All posts by Jeff Dunsavage

Triple-I at 60: New World, Same Powerful Mission

Sixty, many say, is the new 40. People living longer and in better health than ever before have opportunities for work, leisure, travel, and self-expression that previous generations could only dream of or regret not having seized.

Insurance has played a critical role in these improved circumstances by absorbing and distributing risks that otherwise would have made many types of investment prohibitively expensive — investment that directly affects everyone’s quality of life. And for the past 60 years, the Insurance Information Institute has supported the property/casualty insurance industry by helping the public understand risks and the products that help mitigate them.

“Property insurance is an integral part of our national economy. It is vital to business enterprise and to the establishment of credit. Nearly every individual American is directly affected by it.”

These words, from a 1959 announcement of the establishment of Triple-I, are as true and relevant now as they were then. But where that announcement referenced “fire, automobile…fidelity and surety, and inland marine insurance,” we would need to mention “cyber, terrorism, business interruption, supply chain, workers compensation, professional and management liability,” along with numerous other products and features that keep emerging to address the changing risk landscape.

The industry’s history of developing forms of coverage to meet businesses’ and individuals’ changing needs is evocatively illustrated in the following, from a 1962 Triple-I ad:

“During the same year that America’s property and casualty insurance companies provided special coverage for the first Telstar communications satellite, they also wrote more than $100,000 in horse and wagon policies. This year will also see a brisk business in false teeth coverage, rain protection, wedding gifts floaters and other unusual forms of insurance.”

As we continue to support the industry by advancing public awareness and understanding, we’re taking advantage of new tools and technologies to do so.  Sixty years ago, print, telephone, and face-to-face communication were the only games in town. Today, we reach broader and more targeted audiences through social media, webinars, blogs, conferences, and more.

A great example is the recent launch of a Risk and Resilience Hub in partnership with Aon and the Colorado State University Department of Atmospheric Science.  The Hub uses data visualization to help people understand natural catastrophe risks and make data-driven decisions when it comes to managing their exposures.

Far from slowing down and feeling creaky at 60, Triple-I is maintaining its strong pace and going where the industry and consumers need us to be.

The 1959 announcement I cited above invited “written or telephone inquiries” from “researchers, editors, writers, educators, students, librarians, civic groups, and the general public.”

Today, you can follow and engage with us on Twitter, Facebook, and LinkedIn. #TripleI60 

A Better Tool to Predict Impact of Hurricanes? 


Minimum sea level pressure can predict the scope of a storm’s  damage — including from storm surge, not just wind — and be more accurately measured in real time.

The more accurately experts can predict an impending storm’s impact, the better prepared individuals, communities, and businesses can be to soften the blow and bounce back. A recent paper published in the Bulletin of the American Meteorological Society suggests an underutilized tool may be better at predicting hurricane damage than the traditionally used “maximum sustained wind speed.”

Atlantic hurricanes have a long history of financial impact. During 2017-18, hurricanes Harvey, Irma, Maria, Florence, and Michael combined to cause more than $345 billion (U.S.) in direct economic damage.  The Saffir-Simpson Hurricane Wind Scale categorizes only the hurricane wind threat – not the totality of impacts, including storm surge and rainfall.

According to the paper,  several scales have been proposed to replace Saffir-Simpson, but most aren’t easily calculated in real time, nor can they be reliably calculated historically. For example, “storm wind radius” datasets extend back only about 30 years. 

Minimum sea level pressure (MSLP), the paper finds, is a better predictor of the scope of a storm’s  damage and can be more accurately measured in real time, “making it an ideal quantity for evaluating a hurricane’s potential damage.”

MSLP is the lowest pressure recorded in a hurricane.  It occurs at the center of the storm and is part of the large-scale structure of a hurricane’s vortex. Because winds are generated by differences in  barometric pressure between the hurricane’s eye and its perimeter, lower pressure is typically associated with stronger winds.  Also, if two hurricanes have the same wind speed, the one with the lower pressure typically will cover a greater area, potentially posing greater storm surge risk.

“With aircraft reconnaissance, MSLP can be reliably calculated,” the paper says. It’s also much easier to measure at landfall than is maximum sustained wind speed.

“Barometers are among the simplest meteorological instruments and will usually operate in a wide range of conditions,” the report says. Anemometers, which measure wind speed, “are prone to mechanical failure…precisely when they matter most.”

The paper was authored by Colorado State University atmospheric scientist Dr. Philip J. Klotzbach — a Triple-I non-resident scholar — along with scientists from the National Oceanic and Atmospheric Administration (NOAA), North Carolina State University, the University Corporation for Atmospheric Research, and insurance broker Aon.


Uncertainty Clouds Business Risks Related
to Covid-19 Coronavirus


Supply-chain disruptions due to Covid-19 could affect health care worldwide and lead to health, travel, life, workers comp, business interruption, and other claims. 


The Covid-19 coronavirus death toll has passed 1,300 and will likely continue to climb, with more than 60,000 cases reported worldwide. The loss of life and costs of identifying and caring for the sick are compounded by the following considerations:

China, where the virus originated and remains most prevalent, is the world’s largest producer of active pharmaceutical ingredients. In 2018, Politico reports, citing U.S. Commerce Department data, the country accounted for:

  • 95 percent of ibuprofen imports
  • 91 percent of hydrocortisone imports
  • 70 percent of acetaminophen imports
  • 40-45 percent of penicillin imports, and
  • 40 percent of heparin imports. 

China also is a major supplier of disposable medical devices like syringes and gloves, as well as surgical equipment. Michael Alkire, president of healthcare supply chain consultant Premier, told Modern Healthcare it’s hard to estimate how many of these goods come from China.

“There are critical pieces of upstream supply chain information that are unknown, including raw material suppliers, third party and contract manufacturers, sterilizers and more,” Alkire said. “Because reporting of this information is completely voluntary, most won’t do so until it becomes an industry-wide expectation and best practice.”

Any supply-chain disruptions could affect health care worldwide and lead to liability claims. 

“The good news is that most of the people dealing with China tend to have inventory,” said James Bruno, president of consulting firm Chemical and Pharmaceutical Solutions. “But if this doesn’t straighten out in the next three months, we could have some real problems with supply disruption.”

Health-care facilities and other business can become points of infection. Illnesses contracted in such locations can lead to workers comp claims, as well as claims alleging insufficient care was taken to protect customers and vendors from infection. Health workers who contract the virus on the job would likely be eligible for workers comp benefits, though compensability will be determined by the individual situation, policy wording, and laws of the relevant jurisdictions.

U.S. manufacturers rely on China to supply many industrial components and as a market for their own products. If the virus leads to closures of major ports, businesses in the affected countries could cancel contracts with or default on payments to their foreign counterparties. Contract frustration insurance may cover costs associated with such cancellations, depending on circumstances and the terms of their policies

Auto manufacturing could be an early industry to suffer. China shipped nearly $35 billion of auto parts in 2018, according to United Nations data. About $20 billion of Chinese parts were exported to the United States alone in 2018, according to the Commerce Department’s International Trade Administration. Supply disruptions lasting more than a few months could add momentum to rising auto repair costs.

Event and travel cancellations hurt local and national economies. Concerts and other public events in China have been cancelled over the virus, but its impact on tourism isn’t confined to that country. The contagion emerged right before Lunar New Year – when many Chinese typically travel in China and abroad.

China accounts for more than 10 percent of global tourism, Wolfgang Arlt, founder of the China Outbound Research Institute, said in an interview with National Public Radio. While the most popular destinations for Chinese visitors are in Asia, Arlt said, Paris, Sydney, and New York City also are favorites. That helped make China the biggest international tourism spender in 2018, pumping $277 billion into the travel industry, according to the United Nations World Tourism Organization.

Due to China’s outsized role in global tourism, Covid-19 could affect travel, hospitality, and tourism-dependent businesses around the world. With cruise ships quarantined after the disease was detected, cruise lines may have to deal with longer-term impacts on their businesses, as well as immediate ones related to passenger care and vessel decontamination.

Past outbreaks, such as SARS, Ebola, and Zika, have led many insurers to exclude infectious diseases from coverage in their policies. While specific policies for infectious diseases have been developed, companies reportedly have been slow to purchase them.

Infectious Disease:
A Good Reason to Buy Medical Travel Insurance – But Check the Terms

Faced with Covid-19 coronavirus, people – as they tend to during infectious outbreaks – have become concerned about whether and to what extent their insurance will cover costs associated with the event. In the case of travel insurance, there’s good, bad, and ambiguous news.

If you contract coronavirus before you travel or while you’re traveling and have a standard policy that includes coverage for medical treatment and medical evacuation, your care probably will be covered. The “probably” is due to the fact that many insurers set a deadline – a date before which you might be covered but after which you won’t be. That’s because Covid-19 is now a “foreseen circumstance” — people now know about it.

Trip cancellation can be more complicated. Many policies exclude losses caused by disease outbreaks. Cancelling a trip simply because you don’t want to risk infection likely won’t be covered by a standard policy. 

What if you get sick and need to cancel your trip? You might be covered, depending on the insurer and a long list of conditions. For example, an illness that would be covered often requires a medical professional to confirm that the policyholder was, in fact, too sick to travel.

A cancel for any reason (CFAR) policy can help you recoup part  of your expense, but they’re pricey: usually around 10 percent of the cost of your trip, compared with four to six percent for a standard policy.

Do these exclusions and uncertainties mean medical travel insurance is a waste of money?

Not at all.

As I’ve written before, there are many ways one can be injured, fall ill, or die abroad – and your regular medical coverage may not work the same way abroad as it does at home. Since we’re talking about infectious diseases, take a look at the recent snippet below from the CDC website for a glimpse at some areas of concern. The list is always changing.

With travel policies – as with all other forms of insurance – it’s important to understand what’s covered and what isn’t and talk with your agent to be sure you’re getting the coverage you need. You also should thoroughly research your destinations and planned activities for possible exclusions.

JIF Insights: Former U.S.
Economic Adviser:
“Expansions Don’t
Die of Old Age”

 

Jon Hilsenrath, chief economics correspondent for The Wall Street Journal (left), and Glenn Hubbard, past chairman of the U.S. Council of Economic Advisers.

Glenn Hubbard, former chairman of the U.S. Council of Economic Advisers, projected 2 percent U.S. GDP growth for the next year – a bit more optimistic than the 1.8 percent consensus estimate of professional economic forecasters.

The U.S. economic recovery remains in record-setting territory, and though the pace of real GDP growth has slowed – from 3.1 percent in the first quarter of 2019 to 2 percent in the second and 1.9 percent in the third – there are few signs the expansion is fading. According to the Federal Reserve Bank of St. Louis, the current growth rate is consistent with the economy’s potential growth rate, which most economists estimate at between 1.75 percent and 2 percent.

“Expansions don’t die of old age,” Hubbard told attendees at Triple-I’s Joint Industry Forum. “They die of some shock, some policy action that strangles them.”

Asked by Jon Hilsenrath, chief economics correspondent for The Wall Street Journal, whether President Trump’s 3 percent growth target was realistic, Hubbard said it could be achieved, “but it would require some really outsized assumptions.”

“You’d need 2 percent-plus productivity growth,” he said, adding that weak population growth and continued low labor force participation are greater obstacles to reaching such an optimistic target.

Despite technological advances that might be expected to drive productivity, the Organization for Economic Cooperation and Development (OECD) reports, “productivity growth has declined sharply” in recent decades. Low labor force participation is associated with lower GDP and tax revenues, according to the Congressional Budget Office (CBO). It’s also associated with larger federal outlays, because people who aren’t in the labor force are more likely to enroll in federal benefit programs. Labor force participation has been weak since the end of the recession and, despite upticks in 2016 and 2017, the CBO expects it to remain so until 2027.

Slow and steady

“Barring anything unforeseen,” Hubbard said he doesn’t believe a downturn is imminent. He pointed to countries like Australia that have experienced decades-long slow, steady expansions.

“One of the reasons this expansion has gone on for so long,” Hubbard said, “is that it has not been as robust throughout as other expansions.”

He pointed to the “lower for longer” interest rate environment as a risk area for the insurance industry, noting that difficulty earning spread could lead to “pockets of excess risk taking.” While many have warned about this risk,  insurers have shown they can earn profits while maintaining reserve adequacy. As Triple-I recently reported, 2019’s third-quarter $48.1 billion net income after taxes for the property/casualty industry was the second highest since Q3 2007 and only slightly below the highest profit ($49.4 billion), in  Q3 2018.

2020 Elections: Don’t Be ‘Overly Conventional’

On the U.S. elections, Hubbard said “If you’re focused on the economy and economic variables, the President should have a very good chance of being re-elected.”

“I think, though, it’s a mistake to be overly conventional,” he continued.  “That kind of analysis may have led people astray in calling the 2016 race. I look at underlying currents in the economy, and I see a current of many people doing very well, others doing less well – neither side is completely playing to both of those groups.”

Hubbard said he “wouldn’t rule out” a Democratic presidential win, even if the candidate came from the far Left.

“When I ask business leaders about uncertainties they’re worried about, this is number one on their list,” Hubbard said, “because a scenario that delivers a far-Left Democratic President also delivers a Democratic Senate and could mean very different policies.”

JIF Insights: Changing
the Conversation
On Extreme Weather

Extreme Weather panel (L to R): Charles Chamness, National Association of Mutual Insurance Companies; Francis Bouchard, Zurich Insurance Group; Stephen Clarke, ISO; Dr. Daniel Kaniewski, FEMA; Dr. Rick Knabb, The Weather Channel; Kenneth Tolson, Crawford & Company

It was like music to my ears to hear risk and resilience experts at Triple-I’s Joint Industry Forum, in a panel on extreme weather, talk so much about communication.

Moderator Charles Chamness, president and chief executive officer of the National Association of Mutual Insurance Companies (NAMIC), kicked off the session by asking Dr. Rick Knabb – on-air hurricane expert for the Weather Channel (TWC) – about the impact on disaster preparedness of tools like TWC’s “storm surge depth simulator,” which Chamness described as “somewhat terrifying.”

If you haven’t seen it, the simulator uses virtual reality technology to show viewers what different water depths could look like and the kind of damage they could generate (see video below).

“We’ve gotten a lot of feedback,” Knabb replied. “Some people tell us, `Wow, I didn’t know how bad water can be.’  Some people tell us ‘You’re scaring me.’  And on some level, we’re trying to scare people just enough to respond and to prepare.”

Knabb added that he had no data to prove people who watch such simulations take immediate steps to improve their preparedness, “but we’re seeing the conversation change. Social media is one of the best ways I have to see that happening.”

The challenge remains, he said, to overcome “the positive bias” of people saying, “That looks really scary – but I don’t think it will ever happen to me.”

Francis Bouchard, Zurich’s group head of public affairs and sustainability, took the insurance industry to task for talking about risks in language customers don’t necessarily understand.

“We’re all risk elites here,” Bouchard said. “Our vernacular is not what normal people speak. And yet we insist on using our language to describe something that’s totally alien to most of the public.”

FEMA Deputy Administrator for Resilience Dan Kaniewski agreed.

“At FEMA, we no longer speak in these technical terms like `a one in 100-year event’” – a phrase, he said, that “makes a homeowner who’s just purchase their home think they have 99 years before they have to worry.”

Prepare, Mitigate, Insure

“When we at FEMA talk about ‘resilience,’” Kaniewski said, “what do we mean? We mean preparedness. We mean mitigation. We mean insurance.”

Kaniewski cited evidence from FEMA’s annual household surveys indicating that people in disaster-prone states are “more risk aware and better prepared” than elsewhere in the nation.

“But it’s not enough,” he said. “They have to do so much more.”

Beyond physical preparedness, Kaniewski said, “we have to talk to people about being financially prepared. That means having cash on hand. That also means insurance. Insurance is the best resilience tool.”

“Demand flood insurance”

Knabb agreed, calling upon meteorologists around the world to “talk about insurance more.” He also called on insurance agents to discuss flood coverage for their customers who aren’t in flood zones.

“If it can rain where you live,” he said, “it can flood where you live.”

He recounted buying a new home, asking his agent about flood insurance, and being told, “You don’t need it.”

“I told him, ‘Get it for me anyway,’” Knabb said. “And I’ve changed the graphics I use on The Weather Channel – instead of saying, ‘Ask Your Agent If You Need Flood Insurance’ to ‘Demand Flood Insurance.’”

The panel discussion covered a range of topics, including insurers’ need to emphasize risk reduction and resilience  and the “data fluency” of insurance regulators. You can watch the session below.

JIF Insights: Cowbell CEO On Simplifying Cyber
For Smaller Firms

At Triple-I’s Joint Industry Forum last week, I had the opportunity to meet with Jack Kudale, CEO and founder of Cowbell Cyber, and learn more about how the startup aims to simplify and demystify cyber insurance for small and medium enterprises.

Cowbell CEO Jack Kudale’s background includes 25 years in enterprise software and five in cyber security. He led three startups before founding Cowbell.

Cyber remains a tough sell among smaller companies. As previously reported by Triple-I, many believe their risk profiles don’t warrant the cost of the coverage, and some complain the policies contain too many exclusions. A 2019 Advisen survey of brokers and underwriters – all involved in cyber insurance – found “not understanding exposures” (73 percent), “not understanding coverage” (63 percent), and “cost” (46 percent) to be the top three obstacles to writing and issuing cyber.

‘We eliminate the application’

Cowbell this morning announced the launch of Cowbell Prime 100 – the company’s A.I.-powered platform that promises to assess customers’ cyber exposures in real time and match them with the most relevant coverage for their business – all in about five minutes.

“Basically, we eliminate the application,” Kudale said. “The coverage is highly individualized for each specific business.“

And, if that isn’t enough, instead of an annual process of underwriting and renewal, Cowbell Prime 100 will continuously monitor customers’ exposures and recommend coverage changes in real time.

“For smaller companies, the concern is about speed and simplicity,” Kudale said. “Do I have to fill out long forms or answer intrusive questions? We remove all that friction and provide coverage tailored to their exposure.”

Larger companies, Kudale said, “are more interested in insights. Our continuous underwriting will help them better understand their cyber risks and how the recommended coverage addresses them.”

“The more customized the policy,” he continued, “the less concern there is about excessive exclusions.”

Cowbell Factors

The platform’s proprietary “Cowbell Factors” assess:

  • Projected loss costs based on hundreds of thousands of cyber cases,
  • Risk signals from internet-exposed infrastructure,
  • The customer’s cyber security practices,
  • “Dark web” intelligence,
  • Industry-specific business-interruption data, and
  • Regulatory compliance data.

Kudale’s background includes 25 years in enterprise software and five in cyber security. He led three startups before founding Cowbell with partners from the insurance and tech worlds.

Cowbell Prime 100 offers an A.M. Best ‘A’-rated admitted policy backed by Boost Insurance and prominent reinsurance partners, including Markel Global Reinsurance Company, Renaissance Re Holdings, and Nephila Capital. The company currently is appointing brokers and agents in California, Colorado, Arizona, Illinois, Oregon and Nevada.

JIF 2020 Crystal Ball

My first Triple-I Joint Industry Forum (JIF) did not disappoint.

Between panel discussions and conversations with thought leaders and decision makers from across the insurance industry,  I learned a lot and accumulated insights and leads that will feed this blog for some time to come.

At a high level, an informal poll during one session – “JIF 2020 Crystal Ball—What Does the Future Hold?” – asked attendees several questions to get a sense of where they see the greatest opportunities and threats for the coming year.  Asked where they thought innovation would have the greatest impact in 2020, 36 percent said claims, followed by 26 percent who said they believe product marketing would be most affected.

I suppose this isn’t very surprising, as claims and product marketing both touch customers very directly. Marketing makes the promises and, when it works well, claims keeps them.  These should be high-priority areas for companies that expect to remain in business and competitive.

When asked what they expected to affect their companies’ bottom lines the most, 47 percent of participants said natural disasters and 30 percent said litigation costs (highlighting the increased attention being paid to social inflation).

I was a bit surprised to see cyber didn’t rank higher – especially given the fact that it recently came out at the top of concerns cited in the 2020 Allianz Risk Barometer. Autonomous vehicles – for all the media attention they receive – was the top choice of no one in the room.

When asked which of the following natural perils – tornadoes, hail, hurricanes, wildfires, and floods – keeps participants up at night, someone piped up to ask, “Why don’t you have an ‘all of the above’ choice?”

Forced to choose, the group’s top nightmares were: floods, wildfires, and hurricanes, in that order.

Asked about global events and trends they expect to have an impact on insurers worldwide, “Protectionism and trade disputes” was the top answer by far, at 58 percent – far above the next-highest: 28 percent for Brexit.

When asked about their expectations (not necessarily their preferences) for the 2020 election results, more participants (54 percent) said they expect a continuation of the status quo, with a Republican White House and Senate and Democratic House of Representatives. Twenty-nine percent said they expect the Democrats to take the White House and the Senate and House to remain essentially unchanged.

I found these results a bit surprising, given the mid-term turnout that led the House to flip from a Republican to a Democrat majority. The dynamics don’t seem to have changed much since the mid-terms. If the Presidency doesn’t change parties, one might reasonably expect a change of balance in the Senate. If a Democrat wins the Oval Office, I would expect the dynamics that get him or her there would also result in the Senate changing hands.

While interesting, this is not at all a scientific study. What are your thoughts and expectations on these or other topics affecting insurance in 2020?

I.I.I. Joint Industry Forum: Registration Deadline Fast Approaching

I’m looking forward to attending my first Insurance Information Institute Joint Industry Forum next week.  The agenda for the January 16 event at the Marriott Marquis Hotel in New York City is packed with impressive speakers from across the insurance industry, as well as influencers from media, academia, and the world of politics and policy:

  • Triple-I CEO Sean Kevelighan will interview award-winning broadcast journalist and CBS Face the Nation host Margaret Brennan about current issues and the 2020 elections;
  • Former U.S. Council of Economic Advisers Chairman Glenn Hubbard will discuss events and trends shaping the insurance business environment with Wall Street Journal chief economics correspondent Jon Hilsenrath; and
  • Phil Klotzbach, research scientist in the Department of Atmospheric Science at Colorado State University and Triple-I non-resident scholar will lead a panel on extreme weather that includes the Weather Channel’s Dr. Rick Knabb.

Other panels include:

  • The Future of Insurance Marketing;
  • A 21st Century Workforce That Reflects Communities We Serve; and
  • An interactive discussion: JIF 2020 Crystal Ball—What Does the Future Hold?

The full-day event will wrap up with a cocktail reception with Dr. Hubbard. The entire event will be a fun, informative opportunity to learn and network with peers, subject-matter experts, and industry influencers.

I hope to see you there; if you haven’t signed up, please note:  Registration closes at 5:00 p.m. (ET) Friday, January 10, 2020.

2020 Insurance Fact Book Includes New Section
On Emerging Risks

The Insurance Information Institute (Triple-I) 2020 Insurance Fact Book is now available.

The 234-page digital publication features facts, figures, statistical tables, and charts on U.S. and global insurance markets. It also includes detailed data on direct premiums written and factors affecting U.S. auto, homeowners, and business insurance costs.

Three unique insurance risks—cybersecurity, extreme weather, and social inflation—are highlighted in a new section called Emerging and Evolving Insurance Issues. Other new components include:

“As we welcome a new decade, the challenges before the insurance industry are vast,” said Triple-I CEO Sean Kevelighan. “The catastrophic shock and losses from the last few years, from California wildfires and the Atlantic hurricane season, are telling. What the last decade has foreshadowed could be, as some say, the new abnormal. Our new Insurance Fact Book reflects the new risks insurers face.”

The 2020 Insurance Fact Book is available for purchase from the Triple-I’s online store.  Copies may be obtained free of charge by Triple-I member companies and associate members via the Triple-I’s members-only website. Previous editions have been popular with policymakers, journalists, academics, business leaders, and others.