Excellent article by Mr. Buffett. It is a shame that insurance companies and reinsurance carriers with similar philosophies suffer economically while the marketplace pursues those with the “Cheapest Price”….in the long run, we all get what some pay for a product.
That was really interesting. For the young agent who doesn’t know much of anything about industry history, I learned a bit. I wish there was a book on industry history, but there’s nothing.
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.
Tom you have lost your mind if you think that Warren Buffet wants anything BUT to be the last man standing! He is a winner doing what winners do; play hard, work hard, plan, execute, measure, adjust and execute again. The insurance industry as a whole is a bunch of lemmings running right back over the cliff. They’ve all been over the cliff before, know where the cliff is (price wars) AND STILL go for market share regardless of the harm it does to consumers…after all it’s about the shareholder return NOT the consumer. Just look real closely at your insurance companies financials, their reinsurance companies and their attitude towards paying claims. There’s a whole lot they don’t want you to know and stumble over themselves when you ask for the information…I dare ya to ask them for it and see the response you get!
Mark: I think you are wrong about Mr. Buffett’s position, however your have missed the real point.
Everything you say about the industry itself couldn’t be more true. We can site the Marsh and AIG issues just for starters. It is definitely a greedy and corrupt industry overall.
However, exactly because of that if we could remove the politics and behind the scenes influence that is currently very prevelant within most insurance departments and force them to do their job, then the insurance industry would have find a diffent way to play their games.
It may also be impossible ever regulate the regulators but it has as better chance than any self discipline within the industry.
Tom what would be the fun then! Insurance by it’s very nature is purposefully confusing. It is a contract, period. Agents sell it without reading it, consumers buy it without reading it and everyone is shocked when something is not covered. The contract has limitations imposed on it by Federal and State law. In many cases the contract is written and someone changes a law which makes things different at the time of the claim. The industry is being reformed NOW in many ways. Companies are not accepting risk as they use to due to changing laws…can you say “Construction Defect”? How about “Medical Malpractise”? If a lawyer can imagine a tort a lawsuit can be brought and the insurance companies after a while have no choice except to exit the market. Laws/Lawsuits dictates what is or is not profitable for an insurance company to accept as a risk especially in light of the reduction of available reinsurance and the lack of quality reinsurers. End of Day the Warren Buffets of the world will win because they know the game that we get to play at everyday better than we do…otherwise we would be Buffett.
There may not be a book, but Warren Buffet has been writing letters to shareholders and annual reports for the past thirty years. All of the are available at the Berkshire Hathaway web site http://www.berkshirehathaway.com/
We as citizens of the .com world are independent enough to debate this issue but the Nett Nett result of Buffet’s thoughts are that his companies have made money when others did not, his companies have posted growth when others did not, his companies survived when others could not.
I am willing to side with any of the above arguments if I am convinced otherwise of the above paragraph.
The guy has success & proven results as his middle name and when he shares his thoughts, lets listen & absorb them without any hasty interpretations. Apologies if I sound too agressive, but it is articles like these which are to be respected.
Mr. Buffet’s thoughts and reflections on 2004 and Berkshire’s insurance operations was well said and easily identifed the basic causes of the pricing cycles endured by the industry and consumers. A free market society and use of capital result in the time lag between pricing cycles and is the debate for investors such as Mr. Buffett. The thought of both providers and consumers remains constant; short term versus long term, and consequences of decision. The cycle continues.
Buffett made one mistake recently… Geico entered the NJ market. Just try and ask Buffett what kind of risks they have been writing in NJ! If you get a response at all, I do not think you will like it. I predict that in 3 – 5 yrs, Geico will be operating in the red in NJ and will consider leaving the state again.
I have a well of respect for the man as he has been successful in every business he has put his hands in. I have had the privilege to hear him speak at my business school and some of his pearls of wisdom are sometimes overlooked. Do not kid yourselves and misinterpret his message as a “socialist agenda.” He is a shark who knows where the fertile grounds are, and knows when the “meat” has dried up and knows when to move on. A very shrewd investor, and someone I have admiration for. I cannot say the same for Mr. Trump, who epitomizes the “debt” lifestyle. Anyone know what the current number of bankruptcies he is at?
Excellent article by Mr. Buffett. It is a shame that insurance companies and reinsurance carriers with similar philosophies suffer economically while the marketplace pursues those with the “Cheapest Price”….in the long run, we all get what some pay for a product.
That was really interesting. For the young agent who doesn’t know much of anything about industry history, I learned a bit. I wish there was a book on industry history, but there’s nothing.
mr. buffet got any advice for a small town agent to survive in this commodity driven market? as you say customers left me ,not me leaving them.
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.
Tom you have lost your mind if you think that Warren Buffet wants anything BUT to be the last man standing! He is a winner doing what winners do; play hard, work hard, plan, execute, measure, adjust and execute again. The insurance industry as a whole is a bunch of lemmings running right back over the cliff. They’ve all been over the cliff before, know where the cliff is (price wars) AND STILL go for market share regardless of the harm it does to consumers…after all it’s about the shareholder return NOT the consumer. Just look real closely at your insurance companies financials, their reinsurance companies and their attitude towards paying claims. There’s a whole lot they don’t want you to know and stumble over themselves when you ask for the information…I dare ya to ask them for it and see the response you get!
Mark: I think you are wrong about Mr. Buffett’s position, however your have missed the real point.
Everything you say about the industry itself couldn’t be more true. We can site the Marsh and AIG issues just for starters. It is definitely a greedy and corrupt industry overall.
However, exactly because of that if we could remove the politics and behind the scenes influence that is currently very prevelant within most insurance departments and force them to do their job, then the insurance industry would have find a diffent way to play their games.
It may also be impossible ever regulate the regulators but it has as better chance than any self discipline within the industry.
Tom what would be the fun then! Insurance by it’s very nature is purposefully confusing. It is a contract, period. Agents sell it without reading it, consumers buy it without reading it and everyone is shocked when something is not covered. The contract has limitations imposed on it by Federal and State law. In many cases the contract is written and someone changes a law which makes things different at the time of the claim. The industry is being reformed NOW in many ways. Companies are not accepting risk as they use to due to changing laws…can you say “Construction Defect”? How about “Medical Malpractise”? If a lawyer can imagine a tort a lawsuit can be brought and the insurance companies after a while have no choice except to exit the market. Laws/Lawsuits dictates what is or is not profitable for an insurance company to accept as a risk especially in light of the reduction of available reinsurance and the lack of quality reinsurers. End of Day the Warren Buffets of the world will win because they know the game that we get to play at everyday better than we do…otherwise we would be Buffett.
There may not be a book, but Warren Buffet has been writing letters to shareholders and annual reports for the past thirty years. All of the are available at the Berkshire Hathaway web site http://www.berkshirehathaway.com/
I recommend them to you.
We as citizens of the .com world are independent enough to debate this issue but the Nett Nett result of Buffet’s thoughts are that his companies have made money when others did not, his companies have posted growth when others did not, his companies survived when others could not.
I am willing to side with any of the above arguments if I am convinced otherwise of the above paragraph.
The guy has success & proven results as his middle name and when he shares his thoughts, lets listen & absorb them without any hasty interpretations. Apologies if I sound too agressive, but it is articles like these which are to be respected.
Mr. Buffet’s thoughts and reflections on 2004 and Berkshire’s insurance operations was well said and easily identifed the basic causes of the pricing cycles endured by the industry and consumers. A free market society and use of capital result in the time lag between pricing cycles and is the debate for investors such as Mr. Buffett. The thought of both providers and consumers remains constant; short term versus long term, and consequences of decision. The cycle continues.
Buffett made one mistake recently… Geico entered the NJ market. Just try and ask Buffett what kind of risks they have been writing in NJ! If you get a response at all, I do not think you will like it. I predict that in 3 – 5 yrs, Geico will be operating in the red in NJ and will consider leaving the state again.
I have a well of respect for the man as he has been successful in every business he has put his hands in. I have had the privilege to hear him speak at my business school and some of his pearls of wisdom are sometimes overlooked. Do not kid yourselves and misinterpret his message as a “socialist agenda.” He is a shark who knows where the fertile grounds are, and knows when the “meat” has dried up and knows when to move on. A very shrewd investor, and someone I have admiration for. I cannot say the same for Mr. Trump, who epitomizes the “debt” lifestyle. Anyone know what the current number of bankruptcies he is at?
IS WARREN BUFFETT CONNECTED TO BUFFETT SENIOR INSURANCE