Collateral protection insurance

Collateral Protection Insurance, or CPI, insures property (primarily vehicles) held as collateral for loans made by lending institutions. CPI may be classified as single-interest insurance if it protects the interest of the lender, a single party, or as dual-interest insurance coverage if it protects the interest of both the lender and the borrower.

Upon signing a loan agreement, the borrower typically agrees to purchase and maintain insurance that must include comprehensive and collision coverage and list the lending institution as the lienholder. If the borrower fails to purchase such coverage, the lender is left vulnerable to losses, and the lender turns to a CPI provider to protect its interests against loss. There is a need for CPI in the market because in the United States nearly 15 percent of all drivers are uninsured.

Lenders purchase CPI in order to manage their risk of loss by transferring the risk to an insurance company. By doing so, lenders also protect the interests of their customers, borrowers, and investors. Unlike other forms of insurance available to lenders, such as blanket insurance that impacts borrowers that have already purchased insurance, CPI affects only uninsured borrowers. CPI is therefore designed to be equitable to the lender and insured borrowers.

Additionally, depending upon the structure of the CPI policy chosen by the lender, the uninsured borrower may also be protected in several ways. For instance, a policy may provide that if collateral is damaged, it can be repaired and retained by the borrower. If the collateral is damaged beyond repair, CPI insurance can pay off the loan.

How CPI Works

When a borrower takes out a loan for a vehicle at a lending institution, he or she signs an agreement to maintain dual-interest insurance, protecting both the borrower and the lender with comprehensive and collision coverage on the vehicle throughout the life of the loan. The borrower provides proof of insurance to the lender, which is verified by the CPI provider or a tracking company (eg. Miniter Group).

If proof of insurance is not received, notices are sent to borrowers prompting them to obtain required coverage. If responses to notices are not received, the lending institution may choose to have CPI coverage “force-placed” on the borrower’s loan to protect its interest from damage or loss.

The lending institution passes the premium charge on to the borrower by adding the premium to the loan principal and increasing the loan payments. If the borrower subsequently provides proof of insurance, a refund is issued.

Throughout the life of a loan, the CPI provider monitors proof of insurance to ensure that policies remain in force. If policies lapse, notices are sent in accordance with the procedure outlined above.

Past Problems

Interest in collateral protection insurance increased in the late 1980s when, in response to a bank crises, regulators recommended that assets securing loans be insured and, if borrowers did not obtain insurance, that lenders obtain CPI. The rise in CPI activity generated by this recommendation also coincided with a number of consumer complaints, including suits from borrowers.

Borrower lawsuits were often prompted by lenders’ providing inadequate disclosure regarding the right to force-place CPI policies, force-placing policies with unnecessary coverages, and not disclosing they might be making a commission on the transaction. Additionally, some CPI providers had administrative problems with their programs, including the inability to receive and process insurance documents in a timely manner and ineffective tracking technology. These problems resulted in sending unnecessary letters to borrowers, issuing policies to borrowers who were in fact insured, and delays in processing premium refunds when proof of insurance was received, all of which served to exacerbate borrower complaints.

Title 4. Regulation of Interest, Loans, and Financed Transactions Subtitle A. Interest Chapter 307.Collateral Protection Insurance CREDITOR LIABILITY. (a) A creditor, its insurer, or the insurer's agent that places collateral protection insurance in substantial compliance with the terms of this chapter is not directly or indirectly liable to a debtor, cosigner, or guarantor or any other person in connection with the placement of the collateral protection insurance.

(b) This chapter does not impose a fiduciary relationship between the creditor and debtor. Placement of collateral protection insurance is for the principal purpose of protecting the interest of the creditor if the debtor fails to insure collateral as required by the credit agreement.

(c) A creditor is not required under this chapter to purchase collateral protection insurance or to otherwise insure collateral. A creditor is not liable to a debtor or any other person for failing to purchase collateral protection insurance, failing to purchase a certain amount or level of coverage of collateral protection insurance, or purchasing collateral protection insurance that protects only the interests of the creditor or less than all the interest of a debtor. This chapter does not create a cause of action for damages on behalf of a debtor or any other person in connection with the placement of collateral protection insurance.

Market Response and Current State

Lenders improved their contract language to address the disclosure problems that existed in the past. Additionally, the practices and supporting technologies of the CPI market have evolved since the 1980s. Today, leading CPI providers provide online tracking systems that are updated in real time and are used by providers, borrowers, and lenders to communicate and coordinate on insurance-related issues.

CPI providers have also implemented electronic data interchange (EDI) with borrowers’ private insurance carriers in order to maintain current information on required insurance. This has enabled CPI providers to more accurately place insurance only on noncompliant borrowers and to process adjustments and refunds quickly when proof of insurance is subsequently received.

Because of the improvements made in CPI administration, interest in CPI insurance again increased through the early 2000s to the present day. Additionally, a driving factor behind the growth in the CPI marketplace has been in the longer duration of loans. For instance, by mid-2003, the average length of an auto loan at credit unions exceeded 62 months. The longer the term of a loan, the more likely it is that a borrower will be in a negative-equity, or “upside-down,” situation. Borrowers who are upside down are also more likely to default on loan payments, resulting in more repossessions for lenders who then must deal with uninsured damage to repossessed vehicles.

From http://en.wikipedia.org/

Climate risk

Climate risk means a risk resulting from climate change and affecting natural and human systems and regions.

In the course of increasing global temperature and extreme weather phenomena the Intergovernmental Panel on Climate Change (IPCC) has been founded by the United Nations Environmental Programme (UNEP) and the World Meteorological Organization (WMO) for a better understanding of climate change and meeting concerns of these observations. Its main aim is evaluating climate risks and exploring strategies for the prevention of these risks.

Climate risks

As per current projections of IPCC the following future effects have to be expected:

* Continuous increase of temperature
* Cumulation of extreme weather phenomena
* Bumper crops and crop failure
* Polar cap melting
* Changes of the planet’s ecology
* Spreading diseases
* Attenuation of the North Atlantic Drift

While affecting all economic sectors, the effect on single continents will differ. Beside these direct physical climate risks there are also indirect derived ones:

* Physical risks
* Regulational risks
* Litigational risks
* Competition risks
* Production risks
* Reputation risks

Physical risks

Direct risks of climate change are expected especially for branches, which strongly depend on natural resources like agriculture, fishing, forestry, health care, real estate and tourism. For example storms and floodings damage buildings and infrastructure, whereas hot summers with less precipitation cause crop failure.

Regulational risks

The governmental endeavours to reduce climate costs have direct effects on economy. For example the targets regarding emissions within the Kyoto-Protocol shall be realised by implementing emissions trading. By this instrument the value of emissions can be quantified monetarily, approximating the value of avoiding hazardous substances. This value shall be internalized by companies and considered in investment decisions. By considering emission costs the prices for i.e. energy and transport can increase and therefore change consumer demand. The insecurity of legislation leads to indefinite adjournation of projects and investments.

Litigational risks

Similar to the tobacco industry industries producing much greenhouse gases are exposed to the risk of an increasing number of lawsuits, if damages can be traced back to emissions, i.e. for floodings, crop failure, etc.

Competition risks

If companies do not take measures to reduce climate risks they are competitively disadvantaged. This might lead to increasing production costs caused by obsolete technologies and therefore to decreasing profits.

Production risks

Production shortfalls can result from direct or indirect climate risks. I.e. hurricanes damaging oil production facilities can lead to a scarcity of oil and increasing prices. Also the price for energy will rise, because heatwaves cause water scarcity and therefore the supply for cooling water of power plants becomes short.

Reputation risks

Companies who are publicly criticized for their environmental policy or high emission rates, might lose customers, because of negative reputation. This risk is currently subordinate.

Climate opportunities

Besides climate risks also opportunities can derive from climate change for some branches and innovative companies, i.e. for the automobile and renewable energy sectors. Especially energy-intensive sectors can reduce energy costs by using more efficient technologies, which necessarily have to be developed in near future.

From http://en.wikipedia.org/

Choosing Healthplans All Together

"Choosing Healthplans All Together" (CHAT) is the name given to a simulation exercise in which players decide which benefit types (e.g. hospitalization, consultations, tests, imaging, medicines, etc) they would like to include in their health insurance package, and what level of service (basic or high) they prioritize. This activity emphasizes the critical need to design health insurance benefit packages based on local information. The core goal of this exercise is to ascertain which benefit package best reflects the priorities of the group of players within a finite budget allocated for health insurance and within the circumstances in which the participants live.

The CHAT simulation exercise consists of a game-like activity in which the participants (usually in groups of 12 to 15 people) can choose between different benefit types, and for each type, the coverage level that are realistically priced, based on actuarial estimates reflecting the unit cost and utilization data that apply locally, and that were used to calculate the costs before the simulation exercise unfolds. In this way, the simulation exercise can focus on a simplified decision making process that enables participants to visualize the trade-offs they make, while the complicated actuarial calculations involving statistical information are separated.

The CHAT exercise is usually run in several rounds to facilitate the learning process. In the first round, participants individually choose benefit packages that meet their and their families’ needs; the first round serves mainly to teach participants the rules of the game. In subsequent rounds, participants can validate their choices by checking how well they would be covered under different scenarios. The scenarios are described in “health event cards” that each player pulls out from a deck of cards in turn, and reads out aloud; this way, the entire group can validate choices made in the previous round. As the CHAT tool is intended to design a health insurance benefit package for a specific target group, the entire group of participants has to reach consensus on one benefit package for the entire group or community in one of the rounds. The entire process is led by a facilitator who follows a script, which ensures that explanations and process are as standard and comparable as possible in different groups or locations. The process can therefore be seen as a version of a Focus group Discussion.

In 2005 the CHAT tool was thoroughly revised to be tested in the context of a low-income country, with prospective clients who are simultaneously characterized by having low-income, low-education, low-numeracy, rural, and with little or no experience with insurance. Premiums must be low for the poor target population. However, low premiums impose limited coverage, or rationing of benefits. The testing took place in India., As the target population has no access to a national health insurance scheme and rarely buys commercial health insurance products, any attempt to upscale demand for HI among grassroots groups (in India and elsewhere) would require establishing the specific benefits that clients prioritize within a defined, very low, budget. The CHAT simulation exercise had to be changed to give participants choices reflecting the reality prevailing in rural India. Thus, fewer benefit types were offered in India compared to those offered in the US version of CHAT. The levels of benefits had to be reduced as well (basic-or-high, versus the basic-or-medium-or-high options in the US) and the service levels had to be redesigned to reflect only differences in the degree of reimbursement (in the Indian version) while excluding qualitative aspects of healthcare services such as choice of provider (referred to in the US version). And, obviously, the actuarial estimates of the costs of benefits, and consequently also the overall limited cost of the premium payable, were adapted to context.

The exercise in India involved a number of persons who were new to the topic of giving prospective clients choice. Some of the persons who were involved, or observed the CHAT experimentation in the field, offered their impressions of the impact of the CHAT exercises in India: “… have personally experienced / observed that participants – illiteracy notwithstanding – come to an understanding of the concept of insurance… and would like insurance to be available in their villages… The CHAT tool can facilitate the best community choice through consensus… CHAT enhances clients’ awareness of the link between premiums they pay and benefits they can reasonably expect from the insurance… This learning culture of CHAT can clear misunderstandings and, consequently, people will have confidence in the scheme… Only by consulting the people themselves can one break away from the current traditional method of designing insurance solutions based on biased information… and overcome the prejudice that the illiterate (poor) are unable to decide their own lives and that health insurance is too complicated for them” (see the Changemakers Forum:)

The salient point is that the poor themselves are best placed to determine what should be included in their benefit package, as this involvement creates trust, acceptance and willingness to be insured.

As for the substantive results of the CHAT exercises in India, the most consistent finding has been that respondents selected broad benefit packages at basic coverage levels that reflect high aggregate costs (unavailable on the market today) over narrow packages with higher coverage. This brings to light an important mismatch between prevailing demand of health insurance among the poor in India and prevailing supply of health insurance in India, which is dominated by packages that cover mainly low-frequency-&-high-cost events. Furthermore, close to 100% of respondents included coverage of medicines and maternity in the benefit-package. Both these benefits are excluded from commercial HI in India today.

The original CHAT tool was developed in 1995 by physician ethicists at the National Institutes of Health and the University of Michigan in the United States. It was tested in the US in various locations.

From http://en.wikipedia.org/

China Insurance Regulatory Commission

The China Insurance Regulatory Commission (CIRC) is an agency of China authorized by the State Council to regulate the Chinese insurance products and services market and maintain legal and stable operations of insurance industry. It was founded on November 18, 1998, upgraded from a semi-ministerial to a ministerial institution in 2003, and currently has 31 local offices in every province except Taiwan.

Structure

Internal Setup of the CIRC is:

* General Office
* Development and Reform Department
* Finance and Accounting Department
* Property Insurance Regulatory Department
* Personal Insurance Regulatory Department
* Insurance Intermediaries Regulatory Department
* Insurance Fund Management Regulatory Department
* International Department
* Legal Affairs Department
* Statistics and IT Department
* Local Offices Administration Department
* Personnel and Education Department
* Disciplinary Inspection Department

Funds

In September 2008, CIRC set up a nonprofit state-owned corporation with a registered capital of 100 million yuan to manage its insurance protection fund, amounting to at least 7 billion yuan (about US$1 billion).

From http://en.wikipedia.org/

Chartered Property Casualty Underwriter

Chartered Property Casualty Underwriter (CPCU(R)) is a professional designation in property-casualty insurance and risk management. It is the premier designation in the insurance industry, akin to the Certified Public Accountant (CPA) for the accounting industry. Approximately 65,000 people have earned the designation, since its inception in 1942. The rigorous curriculum includes eight (8) post-secondary undergraduate-, or graduate-level courses covering topics such as insurance law, history, contracts, ratemaking, and risk management, as well as business courses in finance, corporate structure, and ethics.

Designees must pass exams in five (5) core courses and three (3) courses in either a personal or commercial insurance concentration. These exams are standardized, three-hour essay- or objective-type exams. Essay exams consist of two types of questions. Part "A" questions test to determine understanding of the course's terminology, concepts, and content. Part "B" questions test to determine the ability of the examinee to apply the information to case-based scenarios.

CPCU designees are also bound by a Code of Ethics, and must satisfy an experience requirement of at least two years of industry experience. The CPCU designation is administered by the American Institute for Chartered Property and Casualty Underwriters

Designation holders have formed a professional society, the Chartered Property Casualty Underwriter (CPCU) Society. In addition to annual national meetings which serves as a conferment ceremony, the society has local chapters throughout out the country.

Five core courses:
CPCU 510 Foundations of Risk Management, Insurance, and Professionalism
CPCU 520 Insurance Operations, Regulation, and Statutory Accounting
CPCU 530 The Legal Environment of Insurance
CPCU 540 Finance for Risk Management and Insurance Professionals
CPCU 560 Financial Services Institutions

Commercial Concentration (with personal survey)
CPCU 551 Commercial Property Risk Management and Insurance
CPCU 552 Commercial Liability Risk Management and Insurance
CPCU 553 Survey of Personal Risk Management, Insurance, and Financial Planning

Personal Concentration (with commercial survey)
CPCU 555 Personal Risk Management and Property-Liability Insurance
CPCU 556 Personal Financial Planning
CPCU 557 Survey of Commercial Risk Management and Insurance

From http://en.wikipedia.org/