Professor Taylor describes the Gini Coefficent

There is a great deal of talk about the growing distance between the "haves" and "have nots" in the country, with much of the conversation centering on inequality (by way of example see here, here, here, and here.)



In many discussions, the measure for differences in equality is the so-called Gini Coefficient. This is described succinctly by Professor Tim Taylor in his blog, Conversable Economist. He notes that the Gini Coefficient was developed by the Italian statistician Corrado Gini in 1912.* The Gini Coefficient represents a full range of data on income distribution as a single number, making it useful for comparisons.



Taylor points out that the Gini, like any descriptive tool, has its limits. For example, because it distills a single number from the overall distribution of income, it loses some measure of detail. As an example, Professor Taylor provides the following: if the Gini coefficient has risen, is this because the share going to the top 20% went up, or the top 10%, top 1%, or top 0.1%?



You can read the post in its entirety at CONVERSABLE ECONOMIST: What's a Gini Coefficient?



*As Taylor notes, Corrado Gini was, as well as a statistician, a fascist theorist who wrote The Scientific Basis of Fascism. (Go figure.)

Hoping for an enlightened response

Robert Laszewski at Health Care Policy Marketplace Review has an interesting post, the link to which can be accessed below. He notes that "health insurance companies have to submit their new health insurance plans and rates between May 27 and June 27 for the 2015 Obamacare open-enrollment period beginning on November 15th" and that "[a]ny major modifications to the current Obamacare regulations need to be issued in the next month to give the carriers time to adjust and develop new products." He argues that if the current version of health reform is to succeed, the insurance companies need to offer better plans that more realistically fit the middle market. As he states, "health insurance plans that cost middle-class individuals and families 10% of their after-tax income and have average Silver Plan deductibles of more than $2,500 a month are not attractive and people won't buy them any more enthusiastically next fall than they already have." It will be interesting to see how the major carriers react.


Health Care Policy and Marketplace Review: The One Thing That Could Save Obamacare––And The O...: To properly price the exchange health insurance business going forward the carriers have to sharply increase the rates. A senior executive ...

FINRA and the U.S. economy

Please visit RIABiz and check out the new series by Ron Rhoades, the first part of which is titled Why Keeping FINRA from ruling RIAs is critical to these firms, the investor -- and even the U.S. economy. Rhoades includes plenty of links and references to previous articles he has written on the subject. Here is a sample quote from the article:

FINRA’s long-standing protection of its members’ excessive rent-taking has led to a crisis in American capitalism, negative implications for U.S. economic growth, and a dismal personal financial outcome in retirement for tens of millions of Americans.

How to rob a bank: William Black at TEDxUMKC

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Bill Black -- a U of M Law School alumnus, by the way -- is a premier expert on white collar crime and developer of the "control fraud" concept. He was a major government player in uncovering the S & L scandal of the late '80s and early '90s (remember the "Keating Five?") This TED talk is an excellent overview of what remain our significant challenges relating to the control and regulation of our financial institutions. 

"Attack of the Claim Drones"

We are most used to hearing about drones, or unmanned aircraft, in the context of the military and international conflicts. The use of drones, however, is not limited to this sphere of operation, and drones are currently at use domestically for public safety, disaster mitigation, and environmental and climate monitoring. The Insurance Journal reports that the industry group Association of Unmanned Vehicle Systems International (AUVSI) has been lobbying the FAA to make changes to its regulations that would allow air space for unmanned vehicles and permit a greater range of government and commercial uses for drones.

The linked article provides an overview of the possibilities and challenges of using drones for insurance claim operations. On the one hand, they provide unmatched speed to the area where a loss has occurred, as well as aerial views not easily achieved by the human adjuster. Not only would this reduce the need for skilled adjusters, it would also reduce the company's number of worker comp claims, as fewer adjusters would be in the field.

On the other hand, adoption of drones creates another potential skills-bottleneck, as the need for drone operators would increase. In addition, even if the FAA makes adjustments in its regulations, there is still a host of legal and privacy issues relating to drone use that would have to be addressed.

While this is just speculation, one can expect that, given the combination of human nature, the drive to adopt new technologies, and the potential to reduce the size and liabilities of its workforce, that insurers will explore the use of drones aggressively in the near future.

Housing-related goods, seven years later

Atif Mian and Amir Sufi at House of Debt blog note that spending on housing-related goods -- i.e., retail spending on furniture, appliances, and home improvement -- remains below its 2006 level in 2013, and emphasize that this is gap is reported in nominal terms, meaning that adjusting for inflation make the gap even larger. They go on to ask a number of interesting and important questions as tease for their (forthcoming in May) book, House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent it From Happening Again. A link to the publisher's book page with additional information is available here.

Trouble around the bend

HousingWire, citing Springboard Nonprofit Consumer Credit Management, notes that trouble may be coming soon for borrowers with HELOCs, as almost half of all HELOCs -- to the sum of $221 billion -- will reset in the next four years. A major reason for concern is that the article cites data showing the majority of HELOCs outstanding today were taken out between 2004 and 2009. Many of these loans during this time span are designed with lower payment terms for the first 10 years before resetting, in most cases, to fully amortizing loans. Depending on the specific terms and amounts of the loan, consumers could see substantial increases in monthly payment amounts.

The cost of winter

Roof collapses and auto accidents, downed tree limbs and power lines, business interruption and supply chain losses: Old Man Winter has packed a punch this year. And just think; winter is not officially over until March 19th!

An estimated $1.5 billion of insured losses already have been attributed to this season's weather. This figure, reported by the Insurance Information Institute, is an estimate from PCS, a division of Verisk Analytics, that covers events occurring between January 1 and February 21, 2014 with more than 175,000 claims paid to policyholders. As the $1.5 billion figure includes only two of the four 2014 winter storms to date, it is certain that the final tally will prove significantly larger.

Insured losses from winter was $2 billion in 2013, and the final total for 2014 is certain to exceed that figure. It is expected that the 2014 winter will enter the record books among the top five costliest since 1980.

Give us healthcare plans with broad networks...unless they're (that much more) expensive

The Kaiser Foundation continues to do great work following the issues related to healthcare reform and its implementation. One tool that they use is an ongoing tracking poll to survey the public's response to the law. This month's poll shares a number of data points, one of which concerns an issue that has been garnering more media attention lately, namely the so-called "narrow network" plans.

According the February tracking poll, about half of those surveyed (51 %) stated preference for a plan that costs more money but allows them to see a broader range of doctors and hospitals. However -- and despite our best intentions, there always seems to be a "however" -- upon being informed that they could save up to 25 % on their health care costs, that number drops from 51 to 37 % among the public overall, and from 35 % to 22 % among those to whom the law is directed: the uninsured and those with non-group coverage. The actual poll can be accessed here.

Duly noted

The Michigan DIFS has issued Bulletin 2014-04-INS, adopting the NAIC's Uniform Certificate of Authority Application (UCAA). The bulletin can be accessed here.