Why I founded Insurance for Good
by Carolyn Kousky
I’ve been thinking about disaster insurance for the last two decades. Early in my career, very few people thought about insurance, and few understood my interest. But that slowly started to change. The polite nods began to be replaced with stories—perhaps their own, perhaps of friends or colleagues—where insurance failed them. Stories of claims not paid and unfair treatment. Stories of lack of understanding and poor risk communication. Stories of being insured, but still not having enough to rebuild. Of insurers supporting fossil fuel extraction, but not helping everyday Americans with lowering risk. More recently, growing numbers of stories of unaffordability. Of spending thousands of dollars on home improvements to still lose insurance coverage.
The roots of Insurance for Good stretch back through those years as I tried to reconcile the stories I heard of frustration and hardship with the enormous potential for good that I saw in risk transfer. I saw social protection—formal or informal—to help people through hard times. I saw price and information signals to lower risk and keep us safer. I saw new business models that centered on people and innovative solutions that filled gaps in our disaster safety net. I saw a key puzzle piece in climate adaptation. Most of all, I saw a powerful force to redirect capital to a resilient, just, nature-positive, and decarbonized future. That vision motivated me to write my book Understanding Disaster Insurance: New Tools for a More Resilient Future.
But that vision is getting harder to achieve.
The world is rapidly becoming a riskier place—and it’s not going to stop anytime soon. Our failure to decarbonize has locked us into ever-rising physical risks ranging from hurricanes and wildfires to hail and tornadoes to salt-water intrusion and drought. This means record-breaking has become normal and “unprecedented” a routine descriptor for our weather-related disasters. Add to that breakneck technological change, an ever more interconnected economy, widespread destruction of nature, and widening inequality, and we see that a range of threats are getting worse in addition to new risks emerging.
Both our institutions and our intuitions are built around an assumption of stationary risk.
In the face of such rapidly evolving risk, our risk management tools, including our approaches to insurance, must radically, and urgently, change. But for most of us, it is very hard to wrap our minds around changing risk. Both our institutions and our intuitions are built around an assumption of stationary risk. As are our traditional risk management approaches: reserving, design standards, our language of “x-year” events, and stable insurance markets… all assume risk is not changing.
Our future will not look like the past. And so neither can our approaches to insurance.
Unfortunately, right now, while stories of burden and hardship are ubiquitous, solutions are not as easy to come by. We need not only solutions for inclusive financial protection, but also how to use risk transfer as one contribution to solving our broader social and environmental challenges. Because the crises we now face as a globe are only growing.
Insurance for Good is a foundation for positive change, for improved risk management, and a platform to adapt and reinvent risk transfer to work in a changing, and increasingly challenging, environment. We need to build risk solutions that can promote an equitable, resilient, climate-friendly, and nature-positive future.
As insurance market stress unfolds and risks grow, many more stakeholders must become familiar with insurance.
That begins with the first core activity of Insurance for Good: understanding and awareness. As insurance market stress unfolds and risks grow, many more stakeholders must become familiar with insurance. Insurance is no longer something that can be assumed or expected. People, governments, and institutions need to develop risk and insurance literacy—and fast. This education is a priority for Insurance for Good. As is creating the space for networking, learning, and sharing resources and tools among a growing community of practice.
There is unlikely to be one new silver bullet solution but instead, a growing patchwork of new tools tailored to specific needs.
Without such understanding, new stakeholders will be unable to rethink risk transfer and design the solutions that meet their needs. Such innovation is another focus of Insurance for Good. The fact that disaster risk is on an ever-upward trajectory requires new models. There is unlikely to be one new silver bullet solution but instead, a growing patchwork of new tools tailored to specific needs. Getting that right will require a firm base of understanding and then innovation and testing for both the public and private sector, with a mindset that unites insights from multiple disciplines and sectors, such as from fail fast startups to adaptive management of complex systems.
Innovation in any sector requires a dedicated team, a detailed understanding of the problem to be solved, out-of-the-box thinking, and the time and resources to bring ideas to life. It requires dismissal of preconceived ideas and willingness to listen, along with collaboration across sectors and disciplines with problem-solving as the uniting objective. Answers will involve new partnerships across the private and public sector, the design of new institutions, and new ways of understanding and embedding risk management into decision-making.
As our insurance markets are beginning to break, now is the time to act.
Now is the time to act. Our insurance markets are beginning to break. Prices are escalating, making protection impossible for many to afford—particularly those that need it most. The private market is pulling back. Risk is being pushed on to households and into our public-sector programs often not designed to handle escalating policy counts.
Insurance for Good will focus on four key activities all designed to support the growing community of practice working to harness risk transfer for social and environmental goals. We aim to be a trusted partner for communities and the public sector on all aspects of their disaster insurance work:
We will provide platforms for shared and curated resources, from our website, which serves as an information hub, to a regular newsletter and blog.
We will provide a suite of capacity building programming for communities and the public sector including targeted training, convenings, and tailored engagements that support learning and action.
We will incubate and accelerate open-source innovation for new policies, programs, and tools with partners to launch pilots, facilitate investment, and catalyze transformation.
We will support research-informed policy and regulatory reform to ensure risk transfer markets are supporting society’s broader goals.
So here we are. Welcome!
Please join us in this effort as we reimagine insurance as a force for good. Only together will we drive change.
Carolyn
P.S.
I want to express my enormous gratitude to the team that, through a labor of love, has brought Insurance for Good to life: a truly committed and insightful founding board, including Helen Wiley, Jonathan Gonzalez, Carlos Martín, and Emily Grover-Kopec; our senior advisor, Kayla Calkins; and a group of community, policy, and private sector advisors—formal and informal. Let us now get to work!
