What’s Driving the P/C Industry?

CAS Webinar

October 11, 2018

Steven Weisbart, chief economist

James Lynch, FCAS MAAA, chief actuary

Insurance Information Institute 110 William Street New York, NY 10038 212.346.5520 jenniferh@iii.org www.iii.org

2

I.I.I. Mission Statement

Improving public understanding of insurance...

…what it does and how it works

2

3

10 Key Ways Insurance Drives Economic Growth

Economic/Financial Stability

3. Insurers are capital protectors

5. Insurance sustains the supply chain

4. Insurance is a partner in social policy

6. Insurers are capital infusers

1. Insurers are financial first responders

2. Insurers are risk mitigators

Safety/Security

Development

10. Insurers are credit facilitators

7. Insurers are community builders

8. Insurance enables infrastructure improvements

9. Insurers are innovation catalysts

The State of Resilience

A Case Study: Flood Risk

5

1982 Union, Missouri, Flood

A Storm for the Ages

Source: Fox2News.com, @BoxxRadio.

Bourbeuse River

Record Crest

33.8 feet

12/5/1982

6

2015 Union, Missouri, Flood

A Storm for the Ages

Sources: CBSnews.com; fox2news.com

Bourbeuse River

Record Crest

34.3 feet

12/29/2019

7

2017: A Record Year Of Catastrophe Losses

$14 billion insured wildfire losses;

California damage estimated ~$11

billion

Thunderstorm related losses 2nd

highest ever in U.S.

Flooding events spurred 73% of federal disaster

declarations

N.A. hurricane season record-

breaking insured & economic losses; disasters affected

>25 million Americans

Cyber: Risk continuing to

increase

Auto: Reaching epidemic

proportions

8

0.92

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1961:Q3 1967:Q4 1974:Q1 1980:Q2 1986:Q3 1992:Q4 1999:Q1 2005:Q2 2011:Q3 2017:Q4

Std

. D

evia

tio

n f

rom

Me

an

1961-1990: Index Average is 0.00

Seasonal Five-Year Moving Average, United States

Education & Analysis

Source: Actuaries Climate Index, http://actuariesclimateindex.org/home/

Index Measures Frequency of Extreme Events (Heat, Drought, Wind, Rain, Sea Level) Vs. 1961-1990 Average

Actuaries Climate Index – Measuring Weather Extremes

9

NFIP Payouts To The Small Group Of Americans With Flood Insurance Have Skyrocketed

78% Of NFIP's Payouts Have Occurred In The Last 13 Years

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

$8,000,000

0

$6,000,000

$10,000,000

$2,000,000

$4,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

Year

Cost of Paid NFIP Claims Aug 2005:

Hurricane Katrina

Oct 2012:Superstorm

Sandy Aug 2017: Hurricane

Harvey

Source: FEMA NFIP

1979:

FEMA Created

10

Major Populations Without Flood Insurance (%):

Texas

▪ 80%

Florida

▪ 60%

Puerto Rico

▪ 99%

Source: McKinsey; FEMA NFIP

Coverage Gaps Have Serious Consequences For American Families And Businesses 88% Of American Households Lack Flood Insurance

11

The Insurance Coverage Gap Cost Consumers An Estimated $1.3 Trillion From 2005-2015

Over the last decade, more than 70 percent of all catastrophes losses worldwide were uninsured.

Flooding is not covered by standard homeowners insurance or commercial insurance policies, making it one of the largest uninsured risks for consumers.

Source: Swiss Re; Wikimedia Commons; DOD

12

(Re)insurance Products

Source: Insurance Journal; Houston Chronicle; Insurance Journal.

FEMA

Reinsurance

Through a $150 million purchase of private

reinsurance products, FEMA was able to recover

approximately $1 billion, or an eighth of its total

2017 loses.

NFIP NatCat

Bonds

By issuing new natural catastrophe bonds

geared towards institutional investors, the NFIP

can bring an estimated $500 million of additional

reinsurance coverage.

Private Market

Flood Products

During 2017, the private flood insurance market

added 50 new carriers. Direct private flood

insurance premiums written reached $630

million, an increase of $217 million over 2016.

Private Industry Case Studies

40%

2018 FEMA Reinsurance

Financial Results

Light, Favorable Winds Buoy Results

14

Commercial & Personal Lines Direct Premiums Written Growth, Quarterly Y-o-Y, 2012:Q1-2017:Q2

.

Sources: NAIC via SNL Financial; Insurance Information Institute calculations.

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

2012:Q1 2012:Q3 2013:Q1 2013:Q3 2014:Q1 2014:Q3 2015:Q1 2015:Q3 2016:Q1 2016:Q3 2017:Q1

Commercial Lines Personal Lines

Since 2016:Q1, personal DPW have grown by over 5% but commercial DPW by less than 3%.

Percent Change from same quarter, prior year

15

11.3%

5.4%

-6%

-3%

0%

3%

6%

9%

12%

08 09 10 11 12 13 14 15 16 17 18

NPW Growth Nominal GDP Growth

Net Premium Growth, Annual Change

All data through second quarter.

SOURCES: NAIC data sourced through S&P Global Intelligence, Bureau of Economic Affairs, Insurance Information Institute.

The tax reform act at the end of 2017 led to the spike in net written premium

in 2018 - $314B at Second Quarter.

As a general rule, net written premium growth tracks nominal GDP growth.

16

5.8%5.4%

-4%

-2%

0%

2%

4%

6%

08 09 10 11 12 13 14 15 16 17 18

NPW Growth GDP Growth

Direct Premium Growth, Annual Change

All data through second quarter.

SOURCES:NAIC data sourced through S&P Global Intelligence, Bureau of Economic Affairs, Insurance Information Institute.

Rising Auto Rates Driving Premium Growth - $337B at Second Quarter.

17

Net Underwriting Gains & Losses,1st Halves of Each Year, 2007-2018

Sources: ISO/PCI; Insurance Information Institute.

$17,000

-$6,300

-$2,500

-$5,700

-$26,100

-$7,500

$2,400

$300

$3,500

-$1,500-$4,500

$6,000

-$29,000

-$25,000

-$21,000

-$17,000

-$13,000

-$9,000

-$5,000

-$1,000

$3,000

$7,000

$11,000

$15,000

$19,000

07 08 09 10 11 12 13 14 15 16 17 18

Net underwriting results in the first half of the yearhave been quite variable, but mostly losses.

$ Millions

Second-highest first-half U/W gains in last

dozen years

18

4.44

4.03

4.59 4.50 4.494.20

3.933.73 3.83

3.683.43

3.64

3.18 3.04 3.02

0%

1%

2%

3%

4%

5%

6%

03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

P/C Insurer Portfolio Yields,2002-2017

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.

Net Yield on Invested Assets for 2018:1st quarter: 2.93%2nd quarter: 3.66%

19

Net Investment Gains Vary Mainly With Realized Capital Gains/Losses, 1st Halves, 2007-2018

Sources: ISO/PCI; Insurance Information Institute.

$31.0$29.0

$26.9 $26.6 $27.0 $25.3 $24.4 $23.7 $24.1 $22.6 $23.4$26.8

$5.0

-$1.2

-$12.8

$2.5$3.9

$1.8 $4.1$7.4

$3.5$4.5 $3.6

$5.4

-$13

-$10

-$7

-$4

-$1

$2

$5

$8

$11

$14

$17

$20

$23

$26

$29

$32

$35

07 08 09 10 11 12 13 14 15 16 17 18

net investment income realized capital gains/losses

In the first half of the year, net investment income has been steady but realized capital gains/losses have been variable.

$ Billions

20

P/C Industry Net Income After Taxes*,1st Halves, 2007-2018

*adjusted for inflation using the BLS CPI calculator, to 2018 dollarsSources: ISO, a Verisk Analytics company; Insurance Information Institute.

$44.3

$18.0

$7.7

$21.5

$5.8

$19.3

$27.2 $28.3

$33.7

$23.0

$16.0

$34.0

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

07 08 09 10 11 12 13 14 15 16 17 18

In the first half of the year, net income varied considerably.

$ Billions, 2018 dollars

2018:1H was the second-highest first-half profit in

the last dozen years.

21

21

Policyholder Surplus By Quarter

Amount of Surplus Change from Prior Quarter

Sources: ISO, A.M .Best.

($ Billions)

749

761

$400

$500

$600

$700

$800

09

:Q2

10

:Q1

10

:Q4

11

:Q3

12

:Q2

13

:Q1

13

:Q4

14

:Q3

15

:Q2

16

:Q1

16

:Q4

17

:Q3

18

:Q2

Tax Law Increased Surplus at Year-End 2017 and Makes Surplus Growth a Bit More Volatile. $1.30 Surplus per $1 Premium.

-0.4%

1.6%

-2%

-1%

0%

1%

2%

3%

4%

5%

15

:Q2

15

:Q3

15

:Q4

16

:Q1

16:Q

2

16

:Q3

16

:Q4

17

:Q1

17

:Q2

17

:Q3

17

:Q4

18

:Q1

18

:Q2

2017:Q4 Scuttlebutt

Is a hard market coming?

23

Three Hard Markets in the Last 45 Years

Sources: A.M. Best (1971-2017), ISO (2014-16), A.M. Best, Insurance Information Institute (1986-1994); U.S. Commerce Dept., Bureau of Economic Analysis; Insurance Information Institute calculations.

-10%

-5%

0%

5%

10%

15%

20%

71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15

1.1%

10.7%

16.6%

12.0%

Net Premium Growth (All P/C Lines) Minus Nominal GDP, Annual Change

The three “hard markets” in this 45-year span were in 1976–77, 1985–86, and 2001–03.

24

Two Hard Markets in the Last 21 Years

Sources: A.M. Best (1986-2016), ISO (2014-16), A.M. Best, Insurance Information Institute (1986-1994); U.S. Commerce Dept., Bureau of Economic Analysis; Insurance Information Institute calculations.

-10%

-5%

0%

5%

10%

15%

20%

86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

16.6%

12.0%

Net Premium Growth (All P/C Lines) Minus Nominal GDP, Annual Change

The two “hard markets” in this 21-year span were in 1985–86, and 2001–03.

25

I.I.I. Hypothesis What causes a hard market?

Return on equity falls to 4% or below?

Surplus drops due to financial market declines and/or significant underwriting losses?

Unusually large losses due to catastrophes?

26

P/C Industry ROE and Hard Markets

Year ROENWP-GDP Growth in

Following YearHard

Market?

1975 2.4% 10.7% Yes

1984 1.8% 14.6% Yes

2001 -1.2% 12.0% Yes

2002 2.1% 5.1% Yes

2017 5.0% 0.4%* No

* Direct Written Premium – GDP Growth through Second Quarter

27

Policyholder Surplus and Hard Markets

YearSurplus Decline

NWP-GDP Growth in Following Year

Hard Market?

1984 -2.7% 14.6% Yes

1999 -0.9% -1.5% No

2000 -4.7% 5.1% Yes

2001 -8.0% 12.0% Yes

2008 -12.5% -2.2% No

2011 -0.8% 0.2% No

2017 +7.4% 0.4% No

* Direct Written Premium – GDP Growth through Second Quarter

28

CAT Claims and Hard Markets

YearCAT Claims Over

$25 billion (2016 Adjusted)

NWP-GDP Growth in Following Year

Hard Market?

1992 $39.6 0.9% No

1994 $27.7 -1.2% No

2001 $36.4 12.0% Yes

2004 $36.4 -6.2% No

2005 $77.1 -3.1% No

2008 $30.7 -2.2% No

2011 $35.2 0.2% No

2012 $36.8 1.3% No

2017 $90.5 0.4% No

29

Hard Market in 2018?

Strong indicator: ≤ 4% ROE

Consistent hard markets in years comparisons.

Indifferent indicator: Surplus Increase/Decrease

Inconsistent hard/soft markets in years comparisons.

Weak indicator: Large Cat Losses

Consistent non-movement; even with 2017 potentially being one of the worst years on record.

Commercial Rate Changes

Commercial Auto . . . And Everything Else

31

Rate Changes Worldwide

Sources: Marsh Insurance Market Index, JLT Re.

Global Insurance Rates Through Q2 2018

Global Reinsurance January Renewals

-12.0%-11.0%

-8.2%

-5.7%

4.8%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2014 2015 2016 2017 2018

1%

-5%

-2%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

20

12

:Q2

20

13

:Q2

20

14

:Q2

20

15

:Q2

20

16

:Q2

20

17

:Q2

20

18

:Q2

Rates Soft/Flat, Especially in Reinsurance

1%Rates Worldwide Increasing a Bit

(Australia)

32

Liability Rate Changes

Slight Softening, Though Local Markets Vary

SOURCE: Marsh Insurance Market Index.

U.S. Casualty U.S. Financial and Prof Liab

2.6%

-2.4%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0% 2.7%

0.9%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

33

Property/Cyber Rate Changes

A Flat Market, Though Local Markets Vary

SOURCE: Marsh Insurance Market Index.

U.S. Property U.S. Cyber

3.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

20.0%

2.1%

-5.0%

5.0%

15.0%

25.0%

34

Commercial Lines Rate Change

Sources: Willis Towers Watson, MarketScout.

‘Material’ Increases in Auto, Property, Umbrella; Q2 Increases > Q1 Increases

-16%

5%

MarketScout

-4%

2.5%

-6%

7%

Willis

3%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

35

Commercial Property Rate Change (vs. Year Earlier)

Sources: MarketScout, Insurance Information Institute..

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Ma

r-0

9

Ju

n-0

9

Se

p-0

9

De

c-0

9

Ma

r-1

0

Jun-1

0

Se

p-1

0

De

c-1

0

Ma

r-1

1

Ju

n-1

1

Se

p-1

1

De

c-1

1

Mar-

12

Ju

n-1

2

Se

p-1

2

De

c-1

2

Ma

r-1

3

Ju

n-1

3

Se

p-1

3

Dec-1

3

Ma

r-1

4

Ju

n-1

4

Se

p-1

4

De

c-1

4

Ma

r-1

5

Ju

n-1

5

Sep-1

5

15-D

ec

16-M

ar

16-J

un

16-S

ep

16-D

ec

17-M

ar

17-J

un

17-S

ep

17-D

ec

18-M

ar

18-J

un

18-S

ep

Sep-183%

Property Rates Closely Following Loss Experience, Especially in Catastrophe Prone Areas.

Mar-09-8%

Sep-126%

4 Years of Rates 0%

41

Commercial Auto Rate Change (vs. Year Earlier)

-4 -4

-3 -3

-2

-3

-1

-2

-1 -1

0

1

4

5

6

5

6

5

4 4

3

2

1 1

2 2

0

-1

2

3 3 3

4

5 5 5

6 6

-6%

-4%

-2%

0%

2%

4%

6%

8%

Ju

n-0

9

Se

p-0

9

De

c-0

9

Ma

r-1

0

Ju

n-1

0

Se

p-1

0

De

c-1

0

Ma

r-1

1

Ju

n-1

1

Se

p-1

1

De

c-1

1

Ma

r-1

2

Ju

n-1

2

Se

p-1

2

De

c-1

2

Ma

r-1

3

Ju

n-1

3

Se

p-1

3

De

c-1

3

Ma

r-1

4

Ju

n-1

4

Se

p-1

4

De

c-1

4

Mar-

15

Ju

n-1

5

Se

p-1

5

15-D

ec

16

-Ma

r

16-J

un

16-S

ep

16-D

ec

17

-Ma

r

17-J

un

17-S

ep

17-D

ec

18

-Ma

r

18-J

un

18-S

ep

Sources: MarketScout, Insurance Information Institute.

42

Workers Comp Rate Change (vs. Year Earlier)

Sources: MarketScout, Insurance Information Institute.

-9

-7

-9

-6

-7

-4 -4

-3 -3

-2

-3

-1

-2

-1 -1

0

1

4

5

6

5

6

5

4 4

3

2

0 0

1

0

-4

-2

-1 -1

-2 -2 -2 -2 -2 -2

-3 -3

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Ma

r-0

8

Ju

n-0

8

Se

p-0

8

De

c-0

8

Ma

r-0

9

Ju

n-0

9

Sep-0

9

De

c-0

9

Ma

r-1

0

Ju

n-1

0

Se

p-1

0

De

c-1

0

Ma

r-1

1

Ju

n-1

1

Se

p-1

1

De

c-1

1

Ma

r-1

2

Ju

n-1

2

Se

p-1

2

De

c-1

2

Ma

r-1

3

Ju

n-1

3

Se

p-1

3

De

c-1

3

Ma

r-1

4

Ju

n-1

4

Se

p-1

4

De

c-1

4

Ma

r-1

5

Ju

n-1

5

Se

p-1

5

De

c-1

5

Ma

r-1

6

Ju

n-1

6

16-S

ep

16-D

ec

17-M

ar

17-J

un

17-S

ep

17-D

ec

18-M

ar

18-J

un

18-S

ep

Stellar Results Have Created a Soft Market.

Economic Outlook

The Strength of the EconomyWill Influence the Insurance Environment

50

The Economy Drives P/C Insurance Industry Premiums:Net Premium Growth (All P/C Lines) vs. Nominal GDP: Annual Change, 1971-2017

Sources: A.M. Best (1971-2013), ISO (2014-17); U.S. Commerce Dept., Bureau of Economic Analysis; I.I.I.

-4%

0%

4%

8%

12%

16%

20%

24%

71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17

NWP GDP

Except for the three “hard markets” in this 47-year period,Net Written Premiums track Nominal GDP—not year by year but fairly well.

51

3.2

1.7

0.5

0.5

3.6

0.5

3.2

3.2

-1.0

5.1

4.9

1.9

3.3

3.3

1.0

0.4

1.5

2.3

1.9

1.8

1.8

3.0

2.8

2.3

2.2

4.2

4.1

-1%

0%

1%

2%

3%

4%

5%

6%

12:1

Q

12:3

Q

13:1

Q

13:3

Q

14:1

Q

14:3

Q

15:1

Q

15:3

Q

16:1

Q

16:3

Q

17:1

Q

17:3

Q

18:1

Q

18:3

Q*

Rea

l G

DP

Gro

wth

U.S. Post-Recession Real GDP Growth,** Quarterly

*GDPnow estimate **Percent change from previous quarter, seasonally-adjusted at an annual rateSources: U.S. Department of Commerce; Insurance Information Institute.

Since the start of 2012, the economy (as measured by real GDP)grew 3% or faster (at an annual rate) in a calendar quarter

only 10 times in 22 quarters. But twice in the last 5.

The start of sustained

3+% growth?

52

Quarterly U.S. Real GDP Growth: Range of Forecasts

Sources: Blue Chip Economic Indicators, September 2018 issue; Insurance Information Institute.

2.2%

1.7%1.8%

1.5%

1.1%

2.8%

2.4%2.5%

2.2%

2.0%

3.3%

3.0%3.1%

2.9%

2.7%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2018:Q4 2019:Q1 2019:Q2 2019:Q3 2019:Q4

Bottom 10 Avg Median Top 10 Avg

Tough times ahead? With interest rates rising, most forecasts expect U.S. growth to slow by 2020; some foresee a sharp slowdown.

5353

Length of US Business Cycles, 1960–Present*

8

19

106

36

58

12

92

120

73

112

10 1116

6

16

8

0

10

20

30

40

50

60

70

80

90

100

110

120

Apr 1960 Dec 1969 Nov 1973 Jan 1980 Jul 1981 Jul 1990 Mar 2001 Dec 2007

Month Recession Started

Contraction

Expansion Following

*Through October 2018; June 2009 was the “official” end of recession.

Sources: National Bureau of Economic Research; Insurance Information Institute.

Duration (Months)

The length of the expansions greatly exceedsthe length of contractions (recessions).

54

State-by-State Leading Indicatorsthrough February 2019

Sources: Federal Reserve Bank of Philadelphia at www.philadelphiafed.org/index.cfm , released October 4, 2018; Next release is November 5, 2018; Insurance Information Institute.

Near-term

growth forecasts

vary widely by

state.

Strongest

growth

= dark green

(1.5%-4.5%);

then light green;

then gray;

weakest = beige

(-1.5% to -4.5%)

4.281.58

1.55

1.603.55

4.36

3.903.57

2.622.241.50

1.69

1.77

3.89

3.433.41

1.90

2.15

2.47

2.20

1.87

3.252.811.72

3.52

2.40

2.472.68

3.081.54

55

Growth of Nonresidential Fixed Investment: Implications for Commercial Insurance

Sources: bea.gov, news release “Gross Domestic Product: Second Quarter 2018 (Second Estimate), Table 6; Insurance Information Institute.

-12

-8

-4

0

4

8

12

16

20

24

20

11

:Q3

20

11

:Q4

20

12

:Q1

20

12

:Q2

20

12

:Q3

20

12

:Q4

20

13

:Q1

20

13

:Q2

20

13

:Q3

20

13

:Q4

20

14

:Q1

20

14

:Q2

20

14

:Q3

20

14

:Q4

20

15

:Q1

2015:Q

2

20

15

:Q3

20

15

:Q4

20

16

:Q1

20

16

:Q2

20

16

:Q3

2016:Q

4

20

17

:Q1

20

17

:Q2

20

17

:Q3

20

17

:Q4

20

18

:Q1

20

18

:Q2

Structures

Equipment

Intellectual property products

Percent Change

from same quarter,

prior year Rising exposure base bodes well for

commercial premium growth

5656

US Treasury Note 10-Year Yields*:Is the long downward trend over?

*Monthly, constant maturity, nominal rates, through August 2018.

Sources: Federal Reserve Bank at http://www.federalreserve.gov/releases/h15/data.htm; National Bureau of Economic Research (recession dates); Insurance Information Institute.

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Recession

10-Yr Yield

Since nearly 50% of P/C bond/cash investments are in 5-year or longer maturities, most P/C insurer portfolios will have low-yielding bonds for years to come.

56

Yields on 10-Year US Treasury Notes

have been below 3% for over 7 years:

10-year bonds bought in 2008 at over

3% will be reinvested today at 2.9%

for 10 more years

57

September 2018: Quarterly Yield Forecastsfor 10-Year US Treasury Bonds in 2018-19

2.9 2.92.8

2.92.8

3.13.2

3.33.4 3.43.3

3.5

3.73.8

3.9

2

2.5

3

3.5

4

4.5

2018:Q4 2019:Q1 2019:Q2 2019:Q3 2019:Q4

10 Most Pessimistic Median 10 Most Optimistic

57

Yield (%)

Many of the 53 forecasts in the Blue Chip survey expectcontinual increases in the yield of 10-year T-bonds in 2018-19.

Sources: Blue Chip Economic Indicators (9/18); Insurance Information Institute

Yield as of 10/5: 3.19%

Cannabis and Insurance

A Sensitive Issue

59

1969, 12

1977, 28

1995, 23

2009, 44

2017, 64

0

10

20

30

40

50

60

70

19

69

19

73

19

77

19

81

19

85

19

89

19

93

19

97

20

01

20

05

20

09

20

13

20

17

% Saying Yes

No survey in years where no data appears.

SOURCES: Gallup Poll Social Series, http://news.gallup.com/file/poll/221027/171025Marijuana.pdf.

Support for Legalization Grows

“Do You Think the Use of Marijuana Should Be Made Legal, Or Not?”

60

54

Democrats 72

49Independents

67

28

Republicans

51

20

30

40

50

60

70

80

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Democrats Independents Republicans

% Saying Yes

SOURCES: Gallup Poll Social Series, http://news.gallup.com/poll/221018/record-high-support-legalizing-marijuana.aspx

Support for Legalization Grows

“Do You Think the Use of Marijuana Should Be Made Legal, Or Not?”

61

Cannabis in the USA

Legalization is Accelerating

SOURCE: National Journal.

Congressional Cannabis Caucus

Rohrbacher(CA)

Bluemenauer(OR)

Young (AK)

Polis (CO)

62

The Science of Weed

SOURCE: National Academy of Sciences, https://www.nap.edu/catalog/24625/the-health-effects-of-cannabis-and-cannabinoids-the-current-state

Conclusive evidence

Improves the lot of adults in

chronic pain.

Substantial evidence

Increases the risk of motor vehicle crashes.

What the Experts Say

63

Cannabis as Medicine

Treatments for Occupational-Related Conditions

Source: David Dietz, “Medical Marijuana, Occupational Injuries, and the Workplace: 2017 Status Update,” https://www.ncci.com/Articles/Pages/II_Insights_MedMarijuana-OccupInjuries.aspx

Work-Related Conditions Cannabis vs. Opioids

Chronic Pain

Anxiety and Depression

PTSD

Traumatic Brain Injury

Spasticity Following Spinal Cord Injury

‘Highly suggestive studies’

Death Certificate Study

Dispensaries Study

Medicare/Medicaid Study

Auto Fatality Study

Not conclusive – Further Study Needed

64

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

14 Percent of Injury Crashes

Speed

Still

Kills

It’s Not Funny

Why rates go up

65

Accident Probability

SOURCE: Sewell, Poling, Sofuoglu, “The Effect of Cannabis Compared with Alcohol on Driving,” American Journal on Addictions, 2009.

Chance of Accident Rises Sharply As Consumption Rises.

66

Legal Sales Lead to More Accidents

SOURCE: Highway Loss Data Institute.

14.0

6.2

4.5

3.0

0

4

8

12

16

CO WA OR Overall

Percent Change in Collision Frequency, 2012-2016*

* Vs. Neighboring States.

Look at ‘Real World’ Crashes

All Measures Statistically Significant

‘Overall’ Measure a Good Proxy for What Will Happen in Any State

Auto Accidents are 6% of WC claims; 12% of Losses

67

Driving While High – the Legal Framework

Illegal Everywhere, but What Makes You High?

SOURCE: National Conference of State Legislators, National Organization for Reform of Marijuana Laws (NORML),

● Under the Influence

● Per Se

● Incapacitated

RI: ‘Zero Tolerance (Medical Exception).’ Rest of NE: ‘Incapable of Driving Safely.’

68

Blood Levels vs. Intoxication

BAC and ‘feeling drunk’ rise and fall in lockstep

SOURCE: Sewell, Poling, Sofuoglu, “The Effect of Cannabis Compared with Alcohol on Driving,” American Journal on Addictions, 2009.

THC levels in blood and ‘feeling high’ rise and fall at different rates

It Is Difficult to Use Blood Test to Measure Whether Someone is High.

69

State of the Debate

Lots of Questions

Source: NCCI, “The Marijuana Conversation: Questions Workers Compensation Insurers Are Asking; Questions Employers Are Asking; Questions Legislators and Regulators Are Asking,”

Insurers Are Asking Employers Are Asking

Regulators Are Asking Legislators Are Asking

Will Schedule I Status Change?

Is Medical Marijuana Covered?

Does WC Cover a High Worker?

Is Drug-Free Workplace Affected?

How Can Reimbursement Be Handled?

Can Worker Rights, Employer Needs Be Balanced?

What Are the Key Issues in the Debate?

If We Legalize, What Will Feds Do?

Employment Trends in Insurance

We’re Doing More With No More People

71

U.S. Employment in the DirectP/C Insurance Industry: 1990–2018*

*As of July 2018; not seasonally adjusted; Does not include agents & brokers.

Note: Recessions indicated by gray shaded columns.

Sources: U.S. Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institute.

460

480

500

520

540

560

580

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Th

ou

sa

nd

s

Sometimes the BLS Reclassifies Employment Within Industries.

When This Happens, the Change is Spread Evenly Over a 12-month Period (in This Case March 2010–March 2011)

72

U.S. Employment in the Reinsurance Industry: 1990–2018*

*As of July 2018; not seasonally adjusted; Does not include agents & brokers.

Note: Recessions indicated by gray shaded columns.

Sources: U.S. Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institute.

20

25

30

35

40

45

50

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Th

ou

sa

nd

s

73

U.S. Employment in Insurance Agencies & Brokerages: 1990–2018*

*As of July 2018; not seasonally adjusted. Includes all types of insurance.

Note: Recessions indicated by gray shaded columns.

Sources: U.S. Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institute.

500

550

600

650

700

750

800

850

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Th

ou

sa

nd

s

74

U.S. Employment in Independent Claims Adjusting: 1990–2018*

*As of July 2018; not seasonally adjusted.

Note: Recessions indicated by gray shaded columns.

Sources: U.S. Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institute.

40

45

50

55

60

65

70

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Th

ou

sa

nd

s

Questions?

Thank you!

www.iii.org