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By PAUL HERING, chief executive officer at Barney & Barney LLC, which celebrates its centennial birth this year

It is believed that the last century has brought about the most change the human race has ever seen. We are constantly in a dynamic state--progressing, growing and shifting--and we are always reacting to these changes. However, on a day-to-day basis, we still seek the same core needs we've sought for centuries: survival, social acceptance and family security. And as time has evolved into modern-day, 21st century, insurance--and the need for it--has become a monumental aspect of assuring both human survival and family security.

No. 1: The introduction and mass production of the automobile.

Although its invention does not technically fall within the timeframe of the last century, its mass production in the United States does. In the early 1900s, the popularity of the automobile caught many insurers off-guard (the first U.S. automobile policy was written on a form used to write coverage for a team of horses).

By 1914, Henry Ford's streamlined production enabled 15 completed cars to come off the factory line every three minutes. By the 1920s, there were more than 20 million cars on the road, and by the 1940s, numerous states began requiring insurance coverage for motorists.

Today, automobile insurance is required for every single driver, in every single state. And as a result, it is the most widely purchased form of insurance. So much so, that cavemen, geckos and all sorts of other cartoon figures have taken to the airwaves to become popular pitchmen.

No. 2: The 1906 Earthquake--San Francisco, Calif.

This estimated magnitude-7.8 quake, both infamous and devastating, was the cause of more than 3,000 deaths, collapsed structures and fires, and more than 200,000 homeless residents in the city alone. More than 80 percent of San Francisco was destroyed in this quake, leaving the once-thriving metropolis flattened and forced to rebuild.

At the time, earthquakes were considered "uninsurable," yet the subsequent fires--which caused 90 percent of the damage--were. Insured losses were estimated in 1906 at $235 million, equivalent to more than $5 billion today.

While the San Francisco earthquake was the worst natural disaster the insurance industry had faced since its inception, it quickly became a catalyst for change in how the industry assessed natural catastrophes and "insurable" properties and events. Out of the 1906 quake evolved the industry's current approach to disaster planning, catastrophe modeling and risk management.

Hurricane Katrina and the Sept. 11 terrorist attacks have again caused the industry to rethink and re-evaluate disaster preparation as catastrophes become more destructive, more complex and more costly.

No. 3: World War II

While the world was immersed in the largest widespread war in history, back home, the American industry was kicking into high gear. Shaking off the lows of the depression and capitalizing on the reinvigorated spirit of innovation, the wartime economic boom spurred much advancement for the insurance industry.

During this time we saw the birth of employee benefits: wage freezes, coupled with growing competition for workers during the war, led employers to offer fringe benefits to entice laborers into action--thus employee benefits were born. Prepaid healthcare systems were also on the rise at this time, and employers were capitalizing.

Soon, government policies were in place permitting tax deductions and tax exclusions for employers that offered benefits to employees. What began as a previously unseen attraction for new employees, had given rise to the employer-based system in place today. Benefits, now a required entitlement and part of a compensation package, include even government mandated such as workers' compensation, Social Security and unemployment insurance.

And today, debates of healthcare reform threaten to turn this system on entirely its head.

No. 4: Internet

To say that the Internet is ubiquitous is an understatement. So much so that it is getting increasingly difficult to recall what life was like before it was introduced. The insurance industry, like all other industries, has seen its relationship with and presence on the World Wide Web continue to evolve at a rapid pace.

The term, "shop around," when describing insurance was usually a long, involved process. Today, an individual can "shop around" for the cheapest rates on car or personal coverage.

With these advancements, however, also comes the threat of privacy liability and a heightened interest in information security. Laws have been enacted to incorporate new technology in its quest to protect personal health and confidential consumer information. Regulatory requirements continue to dramatically increase the need for cyberliability while protecting against security breach.

In addition, reported data breaches have tripled in recent years and show no signs of slowing. While the Internet provides individuals and companies a quick, professional and easy online presence, it also brings the threat of an evolving exposure to previously unseen risks.

No. 5: Spitzer v. Marsh & the AIG Bailout

In the last few years, the insurance industry has received less than favorable coverage from the media. Former New York Attorney General Eliot Spitzer's attack on a few bad apples brought some issues to light, but more effectively seemed to demonize the industry as a whole. Insurance organizations targeted by Spitzer and even those not implicated saw their values fall worldwide.

Likewise, during the financial strain of 2008, with the rescue of insurance giant AIG, the industry as a whole is now closely monitored. Despite the majority of the industry remaining relatively strong, the near failure of one insurer impacted the confidence in the entire industry.

Insurance is a great industry. It is the backbone of capitalism. It allows entrepreneurs to create, investors to invest and the builders of our economy to build. What will the next 100 years bring? I leave this question, to my successors.

October 15, 2009

Copyright 2009© LRP Publications