A View From The Press Boxtag:www.property-casualty.com,2008://12008-07-22T21:13:22ZSam FriedmanMovable Type 3.32NU Names Three WC RM Award Finalists!tag:www.property-casualty.com,2008://1.4082008-07-22T16:05:11Z2008-07-22T21:13:22Z Three finalists have been chosen in the second annual “National Underwriter Award For Excellence In Workers’ Compensation Risk Management”—a program sponsored by the National Council On Compensation Insurance. Cue the drum roll and read on!...Sam Friedman
Three finalists have been chosen in the second annual “National Underwriter Award For Excellence In Workers’ Compensation Risk Management”—a program sponsored by the National Council On Compensation Insurance. Cue the drum roll and read on!]]>
here.
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It's Time To Revamp The Contingency Fee Bantag:www.property-casualty.com,2008://1.4072008-07-21T19:28:30Z2008-07-21T19:44:06Z Should all New York insurance intermediaries be denied the opportunity to earn contingent commissions because mega-brokers were forced to give up that lucrative revenue stream as part of settlements of bid-rigging allegations? I don't think so--but on the other...Sam Friedman
Should all New York insurance intermediaries be denied the opportunity to earn contingent commissions because mega-brokers were forced to give up that lucrative revenue stream as part of settlements of bid-rigging allegations? I don't think so--but on the other hand, perhaps it's time to reconsider the ban hamstringing the big firms as well.]]>
here for the complete story.)
Because all but the major brokers accept contingents, the larger firms are “operating at a competitive disadvantage,” he added. “We are constrained in our ability to compete on price with those who still accept contingents. It’s a simple fact that brokers who accept contingent commissions are essentially getting a subsidy from insurers on the prices they offer clients.”
While I can appreciate why Mr. Bailey would make such a demand, his proposed solution—a universal ban, harming those who have done nothing wrong—is throwing the baby out with the bath water.
Instead, what Willis and the other mega-brokers should be calling for is a modification of their fee bans to allow them to once again draw bonuses from insurers, but with the proviso that all compensation is transparent and carefully monitored.
That way, the playing field would be leveled without denying honest, law-abiding agents and brokers hard-earned income that might be keeping many intermediaries in business, what with straight commissions plunging along with property-casualty prices during this softening market.
After the mega-brokers were caught rigging bids, with contingency deals serving as covers for kickbacks, regulators and the New York Attorney General’s Office--led back then by the now disgraced ex-governor, Eliot Spitzer—had every right to cut off the ill-gotten fees fueling such unethical and illegal misbehavior.
However, a few years have passed, and no one ever suggested the ban on fees negotiated with the guilty parties had to be a lifetime punishment. Perhaps now is the time for the New York insurance department and AG’s office to revisit the ban.
My suggestion would be a probationary period.
First, lift the ban, but impose strict disclosure requirements on the mega-brokers upfront to clients, whether they ask about compensation or not, to discourage any shenanigans. Require other intermediaries to ask their clients if they would like more information about their compensation, but not be required to provide it unless the buyer wants to know more.
As a further, transitional safety check, have an outside firm—chosen by the AG or insurance department, and paid for by the brokerage—do a regular compensation audit, again to provide an incentive for the big brokers to keep their operations beyond reproach.
Of course, if any broker is caught abusing contingent fees or a client’s trust again, a fine and ban on such deals could be imposed.
In time—perhaps three-to-five-years—the audit requirement might be dropped for those firms with a squeaky clean record.
In this way, no intermediary is denied an honest living. After all, the New York Supreme Court’s Appellate Division last month ruled that Liberty Mutual could not be held responsible for failing to disclose payment of contingent commissions to brokers, because such fees are “not illegal.” (Click here to read that story, and here for agent reaction to the decision.)
It’s not the fees that were evil—but those who abused the privilege. The changes I’ve suggested recognize and address that reality.
What do you folks think?
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Don't Judge A Magazine By Its Covertag:www.property-casualty.com,2008://1.4062008-07-18T22:31:09Z2008-07-18T23:02:38Z As someone who recently ran an image of Vice President Dick Cheney's face in the cartoon body of Elmer Fudd to illustrate a story about coverage for wayward hunters, I sympathize with editors at "The New Yorker" who took...Sam Friedman
As someone who recently ran an image of Vice President Dick Cheney's face in the cartoon body of Elmer Fudd to illustrate a story about coverage for wayward hunters, I sympathize with editors at "The New Yorker" who took such a verbal beating this week over the publication's controversial cover satirizing all the fearsome, ignorant misconceptions about Sen. Barack Obama. For those "offended" by the image, or who find it "tasteless," I say, get over it! This country is too sensitive and politically correct for its own good.]]>
Yes, the cartoon image of presidential candidate Obama clad in what might be described as Middle Eastern garb, fist-bumping a wife drawn to look like a 1960s radical, in front of a fireplace with an American flag burning in it and a portrait of Osama bin Laden above it, is no doubt provocative.
That's the whole point--to provoke discussion and debate, hopefully heated and impassioned, about how some people in this too often clueless society see the Democratic candidate.
A good newsmagazine cover will not only make people stop on the street and do a double-take when they pass the newsstand (that's good marketing), but it will also make people stop and think about the subject matter involved, then hopefully draw them into reading more about it and perhaps even help them evolve in their thinking. (For those who do not believe in evolution, I am sorry if I''ve offended you.)
I think a big problem in this country is that people get so worked up about the smallest, most trivial and superficial campaign issues--such as who is wearing a flag pin on their lapel that day--rather than what a candidate will do in office to improve the country's well-being.
We are getting so caught up in empty symbolism and petty arguments that we can no longer appreciate what really matters.
We have big problems ahead of us. Huge problems. A war to end without leaving Iraq up the creek. A stalled economy to restart. A monster budget deficit to close. An energy policy to craft that weans us off dependence on dictatorial oil producers. A Social Security system to shore up. A health care system to reform so everyone has affordable access to decent care.
The message I drew from "The New Yorker" cartoon is that we should focus on the really important issues and not all the nonsense about Sen. Obama's relatively exotic background for a U.S. presidential candidate.
What do you folks think?
Journalism Mag Backs Bloomberg's "Hoax"tag:www.property-casualty.com,2008://1.4052008-07-17T21:19:00Z2008-07-17T19:41:22Z For years, Columbia Journalism Review has called attention to good reporting while skewering what it considers bad journalism in its "Darts & Laurels" column. Unfortunately, I believe the CJR organization deserves a "Dart" for dismissing complaints by me and...Sam Friedman
For years, Columbia Journalism Review has called attention to good reporting while skewering what it considers bad journalism in its "Darts & Laurels" column. Unfortunately, I believe the CJR organization deserves a "Dart" for dismissing complaints by me and the Insurance Information Institute about the accuracy and fairness of the "The Insurance Hoax"--the hatchet job in the September 2007 issue of "Bloomberg Markets" about the industry's claims-handling practices.]]>
here.)
The article did not win any Deadline Club awards--although, much to my chagrin, it was cited later on by the New York Press Club, with its award for consumer reporting. (I am not a member of that club and did not know the article had been nominated there, otherwise I would have protested to that group as well.)
In any case, this started a whole brouhaha.
On May 27, Matthew Winkler, Editor In Chief of Bloomberg News, wrote a letter to Tim Paradis, president of the Deadline Club and an Associated Press reporter, to "express our dismay at the way in which the integrity of the judging was compromised..." (To read the entire letter, click here.)
Mostly, they were upset about industry officials, both named (like Bob Hartwig, president of the Insurance Information Institute, who has been engaged in a nearly year-long battle with Bloomberg over the article's tone and accuracy) and others unnamed.
However, they also were pretty pissed off at me, citing my April 3 blog decrying the nomination and urging readers to protest to the Deadline Club.
"Friedman’s campaign had an impact," wrote Mr. Winkler, who characterized me in his letter as "a frequent defender of the insurance industry," as well as someone who "regularly appears as a speaker at industry functions..."
I knew Bloomberg and company would dismiss me as some industry shill. But as my loyal readers know--with many of the you in the industry having felt the sting of my pointed barbs--that's a bunch of hooey!
Indeed, any regular reader of my blog or NU column would probably be more likely to characterize me as "a frequent critic of the industry." To refresh your memory, just check out my harangues against the mega-brokers after the contingency fee abuse and bid-rigging scandal, the book-cooking by AIG using bogus finite reinsurance purchases, and, yes, the industry's often poor handling of Hurricane Katrina claims. And don't get me started about the horrors of the health insurance industry.
In addition, Bloomberg might be unaware that a substantial part of NU's readership, (15,000 subscribers) are in fact consumers--corporate insurance buyers including risk managers, CFOs and others who assess exposures and, in some cases, purchase insurance to cover them and loss control services to prevent them.
If this consumer audience ever believed that me or my magazine were shameless apologists for the insurance industry, they would send us packing. Instead, we've grown tremendously among the buyer crowd in terms of name recognition, respect and influence.
As for the fact that I "regularly appear as a speaker at industry functions," I am guilty as charged. But, frankly, who else would have me speak? As a business journalist covering the insurance industry full time, I cannot imagine a paint manufacturing conference asking me to talk about trends in their field.
Is Bloomberg suggesting I am bought and paid for by speaking fees? Perhaps, but the fact is I have never been paid to speak to any group I've addressed. (I was offered a paid gig recently, but turned it down.) I do speaking engagements to raise NU's profile and build on my reputation as an opinion leader, not to pad my bank account or solicit kickbacks from the industry I cover.
However, Bloomberg's letter did make one point that gave me pause: "Friedman never took the basic journalistic step of asking Bloomberg to comment on the 'Insurance Hoax' before he condemned it as a 'hatchet job' in his online column."
If I was working on a news story, I would absolutely agree--that's not fair. But in an opinion piece in an online blog, the journalistic ethic is murkier.
Still, it could not have hurt to seek out Bloomberg's opinion at the time. I was just so taken aback by the overwhelmingly one-sided attitude permeating the piece, as well as the way they presented their statistical "facts" and failed to distinguish the nuances within this vast industry, that I rendered my verdict based on the article as it stood--just as any reader would.
Of course, Bloomberg's people and anyone else are welcome to respond to anything I say, right here on my blog. That's what the comment section is for.
This battle--"pitting journalist against journalist," as CJR characterized it--was detailed in an July 8 onlne CJR column by Dean Starkman. As part of his "audit," he solicited my take via e-mail, and we had a rather lively but polite exchange. He also spoke with Bob Hartwig to hear out his complaints about the facts supporting the story.
Unfortunately, Mr. Starkman concluded that "a review by 'The Audit' found no significant factual errors and no errors at all involving the insurance industry. The [Insurance Information Institute's] allegations are unfounded." (You can read his entire post by clicking here.)
In his posting, he reported that "...where I saw strength, critics saw weakness. They believed the story lacked balance and unfairly used anecdotes, even if true, to tar an entire industry." A point-by-point rebuttal by Mr. Hartwig and my blistering critique failed to convince him about the article's shortcomings.
That's really too bad. We'll just have to agree to disagree.
Mr. Starkman quoted me extensively in his piece, noting that: "In an e-mail to me, Friedman says that if he influenced the [Deadline] Club, 'so be it.'”
Indeed!
He also went on to quote my e-mail in stating my main objection, which was that "...the article painted the entire industry with a single brush, which I feel is unfair, considering that the overwhelming majority of Katrina claims were, in fact, paid, and that the industry laid out tens of billions to rebuild these flood-prone areas—often when the cause, wind or flood, was not clear."
Frankly, I just chalk this up to more of the same--the fact that the bulk of those in the media covering insurance (and assessing the performance of reporters doing insurance stories) just don't understand how this business works, let alone appreciate how much it means to society and the economy.
Mr. Starkman raises the issue himself in his post.
He says that insurance is a "backwater in the mainstream business press," which is absolutely right, although I would dispute his conclusion that because of this, "its actors are thus unused to serious, arms-length scrutiny."
In fact, all the industry ever gets is negative press. Part of the problem is poor public relations by the industry. (Perhaps the Insurance Information Institute, beyond publishing their useful annual "Fact Book," should offer at least an online introductory seminar for journalists covering the industry.)
But it's also the old "man bites dog" problem--no one thinks an insurance story is news if billions in claims are paid and lives, homes and businesses are rebuilt; they only send reporters when there is a dispute of some sort.
Mr. Starkman correctly goes on to note that "insurance is a difficult beat that requires immersion in an ocean of obscure ratios and facts and long, grinding arguments over their meaning with an adroit research operation headed by Hartwig, a Ph.D. Suffice it to say that from a career point of view, most business reporters find the beat unrewarding."
The result is that insurance news--good and bad--is under-reported or blatantly misreported. And when reporters are assigned stories, too many don't know what they are talking about, or falsely assume that all insurers, as well as their adjusters and agents, are crooked.
(Mr. Starkman made another interesting point about claims metrics that is worthy of a blog of its own. I'll tackle that point next week.)
I'm sorry Mr. Starkman didn't see the Bloomberg piece my way. Perhaps I'll even be hit with one of CJR magazine's dreaded "Darts"--although I would grudgingly wear it as a badge of honor in this case. The Bloomberg article simply did not capture the "truth" behind this story. A few bad actors does not an industry make, whether the field is insurance or journalism.
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Patient, Heal Thyself!tag:www.property-casualty.com,2008://1.4042008-07-15T20:38:38Z2008-07-15T20:41:19Z With the number of people lacking medical insurance likely to keep skyrocketing now that companies are laying off employees by the thousands, I can't help but wonder whether the country's health will deteriorate as many put off seeing a...Sam Friedman
With the number of people lacking medical insurance likely to keep skyrocketing now that companies are laying off employees by the thousands, I can't help but wonder whether the country's health will deteriorate as many put off seeing a doctor, or try to diagnose and treat themselves.
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I started thinking about all this when a character on one of my favorite TV shows--"My Boys," the TBS program about a female sportswriter and the guys she hangs with--lost his job as a radio disk jockey (the station went all-electronic, letting an I-Pod pretty much run the play list!), along with his health insurance. (COBRA was no doubt available, but the guy was virtually broke, so extension at his own expense wasn't an option.)
The character--Brendan--becomes increasingly ill with some mystery ailment. But rather than seek out a doctor, which he cannot afford, he keeps scanning the Web for a diagnosis that matches his symptoms.
The self-proclaimed "Dr. Brendo" proceeds to experiment with some of the wackiest treatments imaginable, yet keeps getting sicker by the day.
It was all very funny, I suppose, except that it really rings true. With the massive amount of medical information available over the Internet today, it wouldn't surprise me if more people believe they can manage their own medical care.
Unfortunately, the reality is that people, like Brendan, who self-diagnose and treat themselves, are playing a dangerous game. Too many people live in denial, and even when they see a clear symptom, might shrug it off as no big deal. And even if they do detect a real problem, if they act on their own, they risk a misdiagnosis, and could end up getting sicker, or at least extending their illness. In some cases, they could be seriously ill and not even know it--perhaps until it's too late to do anything about it.
With the number of uninsured likely to soar during the recession, the pressure will build for national health care legislation. The question is whether the insurance industry will be part of the problem or part of the solution.
What do you folks think?
Doctors Should Provide Full Disclosure!tag:www.property-casualty.com,2008://1.4032008-07-14T19:48:46Z2008-07-14T20:20:24Z The message of a recent cartoon in "The New Yorker" was so self-evident that it didn't even require a caption. It showed a patient sitting on an examining table looking alarmed at his doctor, who was wearing a white...Sam Friedman
The message of a recent cartoon in "The New Yorker" was so self-evident that it didn't even require a caption. It showed a patient sitting on an examining table looking alarmed at his doctor, who was wearing a white coat covered with drug-maker decals. The doctor looked just like one of those race car drivers displaying all their sponsors. In this marketing-driven age of modern medicine, perhaps such attire for MDs is not such a bad idea. ]]>
After all, whenever I visit my doctor these days, I almost always see at least one, if not more, drug dealers (I mean pharmaceutical manufacturer sales reps), sitting and waiting to deliver their pitch.
Just like when you go "shopping" in the exhibit area at insurance conventions, these marketers come bearing gifts--pens, notepads, mouse pads, key chains, pretty posters...anything so the doctor (and the patients in the office) will remember their names.
I have also read about the junkets run by drug makers for doctors at plush resorts, where they attend "educational seminars" essentially touting the benefits of that particular product.
While there are no quid pro quos that I am aware of, any time someone pays your way on a glorified vacation, it's only natural if a physician might feel obliged to give the product a chance.
Indeed, doctors often dump handfuls of free samples into your lap, to move the process along. With the high price of prescriptions these days--even for those of us lucky enough to have health insurance--such freebies can be a godsend. I know one friend who depends upon such samples to keep his medicine cabinet stocked.
I am not saying that the drugs are worthless--or worse, harmful. In fact, I depend on a number of medications to keep my system in order. But you can't help but wonder whether the medicine is being prescribed because it is absolutely, positively the best drug for one's particular situation, or because the doctor feels an obligation to help their benefactors push their particular cures.
I understand that when prescribing a drug, a doctor is taking responsibility (although only to an extent, as harmful side effects are always a possibility, even with the most established medications), and I cannot imagine any doctor knowingly suggesting a medicine that isn't appropriate for a particular patient.
Still, shouldn't doctors have to disclose any incentives they receive from drug makers when they suggest a prescription? While having decals on a doctor's clothing might be going overboard, I think the idea is worth considering, especially with the marketing blitz across the media spectrum for dozens of new and established drugs targeted at consumers and their medical providers.
Of course, the best advice for any patient these days is caveat emptor--let the buyer beware. Before taking any medication, one should thoroughly research it on the Web, to at least make an informed decision.
In the old days, this was unheard of. A doctor told you to take something, and you took it, period. But times have changed, and with WebMd and the like out there, people can and should take more responsibility for their own health care decisions. (Although people can go too far when it comes to self-diagnosis and treatment. See tomorrow's blog entry for more about that.)
Given the way soaring drug costs are sending the cost of health insurance, workers' comp coverage and even auto policies through the roof, any speed bump placed in the path of runaway prescriptions is worthy of consideration. Besides, shouldn't patients know if their doctor is pushing a drug that just sent them on a golf junket in some sexy locale? What's the harm in providing such information?
What do you folks think?
Sam's Summer Reading!tag:www.property-casualty.com,2008://1.4022008-07-03T21:00:24Z2008-07-03T21:36:11Z My friends, I will be hanging up the "Gone Fishing'" sign next week, and will not be filing any new blog entries while I'm off from work. However, making like the Oprah Winfrey of the insurance industry, I thought...Sam Friedman
My friends, I will be hanging up the "Gone Fishing'" sign next week, and will not be filing any new blog entries while I'm off from work. However, making like the Oprah Winfrey of the insurance industry, I thought I would leave you with a few thoughts on some good books to read this summer, and I invite you to post your recommendations as well!]]>
American Creation," talking about key moments in the nation's founding that are usually overlooked--such as the writing of the Constitution (the second stage of our revolution!), treaty negotiations between George Washington and the Native Americans, the formation of our party system, and the Louisiana Purchase. (This book is not nearly as compelling as his earlier work, "Founding Brothers," which is a brilliant discussion of the relationship among the various Founding Fathers.)
A book that might be very relevant given the cries today for less partisanship in politics is "Team Of Rivals," the brilliant description by Doris Kearns Goodwin about how Abraham Lincoln managed to incorporate some of his most determined opponents into his government, to the country's benefit.
I also earlier this year enjoyed "The Nine," by Jeffrey Toobin, a discussion of how the Supreme Court operated in recent years--including the infamous "Gore V. Bush" decision.
I don't read a lot of fiction, but I loved the new novel by a friend of mine, Ellen Hawley, called "Open Line." It's a really interesting story about a Minnesota radio talk show host who gains national fame (and infamy) by offhandedly suggesting that perhaps the Vietnam War never really happened--a story that takes on a life of its own politically and culturally. It's a quick and fascinating read.
On the continuing education side, I highly recommend the book of another old friend, Jack Appleman, "10 Steps To Successful Business Writing." Jack, who also does training--both group and one-on-one--for insurance companies, shows how you all can write more effective claims letters, reports, memos, proposals and press releases. Jack and I go way back to when I started in journalism at "Modern Grocer," a newsweekly about the supermarket industry, and he's a terrific teacher and writing coach.
I plan to relax this month and read some classic fiction. First up is "Thunderball," the James Bond novel (I got hooked last year after having never read any of Ian Flemming's work), to be followed by "Phantom of the Opera," (which I decided to finally read after seeing the terrific new production in Las Vegas, over 20 years after seeing the Broadway show).
I've got some other good books lined up, including "Mirage" (which talks about the scientists Napoleon brought to Egypt to study their ruins and culture), "Greeks and Romans Bearing Gifts" (about the influence of the classics on the thinking of our Founding Fathers), "The Race Beat" (about how journalists advanced the cause of civil rights in the 1960s through their coverage of the battle against segregation), as well as biographies of the aviator Amelia Earhart and the artist Frida Kahlo.
What books might you folks recommend? I'll check back now and then to post your picks!
Talk to you again on July 14!!!]]>
Broadway Sammy Rose!tag:www.property-casualty.com,2008://1.4012008-07-02T19:55:10Z2008-07-03T13:18:57Z It's not every day you get a Broadway theater named after you! Thanks to all of my fans in the insurance and risk management communities for making this great honor possible!...Sam Friedman
It's not every day you get a Broadway theater named after you! Thanks to all of my fans in the insurance and risk management communities for making this great honor possible! ]]>
here.)
At least this individual was in the media business--this Samuel J. Friedman was a rather prominent press agent back in his day. A foundation run by his kids helped pay to renovate the theater that will soon carry his (our!) name!
Since I love both theater and insurance, it was a pleasure for years to meet and then cover the business of Bob and Margery Boyar, the premiere brokers of Broadway for decades. Indeed, Bob is the only insurance broker to have his caricature hanging at Sardi's!
I first met Bob and his wife back when he was struggling to place coverage for Phantom of the Opera. Seems carriers were leery about taking on the risk of that chandelier "falling" into the audience every night! He set up a seminar at the theater to show underwriters in the entertainment niche, as well as members of the press, all the safety precautions being taken to keep paying customers safe, and eventually placed the cover.
(I wonder what the brokers for the Las Vegas version had to do, what with the Phantom actually swinging from that chandelier, which is not done in the Broadway version!)
Over the years, Bob hosted a bunch of other Broadway insurance seminars, including coverage for road companies and amateur productions. It was always a treat to write about it.
Bob taught me two things about insurance and the stage. For one, he said that Broadway's motto--"The show must go on!"--is music to the ears of any broker or underwriter. But he added that insurers cringe whenever they hear someone in the theater community utter the common backstage wish for good luck: "Break a leg!"
Bob and his wife retired a few years ago, and I miss him still. Broadway ain't the same without the Boyars!!!
As I mentioned in an earlier post on hunting coverage, it is amazing how insurance and risk management considerations permeate every sector of our economy and lives! What would we do without this industry???
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Are We Getting A Snow Job On The Dollar?tag:www.property-casualty.com,2008://1.4002008-07-01T20:57:39Z2008-07-01T21:59:22Z The falling dollar is the best thing that could have happened to the U.S. economy, given today's difficult circumstances, former U.S. Treasury Secretary John Snow insisted in a speech last week in Manhattan before the insurance industry's best and...Sam Friedman
The falling dollar is the best thing that could have happened to the U.S. economy, given today's difficult circumstances, former U.S. Treasury Secretary John Snow insisted in a speech last week in Manhattan before the insurance industry's best and brightest at a gala dinner hosted by Lloyd's. While I appreciated his point, I begged to differ.
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While acknowledging that the economy is sputtering, "we'd have a real crisis if the dollar was not trading as [low] as it is now," he told the gathering. "The American economy is resting on the dollar. Exports, fueled by a cheap dollar, are the only thing keeping the economy going."
He went on about this for awhile, talking about how our booming exports are covering up a lot of other sins--such as the housing market's collapse and the explosion of debt throughout the economy.
However, during the Q&A, I once again played the familiar role of skunk at the garden party, raising the problem of soaring oil prices, and the shock waves energy costs are sending throughout the U.S. and global economies.
I noted that while it's popular to bash OPEC and other big oil producers--including our own oil companies--as ruthless profiteers, in fact the falling dollar is perhaps the biggest culprit, since oil is priced in plummeting U.S. currency. It only makes sense that if the dollar keeps dropping, oil sellers have no choice but to keep boosting their price to maintain the relative value of their precious commodity.
Therefore, I asked, isn't the weak dollar hitting our economy in the gut like a boomerang, since it ultimately means skyrocketing oil prices?
"There's no doubt there are negatives" to the falling dollar, Mr. Snow conceded. But he quickly added that on the bright side, "there are unintended benefits of higher oil prices." He noted that soaring oil costs "might alter behavior in the long term--encouraging less driving, as well as the purchase of smaller, more fuel-efficient cars."
He also said higher prices might be a wakeup call for Americans, providing both economic incentives and political cover for those seeking new oil supplies (such as drilling offshore, as well as in the Alaskan wilderness), while encouraging development of alternative power sources.
The biggest fear, Mr. Snow said, is not a falling dollar or rising oil prices, but "a political and regulatory overreaction."
"The last thing we need is a Sarbanes-Oxley-type of overreaction to the mess we're going through," he said--referring, of course, to the strict compliance demands made of companies and their officers in the wake of the Enron scandal.
"The financial markets blow up from time to time," he said, citing the dot.com and housing implosions as just two examples. "The point is that the private market reacts and compensates. The market itself corrects these mistakes, and will do so again if given time."
"We all want the dollar to come back," he concluded, "just not too fast, because that would mean a crippling recession, rather than the mild correction we are experiencing now."
Better regulation, not just more, is the best response, he advised. "We already have way too many regulators in the U.S., without any one of them knowing exactly what's going on or what to do about it. We need to streamline."
So there you have it. Like an infected individual needing a fever to burn out a contagion, we're asked to wait and let the market's "invisible hand" do its magic.
I fully understand how the U.S. has turned into a gigantic 99-cent store for the world these days, with shoppers flocking here--in person or remotely--to buy up our goods and real estate.
Feeling like a pauper with worthless currency in my pockets when I traveled to London last fall was just a temporary inconvenience we Americans must bear for the greater good.
Still, the cheap dollar leaves me very uneasy. With the people of America--and its government--running up massive debts, with no end in sight to the fiscal madness, you have to wonder at what point this whole house of cards we've built might come tumbling down.
What do you folks think?
Was Cheney Covered?tag:www.property-casualty.com,2008://1.3992008-06-30T19:45:59Z2008-06-30T20:11:15Z Did you realize that accidental shootings--like the one by Vice President Dick Cheney of a hunting companion back in 2006, which prompted hilarious comparisons to Elmer Fudd--is actually the least of the exposures facing insurers covering the risks of...Sam Friedman
Did you realize that accidental shootings--like the one by Vice President Dick Cheney of a hunting companion back in 2006, which prompted hilarious comparisons to Elmer Fudd--is actually the least of the exposures facing insurers covering the risks of the sport? That was news to me, but it made for some great reading in this week's NU cover story report by Phil Gusman. ]]>
here, and to read more about the insurance implications of Cheney's poor aim, click here.)
I realize my choice of art may get me in some hot water with Republican fans of the Veep, but I just couldn't help myself, not after recalling how the New York Post (no friend of Democrats) made hay with the story when it first happened by sporting a shot of Vice President Cheney's face photo-shopped onto cartoon hunter Elmer Fudd's body on its front page.
After reporting on the incident, the Post also ran a humorous sidebar, on "10 People V.P. Cheney Wished He'd Shot."
I am no fan of the Post as a paper of record, but I have to give their editors credit for making the news fun once in awhile. ("Headless Man Found In Topless Bar" remains its best headline.)
In any case, at the time, I wondered about the (what else?) insurance angle. Was there one? But I did not follow up...until now!
With NU reporting on sports and recreation coverage this week, I asked our reporter, Phil Gusman--himself a hunter--to look into the state of the insurance market for this niche, with an emphasis on the claims implications of the infamous Cheney shooting.
To my surprise, as I mentioned earlier, it turns out that shooting someone walking on two legs rather than four is a (thankfully) rare occurrence. When it does happen, there is indeed insurance coverage possible, which we document in the main story's sidebar.
I never cease to be amazed how insurance permeates every sector of our lives. Hunting is no exception. Whether or not you are a hunter yourself, I think you'll find the story interesting.
Feel free to file any comments--or, better yet, personal tales of great hunting mishaps! ]]>
Simon Cowell Could Give Lloyd's A PR Boosttag:www.property-casualty.com,2008://1.3982008-06-27T14:08:20Z2008-06-30T13:15:04Z It is truly amazing to me that after more than three centuries in business, virtually no one in this country outside of the insurance industry understands what Lloyd's of London really is, how it works, and what a critical...Sam Friedman
It is truly amazing to me that after more than three centuries in business, virtually no one in this country outside of the insurance industry understands what Lloyd's of London really is, how it works, and what a critical role it plays in our economy. What can be done to change that? Must Lloyd's go so far as to launch a new reality TV show to educate the American public?]]>
here.) Still, it's clear Lloyd's has a long way to go.
Charlie asked Lord Levene right off what Lloyd's is, exactly. The chairman tried to put the market's impact on the U.S. economy into context statistically, but then Charlie quickly moved on to more generic economic topics. Insurance, as usual, became an afterthought.
So, what can Lloyd's do to get its message out to a blissfully ignorant American public?
Perhaps Lloyd's must adopt the only approach the dumbed-down American viewing public appears to pay attention to these days, by producing a new reality TV program!
Put together competing syndicates staffed by totally clueless Americans. Teach them (and through them, the tens of millions of viewers the program will draw) exactly how Lloyd's works. Then let them loose and pit them against one another in a contest to see who can underwrite risks most profitably!
If you need a British-American pop icon to bridge the cultural gap, have Simon Cowell of "American Idol" infamy host it!
This would be a bit of a throwback to the days when Lloyd's was financed primarily by individual investors (those "Names" who are now an endangered species), rather than today's dominance by corporate capital.
Anyone who suspects such a program could not possibly be entertaining has obviously never sat "in the box" with a real-life underwriter at Lloyd's, as I had the pleasure of doing over a decade ago. I sat by the underwriter's side as he casually signed on for pieces of exposures totalling tens of millions--ranging from earthquake risks facing office complexes in Tokyo, to private school buildings concerned about civil unrest in South Africa.
The gentleman with the underwriting stamp took great glee in teasing the brokers who stopped by to shop their risks that day, introducing me as his shrink, on hand to observe first hand why his blood pressure was so high, his heartburn so chronic, and his personality so manic. Too bad there were no TV cameras there to record it!
All kidding aside, it's terrible that Lloyd's is not only so misunderstood in this country (quick, how many "civilians" would realize that Lloyd's is a market, not an insurance company?), but that it is so unappreciated.
At the dinner on Wednesday, New York Gov. David Paterson noted in his speech that New York City would have been up the creek after Sept. 11, had Lloyd's not coughed up over $11 billion in insurance claims. He also pointed out that Lloyd's is covering many of the reconstruction projects on the World Trade Center site today.
But who else outside of the governor and the insured parties knows about this?
What do you folks think?
]]>
Paterson Pitches For N.Y. Insurance Exchangetag:www.property-casualty.com,2008://1.3972008-06-26T14:30:06Z2008-06-26T15:02:14Z New York Gov. David Paterson started a buzz in the market last night by voicing his strong interest in reviving an insurance exchange modeled after Lloyd's of London, which hosted the gala dinner where the governor made his pitch....Sam Friedman
New York Gov. David Paterson started a buzz in the market last night by voicing his strong interest in reviving an insurance exchange modeled after Lloyd's of London, which hosted the gala dinner where the governor made his pitch. The question circulating around the room was whether a new exchange could succeed after its predecessor crashed and burned over 20 years ago.]]>
For those of you not fortunate enough to have spent 27-plus years covering this business, as I have, and who might not recall the New York Insurance Exchange, the facility debuted in 1980 as a syndicated, subscription-based market modeled after Lloyd’s of London, to write both specialized risks as well as reinsurance.
It was conceived during a capacity crunch, but folded seven years later, the victim of a softening insurance market, capital shortages and poor underwriting, among other problems cited by critics.
However, Gov. Paterson, in his speech last night, said the time might be right to resurrect the exchange because the investment infrastructure is so different today than it was in the 1980s.
“We have private equity funds and hedge funds and other investment funds that might be eager to place their capital in the insurance business right here in New York,” he said. “An exchange would provide such an opportunity. This would be complementary to what Lloyd’s does on its side of the ocean.”
The exchange could create new capacity for hard-to-place risks--such as terrorism--as well as bolster New York’s position as a dominant player in the insurance world, Gov. Paterson noted.
After the dinner, New York Superintendent Eric Dinallo—who first raised the possibility of reactivating an exchange facility back in February—confirmed that he is indeed exploring the option seriously.
“It’s something we’re taking a close look at,” he told National Underwriter. “It’s very preliminary, but the fact is that covering non-correlated risks via an insurance syndicate as part of a central exchange might prove to be very attractive to investors.”
It's important to note that it wouldn't take much, legally at least, to revive the exchange. In fact, although the original exchange folded back in 1987, the law authorizing creation of such a facility remains on the books.
The biggest question, then, is whether having another N.Y. Insurance Exchange is a good idea.
Specialty market brokers and reinsurance intermediaries might certainly be interested, as the exchange could provide capacity in certain challenging lines. Buyers always benefit from more competition as well.
With all due respect to Lloyd's, perhaps this might be one way to keep more insurance capital in the United States, much like the expansion of Vermont and other domestic captive domiciles offered risk managers an alternative to doing business in Bermuda, the Cayman Islands or other foreign havens.
However, some of those attending last night's dinner at the elegant St. Regis Hotel--an all-star cast of top players from across the industry--while voicing cautious optimism and genuine curiosity about how the idea might play out, warned that recreating an exchange would be far easier said than done.
A big part of the problem with the last exchange was the underwriting talent employed, a few at the dinner observed.
Others said the facility drew far too much "naive capacity"--investors who had no clue what they were getting into. When the market softened back then, prices plummeted, underwriters chased accounts off the proverbial cliff, and the exchange was discredited before eventually going belly-up.
It's true that there are far more sophisticated institutional investors in the insurance market today--just look at the replacement of individual "Names" with corporate capital at Lloyd's, as well as the growing use of catastrophe bonds.
But one must also take note of the debacle in the subprime lending market, in which very sophisticated institutional investors--eager for bigger yields in a low interest rate environment--blindly signed on for huge exposures via collateralized debt obligations backed by reckless homeowner loans.
It doesn't take much of an imagination to see similar woes befalling naive investors in a new insurance exchange.
One person at the dinner very familiar with Equitas--the facility formed by Lloyd's to run off long-tail claims that nearly ruined that venerable market's reputation--suggested that while it might be easy to raise capital for such a venture, it might not be so easy to recruit the high-grade talent necessary to run it effectively.
I suggested that you'd also need to mutualize the liabilities somehow--the way Lloyd's does with its Central Fund--so insureds would be confident their claims would be paid no matter what.
I also wondered how would such a facility be regulated--with the state insurance department looking carefully over the shoulders of its managers and underwriters, or via some semi-self-regulatory structure, such as at Lloyd's?
In any case, Gov. Paterson brought up an intriguing possibility--one well worth exploring.
What do you folks think?
Fraud Investigators Of The Insurance World, Unite!tag:www.property-casualty.com,2008://1.3962008-06-25T16:19:53Z2008-06-25T17:09:19Z When we posted a news story yesterday reporting that "anti-fraud associations representing both the property-casualty and health insurance sectors will pool their resources to increase detection and prevention of health care fraud," the first question that came to mind...Sam Friedman
When we posted a news story yesterday reporting that "anti-fraud associations representing both the property-casualty and health insurance sectors will pool their resources to increase detection and prevention of health care fraud," the first question that came to mind was, what took them so long? ]]>
here.)
I suppose I should not be surprised that the p-c and health-disability insurance sectors were off on their own all this time in trying to prevent fraud. While the public perceives the "insurance industry" as two sides of the same coin, the p-c and life-health groups have long operated as if they were two different currencies altogether.
Working together as part of a new "Consortium to Combat Medical Fraud" makes a lot of sense, since they have a common enemy--soaring medical expenses, particularly for prescription drugs, with an unhealthy chunk generated by inflated and fake claims.
With loss costs for auto and workers' comp insurers being forced up by skyrocketing medical bills, it's a wonder no one thought of this earlier.
Honest buyers should benefit. Indeed, most policyholders would be mortified if they realized how their premiums rise to compensate for fraud, thus subsidizing the criminals in their midst.
According to the story by our own Phil Gusman, the Coalition Against Insurance Fraud, the National Insurance Crime Bureau and the National Health Care Anti-Fraud Association will join forces to "share information, organize joint education initiatives and work collaboratively with law enforcement to fight fraud that often crosses over between the p-c and health insurance sectors."
The groups cited a common interest in rooting out "unscrupulous medical providers, who "routinely engage in schemes such as fraudulently billing for services that are not provided, and defraud all segments of the insurance industry that provide compensation for illness and injury."
The associations vowed to work together to cross-match claims and data in an effort to uncover fraud schemes that cross over from one insurance sector to another.
Dennis Jay, executive director of the Coalition Against Insurance Fraud, pointed out the timeliness of this collaborative effort, given that fraud rings tend to be more active when the economy is in the tank.
“Never before have different parts of the insurance system cross-pollinated to seek new ways to prevent fraud," declared Louis Saccoccio, executive director of NHCAA. "This approach will break down barriers and increase awareness across insurance lines so that we share information and coordinate our approach more systematically.”
All I have to say is, it's about time!
What do you folks think? Will this joint effort pay quick dividends?
]]>
A Plea For Sanity On Global Warmingtag:www.property-casualty.com,2008://1.3952008-06-24T19:51:17Z2008-06-24T21:36:18Z Some of you have taken me to task, while others have agreed with my concerns about mankind's impact on climate change and its consequences for insuers and all those they cover. Today, I steer you to my fellow NU...Sam Friedman
Some of you have taken me to task, while others have agreed with my concerns about mankind's impact on climate change and its consequences for insuers and all those they cover. Today, I steer you to my fellow NU blogger, Ara Trembly, writing about how the senior meteorologist at AccuWeather.com threw down the gauntlet in an open letter to the presidential candidates, calling for an unbiased look at the alleged phenomenon. Check it out and feel free to weigh in on both blogs by clicking here.
]]>
This Blog Entry: 508 Wordstag:www.property-casualty.com,2008://1.3942008-06-23T14:35:23Z2008-06-23T16:52:51Z Talk about sticker shock! When I walked into my local Dunkin Donuts, staring me in the face, in huge type, were the obscene calorie counts for all my favorites--including 340 calories for a chocolate-glaze donut, and 660 for a...Sam Friedman
Talk about sticker shock! When I walked into my local Dunkin Donuts, staring me in the face, in huge type, were the obscene calorie counts for all my favorites--including 340 calories for a chocolate-glaze donut, and 660 for a chocolate chip muffin! Thanks to New York Mayor Felix Unger (I mean, Michael Bloomberg), all fast-food eateries must now prominently warn its customers just what they are getting into when they stuff their faces with junk food. I suppose this is good risk management...Or is it merely obnoxious?]]>
I don't quite know what to make of this Bloomberg initiative. On the one hand, in both insurance and risk management, information is power. If you can quantify a risk to determine the odds or cost of something going wrong, the exposure is a lot easier to manage. Having hard numbers handy also helps sell senior management on the importance of loss control and safety.
As risk managers of our own lives, having food content broken down on labels helps us make informed decisions about what to eat, and to be more aware of the potential consequences. Bloomberg's crusade to label all calorie counts (he is trying to extend his fast food awareness program to regular restaurants) speaks to that.
On the other hand, sometimes I would rather just be left in the dark. I know a donut is not good for my waistline, and probably is not the smartest food choice, but I like one now and then. Yet after being confronted with that calorie count, I don't know if I can ever wolf down a chocolate glaze again guilt-free.
That's no doubt Bloomberg's goal--to get people to stop and think about what they are eating, and to make better choices. It's for our own good, as our parents used to say.
Yet I am no longer a child, and don't want to be treated like one. That's the darker side of this initiative--Bloomberg as Big Daddy, scolding us about our lifestyle choices. Is this really any of his business?
I can still have my donuts, of course. Unlike when Bloomberg arranged to have trans-fat removed from all food preparation, donuts have not been banned. But his kill-joy warnings have spoiled the whole donut experience for me.
The worst was last week, when I attended Opening Night of my beloved Brooklyn Cyclones. To my horror, the concession stands at Keyspan Park had calorie counts listed for all the staples--hot dogs, french fries, pizza, pretzels, etc. (I won't reveal the numbers so as not to spoil your next ballpark culinary experience.)
Who wants to worry about such things at a baseball game?!? (Keyspan, in keeping with the spirit of Bloomberg's healthy eating campaign, now offers three types of low-fat salads. Somehow, singing "Take Me Out To The Ballgame" ain't the same with a salad sitting in your lap!)
Risk management is wonderful, but sometimes one can have too much of a good thing, whether that be donuts, hot dogs or risk management!
What do you folks think???
New York Gov. David Paterson started a buzz in the market last night by voicing his strong interest in reviving an insurance exchange modeled after Lloyd's of London, which hosted the gala dinner where the governor made his pitch. The question circulating around the room was whether a new exchange could succeed after its predecessor crashed and burned over 20 years ago.]]>
For those of you not fortunate enough to have spent 27-plus years covering this business, as I have, and who might not recall the New York Insurance Exchange, the facility debuted in 1980 as a syndicated, subscription-based market modeled after Lloyd’s of London, to write both specialized risks as well as reinsurance.
It was conceived during a capacity crunch, but folded seven years later, the victim of a softening insurance market, capital shortages and poor underwriting, among other problems cited by critics.
However, Gov. Paterson, in his speech last night, said the time might be right to resurrect the exchange because the investment infrastructure is so different today than it was in the 1980s.
“We have private equity funds and hedge funds and other investment funds that might be eager to place their capital in the insurance business right here in New York,” he said. “An exchange would provide such an opportunity. This would be complementary to what Lloyd’s does on its side of the ocean.”
The exchange could create new capacity for hard-to-place risks--such as terrorism--as well as bolster New York’s position as a dominant player in the insurance world, Gov. Paterson noted.
After the dinner, New York Superintendent Eric Dinallo—who first raised the possibility of reactivating an exchange facility back in February—confirmed that he is indeed exploring the option seriously.
“It’s something we’re taking a close look at,” he told National Underwriter. “It’s very preliminary, but the fact is that covering non-correlated risks via an insurance syndicate as part of a central exchange might prove to be very attractive to investors.”
It's important to note that it wouldn't take much, legally at least, to revive the exchange. In fact, although the original exchange folded back in 1987, the law authorizing creation of such a facility remains on the books.
The biggest question, then, is whether having another N.Y. Insurance Exchange is a good idea.
Specialty market brokers and reinsurance intermediaries might certainly be interested, as the exchange could provide capacity in certain challenging lines. Buyers always benefit from more competition as well.
With all due respect to Lloyd's, perhaps this might be one way to keep more insurance capital in the United States, much like the expansion of Vermont and other domestic captive domiciles offered risk managers an alternative to doing business in Bermuda, the Cayman Islands or other foreign havens.
However, some of those attending last night's dinner at the elegant St. Regis Hotel--an all-star cast of top players from across the industry--while voicing cautious optimism and genuine curiosity about how the idea might play out, warned that recreating an exchange would be far easier said than done.
A big part of the problem with the last exchange was the underwriting talent employed, a few at the dinner observed.
Others said the facility drew far too much "naive capacity"--investors who had no clue what they were getting into. When the market softened back then, prices plummeted, underwriters chased accounts off the proverbial cliff, and the exchange was discredited before eventually going belly-up.
It's true that there are far more sophisticated institutional investors in the insurance market today--just look at the replacement of individual "Names" with corporate capital at Lloyd's, as well as the growing use of catastrophe bonds.
But one must also take note of the debacle in the subprime lending market, in which very sophisticated institutional investors--eager for bigger yields in a low interest rate environment--blindly signed on for huge exposures via collateralized debt obligations backed by reckless homeowner loans.
It doesn't take much of an imagination to see similar woes befalling naive investors in a new insurance exchange.
One person at the dinner very familiar with Equitas--the facility formed by Lloyd's to run off long-tail claims that nearly ruined that venerable market's reputation--suggested that while it might be easy to raise capital for such a venture, it might not be so easy to recruit the high-grade talent necessary to run it effectively.
I suggested that you'd also need to mutualize the liabilities somehow--the way Lloyd's does with its Central Fund--so insureds would be confident their claims would be paid no matter what.
I also wondered how would such a facility be regulated--with the state insurance department looking carefully over the shoulders of its managers and underwriters, or via some semi-self-regulatory structure, such as at Lloyd's?
In any case, Gov. Paterson brought up an intriguing possibility--one well worth exploring.
What do you folks think?