Tag Archives: eq

Catastrophes and ‘Do Little’ Syndrome

Cliff Treese of Association Data brought some statistics to my attention involving earthquake (EQ) insurance in California. Going back as far as 2001, the percentage of properties without EQ insurance were:

Homeowners       84-88%

Dwelling               95-97%

Commercial         89-93%

So, only about 15% of homeowners, 10% of business owners and 5% of dwelling owners buy EQ insurance. Why? Lots of studies and surveys have been done. It’s too expensive. It doesn’t pay much, especially for partial losses, because of percentage deductibles. “It’ll never happen to me.” The government will take care of me. “I thought my regular insurance covered this.” And on and on.

One of my favorite quotations is from Gen. Jimmy Doolittle, who said, “The problem with Americans is that we’re fixers rather than preventers.” This is so true in so many ways. Following Hurricane Harvey, it was widely reported that only about 15% of flooded properties had flood insurance. We’ll see what happens, if anything.

See also: Harvey: First Big Test for Insurtech 

While we can’t prevent earthquakes and hurricanes, we can prevent, to a large extent, their financial impact by buying catastrophic insurance. Private insurers sell EQ coverage and, underwritten by the NFIP, flood insurance. Yes, in many cases, it’s expensive, but what are the alternatives when the exposure is so real? As I posted last week, is it time that such coverage was mandated and included, with a federal terrorism-like backstop, in standard policies covering property damage? Such a solution would be complex and difficult, but what are the alternatives?

And, while Gen. Doolittle’s quotation is so often true, it may be even more true that, increasingly, the problem with Americans is that we’re not preventers OR fixers. In the meme I used for last week’s post, I used another quotation from the German philosopher Hegel, who said, “History teaches us that man learns nothing from history.” This may be illustrated in a recent USA Today story about repetitive flood properties with this excerpt:

“Instead, NFIP embraced a “flood-rebuild-repeat” model that has spawned an almost $25 billion debt. The National Wildlife Foundation estimated in 1998 that 2% of properties covered by federal flood insurance had multiple damage claims accounting for 40% of total flood insurance outlays, and that more than 5,000 homes had repeat claims exceeding their property value. A recent Pew Charitable Trust study revealed that 1% of the 5 million properties insured have produced almost a third of the damage claims and half the debt.”

NFIP paid to rebuild one Houston home 16 times in 18 years, spending almost a million dollars to perpetually restore a house worth less than $120,000. Harris County, Texas (which includes Houston), has almost 10,000 properties that have filed repetitive flood insurance damage claims. The Washington Post recently reported that a house “outside Baton Rouge, valued at $55,921, has flooded 40 times over the years, amassing $428,379 in claims. A $90,000 property near the Mississippi River north of St. Louis has flooded 34 times, racking up claims of more than $608,000.”

See also: Time to Mandate Flood Insurance?  

Wow. Fully 2% of properties insured for flood account for 40% of all flood insurance payments. A $120,000 home was rebuilt 16 times in 18 years at a cost of almost a million dollars. Another home has allegedly flooded 40 times and still another property 34 times, racking up combined payments in excess of a million dollars. WHY? Apparently because we’re not fixers OR preventers AND we learn nothing from history.

Culture Defeats Strategy Outright!

Valentino Rossi (a.k.a the living legend of MotoGP) is 37 years old (a lifetime in motorsport years), is first in all-time 500cc (MotoGP) race wins standings with 88 victories and is second in all time overall wins standings with 114 race wins (just behind Giacomo Agostini, with 122.) But it’s not just Rossi’s stats, victories, poles, podiums or championship wins that lure the crowds to rally behind him no matter which team he’s on.

Watching riders close up in action is like seeing someone ride a 241 km/h rocket — with riders disappearing over the sides of their bikes, one knee grazing the tarmac, and riders leaning over at angles that seem to defy the laws of physics. A very obviously skillful, fast-moving spectacle with crashes and passing galore, it is more gladiatorial than car racing.

Rossi’s fans are the maddest of all. Every year, hundreds of motorsport fans have pictures of Rossi tattooed on their backs, while others have Rossi’s number, 46, tattooed on their chests. At the Italian GP, hillsides are covered in yellow, Rossi’s color. In Germany, fans turn up on medical drips in homage to the “Doctor,” as Rossi is known.

See also: Does Your Culture Embrace Innovation?  

We can easily identify the Rossis in our workplaces. They are the folks who take responsibility, the connectors, the ones with insight, those who are fair and never lose hope even when the chips are down. The leaders, the innovators, the promise-makers and the supporters. Those who do more than they are asked, care, speak the truth, change things for the better and inspire others. It is the personality and energy that is unique to the individual that makes all the difference. It is the skills that really matter — the human skills that indicate a high level of emotional intelligence (EQ) that make things happen, propel projects forward, create and sustain partnerships and facilitate collaboration. Without these skills, we’d all be rendered bots.

Yet we persist, hiring and promoting based on easily defined skills that can be measured like the stats in motorsport. We can all agree that a rider needs to know how to ride, a designer must know how to design, and an underwriter must know how to assess risks. But when an employee demoralizes the entire team, undermining a project, or a bully causes future stars to quit the organization, we practically need an act of Parliament to get rid of him (even though that person is stealing from us!). We know how to measure productivity, but we have trouble measuring commitment and passion. Would we rather be powerful bystanders? Is the professional expertise all that matters? How, then, do we explain the different outcomes achieved by similarly skilled professionals?

Rossi’s dominance in motorcycle racing, along with his philosophy that generating excitement is more important than winning, has given his sport mainstream appeal and has made him a superstar worshipped as a living legend by countless adoring fans. Rossi’s energy, style and panache draws crowds from around the world. He has made motorcycle racing fun, interesting and meaningful.

See also: Building a Strong Insurance Risk Culture  

We only have to look at any thriving organization and we’ll find what differentiates it from the organizations that are struggling is the difficult-to-measure attitudes, personalities, processes and perceptions of the people who do the work. Culture defeats strategy outright!