While on vacation last week at the Jersey shore, my mind wandered far afield. Perhaps because my daughters repeatedly urged me to watch "Sinners," my thinking ranged to vampires and then zombies.
Eventually, my mental meandering resolved itself into a renewed belief in the importance of scenario planning, especially in these unpredictable times, and the insurance industry should absolutely be preparing for a whole range of possibilities.
Let's start with the one that amused me as I sat on the beach: the possibility of a zombie apocalypse.
A key issue: Are those who get infected by the hordes of zombies dead or merely "undead"?
As I understand zombie lore, the decision could go either way. Zombies don't show any brain activity and have no heartbeat. Yet they still have their physical bodies, and they still function — in that straight-armed, "I'm coming to eat your brain" kind of way.
Life insurers would have to come to a decision and be prepared to defend it.
If zombies are considered to be "undead," all sorts of other types of insurance kick in. Zombies decay and are known to lose limbs, so there could be lots of disability claims, for instance.
There would be auto accidents galore, as people fled.
There might be liability claims against property owners — or not. I'm liable if someone slips and falls because of my carelessness, but am I really liable if a defense I've rigged up blows a zombie's brains out? What if my system blows out the brains of an uninfected neighbor looking for protection?
As for health insurers, you might think they'd be inundated with claims, but there's no treatment for zombies. There would presumably be loads of people injured fleeing the zombies, but would hospitals still be functioning? What would the CPT code be for an injury while avoiding an attack by a zombie?
And on and on and on.
In the real world, where even the multiplying hordes of conspiracy theorists aren't claiming zombies exist, Royal Dutch Shell is the poster child for scenario planning. Based on research at the RAND Corporation in the 1960s, it set up a group that considered, among many other things, the possibility of a surge in oil prices. Shell then put contingency plans in place that left it well-prepared when prices quadrupled in just a few weeks during the oil crisis of 1973.
For me, the key hurdle for scenario planning is to make sure you don't think you're predicting the future. As this article explains in some detail, based on the Shell example, you're just trying to get outside the mental model that you use to view the world. Even if none of your scenarios come to pass — and they likely won't — you've developed a more robust view of your environment and are better prepared.
Now is a great time to apply that sort of discipline in insurance because of all the uncertainty about government policy, about geopolitics and about the economy.
The Trump administration has for months talked about abolishing the Federal Emergency Management Agency but may be backing off after the disastrous flash flood in Texas. Tariff policies are all over the place. What's going to happen with Ukraine, Gaza, Iran...? Economists are predicting a resurgence of inflation in the U.S., and the data released today suggest it may be starting, but many of the expected effects from Trump policies have been muted this far. Will they, in fact, show up? When?
Your strategic decisions may not change much based on some of those issues, but it's worth gaming out the possibilities for any that might.
In the meantime, stay away from those zombies.
Cheers,
Paul