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

● 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 2013o Life/health (L/H) insurers account for 54%.o Property/casualty (P/C) insurers account for 46%.

● Total number of insurance company in 2013: 6,086o Property/casualty: 2,623 o Life/annuities: 904o Health: 835

Introduction-Industry Overview

● Famous insurance companies in U.S.o AIGo 21st Century Insuranceo Berkshire Hathawayo Metlifeo State Farmo Farmers

Introduction-Industry Overview

● Top three drivers for insurance industry:o Customer demando Coping with the change in technologyo Domestic competition

● Top three threats to insurance business:o Impact of new regulationo Losing shares to low-cost producerso 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

● 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:○ Bodily injury liability○ Property damage liability○ Collision○ Comprehensive coverage

Insurance Service- Automobile (Cont’d)

● Determinants of insurance premium○ 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○ For lifetime of coverage

● Term life insurance○ For the lowest cost coverage

● Annuity○ For tax-deferred interest

Insurance Service- Life- Whole Life Insurance

● Characteristics○ 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.

Term life insurance may be right for:● 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:● 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

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

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%

Platinum Bonus Annuity

Specialty InsuranceSpecialty 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

Lower premium

rates

Younger age,U.S. Citizens,

Group

Financial

Credit card● Chip-technology on the credit cards

o 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 Currencyo 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 & Utaho Second-largest regional member of AAAo Headquartered in the San Franciscoo 7,000 employeeso 120 offices across the three stateso 4.5 million members

3.7 million in Northern California 350,000 in Nevada 200,000 in Utah

AAA NCNU - Revenue

● 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 Clubo Not-for-profit auto club organization

● CSAA Insurance Group (IG)o For-profit insurance operationo Primary revenue source for NCNUo Nation’s 15th largest personal lines insurer

AAA NCNU - Insurance Commission

● One of the top five insurance agencies in CA● Auto insurance

o 1 million auto insurance policyholderso 1.7 million insured carso one out of every five cars in Northern California and

Nevada are insured through AAA● 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

● 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 regulation16 recommendationsSolvency & 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 regulationGAAP & economic metrics

Trends in the Insurance Industry

Trends in the Insurance Industry

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