Economics, the P/C Insurance Industry, and Catastrophes

Transcription

1 Economics, the P/C Insurance Industry, and Catastrophes PCS Catastrophe Conference Tampa, FL April 28, 2015 Steven N. Weisbart, Ph.D., CLU, Senior Vice President & Chief Economist Insurance Information Institute 110 William Street New York, NY Tel: Cell:

2 Why the Fuss? What s the Worst That Could Happen? 2

3 Severe Weather Reports, 2014 Severe weather reports are concentrated east of the Rockies There were 18,581 severe weather reports in ,057 tornadoes 5,536 Large Hail reports 11,985 high wind events Source: NOAA Storm Prediction Center; 3

4 1,117 1, ,262 1,156 1,282 1,632 1,820 1,692 2,000 1,800 1,600 Number of US Tornadoes by Year, It looks like we have a bad year every fourth year or so. Uh oh. 1,400 1,200 1, The range of number of tornadoes in a year during is large (888 to 1,820). The mean is 1,254; the median 1,117. Source: ; I.I.I. 4

5 Number of US Tornadoes by Month, April May June May is usually the worst month for tornadoes (avg. = 256), but April 2011 was obviously an exception (actual 758 vs. avg. excluding 2011 of 165). June avg. = 217 Source: ; I.I.I. 5

6 10 Costliest Coastal Storms in U.S. History (Insured Losses, 2013 Dollars, $ Billions) $60 $50 Hurricane Ike and Superstorm Sandy (3 rd and 4 th costliest ever) occurred in the last seven years $49.4 $40 $30 $25.9 $20 $10 $5.7 $6.8 $7.9 $8.8 $9.3 $11.2 $13.6 $19.0 $0 Frances (2004) Rita (2005) Hugo (1989) Ivan (2004) Charley (2004) Wilma (2005) Ike (2008) Sandy (2012) Andrew (1992) Katrina (2005) 2 of the 4 most expensive coastal storms in U.S. history have occurred in the decade after Katrina (and Rita and Wilma). A $15 or $20 billion storm isn t that unusual anymore. Sources: PCS; Insurance Information Institute inflation adjustments to 2013 dollars using the CPI. 6

7 But, Going Back to 1900, We ve Had Many Stronger Storms Than These. What if the Worst Ones Recurred Today, With the Added Population and Development? 7

8 10 Costliest Coastal Storms in U.S. History (Adjusted for Development in the Path of the Storm, to 2012) (Insured Losses, 2012 Dollars, $ Billions) $140 $120 $125 $100 $80 $60 $40 $20 $20 $25 $35 Katrina $40 $40 Andrew $50 $50 $50 $65 $0 Hazel (1954) Donna (1960) New England (1938) Katrina (2005) Galveston (1915) Andrew (1992) Ft. Lauderdale (1947) Galveston (1900) Lake Okeechobee (1928) Great Miami (1926) Only 2 of the 10 most destructive coastal storms occurred in the last 25 years. At least half occurred before we were born, so our sense of history is deficient. Sources: Karen Clark & Company, Historical Hurricanes that Would Cause $10 Billion or More of Insured Losses Today, August 2012, p. 5; Insurance Information Institute 8

9 But Many of These Storms Didn t Take the Worst Possible Track. How Much Damage Would they do if they Hit the Highest Concentration of Property? 9

10 What if a CAT 5 Hurricane Hit Galveston TX and Tracked to the Heart of Houston? Bay City Brazoria Freeport Angleton Christmas Bay Galveston Galveston Galveston Cyrstal Beach Gilchrist High Island McFaddin Clam Lake Sabine Pass (Losses, $ Billions) $200 $180 $160 $140 $120 $100 $80 $60 $40 $30 $21 $20 $0 $42 $80 $142 $180 $176 $147 $110 The damage that a storm can do depends on where it hits and tracks. A Galveston- Houston CAT 5 storm could inflict $180 billion in damage. $61 $35 $22 $25 $22 The eye at landfall These damage estimates include not only buildings but also contents and additional living/operating expenses. Sources: Karen Clark & Company, Increasing Concentrations of Property Values and Catastrophic Risk in the US, April 2015, p. 6; Insurance Information Institute 11

11 What if a CAT 5 Hurricane Hit Miami FL and Tracked Across Southern Florida? Hernando Beach Tampa Boca Grande Sanibel Naples Plantation Key Homestead Miami Beach Hillsboro Beach Palm Beach Hobe Sound (Losses, $ Billions) $350 $300 $300 $250 $200 $215 $150 $100 $50 $75 $93 $45 $75 $58 $80 $125 $110 $75 $0 The eye at landfall The damage a storm can do depends on where it hits and tracks. A Miami-Tampa CAT 5 storm could inflict $300 billion in damage. Sources: Karen Clark & Company, Increasing Concentrations of Property Values and Catastrophic Risk in the US, April 2015, p. 7; Insurance Information Institute 13

12 And What if We Had Multiple Major Storms in a Single Year? Do You Remember 2004? Or 2005? Or 2008? 14

13 Post-Katrina U.S. Insured Catastrophe Losses ($ Billions, $ 2013) $40 $35 $30 $25 $20 $15 $10 $5 $0 $10.7 $7.6 $0.6 $0.6 $29.6 $3.5 Privately-insured $11.6 NFIP $14.6 $0.8 $0.8 $34.1 $2.4 $35.5 $8.8 Pvt Ins. Annual Data Mean: $19.1B Median: $14.6B NFIP Annual Data Mean: $2.24B Median: $0.75B $12.9 $0.4 $ These numbers are national, not coastal, but are often largely coastal in origin. The volatility is obvious. Sources: Property Claims Service/ISO; Insurance Information Institute. 15

14 In 2012, Total Value of Insured Atlantic & Gulf Coastal Exposure: $10.6 Trillion New York Florida Texas Massachusetts New Jersey Connecticut Louisiana S. Carolina Virginia Maine North Carolina Alabama Georgia Delaware New Hampshire Mississippi Rhode Island Maryland (2012, $ Billions) $1,175.3 $849.6 $713.9 $567.8 $293.5 $239.3 $182.3 $164.6 $163.5 $118.2 $106.7 $81.9 $64.0 $60.6 $58.3 $17.3 $2,923.1 $2,862.3 In terms of exposed value, over half is in Florida + New York. Unlike Florida, the insured coastal exposure in northeast states is concentrated in a very small area Source: AIR Worldwide $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 The insured value of all coastal property was estimated at $10.6 trillion in 2012, up 48% from $7.2 trillion in

15 Total Potential Home Value Exposure to Storm Surge Risk in 2014* Florida New York Louisiana New Jersey Virginia Texas S. Carolina Massachusetts N. Carolina Maryland Connecticut Georgia Mississippi Pennsylvania Delaware Alabama Rhode Island Maine New Hampshire Extreme Very High High Florida s extreme exposure is greater than any other state s extreme, very high, and high exposure combined CoreLogic estimated the reconstruction value of homes exposed to Storm Surge along the Atlantic and Gulf Coasts as $1.496 trillion in 2014 (assuming total losses). Only a fraction of this is insured for flood, hence the huge demand for federal aid following major coastal flooding events. ($ Billions) $0 $50 $100 $150 $200 $250 $300 $350 *Insured and uninsured property, assuming total loss of the home. Source: Storm Surge Report 2014, Table 2, CoreLogic, published July

16 P/C Industry Homeowners Claim Frequency, US, Claims Paid per 100 Exposures CAT-related claims Non-CAT-related claims All Claims Sources: Insurance Research Council, Trends in Homeowners Insurance Claims, p.41; Insurance Information Institute

17 P/C Industry Homeowners Average Claim Severity, Inflation-adjusted, dollars $9,000 non-cat claims cat claims $8,000 $7,000 $6,000 $5,000 $4,000 Inflation-adjusted, HO average claim severity is now over twice what it was in $3,000 $2, Sources: Insurance Research Council, Trends in Homeowners Insurance Claims, 2015 edition, p. 41; BLS inflation calculator, with Insurance Information Institute calculations

18 Inflation & Claims Overall Inflation Has Been Low, but Prices for Some Items that Affect Claims Are Rising Notably Faster 21

19 Number of NFIP Claims Paid, Yearly, * How many adjusters are needed each year to handle flood claims? Three times since 2005 NFIP has paid 75,000 claims in a calendar year; that never happened before. (And this excludes claims closed without payment.) 250, ,000 Average for : 39, ,290 Average for : 53, , , ,000 50, ,352 47,245 30,338 16,362 55,856 43,589 36,849 25,314 24,62023,169 74,727 30,99629,111 77,801 16, *calendar years Source: ; Insurance Information Institute 22

20 U.S. Employment in Claims Adjusting, * Thousands This is independent claims adjusting employment, not carrier-employed claims adjustment Hurricane Andrew Hurricanes Katrina, Rita, Wilma Hurricanes Bertha, Gustav, Ike '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 *As of January, 2015; not seasonally adjusted. Note: Recessions indicated by gray shaded columns. Sources: U.S. Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institute. 23

21 Change* in the Consumer Price Index, % 12% 10% 8% 6% 4% 2% 0% -2% -4% For two months in 2008, led by gasoline, the general price level was rising at a 5.5% pace When gas prices dropped, the general price level was briefly lower than a year prior Recession CPI Core CPI Lately, core CPI is at a 1.6% y-o-y pace '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Over the last decade, prices generally rose about 2% per year. *Monthly, year-over-year, through December Not seasonally adjusted. Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institutes. 24

22 Prices for Framing Lumber Weekly, Jan Jan $480 $450 $420 $390 $360 $330 $300 Recession Spike in four months: From $248 on January 1, 2010 to $367 on April 30, 2010 $270 $240 $210 Spike in six months: From $316 on October 12, 2012 to $451 on April 5, Sandy effect? $180 Jan Jan Dec Jan Dec Dec Jan Jan Dec Since the recession ended, a rising trend, with sharp spikes. Sources: National Association of Home Builders at ; Insurance Information Institute. 26

23 '10 '10 '10 '11 '11 Sep 2011 Dec 2011 Mar 2012 Jun 2012 Sep 2012 Dec 2012 Mar 2013 Jun 2013 Sep 2013 Dec 2013 Mar 2014 Jun 2014 Sep 2014 Dec 2014 '15 Change in Price Index for New Nonresidential Building Construction, Monthly % 3.0% 1.5% 0.0% -1.5% -3.0% In June 2010 the price of constructing new nonresidential buildings fell by 2.2% vs. the prior June but by Feb 2012 prices were rising at a 4.3% year-over-year clip This is a new price series, but it shows sharp differences in price increase rates within just a year or two. Through March Not seasonally adjusted. December through March price changes are preliminary. Sources: US Bureau of Labor Statistics, Producer Price Index series WPU801; Insurance Information Institute. 27

24 Reinsurance Market Conditions Ample Capacity, as Alternative Capital is Transforming the Market And Pushing Prices Down 28

25 Global Reinsurance Capital (Traditional and Alternative), (Billions of USD) Total reinsurance capital reached a record $575B in 2014, up 69% from $700 $600 $500 $400 $300 $200 $100 $ Alternative Capital Traditional Capital Total But alternative capacity has grown 237% since 2008, to $64B. It has more than doubled in the past three years data is as of December 31, Source: Aon Benfield Analytics; Insurance Information Institute.

26 Global Reinsurance Capital (Traditional and Alternative), % 11.1% 10% 9.3% 8% 7.7% 6% 4% 4.4% 5.4% 5.6% 5.5% 5.1% 6.2% 2% 0% Alternative Capital s Share of Global Reinsurance Capital Has More Than Doubled Since data is as of December 31, Source: Aon Benfield Analytics; Insurance Information Institute.

27 P/C Insurance Industry: Financial Update Can the P/C Insurance Industry Handle Claims from One or More Major CATs? 31

28 Underwriting Gain (Loss) All Lines Combined, * :Q3 ($ Billions) $30 Underwriting profit in 2013 was $15.5B $20 $10 $0 -$10 -$20 -$30 -$40 -$50 -$60 $5.45B 2014:Q3 profit High CAT losses in 2011 led to the highest underwriting loss since Lower CAT losses in 2013 led to the highest underwriting profit since * Includes mortgage and financial guaranty insurers in all years.. Sources: A.M. Best, ISO, Insurance Information Institute.

29 Combined Ratio Points Associated with Catastrophe Losses: E* E Combined Ratio Points Avg. CAT Loss Component of the Combined Ratio by Decade 1960s: s: s: s: s: s: 5.6E* The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades Catastrophe losses as a share of all losses reached a record high in 2011 Catastrophe losses as a share of all losses were down substantially in 2013 and 2014 *2010s represent E. Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers. Source: ISO ( ); A.M. Best ( ); Insurance Information Institute. 33

30 P/C Insurer Impairments, Impairments among P/C insurers remain infrequent The Number of Impairments Varies Significantly Over the P/C Insurance Cycle, With Peaks Occurring Well into Hard Markets Source: A.M. Best Special Report U.S. P/C Impairments Down Sharply in 2013; Alternative Risk Players Faltered, June 23, 2014; Insurance Information Institute. 34

31 Combined Ratio Impairment Rate P/C Insurer Impairment Frequency vs. Combined Ratio, Combined Ratio after Div P/C Impairment Frequency Long-term average rate is 0.81% impairment rate was 0.43% Impairment Rates Are Highly Correlated With Underwriting Performance and Reached Record Lows in 2007; Recent Increase Was Associated Primarily With Mortgage and Financial Guaranty Insurers and Not Representative of the Industry Overall Source: A.M. Best; Insurance Information Institute 35

32 Reasons for US P/C Insurer Impairments, Historically, Deficient Loss Reserves and Inadequate Pricing Are By Far the Leading Cause of P-C Insurer Impairments. Investment and Catastrophe Losses Play a Much Smaller Role Reinsurance Failure Sig. Change in Business 3.0% Misc. 8.4% 3.4% Investment Problems (Overstatement of Assets) 6.6% Affiliate Impairment Catastrophe Losses 7.8% 7.1% 7.1% Alleged Fraud 12.3% 44.3% Rapid Growth Deficient Loss Reserves/ Inadequate Pricing Leading causes of impairment (deficient reserves and rapid growth) are generally under the control of insurers Source: A.M. Best Special Report U.S. P/C Impairments Down Sharply in 2013; Alternative Risk Players Faltered, June 23, 2014; Insurance Information Institute. 36

33 Percent of US Property Insurers that 10 Became Impaired, Solvency Impairment Was Mainly Concentrated in Companies Writing Mainly Liability Insurance, Not Property Insurance, in the last 4+ Decades Homeowners 7.4% Commercial Multiperil 8.1% All Other Lines 84.5% 84.5% Source: A.M. Best Special Report U.S. P/C Impairments Down Sharply in 2013; Alternative Risk Players Faltered, June 23, 2014; Insurance Information Institute. 38

34 P/C Industry Net Income After Taxes :Q3 $14, $5, $19, $10, $20, $24, $36, $30, $21, $20, $3, $30, $38, $44, $65, $62, $3, $28, $35, $19, $33, $63, $37,652 14:Q3 $ Millions $80,000 $70,000 $60,000 $50,000 $40, ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS 1 = 3.5% 2012 ROAS 1 = 5.9% 2013 ROAS 1 = 10.3% 2014 ROAS 1 = 7.8% Net income rose strongly (+81.9%) in 2013 vs on lower cats, capital gains $30,000 $20,000 $10,000 $0 -$10,000 -$6,970 ROE figures are GAAP; 1 Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 7.7% ROAS through 2014:Q2, 9.8% ROAS in 2013, 6.2% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for Sources: A.M. Best, ISO; Insurance Information Institute

35 P/C Insurance Industry Profitability Peaks & Troughs, :Q3* ROE 25% 1977:19.0% 1987:17.3% History suggests next ROE peak will be in % 1997:11.6% 2006:12.7% 15% 9 Years % 10% 5% 0% 1975: 2.4% 1984: 1.8% 1992: 4.5% 2001: -1.2% 2014:Q3 7.4% -5% *Profitability = P/C insurer ROEs figures are estimates based on ROAS data. Note: Data for exclude mortgage and financial guaranty insurers. Source: Insurance Information Institute; NAIC, ISO, A.M. Best.

36 06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3 11:Q4 12:Q1 12:Q2 12:Q3 12:Q4 13:Q1 13:Q2 13:Q3 13:Q4 14:Q1 14:Q2 14:Q3 $455.6 $437.1 $487.1 $496.6 $478.5 $463.0 $490.8 $512.8 $521.8 $517.9 $515.6 $505.0 $511.5 $540.7 $530.5 $544.8 $559.2 $566.5 $559.1 $538.6 $550.3 $570.7 $567.8 $583.5 $586.9 $607.7 $614.0 $624.4 $653.3 $662.0 $671.6 $697.9 Policyholder Surplus, 2006:Q4 2014:Q3 ($ Billions) $750 $ :Q3 Pre-Crisis Peak Drop due to near-record 2011 CAT losses $650 $600 $550 $500 $450 Surplus as of 9/30/14 stood at a record high $673.9B $ :Q1 data includes $22.5B of paid-in capital from a holding company parent for one insurer s investment in a non-insurance business. Sources: ISO, A.M.Best. The industry now has $1 of surplus for every $0.75 of NPW, close to the strongest claims-paying status in its history. The P/C insurance industry enters 2015 in very strong financial condition. 41

37 Fire Inland Marine Commercial Multiple Peril Homeowners Multiple Peril Allied Lines Private Passenger Auto Physical Damage Commercial Auto Physical Damage 3.7% 6.5% 5.1% 2.5% 6.3% 5.9% 12.8% 10.3% 10.7% 10.2% 7.7% 17.1% 26.1% 23.0% RNW on Property Insurance Lines, 2013 and average 2013 RNW 10-yr avg 30% 25% 20% 15% 10% 5% 0% A few property lines produce sustained significant profits, but most produce only modest profits. All lines vary from year to year Sources: NAIC, Report on Profitabilty by Line by State in 2013; Insurance Information Institute. 42

38 The Investment Story: Low Interest Rates, Past and Future Investment Performance is a Key Driver of Profitability Depressed Yields Will Necessarily Influence Underwriting & Pricing 43

39 Jun-90 Jun-91 Jun-92 Jun-93 Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 9% 8% 7% 6% U.S. Treasury 2- and 10-Year Note Yields*: Monthly, Yields on 10-Year U.S. Treasury Notes have been essentially below 5% for over a decade. U.S. Treasury 10-year note yields spiked 5% 4% 3% 2% 1% Recession 2-Yr Yield 10-Yr Yield 0% Since roughly 80% of P/C bond/cash investments are in 10-year or shorter durations, most P/C insurer portfolios will have low-yielding bonds for years to come. *Monthly, constant maturity, nominal rates, through January Sources: Federal Reserve Bank at National Bureau of Economic Research (recession dates); Insurance Information Institutes. 44

40 Net Yield on P/C Insurer Invested Assets, :Q3 5.0% 4.5% 4.49% 4.20% 4.0% 3.93% 3.73% 3.83% 3.68% 3.5% 3.43% 3.16% 3.0% 2.5% :Q3 Since year-end 2007, P/C Insurer net yields dropped by 133 basis points. This downtrend is likely to continue as older, higher-yielding bonds mature and are replaced by lower-yielding ones. Sources: NAIC, via SNL Financial; I.I.I. 45

41 AAA Corporate Bonds Interest Rate Forecast, 2015:Q2-2016:Q4 6.0% 5.5% 5.42% 5.27% 5.14% 5.01% 5.0% 4.81% 4.62% 4.5% 5.57% 4.0% 3.5% 3.0% 2015:Q2 2015:Q3 2015:Q4 2016:Q1 2016:Q2 2016:Q3 2016:Q4 Interest rates on long-term corporate bonds are forecast to rise over the next two years by roughly a full percentage point. This might end the long decline in portfolio yields but probably won t reverse it. Sources: Blue Chip Economic Indicators, 4/2015 issue; I.I.I. 46

42 Property/Casualty Insurance Industry Investment Gain: :Q3 1 $ Billions $70 $60 $50 $40 $30 $35.4 $58.0 $56.9 $52.3 $51.9 $47.2 $42.8 $44.4 $36.0 $45.3 $48.9 $64.0 $59.4 $55.7 $31.7 $39.2 $53.4 $56.2 $58.8 $54.2 $43.1 $20 $10 $0 Investment gains in 2013 were the highest in the post-crisis era * :Q3 Low interest rates in 2013 caused investment income to keep falling but realized investment gains were up sharply. The financial crisis caused investment gains to fall by 50% in Investment gains consist primarily of interest, stock dividends and realized capital gains and losses. * 2005 figure includes special one-time dividend of $3.2B; Sources: ISO; Insurance Information Institute.

43 Bonds Rated NAIC Quality Category 3-6 as a Percent of Total Bonds, % 4.0% From to year-end 2012, the percentage of lower-quality bonds in P/C industry portfolios doubled 4.07% 3.99% 4.36% 3.0% 2.0% 2.69% 2.10% 2.17% 1.98% 2.04% 2.27% 2.58% 3.07% 3.10% 1.0% 0.0% :Q3 There are many ways to capture higher yields on bond portfolios. One is to accept greater risk, as measured by NAIC bond ratings. The ratings range from 1 to 6, with the highest quality rated 1. Even in 2014, over 95% of the industry s bonds were rated 1 or 2. Sources: SNL Financial; Insurance Information Institute.

44 What Can Behavioral Economics Teach Us About Insurance-Buying Behavior? 49

45 A Risky Situation, Part 1 Imagine you have this choice: You may choose a gamble that offers an 80 chance of winning $4,000 and a 20% chance of winning nothing, or You get a guaranteed $3,000. Which choice do you make? 4 out of 5 people chose the $3,000. Source: David Rolpeik, How Risky Is It Really?: Why Our Fears Don t Always Match the Facts (New York: McGraw-Hill, 2010), p. 40, citing Kahneman and Tversky. 50

46 A Risky Situation, Part 2 Now imagine that you won the gamble and have $4,000 and you now have this choice: You may choose a gamble that offers an 80 chance of losing the $4,000 and a 20% chance of not losing it, or You pay $3,000 of your $4,000 to avoid the gamble. Which choice do you make? 92% of people chose the gamble. Source: David Rolpeik, How Risky Is It Really?: Why Our Fears Don t Always Match the Facts (New York: McGraw-Hill, 2010), p. 40, citing Kahneman and Tversky. 51

47 Risk Preference Test Observations In the first test, involving only positive (or at worst nonnegative) outcomes, most people are risk-averse. They choose the sure thing. In part this is because the first dollars are more valuable to them than the higher amounts. In the second test, involving only negative outcomes, most people are loss-averse. They choose the gamble, hoping the worse outcome doesn t happen. In part this is because the first dollars lost are more valuable to them than the higher amounts Source: David Rolpeik, How Risky Is It Really?: Why Our Fears Don t Always Match the Facts (New York: McGraw-Hill, 2010), p. 40, citing Kahneman and Tversky. 52

48 What is a Psychological Account? An amount of money a person considers acceptable spending for a particular purpose Classic example: you paid $100 for a ticket for a concert but when you arrive to see it the ticket is gone. Another ticket is available for another $100. Do you spend another $100 or Have you spent the money in the concert account and go home? I argue that the reason why some people don t buy certain insurance coverages is that they have a psychological or mental account that is too small Source: Barry Schwartz, The Paradox of Choice: Why More is Less (New York: Harper, 2004), pp

49 Insurance Information Institute Online: Thank you for your time and your attention! 54