« Freakonomics Radio

427. Many Businesses Thought They Were Insured for a Pandemic. They Weren’t.

2020-10-29 | 🔗

A fine reading of most policies for “business interruption” reveals that viral outbreaks aren’t covered. Some legislators are demanding that insurance firms pay up anyway. Is it time to rethink insurance entirely?

This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
This podcast dynamically inserts audio advertisements of varying lengths for each download. As a result, the transcription time indexes may be inaccurate.
If you'd like to listen to F Economics, radio without ads the place to do that is stitcher premium. It's five dollars a month and you can get a free month trial by going to stitcher premium com and use the promo code. Freak you'll also get access to all our bonus. Episodes and you'll be supporting our show too. Let's stitcher premium com, promo code, freak thanks here's a riddle, name, something that one of every three small businesses in the: U S bought to protect themselves emergency, but when an emergency happened to turn out to be useless Are we talking about a burglar alarm, sprinkler system, a gun? Now none of those this riddle best solved by asking an actual small business owner, Janis jacket. and I'm co owner at three brothers bakery with my husband Bobby three brother,
he's bakeries in Houston, it has a few shops there and also cells online. They are particularly famous for their began, pies and famous for something else. Our Honora titles are king and queen of disasters, because we've been through four floods of fire or hurricane and now a pandemic. The first flood was in two thousand and one after tropical storm Alison. It took about three days to clean up before Allison Zucker had suggested to her husband that they ought to buy flood insurance, but, of course you didn't listen to me. This left the junkers on the hook, for about a hundred thousand dollars of damages, but it did inspire them to buy flood insurance, which would cover property damage, as well as what's called business interruption insurance, which would cover lost revenues in the case of a disaster, these turned out to be prudent purchases because in
Two thousand and two thousand and eight we had Hurricane Ike and we think taking down the street ripped off the roof, and we were closed for nine months for that one and that was about one point- two million. That's one point: two billion dollars of damages it's their insurance for the most part covered and then into doesn't fifteen in two thousand the memorial day, flood, which we got about three and a half feet of water, and was a million dollar event and another successful insurance claim two thousand sixteen. We had the tat stay flood, but we were getting re. Close fight, days later. You do the repairs from fifteen, so we just push the water out and didn't make a claim are anything but three brothers. Bakery wasn't done being flooded into. Doesn't seventeen came Hurricane Harvey? It was basically
a river on our streets- and that was another million dollar event, and then I think it was two thousand eighteen. We had a buyer indeed Amber so much calamity so much property damage, but fortunately the jockers had continued to carry insurance if we had not had insurance, we would have been out of business, so Janis Jocker has come to appreciate the insurance industry, but she also understands. The insurance companies are not fully on her side. I now think insurance companies and under Shantay, their goal is not to pay getting paid negotiation. So one time I got my check for business. Sure her can I can, I knows too, was short, and so I could. I said why is this? You know twenty percent short
and the adjuster says to me: well we're in a recession, because it was two thousand and eight. So I said that's ridiculous, so I made a powerful and I gave it to the insurance adjuster and the company did increase the joggers pay out. I felt pretty get about that. Even with all her experience dealing with his ass, The cuban nineteen pandemic has been its own category, a hurricane flood. You know it happened and it's over and they You clean up and you move on. The difference with Covet is it's not over back in the spring, as the economy in Texas begin to shut down, three brothers was allowed to stay open since a bakery is considered an essential service, but The central doesn't mean successful resign. Immediate drop in Robin dramatic, dramatic and again lengthy, released Jocker has business interruption insurance, in fact,
one in three small businesses in the? U S habit, but guess what business interruption. Insurance doesn't cover returns covers no losses from covered. I did, of course, pull out my book, but it just doesn't it didn't cover, because the kicker is, you have to have some kind of physical damn. That's the same situation. Most small businesses now find themselves and even if they did go to the trouble and expense of buying business interruption, insurance, no physical damage, no insurance reimbursement, why should you care small business? They employ nearly half of american workers even before the pandemic. Many small businesses had only a few weeks worth of cash on hand. If that many small beer, This is have already gone under with more to follow how we
the insurance industry and the government respond to this crisis, and why wasn't this pandemic insured That's what we'll try to find out today on for economics, radio right after this from Stitcher and government productions. This is Freakonomics radio, the podcast. It explores the hidden side of everything. Here's your host, Stephen definite Sue correct me if I'm wrong, but I really can't think of a product that more people by even though they don't want to buy then insurance. Yes, well, that might be right. One of the challenges,
people don't buying off insurance because they slightly resent the need for insurance, and that is first gonna give up chairman of Lloyd's of London Even if you know nothing about insurance, you probably know Lloyds of London. They were founded. In sixteen eighty, and indeed it was really. The first comment in short in the world, the eldest class, a business. the commercial world is marine insurance, so the transportation of cargoes and the underwriting of ships in more centuries, Lloyd's became famous for ensuring one of a kind properties. We ensured
Betty Grable legs. We ensured David Beckham, the footballers legs and Rude Elphin Nurips, the ballet dancers legs. We also have at some point insured, Dolly Parton, but I don't think it was her legs, but Lloyd does not just an insurance company light is a marketplace that is a host as in any marketplace to a number of market participants and we host eighty five underwriting syndicates at Lloyds, so Lloyd matches. Those who Wish to buy insurance with those who wish to sell some of the sellers lay off the risk they ensure underwater known as reinsurers, that is, insurance companies who ensure were the insurers. While we are also ourselves a reinsurer of other people's risks at NASA. Some of this can be a little bit circular circular would be one way of putting it for many on the outside baffling might be better term, but
start with some basics. There are many many many forms of insurance, health, insurance and life insurance, of course, along with insurance against all sorts of. Unforeseen or undesirable outcomes, this often falls under what is known as property and casualty insurance. We do a lot of big natural catastrophe insurance. Like one of our biggest lines of business, is a horrible. Some windstorms in North America. Are you involved in insurance against wildfires it'll, just some afraid we're so in places like California. These are very high density places and places a very high. He can. Value and therefore the claims that arise from these kinds of wildfires commensurately high. So how is it most possible for Lloyd's lose a lot of money in a given year. So the issue would be that
we underwrite in recently large size, very severe, theoretically infrequent events, and so, if those events come together, it can create real challenges for us. So the most obvious examples in recent times would be in two thousand and five three hurricanes went through the United States and I reference to the United States. A lot because forty five percent of all of our business comes from the US and in two thousand and seventeen there were also three hurricanes that went through the southeast of the United States in Louisiana and Texas, and those created very sizable claims on the marketplace and, as a result, the market made a loss, Lloyds lost money in two thousand and seventeen and two thousand and eighteen, but returned to profitability in two thousand and nineteen that was a good year for most property and casualty insurers in the: U S with the sector earning a profit of more than sixty billion dollars, but then, of course, came two thousand twenty and a global pandemic
what is that done to Lloyd's business? We think up would have sixteen lines of insurance. Business are affected by the pandemic, the east stones to understand. Are things like event cancellation? We have very big business in providing insurance to things like the Wimbledon Tennis, Twond mantle, the Tokyo Olympics, and when these things get cancelled or postponed, there very file claims that are reasonably easy to calculate and to pay out on. We also have issues like trade credit she chains are damaged travel insurance as well, but then what develops over time or other kinds of claims? So there will be claims associated it with medical malpractice, because people were believe patients having been treated appropriately for the pandemic, for instance, and then it feeds into things like the directors officers insurance, which is the insurance that companies by to protect their offices in the performance of their business. The challenge with covert is dimensional more complex as a risk for the insurance industry to manage them
your average hurricane back in may just a few months into the pandemic, Lloyd's estimated that Covid losses across the property and casualty insurance industry would be an unprecedented two hundred billion dollars of which about half way because the assets that we hold to pay. The claims were impaired by the crash in the stock market. Ok, we need back up a bit here. There's one thing: I'd like to explain to listeners, which is how many are most insurance companies make money which is not just by taking in hopefully more money than they pay out and claims, but by investing it isn't investing business. Can you just talk about that for a moment while it doesn't investing business, because we take premium in the form of cash on those premiums are then invested until claims arise, in other words, insurance companies. Take your money in the form of what they call premiums, clever idea, calling your bill a premium as if it's a wonderful thing they?
and invest that money in say the stock markets. You may recall that as a pandemic, and to spread earlier this year, most stock markets cratered, which made sense but many markets, including the. U S, markets have recovered, which seems to make lessons considering that the pandemic persists. I asked Carnegie Brown. If, He could explain that. Well, you know I can't move you strip out the technology firms. Actually, the marquise haven't recovered very well, there's an accused concentration in the technology markets and, of course, that's not answered because I do think that the pandemic has been an accelerator of the use of tax, knowledge and many traditional business lines? Ok, so going back to that may estimate of two billion dollar industry lost. Half of that loss. Carnegie Brown says, was expected from
lines in insurers investment holdings declines which, as we just noted, were promptly recovered and the other half would directly related to claims, not only the actual claim side of the equation that hundred billion dollars ranks up there with the can hurricane events? I talked about before as a very major loss for the over insurance industry. Now you may think that no one, sighed, the insurance industry or their shareholders. Should the Mon this loss Bruce. Nike Brown, not surprisingly, has a different view of the industry, a more appreciative view of insurance. If you sit looking at it from my perspective, it clear, great enabler enabler. How consider the act of driving your car when you look at the most frequently of insurance, it's insurance, car insurance and insurance, and you have to have it in order to drive a car. Auto insurance is
a few forms of insurance. It is mandatory in most places. What would it look like to drive a car without insurance? If you looked at driving a car through a different lens, you'd say that you couldn't afford to get into Motor car, because if you happen to knock somebody over or have an accident, the created a disability in a third party, they cost to you and economic terms, let alone are all of the emotional issues would be beyond your network and so actually enables things to happen, it being insurance, and we like to think of it. Therefore, as enabling people to take more risk than they would otherwise be able to take and actually light as a proud history of doing first in this area, so we did provide the this autumn and the insurance policies, the first insurance policies for airlines are the first ensures policies for satellites and, most recently, the first insurance for cyber risk. Ok, so a natural question to follow how about pandemic insurance
This is where it gets, as Bruce Carnegie Brown might say a bit circular, yes, but essentially the insurance of business interruption, which is the interruption of your revenues because of an event was essentially a property insurance policy. Remember companies like three brothers bakery in Houston have what is called business. Interruption insurance. Let's say you run a shop and your shop is flooded and as a result of the flood, you can't open. You lose the revenues and the insurance was designed to cover that and indeed the Joker family in Houston, did have storm damage covered in the past repeatedly, and then customers were able to buy extensions or additions to the policy which cover them for additional risks, and one of those
certainly in the case of Lloyds was for pandemic or notifiable diseases risks. When did you start rating that addition, but we've been doing that for a long time, so there's quite a good report on the Lloyd's website after the sun. Issue, where we identify pandemic, has a growing risk the world and we ve been writing insurances for pandemic risks since that time, but most people don't buy it and, as result, do not have the cover. Most of this is really about having your own personal risk registered and companies do the same thing, and one of the challenges for pandemic is that it fell to far down the list. So people were aware that pandemics could happen, but they sought, it didn't believe it could happen to them, and so you would rightly imagine the pandemic will creep up the list, but people cannot afford to be ensured for everything back in July, the CEO of Lloyd's S, made it that between eighty and ninety percent of businesses, with insurance wouldn't be covered for pandemic related shutdowns, which were mandated by the government. Because-
What business interruption coverage typically is linked to says Carnegie Brown. It was very much linked to physical damage in the property, but its label, as you suggest, is much are all encompassing than that, which is why I think, a lot of confusion. Has arisen and I think in the end We need to think a little bit about how we label some of these products because they're not as inclusive as they should be. Janice Hucker of three brothers bakery would agree when you buy a business interruption. Policy She says you get a book, it's about three inches thick and I recommend recommend that you make them it and and give it to you and they I would recommend, is to read the policy before it is better than sleeping pills. I promise you and read it with a and you'll and you'll find some things are missing
where you end up in dispute is with the precise wordings of the policy you get into argument of things. Things was: was it the pandemic caused the the losses? Was a government action through lockdown, where your premise is directly affected by this? was the disease somewhere else in your just causes a third party, but I as you know, the underlying tenor of your question is, and which I absolutely support- is that the worst kind of outcomes here are where customs think they have protection and they don't. Some of these disputes inevitably go to court. Carnegie Brown says that U S: courts have thus far been more likely to side with beans. France companies, as opposed to courts in the UK, which are more inclined to rule in favor of the small businesses. The reasons why the insurance companies are doing are better in the United States is because the policy wordings are much tighter in the United States,
Why are the policy workings much tighter in the? U S, insurances runs state by state in the? U S and one of the things that most states do his reply. Insurance come is to file any change in the wordings of their policies alongside changes in price. So there's a regulatory procedure to the wording. We don't have that in most the countries in Europe and as a result, weddings, are much looser, because you don't want to go to your. U S regulated with something is marginal, so you only change the wording if its recently material and as a result out in the United States has been more discipline in the handwriting of contracts and more discipline in the underwear of insurance contracts has meant that many, business owners who thought their business interruption insurance would cover their pandemic. Losses were a wrong and be left with no legal recourse. So that's that the end of the story, no, it is not the end of the story. I believe
The regulators on the state level were asleep at the switch coming up after the break. How state and federal legislators are trying to claw back some business interruption money and what it's like to be a scholar of risk management, during pandemic. It is the most exciting time in my life, because, first, this time that I'm here of people are really paying attention to this this
again get to calls for fifty percent offer more plus take an extra twenty percent off stay big with fifty percent off police for her fifty percent off kids, jumping bees and fifty percent off ball home must have plus get a little more for your wallet with cold cash plus fast and free store pickup. Let the gifting start for those close to your heart. She cold and goals. Com select, styles offers ballot October, twenty six to November one St Twenty percent off with promo code. How twenty some exclusions applies: historical com for details As we ve been hearing a lot of businesses in the: U S head insurance policies, they thought would pay out when they were slammed by the pandemic, but they didn't pay out. The typical business interruption, insurance policy, specifically excluded losses from pandemic. I believe the regulators on the state level were asleep a switch
Carol is a member of the New York State Assembly. They didn't understand what this exclusion clause would mean. They looked at it and they looked at the plain language of it, which is how folks interpret contracts- and they said, oh, if your business gets the flu, this insurance won't cover. What they didn't assume would be that there will be a world wide pandemic that would shut down the global economy, but peril doesn't lame. Just the regulators, insurance companies surreptitiously slipped in a vain clause and they didn't slip this clause into every contract, but about eighty percent. It seems like where they excluded viruses, bacteria or microbes, and these clauses or approved by state regulators. You could of course argue that slipping, evade clause into a contract is what lawyers who write contracts.
Paid to do, and that is the job of the people who signed the contracts to understand Carol. Didn't see it that way, when you have an actor like a small business, purchasing insurance from a multinational corporation, that his teams of boy an actual worries and provides this insurance is take thirdly, that there's no negotiating of terms and that's the reason why legislators- and in this instance the state legislature, which regulates insurance contracts, has the ability to go. That is to go in and do something about it. After the fact Carol has introduced. The bill in the New York state legislature that would force insurance companies to reimburse businesses for pandemic related losses, even if their policy specifically excluded a viral endemic. This is about consumer protection is about small business protection. Other states have similar measures in the works
our foreign, yellow, Easy Anna Massachusetts, Michigan, New Jersey, Ohio, Pennsylvania, Rhode, Island and South Carolina. Karel says this would hardly be the first time that governments have stepped in to override insurance contracts. Southern states and Gulf states have passed legislation retroactively after devastating hurricanes and natural disasters to tell them assurance, companies are not allowed to drop folks who have Hurricane insurance to require folks more time to put in claims after Katrina etc. These voided specific clauses the contracts and american history Carol says, offers further guidance on undoing exploitive contracts. We have tons and tons of examples where the state has come in and said we will no longer enforce restrictive covenants on the contract of sale of homes where they were discriminatory where they said you will not sell this home to a black person or jewish person, or
or a person based on their race or origin, and we said no that's abhorrent and it's against public policy. One argument against legislation like Robert Carol has proposed is that it could bankrupt the insurance companies bunk they're sitting on a trillion dollars. It's not A bankrupt the industry. Indeed according to the: U S, Treasury the property and casualty insurance industry in the? U S head. As of two thousand and eighteen tone, oh cash and investments of around one point, seven trillion dollars, of which around seven hundred and fifty billion was considered policyholder surplus grow. At an average annual rate of five percent. So, let's pretend just for a minute that states, or even the federal government did decide to force insurance companies to bail out small businesses. How much money are we talking about here? We are you talking about trillions of dollars, of losses on business interruption and I think the real
she is. We got really know how long this is going to continue its Howard? Come Ruther he's an economist at pens, Wharton School of business. He co directs the risk management and decision processes centre. There and he has been studying the insurance industry for decades. Frankly, I shouldn't be saying it: it is the most exciting time in my life, because the first time I'm here here. People are really paying attention to. So, let's just get this this of Why do you and all your centre receive researcher other funding from the insurance industry I play you're, asking that we have sponsorship programme, where we do We have insurers and reinsurers as well as other companies that provide us with a annual contribution and there are no strings attached to this contribution at all. We pride ourselves and have always prided ourselves as being a neutral party and our interests
not in any way support any party but to get the facts out on the table. So we can say here what we feel are appropriate ways to deal with this situation. The current situation, as sees it, is driven in large part by how most people think about insurance, the biggest mistake that I think we make on insurance there too one is we Underst make the risk- and we assume it's not going to happen to me. I don't need insurance, the second, is a little more subtle, and that is we think of insurance as an investment, we don't think of insurance as protection people tend to buy insurance after a disaster not before they buy earthquake insurance. An earthquake, even when they think the probability is lower than an earthquake will occur again than it was before, and then here's the kicker fake,
and saw their policy a few years later and say: look haven't, had a claim look at what I could have done with all my premiums can Ruther has explored these issues in a book called the ostrich paradox. Why we under prepare for disasters? What you have to tell people, and it's very hard, to do this. The best return on an insurance policy is no return at all celebrate you have not had a wash. The evidence that people do under prepare for disasters is quite clear here Bruce Carnegie Brown from Lloyds of London every time, a hurricane, comes on shore. In the United States, fewer than twenty five percent of the people affected by the hurricane have insurance same time we do tend to by other less essential forms of insurance. People
and show their mobile phones, for instance- and you know that's where five or six hundred bucks, but what they don't do is buying of health care if they get counts or enough insurance for their families in the event that they die when it comes to buying the proper types and amount of insurance. Howard, caruthers advice is well, it's sensible advice, perhaps, but it's also frustrating for anyone. Who's ever tried to read an insurance policy. Anyone who's, not insurance executive, for maybe a lawyer. People are not familiar with insurance at all. They often do not read their policies. They think that they have coverage that they actually don't have, and as a result, I would say that most of the businesses, unless they actually have someone carefully looking at this, would not necessarily have realised that they were not covered for business interruption duty. A pandemic, so a lot of them.
Media coverage early in the pandemic, painted a picture that the insurance industry was toast that between the Thought markets crumbling and many insurers, presumably being responsible for a lot of pay out because of the pandemic, is a turn No, neither of those turned out to be accurate, so it seems like the industry dodge a bullet. Essentially, is that accurate or my overstating? No, I think it's accurate, I think, by excluding pandemics from coverage. They dodged the bullet. If it turns out that these states were successful in the courts by saying you have to pay retroactively, then this would cost insurance industry, huge amounts of money, billions of dollars, and this it would be an enormous burden on the industry. So what happens if one state successfully legislates this
Does that become a domino that leads or forces other states to do the same? I would hope it will not. I would hope that each state would be independent in terms of how it would deal with this, and I would say that the sure I would make the case, and frankly, I would make the case personally that that would be inappropriate if it turns out that their coverage was excluded. Because we are talking about an insurance policy and not give out or subsidy that the insurance industry is responsible, for I think that most countries would say that this is a public sector responsibility so far, that's how the Eu S as the public sector responsibility, Through the Cares ACT, the federal government directed more than a half trillion dollars to small business relief to businesses with an without insurance.
Governments around the world have been pouring capital in cash into the economy is to try to minimize the impact. That again is Bruce Carnegie Brown of Lloyd's of London, and this is almost certainly helpful- that itself has not changed whether the insurance industry is liable for its claims or not. But it raises the challenge of what to do about future mix, because, typically, when insurers lose a lot of money on a line of business, they start writing that line of business. What we would look at in this and what we represent two governments around the world is that should think about this in the context of things like flood insurance or terrorism insurance, where often, as a partnership between government the industry, the insurance industry did not charge a penny for terrorism coverage before nine eleven Howard Conrad there again
was surprising. They didn't consider it as a separate aspect of insurance. They just didn't really focus on it. In other words, insurers just included terrorism coverage in their business interruption policies. It was not a separate carvel, probably because the risk just didn't seem very large, they basically had not focused on what happens to the World Trade Center in ninety. Ninety three, the Oklahoma City. Bombings or terrorism around the world, but after nine eleven they all refused to offer coverage. They basically excluded it, It led to the terrorism risk Insurance ACT where the government got involved after Nine eleven New York, which I represent, could not get insurance for anything that is, U S, Congresswoman Carolyn Maloney, who wrote the terrorism risk Insurance ACT. That countries are mentioned, down at ground zero. You could not even ensure a hot dog stand:
The only way we could get insurance was partnering with one of our large companies with Lloyds of London and the premiums were through the roof. So we offered a programme God forbid that we had another terrorism attack. That would be there. Respond to it immediately with a government backstop meaning the fair, What government would be the insurer of last resort in a devastating terrorist attack? This programme is still ongoing as of this year. It would be triggered after losses from it terrorism event exceed two hundred million dollars. This government back stopping now's insurance firms to offer terrorism insurance with premiums that are affordable without the backstop insurance firms, might simply stop writing terrorism, insurance or it would be unaffordable. By now you can surely see the pair walls between terrorism and the pandemic from an insurance perspective and that,
why Congresswoman Maloney has introduced a similar bill called the Pandemic Risk Insurance ACT when he d most private insurance. They cannot provide businesses. Corruption pandemic insurance support, so this will allow a program to help businesses recover and react and rebuild after a pandemic. Here's what she proposes. First ones, Pandemic is declared each participating, ensure pays out a deductible which is equivalent to five percent of the your premiums they collected in the previous year and the total of losses faced by insurers exceeds two hundred and fifty million. Once the program is triggered and started, the federal government will be responsible for ninety five percent of losses and the insurers will be responsible for five percent of losses up to seven huh
fifty billion dollar cap Maloney, acknowledges there's a lot of resistance in Congress to taking on potentially massive programme, but if we have a nine eleven. If we have another pandemic government. He's gonna go in we're gonna go in to help so we might as well set up a programme that sets the parade. What is the way it's going to work and is a partnership with the private sector, who will be assuming part of the loss? It's crazy! It's crazy! It's utterly crew, so in one hundred years from the next global pandemic happens. Well, save those businesses that again is Robert Carol, the New York state Legislator. Just so you know, he and Maloney are both Democrats. His problem with Maloney Report is that it is not retroactive that it doesn't force insurers to pay out for this pandemic
Karen Loan at a similar bill after September eleventh when insurance companies tried not to pay out claims. So when was the next September eleventh, it hasn't happened, insurance companies, love. This. It's a great headline, people think. Oh, they did something while everyone goes bankrupt, accept them Bruce Carnegie Brown of Lloyd's of London has a different set of objections to Carolyn Maloney proposal. Rowan just create a kind of pandemic insurance product with God Our argument has been that that might be yesterday's problem. What if tomorrow's problem is a systemic cyber attack? So why don't we create a product with a government that is more flexible and can be used to address particular risks as they arrive? I think the key he was resilience. Actually, resilience is a quality that is much undervalued by our economic models around the world, so you know we ve all been taught to grow as quickly as we can
when we talk about lean inventories and just in time, delivery and extended supply chains and companies. Valuations have typically responded to that way of working, and I think we need to find ways to two more value into this issue of resilience. So, interestingly companies, when they report the business once a year or even coarsely, make no mention of insurance. It the protection that they have or do not have been so insurance is not yet embedded in companies thinking about them Of their balance sheets and business models, and I think that's a mistake. Now. I'm talking my own book and one sense there for obvious reasons, but it does come back to the fact that I think the world is under insured and I think insurance can help build resilience against specific events when they happen to that end. Lloyds has has come up with three forward. Looking insurance vehicles, the first is called restart is very specifically about trying to provide what we call non damage: business interruption assurance, in other words the kind
of business interruption, insurance that most firms who had business interruption insurance thought would cover them for the pandemic, but which didn't. Another idea is called recover with The re standing for reinsurance recovery here is more of a banking product effectively. It argues that will pay the claim up front and then recover it in premiums collected over subsequent periods of time sort of insurance company meets mortgage lender if you will and the third product is called black swan RE Alex Onary, is really really trying to address the fact that some of these events just too large, and so they need government engagement, Keni brown as chairman of an insurance. Firm plainly is talking his own book as he admits, but the economist and risk scholar, Howard Country through, does see value in rethinking how insured works, especially in rethinking the relationship between private firms and the public sector when it comes to future risks. The I
here of expanding beyond pandemic is critical, and this is an opportunity for us to really reflect on what kind of risks insurers can and cannot provide on a wide variety of different wrist clay to change is certainly one of them, and there is exponential growth with respect to t o two emissions that will cause major major damage on flood trillions of dollars. But there have only been billions in recent years. So let's take advantage of the pandemic to broaden our view of how we deal with catastrophic risk and then say what kind of the public private partnership. Would we want to have for looking at all of them Janis, jogger, CO, proprietor of three brothers bakery in Houston, is paying some attention to these bigger questions of insurance policies, but she is more focused on the smaller issues, the issues she you can actually control, one thing about disasters.
I tell everyone you get one pity party and no more because you ve got to get to work and Jocker, despite her into Involvement with multiple disasters remains an optimist. I always say, I've everything bad comes something good, including the history of her own small business, so the bakery his began about two hundred years ago in Poland and the family baked continuously, and the Nazis came and took the family in front equally the bakery and nine in forty one and then my husband's grandparents were murdered in Auschwitz, the sir Ivory is eventually made it to Houston and they didn't speak English, but they knew the language of baking, and so what were they? Gonna do so they started a bakery
My husband is now the fifth generation in the family that bakes eastern european style, breads, pastries, etc. We asked Jocker if she is planning to sue for insurance company over their lack of courage for pandemic lawsuits are emotionally draining and you're working backwards, and so, in the case of this is probably going to be class This action, the lawyers are gonna, get a lot of money. I don't know that it's, for me it might be worth it for bar, that's completely closed and loss, Other revenue, then I would probably do it cause what else you have the day you're completely closed and how about having state legislators force force payouts. I would be shocked if they legislated that the insurance companies have to pay business interruption because, frankly, I think they dont go out of business, would Jocker consider buying endemic coverage. Now it would have to be better than when I heard about recently. I think it was,
ten thousand dollars. I got a hundred thousand in coverage- that's just not worth it to me. So what does Drucker think would actually be most helpful to small businesses like hers, vote on a stimulus package. That's the most important thing about of all else, and you know I'm not saying anything let a cool thing! I'm just saying Americans are more concerned about what's in there, while at right now come have next time: on four economics radio station. I really don't like where the synergy is now going. John Mackey, the ceo of whole foods market is a famously outspoken. Leader, but you know what every time you get a scar you try not to do the same stupid thing again. Right Mackey argues for thinking differently that how business is done. He calls it country
capitalism and conscious leadership. How is that holding up now that whole foods is owned by Amazon? That's next time on Fr Economics, radio until then take care of yourself, and if you can someone else too for economics, radio is produced by Stitcher and Duner productions. This episode was produced by Zach Lepinski. Our staff also includes Allison Craigle, Greg Rippen, Matt Hickey, Daphne Chen Mary De Duke and Karen Wallace. In turn is immaterial. We had help this week from James Foster. Our theme song is MR fortune by the hitchhikers and all the other music was composed by Luis scare. You can get free economics, radio and any podcast up. If you want the entire back catalogue, use stitched up or go to free economics, dot com, or we also publish trend.
Scripts and show notes we can be reached at radio at Freakonomics com. As always, thanks for listening, I must know related two Andrew Carnegie well than talk about him, a lot because costs the black sheep stayed in Scotland and the others went to the United States, who made their fortunes stature.
Transcript generated on 2020-11-22.