RPC’s Mansfield: It's a Wonderful Life, Insurance

With the festive season firmly in full-swing and with Christmas fast approaching, RPC partner Peter Mansfield takes a look at the world of insurance through the guise of Frank Capra’s 1946 perennial Christmas classic, It's A Wonderful Life…

A swollen river rages through the town of Bedford Falls. It is Christmas Eve and, looking down upon the torrent, shivering on a bridge, is a woman, distraught and wounded by life's cruelties. She prepares to step over the railing. Her name is Insurance.

"Why does everyone think I am boring?" she screams despairingly into the icy wind. "Why does everyone want to work in hedge fund management? Tell me truly, what does Banking have that I don't?"

As she prepares to jump, a man suddenly pushes past her and leaps into the surging river. As his head emerges briefly above the waves, he cries for help and, without thinking, Insurance leaps in after him and drags him to the bank. It is her instinct to protect others from the consequences of specified perils. That is how she defines herself.

Once they are safely on land, Insurance asks, "Who are you?"

"I am your guardian angel," the man replies. He is old but has a face of ageless kindness. "My name is Cuthbert."

"An angel called Cuthbert?" Insurance says disbelievingly. "Well, that sounds like the rubbish angel I deserve. Where are your wings?"

"I don't have my wings yet. I will get my wings when I help you." In the distance a church bell is heard. Cuthbert smiles and explains, "Every time you hear a bell ring, an angel gets its wings."

"Strange," Insurance says. "For me, a bell ringing means that a ship has sunk. Why are you here?"

"To save you from being discouraged, Insurance," Cuthbert says. "I am giving you a great gift – a chance to see what the world would be like without you."

"Ha," Insurance says dismissively. "We both know it would be a better place. People could spend their premiums on things they actually want."

As they clamber up the bank, Cuthbert turns his face to the river. Insurance follows his gaze and recognises the absence of something substantial. There is no bridge. "Where is the bridge?" she asks.

"Without Insurance," Cuthbert says, "the bridge was never designed and never built."

"But how do the cars get over the river?"

"Cars?" Cuthbert says. "There are very few cars. Without you, Insurance, only the wealthy can afford cars."

"This is nonsense," Insurance says. "All I do is compensate people for their loss. If their TV is stolen, or their front room is flooded, or their car is damaged, I put things back the way that they were. I don't change anything."

Cuthbert smiles knowingly. "Each person's life touches so many others. When you are not around, you leave an awful hole. Imagine, for example, a world without health insurance."

"Ha! I don't need to imagine that" says Insurance. "I just look at America. 100 million people share $195bn of medical debt. Half a million file for bankruptcy every year. Over 50% of Americans believe that they could not afford a major health issue."

"Exactly," says Cuthbert. "And that is what happens when there is merely some Insurance. Imagine if there is no Insurance. No insurance for your house when it burns down, or is flooded, or is struck by a tornado. What happens then? How do people rebuild when there is no Insurance?"

"So what does happen?"

"Let me show you." By now the snow is settling and Cuthbert's footsteps are visible as he walks towards Bedford Falls. Very soon, they are entering a shanty town of corrugated iron, and open sewers, of narrow paths and streetside vendors. "In the absence of Insurance, a problem becomes a crisis, and a crisis becomes terminal. Poverty is caused by the absence of Insurance. One crisis and it is all over."

"I think you might be overdoing it."

"No, seriously," says Cuthbert. "If you didn't have insurance, would you buy a house?"

"I am Insurance."

"Oh yes, sorry, I forgot. But imagine a normal person without sufficient capital to satisfy the local regulator. Without Insurance, would they buy a house? Or a car? Or indeed take any risks at all? Would they become a doctor? Or an architect? Or a lawyer? In fact, in many ways, this thought experiment doesn't go near far enough. When were you born?"

"Early 1300s," says Insurance. "In northern Italy. Possibly Pisa or Genoa, depending on who you believe."

"Well, imagine that you were not born. Would there have been the development of marine trade in the Mediterranean, or around the coasts of Europe? Or global trade in the 1600s and 1700s? Nutmeg, cinnamon, pepper. Would you have seen the development of commercial centres in Antwerp, Amsterdam or London? How would that have affected political decisions, or cultural developments? Would we have a Van Eyck, a Brueghel, a Rembrandt? Would we even have the development of democracy?"

"Well, we'd still have the Industrial Revolution, "Insurance says self-deprecatingly. "That wasn't based on insurance."

"You reckon? Do you not remember providing fire cover to the factories and mills? And liability insurance for the canals and railways? And you must be aware that the creation of workers' rights was inextricably linked to Insurance. And, in the 20th century, almost every business development was predicated on the existence of Insurance. Can you imagine the development of medicines without Insurance? Or the improvements in health and safety? Or aviation? Or mass production? Or the development of new products? What about hotels, container ships, radio towers, holidays, pensions? Globalised trade requires global Insurance."

"But surely the State would have stepped in."

"To an extent, but only at the expense of higher rates of tax. And, of course, without Insurance, GDP is lower."

"So, basically, everything that is good in the world is due to me," says Insurance.

"That might be overstating it", says Cuthbert quietly. "But, when you put your mind to it, you can undoubtedly be a force for social good. You see, you really have a wonderful life, Insurance."

With those words, Cuthbert realises that his work is done. The newly encouraged Insurance finds herself alone in the middle of Bedford Falls. The street is once more bustling with cars, and the shanty town has been replaced with homes and businesses, all decorated for Christmas. Of course, people still want to be hedge fund managers, and everyone still views Insurance as boring, but Insurance now just smiles.

In the distance, a church bell rings.

"There goes another ship," Insurance says.