Fixed indexed annuities with Market Risk Benefits
This paper focuses on the cash flow modeling aspects of Market Risk Benefits on fixed indexed annuities contracts, especially the methodology for projecting indexed account growth.
Cheap, clean-energy solution to last-mile transportation is causing serious injuries and disrupting the insurance industry.
Dockless electronic scooter (e-scooter) sharing programs are the new era in micromobility. Billion-dollar startups Bird, Lime, and Skip have introduced fleets of rentable scooters on dozens of college campuses and in more than 100 cities worldwide. Convenient and fun, e-scooters are unlocked with a phone app, cost about $1 plus 15 cents per minute to rent, and can reach speeds of 15 to 20 miles per hour.
With the support of an enthusiastic and growing user base, scooter-sharing companies are drawing fire from injured pedestrians and a concerned medical community. These safety concerns are now in the public spotlight after the July 12 death of British YouTube star Emily Hartridge, who reportedly died while riding an e-scooter. Even before Hartridge’s death, several cities temporarily banned e-scooter rentals until they put regulations in place, citing public safety issues.
E-scooter sharing also introduces new insurance implications. Traditional policies have not kept up with the micromobility revolution, although most e-scooter riders assume they’re covered for liabilities and personal injuries. With e-scooter accidents on the rise, insurance gaps need immediate attention and innovative solutions for on-demand, usage-based transportation.
E-scooter accidents happen for a number of reasons. The Austin Public Health Department and the Centers for Disease Control and Prevention (CDC) studied 190 patients who were confirmed to be injured by an e-scooter between September and November 2018.1 They found that an individual’s first e-scooter ride is by far the most dangerous and is responsible for one-third of injuries, and that 63% of injured riders had taken fewer than 10 e-scooter trips.
More experienced riders can be reckless as they weave in and out of traffic, carry passengers in tandem, and cross intersections at high speeds. “Excessive scooter speed” was cited as a contributor to 37% of accidents studied. The study also found that 16% of injuries involved a motor vehicle because a lack of protected bike lanes is pushing e-scooters onto urban streets.
Scooters need flat pavement for smooth rides and 50% of the study participants believed that potholes, sidewalk cracks, and other surface conditions contributed to their injuries. Despite roadway hazards, 99% of study participants were not wearing helmets, 48% sustained injuries to their heads, and 15% of those injuries were diagnosed as traumatic brain injuries.
The CDC study also found that 19% of injured riders believed that their scooters malfunctioned. Parked outside, e-scooters are subject to potentially harsh weather conditions that contribute to sticky accelerators, brake failures, and tire pressure loss. As a result, there have been numerous reports of riders being thrown off e-scooters when travelling at high speeds.
Although they were not the focus of the CDC study, pedestrians have also sustained serious injuries in cities around the world when e-scooters crashed into them and when they have fallen over vehicles left on sidewalks.
What insurance policies, if any, will cover riders and pedestrians involved in scooter-related accidents? The big rental companies require riders to sign multipage user agreements that essentially absolve them of any responsibility or liability. That leaves individual health insurance to cover medical expenses of the rider.
As for third-party liabilities, there is a question about who will actually cover those claims. Personal liability, homeowners, and renters insurance policies typically exclude vehicle-related liabilities. Personal liability umbrella policies provide an extra layer of protection that might provide some coverage for e-scooter liabilities, property damage, and lawsuits, depending on the policy. However, it’s not likely that the purchaser of a personal liability umbrella is also renting shared e-scooters.
Insurtech startups are recognizing this insurance gap and look to bridge it by offering on-demand insurance for episodic mobility usage including e-scooters. E-scooter riders will be able to buy insurance on-the-go from their mobile devices. Coverage will likely encompass third-party liability, third-party property damage, and first-party personal medical payments as an additional layer over the rider’s health insurance. The need for readily available coverage is urgent as e-scooter crashes are sending people to the emergency room on a daily basis in major cities around the word.
A recent Consumer Reports investigation documents at least 1,500 injuries and eight deaths related to rented e-scooters in the U.S. since late 2017.2 Hundreds of riders have landed in emergency rooms with injuries ranging from cuts, sprains, and bruises to bone fractures and head injuries.
The first comprehensive study of e-scooter injury patterns and clinical outcomes was published by the JAMA Network Open in January 2019.3 The research was initiated by an emergency room doctor and e-scooter user, Tarak K. Travedi. He worked with his team to examine the records of 249 scooter-associated emergency room visits in two Southern California emergency rooms over a one-year period. The goal was to determine if there were any common threads to the injuries that could help develop prevention strategies. The study found that:
The study also found that 10.8% of injured riders were under age 18, highlighting the problem of “underage scooting”’ Although the law requires e-scooter riders to have valid driver licenses, resourceful teenagers have found ways to get around the age limit. They’re renting e-scooters to go to work, shopping, the movies, and other teen hangouts, and taking the same risks as adults.4
When compared to docked bike share trips, e-scooters are gaining in popularity and have recently surpassed them for the first time. Of the 84 million shared micromobility trips taken in the U.S. during 2018, riders took 38.5 million trips on shared e-scooters, about 36.5 million trips on shared bikes, and 3 million trips on pedal dockless bike shares.5
The JAMA report did not compare total bicycle and e-scooter ridership, but it found that e-scooters were sending more people to the emergency room than bicycles during the time of the study: 249 visits for scooter-related injuries compared to 195 visits for cycling-related injuries.
In contrast, a 2019 Bird study concludes that riding a Bird is as safe as or safer than riding a bicycle when calculated on a per-mile-traveled basis. Reported injuries vary substantially by city, but cities that score high on bicycle safety are also reporting fewer e-scooter accidents.6
E-scooter accidents are beginning to trigger litigation, although the body of precedent is small. Most injuries fall under the assumption of risk and ironclad user agreements are preventing lawyers from taking action. To win, lawyers need to prove gross negligence on the part of the scooter rental company.
The most high-profile class-action lawsuit was filed in October 2018 in Los Angeles County Superior Court.7 The case illustrates the range of parties affected by the e-scooter phenomenon. Nine plaintiffs accused Bird and Lime, along with manufacturers Segway and Xiaomi, of “indiscriminate, negligent, grossly negligent and/or unlawful ‘deployment’ … of fleets of defective” scooters in the city:
E-scooter companies are under fire for moving too fast and placing the burden of safety on cities and riders. However, they have taken some actions to help prevent injuries. Several scooter-sharing companies have distributed more than 140,000 free helmets to riders around the world. They provide in-app safety tutorials and videos, some tailored to local regulations. Their new, improved e-scooters are engineered to increase safety with features like dual suspension, bigger tires, and extra rear brakes.
Bird ceases operations after midnight across all of its markets when the risk to all road users increases.8 Lime offers free courses every weekend in Paris where nearly 250,000 people are riding e-scooters on a regular basis. Recently, Parisian officials announced new regulations limiting the number of e-scooter operators and placing a 5 miles-per-hour limit on areas with heavy pedestrian traffic.
Although the industry has taken steps in the right direction, e-scooter injury rates are still high.
McKinsey forecasts that the shared micromobility market in 2030 will be roughly $200 billion to $300 billion in the United States, $100 billion to $150 billion in Europe, and $30 billion to $50 billion in China.9 The difference in market valuations stems mainly from unique pricing strategies.
For the micromobility market to reach its full potential, cities will need to proactively support the e-scooter industry including resolving traffic pain points and congestion problems. Rider and pedestrian safety concerns, parking issues, and adequate insurance coverage all need to be addressed.
Insurers can capitalize on this opportunity if they can find ways to manage the risk and piggyback on existing technology. That could be as straightforward as providing commercial liability insurance to e-scooter rental companies, but could also take other forms. Insurers could also sell new forms of insurance for episodic transportation, collaborate with startups to offer in-app policies on demand, or add coverage to existing policies to mitigate risk for micromobility users. With the rising popularity of e-scooters around the world and a corresponding increase in accidents, the need to protect both riders and pedestrians is immediate and pressing.
1 City of Austin Public Health. "Dockless electric scooter-related injuries study. Retrieved July 17, 2019, from http://www.austintexas.gov/edims/pio/document.cfm?id=318777
2 Consumer Reports. “8 Deaths Now Tied to E-Scooters.” Retrieved July 17, 2019, from https://www.consumerreports.org/product-safety/deaths-tied-to-e-scooters/
3 JAMA Network Open. “Injuries Associated with Standing Electronic Scooter Use.” Retrieved July 17, 2019, from https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2722574?guestAccessKey=c8d43986-1131-4af7-b3bc-a9f9415cd3b3
4 The Verge. “The Secret Life of Teen Scooter Outlaws.” Retrieved July 17, 2019, from https://www.theverge.com/2018/9/23/17882996/teens-electric-scooter-age-requirement-bird-lime
5 National Association of City Transportation Officials. “Shared Micromobility in the U.S.: 2018.” Retrieved July 17, 2019, from https://nacto.org/shared-micromobility-2018/
6 Bird. ”A look at e-scooter safety. Examining risks, reviewing responsibilities, and prioritizing prevention.” Retrieved July 17, 2019, from https://www.bird.co/wp-content/uploads/2019/04/Bird-Safety-Report-April-2019-3.pdf
7 Class Action Complaint filed in the Superior Court of the State of California County of Los Angeles — Central District. Retrieved July 17, 2019, from https://www.santamonicainjurylawfirm.com/documents/Scooter-class-action-lawsuit.pdf
8 Bird. “A look at e-scooter safety. Examining risks, reviewing responsibilities, and prioritizing prevention.” Retrieved July 17, 2019, from https://www.bird.co/wp-content/uploads/2019/04/Bird-Safety-Report-April-2019-3.pdf
9 McKinsey & Company. “Micromobility’s 15,000 mile checkup.” Retrieved July 17, 2019, from https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/micromobilitys-15000-mile-checkup