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JULY 2007 HOT TOPICSTRIA Has Positive Effects on Market for Terrorism Insurance
Under such conditions, legislative strategies that perform reasonably well compared to alternatives over a wide range of plausible futures are desirable. RAND is conducting a study that helps provide policymakers with some insight into different legislative strategies by using computer simulation. An interim report assesses the performance of three TRIA-related policy options: TRIA as currently authorized, no government terrorism risk insurance program (equivalent to letting TRIA expire), and a simple extension of TRIA that leaves the structure of TRIA unchanged but requires insurers to offer coverage for both conventional and NBCR attacks. Currently, insurers must offer terrorism coverage only for conventional attacks. The study assesses the interventions in terms of two conventional attacks—1- and 10-ton truck bombs—and four NBCR ones—a 5-kiloton nuclear bomb, an outdoor anthrax attack, an attack using a radiological device (a so-called “dirty bomb”), and an indoor sarin attack. RAND's approach scans thousands of combinations of parameter values related to attack type, insurance industry uncertainties, and post attack government intervention uncertainties. The end result is thousands of plausible scenarios for each intervention, with intervention performance measured in terms of four outcomes: (1) fraction of losses for which victims receive no compensation, either from insurers or the government; (2) cost to taxpayers; (3) fraction of the insurance industry's net worth used; (4) cost to future policyholders. The results from the study show that, for conventional attacks, TRIA performs better on the outcome measures examined than does letting the program expire, but it does not effectively address the risks that NBCR attacks present to either businesses or taxpayers. Contrary to what has sometimes been argued, the results show that over a broad range of assumptions, the expected costs to taxpayers with TRIA for conventional attacks are lower than if TRIA were allowed to expire. The research also shows that a simple extension to TRIA that requires insurers to offer NBCR coverage along with coverage for conventional attacks without other changes in the program has little upside in addressing NBCR attacks and adds some unintended consequences in dealing with conventional ones. READ THE RESEARCH BRIEF: Assessing Policy Options for Renewing the Terrorism Risk Insurance ActREAD MORE: TRIA Hot Topic
What Does a Class Action Against an Insurance Company Look Like?
A new RAND Corporation study provides the most comprehensive portrait to date of a subset of such litigation: class actions against insurance companies. Based on a detailed survey of large insurers named in class actions, the study describes the general characteristics of more than 700 cases—trends in numbers, their allegations, and their outcomes. The research shows that the number of class actions against insurers increased by nearly 600 percent over the 10-year study period (1993–2002). It also shows that, of all attempted class actions, only 12 percent of the cases were settled as a class, with 37 percent being disposed of by the judge with a pretrial ruling in favor of the defendants. The plaintiffs dismissed their cases voluntarily in 27 percent of the cases, and, of the rest, most were settled on an individual basis. The study also provides some insights into the likely effects of the Class Action Fairness Act. READ THE RESEARCH BRIEF: Anatomy of an Insurance Class ActionREAD THE REPORT: Class Actions in the United States |
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RAND's Institute for Civil Justice provides objective research on civil justice issues. ICJ studies can be found at www.rand.org/icj/. The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address the challenges facing the public and private sectors around the world. Copyright © 2007 RAND Corporation. 1776 Main Street Santa Monica, CA 90401-3208. RAND® is a registered trademark. The RAND Institute for Civil Justice Congressional Newsletter is distributed on an opt-in basis only by visiting us at www.rand.org. We respect your privacy. If you do not wish to receive this periodic newsletter, please email ocr@rand.org or call (703) 413-1100 x5395. View this newsletter on the web at http://www.rand.org/ccjrd/0707/congress/newsletters/civil_justice/2007/07/. |
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Congress is currently wrestling with whether to extend the Terrorism Risk Insurance Act, or TRIA—legislation passed after the 9/11 attacks to provide a temporary federal terrorism risk insurance program. Whether to reauthorize TRIA, modify it, or let it expire is a difficult question to answer because key factors in how effective various options would be are highly uncertain. For example, there are uncertainties about the rate at which businesses would “take up” insurance coverage for property losses from terrorist attacks under different government interventions in the terrorism insurance market. There are also uncertainties about the frequency of attacks and types of attacks—conventional or nuclear, biological, chemical, radiological (NBCR).
Consumer class actions are a controversial feature of the civil justice system. Proponents argue that class actions provide consumers with their only meaningful recourse when individual amounts of money sought are small; critics decry them as nothing more than legalized blackmail. And although class actions can involve millions of people and millions of dollars, little is known about the dimensions of this type of litigation.
