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Who else here is passionate
about insurance?
[Laughter] Okay.
Well, hopefully you know in 2008, when I was in
a government job and looking to get out and
thinking about financial services.
I was surrounded by economists and they said,
"you know, you may want to look elsewhere than
a big bank."
And as a result an insurance company gave
me a call talked to me about the position
that I was looking and interested in, and
they also walked me through why the company
was gonna weather what everybody knew was
coming, which was a recession.
And in the ten years now that I've been affiliated
with the industry, I actually have become passionate
about the industry.
It does a lot for our economy, for our community,
for people. And so what I want to take you
through first, is a little video, because I
want to walk down a path of a world without
insurance.
[Music] Most folks know insurance is the thing
that pays to repair damages to homes and cars,
but if people stop to think about what insurance
means to today's economy, they'd realize that
insurers and the nearly three million people
they employ nationwide make possible projects
of all sizes, from airports, to stadiums and
arenas, to coffee shops, to local childhood
literacy programs.
So to comprehend the many ways insurance makes
the economy better and stronger, try to imagine
a world without insurance. So what would that
look like?
For starters, hazards like natural catastrophes
and motor vehicle accidents, would result
in far greater losses of life and property.
However, through insurance's support for the
Insurance Institute for Business and Home
Safety, the Insurance Institute for Highway
Safety, and other organizations, homes are
safer and more resilient, and motor vehicle
deaths have plummeted to a fraction of what
they were before 1960. Insurers also collect and
analyze data and study ways to make the public
more aware of the negative effects of distracted
driving and to rate community preparedness.
Without insurance, driving to work or having
goods delivered to homes and businesses would
be a lot riskier and potentially cost more
for tens of millions of Americans.
Also, workers might not be covered for injuries
and illness that happen on the job, which
would result in lost wages and financial disruption
for families everywhere.
But because insurance studies risks and compiles
statistics to share with local, state, and
federal governments; as well as private institutions;
we have policies and laws in nearly every
state requiring motorists to have some form
of coverage.
And all states have workers compensation laws.
[Countdown: three, two, one] And without insurance
innovation might slow to a crawl or perhaps
not happen.
The insurance industry as we know it was built
to empower risk takers who have created our
modern economy.
For more than three hundred years, since the
Enlightenment and Age of Exploration, insurance
has been the driving force that has underwritten
investments in transformational technologies.
From steam power, to mass production, to aviation,
to automation and information networks, to
future advancements in artificial intelligence,
nanotechnology, and big data.
But perhaps insurance biggest and most often
overlooked contribution to economic growth
is its key role as a major source of funding
for projects, large and small.
This capital is vital to paying long-term
claims, so insurers' investment portfolios
often include private and municipal bonds
that help finance the growth and prosperity
of communities everywhere.
Right after tragedy, you need help, and that's
what insurance is there for. We act as the
financial first responder after catastrophe.
We get into the communities. We help rebuild
and restore people's lives and the economy
more broadly.
We act as a partner to governments, and households,
and businesses, and we help them understand
what the risks are, help them mitigate the
risks, and in turn they will become more resilient
and sustainable for the future.
World without insurance?
It's pretty safe to say the life would be
a lot different and probably not as exciting.
And this is why insurance is honored to play
a part in making our economy more robust and
resilient every day of the year.
Okay, so more passion?
We just put that together back there, that's
why I'm wearing the same thing.
Well let me then walk you through some more
stuff and let you let you better understand.
The III is an organization funded by
the insurance industry and really our mission
is to improve public understanding of insurance.
What it does, how it works.
We do not sell insurance on our website, we're
only there for the consumer to educate the
consumer, policymakers, other key stakeholders
about what insurance does and what they
need to know about it.
So one of the things we also do is we educate
journalists and we handle thousands of media
inquiries every year.
And so what I am showing you here on this
slide is really a breakdown of insurance related
coverage, and what's important, and what is
the media reporting on.
And you can see about thirty percent of the
media around insurance is something that this
audience deals with on a regular basis, natural
catastrophes.
Another fifteen percent you'll see there is
a man-made catastrophe that we are seeing
on a daily basis, reach epidemic proportions,
which is the automobile issue and what's going
on the roads with distraction, and drugs,
and other things like that.
But when we break down that coverage we actually
looked at it and we said okay, now what's being
published, which is on the bottom axis there,
and you're seeing things like InsurTech technology,
the auto insurance issue that I mentioned,
cyber insurance.
But then we also looked at the vertical axis
there about what people care about, what are
they sharing on social media, and look what
rises to the top.
NFIP, right?
Number one issue that people really care about.
Floods and storms another big issue, right?
So this is what we're dealing with in terms
of we want to know and educate people about
these programs and what they need to know
more about it.
And as we do that I want to also walk you
through though a little bit of what insurance
does.
We mentioned in that video about insurance
is economic capital and being financial first
responders.
We have a white paper on our website that
you can look at that dives into this slide
a little bit more deeply.
But if you break it down in terms of safety
and security, you heard me talk about financial
first responders getting on the ground oftentimes
right there when FEMA and first responders
are there so is the insurance industry helping
rebuild immediately.
We mitigate risk.
Nobody wants that claim to happen, right?
That means something bad happened.
So the industry spends, those organizations,
how do we make roofs more sustainable, how
do we make sure that the highways are more
safe?
Financial stability.
I mentioned I got into this industry in 2008.
This industry weathered the financial crisis.
In 2010, at the height of the financial crisis
there were 157 bank failures, there were eight
insurance impairments that year.
And impairments mean they go into runoff and
the claims get paid, the promises get kept, right.
So this industry weathered a big storm and
kept its promises.
We also do a lot of development.
You can't have a big construction project,
you can't have big infrastructure projects,
unless there's insurance behind it.
That's what economies do.
That's why insurance drives economic growth.
One of the other things, and you saw a little
bit of that graph here, this represents various
industries' contribution to the economy, 
GDP right?
You've got technology there, Internet, mining,
securities, banks.
What's up at the top?
The blue line, that's insurance.
Three point one percent of the overall economy,
banking is two point eight percent.
The securities industry is one point three
percent.
So we're contributing a lot to the economic
growth in terms of jobs, taxes, charity, investments.
The insurance industry actually is one of
the largest asset management industries in
the world.
Eight trillion dollars in assets under management
in the industry.
They're long-term investments too, right?
We have to keep the investments, in fact there's
seven hundred and fifty billion dollars outside
what we call the policyholder surplus waiting
there, because if these things kick in in
the long term the monies need to be there
to again keep the promises.
On the financial first responders, this organization
knows very well about getting on the ground
and making sure that lives are saved immediately.
But what happens when the water drains?
When the dust settles?
You've got to rebuild an economy.
This is what insurance does.
It gets people back in their jobs.
It gets people back in their homes.
It makes sure that the economy gets back up
and running for the longer term, because after
the catastrophe is just the tip of the iceberg,
right?
And we've got a lot to do.
This organization, FEMA, knows very well about
this.
They manage the National Flood Insurance Program,
right?
So they know they understand that this is
not just a day, two, week issue.
It's a much longer issue, something that needs
to be dealt with.
And this is what insurance and why it needs
to be there.
Think about auto insurance.
Oftentimes people that's one of the worst
things that they think they have to buy, right?
Why do I have to do it?
Why are my auto rates going up?
Well we got more people driving than ever
before in history right now and we got a lot
of distraction in the cars, and the phones,
and all of that.
But I don't know how many of you have twenty
thousand dollars sitting around, so that in
case something happens you can pay that.
Because that's what the average, right, this
chart shows you what the average cost of a
bodily injury claim is.
Around fifteen - sixteen thousand dollars,
right?
Well, and then your average premium is around
five hundred, so that means for every dollar
that you spend in premium you save thirty
dollars, if something happens.
That's what your auto insurance is doing.
We hear a lot today about disruption, right?
It's it's kind of a buzzword that everybody's
talking about.
This is what insurance does.
Insurance does disruption.
We help lead through it.
Catastrophes? 2017 was a record year in terms of
insurance losses.
We paid all the claims ninety-one billion
dollars.
Economics?
I just talked to you about how insurance weathered
through the financial crisis in the US and
the world, right?
Geopolitics, sanctions, tariffs, battles,
wars going on in the world.
There's a thing called political risk insurance,
right?
Something happens, supply chain interruption
those types of things, companies need that
insurance in case something happens.
A business gets taken over in a certain country
that's volatile,
there's insurance to cover that.
Technology.
We're in what many call the fourth industrial
revolution and what I would tell you is that
insurance has been there for the first three.
All of those innovators, all those that want
to modernize, they need to transfer that risk.
What's really neat about this fourth industrial
revolution is that the insurance industry
is going to innovate itself.
We heard from that speaker about artificial
intelligence and the impact that that can have.
That is something that insurance is looking
at, because that does and can predict and
save lives.
Now the gap, right?
As much as it's so important it's not there
as much as we need it to be.
In fact seventy percent of all catastrophe
losses worldwide were uninsured.
So people didn't have the insurance, it was
a world for them without insurance.
And then flooding, which is the largest natural
catastrophe in the world, continues to be
the largest risk in terms of the gap that
we have.
We know that in this country.
We know that because there is not a strong
take-up rate in the National Flood Insurance Program
Now here's what's happening on the National
Flood Insurance Program.
FEMA, the NFIP, they're doing the best they
can.
Look at these claims that they're paying,
right?
Hurricane Katrina nearly eighteen million
dollars in claims paid, Sandy eleven million,
Harvy, we don't know it's still going up,
but the claims are being paid.
What I would argue is this sustainable, right?
Can the government keep doing this?
Here again illustrates something, 
this information is taken from FEMA,
as well as some McKinsey report.
But this graph illustrates, we've got
less than five percent increases in people
getting flood insurance, right?
Eighty-eight percent of Americans who actually
need flood insurance, don't have it.
What do we do?
How are we gonna bridge this gap?
Well FEMA and the NFIP are actually looking
at some really neat solutions and I'm
delighted to see it.
We're looking at ways to have the private
industry enter into it.
Sixty years ago when the NFIP was established,
the industry didn't have the data and couldn't
predict the floods.
And as a result, they couldn't offer the insurance
that was needed.
It's similar to the Terrorism Risk Insurance
Act, right?
After 9/11 there was so much unpredictability,
that they weren't able to underwrite terrorism.
And as such the, construction market in areas
like New York City shut down.
So it took an act of Congress, TRIA, to actually
get the construction market.
I think actually at the bill signing, we had
people with construction hats because it reinvigorated
an industry as a result.
And NFIP is like that, right?
The government is there as a backstop.
But now what we're seeing is the private industry
is better, it's got more modernization, it's
got more better modeling, and so FEMA purchase
reinsurance.
And that was a great purchase, right?
A hundred and fifty million dollar purchase
in 2017. Paid out a billion dollars.
Increased the purchase by forty percent for
this year, right?
And then catastrophe bonds are another great
way that the private industry is entering into it.
And then we're also seeing products being
offered.
One of the Triple I members, Swiss Re, is
beginning to offer flood insurance, not just
on the traditional modeling or maps, but on
construction and location.
You know, things that we can better predict
how they will respond and mitigate the risks
associated with flood.
So one of the things I wanted to have everybody
imagine and why do we have such a low take-up
rate on flood?
Well think about our world, what you're seeing
here is what you probably see any evening
or day on national television, right?
You can't watch a half hour on national network
television without saying three insurance
commercials.
Try it.
What if you had that marketing for flood?
Because the fact is over ninety percent take-up
rate exists in the auto insurance and the
homeowners market.
And I would argue it's because of this great
marketing.
So how do we bring that marketing into flood?
Something to think about.
How do we get private industry more engaged?
Well, it's politics right now, right?
And in the words of the late great Tip O'Neill,
"All politics is local".
And that certainly is the case for our flood
issues, right?
We have more Americans right now living in
flood prone areas than ever.
You know nearly two trillion dollars in real
estate is exposed to flooding at this point.
I joke, I don't have the facts behind this
but there -year flood in this country every
week, right?
It's one of the worst terms I think we can
use this day and age.
And there's something that we need to do about
it, we need to recognize that there's an issue,
but we also have to understand that you have
to be actuarial and economically sound in how
you price your risk.
And right now the politics aren't letting
that risk be priced right.
They actually tried a couple years ago, but
they brought it back, right?
They came back on it.
And this is the moral hazard that's being
created in the flood issue.
And we've got to do something about that and
I would argue we've got to do something
about the politics.
But as we well know here in Washington D.C.
that's never easy to overcome.
But I would argue that it's something that
we need to focus on and it will be the fix.
And if we can get rid of the politics, if
we can get the private industry more engaged,
we will have that power of insurance in something
that FEMA deals with very often,
which is flood.
And with that, I thank you.
One of the number one ways to expedite the process
is inventory. And most of the insurance
companies have, in fact we just got rid of
our own application because we realized all
of our member companies already have it.
We had an app called "Know Your Stuff" and
it was just something that electronically
allowed you to know what stuff you have, so
in case you need to make that claim it comes
very quickly.
Unfortunately, not enough people do that.
You know we don't as humans, not just Americans,
we don't want something bad to happen and
we don't believe it's gonna happen to us,
so we don't take that time to prepare.
But if you do, you're gonna be in a lot quicker,
faster place in terms of claims management.
You're looking at it, right?
Well, I mean it's a shameless plug for the
Triple I, but this is what the industry at
least is doing.
We're trying to have organizations like ourselves,
that are getting out and and talking about
this.
Educating people about what it means, preparing
them.
You know his is a very important issue
and it is, insurance again, because humans
don't want something bad to happen, they don't
believe something bad will happen, they don't
want to think about it.
And even in some cases right, we actually
have to mandate it so that the behavior can change.
We saw there that workers comp insurance is
now mandated in all fifty states.
Auto insurance is very similar.
That's what we have.
And we're looking at this and I know we want
to work with FEMA actually to really dig into
this behavioral issue, because I think that's
really what drives it.
And that's what's gonna, we need to know what
drives the behavior, so that literacy can be
more action-oriented.
So I think, again we have organizations
to come, we still have a problem, and ways
to go but we're working at it.
And I think, I'm really excited about some
of the messaging that is coming out of FEMA
right now that's talking about insurance and
how that can bridge the gap, how that promotes
resilience, because it's true.
You will mitigate your risks, you will be
more resilient, if you have that insurance.
You just got to get it though.
Yeah, it's a great question actually and all
the companies that you mentioned are supporting
members of us.
They're also supporting members of, you heard
on the video,
IBHS, the Institute for Building and Home Safety, right?
This is an organization designed, they actually
have a facility that can recreate hurricane-strength
winds.
And you saw in that video they put houses
in there to actually show what's going to
happen in a hurricane if you don't have your
roof tied down, or if you don't have the right parts.
The Insurance Institute for Highway and Safety,
that organization has fundamentally changed
what our roads look like today,
verses fifty or sixty years ago.
This is the organization that crashes the
cars everybody knows that, right?
You see those crashed cars and things like
that.
That is an insurance based organization.
Those are all the members that you talked
about.
Those are companies that are investing in
those organizations to do it.
Ours is meant to promote it.
But what you also talked about which I think
is really interesting, and neat, and I think
the future of insurance, is resilience and
risk mitigation.
You know people right now are looking for
the best deal on insurance, right?
And that's a good way to shop.
Why not get something that stretches your
dollar in the best way.
But also insurers are more and more dedicated
to helping you mitigate that risk.
Helping make sure, again, you don't want the
claim to happen, right that means something
bad happened that means you're going to have
to rebuild and restart.
Even though the claim is there, the money
will be there for you when you have insurance,
it's still a lot to go through.
So more and more insurers and the customers
want to figure out how do I mitigate this
risk?
How do I become more resilient in my life
in my business in other ways?
Yeah, well let me just break down the price
is so high, because I do think oftentimes
everybody thinks it's the insurers that want
the prices to go up.
And let's just go to a different issue
on automobile insurance, because that's one
part of the industry that's had to increase
rates, right?
And it's not a part of a natural disaster
but it is a man-made one.
But you break down what's going on in the
roads, again I mentioned we've got more people
driving than ever before in history, we've
got distraction.
How many people have rented a car and tried
to navigate their navigation system on the
new rental car?
I have to sit there for minutes and do it.
And this, there's actually study out from
the AAA that shows that the manufacturers
aren't really testing that technology like
they probably should be and making sure that
it's safe.
So you've got a distraction in your hand,
oftentimes right, with the phone that's another
area and even in the car itself.
The cost of a bumper in the last three years
to fix and the labor behind it has doubled.
You know you not only have more sensors to
put in there, you gotta have somebody that
knows how to calibrate all of this, right?
You've got legalized drugs, you've got an
opioid crisis, so all of those as an actuary
as an underwriter you have to take those into
account, because it's getting more expensive
when you get into an accident.
Not you personally, but whoever. We've got a lot
of accidents happening.
So that's what's behind rate increases and
similarly Americans, people love to live near
water, and as we well know the flooding frequency
and severity is increasing. So we have more
risk. You're living in riskier areas.
And you made a very important point you know
some people can't afford, oftentimes the flooding
you gotta elevate or you got to move, and
that is not feasible for some people.
But I would argue not all people, right?
And so we do have to figure that out how do
we make sure that for those that it's not
feasible for, how do we make sure that they're
getting the support that they need?
I can tell you it's not repaying an insurance
claim twenty times over and getting them back
into the same house.
Well I would argue that the write your own
is a fraction of the industry, right and the
profitability issue is still a question, right?
Some of the largest insurers, you know household
names insurers, have had to withdraw from
the market because there is no profitability
associated with it.
So again when you have a disaster of this
impact, so I can't speak specifically for
individual marketings, but most of those that
you see, that you hear about, that you see
on network television are not those companies
that we're talking about and probably don't
have the marketing budgets at hand.
And that means that we need we need to figure
out how to bridge that gap too, right?
How do we bridge that gap for those that can
market, that those that want to get engaged
in this issue, that those that want to provide
insurance in this area, can get more engaged.
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