Insurance: Feed the beast but ignore the elephant

Insurers are so desperate to maintain GWP that they will forego underwriting profit in its pursuit!

Every time the premium bar rises it benefits them but hurts individuals, households and businesses…in short the whole economy! This is how skewed the “logic” of the prevailing culture in financial services has become. And, believe me, they are comforted by the fact that Politicians, FSA and the general public concern themselves with “effect” rather than dealing with “cause”:

A morally corrupt corporate culture.   

The secondary industries that have sprung up around insurance claims – in particular motor accidents – bear testimony to this culture. Massive costs come back around to policyholders in the form of increased premiums. No surprise there then but did you know that much the costs come about as a result of insurers’ desire to secure income from lawyers who are happy to pay for details of claimants. Still not too shocking!?

How about if the insurer who may end up making payments is the same one that  is selling the details of a third party intent upon pursuing a claim, (for damages, personal injury) against them??? That’s right. Read it again if you need to but that is how it is!

An interesting article in a recent issue of Scotland on Sunday: Scottish drivers pay price for English law, touched upon the wider issues but contained this “alarming” quote from one company spokesman:

“someone is going to make money out of this referral. If there is going to be a claim anyway, it might as well be us.”

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How complexity spilled the oil

Satellite image showing us the sun reflected b...

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Notice for regular readers (thanks!) I did not write or influence this headline in any way. If you follow the link you will see it is all the work of one of the most authoritative sources global research companies, Forrester, via the, ever reliable, Computerworld who will keep you up to date on IT and general “geekery”.

If the subject matter looks familiar that is precisely because IT IS! I have written about this specific incident in the blog on several occasions and from a couple of perspectives, going back to the days when it wasn’t fashionable NOT to have a daily dig at BP and poor wee Tony Hayward: a man whose, now legendary, gift for miscommunication, could have been learnt at piñata finishing school!!!

They had just placed themselves, respectively, in the positions of “Big bad Corporate” and “sacrificial lamb” for an outraged global population and US administration desperate to find someone to BLAME. WE already suspected that so much of that rhetoric was about deflection…we ALL knew, from the collapse of global banking, that, when it came to Corporate activities, regulation was a fallacy, only an effective smokescreen and that risk management perceived a mere drain on potential profit and bonus potential…therefore tax revenue!

Current societies…are characterised by their extreme complexity at a moment in history in which traditional political institutions have lost much of the power, a power which has now passed into the hands of multinational companies with their relocation strategies. In this situation, a growing deregulation can also be observed which, in turn, redounds in the appearance of new risks and uncertainties.

Ulrich Beck

The best any of us concerned citizens could hope for was that this incident would be, not so much a disastrous oil spill as an inglorious watershed.

The Gulf oil spill of April 2010 was an unprecedented disaster. The National Oil Spill Commission’s report summary shows that this could have been prevented with the use of better technology. Read more of this post

More evidence of the need for cultural change

self evident 

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We already know, from the number of cases that have been exposed in the last few years, how banks, oil companies, insurers, aerospace, construction, motor manufacturers, Politicians, even nations and Churches have misrepresented themselves. Preferring to spend [and spend big] to create and maintain the illusion of respectability, quality, integrity, even piety!  Employees becoming dis-engaged. Prudent and dissenting voices silenced, even, “dismissed”.

Business has made itself just another victim of a culture of its own making. One of opacity and excess complexity.

FTSE 100 companies analysis reveals a lack of transparency over risk in most annual reports. Let’s face it this isn’t really news is it? Nor is it bounded by national borders! No surprise either that BP are cited in the article but, whilst their, justifiably, much maligned CEO came in for some real stick from US Senators I thought his “performance” more credible than that of the Goldman Sachs CEO! Apparently he knew next to nothing, couldn’t remember much about anything related to strategy, transactions, conversations with Treasury Officials, etc. where there may have been some scope for further implicating GS and [the clincher] struggled to see too much wrong in “stealing” money from US taxpayers in the guise of bailout payments to AIG!!!

“Risk identification and management discussion still seems to be difficult for companies to convey in a relevant and informative manner with some reports providing very little in detail in terms of risk management regarding who is responsible, what the process is and some practical examples of how risks are managed throughout the business.”

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Insurance Brokers: Read the signs and act…or risk being left behind!

Extracts taken from the June 2009 edition

OK, so YOU know where you want the business to go and, hopefully, have a clear idea of HOW to get there but that is only the start of the process.

Even in large organisations, the latter is not necessarily true! Many brokers who have started down this path have realised very early on that quantifying how success will look is easy. Plotting a course can be relatively straightforward too. Identifying and developing the opportunities should not be difficult for experienced brokers. From my own experience, that is where the trouble starts… Read more of this post