Insurance as a Force for Good in the World
A Letter from Phil Edmundson, Founder & CEO of Corvus Insurance
I have been fortunate to be in the world of insurance, developing insurance products for new technology companies in industries including life sciences, software, internet, and renewable energy. With the help of brilliant and thoughtful colleagues, my previous company had successfully helped large and small technology organizations around the world manage the risks inherent in new technologies and operating businesses.
In 2003, I took a year off from my role as CEO to attend a mid-career program at the Kennedy School of Government at Harvard. As happy as I was to attend this year-long program, I was more than a bit intimidated by the accomplishments of my mid-career classmates. One had been a member of Congress, another a leader at Save the Children, another a founder of a women’s shelter, yet another a captain in the US Army. And me, well I was serving as a small town’s elected leader, but compared to my classmates, I felt immensely out of my league being mainly a property & casualty insurance executive.
At the end of the first day of orientation, I found myself sitting with a classmate, one of those persons with a kind ear, to whom I rather freely admitted my insecurities. I must have said something like, “you guys are all engaged in work that is so much more important to the world than me, running an insurance brokerage firm”. Maybe it was just the beer talking but I really did feel out of my league. While I can’t even tell you the name of that classmate today, I will never forget his message. A state legislator, he said something like: “you totally underestimate the importance of insurance. In government, insurance is another way of expressing our collective goals for each other, goals of financial security for families, the disabled, and seniors. In business, the fair functioning of responsible parties in commerce. As a percent of the overall federal budget, when you combine Medicare, Medicaid, Unemployment, Social Security, Workers Compensation, and the like, there is no bigger collective expenditure that we make as a society.” That was my denouement to the idea that insurance could be a force for good in the world. I remember feeling my shoulders pull back a little, a dose of self-respect had entered my being.
Over time, I became obsessed with finding examples of how insurance, particularly my main field of insurance, property and casualty insurance, could be a force for good in the world. Certainly, I understood that liability insurance, for example, could be seen as an essential element in providing security to landlords and customers. There is comfort in knowing a business would have the backing of a large insurer should their business operations cause harm from something as simple as a trip and fall or something more complex like product liability.
Some examples of “Insurance as a Social Good” are more reactive than proactive, but still powerful indeed. Slumlords with devastating lead paint peeling off their walls were forced to clean up their acts when insurers refused to offer liability insurance without proof of de-leading.
The Catholic Church and similar institutions certainly found religion around sexual misconduct in part due to the unwillingness of commercial insurers to offer them any more liability insurance without a big clean-up of their sexual misconducts. Today, sports leagues are being forced to address the long-term impact of CTE and concussions due to the unwillingness of their insurers to continue to pay claims. We can hope that the Federal Flood Insurance program might be changed to follow this strategy of incentivizing development only in less flood-prone areas, if policymakers get it right.
But, I didn’t fathom insurance’s possible social purpose fully until I read the obituary of a friend’s father, an insurance agent in a safe quiet suburb, who made it a point in his career to cajole large insurers to offer liability insurance to minority business owners in the inner city of Boston. His effort helped those business owners to get a lease for their storefront businesses and to help restore neighborhoods in the 60’s and 70’s.
Reacting to bad behavior by making insurance fair is one powerful tool. Promoting good results proactively is quite another. So, I set about looking for ways to build insurance products that reflected a higher social purpose and that made great financial sense, as well.
Bad things happen in the world. Roofs collapse, shipments of food spoil, drivers are too aggressive, cyber thieves are proliferating, sexual harassment certainly hasn’t gone away. While businesses and individuals can buy insurance against these risks, that passive response is no longer an acceptable strategy to make the world a better place. And, as with so many other aspects of our lives, there is a whole new set of technology tools that can promote active risk management responses by harnessing data that was previously difficult or impossible to collect.
Today, with an app on a phone, we can measure, gamify and improve the driving behavior of commercial drivers by scoring their braking, acceleration, and even their distracted driving behavior from cell phone use, which is causing the first bump in accident and death rates in my lifetime. With sensors on building roofs and cargo shipments, we can anticipate collapses or spoilage, and in turn intercept the problem before a claim occurs. We can detect the likelihood of litigation by examining social media and big data sets in ways that reveal trends that typically cause lawsuits, and destruction.
Harnessing this data requires a mission to make the world a safer place. Insurers, who pay the costs when bad things happen, are uniquely situated to leverage new forms of data to proactively put technology to work in order to make the world a safer place. Corvus exists to turn that mission into a reality.