Fluent Essays

Each article summary must list the citation(APA format) for the article being summarized and provide 800-1000 words i which the student summarizes the main questions and conclusions of the paper and explains how the conclusions of the paper are useful to someone working in financial management of a corporation in the students current or proposed career path. The text of each summary must be 12-point Times New Roman font, with one-inch top, bottom, left, and right margins, and each summary must begin on a new page.Risk Management and Insurance Review C© Risk Management and Insurance Review, 2018, Vol. 21, No. 3, 389-411 DOI: 10.1111/rmir.12112 FEATURE ARTICLE A CONCEPTUAL MODEL FOR PRICING HEALTH AND LIFE INSURANCE USING WEARABLE TECHNOLOGY Michael McCrea Mark Farrell ABSTRACT A health risk score was created to investigate the possibility of using data provided by wearable technology to help predict overall health and mortality, with the ultimate goal of using this score to enhance the pricing of health or life insurance. Subjects were categorized into low-, increased-, and high- risk groups, and after results were adjusted for age and sex, Cox proportional hazards analysis revealed a high level of significance when predicting mortality. High-risk subjects were shown to have a hazard ratio of 2.1 relative to those in the low-risk group, which can be interpreted as an equivalent increase in age of 7.8 years. Our findings help to demonstrate the predictive capabilities of potential new rating factors, measured via wearables, that could feasibly be incorporated into actuarial insurance pricing models. The model also provides an initial step for insurers to begin to consider the incorporation of continuous wearable data into current risk models. With this in mind, an emphasis is placed on the limitations of the study in order to highlight the areas that must be addressed before incorporating aspects of this model within current pricing models. INTRODUCTION Much like the disruptions seen in the banking industry over the past decade, emerging technologies are revolutionizing the insurance industry. Traditional insurers are under pressure to innovate existing business models to retain a competitive edge (Hilton, 2017). Data from CB Insights showed funding to start-ups in the newly coined InsurTech industry has risen from $140 million in 2011 to $2.7 billion in 2016, and investment in the sector is expected to continue to grow as new technologies arise (Catlin et al., 2017; Jubraj et al., 2017). The primary driver of this change has been the increasingly larger amounts of personal data available to insurers, which offers the opportunity to predict the risk for each Michael McCrea and Mark Farrell are in Queen’s Management School, Queens’ University Belfast, Riddel Hall, 185 Stranmillis Rd, Belfast BT9 5EE, UK; e-mail: [email protected], [email protected] The authors would like to thank Anthony Horn, whose invaluable suggestions contributed significantly to the planning of this research. 389 390 RISK MANAGEMENT AND INSURANCE REVIEW customer and charge them accordingly. Traditionally, in life insurance, underwriting data come from a questionnaire and a medical examination performed by a registered nurse or licensed physician, depending on the coverage amount and the age of the customer. A new potential source of this information is the Internet of Things (IoT), composed of the network of physical objects that can connect to the Internet and communicateRisk Management and Insurance Review C© Risk Management and Insurance Review, 2018, Vol. 21, No. 3, 435-452 DOI: 10.1111/rmir.12109 FEATURE ARTICLE INTEGRATING A PROACTIVE TECHNIQUE INTO A HOLISTIC CYBER RISK MANAGEMENT APPROACH Angelica Marotta Michael McShane ABSTRACT Cyber threats are an emerging risk posing a range of challenges to organizations of all sizes. Corporate risk managers need to understand that cyber risk man- agement must not be a silo in the IT department. Cyber threats are the result of intelligent adaptive agents that cannot be managed by traditional risk man- agement techniques only. The article describes the honeypot concept, which is a proactive measure for identifying and gathering information about attackers in order to develop suitable and effective countermeasures. In addition, this article proposes the integration of the honeypot concept into a cyber risk man- agement approach based on the five preparedness mission areas of the Federal Emergency Management Agency (FEMA). INTRODUCTION Cyber risk has been a topic for years in IT and computer science journals, but only a few cyber risk articles have appeared in risk management and insurance journals. Hovav and D’Arcy (2003) and Gatzlaff and McCullough (2010) have researched cyber attacks from a financial economics perspective to investigate the effect of cyber attacks on an organization’s stock price. Biener et al. (2015) and Eling and Schnell (2016) provide an overview of the evolving cyber insurance market and the insurability of cyber risk, while Eling and Loperfido (2017) investigate and model data breaches from an actuarial perspective. These articles investigate cyber-related issues, but not the cyber risk man- agement process itself. Organizations can no longer afford to let cybersecurity dwell in a technical silo. Cyber threats are different from the risks faced by corporate risk man- agers. Unlike typical corporate risks, cyber threats result from intelligent actors who can adapt and change tactics as defenses are implemented, thus rendering past data quickly obsolete as a predictor of future attacks. In addition, cyber risks are plagued by information asymmetry, correlated loss, and interdependent security issues (Biener et al., 2015; Marotta et al., 2017; McShane et al., 2018; Shetty et al., 2018) that hamper traditional risk management and insurance practices from being effective. Angelica Marotta works at IIT-Italian National Research Council, Pisa, Italy, and is Research Affiliate, MIT Sloan School of Management, Cambridge, MA; e-mail: [email protected] Michael McShane is Associate Professor of Risk Management and Insurance, Old Dominion University, Norfolk, VA; e-mail: [email protected] 435 436 RISK MANAGEMENT AND INSURANCE REVIEW Like traditional terrorists, cyber criminals have an asymmetric information advantage and only need to be right once, while defenders need to be correct every time. Cyber threats are systemic and require much less effoRisk Management and Insurance Review C© Risk Management and Insurance Review, 2018, Vol. 21, No. 3, 413-433 DOI: 10.1111/rmir.12110 FEATURE ARTICLE DRIVERLESS TECHNOLOGIES AND THEIR EFFECTS ON INSURERS AND THE STATE: AN INITIAL ASSESSMENT Martin F. Grace Juliann Ping ABSTRACT This article explores the impacts of new auto technologies and their financial effects on insurance markets, a set of complementary services, and state rev- enues. We use data from the National Association of Insurance Commissioners, the National Highway Traffic Safety Administration’s Fatality Analysis Report- ing System, the Bureau of Justice Statistics, and the Census Bureau to create a data set that links industry and state finance variables to a set of variables related to driving. Our purpose in this initial assessment is to estimate the sen- sitivity of these financial variables to different indices of driving including the number of drivers, the number of cars licensed per year, and the number of vehicle miles driven. The resulting estimates are used to create elasticities to show how sensitive each is to changes brought about by the new technologies. INTRODUCTION One of the most salient social risks, the risk of automobile crashes, is predicted to change with the introduction of new driverless or autonomous technologies. Also, other benefits associated with of driverless technologies may also reduce other costs associated with driving such as its associated pollution, the demand for oil, and the widespread productivity losses due to both traffic congestion and crashes. This article attempts to document the effect of driverless technologies on insurance markets specifically as well as state revenues and services related to automobile insurance. As a first endeavor, we try to analyze the macro effects of a reduction in driving activity and its corresponding impact on losses and other types of accident-related expenditures. The United States experiences a significant cost due to auto crashes. A National High- way Traffic Safety Administration (NHTSA) report (2015) estimates the cost of driving crashes to be about $836 billion in 2010 (in 2018 dollars, $960 billion), which—in addition to the deaths, injuries, and property damages—also includes costs due to pollution, con- gestion, and reductions in quality of life. One of the reasons autonomous vehicles are so Martin F. Grace is the Harry Cochran Professor of Risk Management at Fox School of Business, Temple University, Philadelphia, Pennsylvania; e-mail: [email protected] Juliann Ping is a research assistant in the Department of Risk, Insurance and Healthcare Management at Fox School of Business, Temple University, Philadelphia, Pennsylvania. 413 414 RISK MANAGEMENT AND INSURANCE REVIEW interesting is because of their potential for significantly reducing these costs. Evidence that even the lowest level of automation, so-called Level 1 automation, which implies one automatic activity (like automatic brakinC© Risk Management and Insurance Review, 2011, Vol. 14, No. 2, 299-309 DOI: 10.1111/j.1540-6296.2011.01200.x EDUCATIONAL INSIGHTS USING TECHNOLOGY TO ENCOURAGE CRITICAL THINKING AND OPTIMAL DECISION MAKING IN RISK MANAGEMENT EDUCATION John Garvey Patrick Buckley ABSTRACT This article draws a link between the risk management failures in the financial services industry and the educational philosophy and teaching constraints at business schools. An innovative application of prediction market technology within business education is proposed as a method that can be used to encourage students to think about risk in an open and flexible way. This article explains how prediction markets also provide students with the necessary experience to critically evaluate and stress-test quantitative risk modeling techniques later in their academic and professional careers. INTRODUCTION The financial and economic crisis that we continue to endure presents a serious challenge to the teaching and learning strategies employed in universities. Business graduates are expected to have a deep knowledge of the theory that forms the bedrock of the financial system as well as the mathematical competence necessary to apply asset pricing and risk management methodologies. However, the techniques and models used to control and manage risk are often taught in an environment that does not provide sufficient space and time for rigorous debate and critical analysis. Students are often presented with subject knowledge in a way that the content has al- ready been carefully selected and sequenced by their lecturer. The education literature already notes that this method of providing teaching materials prevents an active learn- ing dynamic (Kinchin, Chadha, and Kokotailo, 2008). In the early stages of university business programs, the often large class sizes limit the opportunity for students to engage in realistic decision-making scenarios. The project described in this article is founded on providing students with an early testing ground for the application of risk management theory. The creation of a closed market populated by other class members is a departure from the traditional approach where students learn about the use of statistical mea- sures of risk such as standard deviation and correlation and become familiar with their John Garvey is a Lecturer in Risk Management and Insurance, Kemmy Business School, Uni- versity of Limerick; e-mail: [email protected] Patrick Buckley is at the Kemmy Business School, University of Limerick; e-mail: [email protected] 299 300 RISK MANAGEMENT AND INSURANCE REVIEW practical relevance to industry standards such as beta or value-at-risk through lectures and formulaic practice. The application by students of statistical methods in a real-time insurance market demonstrates the relevance of human behavior and expectations in driving market dynamics. Beyond the confines of the university campus we can observe increasing pressure on the C© Risk Management and Insurance Review, 2010, Vol. 13, No. 1, 85-109 DOI: 10.1111/j.1540-6296.2009.01175.x PERSPECTIVE ARTICLES TECHNOLOGY’S EFFECT ON PROPERTY–CASUALTY INSURANCE OPERATIONS Robert Puelz ABSTRACT The post-Glass–Steagall era has presented insurers with new opportunities and risks during a time when information flows and business processes are be- ing impacted by changing technology. In this article, we explore how insurers use and perceive current technology to carry out their operations by report- ing results from a sample of insurers that includes some of the nation’s largest property and casualty insurers. We find among insurers in our sample that an online channel is having a significant impact on customer retention and rev- enue enhancement, but a lesser impact on cost reduction. Interestingly, about two-thirds of our sample has experienced an increase in their overall number of transactions following the adoption on an online channel. Moreover, while the Internet is perceived as giving marketing benefits it is not being used as a substitute for agents. We find that 65 percent of respondents have used technol- ogy to integrate customer data across functional areas and another 23 percent plan to do so in the next 3 years. Nearly 71 percent of respondents have or plan to adopt service-oriented architecture in their technology infrastructure. INTRODUCTION One of the tasks of insurance academicians is to help stakeholders and students of the industry understand the functioning of insurance markets, the risk transfer that takes place, and the business proposition of how one can maximize the wealth of an insurer’s owners. Structural shifts in business occur for reasons attributable to knowledge, cre- ativity, and vision; technology is often a catalyst that nurtures new ways of thinking. The following encapsulates one insurance executive’s thinking about the industry: Among the student body are many who will be in the next generation of leaders in the insurance industry. They can look forward to a career with even more stimulating challenges than the industry offers today. There will be fewer people doing things that machines can do and more people doing those important things that only people can Robert Puelz is the Dexter Professor of Insurance, Edwin L. Cox School of Business, Southern Methodist University, Dallas, TX 75275; e-mail: [email protected] I am grateful to Jerry Johns of the Southwestern Insurance Information Services, and my communications with David Repinski of Cunningham & Lindsay, Mike Reid of Liberty Mutual, Jim Snikeris of Farmers, and James Lankford of Texas Farm Bureau. Finally, thanks to Robert Quirk and Henry Wyche for research assistance. This article was subject to double-blind peer review. 85 86 RISK MANAGEMENT AND INSURANCE REVIEW do. The most challenging aspects of these electronic methods are the human rather than the mechanical—the decrease in routine tasks; the varied new skills which are