Climate Change and Global Warming (EX) Task Force
Climate Change and Global Warming (EX) Task Force Page
Executive (EX) Committee Task Forces and Working Groups Summary Report
Summer 2009 Meeting Summaries Index
The Climate Change and Global Warming (EX) Task Force met Friday, June 12.
During this meeting, The Task Force:
- Discussed follow-up activities related to the Climate Risk Disclosure Survey. Andrew Melnyk (American Council of Life Insurers—ACLI) stated that two companies have committed (one other has expressed interest) to participating in a 2009 survey. Those insurers have requested to remain anonymous for now. Information from AIG was also presented, which included the company’s eco-friendly building and risk-modeling initiatives. America’s Health Insurance Plans (AHIP) added that they have spoken to their members and a few health plans have expressed a willingness to complete the survey; two already have. AHIP expects to provide the Task Force with anonymous results by mid-July, and certainly by the Fall National Meeting. NAIC staff presented the Task Force with options for compilation and public distribution of the survey results. The financial impact needs to be investigated to determine which of the following options is most efficient.
- Consumer Information Source, which is available to regulators and the public, perhaps within an addition of group code, with a querying tool.
- General e-mail address for submitting surveys and a manual process to aggregate the data, with reports provided to through SERFF.
- Interactive PDF file for surveys, which would allow for querying the responses.
- Discussed a possible Climate Change and Global Warming Summit. The Summit would either coincide with a national meeting (possibly the Fall National Meeting in Washington, D.C.) or occur during a series of webinar modules. Pennsylvania Insurance Commissioner Joel Ario pointed out that by having the Summit in the District of Columbia, there would be more access to national speakers and agencies, with the only problem being scheduling. The suggested agenda would include an introductory keynote or plenary session, followed by breakout detail sessions on such topics as pay-as-you-drive (PAYD), green building and fostering connections between climate scientists and risk modelers, and then concluding with a plenary session. Due to budgetary concerns, webcasting would not be available, although adding a phone line might be possible. There were also suggestions to have a focus around the Climate Risk Disclosure Survey and the pilot survey results.
- Received a presentation on the PAYD insurance program by Todd Litman (Victoria Transport Policy Institute). PAYD pricing converts insurance to a variable cost with respect to vehicle travel, so premiums are directly related to annual mileage. All existing rating factors are included, so a motorist who currently pays $400 annual premiums would pay about 3¢ per vehicle-mile, and one who currently pays $1,800 would pay 15¢ per mile. PAYD could be optional for consumers and insurers. The consumer could choose between paying premiums by the vehicle-year or by the vehicle-mile.
- Motorist prepays for expected mileage. At the end of the term, motorist pays balance or receives a return of premium.
- Insurer measures vehicle travel using odometer readings, in-vehicle instruments and/or GPS systems.
- Insurance companies could charge a lower rate for pre-paid than for post-paid vehicle-miles.
- Minimum annual mileage purchase (e.g., 3,000 miles) guarantees recovery of basic costs.
Mileage cannot be used instead of other rating factors, but accuracy improves significantly if annual mileage is incorporated, in addition to existing factors.
- Why PAYD?
- Increases actuarial accuracy
- Increases road safety
- Saves energy and reduces emissions (including greenhouse gases)
- Provides consumers with choices and potential cost-savings
- Increases insurance affordability
- Reduces uninsured driving
- Reduces congestion
- Reduces road and parking facility costs
- Current Implementation
- MileMeter—Introduced in Texas.
- Progressive Insurance—MyRate available in several states.
- California Department of Insurance PAYD policy.
- Washington State: Puget Sound pilot project (regional, state and federal funds).
- Twelve of 33 state climate action plans explicitly recommend PAYD insurance implementation (Arizona, California, Colorado, Maryland, Maine, Minnesota, New Hampshire, New Mexico, North Carolina, Rhode Island, Virginia and Vermont).
- South Africa: Nedbank—“Pay-Per-K.”
- European odometer-based PAYD programs.
- Australian PAYD program.
The American Insurance Association (AIA) expressed concern over mandating as opposed to encouraging PAYD, stating that a “one-size-fits–all” model would be less advantageous to allowing differences among competing insurers. The AIA encouraged offering flexibility and expressed an interest in working with regulators on this topic. There was discussion on the advantages and disadvantages for consumers and insurers. Insurers could achieve more market share, but the benefits would return to the consumer, so profit (in theory) would go down slightly. Data collection and verification could also be costly for insurers.
- Received an overview of Green Product Opportunities. Industry representatives commented on innovations developed to be more environmentally aware. Andrew Logan (Ceres) reported that Ceres had published a paper, From Risk to Opportunity: Insurer Responses to Climate Change, which reports a significant increase in green products offerings on a global basis. A recent Ceres webinar on this topic is also available at www.ceres.org/insurance.
Action Items:
There were no action items. |
