The Insurance Information Institute invited its members to a webinar titled “Covid-19’s Impact on Health, the Economy and Growth” on March 5 at 11:00 a.m. EST presented by Triple-I Vice President and Senior Economist Michel Léonard, PhD, CBE.
Dr. Lèonard will discuss the following key points:
• Economic impact likely to continue into Q3/Q4 2020 and 2021 • Could reduce global growth by as much as 1 percent and delay recovery by up to 12 months • Fiscal and monetary policy, rates cuts, unlikely to be effective • Insurance industry to see higher claims, reduced premium growth
He will also preview the Global Macro and Industry Outlook report before it is made available to the public.
To find out more about the benefits of Triple-I membership click here.
Health officials in the U.S. have
advised businesses, schools and communities to prepare for a possible
outbreak of the COVID-19 coronavirus. On Tuesday, February 25, the Centers for
Disease Control and Prevention (CDC) said a wider spread of the virus in the
U.S. can be expected, but the agency is uncertain of the severity of the
threat.
The disruption to everyday life could be severe.
“It’s not so much a question of if this will happen
anymore but rather more a question of exactly when this will happen and how
many people in this country will have severe illness,” said
Dr. Nancy Messonnier, the head of the National Center for Immunization and Respiratory
Diseases at the CDC.
Being prepared for a pandemic should be a part of every
household’s emergency plan. The Federal Emergency Management Agency’s Ready.gov website offers the following tips:
Before a Pandemic
Store a two-week supply of water and food.
Periodically check your regular prescription
drugs to ensure a continuous supply in your home.
Have any nonprescription drugs and other health
supplies on hand, including pain relievers, stomach remedies, cough and cold
medicines, fluids with electrolytes, and vitamins.
Get copies and maintain electronic versions of
health records from doctors, hospitals, pharmacies and other sources and store
them, for personal reference. Get help accessing electronic health records.
Talk with family members and loved ones about
how they would be cared for if they got sick, or what will be needed to care
for them in your home.
During a Pandemic
Limit spread of germs and prevent infection.
Avoid close contact with people who are sick.
When you are sick, keep your distance from
others to protect them from getting sick too.
Cover your mouth and nose with a tissue when
coughing or sneezing.
Washing your hands often will help protect you
from germs.
Avoid touching your eyes, nose or mouth.
Practice other good health habits. Get plenty of
sleep, be physically active, manage your stress, drink plenty of fluids, and
eat nutritious food.
Here at the Triple-I blog, we’ve been following the news of the spread of the COVID-19 coronavirus disease both from an insurance industry and a public safety perspective over the past few weeks. For Triple-I members, we also make available a database of news abstracts. Members can access the latest news pertaining to COVID-19, by clicking here (scroll down on the page to the coronavirus in the news section).
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.”
When John Miklus joined the American Institute of Marine Underwriters (AIMU) as president six years ago, he discovered the association had been in partnership with the Insurance Information Institute (Triple-I) for more than 20 years. But he wasn’t quite sure just what Triple-I did for their organizations. He understood that Triple-I provided marketing and communications services – such as writing speeches and talking points on marine insurance issues for past presidents Walter Kramer and James Craig. But what Miklus soon came to realize and appreciate, was Triple-I’s profound understanding of the insurance business that no other marketing and communications firm provided, and the powerful partnership they had forged.
In years past, AIMU had been hesitant, if not reluctant, to engage the media, according to Miklus. “Working with the Triple-I changed all that. With adequate coaching and introductions to targeted media outlets, Triple-I facilitated a process that was comfortable and thoughtfully prepared. As a result, we got placement in high level media like the Wall Street Journal, and insurance trade press like Reactions magazine and AM Best-TV: taking us places we’d never been before and never thought we’d go.” The partnership has not only heightened awareness of AIMU in the insurance industry, but with the public, making them more fully aware of the challenges facing the shipping industry and insuring marine risks.”
Triple-I Amplify is a PR consultancy built expressly for insurance organizations like AIMU, and Miklus says that partnership with Triple-I Amplify provides unique advantages his organization can’t get anywhere else.
“It not only raises the visibility and credibility of AIMU, but also the importance and relevance of the marine insurance industry, in general,” he said. “It’s never been more vital for a smaller niche product line to be connected to the rest of the insurance industry; our partnership with the Triple-I secures that connection.”
“This industry is much more complex than most people understand, but it’s our job to help translate subject matter into accessible information that’s easy to comprehend,” said Sean Kevelighan, president & CEO of Triple-I. “Working with our Amplify partners, we can quickly eliminate any learning curve and immediately provide marketing and communications services to meet their needs. We know this industry; we know how to communicate effectively; it’s what we do.”
The Triple-I Network
Triple-I serves approximately 70 percent of the U.S. property/casualty market (members) as well as industries that support the Triple-I mission such as trade associations, academia and think tanks (clients). We are the trusted source of unique, data-driven insights on insurance to inform and empower our clients. Another value Triple-I brings is access to distribution channels that tie clients to key industry stakeholders such as the carrier, broker and agency communities.
For 60 years, the Triple-I has been a trusted source of actionable, timely insight for consumers and professionals seeking insurance information. We are the number one online source for insurance information. Our website, blog and social media channels offer a wealth of data-driven research, studies, whitepapers, videos, articles, infographics and other resources solely dedicated to explaining insurance and enhancing knowledge.
Amplify provides the following marketing and communication services to help elevate your brand:
If you’re interested in learning how Triple-I Amplify can help your non-profit or insurance trade association with marketing or communications services, please contact John Novaria, Managing Director, Amplify at johnn@iii.org.
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.
By Max Dorfman, Research Writer, Insurance Information Institute
Recently, I had the pleasure of speaking with Jennifer J. Deal, Ph.D., Senior Research Scientist with the Center for Creative Leadership (CCL), who helped provide insights into generational differences, leadership, and the insurance industry.
Deal will be speaking on many of these points at her
upcoming talk at the WCRI’s
36 Annual Issues & Research Conference, March 5 and 6, 2020, in Boston, MA. She
points to WCRI’s data-driven model as a mission she shares – and pushing for a
greater understanding of the employees they both study. Deal also notes the importance
of generating this data-driven understanding for the insurance business, which
is tackling how to best engage and retain Millennial and Gen Z employees, groups
that hold the future of the industry.
Why is studying Millennial engagement important?
Organizations want employees to be engaged and are deeply
concerned that young people aren’t engaged at work. In general, when new
cohorts come into an organization, it’s important to understand if anything is
meaningfully different about them. If there is, then the organization can
address it and hopefully continue to be effective as it integrates the new
employees into the larger organization.
How can a company use your insights to create a
more cohesive, inclusive environment?
A company can use my work to help staff better understand
the perspectives of the different generations.
Part of what my work does is provide data-based information about
generations to clarify where there is a difference between stereotypes and
reality. This helps both leaders and
people throughout organizations understand the perspectives of people from
other generations who may or may not think like them.
How do generational differences affect the
bottom line?
When people feel disengaged because they feel pushed aside
or ignored simply because they’re from a particular generation, that’s a cost.
When a company feels the need to implement very expensive training programs
that aren’t necessarily going to improve how people work together because they
don’t move the needle on the real issues, that’s a cost. When people leave
because of unmet needs, that’s a cost. Unnecessary tension, conflict, and
disengagement that arises because of generational stereotypes is a drag on the
organization – and the bottom line.
Do you see all this affecting the insurance
industry?
Definitely. I’ve had numerous conversations with leaders in
the insurance industry about issues related to attraction and retention of the
next generation of employees. One of the conversations we’ve had is about the
desire of young people to have stability in their careers. Young people are
much more interested in stability and long-term careers than people think they
are. If that’s something the insurance industry can offer, it will likely be of
great interest to young people.
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.
Nothing is more romantic than a marriage proposal on Valentine’s Day! The first step after giving a valuable engagement ring—well, maybe the second, after the “Yes!”—should be a practical one: call your insurance agent.
While you can’t insure
the sentimental value of such a gift, having the right amount of insurance will
provide financial protection.
Jewelry losses are
among the most frequent of all homeowners insurance claims. Taking these four
steps will ensure adequate protection for your new ring:
1.
Contact your insurance agent immediately.
Find out whether you
will need additional insurance. Most standard homeowners and renters insurance
policies include coverage for personal property such as jewelry; however, many
limit the dollar amount on jewelry to $1,000 to $2,000. With the average engagement
ring costing nearly $6,000, according to The Knot, that’s unlikely to be enough.
To properly insure
jewelry, consider purchasing a floater or an endorsement policy. In most cases, these add-ons to a
homeowners or renters policy would also cover you for “mysterious
disappearance.” This means that if a ring falls off a finger, is flushed down a
drain, or is lost, you would be financially protected. And, unlike a homeowners
policy, floaters and endorsements carry no deductibles, so there is no
out-of-pocket expense to replace the item.
2.
Obtain a copy of the store receipt.
Forward a copy of the
receipt to your insurer—so your company has a record of the ring’s current
retail value —and keep a copy for your own records. It’s also a good idea to
get a copy of the item’s appraised value.
3.
If you received an heirloom piece, have it appraised.
Antique jewelry will
need to be appraised for its dollar value. You can ask your insurance agent to
recommend a reputable appraiser.
4. Create
a home inventory list
A home inventory is a
list detailing information about personal property and items like jewelry. An
up-to-date inventory can speed up the claims process in the event of loss.
For jewelry, we
recommend including the following information in your list:
Item description (include
metal type, stones, carats etc.)
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.”
L to R: David Sampson, American Property Casualty Insurance Association; Vincent Dowling, Dowling & Partners Securities; Hayley Spink, Lloyd’s
At a fast-paced Joint Industry Forum session called Insurance Vision: Seeing Beyond 2020, the subject of artificial intelligence (AI) was bound to come up. Insurers are leveraging AI and machine learning (ML) as part of the data-driven revolution transforming the industry.
Sixty-two percent of top 100 U.S. carriers say they have adopted AI and ML initiatives.
Session moderator David Sampson, President and CEO, American Property Casualty Insurance Association, asked about how U.S. regulators are likely to react as carriers add data analytics to pricing toolkits.
In response, V.J. Dowling, Managing Partner, Dowling and Partners, predicted that “one of the biggest topics of the next 10 years” will be regulatory focus on disparate impact as insurers introduce AI into underwriting and claims handling.
Disparate impact refers to the disproportionate impact of an insurance rate structure on the premiums paid by protected minority classes. Dowling explained that while personal lines insurers 30 years ago might have put customers into broad risk buckets to set a price for each, “technology and data has allowed the number of buckets to increase until, arguably, you get to a point where each individual person has their own price based on their specific characteristics. And what that means is, you get a much bigger dispersion of rates from high to low. The subsidization starts going away.”
Dowling recommended that everyone interested in the subject read this blog post by Lemonade CEO Daniel Schreiber. In the post, Schreiber says “algorithms we can’t understand can make insurance fairer.” Addressing regulators directly, he proposes a “uniform loss ratio test” for pricing outcomes.
To get an idea about how regulators are reacting to the increasing use of consumer data, Dowling points to this letter to life insurance companies from the New York State Department of Insurance.
“It basically says, you can do this, but if it has a disparate impact on the end result, you can’t do it. To me, there was a double negative. You effectively can’t do it,” he concluded.
Sampson asked the other panelist, Hayley Spink, head of global operations at Lloyd’s, to describe the hurdles insurers encountered to complying with the general data protection regulation (GDPR) that went into effect in 2018. GDPR governs how European Union companies handle, collect, and process personal data.
“Especially in our industry, we deal with personal data all the time and we share that personal data between ourselves and third parties, so this has had a big, big impact across the EU,” Spink said.
Insurers could face fines of up to €20 million for noncompliance with the GDPR. In the U.S., California and New York are working to implement similar consumer data privacy laws.
Turning to insurers’ innovative uses of technology, Spink spoke about the use of drones to assess damage after catastrophes and the use of parametric insurance to trigger payments of flood claims in the UK. Lloyd’s runs an innovation accelerator in which pioneering start-ups are partnered with mentors from managing agents across the market.
The panelists also discussed social inflation, third-party capital, and adapting to the skills and interests of the modern workforce.
For the full Joint Industry Forum 2020 agenda click here. Check out this video for an overview of the conference. Interested in attending next year’s conference? Contact us at jif@iii.org.
