Federal Reserve Bank of Chicago to Study How Insurance Builds Assets

June 28, 2007

New research may yield more detailed information on how consumers use insurance to build and protect their wealth, and show insurers how to tap this new information for better marketing and underwriting, according to the Urban Insurance Partners Institute (UIPI), a nonprofit insurance industry organization based in Chicago.

“We expect to achieve a better understanding of how moderate-income consumers use insurance and whether, for example, insurance is another way to access the mainstream financial system,” noted Robin Newberger, business economist for the Federal Reserve Bank of Chicago, which is conducting the study. “Through other research, we know that many of these consumers have assets or are interested in building their assets, but we know very little about their experiences with, and attitudes about, insurance.”

The bank is conducting a broad study, including consumers who already own homes, autos or life insurance, as well as those in similar family income brackets but who do not have insurance. The study’s goal is to determine their level of insurance knowledge, the points at which they consider learning more about insurance or purchasing insurance coverage, the kinds of assets they seek to protect, and the ways in which they use the insurance distribution system.

“The study’s results can be used by programs and organizations that are already helping moderate income consumers build assets and wealth,” added Newberger.

Additionally, UIPI is sponsoring a separate study on how consumers, especially the growing multicultural, immigrant and urban consumer market, can be underwritten more accurately with new data. This data, some of which is newly available from the banking industry and can be used in quoting rates, allows insurers to offer more competitive rates.

“In particular, this data can help insurers fill in the profiles on consumers who have thin or different credit files,” added Jim Rink, UIPI chairman and director of the Rural Insurance, and Farm/Crop Marketing Program at Indiana Farm Bureau Insurance Co. “This population is estimated to include up to 70 million people.”

“Dependable and accurate information is an important component of underwriting,”added Todd Rissel, chairman and CEO, e2value, a home valuation service. “These studies should be of particular interest to anyone who wants to do business in a broader marketplace.”

The two studies, according to UIPI President Suzanne Reade, may have a significant impact on how the financial services industry understands and serves moderate-income consumers.

Source: UIPI

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