A story from Joey Bouchard, CEO of QuoteWell, on why insurance is awesome.
I remember my Dad abruptly walking into our kitchen at home during dinner, looking at my mom, and murmuring, “I don’t know if we’ll ever recover from this.” A burglar had broken into our family-run pawnshop, and from my parent’s perspective, the business would be hung out to dry. They had started the business when I was a baby and would regularly put in 70-hour weeks to keep it afloat. It took a lot of effort, but they eventually grew the business to healthy profitability with a team of over 20 employees who depended on the store for their livelihoods. It was the American Dream, and they were afraid it might be over.
And it very well might have been over had my parents not purchased specialty business insurance specifically for pawnshops. Their insurance agent, a long-time friend, recommended this coverage to ensure protection from such catastrophic events. The insurance contract worked as intended. The insurance company made my family’s business whole again, and we had peace of mind knowing our hard work would not be lost.
While I cannot say that this experience was the only catalyst for my transition to insurance, I had highly positive associations with the industry early on. About 20 years later, I was at a pivotal point in my career where I applied that latent appreciation to a project assignment at Palantir. While most of my peers weren’t eager to work on an insurance client, I jumped at the opportunity.
As a product manager, the task was to develop a series of data-driven software applications for a large European insurance company. Needing to get up to speed on the ins and outs of insurance, I traveled to eight of their offices across six countries in one month, conducting the due diligence to build my mental model of how the industry worked.
Upon completing the project, I had four lasting impressions about the industry.
Insurance’s impact is commonly viewed solely based on its role after a catastrophic loss. For example, many understand that insurance steps in to cover the financial loss when a beachfront Florida hotel is damaged by a hurricane. However, an often overlooked aspect is how insurance enabled both the company's decision to buy a high-risk beach property and the bank's decision to extend the transaction loan.
Insurance decreases downside financial risk and frees up people, businesses, and lenders to act, make choices, evolve, and contribute to the economy in ways they couldn't bear to under the threat of financial ruin. For that reason, both the bank and the business are aware of the hurricane risk. Yet, they're OK moving forward… all because of insurance!
So, of course, we generally recognize that insurance plays a critical role in keeping things on track when a loss occurs and helping out people and businesses in their greatest need. But also noteworthy is that its very existence spurs industry, endeavor, and risk-taking across the economy writ large. Insurance is the invisible grease in the gears of commerce!
The amount of money changing hands as companies and individuals look to manage risk is truly tremendous. For example, in 2020, the cumulative global Property & Casualty insurance spend amounted to $1.8 trillion USD, with Swiss Re predicting an increase to $4 trillion by 2040 [1].
Zooming in a bit on just the US, in 2021, the insurance industry made up 2.9% of total GDP [2]. As a sector, insurance contributes more to GDP than many other front-of-mind industries such as:
At a recent talk, a leading insurance company executive admitted that 95% of the insurance agent submissions the company receives are unstructured PDF attachments sent via email. He bravely called on those in attendance to be agents of innovation and change. While that anecdote is a specific example of a specific need, I assure you it is not an isolated one.