N.Y. AG Suggests Off-Shore Insurers, Rating Organizations, Insurer Investments Next Targets

November 16, 2004

  • November 16, 2004 at 1:45 am
    I David Gordon says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Boy, does this miss the point.
    Great Britain, France, Germany, Italy and Japan are also “off shore”. The term is misused and inapproriate for the purpose of discussing honesty and financial security.
    We have seen many US failures (Reliance & Phico to name two) that were purely “on shore” and the KWELM debacle occurred in London.
    The real issue is integrity and decency, not locale.

  • November 16, 2004 at 1:57 am
    JB says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Spitzers comments:

    “With investments comprising the lion’s share of insurance company earnings, we need to ask ourselves to what extent are investment and interest rates driving premiums and what manner of disclosure is appropriate here.”

    Since the industry has not posted an aggregate combined ratio below 100 in 30 years, obviously 100 percent of the premiums are being used to pay claims & expenses. If it weren’t for investment opportunities, there would not be insurance companies.

  • November 16, 2004 at 2:00 am
    Boo says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    First – I totally agree with Offshore
    Second – it is entirely the fault of the US that there is such concentration in the broker market as the DoJ approved all the acquisitions despite prevailing antitrust legislation
    Three – was this man born pissed off or what?

  • November 16, 2004 at 2:13 am
    MM says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    If disclosure is in order, let’s not discriminate by making it only our industry.

    I would like to see what Wal-Mart pays for an item as opposed to what they sell it for.

    Of course we should not forget the auto industry with their dealer incentives and hold back. Isn’t this the same as what we are talking about with the insurance industry?

  • November 16, 2004 at 2:18 am
    Dr. Paul CPCU, CEBS says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    OK the contingent commissions piece was
    long overdue. But, Spizer has the big head now and better quickly
    understand the good that the global
    ceding of reinsurance risks does. Greenspan talks about and understands that we need global spread of risk for economic recovery. ALSO, we all understand that we are in an age of global economic expansion to be competitive with foreign rivals. Fedeal government going after legally formed foreign insurance businesses that are operating within US tax law would be caving in and a throw-back to protectionist insurance strategies typical of New York state.

  • November 16, 2004 at 2:24 am
    STEVEN SCHOUWEILER says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    His comments merely highlight the fact that he doesn’t understand the insurance or reinsurance industry. Bid rigging, OK that is a crime of a fiduciary nature but this now seems to have taken a life of its own on. From Spitzer’s comments the entire insurance industry (both on-shore and off-shore) are populated with felons. Rate setting is not a mystery as he would think, perhaps it is merely beyond his comprehension. Tort reform in reverse!

  • November 16, 2004 at 2:26 am
    b altman says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    MM got it right. Why don’t they investigate the profit everyone makes. Why don’t they do something that is important like REALLY investigating politicians, caddy’s (do they report tips?), do the taxpayers get their moneys worth on government employees (for example is it cost effective that they are on govt payroll than the “DOLE”- this does not include the armed forces, police dept., fire dept. and other people that put their lives on the line for us.

  • November 16, 2004 at 2:40 am
    holy cow says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    The way this is headed, we won’t be able to find insurance anywhere. This guy is so far off base now, I am not sure that we will ever see reality from him.

  • November 16, 2004 at 2:59 am
    PWT says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    To say that “favoritism, secrecy and conflicts” rule the insurance industry is very short sighted. He obviously doesn’t understand the industry. We have one of the most competitive industries on the planet.

  • November 16, 2004 at 3:06 am
    CV says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    If Spitzer is successful in bludgeoning the insurance marketplace into whatever shape he deems “moral”, is there the real likelihood of a diminished insurance capacity (who wants to have their distribution, products and services held hostage?) and ultimately, higher prices for the policyholder (think of all the prospective defense and settlement costs being baked into premiuum and risk financing options)? Certainly, wrongdoing should be punished and it is clear that there are lots of greedy folks out there. But he seems unconcerned with the consequent chaos in the equity and insurance markets, much less the ultimate effect on the consumers he is so ardently defending. Justice Brandeis once said, ” The greatest danger to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.” Well, liberty may not be at issue here but the consequences of zeal certainly is.

  • November 16, 2004 at 3:06 am
    Mac McCaffety says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Spritzer needs to do two things ASAP.

    1) Learn something about how the Insurance Industry functions. The first thing he’d find out is that all contracts between Companies and their Agents and Brokers are very transparent, (making it easy for him to note the absence of clauses having to do with kick-backs and bid rigging).
    2) Trade his shot gun for a rifle. Then he can expend his energies (and tax payers millions) chasing the guilty.

    His ignorance concerning how the insurance industry functions, coupled with his quest to be mentioned in the same breath with Tom Dewey and Gulliani, is causing unnecessary problems for the ethical 99% of our profession.

    Until

  • November 16, 2004 at 3:07 am
    CJP says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    In other words:
    “Hi. My name is Eliot Spitzer. I will be running for Gov. of NY and need to make it look like I am a saviour for the common man. Who and what can I go after? Hmmm….How about insurance companies? Most people don’t like them and don’t like paying insurance, not to mention have no idea what goes on behind the scenes. So if I make them look bad, I’ll be making me look good.”

  • November 16, 2004 at 3:55 am
    Jon L. Shebel says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Yes, there are problems in the transaction of insurance that have come to light and will probably be addressed, to some degree, by legislation on the federal and state levels by well intentioned legislators which may or may not resolve the real problems identified. The problem is in attempting to do good, legislators could do sever damage to the availibility and price of insurance throughout the world. If the insurance industry does not stand up and confront people like Attorney General Spitzer with the facts in the approperiate forums, the indusrty and consumers will be severly damaged. It is imparative that the insurance industry stand up to those who advocate broad sweeping reforms where there are no problems and the real goal is the furtherance of political careers.The insurance industry needs to come out just as strong as those who are now attacking the industry with a broad brush for the alleged sins of a few. The age old problem is going to be trying to explain the transaction of insurance to those who don’t care because they are just using the issue for political gain, those who blame everything on the insurance industry like trial lawyers and those who make a living attacking the industry. None of them really care about our customers, although they all speak in their names. The citizens of our great nation are our customers and we need to start speaking on their behalf rather than let politicians and trial lawyers get away with saying they are the spokesmen for them. Time to step up and speak out.

  • November 16, 2004 at 4:24 am
    Peter Polstein says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Not only does Mr. Spitzer not comprehend the workings of the insurance industry, but his actions presuppose that he has no feelings what so ever for the potential thousands of hard working people who will loose their jobs as a result of his headline grabbing actions.

    I have been in this industry for almost 50 years, with small brokerage office experience as well as a senior executive position with one of the so called aphabet houses. The overwhelming majority of professionals in this business, are just that, professionals.

  • November 16, 2004 at 4:43 am
    Kenny of NYS says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    New York Attorney General Spitzer is probably on to something here, but I think he should start probing the practices of the NY SIF, a true monopoly paying no commissions and answerable to no one! Their abuse of NYS employers is legendary, especially small new ventures. And how about looking into the practices of the NY Auto Plan and their long term sweetheart no bid contracts with The Robert Plan – an organization that’s been abusing producers and their insureds for decades!

  • November 16, 2004 at 4:57 am
    vdc says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    THIS EXPLOSIVE DIATRIBE AGAINST ONE OF THE MOST INTRICATELY COMPLICATED ARENAS IS NOTHING SHORT OF A NEW VERSION OF “McCARTHYISM”– ITS SO OBVIOUS THAT MR. SPITZER HAS SHIFTED INTO MANIC PHASE THAT IT IS EMBARRASSING, BUT I REMIND HIM OF AN OLD FAMILY SAYING: “HE OPENED HIS MOUTH AND SPILLED HIS BRAINS.” TRUE, THE PARTICULAR INSTANCES THAT WERE FOUND IN THE FIRST DAYS OF THE INVESTIGATION SHOULD BE ADDRESSED, BUT TO RANT ON ABOUT THE ENTIRE INDUSTRY BEING IN COLLUSION SMACKS OF PARANOIA! IS HE A DESCENDANT OF J. EDGAR HOOVER?

  • November 17, 2004 at 7:17 am
    Tom Elliott says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    The NYAG, continually embarrasing himself by his complete ignorance about the industry he can’t stop attacking, has created an untenable operating environment in NY. MMC, AIG, and others should call his bluff and threaten to relocate their operations out of NY and stop marketing insurance to residents and businesses–pointing the finger very publicly at Eliot.

  • November 17, 2004 at 7:24 am
    Registered Voter says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    In light that Mr. Spitzer has almost no working knowledge of the insurance industry and is merely on a crusade to have those NOT in the industry look to him as their savior, it is time for us to react.

    Our companies & professisonal organization need to place some ads enlightening the public that Mr. Spitzer is NOT tyring to help them.Second that his agenda is merely one of self satiafaction by assisting his future political gains.

    So it is now OUR time to go after Mr. Spitzer but properly. It is time to have every company, broker, every agent, every person taht lost thier job due to Mr Spitzer’s actions get out the vote AGAINST Mr. Spitzer.

    To coin a phrase from a TV show, Mr. Spitzer, your fired.

    Remember we need to vote. This is the only way a politician every listens.

    One who is tired of haviing our industry attacked.

  • November 17, 2004 at 7:46 am
    Jon L. Shebel says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Someone needs to set up a political action committee to run TV spots in New York City to respond on an ongoing basis as to what Spitzer is saying and tell the effect it could have on insurance availability and costs to consumers.
    Spitzer is a politician who is going to use the insurance industry as a “whipping post” and all he will understand is a political response on TV that will end his political career. Who’s going to start the committee ? I’ll contribute……….and every company and employee should do the same. The initial budget should be $100 million……….let’s get going !!!!

  • November 17, 2004 at 7:56 am
    W Wallace says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Hello

    By the tenure of the comments, everyone is outraged at Spitzer’s behaviour. We really should point that finger at ourselves. The market power by some parties has lead to abuses and outright crimes.

    There is little comment on how we move on to a new paradigm just some people sputtering outrage. I’ve always noticed that people get the most upset and exhiit the greatest degree of outrage when they are caught in a misdeed or a lie.

    Guess what people, when the single largest player in the biz commits a crime, it tarnishes all of us. So now all our little busniess practices are under review? If they are bona fide, then we’ll be ok.

    If you want to be outraged, focus on Marsh and the increased level of regulation and enforcement everyone will be facing caused by their alleged actions

    Regards

    Wayne Wallace

  • November 17, 2004 at 9:18 am
    W Wallace says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    I am the first to admit that the Insurance business will never be the most admired industry. That means we have to be proactive before the public reacts in outrage and the policians get their 2 cents worth.

    Look at the success of the Insurance Institute of Highway Safety. It is well respected and proactive.

    Remember though this though, this whole mess was started by the largest broker in the US and the world along with some of the largest insurers in the world allegedly committing a crime.

    It appears that the bid rigging was so pervasive, it should have been within the knowledge of many CEO’s.

    Where were their pre-emptive actions?

    As a business, we’ve loaded a shotgun with a deer and bear load and handed it to the people able to do us the most harm (besides ourselves), politicians and the media. They will not even be wrong to be outraged.

    We have to look long and hard in the mirror now and go forward.

    Regards

    W Wallace

  • November 17, 2004 at 9:22 am
    clr says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Spitzer has created more hardships (w/more to come) on more lives than he will ever realize. It would be wonderful if all of us innocent, hard working insurance professionals would write him a letter and tell him of our job loses, of how negatively his rash actions have effected the very essence of our daily exsistence, how he has dashed our hopes of a safe, secure, retirement.

    Has he helped anyone? Tell me who and how…OK, maybe himself, maybe some lawyers, maybe the coffers of some state ins.depts.

    Don’t get me wrong. I believe the guilty should be punished but only the guilty and the innocent should not have to be sacrificed.

  • November 17, 2004 at 9:29 am
    JAS says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Before we all go crazy, perhaps we should admit that transparancy has never been a strong point of the insurance industry, and becoming moreso is inevitable.

    Mr. Spitzer does shoot with a shotgun. In light of his other activities, he should sharpen his focus on agency owned captives that create an environment of improper incentives and should be disclosed.

    We believe all (including off) balance sheet transactions should be disclosed.

    Opinions are like ……..

  • November 17, 2004 at 9:35 am
    mike k says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Experienced insurance and risk management professionals understand the levers of the business and can see where the latest allegations are without merit and excessive for the insurers and brokers that act with integrity.

    The customers of these organizations understand that the returns from the regulated, prudent investment activities of responsible insurers act to subsidize the cost of risk to consumers.

    From the publics’ perspective it is also understandable where these allegations have merit. The actions of the few are further tarnishing the image of a vital industry.

    A concerted effort at the corporate and client level is needed to enhance the publics’ understanding the value provided by a complex, inherently misunderstood, and under appreciated industry

  • November 17, 2004 at 9:44 am
    Andrew J. Barile,CPCU says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Having started the first publicly held offshore insurer, December 7, 1978, ANECO REINSURANCE COMPANY,Limited in Hamilton, Bermuda.who new what was going to develop.Trenwick Re, ACE, XL, etc. As a consultant to the Law Firms threse are exciting times, http://www.abarileconsult.com.

  • November 17, 2004 at 11:18 am
    Jo Ellen says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    It is my educated opinion, having viewed many similar power plays from the inside, that the entire Insurance Industry is being accused, tried, and convicted of participating in illegal activities which, in reality, are confined to only a few rarified circles. Powerful brokers have always tried to pressure companies into cooperating with sometimes nefarious dealings. However,the vast majority of underwriters and Insurance Company Managers resist this pressure and, if necessary, explain any resulting lack of production to their superiors with the TRUTH. This scenareo does not call for strict regulation(whatever that might mean), just enforcement of laws against those who break the laws which already exist.
    Our Industry has always been weak in explaining what we do and how we do it. We are an easy target. There is nothing to hide and education of the public would go a long way toward keeping outrageous charges by aspiring politicians in proper perspective. This is my opinion-which I held long before Mr.Spitzer appeared on the scene.

  • November 17, 2004 at 2:04 am
    anonymous says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Congratualtions Mr.Wallace, yours
    was the first comment that made real sense. If you have nothing to hide then don’t worry about it. Let Spitzer find his WMD’s and the rest of us will continue to do business for our clients as always. Contingency commissions will always exist.

  • November 17, 2004 at 6:17 am
    Mark says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    I completely agree with what you’ve said with the exception that I don’t believe the public will ever come to appreciate the insurance industry. I’d say that most people consider insurance premiums to be on the same level as taxes and think they have to pay a lot of money for nothing in return. Of course they completely overlook the fact that most lines pay huge portions back in losses and, as you said, need every dollor of investment income to subsidize their existence.

    Spitzer is just taking advantage of a misplaced dislike among the public for insurance when the real source of many of these costs are the disproportionate liabilities we have in America. Who is mainly to blame for that issue – the legal profession. And of course Spitzer and his wife are attorneys. The end result of his actions will undoubtably be higher insurance premiums for customers at all levels, not that he’ll care as long as he’s in the paper and on television in prepartion for 2006 elections.

  • November 17, 2004 at 6:44 am
    Tony Valencourt says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    There is little doubt that AG Spitzer’s recent activities in the insurance and insurance brokerage industries are timely, that they address areas that sorely need fundamental reform, and that they are appropriately bringing to light specific cases that require remedial action. That said, and leaving aside the tendency to use too broad a brush, I was a little surprised by the fundamental lack of understanding by the AG of some of the more basic workings of the industry — or at least that is the impression I got from some of his statements. If there is indeed such a basic lack of understanding, the concern ought to be that the remedy might end up being more detrimental than the illness. And, leaving aside the insurance industry per se for a moment, that would bode ill for the U.S. economy and for individual and commercial consumers. Artificially or arbitrarily regulating premium pricing over and beyond the way they are regulated on personal lines would either lead companies to exit lines and jurisdictions, or would cause them a meaningful deterioration in solvency over the long run. Just as reforming unfair practices is important, so is the need to allow premium pricing to find (unregulated) equilibrium over time. Key point.

  • November 17, 2004 at 6:45 am
    Tony Valencourt says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    There is little doubt that AG Spitzer’s recent activities in the insurance and insurance brokerage industries are timely, that they address areas that sorely need fundamental reform, and that they are appropriately bringing to light specific cases that require remedial action. That said, and leaving aside the tendency to use too broad a brush, I was a little surprised by the fundamental lack of understanding by the AG of some of the more basic workings of the industry — or at least that is the impression I got from some of his statements. If there is indeed such a basic lack of understanding, the concern ought to be that the remedy might end up being more detrimental than the illness. And, leaving aside the insurance industry per se for a moment, that would bode ill for the U.S. economy and for individual and commercial consumers. Artificially or arbitrarily regulating premium pricing over and beyond the way they are regulated on personal lines would either lead companies to exit lines and jurisdictions, or would cause them a meaningful deterioration in solvency over the long run. Just as reforming unfair practices is important, so is the need to allow premium pricing to find (unregulated) equilibrium over time. Key point.

  • November 18, 2004 at 12:36 pm
    Jon says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Hey, which one of us is Spitzer’s carrier?

    : )

  • November 18, 2004 at 2:52 am
    Bob says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    If Saint Spitzers ( his nick name among those on the other side of claims settlements) findings of fact put many out of work, Maybe, you should look in a mirror. That is, your industry now has the appearance of growth as a direct result of violations of law.

    In addition, it would further appear that if violations had never happened in the first place, the people that you speak of would have been employed in a sector that was within the basic premise of society.

    In every industry there are bad apples. It is just to bad that the insurance regulators are scared of insurers.

  • November 22, 2004 at 7:56 am
    W WALLACE says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Hello

    Don’t you think that if a broker tried to string arm you into something illegal, unethical or both, that afterwhile you should report them to the appropriate authorities rather than letting this attitude get engrained in the business culture.

    This is why we are weak as an industry. As well, there is a general hesitation by business against denoucing corporate concentration and the accumulation of market power.

    We should shut up and smile, when our prior failures or act or comment come back to bite us on the behind.

    Regards

    W Wallace

  • November 22, 2004 at 7:57 am
    W WALLACE says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Hello

    Don’t you think that if a broker tried to string arm you into something illegal, unethical or both, that afterwhile you should report them to the appropriate authorities rather than letting this attitude get engrained in the business culture.

    This is why we are weak as an industry. As well, there is a general hesitation by business against denoucing corporate concentration and the accumulation of market power.

    We should shut up and smile, when our prior failures or act or comment come back to bite us on the behind.

    Regards

    W Wallace

  • November 22, 2004 at 3:40 am
    Jim Howse says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    The issue is not antidotal and how many people can bring forward good and bad examples. ENRON put lots of money in the YMCA. The issue is not other industries. The issue is our industry. We must acknowledge the gangrene and cut it out. Haggling back and forth is a waste of time.

    Jim Howse

  • November 22, 2004 at 4:02 am
    D McIntosh says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    Come on folks, look at the Big Picture. Attorney General Spitzer is not really interested in cleaning up what he says are ills in the insurance industry. While he uses a broad brush to literally paint all of us as acting suspicious, and he is, what are his real motives? How about Governor of New York, or the U. S. Senate? It worked for Bill Nelson in Florida, why not AG Spitzer? Champion of the people, ever heard that before? While there may be some wrongdoing, Spitzer is using this as his launch into higher public office. As we say in the South, ‘Spitzer has bigger fish to fry’

  • November 22, 2004 at 4:11 am
    G.D."Sandy" Dunn says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    It would seem to me that in order for any public offical to fully investigate anyone or any company the investigator should make sure their house is clean. From what I have seen throughout my years, I would think that official’s should look toward their own house before they accuse others of wrong doing. Remember, those who live in glass houses should never throw stones.

    Most of the time you see this type of effort is when it is a prelude to someone seeking another or higher office.

  • November 22, 2004 at 6:29 am
    jim Howse says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    What matter Spitzer’s motives? Spitzer could run for king of the world. Greed and illegal activities are still wrong. Why the misdirection? Lets clean up our insurance industry before we take on an establishment that we have no stake in, the New York AG’s office. Stick to the message and discard the messinger.

    Jim Howse

  • November 23, 2004 at 11:23 am
    Fred says:
    Like or Dislike:
    Thumb up 0
    Thumb down 0

    The issue is our industry. Haggling back and forth is a waste of time.
    After over 20 years in the industry at both the broker and the home office levels.
    I learned that asking the wrong questions from the inside resulted in sudden job changes…experienced in many companies.

    I spent four years teaching ethics for CE credit to insurance agencies, brokers and company officers. I have worked in the actuarial, financial reporting and treasury areas and I see no way to get changes from within….we spend more time looking for loop holes than we do underwriting the risk!

    I agree that it is not the messenger we have to fear it is what we see in the mirror when we take an honest look at our industry. It is unreasonable to expect change from within when we are all rewarded for our creativity and the impact to the bottom line and not the ethical manner of our conduct. This problem is not new it was just rewarded and any conduct that is consistently rewarded will both continue and grow!



Add a Comment

Your email address will not be published. Required fields are marked *

*