Triple-I recently was asked to comment on two measures now before the House Committee on Financial Services. H.R. 1756, an amendment to the Fair Credit Reporting Act, would prohibit use of credit information in underwriting or pricing auto insurance. H.R. 2684 would require the Treasury Department’s Federal Insurance Office (FIO) to annually study personal private auto insurance.
Our input is summarized below.
H.R. 1756
The insurance credit score is applied to create a rate appropriate to the customer’s riskiness. These scores help insurers avoid charging high-risk customers too little and low-risk customers too much. Every dollar of discount a person with a low score receives is offset by an extra dollar of surcharge to a person with a high score.
Introduced in the late 1980s, the scores have been studied numerous times and found to be a powerful predictor of the likelihood a consumer will become involved in an accident. Concerns have been raised that the scores act as a proxy for income – a variable insurers are banned from using. Recent research finds that this isn’t the case.
Most recently, in 2019 Triple-I and the Casualty Actuarial Society produced a white paper “Insurance Rating Variables: What They Are And Why They Matter” that explains how actuaries rigorously study variables for their effectiveness and impact on the societal goal of keeping insurance available and affordable.
H.R. 2684
Under H.R. 2684, it appears FIO would be required to annually gather premiums charged and quoted from insurers that write personal auto coverage, along with rating factors, underwriting guidelines, and any information used to compile them.
This would be an enormous undertaking. There are more than 250 million private vehicles in the United States – 87 percent of them insured. But the dataset would be much larger. The proposal also asks for every quote issued to policyholders and other applicants. Each renewal policy gets at least one quote – the renewal at existing terms. Anyone who shops for insurance receives more.
Once the information is collected, the bill would require the release of each insurer’s data, rating algorithms, and underwriting guidelines to the public – including the insurer’s competitors. This would be like requiring a drug manufacturer to give up all its patents annually. Insurers would have no incentive to innovate to find, for example, variables that do a better job than the current ones because, once discovered, the variables would have to be turned over to competitors.
By Loretta L. Worters, Vice President, Media Relations, Insurance Information Institute
When Barbara Bufkin started in the
insurance industry nearly four decades ago, she didn’t think about women’s
roles. She started her career as a
commercial underwriter, then a casualty facultative underwriter to a
reinsurance intermediary. In fact, in the
first five years of her career she had four job changes – unheard of at that
time.
Today,
many would say she has exceeded her goals.
She is Chair of the International Board of Governors of the Insurance
Industry Charitable Foundation (IICF), directly engaged in the global and
national Women in Insurance Conference series, and President of the Association
of Professional Insurance Women (APIW). Concurrently, she advocates for the
value of the insurance industry as a career of choice in her role as Co-President
and Board of Trustee of Gamma Iota Sigma (GIS) and as a keynote speaker on The
Power of Purpose in various insurance industry forums. In these initiatives,
she has been driving the Big Tent of culture, inclusion, innovation,
sponsorship, mentoring talent and the power of networks.
In
addition to her Board responsibilities, Bufkin is on the advisory board of ODN,
an early round InsurTech. She is Ambassador of The Insurance Supper Club, and
member of the Dallas Host Committee for 2020 Women on Corporate Boards. In June
2019, she completed the EY Course: Board Readiness in a Transformative Age and
has now taken on a new role as senior advisor to AmWINS
Access.
But
this success didn’t come easy. Bufkin recognized that there were corporate
barriers which she had to learn to navigate.
But through that navigation she learned how to negotiate, a skill
greatly needed in the business world. She
had the courage to build the career she envisioned for herself by seeking out
mentors whom she trusted.
Barbara Bufkin, senior advisor, AmWINS Access chair, Insurance Industry Charitable Foundation
One
area Bufkin could identify with was not only having a successful career but
balancing that career with children as well as being a caregiver for aging
parents; being responsible for a family.
“It was a very… productive time,” she grinned.
Bufkin said it was important now to help
build up the industry during a time of rapid replacement of talent. “For young woman who choose a career in
insurance, it’s a great business to be in.
It’s much more secure during cyclical changes and economic
downturns.”
Bufkin noted that there is a great need
for women’s training. “We need to make sure that women’s voices when they are
not in the room are being heard,” she said, adding that “we need to prepare
women for executive roles. Giving women
strong coaching to be more conscious of their own capabilities and confidence,
to overcome ‘imposter syndrome’ and consider themselves for a position when
they may not have felt ready for it.”
“When I transitioned over to the capital side of the business, I really didn’t know what a glass ceiling was. When I confronted it, it had to be shattered; I didn’t think of it any other way.”
Bufkin said that the statistics and studies that are being conducted now are creating a true awareness around the importance of gender equality and pay equality. “There’s an intentional and committed focus around this,” she said.
“We as women need to be fearless; to accept the challenges and sometimes to understand defeat. And by doing so, can we stand back up and do it better, bigger, greater and stronger.”
By Loretta L. Worters, Vice President – Media Relations, Insurance Information Institute
Women are advancing throughout the insurance industry. Hard work is one factor behind their success, but so are perseverance, supportive mentors, and willingness to take risks with their careers.
Women’s History Month is a time to reflect on the work that
still needs to be done, but it’s also a time to celebrate the inroads that have
been made. The Insurance Information Institute (Triple-I), has created a series
of interviews showcasing dynamic women leaders — trailblazers who have built
successful careers in the industry. We’ll hear their stories, providing insight
on how they made it to the C-suite and their advice to young women just
entering insurance.
Check back to see the interviews by clicking on this link: #womenshistorymonth
Challenges
remain
Studies have found that greater gender diversity can help
organizations be more innovativeand higher performing. Many female CEOs have led their companies’ stocks
to outperform the index in terms of cumulative total returns during their
tenures. Some have managed to produce triple- and even quadruple-digit
percentage gains.
More specific to the insurance industry, a
McKinsey report found that while women outnumber men at
entry-level positions, their representation of the workforce is significantly
smaller near the top of the organizational chart.
Women of color in insurance hold only 12 percent
of entry-level roles and a mere 3 percent of direct-reporting roles to the
CEO. And black, Hispanic, and Asian
women altogether make up only 3 percent of the insurance C-suite.
Growing Wages for Women Helped Narrow Gender Pay Gap, Though Women Still Lag Behind Men in Pay
According to PayScale.com women are often undervalued for the work they do, are more
likely to hold lower-level, lower-paying jobs, and tend to stagnate in their
careers, still making only $0.79 for every dollar made by men in 2019. Moreover,
Hired.com’s State of
Wage Inequality in the Workplacefound that companies pay women on average 4 percent to as
much as 45 percent less than men in the same jobs — and these numbers haven’t
changed since the company released its second annual 2017 report. In addition, 60
percent of the time men are offered higher salaries than a woman, for the same
role at the same company. The survey further reveals that of the 61 percent
of women who discovered they were being paid less than men at the same role in
their company, 16 percent found the difference was at least $20K.
Women’s experiences in
the workforce also vary vastly by race.
PayScale.com noted that black and Hispanic women experience even wider
pay gaps than white women, start their careers in lower-paying positions, and
are less likely than white women to make it to the C-suite.
Anddisparity in earnings inevitably leads to a disparity in retirement savings, according to the National Committee to Preserve Social Security & Medicare, which has further implications for women, who generally have a longer life expectancy than their male counterparts.
Swiss Re Institute estimates that a 26 percent increase in global
GDP in a scenario of labor market gender parity would yield an additional $2.1
trillion in global insurance premiums by 2029.
How the Industry is Working to Make a
Difference
“By focusing on solutions to achieve gender parity, insurers and reinsurers can address a key driver of the widening protection gaps facing individuals, families and societies.”
–Marianne Gilchrist, Head Global & South Asia, Hong Kong, Swiss Re
Insurers are making significant strides to improve gender diversity by creating sponsorship programs and addressing unconscious bias. There is, for example, the Bloomberg Gender-Equality Index, which tracks the financial performance of public companies committed to supporting gender equality through policy development, representation, and transparency.The 2020 Bloomberg Gender-Equality Index includes 325 companies across 50 industries, including insurance headquartered in 42 countries and regions.
Here are a few of the organizations that are making a tremendous difference:
Association of Professional Women is dedicated to encouraging women to embody the future of insurance through participation, progressive education, and engagement with forward thinking industry professionals.
Insurance Industry Charitable Foundation (IICF) and their Women in Insurance Conference Series, led by pioneer Elizabeth (Betsy) Myatt, vice president and chief program officer of IICF.
Women’s Insurance Networking Group (WING) which helps increase awareness through events and are a platform to share skills and knowledge.
Women in Insurance Initiative (WII) is a consortium of organizations throughout the insurance industry, which is taking substantive and measurable action by recruiting, mentoring, and sponsoring women to drive equality in career advancement and leadership throughout the insurance industry.
Last week (March 4-6) the National
Earthquake Conference — attended by
hundreds of experts, including
academics, engineers, government leaders, insurance professionals, and
scientists – took place in San Diego.
The day after the conference, as if to make a point, a 5.5.
magnitude earthquake that
struck Baja California, Mexico, shook San Diego.
While no damage was reported, a study released
at the conference by the San Diego chapter of the Earthquake Engineering Research
Institute showed that a magnitude 6.9 earthquake on San Diego’s Rose Canyon
Fault could damage 100,000 residences, cause widespread road and bridge
failures, and make parts of Mission Bay sink about a foot. Such a quake would
inflict an estimated $38 billion in building and infrastructure damage,
displacing 36,000 households and wreaking havoc on San Diego’s $245 billion
economy.
Don’t be scared, be prepared
Conference goals were to improve life safety when earthquakes
occur, to help communities learn how to recover faster, and to help prevent or
minimize physical earthquake damage through stronger building practices,
including research-informed, model building codes and standards.
Janet Ruiz, Triple-I’s Director of Strategic
Communications, who was one of the attendees, said one of the great points of
the conference was: “Don’t be scared, be prepared.”
Earthquake risk is insurable
One of the ways to be prepared for any disaster is to make sure you have adequate insurance. But as few as 13 percent of California homeowners have earthquake insurance.
Glenn Pomeroy of the California Earthquake Authority said earthquake risk is insurable. The average annual cost of earthquake insurance for a typical home in San Diego is between $100 and $444. Renters can secure financial protection from CEA for as little as $35 per month.
As COVID-19 spreads, we’ve been hearing more about the importance of hygiene and maintaining “social distance.”
Last night I found out the cyberrisk conference I was
scheduled to attend this morning had been changed to a “virtual” meeting. With
so many events being canceled
or postponed out of an abundance of caution over the spreading COVID-19
virus, it was nice to know the show would go on safely.
I’d already been working from home (thank you, Triple-I!) to
avoid exposure during my train commute and potentially becoming a “vector” to family,
friends, and co-workers. As I waited for the event to begin, I scrolled through
my news feed and spotted several stories about risks related to increased
remote work.
Cyberrisk featured prominently in these articles. Unprotected
devices, they warned, can lead to data losses, privacy breaches, and ransomware
attacks.
One
article alluded to campaigns designed specifically to tap into concerns
around COVID-19.
“We are already seeing targeted phishing campaigns
globally,” said New Zealand Health IT chief executive Scott Arrol. “The
cyber virus taking advantage of the biological virus.”
Arrol said hackers seeking to exploit fears of Covid-19 are
sending fake ads or links with online viruses.
The message “might look like it has come from the World
Health Organization, inviting you to register for more information,” he said. “You
click on that link, you’ll be taken to fill out a form and then suddenly…you’re
giving away personal information you shouldn’t.”
Technology can help us maintain social distance, but the devices we rely on need to be managed and protected, lest they make us even more vulnerable.
Insurance broker Aon has issued an advisory cautioning
employers to take steps to ensure that work-from-home employees can connect to secure
remote networks, a Claims Journalarticle
says.
“Any time you’re taking about employees who are not used to
working from home, who may not have the correct cybersecurity posture, a
virtual private network (VPN) is critically important and having two-factor
authentication is critically important,” Aon Senior Vice President Stephanie
Snyder said.
A VPN connects remote users or regional offices to a
company’s private internal network. Two-factor authentication adds a layer of
security beyond a password to make sure a user is authorized to access the
system.
Snyder added that telecommuters may be tempted to work from their laptops at a coffee shop – potentially exposing their computers to intrusion. She said employers need to have strict security protocols in place to avoid such exposures.
So, I wasn’t surprised when one of the first speakers at the
event I was “attending” mentioned viral epidemics like COVID-19 as something
underwriters just a few years ago would not have considered a factor in
assessing cyber risk but now should.
As I’ve written before,
increasingly interconnected risks require a holistic approach to risk
management – one that takes into account preparation, mitigation, and built-in
resilience. As COVID-19 has spread beyond its origins in Asia, we’ve been
hearing more about the importance of hygiene and of maintaining “social
distance.”
Technology can help us maintain social distance, but the devices we rely on need to be managed and protected, lest they make us even more vulnerable.
By
Mary-Anne Firneno, Research Manager, Insurance Information Institute
Americans
have embraced the Internet of Things. As consumers own more internet-connected
devices and buy more products online and businesses use more electronic data
and online storage, cyberattacks continue to occur.
Despite
reports of ever-larger data breaches, awareness of the protection available to consumers
through insurance has shrunk over the past year, according to a survey from the
Triple-I and J.D Power.
Yet consumers
are interested in cyberrisk insurance. More than half of connected-device
owners (56 percent) said they believed homeowners or auto policies should offer
cybersecurity coverage.
So why don’t more consumers buy cyberrisk insurance? The 2020 Consumer Cyber Survey found that three-quarters of connected consumers are reluctant to pay more for cyberrisk coverage – despite the fact that cyber coverage is relatively inexpensive: about $10 from a package policy and about $40 for a separate one.
Persistent
attitudes that cyber coverage is a not a product consumers are willing to
purchase is an opportunity for insurance professionals to explain the value of
personal cyber coverage.
By Loretta Worters, Vice President, Media
Relations, Insurance Information Institute
Millennials – the generation born between 1980 and 2000 – have begun to
influence charitable giving. They prefer
to work for companies that are involved in charitable causes, seeking a greater
desire to make a social impact through their work, compared with previous
generations. In addition, they tend to
share these values on social media.
These are some philanthropic trends in insurance industry Corporate
Social Responsibility (CSR), identified in “Charitable Giving in the Insurance
Industry,” a report by the Insurance Industry Charitable
Foundation (IICF),
released in partnership with McKinsey & Company. The report, along with
IICF’s 2019 Philanthropic Showcase, highlight each of its Key Partner
Company’s charitable endeavors in 2019.
The McKinsey
report found that the level of giving has remained consistent, with a focus on
education, health and social services, and community. One key factor behind
this finding is industry consolidation, which has lowered the number of
companies engaged in corporate giving. Insurers are also orienting philanthropy
more around volunteerism. As a result, industry-wide giving has held steady
between $560 million and $600 million in cash, grants, and other donations
since 2015.
In addition to
the influence of millennials on the types of charitable engagements companies
pursue within their communities, the report offers a glimpse of the industry’s
philanthropic commitment and highlights opportunities to expand programs and
fuel community engagement. Charitable giving in the insurance industry
continues to be an important focus.
Some of the report’s key findings, based upon responses
from property and casualty companies and for the first time since 2011 life
insurance and wealth management segments of the industry, include:
• The industry’s desire to work toward a single cause has
increased to 33 percent in 2019 from 17 percent in 2015.
• The importance of giving within their own communities was
evident as about 30 percent of respondents in 2019 prioritize contributions
where employees live and work and where significant business is already done.
• Insurers have shifted their charitable focus toward
increased volunteering opportunities, recognizing millennials prefer to work
with companies directly involved in charitable efforts and activities, rather
than those making only monetary donations.
• Measurement of charitable giving has increased, to 41
percent in 2019 from 26 percent in 2015, as more companies use key performance
indicators to evaluate the impact of their philanthropy.
For organizations looking to amplify either the impact of
their philanthropic efforts or the range of causes, the findings point to a few
key opportunities including planning for greater employee engagement, with a
special focus on millennials to further employee-focused giving strategies; to measure the impact of philanthropy to
identify and build on charitable successes and refine metrics and giving
standards; to rethink roles across the giving organization as CSR leadership
and employee-driven engagement become increasingly common and CEOs continue to
set broad direction; and finally to consider the value and benefits of a
united, collaborative industry approach to CSR.
The devastating storms that ripped through central Tennessee on March
3 remind us that tornadoes continue to be one of the most destructive and
costly natural disasters.
Tornadoes are more common in the central United States, though they can occur almost anywhere in North America, including in large cities. They can happen at any time of year or at any time of the day or night, though they occur most frequently between early spring and July.
Below are some of the basic precautions to take before, during and after a tornado.
Before
The Red Cross recommends
the following precautions:
Identify a safe place in your home
where household members and pets will gather during a tornado: a basement,
storm cellar or an interior room on the lowest floor with no windows.
In a high-rise building, pick a
hallway in the center of the building. You may not have enough time to go to
the lowest floor.
In a mobile home, choose a safe
place in a nearby sturdy building. If your mobile home park has a designated
shelter, make it your safe place. No mobile home, however configured, is
safe in a tornado.
During
When
a tornado warning sounds or a tornado has been sighted, do not try to outrun
it. Stay calm but quickly seek shelter in the safest place possible.
If you are at
home, the safest
place to be is underground. Basements are usually the most protected area, but
if this is not an option take cover in central part of the house away from
windows—for example in a bathroom, closet, interior hallway or under a heavy
piece of furniture.
If you are in an
office building or skyscraper, go
directly to an enclosed, windowless area in the center of the building—away from
glass and on the lowest floor possible—and crouch down and cover your head.
Interior stairwells are usually good places to take shelter and, if they are
not crowded, allow you to get to a lower level quickly. Stay off elevators, you
could get trapped if the power is lost. If you are in a tall building, you may
not have enough time to evacuate to the lowest floor.
If you are at
school, follow the
staff instructions and go to an interior hall or room in an orderly way as
directed. Crouch low, head down, and protect the back of your head with your
arms. Stay away from windows and large open rooms like gyms and auditoriums.
If you are in a
car or truck, abandon the
vehicle and seek shelter in sturdy structure. If you are in open country, seek
shelter in the nearest ditch. Lie flat, face down on low ground, protecting the
back of your head with your arms. Get as far away from trees and cars as you
can.
If you are in
a mobile home, get
out! Even if the home is tied down, you are probably safer outside.
After
Damage caused by tornadoes is covered under standard
homeowners and business insurance policies, as well as the optional
comprehensive portion of an auto insurance policy.
If you sustain tornado damage:
Contact your insurer as soon as
possible and start the claims filing process. After tornadoes and other
disasters, insurance companies will reach out to those with the worst losses
first.
Take photos of any damage. A
photographic record is useful when making insurance claims.
Make temporary repairs to prevent
further loss from rain, wind or looting; these costs are reimbursable under
most policies, so save the receipts.
Make a detailed list of all
damaged or destroyed personal property. If you have a home inventory, it will
be extremely useful here. Don’t throw out damaged property until you have met
with an adjuster.
Don’t rush to sign repair
contracts. Do your homework, deal with reputable contractors and get
references. Be sure of payment terms and consult your insurance adjuster before
you sign any contracts.
If your home is uninhabitable
because of tornado damage, your homeowners or renters insurance provides
coverage for additional living expenses (ALE), such as hotel bills or meals
out. Save all related receipts and, if you have vacated your home premises,
make sure your insurance representative knows where and how to contact you.
Talk to your insurance
professional if you have any questions about any part of your insurance
coverage.
More on how to file a claim following a disaster here
Facts & statistics on tornadoes and thunderstorms here
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.
COVID-19, the new coronavirus, has killed more than three
times as many people as the 2003 SARS epidemic.
The World Health Organization (WHO) reported that, as of 10
a.m. Central European Time (CET) on March 1, there were 87,137 confirmed
COVID-19 cases and 2,977 of the infected people had died. From November 2002
through July 2003, according to the U.S. Centers for Disease Control and
Prevention (CDC), 8,098 people worldwide became sick with severe acute
respiratory syndrome (SARS) and 774 died.
More people are believed to have been infected with COVID-19
than official statistics show. This is because confirmed infections are based
on positive tests for the virus, and some countries—including the United
States—have been doing very little testing. Further, the estimated 2 percent
death rate attributed to the disease is based on this unreliable infection
count.
Instead of SARS, some are now comparing COVID-19 with the Ebola pandemic of
2014 to 2016. Ebola is believed to have
killed about 50 percent of those it infected, but that outbreak was contained
before it reached the same number of infections as COVID-19.
So, is there a useful historic comparison
to be made with COVID-19? I would argue that there is: the “Spanish Flu” of
1918-19.
Policemen in Seattle during the influenza epidemic. December 1918. National Archives.
There is no vaccine for COVID-19, and
experts suggest it could take a year or
more to develop, test, manufacture, and distribute a vaccine. This suggests
there are few medical strategies for dealing with the current outbreak. It’s as
though we’re medically in the world of 100 years ago.
The 1918 flu virus had an estimated
mortality rate of about 2 percent and was very infectious. It is estimated that
as many as one-third of the entire world population was infected at some time,
so even a 2 percent mortality rate caused millions of deaths.
This raises a scary thought about how
the COVID-19 pandemic might play out: the Spanish Flu swept around the globe in
three phases. The first was in the
Spring of 1918 and, although it infected widely, had a relatively low mortality
rate. The second phase occurred in the Fall of 1918. This phase saw faster
infection spread and was much more deadly. The third phase was in February and
March of 1919 and was less infectious and less deadly than either of the two
prior phases.
World War I – with large concentrations
of soldiers in barracks and trenches and truck convoys moving across Europe –
may have contributed to this infectious arc. But the virus killed more people
than the war on every continent except Europe.
Insurance
industry impact
What would a COVID-19 pandemic mean
for insurers? The main impact would likely be on health insurers, since the
number of people seeking hospitalization would likely spike claims far beyond
anything their rate structures have anticipated. In 1918 hospitals were so overwhelmed
that auditoriums, indoor sports arenas, and similar spaces were set up to house
patients. Scarcity rates would apply; for example, the number of respirators
available currently is far short of what would be needed, and prices for new
supply would likely surge.
As I’ve written previously, for life insurers the effect of a severe pandemic would depend on
which segments of the population are likely to die. In 1918, in addition to the
very old, that virus struck unusually strongly at people in the prime working
years, triggering benefits from both individual and group life insurance. The
sudden impact of such unpredicted losses would affect all life insurers,
particularly the weaker ones.
In the property and casualty sector, the
line most directly affected is likely to be workers compensation, particularly
for health care workers and others exposed to the virus as a result of their
work—such as police, fire, and EMT. Another possible line affected is various
liability lines, involving claims from people who became sick from
manufacturing, dispensing, or receiving a vaccine or other treatments. In
recent years, Congress passed laws blocking such liability claims, but it’s not
clear that it will do so again today.
Beyond the direct effects to
insurance, there are growing forecasts that the global economy, and especially
particular sectors, could see dramatic cutbacks. Businesses and other
organizations that involve people gathering in crowds are already seeing such
effects, and insurance premiums that reflect these downturns are likely to
follow. However, claims are also likely to turn down (e.g., fewer auto
accidents), so the effect on those lines might actually be neutral or positive.
Learn from history
Today people and goods move around the
world with unprecedented speed. Urban environments and the transit systems that
serve them are as packed with people as any military convoy or trench network.
If COVID-19 follows a similar track to
that of the Spanish Flu, the current outbreak would turn out to have been a
mild phase. If this scenario is correct, the first phase would taper off in a
month or two, followed by several months in which the virus would appear to
have ended its threat.
We should continue developing vaccines
and other preventive/mitigating measures during this lull to better prepare for
the more virulent phase that might manifest in the second half of 2020. Failure
to do so would mean we’ve learned nothing from the worst global pandemic in the
last 100 years.
