Director Presents at ARIA Conference

• August 10th, 2017
• in Uncategorized

The summer months offer a full schedule of conference opportunities for researchers. The Alabama Center for Insurance Information and Research (ACIIR) is pleased to announce a full line-up of presentations for its researchers.

The ACIIR’s representative researchers will attend four conferences with experts from their field between the months of August and November. These conferences are an important networking opportunity as well as a chance to generate interest in the academic and practical contributions the ACIIR provides.

In August, the ACIIR sent Director Lars Powell, Associate Researcher Sebastian Awondo, and Postdoctoral Researcher Boyi Zhuang to the international gathering of insurance experts held by the American Risk and Insurance Association (ARIA).

“Attending others’ presentations and talking with these people offered me some great ideas and insights for future research,” said Zhuang. “Overall, this year’s ARIA meeting was one of the best-organized conferences and it offered a wonderful experience.”

Powell and Zhuang presented their joint project, Automobile Insurance, and Credit Shocks: Evidence of Market Competition from Credit-Based Insurance Scoring to the gathering.

“Dr. Zhuang and I use data on insurance prices and credit scores to estimate a relationship,” said Powell. “Our results show that increasing credit risk actually decreased the price of automobile insurance during the recession. While this result might seem counter-intuitive on its face, we develop a consistent theory and test for empirical robustness. As credit gets worse, insurance pricing becomes more accurate. This forces insurers in a competitive market to reduce prices.”

As the students return to The University of Alabama’s campus this fall, the ACIIR is looking ahead to the upcoming conferences with anticipation.

“The most important reason for attending this type of conference is to learn about other scholars’ research,” said Powell. “At ARIA 2017, I watched 18 research or practice-oriented presentations on a spectrum of insurance-related topics.”

White House Panel Discusses New Study by UA’s Insurance Research Center

• August 3rd, 2016
• in Uncategorized

TUSCALOOSA, Ala. – A new study on the resale value of fortified home construction by The University of Alabama’s Insurance Research Center was the topic of discussion today at the White House. The panel discussed property loss mitigation – past, present, and future – at this morning’s White House Forum on Smart Finance for Disaster Resilience. The Alabama Center for Insurance Information and Research, and the Insurance Institute for Business & Home Safety were present for the panel discussion.

“This report is a great example of the practical application of academic research methods,” said Lars Powell, director of the Alabama Center for Insurance Information and Research. “We are very confident in the results and hope they will affect public and private behavior to make exposed communities more resilient to natural disasters.”

“During the past eight years, committed leadership from the White House has effectively framed and advanced the issue of mitigation throughout the public and private sectors,” said Debra Ballen, IBHS general counsel and senior vice president, public policy. “Today, people at all levels of government, as well as businesses and individuals are more focused on mitigating damage from severe weather risks than ever before.”

When asked what successful mitigation looks like, Ballen said strong, well-enforced building codes are the starting point, but there are limitations with codes. She noted that 13 states do not currently have statewide codes in place and many locations with codes do not enforce them effectively.

“This led IBHS to develop its voluntary, market-based FORTIFIED Home™ program, which is a set of engineering and building standards designed to help strengthen new and existing homes through system-specific building upgrades to minimum code requirements that reduce damage from specific natural hazards,” Ballen said.

The study, “Estimating the Effect of FORTIFIED™ Home Construction on Home Resale Value,” is about the effect of IBHS FORTIFIED Home™ designations on home values in Mobile and Baldwin counties in Alabama.

ACIIR’s study found that switching from a conventional construction standard to a Fortified designation increases the value of a home by nearly 7 percent—holding all other variables constant. Our findings suggest that building Fortified houses or retrofitting houses to meet Fortified standards is an economically sound investment. The additional cost of building or retrofitting is frequently is less than 7 percent of home value; therefore, the benefit of a Fortified designation is very likely to outweigh costs. This is without considering other direct benefits such as insurance premium discounts, potential uninsured rebuilding costs, and the inconvenience of temporary housing following a disaster. ACIIR adds that given the robustness of statistical results, they believe it appropriate for appraisers and financial institutions to reflect Fortified designations in appraisals for use in the mortgage process.

In addition to ACIIR staff, the report is co-authored with professors from Auburn University and the University of Mississippi with expertise in finance and real estate.

“This is tangible evidence that FORTIFIED homes are not only more disaster-resistant, they also are being valued higher in the marketplace,” Ballen said. “We need only look at the FORTIFIED homes that survived Hurricane Ike in 2008 on the Bolivar Peninsula in Texas, while virtually all others around them were demolished, to know FORTIFIED is a robust and effective resilient construction standard. Thanks to Dr. Powell’s research, we now know that FORTIFIED also increases the financial value of homes.”

A copy of the study can be downloaded here.