The Insurance Research Council (IRC), a division of the American Institute for CPCU and the Insurance Institute of America, provides timely and reliable research on public policy issues that affect insurers, their customers, and the general public. Terrie Edward Troxel says entities within and outside the property/casualty insurance business rely on IRC research to make major pricing, safety, and policy decisions.

The foundation of a successful business is sound decision making in allareas of the enterprise. Good decisions are based on considering as muchpertinent information as possible and then determining a course of actionbased on that information - and on one's experience and intuition. Relying on experience and intuition alone is pretty risky.

Since 1977, the IRC has used sophisticated data collection techniques and analyses to research key issues in the property/casualty insurance business, such as:
• Automobile injury claiming behavior and compensation. IRC studies look at trends in claiming behavior under alternative auto accident reparation systems and provide details concerning the type of injuries, the number of dollars of payment, and the economic losses on a state-by-state basis.
• Fraud and efforts to control fraud losses. IRC research examines the trends in claims fraud that push up insurance costs. IRC research in this area also measures the success of efforts by insurers and public officials to combat and control fraudulent claiming behavior.
• Insurance industry exposure to catastrophic losses from natural disasters. IRC studies have simulated how the insurance system would handle massive financial losses associated with major natural disasters.

Other major issues on which the IRC has produced research are urbaninsurance, auto theft, availability and cost of insurance for small businesses, environmental impairment liability, uninsured motorists, workplace safety, and adequacy of driver records.
IRC research is designed not only to provide sound information for insurersbut also to provide policy makers and opinion leaders with reports thatserve as objective guides to understand insurance related issues. The IRCdoes not advocate particular public policy positions, directly influencespecific legislative initiatives, or engage in lobbying communications. Itsresearch reports are widely used, however, to assist people in making sound decisions on legislative and regulatory issues. IRC-produced research has been useful in advancing public policy matters, such as automatic safety systems in automobiles, adoption and more rigorous enforcement of anti-drunk driving laws, and use of safer building designs and materials.

The IRC also conducts several surveys of US households each year thatmeasure public attitudes and beliefs on a variety of risk and insurance topics. This year, it released Public Attitude Monitor (PAM) surveys on the public's perception of the risk of being hit by a natural disaster; attitudes toward workers' compensation fraud and the Y2K computer problem; and views regarding vehicle theft and reducing accidents among the US's youngest and oldest drivers. These surveys are based on extensive in-person or telephone interviews conducted with people throughout the country. The results are interesting and sometimes quite surprising.They provide yet another set of information that can be useful in making certain types of insurance-related decisions.

Reports released in 1999
A 1999 PAM survey on respondents' expectations regarding the likelihood of being involved in a natural disaster revealed that a growing number of Americans, 60% of those responding to the survey, believe that a major natural disaster is likely to hit their location sometime in the next 10 years. In spite of that belief, however, few homeowners have purchased the supplemental insurance needed to protect them from the potentially large financial losses associated with natural disasters.

In a similar survey conducted by the IRC in 1995, less than half (48%) of those surveyed thought a natural disaster was likely to affect them.This change was not entirely unexpected, since the 10 most costly disasters in US history have occurred in the past decade. Disasters such as Hurricane Hugo in 1989, Hurricane Andrew in 1992, and the Northridge Earthquake in 1994 have increased public awareness of the tremendous threats posed by natural disasters.

What was somewhat surprising, however, is that the survey revealed that 27% of those responding plan to rely primarily on federal disaster relief rather than private insurance to recover from a natural disaster. People's reliance on federal disaster assistance may be based, in part, on a lack of understanding of what that assistance entails. The Federal Emergency Management Agency reports that federal disaster assistance is available in only 10% of all disasters. In addition, that relief takes the form of providing property owners with low-interest loans. Outright grants are made only to victims who cannot afford to repay a loan.The second PAM study released this year found that over one third of the respondents believe it is acceptable for employees to stay off work and workers' compensation benefits because they still feel some pain, even though their doctor said they are able to return to work. This study revealed that 35% of respondents thought this behavior is usually or almost always acceptable. This is twice as high as the 17% of respondents in a 1992 survey who found it almost always or usually acceptable to stay off work despite a doctor's approval to return to work.This change in attitude may be attributable to greater scepticism aboutmedical decisions or possibly greater reliance on the individual's personal assessment of his or her amount of pain and ability to perform job duties. It may also reflect a recent trend to push the limits of an otherwiselegitimate claim.

A major study of more than 87,000 auto injury claims released by the IRC earlier this year, Injuries in Auto Accidents: An Analysis of Auto Insurance Claims, revealed both good news and surprising news. The good news was that auto crashes are resulting in fewer severe injuries. The surprising news was that a lower proportion of injury claims involve lawyer representation. The most surprising news was that claimants without attorneys netted more dollars than did claimants with attorneys. Although claimants with attorneys received substantially higher gross payments, they lost an average of 32% to legal fees. Claimants without attorney representation also received payments more quickly than did claimants with attorneys.

The reversal revealed by the study in the trend of more serious injuries andhigher claim costs during the 1980s and early 1990s may be credited, in part, to seat belt use laws; better seat belt, airbag, and passenger compartment design; campaigns against drinking and driving; intensified fraud investigation; and insurer investment in technology to streamline claims review.The latest IRC study, Uninsured Motorists, found that the chances today are about 14 in 100 that if an insured car occupant is injured in an auto accident in the US, an uninsured motorist caused the accident. The ratio of uninsured to insured motorists, however, varies widely from state to state and within states. For example, the uninsured driver ratio for Mississippi was nearly six times as high as the ratio for Maine. Seventeenstates and the District of Columbia had a ratio of uninsured motorists to bodily injury claim frequencies above the national average, while one state matched the national average, and 32 states had a ratio below the national average.

There were wide variations within states as well. The most noticeable pattern within states was that uninsured motorist claim frequencies and loss costs were consistently much higher in large cities than in more rural areas. In most states, the largest urban area usually had the highest uninsured motorist claim frequency, ratio of uninsured motorists to bodily injury claim frequencies, and average uninsured motorist loss costs. For example, the uninsured motorist claim frequency in central Chicago was nearly five times as high as the state average.

People who have purchased insurance are increasingly frustrated by the uninsured motorist problem. Working to reduce the number of drivers who are uninsured is an important public policy issue for both auto insurers and legislators. States are responding with a number of initiatives to encourage the purchase of insurance, including “no pay-no play” laws designed to limit the rights of uninsured drivers to make claims against insureddrivers.

Broad-based industry research
The range of empirical studies the IRC undertakes is broader than that undertaken by any other insurance industry-supported research-oriented organization. The IRC addresses subjects relating to all lines of property/casualty insurance, including coverages of automobiles, homes, businesses, municipalities, and professionals. It takes pride as an organization in raising the level and quality of debate about insurance matters. It provides the facts pertaining to key industry issues that assist policy makers and others to understand these issues. And using sound research contributes to making sound decisions.For more detailed information about any of the IRC studies mentioned above, contact the IRC by phone at (610) 644-2212, ext. 7569; by fax at (610) 640-5388; or by e-mail at irc@cpcuiia. org. Or visit IRC's Web site at www.ircweb.org.

Terrie Edward Troxel is president and ceo of the American Institute for CPCU and the Insurance Institute of America. The Institutes and the IRC division are located in Malvern, Pennsylvania, a suburb of Philadelphia.