Chicken Little in Reverse
I was in Tempe, Arizona at the fifth annual Target Markets Program Administrators Association meeting last month when Hurricane Wilma was threatening to hit. Even though Mexico took the brunt of Wilma’s fury, resulting in a “mere” $10 billion or so of U.S. insured losses, the industry needed another hurricane like I need another 20 pounds.
Still, in spite of Wilma lurking in the wings and the ongoing fallout from Katrina, most attendees seemed more interested in the best way to nail down a solid program administrator contract–in other words, business as usual. Ironically, in an Arizona that’s supposed to be dry and sunbaked this time of year, it was cool and rainy every day I was there. (Climatic change, anyone?)
Meanwhile, back in Chicago, there were other harbingers of an impending apocalypse. The White Sox swept the Astros in the first two games of the 2005 World Series and then went on to sweep the series, bringing home the championship for the first time in 88 years. This means pillars of fire and rains of locusts can’t be far behind, which will make for some interesting insurance claims.
On a less dramatic note, Chicago also hosted PCI’s annual meeting. The trade association’s overriding message was that the current insurance regulatory system needs to be fixed, and fast. Speakers raised some interesting points about increasingly severe storm cycles, the need for a TRIA-type system for cat losses, and a revamp of the National Flood Insurance Program.
One speaker brought up an even more important point: the need and the responsibility of industry executives to act like leaders in the face of unprecedented challenges. Greg Ostergren, CEO of Springfield, Mo.-based American National Property and Casualty Co., summed it up in a panel discussion on Katrina when he said, “Insurance is a contract between business and society.” That means CEOs have a responsibility to “seek to lead rather than barely reacting to these debates.”
According to a September study by Ipsos Public Affairs, only 18 percent of Americans approve of how the insurance industry handled its job after Hurricane Katrina, with 43 percent disapproving and 39 percent unable to take sides. Charitable organizations, and even state, local and national government, got higher ratings.
Working as they do in a business that deals with disasters large and small, where they’ve seen it all before, too many insurance people seem to have developed an attitude of Chicken Little in reverse–the sky isn’t falling, it’s just a storm cycle. But today’s convergence of issues–unprecedented natural disasters, an antiquated regulatory system and market pressures to literally take on the problems of the world–is giving new urgency to the need for change. If nothing else, the third-quarter results of some very heavy hitters should prove the point that the time for business as usual is over.
Look up, folks. The sky really is falling.