Insurance Regulation: What You Need to Know Now

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Slide, Wednesdays with Woodward (registered trademark), A Webinar Series. Insurance Regulation: What You Need to Know Now. Logos of Small Business & Entrepreneurship Council, Travelers Institute, Travelers, and American Property Casualty Insurance Association. A woman appears in a video call at the top right corner of the slideshow 

(SPEECH) 
OK. Good afternoon and thank you for joining us. I'm Joan Woodward, and I'm honored to lead the Travelers Institute. The public policy division and educational arm of Traveler's Insurance. Today's program is part of Wednesdays with Woodward. A series we launched this summer to explore issues impacting our personal and professional lives in these very uncertain times. 

We're joined today by the American Property Casualty Insurance Association, and the small business entrepreneurial ship council, to present a look at what's ahead in insurance regulation, and how it's going to impact us this year. So before we begin, I'd like to draw your attention to our disclaimer. 

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Slide, Disclaimer. This program or presentation is provided for your information and education only. The program or presentation does not constitute legal advice. For decisions regarding use of the practices suggested by this program or presentation, follow the advice of your own legal counsel. Travelers disclaims all forms of warranties whatsoever, without limitation, implementation of any practices suggested by this program or presentation is at your sole discretion, and Travelers or its affiliates shall not be liable to any party for any damages whatsoever arising out of, or in connection with, the information provided or its use. Please note that this session is being recorded by Travelers. The recorded session may be used, copied, adapted, distributed, publicly displayed and or performed as Travelers deems appropriate. 

(SPEECH) 
Clearly, 2020, there's a lot to unpack. But we're in luck today, because we've got two of the best here to help us make sense of what's going on. 

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Slide, Speakers. Pictures and titles of Joan Woodward and two men, Dr. David A. Sampson and Glenn Westrick 

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First, Dr. David Sampson is president and CEO of the American Property Casualty Insurance Association. The primary national trade association from home, auto, and business insurers. APCIA promotes and protects the liability of private competition for the benefit of consumers and insurers, with a legacy dating back 150 years. 

Dr. Sampson is a respected industry voice and frequent keynote speaker and regularly interviewed by the media. I'm sure you've seen him on CNBC and other places. Before joining the industry, he served in multiple high-ranking governmental positions. To name just a few, he served as Deputy Secretary of the US Department of Commerce under George W Bush. And was a member of the President Bush's management council. 

Also with us today is Glenn Westrick. He's Senior Vice President for Government Relations at Travelers. Responsibility for globally, the federal, state, and international government relations and political strategies. Prior to coming to Travelers in 2007, Glenn was Senior Counsel for the US House of Representatives Committee on Financial Services. The Committee that regulates us. There he advised Chairman, Mike Oxley and other committee members on issues related to capital markets, insurance and such. 

Before that, he practiced law in New York City. We're very excited to have you both here today and look forward to your insights. Before I hand it over to David, a quick note to all of you out there. And thank you so much for joining us today. We have quite a crowd on the line. We're going to take your questions at the end of their presentation. But please don't wait to submit your questions at any time while they're speaking. Use that Q&A function at the bottom middle. So just hover over the bottom middle of your screen and enter your question there. And if you don't want me to read your name, you can do send anonymously, and I won't read your name. 

So with that, thanks again for joining. And Dr. David Sampson, I'm going to turn it over to you. 

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Dr. Sampson appears on the video call 

(SPEECH) 
Well Joan, thank you so much for the invitation to be with you all today. 

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Slide, A P C I A Mission Statement. As the leading industry voice, A P C I A advances private competitive insurance markets to protect consumers, businesses, and communities. We support a strong, state-based regulatory system and proactive U S engagement in international regulatory discussions, to facilitate market growth and stability through proactive education, thought leadership, and advocacy. Anthony J. Kuczinksi, A P C I A Board of Directors Chair 

(SPEECH) 
Travelers is clearly a leading voice in setting our policy, advocacy, legal and public affairs strategy at APCIA. And I would just note that on Monday of this week at our annual meeting, Chairman and CEO Alan Schnitzer was elected to serve as Chair Elect of the APCIA Board of Directors effective January 1st. 

And as many of you know, Glenn has served as the Co-Chair of our Legal and Governmental Affairs Committee through which all public policy recommendations from our policy committees go before they go to the board of directors. And Joan, thank you and your team for all of your collaboration with us on public affairs consumer education and diversity and inclusion initiatives that we've been working on this year. We can move to the next slide. 

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Slide, Thought Leadership Priorities, a list 

(SPEECH) 
I see this new era that we're in 2020 as being really one of the most consequential moments, not only certainly in the history of our nation and globally, but specifically for the Property and Casualty Insurance Industry in terms of the direct, near term and over the long term horizon. The stakes, I think I can safely say, have never been higher. And I thought what I would do today would be to walk all of you through some of those elements that we've been facing this year and then I think are going to be with us in 2021. 

We started off this year, as you can see with this slide, with some very clear strategic priorities for the organization. These were adopted by our board of directors. Heavily influenced, I would say, by the Travelers. Especially as you see, our number one strategic goal at the beginning of this year was to address lawsuit abuse and legal reform issues. Because the impact of that on all of our member companies has been very profound with a real threat of growing social inflation. 

But everything changed by March 13th of this year. 

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Slide, COVID-19 Core Principles, a bullet point list 

(SPEECH) 
And we quickly shifted and adopted and enhanced and reformed agenda after March 13 of this year. And I think it's safe to say that we really went on a war footing, because the battle fronts truly changed overnight. This slide indicates the core principles that our board of directors adopted. Because the pandemic crisis very quickly became a business of insurance crisis with a wave of threats to retroactively impose insurance coverage. And opportunistic trial lawyers leveraging the pandemic to expand coverage and for personal gain. 

So our board surged into action to protect the property and casualty industry, as I mentioned. We immediately shifted to a war footing. And our board adopted these key principles. Now when I say we shifted to a war footing, it's not that much of an exaggeration. Our board of directors was scheduled to meet four times in all of 2020. Meet once a quarter. Already this year, our board of directors has met nine times since the world changed on March 13. 

And our executive committee was scheduled to meet eight times in all of 2020. And thus far this year, it has met 21 times already. And very early on in this crisis, we were meeting at night, we were meeting on Saturdays and Sundays. Both Saturdays and Sundays on a number of weekends very early in the crisis. And in addition to that, I was talking to our member CEOs virtually every day, from early in the morning to late at night, to gain an understanding of what they were seeing in their own business operations. 

And we were also engaging stakeholders and policymakers at the very highest levels of government, both federal and the state level, in all of the key branches of government and key executive branch departments. Because the implications of what was being considered early on in this crisis was going to have a devastating impact. Not only on our balance sheets and our solvency as an industry, but ultimately for All-American families and businesses who depend on us to be there to deliver on the promises that we have made in our insurance contracts. 

We move on to the next slide now. 

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Slide, Voice of the Industry, screenshots of news articles from various websites 

(SPEECH) 
At the same time we were dealing with policymakers, we were also managing the PR and media threats in the local, state, regional, and national news. And working with company public affairs teams like the Travelers, we were finding ourselves in a position of having to counter false narratives that were being propagated by the trial bar, and by a number of business groups in top tier print, television media. And we were also proactively reinforcing in the press the industry's commitment to policyholders and communities, that we were going to be there to pay all covered claims arising in the midst of this crisis. 

Moving on to the next slide. 

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Slide, Business Interruption Proposals, a map of the United States showing legislation in different states 

(SPEECH) 
Alongside industry leaders like Travelers, APCIA has been running a very comprehensive advocacy playbook since March. Both on offense and defense. Recognizing that the goal lines are constantly moving in a very long game. So over the course of this year, working with our member companies, we have been successful thus far in holding back 14 state retroactive business interruption proposals, as well as a number of looming threats at the federal level where there were a number of bills poised to be introduced in Congress that would have mandated retroactive business interruption coverage. 

I would say that I think while we're not going to the victory flag closet yet, or waving a mission accomplished banner, I do think that this is a battle front that we feel reasonably optimistic that we have contained this year. I would say that probably the high watermark for this battle was the District of Columbia, where the city government was prepared to enact a retroactive business interruption proposal. And marshaling all of our forces with our constitutional law firms that we have on retainer, as well as our insurance coverage firms, we were able to convince the DC city government that their proposal was constitutionally flawed. 

And I think that after they stood down from that proposal, we've seen the momentum for those kinds of bills in the states recede a bit. These proposals would have severely impacted the stability of the US property and casualty industry. Next slide. 

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Slide, Workers Compensation Presumption Proposals, a map showing legislation 

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We've also been engaged in a number of battles in the workers' Comp space. With the exception of New Jersey, we have defeated or significantly amended major workers' Comp presumption proposals following the development of our core public policy principles. 

Overly broad presumptions pose a severe threat to the business community by creating new obligations that were never contemplated for payment under the Workers Compensation Law. And for which premiums were never collected. These actions threaten the stability of the workers' compensation system to the detriment of all employees and their employers. 

Policy makers mandating coverage presumptions create additional burdens and costs for employers already struggling to stay open, reopen or maintain their workforces. 

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Slide, State Lawsuit Abuse Protection, a map showing legislation 

(SPEECH) 
On the legal and judicial advocacy side, this has been truly an unprecedented year for the industry and for APCIA. We have been preparing direct litigation strategies, should industry oppose business interruption or workers compensation proposals advance in judicial or regulatory bodies. 

We have been deploying amicus support in key court cases on behalf of our members. We've been coordinating COVID-19 policyholder coverage litigation strategy designed to address common issues arising in these suits across the country. And supporting the enactment of liability reform and protections in more than 30 states. Very early in this crisis, by the middle of April, our board of directors set aside a $3 million legal reserve fund to enable us to retain the top constitutional and insurance coverage firms in the country to work with us on behalf of our members. 

Next slide. 

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Slide, Pandemics generally are not insurable risks, a bullet point list and screenshots of articles 

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On Capitol Hill, in the media, and in the states, we have been developing a comprehensive federal policy proposal for managing future pandemic risk, as well, based on the fundamental premise that pandemics generally are not insurable risk. They're not insurable for a number of key reasons. But primarily because there is no way to diversify that risk. Pandemics by their very nature are global. They hit the entire world at the same time. And they're highly correlated with other risk in the system, such as a risk in the equity markets. 

Our executive committee and the board charged us very early on to begin working on a prospective plan for future pandemics, given the reality that pandemics are fundamentally uninsurable at the primary level. And so we, along with others in the industry, by early summer had proposed the Business Continuity Protection Plan. It has been embraced by the vast majority of the P&C industry. We're very pleased that we were joined in this proposal by the Big I, the independent insurance agents and brokers. As well as one of our sister trades, NAMIC, as well. 

It provides for a foundational level of coverage for businesses that could purchase coverage from the federal government at the primary level. But also allows for private insurance markets to develop at the excess or surplus, or at the reinsurance level. Next slide. 

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Social Equity & Inclusion, a bullet point list and screenshots of articles 

(SPEECH) 
If pandemics were not enough to deal with this year, we are also in the midst of the worst social unrest in our nation's history. Now I would just say that these are long, simmering, underlying currents, trends, concerns in American society. 

And I'm not surprised that they erupted in a very powerful way in the midst of the pandemic. Remember that in the pandemic, the first six weeks of, the last two weeks of March through the end of April, we saw the most significant economic contraction in those six weeks then we had seen since the Great Depression of 1929. 

In just six weeks, from mid-March to late April, we saw a greater percentage of the workforce out of work than it took from 1929 to 1932 for the economy to shed those same percentage of jobs. The death of George Floyd and other tragedies this year have caused a renewed societal scrutiny of racial equity, justice and inclusion issues. And as a result of that, we need to consider our industry's larger role in contributing to positive social change. 

State insurance regulators have committed to an aggressive, action-oriented agenda that includes a reassessment of insurance rating and underwriting factors, insurers use of big data and artificial intelligence, all within the context of social equity and inclusion. I should mention that so-called consumer activists are using this crisis in a way to fundamentally attack the industry. And the foundation of the industry, which is risk-based pricing, under the guise of disparate impact concerns. 

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Slide, 2020 Risk-Based Pricing Threat, a map showing legislation 

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So our board formed a board working group on societal equity and inclusion in July. That board working group has already met four times since July, and have developed a very aggressive work stream to engage in a constructive way on behalf of the industry to contribute to meaningful, societal conversations, and putting us on a pathway to a more inclusive society. Moving to the next slide. 

I mentioned that the eruption of this social unrest has brought a wide range of state threats to risk-based pricing. This heat map shows you the states in which we have had to engage on this issue in 2020. And if we can go to the next slide, it just demonstrates, our heat map, we expect 2021 to usher in even more challenges. 

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Slide, 2021 Risk-Based Pricing Threats, a map showing possible threats 

(SPEECH) 
Our teams on the ground are anticipating formidable efforts in at least 29 states next year to ban some form of insurance underwriting practices that have been well established, actuarially sound, and have been the basis for industry underwriting for decades. 

In Congress, bills have also been introduced in the House and Senate to address so-called auto insurance discrimination through banning certain types of non-driving auto factors. In addition, the Federal Advisory Committee on Insurance, which is a part of the Federal Insurance Office housed within the Department of Treasury, also continues to get pressure to consider analysis of disparate impact and proxy discrimination in the sale of auto, homeowners and small business insurance. 

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Slide, American Property Casualty Insurance Association. Insuring America. A P C I dot org 

(SPEECH) 
And now, as the year draws to a close, on top of the challenges that we've already been facing with the pandemic and social unrest, and I would be remiss not to mention an unprecedented number of hurricanes making landfall, as well as the fourth consecutive year of record wildfires in California. We're also facing the most divisive national election in modern American history. We are engaged in that, on behalf of the industry. 

But as I have said earlier this week in a major address to the industry, I am deeply concerned that the underlying fissures in society could lead to political unrest on top of the social unrest that we've already been experiencing this year. And I think it's very important, as does our board and our executive committee, for the industry to have a voice of reason and concern. And call us to our better angels to trust the system of checks and balances that are embedded in American society and our government. 

So I just say all of that to say, 2020 has been a year like no other. Profound challenges for the industry. And I think all of these trends are going to continue into 2021. And now I look forward to turning it over to my colleague Glenn, who's going to tell us how we're going to address all of those. 

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Glenn appears on the video call 

(SPEECH) 
Well. Well, thank you David. And thank you Joan for inviting me to participate today. Your events are always a home run, and I really appreciate being included. I've worked with Doctor Sampson in many capacities going back to when he was working in the Bush Administration. And of course now, leading APCIA. 

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Slide, a picture of a white building with columns and a dome in the center 

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He is a tough act to follow. And I certainly associate with his comments that he's made here today. 

His leadership and the engagement of the APCIA executive committee, and all the CEOs, including Travelers’ CEOs, CEO, Alan Schnitzer, was really a textbook case in crisis management in March. Going back to those days and seeing how David and his team and the CEOs engaged, it was really something to behold. And the industry, and certainly APCIA is in very good hands with David leading. 

Looking to 2021 here from the craziness of 2020 and talking about the election that David just made reference to. From my perspective, we think we'll see one of two things. Either a status quo election, or a sweep election. 

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Slide, Sweep or Status Quo? Pictures of Joe Biden and Donald Trump 

(SPEECH) 
I am certainly out of the election prediction business since 2016. So I'm not going to say who I think is going to win, because I don't know. And any time you try to come up with a rational explanation, 2020 throws something back at you and surprises you. 

And of course, we're having a national election in a pandemic. So we have no idea what the turnout is going to look like. And turnout will decide who eventually wins this race. If we do have a status quo election, then there's going to be, I think, less action going on. At least at the federal level for legislation. A Trump win would bring a very limited federal agenda. Most second term presidents do not have the coattails or the energy of the first term to have an aggressive legislative agenda. And you don't have big legislative changes. 

The other option is a sweep, a Biden sweep and a Democratic win across the board. Now that will bring a huge legislative activity to Washington. One party control normally does. And certainly, one party Democratic control will do that. Just have to look back towards the first two years of President Obama's Administration, where they had the Recovery Act. You had the Affordable Care Act and Dodd-Frank all in the first two years. You know, amazing legislative activity. 

And we think we will see that type of activity if the Democrats do have a sweep in November. So we have to look at it from that perspective of how a sweep would impact the property casualty industry. And I've lumped that into what I call the big four issues for our industry. 

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Slide, The Big Four, pictures of a tax return form, a heat map of Earth, a microscopic image, and a stack of coins 

(SPEECH) 
But I have to note before addressing that, that the federal government still has a limited ability to influence the property casualty industry, because we are primarily regulated by the states. 

And the states do a good job of regulation. We work very well with them. And they provide different types of regulation across the country. Different states, different sets of regulations. It's a moderating and stabilizing system. But obviously, we're the federal government has a large role to play. And these four issues, I think, will be big issues for the industry. 

Leading off the first one is taxes. The Tax Cut and Jobs Act of 2017 was a big win for US businesses for lowering tax rates to make us competitive with our competitors around the globe. Taxes had not been reformed since 1986 on the business side, so it was a comprehensive change. And specifically, for domestic insurance companies, the bill lowered the playing field against our competitors overseas. So it was a double win for us in the Domestic Insurance Industry. 

We know the Biden administration will come in with a tax plan. They've already talked about raising taxes. The big thing will be who pays? Who pays what? What industries end up on the losing side? There's always winners and losers in a tax fight. And we know that's going to happen in the event of a sweep. And we're prepared to engage like we did in 2017. 

Second big issue. I'm calling it climate, but it's bigger than that. You can put in energy, you can put in infrastructure, you can put in climate issues, ESG issues. I do think we'll see a major package in a type of bill in Washington that addresses these issues. There's a lot of passion on these issues, especially on the progressive side of the Democratic party that wants to get at climate through energy policy. 

Again, the questions for our industry, for the insurance industry, will be what type of mitigation efforts or are they going to include if we're going to have an energy package, a climate package? Are we going to have mitigation efforts that's going to help in the next storm season or the next fire season where we really need help and coordination with the states? Will it change our investment portfolios? Are they going to target certain industries? Obviously, the fossil fuel industry is under scrutiny. 

Will it limit or change our underwriting appetite? And again, in Washington, it's always who pays the bill for that. It'll be a big debate, and we think that will happen soon in the next Congress. Third is risk-based pricing. And David already spoke eloquently about risk-based pricing and how important it is to our industry. It really is key pricing to risk, is how insurance business gets done. We are a very heavily regulated industry. So we are regulated for our forms and our prices and how we do business at the state level very closely. 

We need to explain that to a new set of legislators and potentially regulators in Washington, about how we do our business, how it's important. To price to risk, the benefit that come to consumers for that. I think David made an excellent point about the social justice aspect to that. There is going to be questions about pricing and we're going to have to be prepared to answer that and to discuss that in a rational manner. So that the market discipline that risk-based pricing brings can continue, and we can continue getting our products to the consumers at the best possible price. 

The fourth big one, I think of the big four, is of course, pandemic. And I have to say, David and the APCIA team, both on the legislative end but on the media end, did a terrific job on the retroactive business interruption proposals at the state and federal level. Our team, our communications team, Patrick Linehan’s team at Travelers worked very closely with APCIA. And how they changed that narrative and explained complicated insurance policies to a very skeptical press was really impressive to watch. And I know people probably saw David several times on CNBC and those types of outlets. But it was more than that. It was engaging to have the press understand those issues. 

And that really helped engage on the lobbying side. We were able to explain to legislators what this type of retroactive coverage would mean. And again, tell them what we do. What we do cover, what we do underwrite when there's fires, when there's storms. Pandemic was different. And that really helped us. And then we got to the BCPP, which from David's leadership, Allen's leadership at APCIA, we got involved in that very quickly. And we brought together the top minds in our company and around the APCIA table from underwriting to credit risk management to capital to reinsurance. 

We heard from everybody on the Travelers side from claim, about how we need to address a potential federal proposal within the four corners of the principles that we've laid out. It was not an easy task, but we work together to come up with the BCPP. And we think that is a great place to plant our flag in the ground. We are ready in the Property Casualty Industry. 

Glenn? 

Yes, Joan? 

Glenn, can you please explain for folks what the BCPP is? 

It's the business continuity program that David had outlined. And it's basically a way of getting relief directly to businesses. Not an insurable event. And to David's point, we've had the Big I support it, NAMIC support it. It's the only concept out there that has broad support of industry partners. So we're ready to discuss that. We just don't think Congress is ready to discuss it yet. We know they'll get to it at some point. They are still in the reaction mode to the pandemic. And we think that that's going to go on for probably many more months. 

But we're confident that we've thought this issue through. We've got a proposal that we can engage on. And so we can be leading from strength and leading from a position of looking at these concepts closely when Congress gets to this issue. Which undoubtedly, they will at some point. 

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Slide, Legal and Tort Climate, a picture of a courtroom 

(SPEECH) 
Hanging all over this, I want to go to what I call an issue that never goes away for us. And David mentioned it, and our CEO Alan Schnitzer talks about it quite a bit with the social inflation. 

And it's the deteriorating legal and tort climate. And that's an issue that doesn't go away. And its issue that we're seeing across the country. There's a huge amount of money and political power that's involved in this situation. The Trial Bar is a big business. They spend billions of dollars in advertising. They're tech savvy. They are excellent at finding and making lawsuits. It's what they do. They build and manufacture lawsuits and they're great at it. And they're exploiting the legal system throughout the country to their advantage. 

That's going on every year. The costs are there, we're seeing them. We're seeing them reflected in certain business lines. We know that that's happening and we're engaging with our partners at APCIA and others around the country to try and push back on that narrative and bring some sanity back to the legal and toward environment. But we know that's going to be very, very difficult. But who knows when the next crisis will come. There was an availability crisis for liability coverage in the 80s. Will something like that prompt action? We'll just have to see. But the legal and tort climate and its direction is always a huge concern for us. 

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Slide, The Wildcard: Senate Rule 22, pictures of a stack of books and the Capitol building 

(SPEECH) 
Finally, I'll close with the wild card. The former Capitol Hill staffer in procedure geek like me, I have to close with a wild card about Senate procedure. I think this is something worth watching for everybody if you see what's going to happen in Washington. Rule 22 is the Cloture Rule, which prevents legislation really from starting and stopping unless you have 60 votes in the United States Senate. It's the thing that makes the Senate the Senate and forces compromise. Even though we haven't seen much of compromise lately. 

If the Senate does come in in the next year in the event of a sweep, and you hear that Rule 22 is being changed, it will mean a remarkable change in legislative Senate tradition. And you can see bills passed at a much faster rate. That means political uncertainty and legislative uncertainty will go up and legislative stability will go up. Because if you can undo a bill with a mere majority of votes, next Congress can come back and change major legislation. Which has been a hallmark of the American Senate, is that when you have major legislation it stays. 

So we'll have to see. I think that's a big wild card and something that we all would potentially have to deal with come January. With that, thank you for your time. And I'll turn it back to Joan. 

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Joan reappears 

(SPEECH) 
OK, terrific. Glen, David, thank you so much. Really, really informative and all sounds so logical to us on the other side of this. But may be confusing and complicated to others outside of our industry. So thank you for breaking it down. All right, folks, we have a number of questions coming in through the Q&A chat phone. So don't use the chat feature. There's something called Q&A, and that's where we're reading your audience questions from. So please use the Q&A feature. 

But first, before we get to those, I have a couple of questions myself for the two of you fine gentlemen. And we're going to talk pandemics and COVID coverage business interruption in a few more questions coming. But first, I have a question about what's going on immediately in Washington. Obviously, we're all watching the Amy Coney Barrett confirmation hearings in the last few days. First question has to do more with the Stimulus Bill. And the state of the Stimulus Bill. So I'm going to go to you David. 

What provisions in the Stimulus Bill right now will affect our industry? What are you lobbying for or against in that Bill? And secondly, do you think it'll pass? 

Not optimistic that there will be anything passed before the election. I just think the incentives are too strong for something not to pass. I mean if you're Speaker Pelosi and you're leader, Minority Leader Schumer, you believe that come November 3 there's going to be a major sweep election where all three branches, well the executive branch and Congress will be controlled by the Democratic party. And so I think that they see an opportunity to significantly expand the Stimulus Bill or the Recovery Bill far beyond any deal that they can get with Leader McConnell. 

And Leader McConnell's got challenges on his side right now of getting a majority of Republicans to even support what the President, or more specifically, what Secretary Mnuchin is negotiating with the speaker. So I'm skeptical that there will be anything passed before the election. I do think that the key element that we have been working toward. And first of all, I would say I believe there does need to be a further additional stimulus. The business community is in truly in extremis conditions right now. 

Many of the businesses that are closed will never reopen. And so there is, I think, a desperate need for that. I think the Federal Reserve has weighed in on that, as well. We have been working very closely with the Administration and Leader McConnell since the passage of the second stimulus. Our major concern is for inclusion of liability protections for COVID related claims against businesses who reopen and who are following all of the recommended CDC and other guidelines on how to safely reopen. I would say that in and of itself is somewhat confusing, because the state of the science changes. 

But I think that is the number one issue that we're working toward for inclusion in any additional stimulus. I would just make one final point on this. There is a very strong, long term correlation between GDP growth in US economy and growth in DWP. And so it is in our interest as an industry to see the economy bounce back as quickly as possible, both on the personal line side and for the consumers, as well as for the business community. And we have been encouraging Congress to get its act together and move forward on an additional Recovery Bill on behalf of the American economy. 

OK. Thank you. Glenn, I'm going to ask you to opine on the same question. Maybe spending a little more time on the liability shield, because as I understand it, it's for not just businesses, but it's for educational institutions, it's for colleges, it's for nonprofits. So the shield would apply to, I assume, all types of organizations. Not just for profit big business. 

Yeah. That's right, Joan. The idea would be that as we go to reopen the economy, you know, which was closed down by the government. As the government start to allow us to reopen the economy, the businesses and institutions and particularly education is important with all the colleges and universities. As they reopen, that they are following the right guidelines in good faith. 

That they should be protected from legal liability to get started. And to David's point, getting the economy back up and running, getting GDP going again is essential. And I think he hit it spot on. I think the one program, too, in addition to the liability job shield which we just think is common sense, is the PPP program. 

Which is the money that Congress has put aside for small businesses that they came up with in March, and has been, I think, one of the big success stories of the COVID relief packages. And refilling that money and getting to David's point, you know, businesses are in extremis. Getting the money, getting the businesses access to that money is probably one of the most important things that they could do. 

And Glenn, what is your call? Do you think this bill gets done before the election or after? 

Oh no, I agree with David. I think the political furies are way too much right now for it to be done before the election. It could potentially in a lame duck because I think everyone is concerned about the economy, but not three weeks from an election. 

OK. So back to David here. Let's talk about the potential outcome of this election. What are your biggest legislative concerns? So first, we're kind of a status quo with Trump. What do you think he might take on again that could be negative for the industry in any way? And what's the regulatory outlook under a Biden presidency, specifically for the industry? 

Yeah. I don't think, if this is a status quo election, and I would just say I'll go out on a limb here. If President Trump is re-elected, I think that it is a good chance that the Republican majority will maintain in the Senate. If Trump loses, I see no scenario in which the Republicans maintain a majority in the Senate. I really don't see a lot of activity focused, in a status quo election, that will be focused on the insurance industry. 

There are a number of items that we've been working on. I think that our major priority would be trying to advance the Business Continuity Protection Plan in the Senate. And I think that would be our number one priority. And I think that based on our conversations with the senior administration officials, they would be concerned about a more organized and systemic approach to business continuity in a future pandemic. And so I think that would be our prime area of engagement there. 

If this is a tidal wave election that includes a Biden administration and democratically controlled majorities in the House and the Senate, I think it's safe to say there's going to be a substantial increase of the Democratic majority in the House, already. I think that's pretty much cooked in. They're going to have a very broad agenda that they've been working on that includes a number of items. It's going to include, I think, in the top three or four of that it's going to be taxes, as Glenn has already referenced. 

I think it will be a number of social equity legislative agenda items. I think it will be a, there will be a huge infrastructure bill that would be included very early on in the legislative package. So I think those are going to be the major issues that they're going to want to advance. But when you come down to a more micro level, and certainly Glenn is former Chief Counsel of the House Financial Services Committee, is probably better able to speak to this than I am. 

I do think that the House Financial Services Committee will have a high degree of scrutiny of the financial services industry specifically or generally. And then we are integrally a part of that broader financial services sector. I don't think we'll be the primary target. I think that there are a lot of other issues that deal more with banking that will be first on the list. But I do think that the area that we would be most exposed to legislative activity would be within the area of risk-based pricing. 

OK. OK. Now we're going to get to some of the audience questions. And there's a couple pouring in here. So I'm going to take a few right now. We'll try to do a kind of quick lightning round. This coming in from Seth Rosenberg of Citadel Investments. So maybe Glenn, for you. Does the current court system, Republican versus Democrat, lean favorable to insurers? That's the current court system. How much does that matter? And your view on the Supreme Court landscape, assuming Judge Barrett becomes Justice Barrett here. 

Well, it's tough to talk about, the states are so different in their litigation structure and their court structure. So I think we see, it's difficult in some states. And some states have a better environment. It's more consistent at the federal level. But I think the biggest thing is just the amount of resources that the plaintiffs’ bar has. And their sophistication and technology to push a new legal theories and to create lawsuits. And that's the most troubling concern. 

As far as the Supreme Court nomination, sometimes things are, do you have the votes or no you don't have the votes in Washington. And Majority Leader McConnell has the votes to confirm Judge Barrett. She's already a federal judge, so she's been through this before. I think you see that in her testimony. She knows what she's doing. And she knows how to answer the senators and how to deal with a lot of the theatrics that go on in a hearing. Especially, a Supreme Court hearing. 

So she's doing well. Doing what she needs to get done. And I think the Republican majority is concerned to David's point about if it is a close election, they want a full nine people on the Supreme Court that's motivating them to get this done. So I do think that will happen. And then we'll have to see the results of the election. Certainly, there's been speculation about increasing the size of the Supreme Court in the event of a Democratic sweep. But that Vice President Biden has been pretty careful to say nothing on that issue. And not tip his hand one way or the other. But certainly, people are talking about it. And that will be a major political issue if the Democrats do win. 

Do they need 60 votes in the Senate to change the number of Supreme Court Justices? 

Well that depends. If they're going to change Rule 22 for legislation. And it has been changed over the time, over time you know, they used to have that rule for administrative appointments and for judicial appointments. They got rid of that over the course of several years. So now they could change that Rule. And then it's just a 51 vote threshold to get that done. And that's what it would require. 

OK.

So it's all eyes on the Senate. Do they change the filibuster rule? Do they look at the Supreme Court and the amount of people on the Supreme Court? That'll be all eyes on who's running the Senate and who has the majority. 

OK. Thank you, Glenn. All right. David, maybe this one's for you. And two people ask the same question. So Mark Statler and Nick Sullivan have this question. What is the likelihood of a federal backstop for communicable diseases similar to TRIA? Do you think it would happen in a Biden administration? Happen in a Trump administration? Or not happen at all?

Well, as I've mentioned and Glenn as mentioned before, we think that a TRIA-like approach, which has been called PRIA, is not a workable solution for pandemic. Because the industry retention rates under that would simply be unsustainable. So we have taken a different approach, The Business Continuity Protection Plan. I would say that I think that there is going to need to be some more systemic approach for future pandemics. 

And I think that there will be openness, regardless of a Biden or a Trump administration for a more systemic approach. I don't think anybody believes that the way the federal government has handled the current pandemic is optimal or is the best practice for handling a future pandemic. And so I believe that both an administration from either party will be open to a better, more systemic approach. 

We think that the BCPP, which has the federal government providing that base layer of coverage. Our economists, and it's been confirmed by others, that business continuity losses in the US are running about a trillion dollars a month at the height of the government induced closure. The industry's entire surplus is $850 billion. It doesn't take you very long to see that that would be exhausted very, very quickly. If the expectation was that the private insurance market is going to handle those kinds of losses. And that's for commercial and personal lines. 

So we believe that if the federal government comes in with that base level of protection for government induced closure, there can be a role for private insurance markets to develop at the excess or reinsurance level. And so I think that's going to have to be something done in the future. 

OK. Glen, a question for you on risk-based pricing. So what's the approach the industry will or should take next year to really combat this risk based pricing issue?

Well, I think it's just explaining to the legislators would be, state legislators, because we'll see it on the states side. And federal legislators, how rates are made. I think we need to do a better job explaining that. Explaining what goes into rate making. We make them in conjunction with oversight from the State Insurance Departments. But nothing works better than explaining to legislators how it works. That will take some of the mystery out of it. 

And we have seen over the past several years, it's a robust market. Especially on the auto side, homeowners’ side, where there's lots of available, generally affordable. There's a lot of competition. It's our job to explain that the risk-based pricing is serving all consumers as effective as possible. So I think it's a communication responsibility on our end. 

OK. OK. A question coming in from Matt Gunther. Hi Matt, thanks for joining us. So if Biden wins, do you see the most likely outcome in the Senate being a 50-50 split? Dems lose Alabama, but the Republicans win four seats at risk. In that case, do you anticipate more moderate Democrats from conservative states like Joe Manchin of West Virginia standing against more progressive legislation or they automatically go along with party line? 

I feel comfortable in saying that if Vice President Biden wins, the Senate Majority will be decisively Democratic. 

I agree with David. Historically, when you have that type of an election, the Senate seats generally break all one way. So I think if Vice President-elect Biden is elected, that the Democrats will have a comfortable majority. And then we'll see if they change the rules to accommodate legislation. 

OK. Thanks. Another question coming in on environmental, social, and governance issues. So David, maybe for you. What should the industry's response to calls to incorporate ESG factors into operations? 

Well, ESG is fundamentally about sustainable business models. And I think that the vast majority, certainly a publicly traded insurance companies, already factor those considerations in. This has been a very active issue arising both domestically and internationally that APCIA has addressed. It was embedded in one of the strategic goals that we began the year with. 

I think that given the issues that we've dealt with pandemic natural disasters, there hasn't been the attention focused on that quite this year. But I expect that will come back. And I think that the domestic concerns about social equity and justice mean that this is an issue that's going to be with us for quite some time. And I think it's the responsible companies, both publicly traded and non-publicly traded companies, have a greater sensitivity about sustainable business operations and practices than ever before. 

OK. Well, I think on that note, we are going to wrap up.

(DESCRIPTION) 
Slide, Wednesdays with Woodward, A Webinar Series. Upcoming Webinars. Register at travelers institute dot org 

(SPEECH) 
I want to tell you first about upcoming webinars that we hope you'll find useful. But first, let me thank David and Glenn for your really invaluable insights and we hope to invite you back after the election and to the new year, to talk about how things are going in Washington and where you see the challenges and opportunities for our industry. Because it is an inflection point, clearly, for our industry. So thank you David. Really, really appreciate your partnership with us. Glenn, you're always delightful and insightful. So thank you. 

Thank you. 

All right folks, so we have great webinars coming up over the next few weeks. On your screen, you'll see October 21, Cybersecurity During the Pandemic. This has become really the number one issue on our risk index, showing that businesses are so concerned about cyber threats. And then on October 28, Leading Through Crisis. This is really a special and personal to me conversation. 

I'm going to be interviewing the CEO and co-founder of Team Rubicon. His name is Jake Wood. And we're going to be giving away Jake's new book on that webinar about leadership. And leadership through crisis. He spent many years in the military, and Team Rubicon is an organization of all volunteer military veterans in disaster, cleanup and recovery. And it's just an amazing story. You're going to want to be with us on October 28. 

And then November 4th, the day after the election we're having a webinar on Resiliency in Times of Uncertainty. So the day after the election, we're going to hear from experts about mental health, about well-being, taking care of yourself through times of uncertainty. So please join us. And also, we have replays available for all of our past webinar series on the TravelersInstitute.org website. Please join us there. 

(DESCRIPTION) 
Slide, Watch webinar replays at travelersinstitute dot org , a bullet point list 

(SPEECH) 
You can also register for our upcoming webinar on our website, as well. So Thanks for joining us Glenn and David. Thank you so much. And stay safe my friends out there. We appreciate your partnership. 

All right, thank you. 

Thanks so much Joan.