“How’s business?”
“Don’t ask.”
“What’s wrong?”
“You’ve heard of underwriting?”
“I’m familiar with the concept.”
“Well, it’s back. I’m working my rear end off trying to get business renewed. I have no time to even look for new business, not that the companies wouldn’t hassle me to death with useless questions.”
“What kind of questions?”
“Like, ‘What kind of business is the insured engaged in?'”
“The nerve.”
“You’re tellin’ me. They never cared before. ‘Just bring us the business, any business, and we’ll write it. Bring us the business you have with other carriers, and we’ll write it at a much lower rate.’ And now they want to know what these people do?”
“Why not just tell them?”
“Hey, I don’t know what some of my clients do. Some of my clients don’t even know. I’ve got one account, a high-tech firm, where the president hasn’t got a clue what his company does. Something to do with connecting databases, he said. He doesn’t know. His partner designed the software; the president is the numbers guy. You know: ‘Tell me what the revenues will be and some projected costs, and I’ll figure out how to run this thing profitably.'”
“Didn’t the insurer ask what the company did on last year’s application?”
“Yeah, and do you know what I wrote? ‘Makes a lot of money.’ The company went from five people to an IPO in an hour and a half.”
“And the insurance company accepted that answer?”
“You bet. In fact, the underwriter circled the answer and wrote ‘Right on.’ This year, the same guy wanted to know everything about the business.”
“Are you getting hassled on all your renewals?”
“Am I? Man, it’s grim. I have one account that deals with plutonium that just happens to be located near wetlands. The insurer was more than willing to provide a pollution endorsement-last year. I’m trying to figure out how to tell the company president that he hasn’t a prayer of getting pollution coverage, or maybe coverage in general, except from the surplus line market.”
“Well, insurers are certainly within their rights to implement underwriting standards.”
“Agreed. But all at once? This is what they tried to pull in the mid-’80s, and look what happened-they got hammered with an antitrust verdict.”
“Yeah, but in the mid-’80s, the commercial liability market in general dried up. Now, the market is hardening only for certain risks. That’s not antitrust; that’s smart business.”
“So it’s smart business to write a plutonium-polluting company one year and turn your back on it the next? Gee, I’m glad insurers finally found the religion of common sense.”
“What are you telling your clients?”
“I’m pleading insanity.”
“Yours or the company’s?”
“Well, I assume you’re getting some accounts renewed.”
“That’s another problem. I’m getting renewals, but those darn companies are trying to raise rates. I have my staff checking the insurance code because I’m pretty sure this is against state law.”
“Raising rates?”
“When was the last time you heard of a rate hike on a commercial account? Were you alive then?”
“I think I was.”
“My point is, everybody got lower rates, even Plutonium Acres. Don’t tell me that every insurer would want to decrease rates for virtually every account. Somewhere, somebody must have reached the conclusion that rates for certain types of risks should go up, but they couldn’t raise them because it was against the law.”
“Isn’t it more likely that insurers were avoiding rate hikes because it was the kiss of death in the marketplace?”
“So what you’re telling me is, companies believed it was more important to lose tons of money on a risk and keep the risk than to raise or not decrease rates and lose the account?”
“Hey, I didn’t say it makes sense.”
“Look, nothing’s made sense for a long time … “
“So this ‘new’ marketplace has some sense to it?”
“Not for the policyholders.”
“Oh, them.”
“Exactly. That seems to be the attitude of the carriers. ‘Policyholders? We don’t need no stinkin’ policyholders.’ We’ve gone from the war for market share to the war to get rid of market share. How do I explain that to my clients?”
“You mentioned the insanity defense.”
“Do you know what the commission is on insanity? Fifteen percent of nuts is still nuts.”
Richard Rambeck, the former editor of InsuranceWeek, has written about insurance issues for nearly a dozen years.He can be reached via e-mail at rambo3@ix.netcom.com.
Was this article valuable?
Here are more articles you may enjoy.
Homebuilders Cut on ‘Sluggish’ Housing Market, Florida Woes 
Wall Street Pushes Back After Activists Escalate Protests 
Marsh McLennan Agency to Acquire The Horton Group 
Hurricane Beryl: Insurers See Minimal Impact, Brace for Active Season From This Issue
