The Bloomington Insurance Company in Illinois is licensed to write property and casualty insurance including automobile insurance in 17 states spreading out from Illinois and now wants to sell insurance to owners of recreational vehicle owners. It has regional offices in some of those states. RV owners may own or rent the RV. They often tow an automobile, sometimes haul bicycles or ski boats or motorcycles. Their travels tend to be on highways and rural roads. RVs that travel are insured as a type of personal automobile. Motor homes that are permanently placed in a motor home park are insured as homes with homeowner's insurance. The insurer has one underwriter who has done this type of insurance in a prior job. a. Analyze this idea as a strategic plan. b. Discuss whether affinity group marketing could be useful to this plan, and how that might affect setting premiums. c. The underwriter has the idea to also market through RV dealerships and pay a 5% fee to the dealerships for each policy bought by a RV customer. Discuss the legality of this idea. d. How should this insurer plan to handle claims that arise when the vehicle is outside of the 15 states where it is writes insurance? e. What other types of insurance should this insurer try to offer to these customers? f. Discuss how reinsurance might be useful to this insurer for homes in motor parks, and to structure such a reinsurance plan. g. Evaluate whether Bloomington Insurance should offer this type of insurance through its website, and whether to sell this insurance directly itself.The Forest Insurance Company in Asheville, North is also licensed in Tennessee, and specializes in rural and small-town markets. It writes residences up to $400,000, BOP, and farm policies. It wants to expand its book to cover camp and recreational sites, and small hotels, and expand into neighboring states of South Carolina and Georgia. It already works with and has| appointments with many small agencies in small towns in these states. a. What must Forest Insurance do with the departments of insurance in NC and TN to expand its lines of insurances as describe above? b. What must Forest Insurance do to sell insurance in in SC and GA? c. Discuss the market research Forest Insurance should do before expanding to SC and GA. d. Describe the marketing plan for agents that Forest Insurance should develop to expand its lines of insurance within its existing states of NC and TN. e. Forest Insurance would like to offer only a $1,000,000 per occurrence limit for the general liability policies for the new market of camps and recreational but is aware that this market may want higher limits. Discuss the advantages and disadvantages of Forest Insurance staying with this $1m limit for camps and recreational f. Jury verdicts and settlements are on a steep rise even in Georgia. Business customers are starting to ask about umbrella insurance policies. Forest Insurance does not really want to have multi-million exposures. How can Forest Insurance offer umbrella policies without taking on much risk itself? g. Describe the solvency concerns an insurance regulator might have with Forest Insurance's plans to expand in these new lines of insurance and in new markets at the same time. h. Management at Forest Insurance assumes that losses in SC and GA will be similar to what it has experience with in NC and TN, and therefore it should use the same premium rates for the new markets. Discuss the deficiencies of this assumption. i. Describe how the actuaries should evaluate and project losses for the new markets and set prices for the insurance in those markets
