Following the death of George Floyd, the world's largest insurance companies spoke up in favor of Black Lives Matter. Even as they were paying out unprecedented claims due to the destruction caused by Black Lives Matter protesters and those seizing their mantle, the companies issued statements and coughed up donations to support the movement.
This summer's unrest cost the industry more than a billion dollars in riot damage, the largest such loss in U.S. history. Those losses are now in danger of affecting employees' pay, industry insiders said, but not their employers' stance: As of February 18, Chubb was planning a panel with Black Lives Matter whose promotional materials included a pro-Black Panther documentary and an enjoinder to "stay woke," according to emails reviewed by the Washington Free Beacon.
For insiders who have seen up close the costs of the riots, the move is unsettling. "It's just one of many examples of corporate virtue-signaling," one Chubb employee told the Free Beacon. "It certainly doesn't represent the opinions and values of most people who work in the company. We're not Google or Facebook."
The insurance industry is not unique among corporate America: Walmart, Target, and other stalwarts of "woke capital" have issued statements indicating their support for the protests while their stores were ransacked by rioters. Because those companies had insurance, however, they didn't have to pay for the looting. Their insurers did.
At first glance, the stance adopted by insurance giants might seem like a case of ideology trumping interests. Why would these corporations donate to a movement that had cost them billions, unless they had decided to put social justice over shareholders?
But something funny happened: Shareholders didn't lose money from the unrest. Instead, insurance stocks rose in the face of riot-related payouts. Chubb and AIG finished 2020 in about the same financial condition they entered it, overcoming a COVID-induced shock that temporarily wiped out their gains from the previous year.
That may be because the insurance industry stands to lose little from the destruction in the long run, one economist suggested—especially as many of the destroyed businesses were underinsured."
In Minneapolis, for example, insurance covered only half the city's losses, which were concentrated among immigrant- and minority-owned stores. That will increase demand for property insurance and drive up rates, according to R.J. Lehmann, a senior fellow of insurance policy at the International Center for Law and Economics.
It's never good for insurers to have to pay out claims, Lehmann told the Free Beacon, but it is good for them if businesses are worried about civil unrest. "Higher uncertainty makes more people want to buy coverage," he said, "and makes them willing to pay more for coverage."
At the same time, it makes insurance more expensive. "It would not be surprising if the risk of urban conflagrations increased rates or made insurance less available," Lehmann said, in part because insurers try to avoid concentrating risk in any particular area. Industry insiders echoed his analysis, saying rates had gone up in the wake of the unrest.
That's "especially" true in urban areas hit hard by riots, the Chubb employee added. Rate hikes will allow insurers to make up their losses, but only at their poorest clients' expense.
The dynamic amounts to a poignant refutation of the adage "Get woke, go broke." Insurance companies haven't suffered for their support of Black Lives Matter and could even benefit from it. If anyone goes broke, it won't be the insurers but rather the small-business owners struggling to buy insurance—a struggle compounded by the pandemic, the costs of which insurance companies have refused to cover.
Also compounding that struggle is a history of redlining. "Insurance companies may say they're color-blind," Robert Hunter, a former insurance commissioner, told Fortune in the wake of the unrest. "[B]ut they're not zip code blind." During the Rodney King riots in 1992, many minority business owners risked confrontation with criminals because they knew their policies wouldn't cover much damage. Similar scenes played out across the United States last year, as underinsured shopkeepers took up arms against vandals.
Other shopkeepers just pleaded, often to no avail. "Please, I don't have insurance," an Iraqi immigrant told looters who were targeting his Minneapolis deli. Some black-owned businesses put up signs identifying as such, hoping they would deter attacks. In many cases, they did not.
By supporting Black Lives Matter, then, insurance companies are effectively supporting a movement that will reduce coverage for African Americans. As unrest intensifies, they will raise rates, and the market will reach a new equilibrium—one in which insurers are fine, but poorer policyholders may not be.
UPDATE 3/25/21 3:49 p.m.: This piece has been updated to reflect the fact that insurance companies may be backing protests because they stand to lose little from them, not because they stand to profit from them, as originally stated.
Published under: Black Lives Matter , Coronavirus , Riots , woke