Steve Badger, insurance industry guru and advocate, admitted that one of the first things he does every single day is read this blog—while he is on his morning toilet after pouring his morning coffee. You may be there right with him. But few would admit it, especially in front of an insurance industry audience that is the insurance industry’s General Counsel.
Insurance company General Counsel are people that can influence social outcomes. I agreed to this debate because that audience is sophisticated and can establish positive change for policyholders. As I told them, my focus is always: “What is best for the policyholder?” Unfortunately, I think many in the insurance claims industry fail to take this stance.
Discussing academic issues often takes on a historic context. For example, I made a point without rebuttal that in the middle of the 19th Century, many insurers were re-writing policies and reducing their rates so that the policyholder had illusory coverage or an insurer that was on the verge of bankruptcy. This is why we established insurance regulation that protected insurers from their own competitive practices.
The same concern is found today with insurers competing on price and advertisements which try to make losses look like a comedy. The ethical denigration of those in charge of their own industry is the problem. They poke fun at their own customers’ losses and advertise that price is more important than ethics and trust. It is shameful, but insurance executives allow it in order to meet their revenue goals and incentive bonus.
Do Steve Badger and many of the General Counsel publicly agree with me? Only if they want to get fired from their jobs.
While Steve Badger is sitting on his toilet reading this, many in the insurance claims industry are following processes and claims rules without any thought if what they are doing provides policyholders full and prompt payment. The claims process rules can make it impossible for claims to be paid promptly or fully. These are major issues that need to be addressed.
At the same time, abuses and gamesmanship are wrong. While I fully support restoration contractors making a valid margin for their work, can anybody honestly say that all the seminars about leveraging up and publicizing windfall insurance payments are right? When did windfall payment become acceptable rather than full payment? There are a number of fake and fraudulent purveyors of greed that need to be called out in the insurance restoration industry because they harm legitimate restoration businesses, which I totally support.
Who supports full and prompt payment for policyholders? My hope is that General Counsel will ask their claims departments what their processes are after our debate. I find that claims processes are the culprits to delayed and underpaid claims. Badger seemed unswayed until I suggested he read his own client’s internal claims tutoring guides about why they should delay claims to obtain “leverage” on policyholders. Maybe the General Counsel can suggest change, and that is what I hope for.
Insurance is an important social product. Insurers need to make a profit. I expressed a concern that rates and premiums were far too low. Few are insured to value. Climate change and the increase in frequency plus severity of loss have made it impossible for insurance companies to make money. Premiums have to increase, yet nobody seems to have the courage to say this.
The bottom line is that civil dialog followed up with action can lead to positive change. I hope that my debates with my distinguished and opposing colleague will result in a better insurance environment for all. Insurance is an important social product that needs to succeed.
Steve Badger is not a dope. He is a pain in the butt advocate for insurers. But our property insurance industry is on a rope in many venues. We agree about that. We all need to do our best to make this work for those investing in and consuming the property insurance product.
Thought For The Day
They call it the rope-a-dope. Well, I’m the dope. Ali just laid on the rope and I, like a dope, kept punching until I got tired. But he was probably the most smart fighter I’ve ever gotten into the ring with.
—George Foreman