10 Comments

Last month, InsuranceJournal.com published a New York Times report that a Major League Baseball investigation into leaked financial documents had become focused on insurance companies that do business with clubs. The Times reported that the companies under investigation sell liability insurance for top-level team executives and directors, not players. Financial information on the Tampa Bay Rays, Los Angeles Dodgers, Pittsburgh Pirates, Florida Marlins and Seattle Mariners was leaked to the Web site, Deadspin.

We are aware that not all reader comments on our Web site are germane to insurance or professional in tone. However, we can learn from comments that do stick to the topic and share their professional viewpoint. This MLB story is one with comments offering food for thought. Here are some excerpts from the string of comments:

1. This just reinforces my opinion that commercial lines underwriters (non-professional lines) have no need of financials other than to qualify self-insured retention or large deductible amounts. These can be satisfied by requiring a cash or security deposit to cover X number of claims or occurrences. A D&O or financial products line underwriter do[es] need to see balance sheet and profit and loss statements but should be restricted to review and destruction, or return to the insured after use. There is no need for an underwriter to keep or maintain a copy for [his or her] file.
2. Understand your point. Try suggesting a cash requirement or security deposit up front to offer terms. Obviously, submission info should always be kept confidential.
3. We offer our insureds the option to send financials directly to the underwriter so we never see them. The only time we need financials is for D&O.
4. Quite likely the source was a D&O provider. Not that this takes away the merit of your point regarding the need for financials for casualty lines, though I do see how financials could be valuable for property underwriting (moral hazard).
5. If you are writing property coverage, you really should look at this information … GL is not so important. I have heard the argument that if someone goes into bankruptcy and cannot pay their premiums, we still have to provide coverage. But really, how often does this happen, and how much exposure do you have? … There is a balance between underwriting every tiny little exposure and getting the quote out.
6. While financials probably are not an absolutely necessary piece of underwriting information for your standard line P&C UW, they can offer valuable supplemental information to a UW. One of the first expenses that many insureds will cut in hard economic times are those related to loss control activities (i.e. safety programs, extra housekeeping measures, employee training, etc). When loss activity is rising and cash flows are decreasing it could be an indicator that things are only going to get worse.
7. There has to be some balance in UW and production. It’s like pulling credit reports on drivers for auto coverage. Could it give you an idea about whether you’re going to get all your premium? Maybe. But I just don’t see it as necessary.
8. Policyholder information is confidential and should not be leaked.
9. The worst part of about the leak is that it revealed that the Pirates earned a profit. It really makes the fans want to go out and spend money on a lousy product knowing that the owners are pocketing the money instead of investing it into making the team better.
10. The Pirates made a profit? Don’t they average 1 fan a game?

Topics Underwriting