A change in seasons again brings hopeful signs that much of pre-pandemic life is returning. Current COVID‑19 variants, while more contagious, are less virulent than earlier variants. U.S. workers in many sectors are returning to offices under a new hybrid model that may soon become commonplace. International travel restrictions are subsiding, and passengers are responding by increasing bookings. Business conferences and meetings continue to move from virtual back to in‑person events.

But other, more ominous harbingers are germinating as well. Inflation is soaring to 40‑year highs. Supply chains remain kinked by labor shortages and logistical challenges, including the COVID lockdown in China. Chip scarcity is severely crimping vehicle production. Truckers have held debilitating strikes at a critical U.S./Canadian border crossing and elsewhere in in North America. Emotionally searing video and dispatches from Ukraine remind the world of war’s ravages and the agony of protracted conflict. The jolt and implications of the January 2021 storming of the U.S. Capitol continues to linger.

Clearly we are in a different place than where we were prior to the pandemic – but where are we exactly? Is that place now more uncertain and unsettled than where we were before? And if so, are we on the precipice of an era marked by heightened political and societal unrest? What are the implications for insurers?

Civil Unrest on The Rise

The year 2020 gave rise to a substantial growth in riot and civil commotion claims after events largely triggered by the George Floyd tragedy. While 2021 proved much less momentous than the preceding year, “hashtag” protests in the U.S. and civil disorder losses have increased from an average of less than $100 million a year for the past 70 years to $2 billion in the last two years.¹

Another study compared the 2016‑2019 period to the record-shattering 2020 and found that – even in some states generally considered hotspots of protests – protest-related activities experienced startling increases on a percentage basis:²

Top 5 Statewide Percentage Increases –
Commercial Property and Businessowners Combined

Source: © Verisk. Reported data is preliminary.

The Role of Social Media

Some commentators suggest that the social fabric that once existed has frayed, noting that “we are increasingly ’bowling alone,’ ‘coming apart’ and inhabiting a ‘fractured republic.’”³ They further warn that what happens in the middle social layers of society is vital to a democratic and pluralistic country, “held together by extended networks of cooperation and social support, norms of reciprocity and mutual obligation, trust and social cohesion.”⁴

The early 2000s gave rise to Twitter and Facebook, and between 2009 and 2012, the platforms added features that allowed users to “like” and “retweet,” respectively. This made social media more engaging and interactive, and also facilitated the rapid spread of information, some of which bore no objective semblance to reality, particularly at the extremes.⁵ This activity has resulted in two groups of people positioned at either extreme, feeding on the worst statements of the other side and creating what one scholar calls a “polarization” cycle in which adherents view victory as something that must be obtained at all costs, even if violence sometimes results.⁶ The polarization feeds a mob mentality which, in part, explains how events such as the recent trucking strikes and January 6th Capitol riot came to fruition.

Extremism represents an admittedly small cultural subsection, but with social media reform not yet on the horizon, and longstanding economic disparity showing no signs of subsiding, a population prone to violence will continue to exist indefinitely. Further, a recent study concluded that social media is a key driver of political risk because of its ability to spread content that fuels anti-government sentiment, organize demonstrations, and document, and thereby amplify, protest actions.⁷ Another author posits that polarization will exist for some time, with a lingering risk of civil unrest.⁸

The Future

The pandemic jarred society from a prolonged period of stability marked by extended “near zero” inflation, relative global tranquility, and a record-breaking economic expansion. With that era coming (or nearly coming) to an end, how will society respond to a reemergence of once-dormant inflation, the prospect of a significant worldwide recession, and/or the possible reappearance of multiple international flashpoints?

Uncertainty on a variety of fronts breeds personal insecurity, and with it the potential to foment social unrest. Now armed with an array of social media platforms, individuals can quickly coalesce around issues that may or may not be predicated on actual facts. As emotions rise, rational thinking may quickly yield to impulsive behavior and reach a flashpoint. Consequently, geopolitical events, law enforcement abuses, adverse socio-economic circumstances, and political elections carry much greater potential to boil over into loss-generating civil disturbances than in years past.

With that in mind, we offer the following suggestions:

• Be aware of a policyholder’s activities – Has the insured taken positions that may be considered socially divisive? Are you aware of the insured being the target of any boycotting and/or negative social media activities?
• Consider the potential for risk aggregation – Could your insured be disproportionality exposed to a large civil disturbance by having multiple locations in a single city? Have you adequately assessed geographic proximity?
• Make note of changing socioeconomic circumstances – How well do you know the community in which you’re writing business? Do you make use of tools such as the Gini coefficient, which measures income inequality within a given geographical area or social group? To what extent do you assess displeasure with local governments? Have you noticed an uptick in public demonstrations?
• Reassess the rates you’re charging – Do your rates reflect the exposures represented by an environment in which riot and civil disturbance claims are expected to occur more frequently and at greater severity?

As always, if you have any questions or would like to discuss this topic further, please reach out to me or your Gen Re representative.

Endnotes

1. 10 Emerging Risks to Watch (insurancejournal.com).
2. https://www.verisk.com/insurance/visualize/civil-unrest-2021-learning-from-last-years-record-losses/.
3. https://www.lee.senate.gov/public/_cache/files/b5f224ce-98f7-40f6-a814-8602696714d8/what-we-do-together.pdf
4. Ibid.
5. https://www.politico.com/news/magazine/2021/11/07/social-psychologist-haidt-tribalism-facebook-519720
6. Ibid.
7. https://www.wtwco.com/en-US/Insights/2021/12/political-risk-index-winter-2021
8. https://www.weforum.org/agenda/2021/02/2020-protests-changed-insurance-forever/