Canada ”. Statistics Canada.
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