If a claim underpayment stategy were orchestrated nationwide and in Canada, and was coupled to tighter underwriting schemes, would insurers quickly become quite flush with “underwriting” profit cash?
And if so, would investors complain, or would regulatory agencies take notice?
It’s interesting to note that surplus lines solvency and underwriting success stays at a level just a little better than admitted companies.
The primary and original duty of insurance commissioners, dating from Elizur Wright. Wright was an actuary and math wizard, not a banker. As the first insurance commissioner he set out to assure the solvency of insurance companies, understanding that the worst insurance result is insolvency when you turn in your claim.
Today insurance commissioners show up after the companies are dead on their feet. Showing up after the patient is dead is not being a helpful doctor.
The problem is that guarantying solvency does not make for a political stepping stone. “I made your insurance rates go up so your company could pay claims” just won’t fly well as a campaign platform.
So the result is that insurance companies survive at about the same rate with or without interference from a regulator.
While I am pleased the industry has recovered so well, what this means is that now we will be going into another price war and stupidity of underwriting so that the cycle of losses will repeat themselves.
While this is good for the buyer now it will hurt everyone in the long run.
If a claim underpayment stategy were orchestrated nationwide and in Canada, and was coupled to tighter underwriting schemes, would insurers quickly become quite flush with “underwriting” profit cash?
And if so, would investors complain, or would regulatory agencies take notice?
It’s interesting to note that surplus lines solvency and underwriting success stays at a level just a little better than admitted companies.
The primary and original duty of insurance commissioners, dating from Elizur Wright. Wright was an actuary and math wizard, not a banker. As the first insurance commissioner he set out to assure the solvency of insurance companies, understanding that the worst insurance result is insolvency when you turn in your claim.
Today insurance commissioners show up after the companies are dead on their feet. Showing up after the patient is dead is not being a helpful doctor.
The problem is that guarantying solvency does not make for a political stepping stone. “I made your insurance rates go up so your company could pay claims” just won’t fly well as a campaign platform.
So the result is that insurance companies survive at about the same rate with or without interference from a regulator.
While I am pleased the industry has recovered so well, what this means is that now we will be going into another price war and stupidity of underwriting so that the cycle of losses will repeat themselves.
While this is good for the buyer now it will hurt everyone in the long run.
Roger:
Isn’t it easier to gouge a very flush insurance company rather than one barely able to pay an adjuster because it paid out too much already?