Not to protect the insurance industry, which I know nothing about, but how does their hypothetical failure, misery and bailout relate to, or validate the study in question?

Criticism: Academia fails to model the real world, in contrast to industry ("is way behind industry").

Response: An entire industry of competing and well-funded actors that specialize in modeling and predicting expensive failure states also failed to model the world accurately.

Implication of Response: Where is the evidence that this is inferior to industry?

>>Implication of Response: Where is the evidence that this is inferior to industry?

A meta implication is that expert models were insufficient to inform decisions.

Well, even if they did they'd ask for it because they know they'd likely get it. And then what exactly is the incentive to account for it and pay for it with your own money if you can not account for it and get money from the government if anything bad happens?