Insurance Industry Run by ‘C’ Students? Don’t Tell CPCUs That

By | February 1, 2008

The insurance industry is a “C” student industry; the “A” and “B” students are working elsewhere, said the insurance company executive.

Them’s fighting words, especially in a room full of Chartered Property Casualty Underwriters (CPCUs) and professional risk managers.

A man at a back table stood up in defense of his peers and firmly proclaimed, “I take exception to your suggestion that we are all ‘C’ students in this industry. I am sure a lot of us did better than that.”

Insurance Journal hunted for proof of the inferior grades or IQ of insurance industry professionals compared, for instance, with the grades of those geniuses in the subprime mortgage industry. Now there’s a bunch of overachievers who no doubt graduated at the top of their class. We found nothing to support the “C” student theory. We found some commentary that the industry’s salaries were “C” grade but not the quality of the people.

To be fair, the executive was pointing the finger as much at himself and his company as at anyone. Plus, his criticism was meant to highlight a specific issue. He offered his “C” student criticism as a probable explanation of the particularly bothersome and, in his opinion, inexcusable industry habit of rarely getting a commercial policy out to a client efficiently and on time. The industry in the U.S. thinks nothing of taking weeks, months, even quarters after the effective date of a negotiated contract before getting the paperwork done and out to the client.

“I don’t understand why we can’t issue a policy by the effective date,” he said, including his own company in the slap.

He suggested the U.S. insurance industry is the only business that operates this way. This sort of behavior doesn’t fly in Europe, where laws require insurers to issue policies on time and they manage to comply.

His solution was to urge risk managers and brokers to begin the renewal process earlier and hammer out soft terms and conditions and other details earlier.

While becoming more efficient at policy issuance makes sense for everyone, it is in fact a self-serving goal for the insurance industry— the way it is now handled is inefficient and costly. Current practices also make the industry vulnerable when a claim emerges before all details are settled and the policy is issued.

In short, it’s not the smartest way to run a business. The industry gets an “F” in paperwork.

The company executive appeared to apologize to his audience of professional brokers and risk managers when he said his “C’ student characterization was meant “sarcastically” and he hoped they wouldn’t take it personally.

Then he added. “But it does seem we very often act like ‘C’ students.”

Not exactly an “A+” for diplomacy.

Editor’s Note: This article originally appeared in Insurance Journal magazine, Jan. 28, 2008. To subscribe to Insurance Journal magazine, visit https://www.insurancejournal.com/subscribe/

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