September 12, 2017
Disasters show insurers can change the world
by Paul Carroll
The natural disasters of the last week-plus bring to mind the old chestnut: “Other than that, how’d you like the play, Mrs. Lincoln?”
The other-than-the-“assassination” reports have been good, thus far, in the wake of Hurricane Harvey and Hurricane Irma. Irma took an ever-so-slightly unexpected path, so, while electricity is out for millions and will likely be a problem for weeks, the storm visited much less destruction on Florida than expected. Local, state and federal authorities have seemed to react well. Insurance companies are on the scene, trying to pay claims and get people back to their regular lives as soon as possible. Citizens have risen up to to help themselves and others—the drive that I mentioned last week that was led by Houston Texans defensive lineman J.J. Watt has now passed $31 million in donations, not counting the enormous gifts of supplies and transportation he’s received.
But we’re still left with the “assassination” parts of the hurricanes, and those are dreadful. For instance, our chief innovation officer, Guy Fraker, knows that the eye of Irma passed directly over his key in Florida and that the bridges on both sides of the key have been wiped out. It’s not clear when he’ll even be able to get back to check on his home. People in Florida and the affected parts of Texas and Louisiana will need months or years to recover.
As it happens, in the midst of the storms, Fortune put out a list of 50 “Change the World” companies that are turning “doing good into good business.” The 50 were chosen based on their social impact, financial results and degree of innovation. I looked eagerly to see how many insurance companies made the list and found…two. Insurance Australia Group was ranked #29, and Allstate was #39. Having two isn’t bad representation, given all the other industries competing for just 50 spots, but, with everything the industry is doing to pull Florida, Texas and Louisiana back together, I had certainly hoped for more.
The Fortune list comes at a time when a backlash has developed against the idea that the sole purpose of a corporation is to serve the shareholders by increasing profits and stock price as much as possible. The idea, formulated in 1970 by Milton Friedman, a Nobel-prize-winning economist who was the leader of what’s known as the Chicago school, stoked the fever that led to accounting fraud and scandals such as WorldCom and Enron. More generally, a sense is developing that companies have responsibility to all sorts of stakeholders, including employees, customers, communities, the environment and, in the case of our favorite industry, insureds.
A company to watch is Unilever. It has explicitly taken a “change the world” approach, to the point that it recently faced a takeover attempt by Kraft Heinz, which promised to stoke shareholder returns. Unilever fended off the attempt, the board committed to its more-balanced approach to long-term gains for all stakeholders, and Unilever is certainly reaping PR rewards.
Given the business we’re in, I have to believe that there are opportunities for insurers to take the lead in this “change the world” movement. Insurers seem to be off to a good start in the aftermath of Harvey and Irma. Let’s hope that continues. Publications like Fortune will notice.