Shaping the Narrative of the P/C Industry

It is important to step back and take a 30,000-foot view of the macro context of today’s public policy challenges — specifically, the new tidal wave of socio-environmental awareness that the U.S. is experiencing.

The expectations being placed on corporate America to expand its role in social issues and take sides is a paradigm shift with particular challenges for the insurance industry, as policymakers and activists increasingly look to our sector to solve centuries of social and economic issues. Insurers are being asked to directly improve their own diversity and inclusion in the workforce and on boards and minimize their own carbon footprints.

But they are also increasingly being subjected to demands to divest from and stop insuring politically disfavored activities. Today, that is fossil fuel producers, but tomorrow it will be another industry that finds itself targeted by activists.

Insurers also are being asked to end the use of actuarially-sound, long-established rating and underwriting factors that are perceived as creating social inequities because of adverse ratings outcomes.

These are the same factors that are providing millions of families and individuals with meaningful coverage benefits and significant discounts. For example, APCIA’s new analysis found that since the introduction of credit, in 25 states evaluated, the number of drivers in the more expensive high-risk pools has declined ten-fold from 1.6 million in 1985 to 160,000 in 2019. Because of credit-based insurance scores, good drivers pay less and drivers with bad records can avoid high risk pools.

So here we are with profound issues and challenges at the state, federal and international levels.

In response, APCIA will adamantly support and promote risk-based pricing as critical to our ability to provide the most affordable, accessible, fair, and widely available products, while serving as the foundation of a competitive marketplace that best serves consumers.

Our industry must remain grounded in the core purpose of property casualty insurance, which is to enable economic growth through sustainable risk transfer and risk mitigation solutions for our customers at a price commensurate with their actual or expected losses. Doing so ensures a fair cost to each customer while also protecting the solvency of the insurance industry.

Not every social issue lends itself to an insurance-specific solution. And while insurance cannot be asked to solve all of society’s historically rooted issues, we must be sensitive to the need to work together and contribute to and advance social and environmental progress where it does not conflict with our core business paradigm.

Change is coming, and we must help guide it. Otherwise, we will face more disruption such as the emergency rule by Washington State Insurance Commissioner Kreidler to ban insurers’ use of credit scores.

APCIA is working with policymakers to identify ways to address fairness, equity, availability, affordability, climate risk and accountability. We want to identify and articulate the specific problems policymakers want to solve, and discuss potential tailored solutions, before racing to overturn more than 150 years of insurance fundamentals.

APCIA will continue to vigilantly and aggressively protect our industry through this current social upheaval. But we will need to work closely with policymakers to address environmental issues and better understand the emerging social justice concerns and develop potential solutions within our core risk mitigation and transfer competencies.

At our virtual Legislative Action Day in May, I laid out our five pillars for how we will advocate on behalf of the industry in this environment.

First, I believe it’s essential that we approach all of our opportunities and threats from a strong, principled foundation. Second, as an organization, APCIA’s mission is to fight and win advocacy battles on behalf of our members on issues that are industry priorities. Third, our advocacy will be data-driven. That means no ad hominem attacks because facts matter. Fourth, we will continue to be proactive in shaping the narrative of the property casualty industry’s value proposition. Insurers work to prevent the unthinkable from happening, and providing the financial security to recover if it does. And fifth, we are dedicated to enduring bi-partisan partnership and solutions wherever possible.