Perhaps a Large Cash Prize is the Answer

When battling Legislative dragons every two years, those of us who work for the Texas property and casualty insurance industry are dramatically reminded how poorly our business is understood. Furthermore, our antagonists don’t really believe we operate independently in a competitive marketplace.
Through the eyes of many lawmakers and their consumer constituents, insurance companies are all in the same boat; they sell a seemingly intangible product that is hard to understand for a price that is perceived as too high.

This is a big, continuing problem for agents and companies alike and unless the insurance community can figure out a way to generate more understanding, acceptance and trust, we are all doomed to fight the same fight over and over with little chance of improving the current situation.

Maybe we should offer a prize to the person who can solve this problem. History offers evidence that it just might work.

Up until the 1700s, ship captains relied on the moon and stars when determining their approximate course and location on the high seas, and their miscalculations had disastrous consequences.

In October, 1707, a fleet of British vessels was returning from battles with the French. Only a day’s sail away from home, the flagship miscalculated its position and a total of four ships were scuttled by the ever-treacherous Scilly Islands. Within minutes, thousands of men drowned and an important part of the British armada was lost.

It was a national tragedy and served as a grim reminder that unless navigational techniques were improved, other disasters would follow. Finally, in 1714, the British Parliament offered 20,000 pounds, a princely sum in those days, for anyone who could solve the key problem of navigation — how to find longitude at sea.

Furthermore, the first country to determine a method of accurate navigation over the world’s waterways would rule the economy of all nations. In Paris and in Greenwich, observatories were built, to chart the sky in an effort to learn if the moon and stars could help guide a ship at sea. Almost everyone assumed that the final answer would come from an educational institution.

A distinguished board of royalty and scientists was inundated with crackpots and lunatics who came up with all kinds of useless devices and schemes to claim the prize.

However, a young carpenter named John Harrison had already given the troubling question a lot of thought. Harrison believed there had to be a connection between longitude and time. Despite the fact that the famous Isaac Newton may have prejudiced the board by saying that astronomy, not clocks would determine longitude, Harrison was undeterred.

Having no formal education and having never been on a ship, Harrison turned his attention toward clock making and set forth to build a sea clock or chronometer that would measure time exactly while at sea and enable mariners to calculate longitude for the first time.

Harrison built three clocks and then designed a watch that became the most accurate watch ever built. It eventually earned Harrison and his sons the grand prize.

We insurance professionals know it is hard for people to grasp the concept of insurance. Many of our friends and customers, even some of our family members, roll their eyes just at the mention of the word insurance. Unfortunately, we have no clock or watch to show our skeptics how insurance works, but it is not for a lack of trying.

We have run national ad campaigns, included informative brochures in renewals, and conducted numerous meetings with legislators and staff. We have established organizations such as Underwriters Laboratories and the Insurance Institute for Highway Safety to reduce costs and save lives.

Perhaps if we had some device or process we could employ to successfully explain the benefits and cost of insurance we could avoid the political shipwrecks that are almost guaranteed every two years.

Regardless of our efforts, lawmakers once again came to Austin on a collision course with insurers, ready to lash them to the political whipping post. Our unprecedented mold-related water losses and the billions we paid in claims meant little to legislators who were eager to implement rate rollbacks, ban credit scoring, institute government price fixing, and squeeze regulations so tight that every step taken by insurers would be difficult and expensive.

Fortunately, we avoided many of these punitive measures this time around, but I am confident that political and regulatory disaster are destined to return unless we figure out a way to more successfully market, price and service our product so that it is understood and accepted.

Should we offer a prize? I’ll put up the first dollar.

Rick Gentry is the executive director of the Insurance Council of Texas, a multi-purpose trade association of property and casualty insurance companies operating in Texas.

Topics Texas Legislation