As the APCIA hosted its 2020 annual meeting virtually, President and CEO David Sampson discussed the organisation’s most pressing issues going forward.
Years from now when people look back on 2020, it will be interesting to see which words they use to describe the year.
When asked for his thoughts on what 2020 has been like for the re/insurance industry as a whole, David Sampson, President and CEO of the American Property Casualty Insurance Association (APCIA), is candid: “What adjective can you possibly use that hasn’t been overused and that can adequately describe the impact and devastation that this year has caused?”
This year’s APCIA conference was held entirely online due to the impact of COVID-19. “We made that call fairly early on to give people plenty of planning time,” says Sampson. “We’re highly cognisant of the known unknowns that are out there – what we do know is that this is still a very highly communicable disease and the outbreak is not over.
“As we looked at all the data back in late spring, we concluded that it was not likely to be in a safe operating environment for us to have in-person meetings in the fall. So, we made that call early in conjunction with our members, discussion with our board, with our key partners and sponsors, the reinsurers and the brokers, and everyone has been tremendously supportive.”
Sampson stresses that APCIA is appreciative of the fact that reinsurers and brokers in particular have maintained their support with the organisation and they are finding their own way in the virtual world.
The need for networking norms
“All that just underscores how important and how valuable the networking is that takes place at our annual meetings,” says Sampson. “Everybody has expressed how much they’re going to miss that. It underscores how important the business interactions are between our primary companies and the reinsurers and brokers.
“Everybody is looking forward to when we can be back together in person next year but everyone is demonstrating tremendous flexibility with the virtual annual meeting. They have demonstrated tremendous agility throughout from the very beginning of this pandemic to reposition their own workforces to a remote working environment, and continuing to serve policyholders in what has truly been an unprecedented year of natural disasters and catastrophes manifesting themselves in multiple ways.”
Sampson believes that despite the debilitating economic impact of COVID-19, the silver lining has been the P&C industry’s wider adoption of digital processes.
“Certainly, the pandemic has been a great disruptor and there’s no doubt about how it has been fundamentally disruptive to the global economy this year,” he says. “The pandemic is threatening and taking the lives and livelihoods of people; when the pandemic was at its height, businesses were experiencing about a trillion dollars of losses a month. So there’s no doubt that this has been a tremendously disruptive event. However, I would make the observation that in many ways the pandemic is also the great accelerator of underlying trends in society, in the U.S. economy and certainly within the insurance industry.”
Sampson notes that P&C players have been investing heavily over the last decade – increasingly so in the last five years – in a more digitised business process. Many companies, he says, have been experimenting to one degree or another with increasing telework for their teams for multiple reasons, and the pandemic has helped accelerate that trend.
Sampson is in touch with multiple APCIA-member CEOs on a weekly basis, and the repeated sentiment he hears from them is how pleasantly surprised they were at how smooth the transition has been from a physical work environment to a virtual work environment. He says that was also true in terms of being able to continue to interact with the policyholder both on the front end as well as on the back end when there’s a claim to be processed.
Further, he believes that the transition to working remotely is a tribute to the agility and the flexibility of the P&C insurance business. “This is an industry that by the virtue of its fundamental business proposition is designed to be there for policyholders when the unthinkable happens, and certainly this year has been a year of the unthinkable.”
Storm and fire
Looking at the other events of the year, Sampson points out that on top of the pandemic, the 2020 hurricane season has broken records: for only the second time in hurricane-naming history, the Greek alphabet is being used to name storms. The Southeast U.S. has been hit multiple times by hurricanes this year, and 2020 also marks the fourth consecutive year of record-breaking destructive wildfires in wildfire-prone California.
Sampson underlines that the wildfires are having a devastating impact on the economy, on peoples’ lives and homes, but it’s also having a large impact on the insurance industry in the Golden State. He also makes the point that the political and regulatory environment in California is significantly exacerbating the challenges that the insurance industry is already facing.
“I spent three weeks on vacation in Idaho and Eastern Oregon,” he relates. “We’ve been going for years and there’s always been wildfires, but I have never seen anything comparable to the smoke coming into Idaho and Eastern Oregon from the California wildfires. It just truly was apocalyptic, there’s no other word for it.”
When it comes to regulatory changes he’d like to see around wildfire recovery and the insurance industry’s role, Sampson replies that one of the first issues is rate flexibility. “We are a risk-based industry; rates should reflect the cost of losses,” he says. “That’s not been the case in California – it is simply unsustainable to have and to continue to incur these kinds of losses, the ability to underwrite properties and the ability to include the cost of reinsurance in rate filings. All of those are just top level areas of concern that need to be addressed in California.”
Emerging accelerators
2020 brought up other issues in the U.S. however, ones that have been bubbling under the surface of the country for some time. One of the major issues that APCIA looked at during the annual meeting is the emergence of social equity and fairness issues in 2021.
“This has been another example of where I would say that the pandemic is a great accelerator of underlying trends in society,” says Sampson. “Certainly the issues of social equity and fairness have been increasing in the U.S. in recent years, so it’s not surprising at all to me that in the midst of the pandemic and the greatest economic contraction in U.S. history since the Great Depression that the tragic police-involved shootings and fatalities this year saw an eruption of this issue very much on the national scene. It’s a legitimate and important issue that needs to be addressed but I would also point out that thus far given the impact of social unrest and rioting taking place this year we have already seen over $2bn in insured losses as a result.”
To put that in perspective, he continues, “the 1992 Los Angeles riots after the Rodney King beating was about $1.4bn in today’s dollars, so the nationwide impact of this is truly staggering. This is an issue that we’re going to have to address as a society and the insurance industry needs to be and wants to be an important part of that constructive dialogue to get us to a more inclusive society.”
The scale and breadth of some of the demonstrations across the U.S. in 2020 have certainly highlighted Sampson’s point, with protests varying from outrage over the murder of George Floyd to the removal of statues of Confederate generals due to their connection with slavery.
It’s something that APCIA certainly want to address. “Our board created a working group this summer on social equity and fairness issues to address both increasing the diversity of the industry’s workforce as well as how we can play a constructive role in the dialogue a more inclusive and diverse society and economy,” Sampson concludes. “That’s going to be an important issue in 2021 and in years to come. It has implications for risk-based pricing within the industry; we’re already seeing risk-based pricing come under attack by so-called consumer groups. Many regulators and the NAIC are looking at the issue of long-established, actuarially sound underwriting factors within the context of social equity and inclusion. So that’s going to be a major regulatory issue that we’re going to be engaged with in 2021.”
This story was originally published in Reactions.
