Non-Life insurance 65.12

Report
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 publishing
 FISIM: 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 security
65.1 Insurance
65.11 Life insurance 6511
65.12 Non-life insurance 6512
65.2 Reinsurance
65.20 Reinsurance 6520
65.3 Pension funding
65.30 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 euro
 From 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)
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
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About the industry (4/4)
Non-life insurance: premiums written (BtoB)
- Premiums written (BtoB) were in 2012
€1.7bn (The Federation of Finnish
Financial Services)
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
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Different approaches

Activity-based  premiums + invested income - claims

Assumption of risk  premiums + invested income
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Methods
Model pricing
 Difficult to maintain?
 Unit value
 Quality changes?
 Premiums
 Method in CPI; claims (compensations paid) are
deducted from the value weight of insurance premiums
 Inconsistencies 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

Sample
 4 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 output
 premiums + 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?
Susanna Tåg
[email protected]
tel. +358 9 1734 2991
Anna-Riikka Pitkänen
[email protected]
tel. +358 9 1734 3466
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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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