(Editor's Note: This article was based on Mr. Thomas' speech inOctober to the North Carolina Association of Insurance Women.)

THERE was a television ad several years ago for an investmentcompany that has since gone out of business (so much foradvertising). It showed a cocktail party with a group of obviouslyprosperous people in attendance. Above the hubbub of conversation,someone said, “My broker is E.F. Hutton, and E.F. Hutton says….”Then there was a hush as everyone strained to hear what old E.F.had to say.

Recently I had a similar experience in a dream. I was at a wineand cheese mixer and someone asked, “What do you do?” I started todescribe my insurance career, when suddenly the room got quiet andall ears tuned in to what I had to say, which turned out to be,“Uh, I'm an account executive.”

There's a study that says only 55% percent of consumers arefavorably disposed toward auto and homeowner insurance companies.Statistically speaking, that means every other person who meets mereally would rather not. So in mixed company, I figure discretionis the better part of valor-at least in my dreams. There's noreason to be ashamed to be in the insurance industry. I know that.Quite the contrary, there's every reason to be proud of it. Weprovide a great service not only to our customers but also tosociety. Sometimes we forget that. My purpose here is to remind youof the value we provide. Yes, I'm here to deliver a feel-goodmessage, but we all can use a pat on the back from time totime.

Let's start with the obvious. People pay us to protect them fromfinancial losses that result from a multitude of causes. We do agreat job of that-in fact, too good a job. We in the P&Cinsurance industry pay back to our customers more dollars inbenefits and services than we receive from them in premiums. We'vedone this each year for the past 25 years. We're not talkingpenny-ante differences, either. The difference has ranged from alow of about $1 billion to a high of over $50 billion. It's gottento the point where we cite a first-quarter loss of $1.46 billion in2003, and it almost sounds like we're bragging. After all, thatprojects to a loss of under $6 billion for the year-which would bea major improvement over the $30 billion we lost in 2002 and the$50 billion in 2001.

I wish the old joke that we could “make that up in volume” werecorrect. I wish we could make it up through our financialinvestments, as our detractors have always claimed we do. But weall know what's happened in the financial markets. Any way you lookat it, our customers receive a greater-than-expected value fromtheir insurance dollar.

In today's what-have-you-done-for-me-lately world, it's hard tounderstand where you really stand with your customers. But sincewe're geared to life in 10-second sound bites, let's go with that.In a few words, how would you characterize our industry's positionwith customers? What would be an appropriate advertising slogan?How about Don't leave home without it (American Express) or Mmmm,mmmm good (Campbell Soup)? Consider the role of insurance asprotector. This concept dates back to ancient Babylonia, wheremerchants shipping goods to Egypt, Phoenicia, India, China andelsewhere were charged an extra fee that went into a pool used torepay those merchants whose goods were lost during the journey.This pooling of funds from many to pay the losses of a few is themodel we still use today.

Under this model, U.S. P&C insurance companies collected$348.2 billion in premium in 2002. The chart on this page shows thebreakdown by line. A casual glance at the combined ratios in thechart shows you why the P&C insurance industry has experiencedsuch difficulties in recent years.

With the bad economic news over the past couple of years, theremight be a tendency to think that we and all other industries havebeen riding the same wave. Not true. A comparison of the return onequity for the P&C insurance industry and all U.S. industriesover the past 25 years shows that the P&C industry has hadlower highs, deeper troughs, and more frequent up-and-down shiftsthan U.S. industries in general. What's more, there have beenchanges in the market cycles that we in the insurance industry arealways talking about. The hard markets that we're always lookingforward to are coming further and further apart, and they aren't asstrong as they used to be. Actually this could be a good thing-ifwe could smooth out the soft cycles as well. For years we have saidthe goal was to manage our underwriting and pricing to avoid thegiant and costly fluctuations. I'm in the “I'll believe it when Isee it” camp on that one, though. So, at this point, it's safe tosay the concept of insurance as protector is working better forcustomers than for the carriers.

There are times when insurance companies go above and beyondmere protection. When hurricanes or tornadoes or earthquakes hit,insurance companies form a cushion around customers and help absorbthe shock. They convert huge, unknowable costs into a steady streamof known insurance premiums. This enables individuals, businessesand communities to weather the catastrophes, clean up, fix up andgo on with their lives. During catastrophes our industry absolutelyshines.

Insurance as shock absorber presents a little different image ofour industry. What would the ad slogan be for this concept? Howabout, When it rains, it pours (Morton salt), or Plop, plop, fizz,fizz: Oh what a relief it is! (Alka Seltzer).

Paying claims and helping people put their lives back togetheris the obvious manifestation of insurance, but it's not its soul.To appreciate the real essence of insurance, you need to answer thequestion, “What if it didn't exist?” For the true value ofinsurance is not just in making the relatively few people wholeagain after a loss, it's in enabling people to be in business inthe first place. It's creating opportunity and contributing to theoverall economy of the United States.

By removing uncertainty in the form of fire, theft, weather,accidents, etc., insurance enables business development and growth.Who would risk their life savings to start a business if losing itwas as normal as storms, fires or robberies? Who would lend moneyto start or expand businesses if there were no insurance againsttheir losses? Would distributors front goods for them? Wouldmanufacturers agree to consignment arrangements? Insurance,clearly, is the grease that eases the machinery of commerce intomotion. It's a great protector and shock absorber, no doubt aboutit. But even more important, insurance is a great enabler. Thisvalue extends beyond just providing protection. Look at how elsethe insurance industry supports the well-being of the country:

?Over 2.2 million people are employed in the insurance industryand received more than $108 billion in wages and salaries in2001.

?The industry paid $10.2 billion in premium taxes in 2001, whichamounts to $36 for every person in the United States.

?The insurance industry's employment, payrolls and productsaccount for more than $200 billion, or 2.4%, of the nation's grossnational product.

?Insurers are an important source of funds for the nation'scredit and equity markets. Without investment capital, the countrycould not build new factories, roads, schools, communicationsystems and other facilities needed for economic growth.

?At the end of 2001 the industry held $193 billion in state andlocal government bonds, which was 11% of all their outstandingbonds. The governments used the proceeds to finance such publicworks as schools, libraries, water treatment plants and roads.

?At the end of 2001 the industry held more than $2.5 trillion incorporate stocks and bonds. This investment capital enabledmanufacturers and other employers to build new productionfacilities, purchase new equipment and support employment.

?The industry also is a major purchaser of U.S. governmentbonds. At the end of 2001 it held $453 billion in these bonds.

What would be a good ad slogan for insurance as enabler? MaybeYou deserve a break today (McDonald's) or perhaps Have it your way(Burger King).

Beyond functioning as a protector, shock absorber and enabler,perhaps the insurance industry's most challenging role is problemsolver. Every year new problems fall from the sky without warning,and in many cases without funding: jury awards that provideclaimants windfall settlements; and claims for perils that weren'teven known when the policies were written, such as asbestos andmold. Unfortunately, the insurance industry is seen as having deeppockets, and the trial lawyers are determined to pick those pocketsclean. Consider these facts:

?Filing of class-action lawsuits at the federal level hasincreased over the past 10 years by more than 300%, more than1,000% in state courts.

?Insurers underwrote the asbestos risk for essentially nopremium decades ago because asbestos was believed to be benign.With total costs estimated at $200 billion, asbestos is now thegreatest liability exposure of all time. Asbestos litigation hasdriven 67 companies bankrupt, including many that never made orinstalled asbestos.

?In 2001, 52% of all medical malpractice awards exceeded $1million. Tort costs have risen far faster than insurance premiumsor medical care inflation. Nearly 80% of doctors say they orderunnecessary tests because of malpractice litigation, and 74% saythey make unnecessary referrals to specialists. The price tag: anestimated $60 billion to $108 billion a year in unnecessary healthcare costs.

?Mold has been with us for years, and until recently insuranceadjusters handled mold claims only if they were a part of a coveredincident, such as a burst water pipe. The average claim amounted toseveral thousand dollars. Then trial lawyers claimed some forms ofmold caused a variety of health problems, and suddenly common moldbecame an uncommon liability problem, driving up the cost ofhomeowners insurance and threatening to slow construction in someareas of the country. The average mold claim today costs about$35,000. Individual claims may exceed $100,000.

?Meanwhile, attorneys have other “risks” waiting in the wings,including obesity from fatty foods, radiation from cell phones,genetically modified foods and reality TV.

Property and casualty insurers paid some $30.5 billion more inclaims and expenses than they collected in premiums in 2002. Notsurprising, the number of P&C company insolvencies in 2002reached an all-time high of 38. Overzealous trial lawyers are in nosmall way the cause of this. What's more, this tort threathandicaps American businesses and makes them vulnerable to foreigncompetitors with more rational tort systems. What would be a goodslogan for insurance as problem solver? How about, Takes a lickingand keeps on ticking (Timex).

We always seem to overcome obstacles and meet the challenges,and I suppose we'll find a way to handle our current ones too. Oursis a difficult assignment, and it requires a lot of hard work anddedicated service from many, many insurance professionals. So thenext time you're at a cocktail party and someone asks what you do,stand tall and in a strong voice say: “I protect the lives andwell-being of consumers and business owners. I enable people toobtain the resources to live better lives. And by transforminglarge catastrophic losses into manageable monthly premiums, Ienable people to plan for a bright future.”

Or you might just borrow a slogan made popular by GeneralElectric, and say: We bring good things to life.