Let's start with the obvious. People pay us to protect them from financial losses that result from a multitude of causes. We do a great job of that-in fact, too good a job. We in the P&C insurance industry pay back to our customers more dollars in benefits and services than we receive from them in premiums. We've done this each year for the past 25 years. We're not talking penny-ante differences, either. The difference has ranged from a low of about $1 billion to a high of over $50 billion. It's gotten to the point where we cite a first-quarter loss of $1.46 billion in 2003, and it almost sounds like we're bragging. After all, that projects to a loss of under $6 billion for the year-which would be a 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” were correct. I wish we could make it up through our financial investments, as our detractors have always claimed we do. But we all know what's happened in the financial markets. Any way you look at it, our customers receive a greater-than-expected value from their insurance dollar.

In today's what-have-you-done-for-me-lately world, it's hard to understand where you really stand with your customers. But since we'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 position with 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 as protector. This concept dates back to ancient Babylonia, where merchants shipping goods to Egypt, Phoenicia, India, China and elsewhere were charged an extra fee that went into a pool used to repay those merchants whose goods were lost during the journey. This pooling of funds from many to pay the losses of a few is the model 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 the breakdown by line. A casual glance at the combined ratios in the chart shows you why the P&C insurance industry has experienced such difficulties in recent years.

With the bad economic news over the past couple of years, there might be a tendency to think that we and all other industries have been riding the same wave. Not true. A comparison of the return on equity for the P&C insurance industry and all U.S. industries over the past 25 years shows that the P&C industry has had lower highs, deeper troughs, and more frequent up-and-down shifts than U.S. industries in general. What's more, there have been changes in the market cycles that we in the insurance industry are always talking about. The hard markets that we're always looking forward to are coming further and further apart, and they aren't as strong as they used to be. Actually this could be a good thing-if we could smooth out the soft cycles as well. For years we have said the goal was to manage our underwriting and pricing to avoid the giant and costly fluctuations. I'm in the “I'll believe it when I see it” camp on that one, though. So, at this point, it's safe to say the concept of insurance as protector is working better for customers than for the carriers.

There are times when insurance companies go above and beyond mere protection. When hurricanes or tornadoes or earthquakes hit, insurance companies form a cushion around customers and help absorb the shock. They convert huge, unknowable costs into a steady stream of known insurance premiums. This enables individuals, businesses and communities to weather the catastrophes, clean up, fix up and go on with their lives. During catastrophes our industry absolutely shines.

Insurance as shock absorber presents a little different image of our industry. What would the ad slogan be for this concept? How about, 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 together is the obvious manifestation of insurance, but it's not its soul. To appreciate the real essence of insurance, you need to answer the question, “What if it didn't exist?” For the true value of insurance is not just in making the relatively few people whole again after a loss, it's in enabling people to be in business in the first place. It's creating opportunity and contributing to the overall 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 it was as normal as storms, fires or robberies? Who would lend money to start or expand businesses if there were no insurance against their losses? Would distributors front goods for them? Would manufacturers agree to consignment arrangements? Insurance, clearly, is the grease that eases the machinery of commerce into motion. It's a great protector and shock absorber, no doubt about it. But even more important, insurance is a great enabler. This value extends beyond just providing protection. Look at how else the insurance industry supports the well-being of the country:

?Over 2.2 million people are employed in the insurance industry and received more than $108 billion in wages and salaries in 2001.

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

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

?Insurers are an important source of funds for the nation's credit and equity markets. Without investment capital, the country could not build new factories, roads, schools, communication systems and other facilities needed for economic growth.

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

?At the end of 2001 the industry held more than $2.5 trillion in corporate stocks and bonds. This investment capital enabled manufacturers and other employers to build new production facilities, purchase new equipment and support employment.

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

What would be a good ad slogan for insurance as enabler? Maybe You 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 problem solver. Every year new problems fall from the sky without warning, and in many cases without funding: jury awards that provide claimants windfall settlements; and claims for perils that weren't even known when the policies were written, such as asbestos and mold. Unfortunately, the insurance industry is seen as having deep pockets, and the trial lawyers are determined to pick those pockets clean. Consider these facts:

?Filing of class-action lawsuits at the federal level has increased over the past 10 years by more than 300%, more than 1,000% in state courts.

?Insurers underwrote the asbestos risk for essentially no premium decades ago because asbestos was believed to be benign. With total costs estimated at $200 billion, asbestos is now the greatest liability exposure of all time. Asbestos litigation has driven 67 companies bankrupt, including many that never made or installed asbestos.

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

?Mold has been with us for years, and until recently insurance adjusters handled mold claims only if they were a part of a covered incident, such as a burst water pipe. The average claim amounted to several thousand dollars. Then trial lawyers claimed some forms of mold caused a variety of health problems, and suddenly common mold became an uncommon liability problem, driving up the cost of homeowners insurance and threatening to slow construction in some areas 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 in claims and expenses than they collected in premiums in 2002. Not surprising, the number of P&C company insolvencies in 2002 reached an all-time high of 38. Overzealous trial lawyers are in no small way the cause of this. What's more, this tort threat handicaps American businesses and makes them vulnerable to foreign competitors with more rational tort systems. What would be a good slogan for insurance as problem solver? How about, Takes a licking and 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. Ours is a difficult assignment, and it requires a lot of hard work and dedicated service from many, many insurance professionals. So the next 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 and well-being of consumers and business owners. I enable people to obtain the resources to live better lives. And by transforming large catastrophic losses into manageable monthly premiums, I enable people to plan for a bright future.”

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