Posted On: March 8, 2005, 2:00 pm CST

Posted By: TOM

An excellent article by Mr. Buffett. In addition to his obvious high level of intellegence, he possesses and extraordinary level of good old fashioned common sense, logic, honesty, and conservatism, and he obviously applies all of these attributes and principals in all of his business dealings.

Having said all that his article nevertheless forces me to reiterate a point I have commented on in the past.

Mr. Buffett does an excellent job of explaining why CEO'S of especially publicly held companies make some of the bad decisions they make when it comes to inadequacy of rates, non-prudent underwriting and under reserving, amongst others.

It is very obvious that this ridiculous practice will never be controlled by the industry itself, however as I have stated in the past, if the respective departments of insurance would adequately inforce the basic rule which states that "rates cannot be excessive, inadequate, or discriminatory", and in addition if the respective regulators made sure that all companies held to a conservative approach to adequate reserving practices, then we would end up with a level playing field wherein all participants competed on the basis of who did the best job of management which would also result in the highest level of customer satisfaction. Everyone wins with this approach and I believe Mr. Buffett would readily agree that in the long run the consumer would realize a lower cost of insurance and those dreaded hard market cycles would be a thing of the past.