Very interesting comments…and I agree with them 100,000%. 22 year vet on the agency side here…trained by two of the best…one focused me on processing and handling accounts…the other on “underwriting”. I owe much to these two ladies, one of whom is still active in the industry. Over the years I have seen many come along on all levels of management who simply do not belong in the industry let alone in management.
Insurance has been watered down drastically and I do not see it turning anytime soon.
I consider “CE” to be a great time to grow myself…I remember one agency owner who viewed time away from the desk for “CE” to be lost time. He even purchased a computerized system that allowed us to do “CE” in house…he printed off all the potential questions and their answers. We were instructed to use the cheat sheet. 8 hours of “CE” would fly by in about 30 minutes.
I could go on forever with stories..bottom line is this industry is in trouble unless it changes the way we look at ourselves and make change….hard as it is.
As a 26 year veteran of the industry, I found myself nodding at several of Mr. Smith’s comments. I wish to offer some additional observations, either in support to his comments or in addition to them.
There were, not so many years ago, several well known names of P&C companies that had very good training programs. Names like AEtna, USF&G, Continental. Remember the AEtna School in Hartford, CT? It took up a whole city block. These companies understood the benefit of a good underwriting foundation, but got themselves caught up, to some degree or another in that cashflow underwriting. That certainly has been part of the industry’s problems as Mr. Smith suggests. And with the longest soft market cycle in the history of the industry, there certainly are several underwriters and managers whose only experience is “what price will it take to win the deal.”
But there were other problems as well. There were liabilities that the industry never anticipated; the pollution claims, the asbestos claims, the terrorism claims, notwithstanding what the trial lawyers say. And there will continue to be these types of surprises. All the more reason for a sound underwriting foundation. The business is all about the intellectual capital. We have to stop looking at underwriters and claims adjusters as so many points of the expense ratio. The ARE the business.
There have been companies that have dabbled where they ought not to have gone, thinking that their assets would be protected by an MGA with experience in that field. This only seems to work well when the MGA’s revenues are directly and substantially tied to the company’s profits.
Another issue is our comparative lack of embracing of technology. Heck, if it weren’t for Y2K, we would still have many legacy systems written in COBOL (and probably still do, just tweaked). Despite ACORD’s multiple decades effort, we still can not even agree on standards of data communication. As an industry we have to make a commitment to integrated automation, and I mean integrated throughtout the distribution channels. Our systems schematics have got to stop looking like plates of spagetti. They have got to flow from the producer to the company, the company to the reinsurer, the reinsurer to the retrocessionaire and back; and from quoting to binding to booking to ceding, and to claims processing.
If we don’t figure it out, someone else will become the 800 pound gorilla on the street and their name is likely to be Wachovia, or BB&T, or Bank of America.
YES!! You hit it! I too started in the 60’s and agree with what you are saying. I believe the industry has lost vision, direction and just plain common sense; it will self-destruct in the near future with everyone pointing fingers at the lawyers, courts, legislatures, everything and everyone but at their own actions.
This is an insightful series of articles. What struck me is Mr. Smith’s courage in making frank, critical comments and assessments while he is still employed and active in the industry. But I recently met Mr. Smith, so I’m not surprised.
I thank him for reflecting on his experience and sharing the conclusions he drew from the process.
Very interesting comments…and I agree with them 100,000%. 22 year vet on the agency side here…trained by two of the best…one focused me on processing and handling accounts…the other on “underwriting”. I owe much to these two ladies, one of whom is still active in the industry. Over the years I have seen many come along on all levels of management who simply do not belong in the industry let alone in management.
Insurance has been watered down drastically and I do not see it turning anytime soon.
I consider “CE” to be a great time to grow myself…I remember one agency owner who viewed time away from the desk for “CE” to be lost time. He even purchased a computerized system that allowed us to do “CE” in house…he printed off all the potential questions and their answers. We were instructed to use the cheat sheet. 8 hours of “CE” would fly by in about 30 minutes.
I could go on forever with stories..bottom line is this industry is in trouble unless it changes the way we look at ourselves and make change….hard as it is.
As a 26 year veteran of the industry, I found myself nodding at several of Mr. Smith’s comments. I wish to offer some additional observations, either in support to his comments or in addition to them.
There were, not so many years ago, several well known names of P&C companies that had very good training programs. Names like AEtna, USF&G, Continental. Remember the AEtna School in Hartford, CT? It took up a whole city block. These companies understood the benefit of a good underwriting foundation, but got themselves caught up, to some degree or another in that cashflow underwriting. That certainly has been part of the industry’s problems as Mr. Smith suggests. And with the longest soft market cycle in the history of the industry, there certainly are several underwriters and managers whose only experience is “what price will it take to win the deal.”
But there were other problems as well. There were liabilities that the industry never anticipated; the pollution claims, the asbestos claims, the terrorism claims, notwithstanding what the trial lawyers say. And there will continue to be these types of surprises. All the more reason for a sound underwriting foundation. The business is all about the intellectual capital. We have to stop looking at underwriters and claims adjusters as so many points of the expense ratio. The ARE the business.
There have been companies that have dabbled where they ought not to have gone, thinking that their assets would be protected by an MGA with experience in that field. This only seems to work well when the MGA’s revenues are directly and substantially tied to the company’s profits.
Another issue is our comparative lack of embracing of technology. Heck, if it weren’t for Y2K, we would still have many legacy systems written in COBOL (and probably still do, just tweaked). Despite ACORD’s multiple decades effort, we still can not even agree on standards of data communication. As an industry we have to make a commitment to integrated automation, and I mean integrated throughtout the distribution channels. Our systems schematics have got to stop looking like plates of spagetti. They have got to flow from the producer to the company, the company to the reinsurer, the reinsurer to the retrocessionaire and back; and from quoting to binding to booking to ceding, and to claims processing.
If we don’t figure it out, someone else will become the 800 pound gorilla on the street and their name is likely to be Wachovia, or BB&T, or Bank of America.
Mr. Smith, enjoy your retirement.
YES!! You hit it! I too started in the 60’s and agree with what you are saying. I believe the industry has lost vision, direction and just plain common sense; it will self-destruct in the near future with everyone pointing fingers at the lawyers, courts, legislatures, everything and everyone but at their own actions.
This is an insightful series of articles. What struck me is Mr. Smith’s courage in making frank, critical comments and assessments while he is still employed and active in the industry. But I recently met Mr. Smith, so I’m not surprised.
I thank him for reflecting on his experience and sharing the conclusions he drew from the process.