Transcript American Automobile Association

American Automobile
Association
Group Member: Shen TENG, Mengnan ZHANG, He WANG, Cheng
ZHONG, Qingzi YANG, Jiankai LIN, Jing QIN, Danqi LI
Agenda
● Introduction
○ Basic Information
○ History
● Insurance Industry
● Insurance Service
○ Automobile Insurance
○ Life Insurance
○ Excess Liability & Health Liability
● Credit Card & Travel Service
● Operation
● Regulatory Environment
Introduction
● American Automobile Association (AAA)
● A not-for-profit service organization
● 54 million members in US and Canada
● Headquarter: Heathrow, Florida
● Services: insurance, travel, financial
Introduction-History
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1902: Founded on March 4 in Chicago, Illinois
Lack of highway and roads suitable for automobiles
9 motor clubs banded together to form Triple-A
Included Chicago Automobile Club, Automobile Club of
America, Automobile Club of New Jersey, etc.
● Total 1,500 members
● 1904: Merged with the American Motor League (the first
automobile organization)
Introduction-History
● 1905: Publish the first AAA road map
● 1920: Began School Safety Patrol Program
- Provide local schools with materials to train and organize students
into a patrol force
● WWII: Service the Advisory Commission of the Council
of National Defense
- Pledged resources to national defense planning efforts
● 1947: Established the AAA Foundation for Traffic Safety
- A separate entity conducting study on traffic & pedestrian safety
Introduction-History
● 1960s: Helped draft the National Traffic and Motor
Vehicle Safety Act & Highway Safety Act
● 1970s: Created the AAA Fuel Gauge Report
- Assist motorists to find available gas stations
● 1985: First sold the AAA North American Road Atlas
- The New York Times best-seller in 6 weeks
● 1980s: Online-Touring Information System (OTIS)
- Terminals with rotating menus & touch-control screens
- Combined with other AAA Travel’s automated services
Introduction-History
● 1996: “Teaching Teens to Drive” education program
- Parent’s involvement in teen driving education
● 2000: Public Service Award
- Leadership in the Child Passenger Safety Certification Program
- Continuing efforts in graduated driver licensing
● Focusing on the senior’s road safety improvement
- Help seniors to stay mobile longer and more safely
● Developed Roadwise Review
- Let old drivers identify physiological changes affecting driving
Introduction-Industry Overview
● Net premiums written: $1 trillion in 2013
o Life/health (L/H) insurers account for 54%.
o Property/casualty (P/C) insurers account for 46%.
● Total number of insurance company in 2013: 6,086
o Property/casualty: 2,623
o Life/annuities: 904
o Health: 835
Introduction-Industry Overview
● Famous insurance companies in U.S.
o AIG
o 21st Century Insurance
o Berkshire Hathaway
o Metlife
o State Farm
o Farmers
Introduction-Industry Overview
● Top three drivers for insurance industry:
o Customer demand
o Coping with the change in technology
o Domestic competition
● Top three threats to insurance business:
o Impact of new regulation
o Losing shares to low-cost producers
o Speed of economic recovery
Introduction-AAA Strategies
● AAA is North America's largest motoring and leisure
travel organization.
● AAA advocates the motorist and traveler, continually
lobbying for driver and passenger rights, fair laws and
safer vehicles and roads.
Introduction- Membership Benefits
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Roadside Help, Anytime
Discounts that help you pay for your membership
Quality Auto Insurance at a Great Price
A Full-Service Travel Agent
Road Trip Plans Just for You
Pro-Rata, Money Back Guarantee
Insurance Service- Automobile
● Common coverages:
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Bodily injury liability
Property damage liability
Collision
Comprehensive coverage
Insurance Service- Automobile (Cont’d)
● Determinants of insurance premium
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the coverages and the deductibles you choose
the car you drive
how often and how far you drive
where you live
your driving record
your credit history
your age, gender, and marital status
Insurance Service- Life
● Whole life insurance
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For lifetime of coverage
● Term life insurance
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For the lowest cost coverage
● Annuity
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For tax-deferred interest
Insurance Service- Life- Whole Life Insurance
● Characteristics
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The fixed interest rate with a premium that never
change.
A policy that builds cash value.
A lifetime of coverage.
Insurance Service- Life- Whole Life Insurance
Just pay premiums when
they are due, and
coverage is guaranteed
to last as long as you live.
Insurance Service- Life- Term Life Insurance
Term life insurance may be right for:
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Young families on a limited budget
People looking to cover time-sensitive needs
Families needing coverage for 30 years or less
Wage earners who have employer-sponsored life
insurance but need additional protection
Insurance Service- Life- Term Life Insurance
How much insurance you'll need depends on:
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The size of your family and ages of your family members
The standard of living you want to maintain
Future expenses such as education, health, or mortgage costs
Final expenses likely incurred at the time of death, including taxes,
legal fees, and funeral costs
Insurance Service- Life- Term Life Insurance
Term life insurance
provides temporary
protection to cover a
specified period of
time.
Insurance Service- Life- Annuity
Current tax laws allow for the deferral of income taxes on
an annuity’s earnings until they are withdrawn.
Tax deferral helps an annuity grow at a faster rate than
taxable interest accounts because your money grows in
three ways:
● your premium earns interest
● your interest earns interest
● and the money you would have paid in taxes remains in
your account to earn interest.
Insurance Service- Life- Annuity
Platinum Bonus Annuity
Issue Amounts
Current Base
Interest Rate
First-Year Bonus
Interest Rate
Total First-Year
Annuity Rate
$3,000-$49,000
1.5%
1.5%
3.0%
$50,000-$499,999
1.5%
2.0%
3.5%
$500,000 and above
1.5%
2.5%
4.0%
Specialty Insurance
Specialty insurance coverage goes beyond ordinary
policies and often centers on providing insurance for
more exclusive or difficult risks. Typically, it covers
unique, rare or expensive items or potential events.
Excess Liability Insurance
Health Insurance
Excess Liability Insurance
• An excess liability insurance policy provides extra financial protection
in case you are required to pay a larger amount of money than your
standard liability policy covers.
• A simple example:
Have an insurance policy that provides $750,000 coverage of
liability.
Be sued and lose $1 million from a court.
Additional $250,000 is not covered by primary insurance –
so-called excess.
The excess liability insurance step in and pay the rest.
Characteristic
• Pay claims only under the same conditions as the primary
insurance.
• Depending on insurance needs, a policyholder can essentially
stack excess liability policies to ensure adequate coverage.
Highlights of AAA Excess Liability Policy
• Surprisingly low premiums, competitive with any other
company.
• Eligibility: a minimum of $250,000/$500,000 liability
coverage on the automobile policy and $300,000 liability
coverage on the homeowner’s policy.
• Easy switching from customers’ existing carriers to AAA.
• Quality of service: High level of financial stability, reflected
by the A+ Superior Rating awarded to AAA by A.M. Best,
the highly respected insurance industry analyst.
Health Insurance
Health
• AAA offers a variety of plans for individuals and families to fit their
specific needs.
Patriot Travel Medical
• Provides coverage for U.S. citizens traveling abroad for a minimum of
10 days to a maximum of two years.
• Covers many different types of travel: individuals, CEO group,
international students, etc.
Student Health Advance
– an instance of AAA health insurance
Younger age,
U.S. Citizens,
Group
Lower
premium
rates
Financial
Credit card
● Chip-technology on the credit cards
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Make your international travel easier
● Earn rewards toward travel, attraction, cash, gift card, no
annual fee
● Monitor your credit to detect the key changes
● Send email notification
● ProtectMyID agent to help cancel and replace
Financial
● Foreign Currency
o You can buy some amount of foreign currency at select AAA
branches in 100 denominations
● Money market
o We partnered with Discovery bank to provide high yield saving
product
o 12, 24, 60 month term CDs or IRA, higher rate than Discover
offers to the public.
Financial
● No minimum deposit to open money market account or
CD, IRA account and a low minimum deposit to open
online saving account
● Accounts are FDIC-insured up to maximum allowed by
law.
Travel
Service
● Car, hotel, flight, cruise
● Mobile apps: access to roadside assistance , discounts ,
maps , gas price
● Woodall’s campgrounds: partnered with Woodall provide
you with most accurate up to date camping information
● Driving tips: each trip features an overview map of your
route, driving time, mileage count
AAA NCNU
● AAA Northern California, Nevada & Utah
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Second-largest regional member of AAA
Headquartered in the San Francisco
7,000 employees
120 offices across the three states
4.5 million members
 3.7 million in Northern California
 350,000 in Nevada
 200,000 in Utah
AAA NCNU - Revenue
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Membership
Insurance commission
Travel service
Advertising income
Investment income
AAA NCNU - Revenue
AAA NCNU - Insurance Commission
● In 2011, AAA NCNU separated its primary
operations
● The Club
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Not-for-profit auto club organization
● CSAA Insurance Group (IG)
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For-profit insurance operation
Primary revenue source for NCNU
Nation’s 15th largest personal lines insurer
AAA NCNU - Insurance Commission
● One of the top five insurance agencies in CA
● Auto insurance
1 million auto insurance policyholders
o 1.7 million insured cars
o one out of every five cars in Northern California and
Nevada are insured through AAA
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● Homeowner insurance
AAA NCNU - Investment
≈21.5%
≈22.2%
Exhibit 25.6 Property and Casualty Insurance
Companies
CSAA IG - Valuation
CSAA IG
Industry*
Year
2012
2013
2012
2013
Return on
Revenue
5.47%
3.09%
7.10%
13.00%
Underwriting
Expense Ratio
32.50%
32.80%
28.20%
27.90%
Investment Yield
4.10%
3.50%
3.60%
3.30%
Liquidity Ratio
84.94%
87.00%
81.60%
78.00%
*2013 Property/Casualty & Title Insurance Industry Report
Regulatory Environment
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National Association of Insurance Commission (NAIC)
Insurance Regulatory Information System (IRIS)
Required to report a risk-based capital ratio
Financial Services Modernization Act
Federal Insurance Office
(Treasury Department)
Trends in the Insurance Industry
• Managing uncertainty
Overregulation
• Global regulatory uncertainty
• FIO report on modernizing insurance regulation
16 recommendations
Solvency & Business conduct regulation
Trends in the Insurance Industry
•Own Risk and Solvency Assessment (ORSA)
Future-driven process of solvency regulation
•Effect on business strategy
and operations
Prudential regulation
GAAP & economic metrics
Trends in the Insurance Industry
•Big data
Next major challenge and next new opportunity
Maximizing ROI
Hire data scientists
•Social media
Integral part
Brand value
Reduce the risks
Q&A