Car Insurance

By some estimates, alternative risk transfer (ART) or financing (ARF) now account for half of all insurance business written in the United States. Eight years ago, no more than a third of all risks were ART-financed. Before long, traditional techniques will become the alternative. Standing the eternal verities on their head is no mean achievement. Insurance, in one form or another, has been around for several thousand years; ART is no more than 50 years old.

Insurance is among the most conservative of business practices, yet in relatively no time flat, it is graduating to a different way of doing things. Why? And what does this augur for the future of insurance?

The answer to those questions has to do with the shortcomings of traditional cover and the aggressive nature and customization that ART offers. In some ways, a parallel is to be found in the clothing industry, where “off-the-rack” has always outsold custom tailoring, mostly for financial reasons. Few of us are a perfect 40 short or size 12, but off-the-rack clothing fits us well enough, and besides, costs a fraction of hand-made garments. The key advantage of ART is that a well-crafted program need be no more expensive than traditional risk or, in some cases, more profitable.

Before considering the prospects for ART, a quick definition might be in order. ART allows companies to put together integrated products that are not readily available through the traditional markets. The simplest definition is thus a negative one: alternative risk solutions are those that are non-traditional. Another says that any company that commissions the creation of its own solutions to its risk financing needs is using ART. A third definition sees ART as the transfer of financial risk from the insurance industry to the capital markets and vice versa. None of those definitions is entirely satisfactory, but they provide a starting point.
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Traditional techniques offer policies to which companies must fit their requirements. ART solutions work the other way around: companies define their needs and solutions are then crafted for that company. No classes of business are excluded, and no risk that can be priced is left naked.

In his European Commission ART Market Study, John P. Ryan of Tillinghast Towers-Perrin, cited the main factors leading to the growth of the alternative risk market. Those factors include the volatility of the conventional market, resulting in the withdrawal of capacity in that market following soft markets or catastrophe events; the high cost of conventional reinsurance at such times; lack of capacity for large natural catastrophes and certain specialized lines such as medical malpractice; reduction in the demand for “pound-swapping” (whereby premiums payable are essentially just used to pay claims) insurance from corporate insurance purchasers and reinsurance buyers; increased retentions demanded by many large insurers and reinsurers and the greater volatility this creates in the reinsurance markets; convergence between banking, insurance and securities markets; greater emphasis on the efficient use of capital and subsequent risk diversification; greater sophistication in risk management techniques, including demands for an integrated approach to risk; intense competition causing both buyers and sellers to look for new solutions; and exceptional profits made in recent years by successful writers of ART products, attracting new entrants and increasing the capacity of the market.

Little wonder, then, that ART has grown so swiftly.

Captive insurance, the original ART technique, allowed companies to manage their own risk through purpose-built vehicles, retaining in the long term what would otherwise have been the broker’s margin and the insurer’s profit. Companies outside the insurance industry, not skilled at managing their risks or portfolios, hired captive managers and investment managers to perform those functions. Most captives succeeded. It was only when captives accrued serious capital that they began insuring unrelated risks, and that path sometimes led to disaster.

Bermuda and the Cayman Islands, the British Virgins and Barbados, and now Vermont, Hawaii and other states have built their insurance sectors on ART practices, especially captives. The simplest form of captive, the single-parent, was followed, in due course, by more complicated models: association or group captives, rent-a-captives and now segregated cell companies that aggregate diverse interests but segregate them internally for the protection of all. Risk retention groups, securitizations, derivatives, loss portfolio transfers, finite reinsurance, catastrophe bonds, reciprocal insurance exchange (in Canada), weather insurance–ART now has as many heads as Hydra.

There can be little doubt that ART will continue to grow in areas where both insurers and insureds can manage non-traditional risks in concert.

There is an assumption that ART works only, or best, for large companies. Yet that fails to hold true from either perspective. Barely half the thousand largest companies in the United States reportedly have captives, for example. And with modern management techniques, the longer the current hard market in property/casualty lasts, the greater the opportunities for smaller companies to move into ART.

Court of Appeal (Lord Justice Schiemann, Lord Justice Mance and Mrs Justice Smith) 12 December 2000

AN INSURANCE policy which covered the insured for third party risks not only whilst driving the insured car but also whilst driving any car with the owner’s permission was still valid, notwithstanding that the insured had sold and not replaced the car in respect of which was the policy had been issued.

The Court of Appeal dismissed the appeal of Simon Peter Dodson against a decision that summary judgment should be entered for the defendant insurance broker in a claim for an indemnity in respect of claims arising out of a road traffic accident.

The claimant instructed the defendant insurance broking firm, of which his father was principal, to put into effect a valid policy of insurance which would enable him to drive, subject to the owner’s permission, any motor car not belonging to him and not held under a hire purchase agreement by him. In particular he wished to be sure that he would be insured to drive any of his parents’ cars. A policy and certificate of motor insurance for the period from 11 September 1992 to 11 September 1993 were issued by Eagle Star. Clause 1(1) of the policy provided:

“The company will indemnify the insured in respect of legal liability for death of or bodily injury to any person and damage to property caused by or in connection with… (b) the driving by the insured (with the owner’s permission) of (c) any motor car or motor cycle neither owned nor held under a hire purchase agreement by the insured…”

On 17 April 1993 the claimant sold his car. On 16 May 1993 he was driving his mother’s car with her consent, when he was involved in a collision as a result of which one person was killed and two others were injured. Eagle Star declined to indemnify the claimant in respect of claims for damages arising out of the accident, asserting that his policy had become void and was not in force once he had sold his own car and failed to obtain an immediate replacement. The claimant sought an indemnity from the defendant on the basis that his liabilities had been caused by the defendant’s allegedly wrong and negligent advice.

The first step in purchasing motorcycle insurance is to contact your agent or broker with whom you currently have auto or home insurance. In several states, like California, you must have insurance coverage before you can bring your new bike home from the dealership. If your current insurance company does not cover motorcycles, talk with friends or others who already have coverage. This way, you’ll be able to work from a good list of recommended agencies to start out. You may also gain information through your salesperson and motorcycle magazines. Be cautious with your dealership though; they don’t always work with the best insurance companies. Don’t become pushed into something you’re not comfortable with.

HOT TIP!
If you are a first time, or even an experienced rider who has not taken a motorcycling safety course, put it on your “to do” list. Not only will it sharpen your street survival skills, but it will also bring you a discount on your insurance premium.

Things To Keep In Mind
Your premium will be based upon several key factors involved with your motorcycling situation. They include, but are not limited to:

-The motorcycle engine displacement size in cubic centimeters (cc)

-Type of motorcycle

-Brand of motorcycle

-Your age

-Your driving record

-Your driving experience

-Is the bike garaged?

-Location

-Number of intended miles driven weekly

Majority of the time, you’ll receive a higher premium with a larger displacement engine. These bikes are more expensive and provide higher performance.

The type of motorcycle you plan on insuring also affects premium price. A 500 cc cruiser will be cheaper to insure than a 500 cc sport bike. Sport bikes usually have fairings (plastic covers that shroud the engine), and other various pieces of bodywork that can make them expensive to repair in a crash or accident. The make (brand) of your motorcycle is not such a big factor, but it is taken into consideration. A brand with models few and far between will run higher than a common brand. Your age will affect your premium. Older drivers tend to experience cheaper rates than their younger counterpart, on the same motorcycle. Statistics show that riders under the age of 25 tend to be involved in the most accidents. Driving record and experience both affect your premium. If your record is blemished with tickets and accidents, then expect to pay more. Experience tends to go hand in hand with your age. Will your motorcycle be garaged, or parked out along the street? If you plan on leaving it out on the street, then you’ll experience a higher rate than if it is garaged. Leaving it parked along the street leaves the bike open to theft and accidents. If you live in a big city, your rates may slightly be higher than if you live in a rural area. Will the bike be your daily driver, or used for leisure? The mileage you tend to put on the bike on a weekly basis will push your premium up or down. If the motorcycle is your main mode of transportation, expect a higher rate.

The announcement of the deal was made by Independent Financial Marketing Group, a Purchase, N.Y.-based company. It’s not clear whether the deal will result in any layoffs by TCF, or if TCF employees will join the New York company.

TCF officials could not be reached for comment.

In addition to its banking network and services ,Wayzata-based TCF Financial has operated a broker/dealer unit, TCF Investments Inc., since 1994.

“This was a difficult decision,” said TCF Investments CEO Peter Torvik, in the statement released by Independent Financial. “We needed to improve technology and modernize processes without sacrificing our traditional level of service to customers and representatives.”

Through the agreement, TCF Bank’s 455 branches will have access to the Independent Financial’s products and services.

Motorcyclists must have insurance to operate their bikes on public roads and highways. Without it, you’re liable for any bodily injury or property damage you cause. You could also be ticketed for not having liability insurance if you’re involved in an accident.
Instructions

* STEP 1: Ask the agent or broker who currently insures your auto or home about motorcycle insurance. In some states, such as California, you must have insurance before you can pick up your new bike at the dealership.
* STEP 2: If your insurance company does not cover motorcycles, consult friends or neighbors who have coverage for their motorcycles for good agencies to contact.
* STEP 3: Talk to the cyclist or salesperson who sold you the motorcycle, and also look through motorcycle magazines, motorcycle Web sites and the yellow pages. Dealerships don’t always work with the best companies, and you might get talked into a policy you don’t want.
* STEP 4: Note that your premium rate is based upon factors such as the size, type and brand of bike, as well as your age, your driving record, your years of driving experience, your garaging location and the amount of miles you’re likely to drive in a week. Premium rates vary greatly from biker to biker.