Posted On: October 21, 2004, 8:44 am CDT

Posted By: Chris

If Marsh placed every policy sold in the US, and every policy Marsh sold included an aspect of the illegal activities alleged (essentially bid rigging), and that illegal activity was the sole cause of inflated prices of all policies, then I would agree with MGD.

However, the probability is that not all of Marsh's book involved illegal acts, and the reality is that, while Marsh may be the biggest US commercial broker, their share of the total insurance market (all lines, sold by all types of selling models) in the US just doesn't justify the quantum leap that MGD makes in his assertion.

And, to the extent that illegal practices have increased premium, I don't thik anyone would argue that reductions are in order.

But, almost every product sold has a cost of selling associated with it. And, to be certain, the cost of sales affects pricing. But a CPCU should know that, all other things being equal, lines of coverage that have higher litigation frequency/costs are priced higher. And, lines of coverage that have unnecessarily higher litigation frequency/costs are are priced unnecessarilty higher, or are unaffordable to the majority of risks that need the coverage, or are unavailable altogether.

Tort reforms, when aimed at the unnecessary frequency/cost component of the equation, are certainly justified if it means eliminating the unnecessary higher price attendant, making the policies affordable, or making them available when they otherwise would not be.