A View From The Press Box

With one glaring gaffe, U.S. Senator Hillary Rodham Clinton inadvertently exposed one of the biggest problems facing the National Flood Insurance Program—the fact that too few outside the industry have a clue about what the coverage entails, whether they need it, or even who writes it.

Have you ever felt a burning desire to really let me have it after disagreeing with my point of view in National Underwriter magazine on insurance and risk management issues, but just didn’t get any satisfaction out of mailing, faxing or even e-mailing a response? Now's your chance! Just respond to any of my blog entries, or to the comments of your fellow readers.

Would those of you longing for federal regulation of insurance be quite so enthusiastic about having Uncle Sam overseeing your business if the National Insurance Czar ended up being Eliot Spitzer, the person whose relentless probes turned the industry upside down?

Anyone who doubts how big a risk Long Island and New York City might face should a major hurricane hit the vulnerable region need only examine the extensive damage done when the relatively mild Ernesto hit this past weekend.

I am starting to have serious doubts whether New York’s crusading attorney general, Eliot Spitzer, will ever lay a glove on Maurice Greenberg.

Why do so many people still believe TRIA is nothing but a handout to the insurance industry, when it is so obvious that the market cannot function without Uncle Sam’s support?

Sept. 11, 2001 hit those of us here at National Underwriter's editorial headquarters very personally--not only because our Hoboken, N.J. office is right across the Hudson River from the World Trade Center site, and some of us rode the PATH trains to and from that station every day, but also because so many insurance people worked at that ill-fated building. What follows is the editorial we put out on the first anniversary of 9/11. Reading it over today, it still hits hard emotionally. Feel free to add any memories or comments of your own.

In the Sept. 11 edition of National Underwriter, Joseph J. Beneducci, president and chief operating officer of Fireman’s Fund Insurance Company, argues that optional federal charters will reinvigorate the property-casualty insurance industry. Click here for the full story, and then come back to my blog to comment.

The Property Casualty Insurers Association of America made headlines a couple of weeks ago by agreeing to join with ProtectingAmerica.org to fight for a national catastrophe fund. Then they rocked the industry yesterday by announcing they were dropping out of the advocacy group. That's remarkable, but it doesn't surprise me, as insurers appear to be running around like chickens with their heads cut off when it comes to natural disaster coverage.

When I joined National Underwriter as a reporter 25 years ago today--Sept. 14, 1981--I banged out my copy on something called “three-part crash” stuffed into a Royal office manual typewriter, edited by hand. Things sure have changed--both at the magazine and in the insurance industry I've covered all these years.

I was shocked yesterday to hear Property Casualty Insurers Association of America President Ernie Csiszar abruptly announce his resignation. The move comes shortly after PCI reversed course and pulled out of ProtectingAmerica.org--the Allstate-backed group pushing for a federal mega-catastrophe fund--which PCI joined with much fanfare days before defecting.

My blog entry on Friday morning, offering my own speculation on why Ernie Csiszar so abruptly resigned last week as president of the Property Casualty Insurers Association of America, prompted some buzz from others in the market with personal knowledge of how the split actually went down.

In a column in this week’s edition of National Underwriter, Associate Editor Mark Ruquet talks about how personally he and other consumers take the use of credit scoring when their insurance policies are priced. It’s a dynamite topic, sure to generate plenty of gripes among carriers as the issue is distributed at this week’s NAMIC conference.

In last week's edition, National Underwriter ethics columnist Peter R. Kensicki reported on reader feedback to his latest challenge: What are the ethical issues raised by lawsuits over claims for wind-versus-water damage following Hurricane Katrina? I have my own thoughts on the subject, briefly outlined in this entry, but please check out the column for yourself by clicking here and then weigh in with your take on the situation.

I was very sorry to hear that Jeff Meyers--executive director for the past few years of “Trusted Choice,” the branding program of the Independent Insurance Agents and Brokers of America—would be leaving the association this week. The big question now is what the Big I will do with the program going forward.

When I posted a blog entry on Sept. 19 about NU Associate Editor Mark Ruquet's column in the Sept. 18 print edition of National Underwriter, citing on a personal level the drawbacks of allowing insurers to use credit scoring to price coverage, it created quite a stir, drawing a wide range of comments. After carefully considering how readers responded, he's weighing in with some counterpoints of his own. Read on.

My hero this month is Michael D’Arelli, vice president of legislative and regulatory affairs for the Western Insurance Agents Association, who hammered national brokers for suggesting that all producers should give up their contingency fees because of the shame brought on the industry by a notorious few in their ranks.

I am disappointed not to have gotten a livelier response to my post yesterday about a leading independent agent association official blasting big brokers who are whining over the loss of their contingency fees! I assumed agents would be venting like crazy over this, and perhaps a broker or two might step up to the plate to hammer the bifurcated compensation system in place among producers today. Credit scoring, natural catastrophe coverage, even Ernie Csiszar's shocking split from PCI drew a host of thoughtful comments, but no dice on producer compensation--one of the biggest controversies to hit the industry in recent years! Here's your last chance to weigh in before I change topics Wednesday morning.

It was pretty funny to read last week about how American International Group donated $50,000 in December 2003 through various subsidiaries to the gubernatorial campaign of New York Attorney General Eliot Spitzer, who certainly went on to bite the hand that fed him!

You would think that renewing federal reinsurance protection for terrorism risks in the short term, and establishing a permanent backup facility of some sort for the long-run, would be a no-brainer, given the potential severity and lack of predictability of the exposure involved. But then again, there is so little brain power, guts or political will in Washington these days that it's no surprise Uncle Sam is once again considering leaving the insurance industry in the lurch on this horrific risk.

For many years, independent agents were little more than policy shoppers--their sole measure of success being how low a premium quote they could get for price-sensitive clients. That’s all changed, and for the better. Indeed, as the profiles of this year’s finalists for the National Underwriter Commercial Insurance Agency Of The Year award reveal, selling a policy is often the last thing on an agent’s agenda when pitching a new client. Risk identification, loss control and alternative markets are now front and center.

NU Managing Editor Susanne Sclafane writes:

The chilly air in Hoboken wasn’t the only reminder that October had arrived as I reached my office this morning. Reports from two investment analysts reminded me that the fourth quarter has started—and that forecasts for the industry would now begin to change--particularly about pricing trends. How much should they change?

I didn't know what type of response to expect when I launched this blog last month. Would anyone actually read it? Would anyone bother to comment? I had hoped, frankly, for a few hundred loyal readers. Well, it turns out that for the first month, about 2,500 of you joined me to read my musings on the industry, generating some 15,000 hits! I am very grateful for your support thus far, and urge you to keep checking in and offering your very much appreciated feedback. We're creating a terrific community here, and I hope it keeps growing. Don't hesitate to write with ideas for blog entries or story suggestions for NU. Thanks again!

Sam Friedman
Editor In Chief
National Underwriter

Following my Sept. 28 post, "TRIA Renewal A No-Brainer," I drew a rebuke from one reader who challenged my use of quote marks around the "war" on terrorism. I meant no offense, but sought only to point out the hypocrisy of the Bush White House, which wants to have it both ways on the matter. If this is truly a "war" on terrorism, then the WTC destruction should not have been covered by policies containing standard acts of war exclusions--except for workers' comp--right? And wouldn't the debate over TRIA be moot, since all such future losses would be excluded? What do you folks think about that?

Has the insurance industry finally gotten over its Spitzer hangover? Late last month, of 260 senior executives surveyed while attending KPMG’s 18th annual Insurance Industry Conference in New York, only 16 percent said regulatory and market conduct risk posed the greatest threat to the insurance industry, down dramatically from 46 percent the year before.

NU Senior Editor Caroline McDonald writes:

The U.S. captive field is getting more and more competitive, with additional domestic domiciles sprouting up and long-time havens updating their regulations to keep pace, making the choice of where to set up shop more difficult for risk managers. But if it’s possible for a captive domicile to have all the necessary pieces in place for success, Delaware promises to come as close as any. Although several domiciles are nearly ideal, a “new and improved” Delaware just might give them a run for the money.

An insured calls to report a loss that appears to be questionable. What are the ethical responsibilities of an agent for this type of claim? Do the responsibilities differ if the producer is a broker? That’s the “Question Of Ethics” posed by NU columnist Peter R. Kensicki for his next piece, scheduled to appear in NU's Dec. 11 edition. Click ahead on this entry for more details and to respond--either right here and now, and/or for our print edition.

Last week, putting quote marks around the “war” on terrorism in my blog posting prompted heated discussion about whether insurers should pay 9/11-type claims if indeed we are at “war” with an organized group dedicated to killing our people and destroying our property. I took your comments to that posting along with my responses and used them in my editorial column for the Oct. 16 National Underwriter--both to give the issue a wider jury (our 75,000 print subscribers) as well as generate further debate. Click below to read the rest of my column and then feel free to continue the discussion under "Comments."

Hell hath no fury like a U.S. Senator scorned! That’s the message insurers heard loud and clear last week when they learned that Sen. Trent Lott, R-Miss.—who just happens to be suing his homeowners insurer—had skillfully slipped language into next year’s appropriations bill for the U.S. Department of Homeland Security requiring the agency to investigate the industry’s conduct in handling Hurricane Katrina claims.

Head's up, insurers! You're going to have a ton of explaining to do if another monster hurricane or terrorist attack doesn't come along to wipe out tens of billions of your premium dollars. The stage was already set this weekend, when The New York Times ran a story, headlined "Earnings For Insurers Soaring," which reports to the general public what the industry itself has known for quite awhile now--that "insurance companies are expecting record profits in 2006 after predictions of another year of devastating hurricanes have so far come to naught."

The battle over whether to allow Uncle Sam to directly regulate the insurance business via an optional federal charter has split the agent/broker community wide open. However, even the Independent Insurance Agents and Brokers of America has started to come around to the idea of some national regulation--but not with Uncle Sam in charge. Where do you fall in this debate?

How ironic it is that the same week a federal appeals court affirmed contradictory jury verdicts as to whether the 9/11 attack on the World Trade Center was one or two events for insurance purposes, President George W. Bush once again confirmed what I've been saying in this blog--that we are in a shooting war, not a rhetorical conflict, with terrorists. In an appearance on the "fair and balanced" Fox News, President Bush told host Bill O'Reilly: "I believe there's a group of people here in Washington...who have a different view of this war. They view it as a law enforcement matter. I view it as war." Exactly! So why can't insurers deny terrorism-related claims under the standard War Risk Exclusion?

If I had a dream job related to insurance other than my current post as Editor In Chief of National Underwriter, it would be risk manager of major league baseball. As a baseball fanatic, it was a real pleasure last spring to meet the person filling that coveted position. With the World Series starting tomorrow night, I post the column I did earlier this year about this lucky dog, for those of you who share my passion for the National Pastime. I also invite you to weigh in as to who you think will win this year's World Championship. I give my prediction at the end.

It wasn’t easy coming up with positive suggestions on how public relations and marketing executives could polish the insurance industry’s tarnished reputation. Yet I did manage to offer some advice while sitting on a panel in San Francisco during the Insurance Marketing Communications Association annual meeting last June, although I'm not sure everyone there was thrilled to hear it.

Once Eliot Spitzer is elected governor of New York, who do you think he will pick to be insurance superintendent? What qualifications should this individual have? What will their mandate be? What will the impact be on the industry?

What are we going to do with the exploding number of addicts who cannot put down their BlackBerries? Beyond their rude behavior—how many of you have tried having a dinner conversation with someone while they keep peeking furtively into their lap to catch the latest incoming message?—there is a repetitive stress factor at work here that could impact workers' comp insurers and risk managers.

I should have known that any team that could have beaten my mighty Mets would go on to win the World Series, but I, like many of you, figured wrong by picking the Detroit Tigers to take the St. Louis Cardinals. Not that many people noticed, as it drew the lowest TV ratings of any World Series in history! Meanwhile, for those of you already eager to move on to the Hot Stove League, click below to read about how an actuary is thriving in major league baseball--which is almost as dependent on statistics as are those in the insurance industry.

The $7 billion reinsurance deal between Berkshire Hathaway and Equitas is the best news for the Lloyd's market in quite some time. For while Lloyd's has taken giant steps to restructure its capital base, upgrade its internal management structure and streamline its operations, there was always a black cloud looming over its head, with some concerned about whether the market's pre-1993 loss facility would have enough pounds on hand to cover its mammoth asbestos and environmental liabilities.

I was disappointed not to get a flood of comments on my Oct. 27 posting about so many business people becoming addicted to their Blackberries! Could it be I struck too close to home? In any case, while on a Caribbean cruise for my 25th wedding anniversary last week, I could not believe how many people were glued to their laptops in wi-fi hot zones on the ship, rather than lounging with me on deck. Such behavior contradicts the whole point of going on such a trip in the first place, where one of the advantages is getting away from it all, but we're all so wired we can't shake ourselves free! I was tempted to seize one of the laptops and toss it overboard as an example to the others, but didn't want to spend my second honeymoon in the brig! And no, folks, I did not post last week's entries from the ship--I prepared three blogs in advance, and asked my able staff to post them and field all comments.

It never ceases to amaze me how for 25 years now, all I have heard is agents whining about how carriers, myopically protecting their turf, won't allow them to grasp the Holy Grail of insurance--Single-Entry, Multi-Company Interface. Yet our own tech guru, Senior Editor Ara Trembly, suggested in his column last week that perhaps apathetic agents are the ones holding back SEMCI. A week earlier, a senior CNA official in his own Final Say column argued that SEMCI and duplicate data entry (the bane of every agent's existence) are two totally different issues, and that focusing on the former might make the SEMCI debate moot.

I bet many of those at today's annual conference of the Insurance Media Association wondered what Sam Friedman, an editor, was doing up at the podium. Not that long ago, I would have wondered the same thing, as editors tend to steer clear of any meeting involving ad sales, marketing and public relations experts--not only because they don't want to be pitched en masse, but also because they fear being "corrupted" by associating with the "dark side" of the business. But as I explained in my speech, that attitude won't wash anymore in today's media-savvy environment, and I proceeded to explain why.