The trusted source of unique, data-driven insights on insurance to inform and empower consumers. Insurance Information Institute
Careers and Employment, Catastrophes, Insurance Industry, Risk Management

Women’s History Month Karen Clark: A Model of Success

Leave a comment

By Loretta Worters, Vice President, Media Relations, Triple-I

Like many people, Karen Clark’s career was influenced by circumstances and serendipity rather than advanced planning.  In graduate school she developed a love of building computer models, leading to her first job in the research department of Commercial Union Assurance. 

“One of my first assignments was to figure out if the insurer had too much coastal exposure because they had been growing along the coastline,” said Clark.  “I started to research hurricanes and how I could potentially build a model to estimate hurricane losses.” 

That research ultimately led Clark to write her seminal paper “A Formal Approach to Catastrophe Risk Assessment and Management,” published in the Casualty Actuarial Society Proceedings, in which she argued for probabilistic models rather than the subjective rules of thumb then used in underwriting. 

“Catastrophe modeling was a game-changer because it introduced a whole new way of understanding and managing risk,” Clark explained.  “We don’t just look at worse-case scenarios, but we develop a probability distribution of potential outcomes.  What are the chances of a $1 billion versus a $10 billion hurricane loss?  You need probabilities so you can evaluate how likely you are to have a solvency-impairing event and how much reinsurance you want to purchase and for pricing the product.  You also need to know what the costs and benefits are of different mitigation strategies.  That’s what was missing prior to the catastrophe models.” 

Being Taken Seriously as a Woman in the Insurance Industry

When Clark first started out, catastrophe reinsurance was primarily written out of Lloyd’s of London.  “Lloyd’s was 100% male,” she laughed.  “I gave my first presentation in the Lloyd’s Library to about 100 male underwriters.  Not only was I a woman, but I was an American woman, and I was seven months pregnant,” she said.  “Along with that, I was carting this portable computer. Many underwriters had never seen a portable computer, much less used one. 

“After my presentation, there was silence in the room, and little interest, but that didn’t dissuade me.  I was determined to find those innovators and forward thinkers and I did find a few in Lloyd’s and in the U.S., who helped me to develop AIR’s first product, CATMAP.”

Clark said it is important early on to find those forward thinkers who believe in what you’re doing and are willing to make a commitment.  She advised women not to take no for an answer and to be good communicators.  “You always have to ask for what you want.  The worse that can happen is you get a no.” 

Clark hasn’t looked back since.  As founder of the first catastrophe modeling company, Applied Insurance Research, later AIR Worldwide, she became an internationally recognized expert in the new field of catastrophe risk modeling, revolutionizing the way insurers, reinsurers and financial institutions manage their catastrophe risk. 

Clark declined many offers to sell her company over the years, but eventually decided to sell AIR to Insurance Services Office (ISO).  Several years later, she co-founded  Karen Clark & Company (KCC) with her business partner, Vivek Basrur, never intending to develop catastrophe models again.  “But as my partner likes to say, life is what happens when you have other plans.”

Reinventing an industry

“Through numerous consulting engagements with global (re)insurers we discovered the models were not meeting all the needs of the senior level decisions makers.  We started hearing several consistent themes and eventually developed what we called the CEO Wish List”, said Clark.

That CEO Wish List informed the KCC vision for a new generation of catastrophe models—models that are more accurate, fully transparent, and provide decision makers with additional risk metrics and insight into large loss potential.  “We didn’t change the fundamental structure of the models”, says Clark, “but rather how the models are  delivered to (re)insurers and how they can be leveraged in new ways.”

Clark said that KCC is doing a few things differently than other modelers and one of them is their scientific approach.  “Rather than extrapolating from historical data, we have implemented advanced physical modeling techniques for the more frequent events, such as severe convective storms, winter storms, and extratropical cyclones.  This enables our models to capture all weather-related claims and not just those defined as catastrophes.  Our internal systems automatically ingest over 30 gigabytes of data a day from all the satellites, radar stations and global models so our clients have high resolution hazard footprints every morning for monitoring and managing daily claims activity. 

“Interestingly, reinventing the catastrophe modeling industry was just as challenging as inventing it”, says Clark, “because most people thought it was impossible.”  “We again had to find those industry leaders and early adopters who believed in our vision and then worked with us to make it a reality.”

Clark said she’s very fortunate she discovered her passion at a young age when she first started her career.  I just love what I do, and until I can come up with something else that I could enjoy doing daily as much as I enjoy KCC, I’ll be right here.”

Cross-posted from the Triple-I Resilience Accelerator blog

Catastrophes, Insurance Industry

Triple-I CEO: 2020 Proved Insurers Can Lead Through Disruption

Leave a comment
Sean Kevelighan


The U.S.’s auto, home, and business insurers have more than met the challenges raised by COVID-19 over the past year, according to Sean Kevelighan, CEO, Insurance Information Institute (Triple-I).

“2020 proved how this industry can lead through disruption. We can adapt. We can innovate. We can keep our promises and pay claims—even during a global pandemic,” Kevelighan said, in remarks today to the Reinsurance Association of America’s (RAA) virtual 2021 Catastrophe Risk Management conference.

The net income after taxes for U.S. auto, home, and business insurers cumulatively dropped to $35 billion in the first nine months of 2020, a 25-plus percent decrease from where the insurers’ net income after taxes stood after the first nine months of 2019, Kevelighan said. The deterioration was attributable in part to the severity of 2020’s hurricanes, wildfires, and civil unrest.

Despite these events, the Triple-I’s CEO noted how insurers provided an estimated $14 billion in premium relief to locked-down drivers, donated nearly $300 million to charitable causes, and largely retained its national workforce of 2.8 million Americans as premiums grew modestly.

“If you look at net premiums written growth, we were actually at the 10-year average last year,” Kevelighan continued, reporting how auto, home, and business insurers realized three percent net premiums written growth year-over-year when comparing the first nine months of 2020 to the same timeframe in 2019. Net premiums written are premiums written after reinsurance transactions.

COVID-19’s arrival in the U.S. also prompted the Triple-I’s launch last year of its Future of American Insurance & Reinsurance (FAIR) campaign, he continued, as policymakers, such as those in the U.S. House of Representatives, sought clarity on what property damages were, and were not, covered under standard business income (interruption) insurance policies.

“The FAIR campaign was meant to be an aggressive way to inform the discussion,” Kevelighan stated, “Our customers needed financial support and we knew the federal government was the only entity who could provide it.”

In assessing 2021’s key issues, Kevelighan said he thought telematics and social inflation would take on greater import among insurers and their policyholders. “Telematics is one way our industry can drive safety on our roads,” the Triple-I’s CEO said, referring to the devices drivers can place voluntarily in their vehicles to reduce the cost of auto insurance and to encourage safe driving habits. “Social inflation is getting worse. These massive litigation lawsuits are really putting a strain on the cost of liability insurance,” Kevelighan stated.

Following his remarks, Kevelighan participated in a live question and answer session moderated by Frank Nutter, president, RAA. Katrin Zitzelsberger, senior epidemiologist, Munich Re, and Damon Vocke, partner, Duane Morris, joined them.

Auto Insurance

U.S. Drivers Spent $13 Billion in One Year to Protect Against Uninsured and Underinsured Drivers: IRC Report

Leave a comment

One in eight drivers on U.S. roads was without auto insurance in 2019, according to a report released today by the Insurance Research Council (IRC).

At-fault drivers who don’t comply with state insurance requirements raise insurance costs for everyone else. Insured drivers paid more than $13 billion in 2016 (about $78 per insured vehicle) for protection against at-fault drivers who have inadequate coverage for medical costs and property damage they inflict on others.

“Keeping auto insurance affordable is more difficult when a significant number of drivers refuse to carry their fair share of the costs,” said David Corum, vice president of the IRC.

While countrywide the uninsured motorist rate was 12.6 percent in 2019, these rates varied substantially across states, ranging from 3.1 percent in New Jersey to 29.4 percent in Mississippi.

Although the uninsured motorist rate increased only 1.2 percentage points nationwide from 2015-2019, several states experienced more significant increases, including Washington (6.9 percentage points), Rhode Island (6.8 percentage points) and Mississippi (6.4 percentage points). Other states experienced decreases in uninsured motorist rates, including Michigan (10.1 percentage points) and Delaware (2.9 percentage points).

The IRC report, Uninsured Motorists, 2021 Edition, examines data collected from 11 insurers representing 60 percent of the private passenger auto insurance market in 2019. For more information on the study’s methodology and findings, contact David Corum, at (484) 831-9046, or by e-mail at IRC@TheInstitutes.org. For more information about the report, visit the IRC’s Web site at www.insurance-research.org.

Corporate Social Responsibility, Insurance Industry

Insurance Gives Back: March 2021 Update

Leave a comment

When disaster strikes the insurance industry is a financial first responder. Millions of dollars are on the way to policyholders to cover claims related to the severe winter weather that pummeled the United States in February. But the industry is also staffed by individuals who care deeply about their communities and contribute above and beyond what their jobs require.

Below are just a few examples of donations companies and organizations have made to help their neighbors in need.

  • The American Family Insurance Dreams Foundation made a $10,000 donation to the American Red Cross on behalf of the enterprise to aid disaster relief in Texas.

  • Several insurers including Liberty Mutual and Northwestern Mutual are part of the American Red Cross Disaster Responder Program. The Red Cross works with government and community partners to coordinate food and water distribution to where it is most needed.

  • The Hanover Insurance Group, Inc. raised $1.5 million for United Way and hundreds of other nonprofit organizations across the country through an employee giving campaign. The contribution represents the largest donation the company’s charitable foundation and its employees have ever made through the annual giving program.  

  • The Insurance Industry Charitable Foundation’s (IICF) Southeast division has raised more than $560,000 to support 21 nonprofit beneficiaries who are facing challenging times due to the COVID-19 pandemic and the recent winter storms. The IICF is also raising funds to help feed children and families that are facing hunger because of the pandemic.

  • New York Life donated $100,000 to Feeding Texas in response to the winter storm to support immediate food shortage needs in the most vulnerable communities in the state. The New York Life Foundation will match donations made by employees and agents up to an additional $100,000 to both Feeding Texas and the New York Life Emergency Assistance Fund, which provides financial assistance to employees and agents impacted by catastrophic events.

  • Texas Mutual Insurance Company donated $100,000 to six organizations on the frontlines providing Texans with basic needs like food, water and shelter. The Coalition for the Homeless in Houston was one of the recipients.

  • The USAA Foundation, Inc. has announced a $350,000 commitment to help Texas residents recover from February’s storm.
Careers and Employment, Insurance Industry

Mentoring: Insurance for Success. Spotlight on Cathy Weatherford

Leave a comment

To commemorate Women’s History Month, Scott Holeman, Triple-I’s Media Relations Director, interviewed Cathy Weatherford, the first woman to serve as Insurance Commissioner of Oklahoma.

Like most insurance and financial service professionals, Cathy Weatherford didn’t pick her career. It picked her. Taking advice from her father who served as a state legislator in Oklahoma, Cathy applied for state government jobs where there were a variety of opportunities with health and retirement benefits. She landed at the Oklahoma Insurance Department.

For 16 years, she climbed the department’s ladder while honing her skills in public policy and insurance regulation. She also learned the art of politics while serving as a top aide on a gubernatorial campaign. Soon after, Weatherford landed the job of Oklahoma Insurance Commissioner, the first woman to serve in that role. “That was a ceiling-smashing moment for me,” said Weatherford. “I suddenly became acutely aware of the torch I was carrying for my daughters and for younger women in my state.”

Many of her direct reports at the department were young women. The terms “mentor” and “sponsor” were not common in state government or even the private sector, but Weatherford says she used her role to help younger women and men enhance their professional growth by sharing her unique perspectives, honest feedback and earnest advice.

“Mentoring is about sharing your experiences, suggestions and knowledge,” says Weatherford. “Hold back on trying to push your personal opinions because mentees need to make their own decisions in order to gain confidence and strength. Be a mentor—not a mother. Stay out of relationship and marital advice. Support them in difficult professional moments and celebrate their professional accomplishments.”

After leaving the Oklahoma Insurance Department, Weatherford worked in private industry before being named CEO of the National Association of Insurance Commissioners, where she led efforts to modernize insurance regulation. “We moved regulation into a highly efficient and productive process through technology and innovative software solutions,” said Weatherford. “We developed educational credentials for regulators to further professionalize regulatory careers, and we engaged in and play a major role in the international regulatory arena. Most importantly, we proved that state insurance regulation works and does not need federal intervention.”

Her next stop was to rebrand and rejuvenate the National Association for Variable Annuities/NAVA after the financial crisis. As president and CEO of Insured Retirement Solutions (IRI), she moved the association from Reston, VA to Washington, D.C., expanded the role of the association and made it more consumer-facing. She retired from that job in 2019 after 10 years.

In the last 13 years, Weatherford has mentored six young women. One of them is Molly Meek, a Kansas City, MO-based account executive for an insurance brokerage firm. Meek almost left the industry after her first job wasn’t providing the experience she’d hoped. Weatherford encouraged her to try again before switching career paths. “It’s so amazing having Cathy as a mentor,” says Meek. “Having someone I can call who can help explain large organizations and their politics, as well as helping me focus my efforts, is invaluable. That’s not something college prepares you for.”

Weatherford is the author of “Women and Wealth: Inspiring Stories from Real Women on the Path to Financial Success.”

Careers and Employment, Corporate Social Responsibility, Insurance Industry

Change Through Action: Diversity, Equity, and Inclusion in Insurance

Leave a comment

By Kris Maccini, Social Media Director, Triple-I

Dr. Leroy Nunery II

While the insurance industry acknowledges the importance of Diversity, Equity, and Inclusion (DEI), has it become part of the core values and culture? The short answer: there has been progress, but more action is needed. Triple-I met with Dr. Leroy Nunery II, author of The Journey of African-American Insurance Professionals and Triple-I non-resident scholar, to discuss how the industry has advanced in DEI since his 2018 study.

Nunery describes Diversity, Equity, and Inclusion as interoperable, noting that each is often defined separately but can’t stand alone. “Diversity is the practice of considering differences from whatever the norm is at a company. Equity is about access to opportunities that people might not have. Inclusion is bringing people together at the same table and the concern that they have for each other,” he explains.

According to S&P Global research, the number of Black professionals in the insurance industry increased to 12.4 percent of the workforce from 9 percent in the last 10 years, with the number of Asians and people in the Other category increasing to 6.2 percent and 2.7 percent, respectively. While the numbers are rising, the pace of change is lagging.

One of the primary challenges to DEI within insurance is the barrier to entry. Nunery explains, “Insurance is largely nepotistic and driven by family connection. It’s challenging to succeed without that group connection or network.” He believes that people of color can shift these numbers and take advantage of that momentum. “We can be exclusive at times. We say, ‘We’re all in,’ but we do everything we can so only a small group can get in. We need to do a better job of transferring knowledge,” he says.

Companies are realizing that commitment to DEI is more than hiring more people of color. There are markets to develop, business alliances to form, and investments in training and advocacy. Nunery is working with a client on a six-month job shadowing program that partners people of color with senior executives – granting C-suite exposure and access to meetings that were previously out of reach. “It’s important to coach up talent to perform at a greater level,” Nunery says of these programs. “It’s a tightrope to walk, but I tell people not to worry about failure. Worry about how successful you’re going to be.”

Camaraderie and mentorship can only go so far. A September 2020 survey by Business Insurance showed that 63 percent of respondents believe that the CEO bears the greatest responsibility in making DEI work. Nunery agrees and adds that the CEO not only needs to say that DEI is important but also puts it into action.

“When you ask companies to prove DEI, they come up short,” Nunery says. “Managers are not evaluated for it. There are no key performance indicators. Boards ask about it but don’t make it mandatory. To make DEI successful, let’s be more honest with our exchanges.”

Business Risk, Cyber Risk

Businesses are urged to take steps immediately to mitigate massive data breach tied to Chinese hackers

Leave a comment

The alarm about the ongoing hack of Microsoft Exchange Server, which began as early as January, appears quite justified. Microsoft believes a state-sponsored Chinese group called Hafnium orchestrated the attack that exploited flaws in Exchange software to gain access to email accounts and install unauthorized software, gaining full control of affected systems.

Hafnium primarily targets entities in the United States across a number of industry sectors, including infectious disease researchers, law firms, higher education institutions, defense contractors, policy think tanks and NGOs, according to Microsoft.

In a tweet, the United States Cybersecurity and Infrastructure Security Agency (CISA) urged “ALL organizations” across “ALL sectors” to follow its guidance to address the email software’s vulnerabilities.

The number of U.S.-based organizations affected is estimated to be at least 30,000, while worldwide that number is close to 100,000. The vulnerability can be exploited to compromise networks, steal information, encrypt data for ransom, or even execute a destructive attack. CISA advises business leaders at all organizations to ask IT personnel to immediately address this incident or get third-party IT support.

A Hafnium attack should trigger any cyber insurance an organization has in place, according to Lockton, an insurance broker.  Lockton recommends that organizations contact their insurer only if they discover that the vulnerabilities being exploited are present in the system. If an attack is underway, it should be reported to cyber insurers immediately.

Auto Insurance, Legal Environment

Nevada Class Actions Against Auto Insurers Risk Hurting Policyholders

Leave a comment

Class action lawsuits filed in Nevada last month against 10 auto insurers are more likely to hurt policyholders than help them.

The suits contend that discounts, rebates, and policyholder dividends provided in 2020 – amounting to about $14 billion nationally – were not “meaningful” and that the rates charged violate state law against excessive premiums. The $14 billion figure does not include the more than $280 million in philanthropic contributions the industry has also made during COVID-19 to support communities.

The fact is, auto insurance premium rates fell nationally in 2020 for the first time in a decade. Insurers’ net income after taxes fell 26.1 percent through the third quarter of 2020, compared with the same quarter the previous year. A major factor was the pandemic-related discounts granted in 2020.

“The rate is lower because people are driving less,” said Triple-I chief actuary James Lynch, noting that during a lockdown period in the spring driving was down as much as 50 percent. Fewer cars on the road should lead to fewer accidents, and this expectation is what led insurers to proactively provide discounts and other policyholder benefits during the pandemic. Many auto insurers have built these discounts into premium rates for 2021, Lynch said.

Accidents down, fatalities up

Accidents did decline in 2020; unfortunately, traffic fatalities and claims increased. According to the National Highway Traffic Safety Administration (NHTSA), fatalities rose 4.6 percent in the first nine months of 2020, despite overall vehicle miles traveled having decreased. Fatalities in the third quarter of 2020 were 13 percent higher than in the same period of 2019 – the largest such increase in more than a decade. This suggests that driver behavior deteriorated rapidly and significantly during the pandemic.

The 2020 premium reduction would have even been larger, Lynch said, “if people had slowed down.”

Claims rising faster than premiums

Even before COVID-19, auto damage claims were rising faster than general inflation, and auto insurance premium increases trailed inflation. Fatalities had been declining as cars became safer – but safety technology is expensive, making repairs more costly and driving up the size of policyholder claims.

The 2020 trend of increasing fatalities could worsen as traffic volume returns to pre-COVID levels. Data show that many motorists who substantially increased their driving speed when traffic was 50 percent below normal have not slowed down as traffic increased, Lynch said.

“The concern is that frequency patterns will return to the norm, but fast driving will keep claim severity high, putting upward pressure on rates,” Lynch said.

The salient point is this: Insurers have kept their promises to pay claims, given $14 billion back to policyholders, and generously supported communities through philanthropy – even as rising accident severity during the pandemic dented their net incomes. Defending themselves against frivolous litigation will only add to their expenses, and lower premiums are unlikely to be the result.

Catastrophes, Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods

Floods, Freezing, Other Extreme Weather Highlight Need for Planning and Insurance

Leave a comment

Recent flooding in Kentucky “is going to be one that goes into the record books,” the state’s Emergency Management Director Michael Dossett said in a news conference this week. At least 49 counties had issued disaster declarations following days of rain that dumped four to seven inches across a wide stretch of the state and pushed rivers to levels not seen for decades.

Dossett and Gov. Andy Beshear said the state had been in contact with the Federal Emergency Management Agency (FEMA) to seek federal aid and that assessments would be made next week for both the flooding and an ice storm last week. Damage assessments for the ice storm had been put on hold by the floods.

Extreme weather events, like these floods and last month’s winter storm that left dozens of Texans dead, millions without power, and nearly 15 million with water issues, underscore the importance of resilience planning and of homeowners and businesses having appropriate insurance coverage.

Flood protection gap

About 90 percent of all U.S. natural disasters involve flooding.  Whether related to coastal and inland inundations due to hurricanes, extreme rainfall, snowmelt, mudflows, or other events, floods cause billions of dollars in losses each year. According to FEMA, one inch of flood water can cause as much as $25,000 in damage to a home.

But direct economic losses are only part of the picture. Human costs are enormous, and it can take families, businesses, and communities years to recover.

Flood damage is excluded from coverage under standard homeowners and renters insurance policies. However, coverage is available from the National Flood Insurance Program (NFIP) and from a growing number of private insurers.

Many people believe they don’t need flood insurance if the bank providing their mortgage doesn’t require it; others assume their homeowners insurance covers flood damage; others think they cannot afford it.

As a result, a substantial protection gap exists.

A recent analysis by the nonprofit First Street Foundation found the United States to be woefully underprepared for damaging floods. It identified “around 1.7 times the number of properties as having substantial risk,” compared with FEMA’s flood zone designation.

“This equates to a total of 14.6 million properties across the country at substantial risk, of which 5.9 million property owners are currently unaware of or underestimating the risk they face,” the report said.

Current system unsustainable

The NFIP owes more than $20.5 billion to the U.S. Treasury, leaving $9.9 billion in borrowing authority from a $30.43 billion limit in law. This debt is serviced by the NFIP and interest is paid through premium revenues. With flood losses on the rise, the current system is not sustainable without changes.

In December, FEMA proposed “substantively” revising the “estimated cost of assistance” factor the agency uses to review governors’ requests for a federal disaster declaration to “more accurately assess the disaster response capabilities” of the states, District of Columbia and U.S. territories. Its Risk Rating 2.0 initiative, set for implementation in October, aims to make flood insurance rates more accurately reflect insured properties’ individual flood risk.

 In other words, the federal government will likely ask states, municipalities, and some policyholders to shoulder more of the cost of recovering from natural catastrophes.

Complex challenges require multi-pronged approaches to address them, and FEMA and other federal and state agencies are working with the private sector to close the flood protection gap. In the near term, the most cost-effective way for families and businesses to mitigate flood risk is insurance.

If it can rain where you are, it can flood where you are. As Daniel Kaniewski, managing director for public sector innovation at Marsh & McLennan and former deputy administrator for resilience at FEMA, put it during a Triple-I webinar last year: “Any home can flood. Even if you’re well outside a floodplain, get flood insurance. Whether you’re a homeowner or a renter or a businessowner — get flood insurance.”

Latest research and analysis