Insurance Industry: A Return to Professionalism Needed
July 2010
Back in March of 1981, among other music and
lyrics that I wrote, I put down a reggae song which made me feel as uncertain
then about the marketplace as I feel now. It went:
Why's your face familiar?
Have we met before?
She looked up, and simply smiled,
"I've heard that line before."
by Peter
M. Polstein
The roots of this industry have been eroded over the past 20 or more years
by a systemic and systematic loss of the values which damaged our industry as
the professional, trustworthy, and pleasant place in which to work and enjoy
both the fruits of our labor and the friends made as a result.
While, no longer actively broking business, I am consulting on a variety
of matters, the majority of which require some laborious time spent reading
contracts. IRMI published an article of mine a few years back,
"Risk Assessments and Peer Reviews," about
a peer review and risk analysis that I had the privilege to conduct on a banking
group in conjunction with an FDIC audit. Initially, I was not interested in
reviewing any of their insurance contracts until I had the opportunity to interview
key personnel and, more importantly, read key contracts.
Being at the possible cusp of another review, I have a difficult time understanding
the philosophy espoused by a number of potential clients, risk managers, agents,
and brokers that my conducting such an analysis is an imposition on counsel,
whose job it is to review these documents. I have no beef with the legal profession—with
the exception of overly verbose writings—however, I do find, on many occasions,
that little thought has been given to risk. Is this not the very facet that
provides the insurance professional's basis of understanding the client's needs,
as well as the very structure of submissions to those to whom the client remits
premium for the ostensible risk being assumed?
The Breakdown of Oversight
While I digress, it does fit my continued concerns for our industry, and
the people who labor in it. Part of the erosion has been the lack of industry
obligations in their contractual sensibilities toward their insureds, shareholders,
and the public to whom they owe an allegiance of professionalism. For the most
part, those who negotiate on behalf of their client base are basically free
from much of the criticism levied against the industry. Yet, we are the very
ones who are the recipients of the brunt of the additional workload foisted
on us as a result of a plethora of industry malfeasance and acts that can only
be characterized as criminal or of unreasonable judgment.
For the purposes of this discourse, let's eliminate the idiotic underwriting
of both Freddie and Fannie, with the government push toward disaster. Yet, out
of that came the derivative marketplace, collateral debt obligations, and a
credit rating market, whose obligation it was to censor those who offered and
assured those who purchased. Basically, these were risks, effectively not different
from many of those already in existence or in negotiation.
The villains in this charade were a wide group of financial entities who
obviously ran amuck with little supervision, if any, with a simple philosophy
of greed, and no thought of hedging what would be a catastrophic incident. Surely,
we all agree that these actions triggered the decline of our marketplace, the
stock markets on a worldwide basis, and the invasion of our industry by our
government, which continues to crank out a plethora of rules, regulations, czars,
and innuendoes from people who unfortunately have little if any working knowledge
of our industry, yet are quick to acknowledge that the solution lies in their
hands as none of us have provided a comfort level to the contrary.
What is truly unfortunate is that there have been rules and regulations covering
the vast majority of all that has occurred, yet without reasonable supervision,
we all find ourselves in this intrusive atmosphere and world of intervention.
Would it not have been simpler to just reinstitute that which has been already
instituted? Obviously, the barn door has been open for far too long; the chickens
have fled; they weren't captured; and the eggs have been left to rot.
When a Handshake Was a Promise
OK, so I rant at times, yet I would love to return to the days when broking
was a personal, professional, and substantive method of obtaining what we all
strived for—to meet the expectations of our clients. While conducting business
over a three martini lunch was not necessarily my thing, it was truly remarkable
how many deals (with underwriters being sober) that were laid out on a tablecloth,
and signed, necessitating the purchase of the cloth to ultimately advance the
deal to your insured. Or how many times did we call at closing to bind an easy
or tough risk, to have the underwriter and broker acknowledge the date and time,
and expect a binder delivered either the next morning or after the weekend?
Was this simply a moment in time? I don't think so, and the computer or Internet
should not prevent personal attention to be taken by both parties. London had
it right—if you want conduct business with me, come see me, and let's look at
each other face to face and negotiate the expectations of all parties to the
deal.
Personally, I would burn every standard form that ever was created in lieu
of providing underwriters with submissions that provided professional and sound
risk analysis, leaving one of two words as a conclusion—preferably "Yes" or
"No."
Conclusion
I am hopeful that, with a change in the current government structure, our
industry will see a more modified and sensible basis of oversight, since it
is clear that no systemic risk is apparent in the normal operation in the conduct
of underwriting and negotiating coverage. In short, let's get back to assessing
risk and broking it, rather than worrying about the next 10 pages of repetitious
cover your cotton tail rhetoric.
The second verse of six more lines was simply:
I'm serious, Love.
Is it déjà vu?
I'm not one to forget a face,
We've been here together
In another time
Or perhaps another place?
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