Insurance:

Leading Through Disruption 

Sean Kevelighan, Chief Executive Officer 

Steven Weisbart, Chief Economist

James Lynch, Chief Actuary

Insurance Information Institute  110 William Street  New York, NY 10038 

212.346.5520  seank@iii.org  stevenw@iii.org  jamesl@iii.org  www.iii.org
I.I.I. Mission Statement

Improving public understanding 

of insurance...

...what it does and how it works

2
Insurance & Economic Leadership
Insurance & Economic Leadership 

1Life/Health and P/C Insurance; 2PC 360 http://www.propertycasualty360.com/2013/04/17/insurance-industry-crisis-400000-

positions-to-fill?slreturn=1476304299; 3U.S. Bureau of Economic Analysis, 2016; 4U.S. Department of Commerce, 2015; 

5Federal Reserve, 2015; 62011–2014, Insurance Industry Charitable Foundation. 

2010

Bank Failures: 157

Insurance Impairments1: 8

Policyholder Surplus:

$700.9B End 

2016

2.8M Employed

Need to Fill

400K+ by 20222

$507.7B 2.7%

US GDP3

Premium Taxes Paid4 $19.2B

Bond Investment5 $489B

Charity/Volunteerism6 15%

Economic Growth 

Promoter/Facilitator 

Strong Jobs 

Pool/Provider

Sustainable 

Business Model
2.5%

2.3%

2.7% 2.7%

2.7%

3.7%

2.7%

2.9%

1.4%

1.1%

1.7%

1.4%

0.8%

1.3% 1.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

19971998199920002001200220032004200520062007200820092010201120122013201420152016

Insurance Banks and Credit Intermediaries Securities

The Insurance Industry’s Contribution to GDP 

Now Nearly Equals Banks’

Sources: US Bureau of Economic Analysis; Insurance Information Institute.
Insurance Industry Snapshot:

By the Numbers

2.8 million

People in the U.S. 

employed, in a wide 

variety of careers, 

from human 

resource 

administrators to 

public relations 

managers to 

financial analysts

Source: A Firm Foundation, Insurance Information Institute. 

$5.8 trillion

Assets under 

management 

at year-end 2016, 

including 

$1.5 trillion for the 

property/

casualty sector 

and $3.7 trillion 

for the life sector

$508 billion

Contributed to the 

U.S. gross domestic 

product in 2016,

roughly 2.7% 

of the whole

$40.0 billion

Federal and foreign 

income taxes paid 

in 2016, plus U.S. 

premium taxes paid
The Yearly Cash Flow to Rebuild Lives

and Property is Substantial

In 2016 alone, the industry paid

Insurers annually pay over a trillion dollars in claims to rebuild 

lives, property, and businesses.

$386.4 billion P/C incurred claims (L + LAE)

554.7 Life/Annuity benefits

560.9 Health Insurance benefits

= $1.502 trillion

This is equivalent to $125 billion per month.
$3,904

$698

$468

$748

Bonds

Stock

Mortgages & Real Estate

Other

Insurers Are Major Investors, 2015

Total invested assets: $5.8 trillion 

Sources: NAIC (the Center for Insurance Policy and Research, June 6, 2016) via SNL Financial; Insurance Information Institute.

Categories of investments 

($billions) Categories of bonds ($billions)

$2,117

$549

$868

$252 $548

Corporates

Munis

Mortgage & Asset-Backed

US Gov't

Other

22% of corporate bonds outstanding

15% of municipal bonds outstanding
As Economies Grow Wealthier, Insurance Market 

Penetration (Premium as % of GDP) Also Grows

Source: A.M. Best. 0%

2%

4%

6%

8%

10%

12%

14%

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000

GDP per capita

Penetration (%)

Some wealthy countries 

have penetration rates of 

10% and higher
Insurance Market Report 
State of Insurance 

1PCS; 2Conning Research; 3S&P Financial.

$76.8B

$21.6B

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

2016 Loss Up 

Modestly Compared 

With 10-

YearAaverage 

$19.1B

U.S. Insured Cat Losses

P/C Payouts / Property Losses1

$15.4B

2015

$21.6B

2016

Catastrophe Costs 

Autonomous

Vehicles

P2P insurance

Cybersecurity

Sharing Economy

Workers Comp

Regulation

Politics

Overcapitalization

(Reinsurance)

Top Issues 

2016

2015

500

-11%

564

$20B

-80%

$101B

DEALS VALUE

Insurance-related Deals 

Involving U.S. Firms2

$6.3B

(JAPAN) (BERMUDA)

25

pending or completed 

M&As involving U.S. 

insurance companies 

(2017)3

Consolidation/M&A
The Economy Drives P/C Insurance Industry Premiums

Direct Premium Growth (All P/C Lines) vs. Nominal GDP

Sources: S&P Global Market Intelligence; U.S. Commerce Dept., Bureau of Economic Analysis; Insurance Information Institute.

-6%

-3%

0%

3%

6%

9%

12%

06:Q106:Q307:Q107:Q308:Q108:Q309:Q109:Q310:Q110:Q311:Q111:Q312:Q112:Q313:Q113:Q314:Q114:Q315:Q115:Q316:Q116:Q317:Q1

DWP y-o-y change y-o-y nominal GDP growth

Direct written premiums track nominal GDP—

not quarter by quarter but overall fairly well.
Commercial & Personal Lines NPW Growth

Note: Data include state funds beginning in 1998.

Sources: A.M. Best; Insurance Information Institute.

-10%

-5%

0%

5%

10%

15%

20%

25%

96 98 00 02 04 06 08 10 12 14 16

Commercial Lines

Personal Lines

Commercial lines is prone to much more 

cyclical volatility than personal lines. 

-1.3%

5.7%
P/C Insurance Industry 

Combined Ratio, 2000-2017*

*Excludes Mortgage & Financial Guaranty insurers 2008-2014.

Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2; 2013: = 96.1; 2014: = 97.0. 

Sources: A.M. Best; ISO, a Verisk Analytics company; I.I.I.

110.1

115.8

107.5

100.1

98.4

100.8

92.6

95.7

101

99.3

101.1

106.5

102.5

96.4 97.0 97.8

100.7

99.6

90

100

110

120

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Q1-17

A return to 

more usual 

underwriting 

loss.

Heavy Use of 

Reinsurance 

Lowered Net 

Losses.

Best 

Combined 

Ratio Since 

1949 (87.6)

Higher CAT Losses, 

Shrinking Reserve 

Releases, Toll of 

Soft Market

Sandy

3 Consecutive Years of 

U/W Profits; 1st time 

since 1971-73
4.44

4.03

4.59 4.50 4.49

4.20

3.93 3.73 3.83 3.68

3.43

3.65

3.18 3.10

0%

1%

2%

3%

4%

5%

6%

03 04 05 06 07 08 09 10 11 12 13 14 15 16

P/C Insurer Portfolio Yields,

2003-2016

Sources: NAIC data, sourced from S&P Global Market Intelligence; Insurance Information Institute.

Even as prevailing rates rise in the next few years, 

portfolio yields are unlikely to rise quickly,

since low yields of recent years are “baked in” to future returns.

P/C carrier yields have been falling for over a 

decade, reflecting the long downtrend in 

prevailing interest rates. 
$65.1

$33.8 $40.7

$56.8 $57.7 $58.1 $66.0 $66.7

$58.5 $56.2

$21.6

-$19.8

$1.6

-$8.4

-$35.3

-$13.8

$17.5 $14.2

$11.2

-$2.4

-$20

$0

$20

$40

$60

$80

07 08 09 10 11 12 13 14 15 16

Underwriting Investment

Sources of P/C Insurer Profits, 2007-2016

Sources: NAIC data, sourced from S&P Global Market Intelligence; Insurance Information Institute.

Insurer gains from investments vary from year to year (they plunged in 

2008-09) but in the last decade, excluding the effect of the Great Recession, 

ranged between $55 billion and $65 billion each year. In contrast, net 

underwriting gains have not exceeded $21 billion in any year and were actual 

losses in five of the 10 years.
-5%

0%

5%

10%

15%

20%

25%

50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 93 95 97 99 01 03 05 07 09 11 13 15

ROE

BLUE = Democratic President RED = Republican President

P/C Insurance Industry ROE by Presidential 

Party Affiliation

1950-2016*

*2016 data is through Q3. Source: Insurance Information Institute. Truman Eisenhower Kennedy/ Johnson Nixon/ Ford Carter

Reagan/

Bush I

Clinton

Bush II

Obama
Catastrophe Change
Natural Catastrophe Losses Totaled $175 Billion, 

Up From $103 Billion in 2015

Source: © 2017 Munich Re, Geo Risks Research, NatCatSERVICE. As of February 2017. 

World Natural Catastrophes, 2016
The Frequency of Extreme Weather Events 

Is Rising

Number of World Natural Catastrophes, 1980-2016

Source: © 2017 Munich Re, Geo Risks Research, NatCatSERVICE. As of February 2017. 
Induced Earthquakes 

Source: USGS-NEIC ComCat & Oklahoma Geological Survey; preliminary as of July 4, 2017.

0 0 3 0 2 1 3 1 2

20 43 63 35

109

585

887

639

137

-100

0

100

200

300

400

500

600

700

800

900

1,000

78-99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Number of Earthquakes

Year

~1.6/year

Includes 3 quakes 

M4.0-4.8; 

1 quake M5.6

Includes 15 quakes 

M4.0-4.4

Includes 30 quakes 

M4.0-4.7

Includes 20 quakes 

M4.0-5.1; 

1 quake M5.8

Earthquake insurance take-up rates increased by over 300 percent 

from 2006 to 2015 in Oklahoma.

Oklahoma Earthquakes Magnitude 3.0 and Greater
Cyber Attacks – No. 2 Global Risk 

Source: Allianz Risk Barometer on Business Risks 2017.

12%

12%

14%

15%

15%

19%

26%

28%

31%

43%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Theft, fraud, corruption

New technologies

Loss of reputation or brand value

Fire, explosion

Macroeconomic developments

Changes in legislation and regulation

Market developments

Natural catastrophes

Cyber incidents

Bus. interrupt., supply chain risk
CAT Claims as a Percent of Total Claims*, 

First Quarter, 2011-2017

*Net of reinsurance and including Loss Adjustment Expenses

Sources: ISO PCS; Insurance Information Institute calculations.

2.4%

4.5%

3.1%

4.0% 4.2%

5.6%

8.1%

0%

2%

4%

6%

8%

10%

11:Q1 12:Q1 13:Q1 14:Q1 15:Q1 16:Q1 17:Q1

CAT claims are normally a small part of total claims in the first quarter,

but that wasn’t true in 2017. Moreover, although it’s a small sample,

the trend seems to be rising.
Road Safety

Source: Insurance Information Institute research.

Distracted 

driving

Faster 

driving

Economic 

well-being

Legalized 

marijuana

Expensive 

auto parts

Safety Devices 

Can Be 

Expensive

Better Economy 

= More Drivers 

= More 

Accidents

18 Percent of 

Injury Crashes

Speed

Still

Kills

Driving While 

High

Why rates 

go up
Insurance and the Fourth Industrial 

Revolution
Insurance Disruption

Technology / Digitalization 

Fundamental

Changes 

 Future of Auto

 Future of Reduced 

Risk Pools

Opportunities

 Automation / 

Efficiencies

 New Product Lines 

(Cyber)

 Emerging Technologies

Challenges

 Consumer Trust –

Demonstrate the 

Societal Value

 Big Data vs. Individual 

Privacy

New Market Entrants 

“Uber of Insurance”?

 Lemonade

 Offered in CA, IL, NJ, 

NY 

Regulatory 

Opportunities/Threats

 Barrier to Entry

 US vs. Other Less 

Regulated Regions

 Trust Pull-back – the 

Sandbox Approach
InsurTech Disruption: Threat or Opportunity? 

Automation efficiencies can have powerful impact on industry 

1

Insurtechs are insurance businesses, usually startups, that use technologically innovative apps, processes, or business models; 2016 data based on 

some 500 commercially well-known cases. 2Assumes a 3 to 5 percentage point improvement in loss ratio, a 2 to 4 percentage point improvement in 

operating expenses, and a 6 to 8 percentage point improvement in direct sales conversions. 3Includes growth in investment income as well premiums. 

Investment income modeled as a flat percentage of premium in each year. 4Includes impact of semi- and fully autonomous vehicles. 5Assumes a 

25 percent reduction in premiums as a result of telematics and sensors and a 50 percent risk transfer to commercial product liability.

Source: Panorama by McKinsey; Digital and Auto Insurers Value at Stake Analysis, McKinsey, 2016.

Focus of InsurTech in the 

insurance value chain1, %

Future profits as a 

% of today’s profits

Only nine percent of InsurTechs

aim to oust incumbents

Digitizing the business, 

auto insurance example

61%

30%

9%

Enabling the 

value chain

Disintermediating 

incumbents from 

customers

Disrupting the 

value chain

Today’s 

profits

2025 

profits

2035 

profits5

Short-term 

gain

Long-term decline

Improvements 

in growth, and 

loss-andexpense 

ratio2

Impact from 

improved 

vehicle 

safety3-4

Shift in 

liability to 

commercial 

product 

lines4

Improved 

loss-andexpense 

ratio4

100

120-200 220-300

-20 to -60

-60 to -100

15-55 155-195
InsurTech Startups Have Broad Range...BUT... 

Source: Aon.

Risk Health

Insurance Marketplace 

Peer to Peer Health Navigators

Micro-duration Coverage

Telematics

Digital Brokers
$205M

$57M

$37M

$21M

$4M

...With Broad Incumbent Support 

Note: Total funding.

Source: Aon.
Successful Digital Transformation  Holistic 

Approach 
THANK YOU

Q&A
APPENDIX 
Rising Auto Costs 

A force to be reckoned with... 
Net Combined Ratio, 2005-2016

Source: National Association of Insurance Commissioners data, sourced from S&P Global Market Intelligence;

Insurance Information Institute.

Loss ratios have been rising for a decade. 

2015 return on net worth is likely close to zero or negative.

94%

107%

110%

95.3%

100.8%

106.0%

90%

95%

100%

105%

110%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Commercial Personal
State Issues

Source: Fast Track Monitoring System. 

From 2015 to 2017, the cost of accidents 

has risen dramatically. By contrast, consumer prices overall 

rose 3.9 percent during 2014 and 2015.

Increase in Loss Costs, 2015:Q1–2017:Q1

Bodily Injury

15.3%

Property

Damage

15.0%

Personal Injury 

Protection

14.1%

Collision

13.2%

Comprehensive

22.5%

Auto Insurance
More People Working and Driving

=> More Collisions, 2006-2016

Number Employed, Millions

Sources: Seasonally Adjusted Employed from Bureau of Labor Statistics; Rolling four-quarter average frequency from Fast Track 

Monitoriing System; Insurance Information Institute.

When people are out of work, they drive less. When they get jobs,

they drive to work, helping drive claim frequency higher.

5.2

5.3

5.4

5.5

5.6

5.7

5.8

5.9

6.0

6.1

120

125

130

135

140

145

150

06:Q106:Q307:Q107:Q308:Q108:Q309:Q109:Q310:Q110:Q311:Q111:Q312:Q112:Q313:Q113:Q314:Q114:Q315:Q115:Q316:Q116:Q3

Number Employed (left axis)

Collision Claim Frequency (right axis)

Overall Collision Claims 

Per 100 Insured Vehicles

Recession
Severity: Driving Fatalities Are Rising

Annual Change in Motor Vehicle Deaths

Sources: National Safety Council, Insurance Information Institute.

-7.0%

-5.9%

-3.0%

-9.5% -9.0%

-2.4%

6.7% 6.5%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

1991 1996 2001 2006 2011 2016

Driving has been getting safer for decades, but recent trend is 

discouraging—38,300 deaths in 2015.

Seatbelt Use Rose 

to 62% of Drivers, 

From 49% in ‘90

Big Drop-off Due 

to the Great 

Recession
Fixing a Bumper

...On an Entry-Level Luxury Car (~$35K)

2016 vehicle has LED headlights and adaptive cruise control.

Source: Liberty Mutual Insurance.

What Has Changed?

Fewer Accidents, Higher Costs

2014 Cost vs. 2016 Cost

1,225

621

2,818

733

 $-

 $500

 $1,000

 $1,500

 $2,000

 $2,500

 $3,000

Parts Labor

2014 2016

2014 2016

Grille: Distance Sensor $0 $2,818

Headlamp Assembly 394 918

Mechanical Labor 0 108

 Parts: 130% Higher

 Labor: 18% Higher

 Total cost: $1,705 higher
Commercial Auto Rates Since Late 2008

Sources: MarketScout, Insurance Information Institute.

Commercial auto rates fell less in soft cycle and have risen 

more than overall property/casualty market.

96 

91 

92 

97 

100 100 

96 

95 

97 

96 96 

102 

106 

107 107 

110 

 90

 95

 100

 105

 110

09-Dec 10-Dec 11-Dec 12-Dec 13-Dec 14-Dec 15-Dec 16-Dec

All Commercial Comm Auto

(Rate Index: December 2008 = 100)
Vehicles in Crashes Per 100 

Registered Vehicles (Government Data)

Property Damage Only (PDO) claims involving passenger vehicles and large trucks, respectively. Large trucks: GVW > 10,000 lbs.

Sources: Federal Highway Administration, National Highway Traffic Safety Administration, Insurance Information Institute. 

-4% -3%

0%

-4%

4% 2%

6%

1%

-7%

-23%

-9%

6%

11%

6%

25%

-4%

-25%

-15%

-5%

5%

15%

25%

2008 2009 2010 2011 2012 2013 2014 2015

Passenger Vehicles Large Trucks

Commercial Auto Claim Frequency Began Growing Before 

Personal Auto.

(% Change From Year Earlier)

Fast Track Data 

Lag Government 

Data.

Signs Frequency 

May Have Peaked
Insurance As An Economic Growth 

Driver 
Major Construction Projects Don’t Start 

Without Insurance

 An example: Boston’s “Big Dig.” 

At $14 billion, the project was...

 Larger than the original Panama 

Canal

 More expensive than the “Chunnel” 

connecting France and England

 Among the carriers who were 

winning bidders were AIG, 

Lexington, Zurich-American and 

Kemper Environmental.

 Workforce included 150 general 

contractors, 600 construction 

companies

 Worst fear: that a building within 

50 feet of the excavation would 

collapse

Source: Mark Hollmer, “The Big Risk: Insuring the Big Dig,” Insurance Times, Sept. 17, 2002.
As Financial Intermediaries, Insurers Expand 

the Funds Available to Grow the Economy

As financial intermediaries, 

insurers convert short-term funds 

into longer-term investments

 In 2015, the industry converted 

$71 billion in premium income 

that was not needed for 

immediate claims payments 

into new long-term investments 

(bonds, mortgages, common 

and preferred stock, and owned 

real estate)
Insurance Contributes to Growth by 

Speeding Recovery

 Insurers are “financial first 

responders” 

 Insurance claims administration 

and payment is the most 

efficient way to achieve rapid 

recovery

 Insurers perform this function 

more quickly and reliably than 

government or other aid 

organizations

 This effect benefits not just 

those directly affected but also 

the wider community

 After SuperStorm Sandy, 93% 

of claims were closed within 

6 months
Mandated 

auto liability insurance Workers compensation insurance

 In just the last dozen years, Workers 

Comp insurers have continued to help 

reduce injury and illness rates in the 

workplace.

 Since 1959 (when IIHS was 

founded), over half a million 

deaths in auto crashes avoided

Insurance Is an Instrument of Social Policy

Source for chart: U.S. Dept. of Labor, Bureau of Labor Statistics, “Employer-Reported Workplace Injuries and Illnesses—2015,” 

released October 27, 2016. Source for IIHS calculation: Robert Hartwig speech at IIHS 50th Anniversary, September 9, 2009.
Insurance Supports New Ventures

Sources: Art: Cover of Contingencies magazine, May-June 2017 issue; headline: http://www.nbcnews.com/science/space/spacexexplains-september-explosion-says-it-ll-try-again-sunday-n702421

 Insurance enables individuals and organizations 

to take new risks.

 In the case of the Falcon 9 launches, insurance 

is needed for potential damages to

 The launch pad

 Nearby government property

 Nongovernment property

 The rocket and [$200 million] satellite
For the Economy, Insurance Is Growing 

in Importance

 This is because economic 

activity is increasingly 

interdependent

 This translates to an increase in 

the need for, and the cost of, 

activities that ensure the 

functioning of production and 

consumption (e.g., transportation, 

information)

 With modern technology, the 

vulnerability of these systems 

and interdependencies increases