Non-Life insurance 65.12

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65.12 Non-Life Insurance Developing a new industry index

Susanna Tåg

15.5.2014

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Agenda

Background

Classification

Definition

About the industry

Different approaches

Methods

Situation in some other countries

Data collection and weights

Challenges

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Background

Developing industry-specific indices for K Financial andinsurance industry

Direct banking: calculating, not yet publishing

FISIM: following, from NA, not yet published

Next starting to develop the index for insurances, firstly fornon-life insurances

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Classification

65 Insurance, reinsurance and pension funding, exceptcompulsory 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 orgroups of units protect themselves against the negativefinancial consequences of specific uncertain events.

Two types of insurance can be distinguished: socialinsurance and other insurance.”

http://africamentor.com/wp-content/uploads/2012/08/politicalriskins.jpg

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About the industry (1/4)

The insurance policy defines the roles of the partiesinvolved, which are as follows:

(a) the insurer providing cover;

(b) the policyholder responsible for paying premiums;

(d) the insured person or object that is subject to the risk

The most common form of insurance is called directinsurance, which can be divided into life insurance andnon-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 FinnishFinancial Services)

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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 FinnishFinancial Services)

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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) arededucted from the value weight of insurance premiums

Inconsistencies between nominal value and productionvolume? (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 vehicleinsurance, fire insurance, marine and other transportation insuranceservices

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Situation in some other countries

USA

Direct Health and medical insurance carriers, direct property andcasualty insurance carriers

Methods: model pricing (estimated premiums for “frozen” policies) oractual 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 insurancemarket

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 ofthe 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 expectedclaim = margin (ESA 2010)

Use as a deflator?

“Given that the premiums are set with the futureexpected claims and investment earning in mind; adeflator constructed from premiums data alone, thoughnot ideal, may be sufficient” (Yocom et al. 2011)

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Thank you for your attention!Questions?

Susanna Tåg

susanna.tag@stat.fi

tel. +358 9 1734 2991

Anna-Riikka Pitkänen

anna-riikka.pitkanen@stat.fi

tel. +358 9 1734 3466

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Sources

Chessa, A.G. 2010. A new method for price and volumemeasurement of non-life insurance services for the Dutchnational accounts. Statistics Netherlands.

European System of National Accounts (ESA 2010)

Yocom, J., Opsitnik, L. and Neofotistos, S. 2011. ”DirectInsurance Carriers Services in Canada ”. StatisticsCanada.