IRMI Update—Issue #43
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
June 18, 2002
In This Issue
Colleague,
A recent article in Risk Management and Insurance
Review piqued my interest. In "The
Loss of the Certainty Effect," authors Richard and Barbara Stewart,
principals of Stewart Economics, Inc., assert that, "Recent changes in the commercial
property-liability insurance business have made it unlikely that large claims
will be paid promptly and willingly." They conclude that, "If insurance were
seen by customers as less than fully certain and reliable, the resulting discounting
of its value—and hence buyers' willingness to pay for it—would be much deeper
than one would expect." They predict that unless the industry takes action to
regain customer confidence, commercial insurance will spiral into a scenario
of discounting premiums, denying claims, and losing both credibility and customers.
I think the Stewarts' article is on target in illuminating a fundamental
problem with the industry that's worried me for years. Have insurers forgotten
their product is not insurance policies, but the elimination of risk through
the payment of claims? Has the basis for determining whether a claim should
be paid or fought become the size of the claim rather than the policy language?
If claims are the product, why does it seem that some insurers always look for
ways to deny them or, if they must pay, drag their feet as long as possible?
If claims are the product, shouldn't adjusters be the most respected and highest
compensated people in the business? Unfortunately, I fear most professionals'
answers would not reflect well on the commercial lines insurance industry.
I think the Stewarts have pinpointed what may be the most significant long-term
threat facing the insurance industry. Too many legitimate claims are challenged
or delayed for no legitimate reason. If insurance purchasers conclude the risks
of collecting on legitimate claims are too great, they will reduce the price
they are willing to pay for insurance. Over time, this could threaten the viability
of the industry.
So what do you think? Is it becoming so difficult to get commercial lines
claims paid that the value of insurance coverage is being significantly diminished?
Would it be possible for an insurer to differentiate itself in the marketplace
by adopting a more liberal claims payment philosophy? Or, are the Stewarts off
base with their hypothesis? [See reader comments.]
Have a great day!
Jack
Jack P. Gibson
President
IRMI
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Create Opportunities To Settle General Liability Claims. The mantra of the personal injury defendant is either "settle the claim or defend
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By: Christopher Gullen
Executive Vice President
James E. Logan & Associates, Ltd.
West Bloomfield, Michigan
E-mail: crgullen@aol.com
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Predecessor Firm Coverage—In
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