September 6, 2017
Hurricanes test insurance — and insurance innovation
by Paul Carroll
With Hurricane Harvey gone and people in Houston starting to pull their flood-ravaged lives back together, here comes Hurricane Irma. This is what Irma looks and feels like at the moment, as described by our friend and colleague Guy Fraker, ITL’s chief innovation officer and a resident of the Florida Keys:
“If the forecasted winds and waves come to fruition, the house will be a total loss. We normally have 1.5- to 2-foot ‘waves’ on our mile-wide channel. Saturday and Sunday are projected to see 27- to 31-foot waves, lasting 11 to 13 seconds each, for 15 hours. With winds topping 150 mph pushing debris on water 30 feet above normal, this is Andrew all over again.”
Guy has a gig in Baltimore this week, and his wife, Becca, is with him, so the one hopeful note is:
“The car is on the fourth floor of the Ft. Lauderdale airport, with essentials, and we loaded up the luggage—so we’ll see.”
While we can still hope and pray that Irma, with its currently 180 mph winds, swerves north and away from land, Harvey and perhaps Irma provide the first real test of the newly innovative insurance industry. We’ve been talking a good game for a couple of years now, but how fast will we really be to pay claims? How good will the drones be at assessing damage? How much smarter have our assessments of risks become? Will “gig” workers make a difference?
We also, of course, face the question that comes with every disaster: In this moment of truth, are we as an industry really trying to give people peace of mind and get their lives back to normal as quickly as possible, or is that just a marketing claim and something we tell ourselves so we can feel good about what we do? I’m hoping we’re sincere and have learned some of the hard lessons from Sandy and Katrina about where points of contention are and about how we need to treat customers. We’ll see.
Finally, we have to figure out what to do with the National Flood Insurance Program, which is set to expire at the end of the month. Even if Washington weren’t dysfunctional, an answer would be elusive. We all know that the NFIP doesn’t work. What would work is rather harder to define.
If you find these topics half as compelling as I do, then I commend to your attention four articles that we’ve published over the past week, which I’ll describe here rather than just include in the six articles below. I tackle all three topics—the test of innovation, the need to honor our commitments and the NFIP question—in “Harvey: First Big Test for Insurtech.” (My advice on the social responsibility front: Be like J.J. Watt, not Joel Osteen.) Bill Wilson suggests a solution for the NFIP in “Time to Mandate Flood Insurance?” Michael Murray suggests that the federal government could get out of flood insurance entirely, in “Harvey Hammers Home NFIP Issue.” He also offers a thorough, insightful exploration of the public trust issue in “Hurricane Harvey: A Moment of Truth.”
I’m hoping that next week’s note will be much cheerier—but not counting on it.
Paul Carroll, Editor-in-Chief
P.S. Back in April, I wrote about— OK, I mocked —Juicero as an example of how innovation can run amok even when smart people are involved. The heavily funded startup’s business model was to have you buy a $700 device for the privilege of getting access to the company’s overpriced juice—only to have a Bloomberg reporter show that she could squeeze the juice packets by hand faster than the high-powered, super-smart, internet-connected juicer could. Well, Juicero, mercifully, closed up shop over the weekend.
Good riddance—but rest assured that this won’t be the last spectacularly bad idea to draw funding. Keep your guard up.